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This is filed pursuant to Rule 497(b).
File No. 333-00931.
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[logo]
Norwest Advantage Funds
Two Portland Square
Portland, Maine 04101
April 1, 1996
Dear Shareholder:
Norwest Advantage Funds (the "Trust") is pleased to
forward to you the attached Notice and Prospectus/Proxy Statement
for the Special Meeting of Shareholders of Adjustable U.S.
Government Reserve Fund, Government Income Fund and Income Stock
Fund (the "Funds") to be held on May 13, 1996. Please read these
materials carefully and cast your vote on the proposal.
As part of a continuing effort to offer the mutual funds
advised by Norwest Investment Management in one integrated fund
family, and thus streamline the investment options available to
current and potential investors, management of the Trust has
proposed the combination of each Fund with another existing fund
of the Trust (each, an "Acquiring Fund"), that has investment
objectives and policies similar to those of the Fund.
Fund Acquiring Fund
Adjustable U.S. Government Stable Income Fund
Reserve Fund Intermediate U.S. Government
Government Income Fund Fund
Income Stock Fund Income Equity Fund
Specifically, management is proposing that each of the Acquiring
Funds acquire the assets and liabilities of its corresponding
Fund. The Board of Trustees of the Trust has carefully reviewed
the proposals and has considered the effects of the proposed
acquisitions on shareholders with respect to the investment
performance, expense levels and shareholder services of each Fund
and Acquiring Fund. In light of these considerations, the Board
recommends approval of the transactions.
Subject to shareholder approval, current shareholders of
each Fund will become shareholders of the same class of the
corresponding Acquiring Fund. Although you will become a
shareholder of another fund, your new Acquiring Fund will be
advised by Norwest Investment Management, the Funds' current
investment adviser, and will continue to invest in the same type
of securities that your Fund invests in.
As you evaluate the proposed acquisition that relates to
your Fund, please note the following:
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The absolute dollar value of your investment will NOT
change as a result of the acquisition, although the
number of shares and the net asset value of each
Acquiring Fund share you receive may differ from the
number and net asset value per share of your Fund
shares.
The acquisition will be tax-free to you, in that the
acquisition will not result in any federal taxable
gain or loss or excise tax. In addition, the federal
tax basis and holding period of shares in your Fund
will carry over to the shares of the Acquiring Fund.
However, your per share tax basis may have to be
recalculated as a result of any difference between
the net asset values per share of the Fund and the
Acquiring Fund.
Differences between the investment objective and
policies of each Fund and its Acquiring Fund are
discussed in the enclosed material.
The acquisition will not involve any sales charges,
commissions or transaction charges.
The Board recommends that you vote FOR the proposed
acquisition.
We appreciate your participation and prompt response to
this matter and thank you for your continued support.
Sincerely,
John Y. Keffer
Chairman
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[logo] Norwest Adjustable U.S. Government Reserve Fund
Advantage Funds Government Income Fund
Income Stock Fund
Two Portland Square
Portland, Maine 04101
1-800-338-1348
_________________________________________________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Adjustable U.S. Government Reserve Fund
Government Income Fund
Income Stock Fund
A Special Meeting of Shareholders of Adjustable U.S.
Government Reserve Fund, Government Income Fund and Income Stock
Fund of Norwest Advantage Funds (the "Trust") will be held at the
offices of the distributor of the Trust, Forum Financial
Services, Inc., at Two Portland Square, Portland, Maine 04101, on
May 13, 1996 at 10:00 a.m., (the "Meeting") for the following
purposes:
1. To approve a Plan of Reorganization and Liquidation
providing for:
PROPOSAL FOR SHAREHOLDERS OF ADJUSTABLE U.S. GOVERNMENT
RESERVE FUND
(a) the transfer of all the assets of Adjustable U.S.
Government Reserve Fund in exchange for shares of Stable Income
Fund of the Trust and the assumption by Stable Income Fund of all
the liabilities of Adjustable U.S. Government Reserve Fund and
the distribution of such shares to shareholders of Adjustable
U.S. Government Reserve Fund in liquidation of Adjustable U.S.
Government Reserve Fund;
PROPOSAL FOR SHAREHOLDERS OF GOVERNMENT INCOME FUND
(b) the transfer of all the assets of Government Income
Fund in exchange for shares of Intermediate U.S. Government Fund
of the Trust and the assumption by Intermediate U.S. Government
Fund of all the liabilities of Government Income Fund and the
distribution of such shares to shareholders of Government Income
Fund in liquidation of Government Income Fund; and
PROPOSAL FOR SHAREHOLDERS OF INCOME STOCK FUND
(c) the transfer of all the assets of Income Stock Fund
in exchange for shares of Income Equity Fund of the Trust and the
assumption by Income Equity Fund of all the liabilities of Income
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Stock Fund and the distribution of such shares to shareholders of
Income Stock Fund in liquidation of Income Stock Fund.
OTHER MATTERS
2. To transact such other business as may properly
come before the Meeting or any adjournment or adjournments
thereof.
The Board of Trustees (the "Board") has fixed the close
of business on March 25, 1996 as the record date for
determination of those shareholders entitled to notice of, and to
vote at, the Meeting or any adjournment thereof. The enclosed
proxy is being solicited on behalf of the Board of Trustees.
Each shareholder who does not expect to attend the Meeting in
person is requested to complete, date, sign and promptly return
the enclosed form of proxy.
By order of the Board,
David I. Goldstein
Secretary
Portland, Maine
April 1, 1996
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PROSPECTUS/PROXY STATEMENT
ADJUSTABLE U.S. GOVERNMENT RESERVE FUND,
GOVERNMENT INCOME FUND AND INCOME STOCK FUND
OF NORWEST ADVANTAGE FUNDS
Two Portland Square
Portland, Maine 04101
1-800-338-1348
April 1, 1996
INTRODUCTION
This Prospectus/Proxy Statement relates to the
solicitation of shareholder approval for the proposed transfer of
all the assets of each portfolio of Norwest Advantage Funds (the
"Trust") listed below (each, a "Transferor Fund" and
collectively, the "Transferor Funds") to the portfolio of the
Trust whose name is set forth opposite the name of the Transferor
Fund (each, an "Acquiring Fund" and collectively, the "Acquiring
Funds") in exchange for A Shares, B Shares and I Shares of the
Acquiring Fund to which the assets are transferred and the
assumption by the Acquiring Fund of all the liabilities of the
Transferor Fund.
Transferor Fund Corresponding Acquiring Fund
Adjustable U.S. Government Stable Income Fund
Reserve Fund Intermediate U.S. Government
Government Income Fund Fund
Income Stock Fund Income Equity Fund
An Acquiring Fund is sometimes referred to herein as the
"Corresponding Acquiring Fund" of the Transferor Fund from which
assets and liabilities are proposed to be transferred, and a
Transferor Fund is sometimes referred to herein as the
"Corresponding Transferor Fund" of its Acquiring Fund. The
Acquiring Funds and Transferor Funds are sometimes referred to
collectively herein as the "Funds" and individually as a "Fund."
As a consequence of the proposed transaction, A Shares,
B Shares and I Shares of each Acquiring Fund will be distributed
to the shareholders of the Corresponding Transferor Fund in
liquidation of the Corresponding Transferor Fund. The proposed
transaction will be effected at net asset value without the
imposition of any sales charges or other fees.
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The Trust is an open-end management investment company
organized as a Delaware business trust and each of the Acquiring
Funds and Transferor Funds is a diversified portfolio of the
Trust.
THE BOARD OF TRUSTEES RECOMMENDS APPROVAL OF
THE PLAN OF REORGANIZATION AND LIQUIDATION
This Prospectus/Proxy Statement, which should be
retained for future reference, sets forth concisely the
information about the Acquiring Funds that a prospective investor
should know before signing and returning the enclosed proxy card.
This Prospectus/Proxy Statement is accompanied by the Prospectus
offering A Shares and B Shares of Stable Income Fund and
Intermediate U.S. Government Fund dated April 1, 1996 (the
"Income Funds Prospectus"), the Prospectus offering A Shares and
B Shares of Income Equity Fund dated April 1, 1996 (the "Equity
Funds Prospectus") or the Prospectus offering I Shares of Stable
Income Fund, Intermediate U.S. Government Fund and Income Equity
Fund dated March 1, 1996 (the "I Shares Prospectus"), as
appropriate (collectively, the "Acquiring Funds Prospectuses").
The information in the Acquiring Funds Prospectuses that pertains
to the Acquiring Funds is incorporated herein by reference.
Information regarding the prospectuses offering shares of the
Transferor Funds is set forth below under "Information About the
Funds." A Statement of Additional Information dated April 1,
1996 (the "SAI"), which provides a further discussion of certain
matters discussed herein, as well as additional matters,
including information about the Acquiring Funds and the
Transferor Funds, has been filed with the Securities and Exchange
Commission (the "Commission") and is also incorporated herein by
reference. The Statement of Additional Information offering A
Shares and B Shares of the Acquiring Funds (the "Acquiring Funds
A Shares and B Shares SAI") dated April 1, 1996 and the Statement
of Additional Information offering I Shares of the Acquiring
Funds dated March 1, 1996 (collectively, the "Acquiring Funds
Statements of Additional Information") have been filed with the
Commission as part of the SAI and, as they pertain to the
Acquiring Funds, are further incorporated by reference herein.
Copies of the SAI may be obtained without charge by writing to
the distributor of the Trust, Forum Financial Services, Inc.
("Forum") at Two Portland Square, Portland, Maine, 04101, or by
calling 1-800-338-1348.
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TABLE OF CONTENTS Page
Introduction 1
Summary 3
Expense Information 5
Reasons for the Transaction 9
Comparison of Investment Objectives and Policies 10
Information about the Transaction 14
Information about the Funds 16
Voting Information 16
Exhibit A: Plan of Reorganization and Liquidation A-1
Exhibit B: Performance Information B-1
NORWEST ADVANTAGE FUNDS IS A FAMILY OF OPEN-END INVESTMENT
COMPANIES COMMONLY KNOWN AS MUTUAL FUNDS. THE SHARES OF MUTUAL
FUNDS ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE
FDIC, THE FEDERAL RESERVE SYSTEM OR ANY OTHER GOVERNMENT AGENCY.
THE SHARES ALSO ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR
ENDORSED OR GUARANTEED BY NORWEST BANK MINNESOTA, N.A. OR ANY
OTHER BANK OR BANK AFFILIATE.
AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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SUMMARY
This summary is qualified by reference to the more
complete information contained elsewhere in this Prospectus/Proxy
Statement, the Acquiring Funds Prospectuses and the Plan of
Reorganization and Liquidation attached hereto as Exhibit A.
Proposed Transaction. At the meeting held on
January 29, 1996, the Board of Trustees of the Trust (the
"Board"), including the Trustees who are not "interested persons"
of the Trust (the "Independent Trustees") within the meaning of
the Investment Company Act of 1940 (the "1940 Act"), approved a
Plan of Reorganization and Liquidation (the "Plan") providing for
(i) the transfer of all the assets of each Transferor Fund in
exchange for A Shares, B Shares and I Shares of the Corresponding
Acquiring Fund, (ii) the assumption by the Corresponding
Acquiring Fund of all the liabilities of the Corresponding
Transferor Fund and (iii) the distribution of the A Shares, B
Shares and I Shares of the Corresponding Acquiring Fund to
shareholders of the Corresponding Transferor Fund in liquidation
of the Corresponding Transferor Fund (the "Transaction"). The
aggregate net asset value of the A Shares, B Shares and I Shares
of an Acquiring Fund issued in the Transaction will be equal to
the aggregate net asset value of the A Shares, B Shares and I
Shares, respectively, of the Corresponding Transferor Fund then
outstanding.
As a result of the Transaction, each holder of A Shares,
B Shares or I Shares of a Transferor Fund will receive that
number of full and fractional shares of the corresponding class
(i.e., A Shares, B Shares and I Shares, as the case may be) of
the Corresponding Acquiring Fund equal in net asset value at the
close of business on the date of the exchange to the net asset
value of such holder's A Shares, B Shares or I Shares of the
Transferor Fund. The Transaction will be effected at net asset
value without the imposition of any sales charges or other fees.
The Board has determined that (i) the interests of
existing shareholders of each Transferor Fund would not be
diluted as a result of the Transaction and (ii) the Transaction
would be in the best interests of each Transferor Fund and the
shareholders of each Transferor Fund and recommends approval of
the Transaction. Approval of the Plan and the Transaction with
respect to a Transferor Fund will require the affirmative vote of
the holders of the lesser of (i) 67% of the shares present or
represented at the meeting at which the holders of more than 50%
of the outstanding shares are present or represented or (ii) more
than 50% of the outstanding shares of the Fund. The expenses
incurred in connection with the Transaction will be borne pro
rata by the Funds on the basis of their net assets.
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The Transaction is expected to occur shortly following
shareholder approval thereof. However, at any time prior to the
closing of the Transaction, the Board may terminate the Plan in
its entirety or with respect to any Transferor Fund and its
Corresponding Acquiring Fund.
Tax Consequences of the Transaction. No gain or loss
shall be recognized by any Transferor Fund or the shareholders of
any Transferor Fund as a result of the Transaction. The
aggregate tax basis of the Acquiring Fund shares received by a
shareholder of the Corresponding Transferor Fund will be the same
as the shareholder's aggregate tax basis in the shares of the
Corresponding Transferor Fund and the holding period of the
Acquiring Fund shares received by a shareholder of the
Corresponding Transferor Fund will include the holding period of
the shares of the Corresponding Transferor Fund held by the
shareholder, provided that such shares are held as capital assets
by the shareholder at the time of the Transaction. The foregoing
tax information is based on an opinion of Seward & Kissel,
counsel to the Trust. An opinion of counsel is not binding on
the Internal Revenue Service. See "Information about the
Transaction - Federal Income Tax Consequences of the Transaction"
below.
Management of the Funds. The investment adviser to each
Fund is Norwest Investment Management, a part of Norwest Bank
Minnesota, N.A. ("Norwest"). Norwest serves as the Trust's
transfer agent, dividend disbursing agent and custodian. The
manager of the Trust and the distributor of its shares is Forum.
Dividends and Distributions. Except as described below,
the dividend and distribution policies of each Transferor Fund
and its Corresponding Acquiring Fund are identical. Dividends of
net investment income are declared and paid annually, in the case
of Income Equity Fund, and monthly, in the case of Income Stock
Fund. However, it is anticipated that Income Equity Fund will
implement a new dividend policy in 1996 pursuant to which
dividends of net investment income of the Fund will be declared
and paid quarterly. Dividends of net investment income of the
other Funds are declared and paid monthly. Each Fund's net
capital gain, if any, is distributed at least annually.
Purchase Procedures, Exchange Privileges and Redemption
Procedures. The purchase procedures, exchange privileges and
redemption procedures of each Transferor Fund and its
Corresponding Acquiring Fund are identical.
Alternative Distribution Arrangements - B Shares. The
Transferor Funds and the Acquiring Funds have adopted a
distribution plan with respect to the B Shares of the Funds,
pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plan"),
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providing for distribution payments by each Fund to Forum. The
12b-1 Plan is described in greater detail under "How to Buy
Shares - Alternative Distribution Arrangements - B Shares" in the
Income Funds Prospectus and the Equity Funds Prospectus. The
provisions of the 12b-1 Plan are identical with respect to the
Transferor Funds and the Acquiring Funds except that the 12b-1
Plan permits the Board to authorize each Acquiring Fund to assume
the uncovered distribution charges or unreimbursed distribution
expenses of any other registered investment company or series
thereof upon an Acquiring Fund's merger or combination with, or
acquisition of, substantially all of the assets of that
registered investment company. The 12b-1 Plan does not currently
permit any of the Transferor Funds to assume the uncovered
distribution charges or unreimbursed distribution expenses of
another registered investment company or series thereof. See
"Information About the Transaction - Uncovered Distribution
Charges" below. In addition, as described in the SAI, payments
to Forum under the 12b-1 Plan may differ with respect to the
Transferor Funds and Acquiring Funds in the event the 12b-1 Plan
is terminated with respect to a Transferor Fund or Acquiring
Fund.
Investment Objectives and Policies and Risk Factors.
The investment objectives and policies of (i) Adjustable U.S.
Government Reserve Fund and Stable Income Fund are similar,
(ii) Government Income Fund and Intermediate U.S. Government Fund
are substantially similar and (iii) Income Stock Fund and Income
Equity Fund are substantially similar. The Funds' investment
objectives are listed below.
Funds Investment Objectives
Adjustable U.S. Government seeks high current income
Reserve Fund consistent with minimal
principal fluctuation.
Stable Income Fund seeks to maintain safety
of principal while
providing low-volatility
total return.
* * *
Government Income Fund seeks maximum income, as
a primary investment
objective, and
preservation of capital,
as a secondary investment
objective.
Intermediate U.S. Government Fund seeks to provide income
and safety of principal
by investing primarily in
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U.S. Government
Securities.
* * *
Income Stock Fund seeks current income and
growth of income and,
consistent with those
objectives, long-term
capital growth.
Income Equity Fund seeks to provide both
long-term capital
appreciation in line with
that of the overall
equity securities markets
and above average
dividend income.
All investments made by the Funds entail some risk. Certain
investments and investment techniques, however, entail additional
risk, such as the potential use of leverage by the Funds through
borrowings, securities lending and other investment techniques.
Due to the similarity in the investment objectives, policies and
styles of each Transferor Fund and its Corresponding Acquiring
Fund, the risks involved in investing in the Acquiring Funds are
similar to those associated with investing in the Transferor
Funds. In deciding whether to approve the Reorganization,
shareholders should consider the similarities and differences
between the investment objectives and policies of the Transferor
Funds and Corresponding Acquiring Funds as discussed under
"Comparison of Investment Objectives and Policies" below and in
the prospectuses offering shares of the Funds.
EXPENSE INFORMATION
The tables below set forth information with respect to
shares of each Transferor Fund and shares of its Corresponding
Acquiring Fund as well as pro forma information for shares of the
Acquiring Fund after giving effect to the Transaction. The
tables were prepared by Forum based on the net asset, fee and
expense levels of the Transferor Funds and Acquiring Funds as of
October 31, 1995.
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Adjustable U.S. Government Reserve Fund/Stable Income Fund
Pro Form
Combined
Fund (i.e.,
Stable Income
Fund
Adjustable Following
U.S. Government Stable the
Reserve Fund Income Fund Transaction)
Shareholder Transaction Expenses
Maximum sales charge imposed on
purchases
(as a percentage of offering
price)
A Shares(a) 1.5% 1.5% 1.5%
B Shares and I Shares Zero Zero Zero
Maximum deferred sales charge
(as a percentage of the lesser
of original purchase price or
redemption proceeds)
A Shares and I Shares(a) Zero Zero Zero
B Shares(b) 1.5% 1.5% 1.5%
Exchange Fee Zero Zero Zero
Annual Operating Expenses (as a
percentage of average daily net
assets after applicable fee
waivers and expense
reimbursements)(c)
Investment Advisory Fees 0.43% 0.30% 0.30%
Rule 12b-1 Fees
A Shares and I Shares None None None
B Shares(d) 0.75% 0.75% 0.75%
Other Expenses
A Shares 0.42% 0.35% 0.35%
B Shares 0.41% 0.35% 0.35%
I Shares 0.42% 0.35% 0.35%
Total Operating Expenses
A Shares 0.85% 0.65% 0.65%
B Shares 1.59% 1.40% 1.40%
I Shares 0.85% 0.65% 0.65%
===== ===== =====
________________________
(a) If A Shares of a Fund 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 0.50% will be applied to the redemption. See "How
8
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to Buy Shares - Alternative Distribution Arrangements" in
the Income Funds Prospectus.
(b) The maximum 1.5% contingent deferred sales charge on B
Shares applies to redemptions during the first year after
purchase; the charge declines thereafter, becoming 0.75%
during the second year, and reaches zero thereafter. See
"How to Buy Shares - Alternative Distribution Arrangements"
in the Income Funds Prospectus.
(c) The amount of expenses for Adjustable U.S. Government
Reserve Fund and the I Shares of Stable Income Fund is based
on amounts incurred during each Fund's fiscal year ended
May 31, 1995 and October 31, 1995, respectively. Absent
expense reimbursements and fee waivers, (i) the expenses of
the A Shares, B Shares and I Shares of Adjustable U.S.
Government Reserve Fund would have been: Investment Advisory
Fees, 0.50%; Other Expenses, 0.65%, 1.57% and 0.59%,
respectively; and Total Fund Operating Expenses, 1.15%,
3.07% and 1.09%, respectively, and (ii) the expenses of the
I Shares of Stable Income Fund would have been: Other
Expenses, 0.68%; and Total Fund Operating Expenses, 0.98%.
The information for the A Shares and B Shares of Stable
Income Fund and for each class of shares of the pro forma
combined fund is based on estimated expenses for Stable
Income Fund's current fiscal year. In the absence of
estimated expense reimbursements and fee waivers, (i) the
expenses of the A Shares and B Shares of Stable Income Fund
would be: Other Expenses: 0.66%; and Total Fund Operating
Expenses, 0.96, 1.96%, respectively, and (ii) the expenses
of the A Shares, B Shares and I Shares of the pro forma
combined fund would be: Other Expenses, 0.51%; and Total
Fund Operating Expenses, 0.81%, 1.81% and 0.81%,
respectively. Reimbursements and waivers may be reduced or
eliminated at any time.
(d) Absent waivers, the Rule 12b-1 Fees would be 1.00%. 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.
EXAMPLE
The Example below indicates the dollar amount of
expenses that an investor would pay assuming a $1,000 investment
in a Fund's Shares, a 5% annual return and reinvestment of all
dividends and distributions.
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1 year 3 years 5 years 10 years
Adjustable U.S. Government
Reserve Fund
A Shares $24 $42 $61 $118
B Shares
Assuming redemption at
the end of the period $31 $50 -- --
Assuming no redemption $16 $50 -- --
I Shares $9 $27 $47 $105
Stable Income Fund
A Shares $22 $35 $51 $95
B Shares
Assuming redemption at
the end of the period $29 $44 -- --
Assuming no redemption $14 $44 -- --
I Shares $7 $21 $36 $81
Pro Forma Combined Fund (i.e.,
Stable Income Fund following
the Transaction)
A Shares $22 $35 $51 $95
B shares
Assuming redemption
at the end of the period $29 $44 -- --
Assuming no redemption $14 $44 -- --
I Shares $7 $21 $36 $81
Government Income Fund/Intermediate U.S. Government Fund
Pro Forma
Combined
Fund (i.e.,
Intermediate Intermediate
U.S. U.S. Government
Government Government Fund Following
Income Fund Fund the Transaction)
Shareholder Transaction Expenses
Maximum sales charge imposed on
purchases (as a percentage of
offering price)
A Shares(a) 3.75% 3.75% 3.75%
B Shares and I Shares Zero Zero Zero
Maximum deferred sales charge (as
a percentage of the lesser of
original purchase price or
redemption proceeds)
A Shares and I Shares(a) Zero Zero Zero
B Shares(b) 3.0% 3.0% 3.0%
Exchange Fee Zero Zero Zero
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Annual Operating Expenses (as a
percentage of average daily net
assets after applicable fee
waivers and expense
reimbursements)(c)
Investment Advisory Fees 0.37% 0.33% 0.33%
Rule 12b-1 Fees
A Shares and I Shares None None None
B Shares(d) 0.75% 0.75% 0.75%
Other Expenses
A Shares 0.38% 0.35% 0.35%
B Shares 0.38% 0.35% 0.35%
I Shares 0.38% 0.35% 0.35%
Total Operating Expenses
A Shares 0.75% 0.68% 0.68%
B Shares 1.50% 1.43% 1.43%
I Shares 0.75% 0.68% 0.68%
===== ===== =====
________________________
(a) If A Shares of a Fund 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 0.75% will be applied to the redemption. See "How
to Buy Shares - Alternative Distribution Arrangements" in
the Income Funds Prospectus.
(b) The maximum 3.0% contingent deferred sales charge on B
Shares applies to redemptions during the first year after
purchase; the charge declines thereafter, becoming 2.0%
during the second and third years, 1.0% during the fourth
year and reaches zero the following year. See "How to Buy
Shares - Alternative Distribution Arrangements" in the
Income Funds Prospectus.
(c) The amount of expenses for Government Income Fund and the I
Shares of Intermediate U.S. Government Fund is based on
amounts incurred during each Fund's fiscal year ended
May 31, 1995 and October 31, 1995, respectively. Absent
expense reimbursements and fee waivers, (i) the expenses of
the A Shares, B Shares and I Shares of Government Income
Fund would have been: Investment Advisory Fees, 0.40%; Other
Expenses, 0.61%, 0.60% and 0.53%, respectively; and Total
Fund Operating Expenses, 1.01%, 2.00% and 0.93%,
respectively, and (ii) the expenses of the I Shares of
Intermediate U.S. Government Fund would have been: Other
Expenses, 0.60%; and Total Fund Operating Expenses, 0.93%.
The information for the A Shares and B Shares of
Intermediate U.S. Government Fund and for each class of the
pro forma combined fund is based on estimated expenses for
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the Intermediate U.S. Government Fund's current fiscal year.
In the absence of estimated expense reimbursements and fee
waivers, (i) the expenses of the A Shares and B Shares of
Intermediate U.S. Government Fund would be: Other Expenses,
0.66%; and Total Fund Operating Expenses, 0.96% and 1.96%,
respectively, and (ii) the expenses of the A Shares, B
Shares and I Shares of the pro forma combined fund would be:
Other Expenses, 0.51%; and Total Fund Operating Expenses,
0.84%, 1.84% and 0.84%, respectively. Reimbursements and
waivers may be reduced or eliminated at any time.
(d) Absent waivers, the Rule 12b-1 Fees would be 1.00%. 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.
EXAMPLE
The Example below indicates the dollar amount of
expenses that an investor would pay assuming a $1,000 investment
in a Fund's Shares, a 5% annual return and reinvestment of all
dividends and distributions.
1 year 3 years 5 years 10 years
Government Income Fund
A Shares $45 $60 $77 $127
B Shares
Assuming redemption at
the end of the period $45 $67 $82 --
Assuming no redemption $15 $47 $82 --
I Shares $8 $24 $41 $92
Intermediate U.S. Government Fund
A Shares $44 $58 $74 $119
B Shares
Assuming redemption at
the end of the period $45 $65 $78 --
Assuming no redemption $15 $45 $78 --
I Shares $7 $22 $38 $85
Pro Forma Combined Fund (i.e.,
Intermediate U.S. Government
Fund following the Transaction)
A Shares $44 $58 $74 $119
B shares
Assuming redemption at
the end of the period $45 $65 $78 --
Assuming no redemption $15 $45 $78 --
I Shares $7 $22 $38 $85
12
<PAGE>
Income Stock Fund/Income Equity Fund
Pro Forma
Combined Fund
(i.e., Income
Equity Fund
Income Income Following the
Stock Fund Equity Fund Transaction)
Shareholder Transaction Expenses
Maximum sales charge imposed
on purchases (as a percentage
of offering price)
A Shares(a) 4.50% 4.50% 4.50%
B Shares and I Shares Zero Zero Zero
Maximum deferred sales charge (as
a percentage of the lesser of
original purchase price or
redemption proceeds)
A Shares and I Shares(a) Zero Zero Zero
B Shares(b) 4.0% 4.0% 4.0%
Exchange Fee Zero Zero Zero
Annual operating expenses (as a
percentage of average daily net
assets after applicable fee
waivers and expense
reimbursements)(c)
Investment Advisory Fees 0.37% 0.65%(d) 0.65%(d)
Rule 12b-1 Fees
A Shares and I Shares None None None
B Shares(d) 0.75% 0.75% 0.75%
Other Expenses
A Shares 0.63% 0.35% 0.35%
B Shares 0.63% 0.35% 0.35%
I Shares 0.63% 0.35% 0.35%
Total Operating Expenses
A Shares 1.00% 1.00% 1.00%
B Shares 1.75% 1.75% 1.75%
I Shares 1.00% 1.00% 1.00%
===== ===== =====
________________________
(a) If A Shares of a Fund 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 1.00% will be applied to the redemption. See "How
to Buy Shares - Alternative Distribution Arrangements" in
the Equity Funds Prospectus.
13
<PAGE>
(b) 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" in the Equity Funds Prospectus.
(c) The amount of expenses for Income Stock Fund is based on
amounts incurred during the Fund's fiscal year ended May 31,
1995. Absent expense reimbursements and fee waivers, the
expenses of the A Shares, B Shares and I Shares of Income
Stock Fund would have been: Investment Advisory Fees, 0.80%;
Other Expenses, 0.71%, 1.02% and 0.67%, respectively; and
Total Operating Expenses, 1.51%, 2.82% and 1.47%,
respectively.
The amount of expenses for Income Equity Fund and the pro
forma combined fund is based on estimated expenses for the
current fiscal year of Income Equity Fund and, further,
assumes approval by shareholders of Income Equity Fund of
the proposed increase in the Fund's advisory fee (described
in footnote (d) below). Absent estimated expense
reimbursements and fee waivers, (i) the estimated expenses
of the A Shares of Income Equity Fund and the pro forma
combined fund would be: Other Expenses, 0.59%, 0.42%,
respectively; and Total Operating Expenses, 1.24%, 1.17%,
respectively, (ii) the estimated expenses of the B Shares of
Income Equity Fund and the pro forma combined fund would be:
Other Expenses, 0.59%, 0.42%, respectively; and Total
Operating Expenses, 2.24%, 2.17%, respectively, and
(iii) the estimated expenses of the I Shares of Income
Equity Fund and the pro forma combined fund would be: Other
Expenses, 0.59%, 0.42%, respectively; and Total Operating
Expenses, 1.24%, 1.17%, respectively. Reimbursements and
waivers may be reduced or eliminated at any time.
(d) Income Equity Fund currently pays an advisory fee equal to
0.50% annualized of the average daily net assets of the
Fund. A proposal to increase the amount of the advisory fee
paid by Income Equity Fund to 0.65% of the Fund's average
daily net assets has been submitted to the shareholders of
Income Equity Fund for their approval at a Special Meeting
of Shareholders scheduled to be held in May 1996.
(e) Absent waivers, the Rule 12b-1 Fees would be 1.00%. 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.
14
<PAGE>
EXAMPLE
The Example below indicates the dollar amount of
expenses that an investor would pay assuming a $1,000 investment
in a Fund's Shares, a 5% annual return and reinvestment of all
dividends and distributions.
1 year 3 years 5 years 10 years
Income Stock Fund
A Shares $55 $75 $ 98 $162
B Shares
Assuming redemption at
the end of the period $58 $85 $115 --
Assuming no redemption $18 $55 $ 95 --
I Shares $10 $32 $ 55 $122
Income Equity Fund
A Shares $55 $75 $ 98 $162
B Shares
Assuming redemption at
the end of the period $58 $85 $115 --
Assuming no redemption $18 $55 $ 95 --
I Shares $10 $32 $ 55 $122
Pro Forma Combined Fund (i.e.,
Income Equity Fund following
the Transaction)
A Shares $55 $75 $ 98 $162
B shares
Assuming redemption at
the end of the period $58 $85 $115 --
Assuming no redemption $18 $55 $ 95 --
I Shares $10 $32 $ 55 $122
The Examples are based on the expenses listed in the
"Annual Operating Expenses" tables above. The 5% annual return
is not predictive of and does not represent the Funds' projected
returns; rather, it is required by government regulation. The
Examples assume deduction of the maximum initial sales charges
for A Shares, deduction of contingent deferred sales charges 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 four years,
in the case of Adjustable U.S. Government Reserve Fund and Stable
Income Fund, six years, in the case of Government Income Fund and
Intermediate U.S. Government Fund, and seven years, in the case
of Income Stock Fund and Income Equity Fund. The Examples should
not be considered representations of past or future expenses or
return; actual expenses may be greater or less than indicated.
15
<PAGE>
REASONS FOR THE TRANSACTION
At the January 29, 1996 Meeting of the Board, Norwest
and Forum recommended to the Board that it approve and recommend
to the shareholders of each Transferor Fund for their approval a
combination of each Transferor Fund and its Corresponding
Acquiring Fund by means of a tax-free acquisition of all the
assets of each Transferor Fund by its Corresponding Acquiring
Fund in exchange for shares of its Corresponding Acquiring Fund
and the assumption by the Corresponding Acquiring Fund of all the
liabilities of the Transferor Fund, which shares would then be
distributed to the shareholders of each Transferor Fund in
liquidation of each Transferor Fund. The Board accepted the
recommendation of Norwest and Forum, concluded that the
Transaction and the Plan would be in the best interests of each
Transferor Fund and its shareholders and recommended that the
shareholders approve the proposed Transaction.
Norwest and Forum made their recommendation to the Board
based on the similarities in investment objectives, policies and
styles of each Transferor Fund and its Corresponding Acquiring
Fund. Norwest and Forum believe that the Transaction would
eliminate any existing or future competition between the
Transferor Funds and Corresponding Acquiring Funds for investment
opportunities and for shareholders and would provide economies of
scale by eliminating duplicative functions and permitting larger
portfolio transactions.
The Board reviewed the annualized expense ratios of the
Transferor Funds and Acquiring Funds and the pro forma combined
funds and noted that the expense ratio of each pro forma combined
fund following the Transaction would be no greater than the
expense ratio of the Corresponding Transferor Fund prior to the
Transaction. In addition, the Board considered the following
comparative annualized total return information relating to the I
Shares of each Transferor Fund and each Acquiring Fund as of
October 31, 1995:
10 year period
1 year 5 year (or since
period period inception)
Adjustable U.S. Government Reserve
Fund 5.20% N/A 2.21% (6/16/92)
Stable Income Fund 7.39% N/A 7.39% (10/31/94)
Income Stock Fund 25.14% N/A 14.76% (6/1/93)
Income Equity Fund 25.99% 16.23% 15.05%
Government Income Fund 10.03% N/A 2.13% (12/1/88)
Intermediate U.S. Government Fund 11.31% 7.21% 7.33%
16
<PAGE>
The Board also considered, among other things: (i) the
terms and conditions of the Transaction; (ii) whether the
Transaction would result in the dilution of shareholders'
interests; (iii) the investment objectives and policies of each
Transferor Fund and each Acquiring Fund; (iv) the fact that the
expenses incurred in connection with the Transaction will be
borne pro rata by each Transferor Fund and each Acquiring Fund on
the basis of their net assets; (v) the benefits of the
Transaction to persons other than the Transferor Funds; (vi) the
fact that each Acquiring Fund will assume all the liabilities of
the Corresponding Transferor Fund; (vii) the expected federal
income tax consequences of the Transaction; (viii) the historical
and pro forma information referred to above; and (ix) the
treatment in the Transaction of the uncovered distribution
charges of the Transferor Funds.
Based on the factors described above, the Board
unanimously determined that the Transaction would be in the best
interests of each Transferor Fund and each Transferor Fund's
shareholders and would not result in dilution of the interests of
shareholders, and recommended that each Transferor Fund's
shareholders approve the proposed Transaction.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
Stable Income Fund and Adjustable U.S. Government
Reserve Fund. The investment objectives, policies and styles of
the Funds are similar. The investment objective of Stable Income
Fund is to maintain safety of principal while providing low-
volatility total return. The investment objective of Adjustable
U.S. Government Reserve Fund is to seek high current income
consistent with minimal principal fluctuation. There can be no
assurance that either Fund will achieve its investment objective.
Stable Income Fund seeks to attain its investment
objective by investing primarily in investment grade short-term
obligations. Stable Income Fund invests in a diversified
portfolio of fixed and variable rate U.S. dollar denominated
fixed income securities of a broad spectrum of United States and
foreign issuers, including U.S. Government Securities (as defined
in the Acquiring Funds Prospectuses) and the debt securities of
financial institutions, corporations, and others. The securities
in which the Stable Income Fund invests include mortgage-backed
and other asset-backed securities, although the Fund limits these
investments to not more than 60 percent and 25 percent,
respectively, of its total assets. In addition, Stable Income
Fund limits its holdings of mortgage-backed securities that are
not U.S. Government Securities to 25 percent of its total assets.
Stable Income Fund may invest any amount of its assets in U.S.
17
<PAGE>
Government Securities, but under normal circumstances less than
50 percent of the Fund's total assets are so invested. In
addition, Stable Income Fund may not invest more than 25 percent
of its total assets in the securities issued or guaranteed by any
single agency or instrumentality of the U.S. Government, except
the U.S. Treasury, and may not invest more than 10 percent of its
total assets in the securities of any other issuer.
Adjustable U.S. Government Reserve Fund seeks to attain
its investment objective primarily by investing in a portfolio of
adjustable rate securities, including adjustable rate mortgage-
backed securities ("ARMS"), that are U.S. Government Securities.
Under normal circumstances, the Fund will invest at least 65
percent of its total assets in adjustable rate U.S Government
Securities. Norwest currently anticipates that a substantial
amount of the adjustable rate U.S Government Securities purchased
by the Fund will be ARMS. Norwest focuses on high quality, short
and intermediate maturity instruments. Adjustable rate
instruments are emphasized to attempt to control principal
fluctuation. Investment return is enhanced through the
application of disciplined fixed income management techniques
combined with fundamental economic, credit and market analysis.
Adjustable U.S. Government Reserve Fund may invest up to 35
percent of its total assets in fixed rate U.S. Government
Securities or corporate securities and in mortgage- and asset-
backed securities that are not U.S. Government Securities.
To the extent that Adjustable U.S. Government Reserve
Fund may invest to a greater degree than Stable Income Fund in
mortgage- and asset-backed securities, including mortgage-backed
securities that are not U.S. Government Securities, an investment
in Adjustable U.S. Government Reserve Fund may be subject to
greater risks than an investment in Stable Income Fund. See the
description of mortgage- and asset-backed securities in the
Acquiring Funds Prospectuses. However, to the extent that
Adjustable U.S. Government Reserve Fund invests to a greater
degree in U.S. Government Securities than Stable Income Fund, the
investment portfolio of Stable Income Fund may be subject to
greater credit risk than the investment portfolio of Adjustable
U.S. Government Reserve Fund.
Each of the Funds invests (primarily, in the case of
Adjustable U.S. Government Reserve Fund) in securities with
maturities (or average life in the case of mortgage-backed and
similar securities) ranging from short-term (including overnight)
to 12 years and seeks to maintain an average dollar-weighted
portfolio maturity of between 2 and 5 years. In addition, under
normal circumstances, Adjustable U.S. Government Reserve Fund's
portfolio of securities has a duration of no more than 1.75
years. Duration is a measure of a debt security's average life
that reflects the present value of the security's cash flow and,
18
<PAGE>
accordingly, is a measure of price sensitivity to interest rate
changes ("duration risk"). Because earlier payments on a debt
security have a higher present value, duration of a security,
except a zero-coupon security, will be less than the security's
stated maturity.
Each Fund limits its investment to those securities that
are rated, at the time of purchase, within the three highest
long-term or two highest short-term rating categories assigned by
a nationally recognized statistical rating organization, such as
Moody's Investors Service, Inc., Standard & Poor's Ratings
Services or Fitch Investors Services, L.P., or which are unrated
and determined by Norwest to be of comparable quality. Each Fund
may invest in securities that are restricted as to disposition
under the Federal securities laws (sometimes referred to as
private placements or restricted securities).
In order to manage its exposure to different types of
investments, each Fund may enter into interest rate and mortgage
swap agreements and may purchase (and, in the case of Stable
Income Fund, sell) interest rate caps, floors and collars. Each
Fund may also engage in certain strategies involving options
(both exchange-traded and over-the-counter) to attempt to enhance
the Fund's income and may attempt to reduce the overall risk of
its investments or limit the uncertainty in the level of future
foreign exchange rates ("hedge") by using options and futures
contracts and foreign currency forward contracts. The Funds'
ability to use these strategies may be limited by market
considerations, regulatory limits and tax considerations. Each
Fund may write covered call and put options, buy put and call
options, buy and sell interest rate and foreign currency futures
contracts and buy options and write covered options on those
futures contracts. An option is covered if, so long as a Fund is
obligated under the option, it owns an offsetting position in the
underlying security or futures contract or maintains a segregated
account of liquid, high-grade debt instruments with a value at
all times sufficient to cover the Fund's obligations under the
option.
As fundamental policies that may not be changed without
the approval of a majority of a Fund's shareholders (each, a
"fundamental policy"), each Fund is diversified, as that term is
defined in the 1940 Act, and is prohibited from concentrating its
assets in the securities of issuers in any single industry.
Stable Income Fund has reserved the right to invest, without
shareholder approval, all or a portion of its assets in another
open-end investment company with substantially the same
investment objectives as the Fund; absent shareholder approval,
Adjustable U.S. Government Reserve Fund may not invest all of its
assets in another investment company. Other fundamental and
nonfundamental investment policies of the Funds are substantially
19
<PAGE>
the same, including those with respect to borrowing, repurchase
agreements, temporary defensive positions and illiquid
securities. A more detailed description of the types of
securities in which Stable Income Fund invests, its fundamental
and nonfundamental investment policies, and the risks associated
with an investment in the Fund is contained in the Income Funds
Prospectus, the I Shares Prospectus and the SAI. A discussion of
the factors that materially affected the performance of Stable
Income Fund during its most recently completed fiscal year and a
graph illustrating the Fund's performance are set forth in
Exhibit B to this Prospectus/Proxy Statement.
Intermediate U.S. Government Fund and Government Income
Fund. The investment objectives, policies and styles of the Funds
are substantially similar. Intermediate U.S. Government Fund
seeks to provide income and safety of principal by investing
primarily in U.S Government Securities. Government Income Fund
seeks maximum income as a primary investment objective and
preservation of capital as a secondary investment objective.
There can be no assurance that either Fund will achieve its
investment objective.
The Funds pursue their investment objectives primarily
by investing in U.S. Government Securities (as defined in the
Acquiring Funds Prospectuses). Under normal circumstances, each
Fund invests at least 65 percent of its assets in U.S. Government
Securities. However, Intermediate U.S. Government Fund may
invest up to 35 percent of its assets in fixed income securities
that are not U.S. Government Securities and Government Income
Fund may invest up to 20 percent of its assets in mortgage-backed
securities that are not U.S Government Securities. In addition,
Intermediate U.S. Government Fund may not invest more than 25
percent of its total assets in securities issued or guaranteed by
any single agency or instrumentality of the U.S. Government,
except the U.S. Treasury.
Intermediate U.S. Government Fund emphasizes the use of
intermediate maturity securities to lessen interest rate risk,
while employing low risk yield enhancement techniques (such as
investment in adjustable rate securities and swap agreements) to
add to the Fund's return over a complete economic or interest
rate cycle. Intermediate U.S. Government Fund invests in
mortgage-backed and other asset-backed securities, although the
Fund limits these investments to not more than 50 percent and 25
percent, respectively, of its total assets.
Government Income Fund seeks to attain its investment
objective by investing in U.S. Government Securities, including
mortgage-backed securities, and repurchase agreements pertaining
to U.S. Government Securities. Norwest attempts to structure the
Fund to benefit from the attractive risk/return characteristics
20
<PAGE>
of intermediate maturity issues. Norwest attempts to enhance the
Fund's income through ownership of mortgage- and asset-backed
securities. Government Income Fund may not invest more than 10
percent of its net assets in asset-backed securities that are
backed by a particular type of credit, for instance, credit card
receivables.
In order to manage its exposure to different types of
investments, each Fund may enter into interest rate and mortgage
swap agreements and may purchase (and, in the case of
Intermediate U.S. Government Fund, sell) interest rate caps,
floors and collars. Each Fund may engage in certain strategies
involving options (both exchange-traded and over-the-counter) to
attempt to enhance return and may attempt to reduce the overall
risk of its investments ("hedge") by using options and futures
contracts. A Fund's ability to use these strategies may be
limited by market considerations, regulatory limits and tax
considerations. Each Fund may write covered call and put
options, buy put and call options, buy and sell interest rate
futures contracts, and buy options and write covered options on
those futures contracts. An option is covered if, so long as the
Fund using the option is obligated under the option, it owns an
offsetting position in the underlying security or futures
contract or maintains a segregated account of liquid, high-grade
debt instruments with a value at all times sufficient to cover
its obligations under the option. However, Government Income
Fund does not currently contemplate that it will engage in
options and financial futures transactions to any material
extent.
Each Fund invests primarily in debt obligations with
maturities (or average life in the case of mortgage-backed and
similar securities) ranging from short-term (including overnight)
to 12 years, and normally seeks to maintain an average dollar-
weighted maturity of between 3 and 7 years. Under normal
circumstances, each Fund's portfolio of securities will have a
duration of between 75 percent and 125 percent of the duration of
the Lehman Intermediate Government Bond Index, an unmanaged index
of fixed income securities. Duration is a measure of a debt
security's average life that reflects the present value of the
security's cash flow and, accordingly, is a measure of price
sensitivity to interest rate changes.
Each Fund may enter into dollar roll transactions as
part of its mortgage-backed securities investments, for the
purpose of acquiring securities for its portfolio, but not for
investment leverage. Intermediate U.S. Government Fund limits
its obligations on dollar roll transactions to 35 percent of its
net assets.
21
<PAGE>
Certain other of the Funds' investment policies differ.
While each Fund may invest in zero-coupon securities,
Intermediate U.S. Government Fund limits its investment in these
securities (except those issued through the U.S. Treasury's
STRIPS program) to not more than 10 percent of the Fund's total
assets. Intermediate U.S. Government Fund may invest in
securities that are restricted as to disposition under the
Federal securities laws (sometimes referred to as private
placements or restricted securities) and make short sales of
securities, while Government Income Fund has not adopted
investment policies with respect to, and, therefore, does not
currently intend to invest in private placements or engage in
short sales. Short sales of securities are considered to be
speculative. See "Additional Investment Policies and Risk
Considerations - Short Sales and - Purchasing Securities on
Margin" in the Income Funds Prospectus of the Trust and "Appendix
A: Investments, Investment Strategies and Risk Considerations -
Short Sales and - Purchasing Securities on Margin" in the I
Shares Prospectus of the Trust.
Intermediate U.S. Government Fund will only purchase
securities that are rated (at the time of purchase) within the
two highest rating categories assigned by a nationally recognized
statistical rating organization ("NRSRO"), such as Moody's
Investors Services, Inc., Standard & Poor's Ratings Services or
Fitch Investors Services, L.P. or which are unrated and
determined by Norwest to be of comparable quality. Government
Income Fund limits its investments to securities that are rated
(at the time of purchase) within the three highest rating
categories assigned by an NRSRO.
As fundamental policies that may not be changed without
the approval of a majority of a Fund's shareholders (each, a
"fundamental policy"), each Fund is diversified, as that term is
defined in the 1940 Act, and is prohibited from concentrating its
assets in the securities of issuers in any single industry.
Intermediate U.S. Government Fund has reserved the right to
invest, without shareholder approval, all or a portion of its
assets in another open-end investment company with substantially
the same investment objectives as the Fund; absent shareholder
approval, Government Income Fund may not invest all of its assets
in another investment company. Other fundamental and
nonfundamental investment policies of the Funds are substantially
the same, including with respect to borrowing, repurchase
agreements, temporary defensive positions and illiquid
securities. A more detailed description of the types of
securities in which Intermediate U.S. Government Fund invests,
its fundamental and nonfundamental investment policies, and the
risks associated with an investment in the Fund is contained in
the Income Funds Prospectus, the I Shares Prospectus and the SAI.
A discussion of the factors that materially affected the
22
<PAGE>
performance of Intermediate U.S. Government Reserve Fund during
its most recently completed fiscal year and a graph illustrating
the Fund's performance are set forth in Exhibit B to this
Prospectus/Proxy Statement.
Income Equity Fund and Income Stock Fund. The
investment objectives, policies and styles of the two Funds are
substantially similar. The investment objective of Income Equity
Fund is to provide both long-term capital appreciation in line
with that of the overall equity securities markets and above
average dividend income, while Income Stock Fund seeks current
income and growth of income and, consistent with those
objectives, long-term capital growth. There can be no assurance
that either Fund will achieve its investment objective.
Income Equity Fund invests primarily in the common stock
of large, high-quality domestic companies that have above-average
return potential based on current market valuations. Primary
emphasis is placed on investing in securities of companies with
above average dividend income. Income Equity Fund considers
large companies to be those whose market capitalization is at
least $600 million at the time of the Fund's purchase. Market
capitalization refers to the total market value of a company's
outstanding shares of common stock. Under normal circumstances,
Equity Income Fund will not invest more than 10 percent of its
total assets in the securities of a single issuer.
Income Stock Fund pursues its investment objective by
investing primarily in equity securities of companies that, in
the view of Norwest, offer earnings growth potential while paying
current dividends. Income Stock Fund invests primarily in equity
securities paying current dividends, although it may purchase
securities that are not paying dividends but offer prospects for
growth of capital or future income.
Income Stock Fund seeks to achieve its investment
objective by investing in a broadly diversified portfolio which
offers above average dividend and earnings growth potential. The
Fund's emphasis on current yield and dividend and earnings growth
potential is based upon the investment philosophy that long-term
performance is based upon both current yield and capital
appreciation derived from earnings and dividend growth. Dividend
income is generally a significant contributor to the returns
available from investing in stocks over the long term, and
Norwest believes that dividend income is often more consistent as
a source of investment return than capital appreciation.
Moreover, the price volatility of stocks with relatively higher
yields tends to be less than stocks that pay out little dividend
income, affording the Fund the potential for greater principal
stability. While current yield is an important factor in
selecting stocks, Norwest believes that long-term capital
23
<PAGE>
appreciation is generally associated with the stocks of companies
whose dividend income and earnings are growing.
In selecting securities for Income Equity Fund, Norwest
uses various valuation measures, including above-average dividend
yields and below industry average price to earnings, price to
book and price to sales ratios. In selecting investments for
Income Stock Fund, Norwest emphasizes fundamental analysis of a
company's operating trends, balance sheet developments and
industry conditions. Valuation, yield, dividend and earnings
growth potential and portfolio diversification are also factors
in purchase decisions.
Each Fund may invest in common and preferred stock and
securities convertible into common stock and may purchase
American Depository Receipts ("ADRs") and other similar
securities of foreign issuers. In addition, Income Equity Fund
may invest in European Depository Receipts ("EDRs"), while Income
Stock Fund has not adopted an investment policy with respect to,
and therefore does not currently intend to invest in, EDRs. See
"Investment Objectives and Policies - International Fund -
Foreign Investment Considerations and Risk Factors" in the Equity
Funds Prospectus and "Investment Objectives, Policies and Risk
Considerations - Equity Funds - International Fund - Foreign
Investment Risks and Considerations" in the I Shares Prospectus
of the Trust. Income Stock Fund may not invest more than 20
percent of its assets in securities of foreign issuers and in
sponsored and unsponsored ADRs.
Income Stock Fund may invest also in fixed income
securities, including corporate debt obligations, that are rated
in one of the three highest rating categories by a nationally
recognized statistical rating organization ("NRSRO") or, if
unrated by an NRSRO, judged by Norwest to be of comparable
quality. However, under normal market conditions, Income Stock
Fund's fixed income positions (not including convertible
securities) will not exceed 20 percent of the Fund's total
assets. Income Equity Fund has not adopted an investment policy
with respect to, and therefore does not currently intend to
invest in, fixed income securities (other than convertible
securities).
As fundamental policies that may not be changed without
the approval of a majority of a Fund's shareholders (each, a
"fundamental policy"), each Fund is diversified, as that term is
defined in the 1940 Act, and is prohibited from concentrating its
assets in the securities of issuers in any single industry. In
addition, under normal circumstances, Income Equity Fund will not
invest more than 10 percent of its total assets in the securities
of a single issuer. Also, Income Equity Fund has reserved the
right to invest all or a portion of its assets in another
24
<PAGE>
diversified, open-end investment company with substantially the
same investment objective and policies as the Fund; absent
shareholder approval, Income Stock Fund may not invest all of its
assets in another investment company. Other fundamental and
nonfundamental investment policies of the Funds are substantially
the same, including with respect to borrowing, repurchase
agreements, temporary defensive positions and illiquid
securities. A more detailed description of the types of
securities in which Income Equity Fund invests, its fundamental
and nonfundamental investment policies, and the risks associated
with an investment in the Fund is contained in the Equity Funds
Prospectus, the I Shares Prospectus and the SAI. A discussion of
the factors that materially affected the performance of Income
Equity Fund during its most recently completed fiscal year and a
graph illustrating the Fund's performance are set forth in
Exhibit B to this Prospectus/Proxy Statement.
INFORMATION ABOUT THE TRANSACTION
Plan of Reorganization and Liquidation. The Plan
provides that upon the closing of the Transaction, each Acquiring
Fund will acquire all the assets of its Corresponding Transferor
Fund and assume all the liabilities of the Corresponding
Transferor Fund in exchange for A Shares, B Shares and I Shares
of such Acquiring Fund (the "Closing"). The number of full and
fractional A Shares, B Shares and I Shares of any Acquiring Fund
to be issued to the holders of A Shares, B Shares and I Shares of
the Corresponding Transferor Fund, is to be determined on the
basis of the relative net asset values per share of each class of
shares.
At the Closing, each Transferor Fund will liquidate and
will distribute pro rata to its holders of record the A Shares,
B Shares and I Shares of the Corresponding Acquiring Fund
received by the Transferor Fund. The liquidation and
distribution will be accomplished by the establishment of an
account on the share records of the Trust with respect to each
Acquiring Fund in the name of each shareholder of the
Corresponding Transferor Fund representing the number of full and
fractional shares of the Acquiring Fund due such shareholder.
Fractional A Shares, B Shares and I Shares of the Acquiring Funds
will be carried to the third decimal place. Simultaneously with
the establishment of accounts on the share records of the Trust
with respect to the A Shares, B Shares and I Shares of an
Acquiring Fund due to the Transferor Fund shareholders,
Transferor Fund shares held by those shareholders will be
canceled. New certificates for shares will be issued only upon
written shareholder request, and any certificate representing
shares of an Acquiring Fund to be issued in replacement of a
certificate representing shares of a Transferor Fund will be
25
<PAGE>
issued only upon the surrender of the certificate representing
the Transferor Fund Shares.
Consummation of the Plan is subject to the conditions
set forth therein, including the condition that all necessary
orders or exemptions under the 1940 Act with respect to the
Transaction shall have been granted by the Commission. The Plan
may be terminated, in its entirety or with respect to any
Transferor Fund and its Corresponding Acquiring Fund, by the
Board and the Transaction abandoned at any time prior to the
Closing. Following the Transaction, Intermediate U.S. Government
Fund will be renamed Intermediate Government Income Fund.
Description of Shares of the Acquiring Funds. Full and
fractional A Shares, B Shares and I Shares of the Acquiring Funds
will be issued without the imposition of a sales load or other
fee to the shareholders of the Corresponding Transferor Funds in
accordance with the procedures described above. The A Shares, B
Shares and I Shares of each Acquiring Fund to be issued in the
Transaction will be fully paid and nonassessable when issued and
will have no preemptive or conversion rights, except that the B
Shares of each Acquiring Fund will convert to A Shares four years
after purchase, in the case of Stable Income Fund, six years
after purchase, in the case of Intermediate U.S. Government Fund,
and seven years after purchase, in the case of Income Equity
Fund. In addition, the voting procedures of the Transferor Funds
and the Acquiring Funds are identical.
Federal Income Tax Consequences of the Transaction. At
the Closing, the Trust will receive an opinion from Seward &
Kissel, counsel to the Trust, with respect to the federal income
tax consequences of the Transaction. The tax opinion will be to
the effect that, with respect to each Transferor Fund and its
Corresponding Acquiring Fund, on the basis of then current law
and certain representations and assumptions, and subject to
certain limitations: (i) the Transaction will constitute a
reorganization within the meaning of Section 368(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the
Transferor Fund and Acquiring Fund will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code;
(ii) the shareholders of the Transferor Fund who receive shares
of the Acquiring Fund pursuant to the Transaction will not
recognize any gain or loss upon the exchange of their shares of
the Transferor Fund for shares of the Acquiring Fund; (iii) the
aggregate tax basis of the shares of the Acquiring Fund received
by each shareholder of the Transferor Fund will be the same as
the aggregate tax basis of the shares of the Transferor Fund
surrendered in the exchange; and (iv) the holding period of
shares of the Acquiring Fund received by each shareholder of the
Transferor Fund will include the holding period of the shares of
the Transferor Fund which are surrendered in exchange therefor,
26
<PAGE>
provided that the shares of the Transferor Fund constitute
capital assets of such shareholder at the Closing. The tax
opinion will address certain federal income tax consequences of
the Transaction in addition to those set forth above and is
described in greater detail in Section 4(k) of the Plan, which is
attached hereto as Exhibit A. There is no intention to consult
the Internal Revenue Service as to the foregoing matters.
Capitalization. The following tables show the
capitalization and net asset values per share of each class of
shares of beneficial interest of each Transferor Fund and each
Acquiring Fund as of October 31, 1995 and on a pro forma basis as
of that date after giving effect to the Transaction.
Adjustable
U.S. Government Stable Pro Forma
Reserve Fund Income Fund Combined
Net assets $61,795,730 $48,086,568 $109,882,298
Net asset value per share
A Shares $9.41 N/A $9.41
B Shares $9.37 N/A $9.37
I Shares $9.41 $10.72 $10.72
Shares outstanding
A Shares 4,389,151 N/A 4,389,151
B Shares 41,603 N/A 41,603
I Shares 2,136,415 4,485,961 6,361,775
Intermediate
Government U.S. Government Pro Forma
Income Fund Fund Combined
Net assets $128,724,844 $50,213,013 $178,937,857
Net asset value per share
A Shares $8.78 N/A $8.78
B Shares $8.77 N/A $8.77
I Shares $8.78 $61.98 $61.98
Shares outstanding(a)
A Shares 2,307,078 N/A 2,307,078
B Shares 1,288,152 N/A 1,288,152
I Shares 11,070,701 810,182 2,307,078
27
<PAGE>
Income Income Pro Forma
Stock Fund Equity Fund Combined
Net assets $113,948,582 $49,000,004 $162,948,586
Net asset value per share
A Shares $12.37 N/A $12.37
B Shares $12.30 N/A $12.30
I Shares $12.38 $24.02 $24.02
Shares outstanding
A Share 1,439,861 N/A 1,439,861
B Shares 581,962 N/A 581,962
I Shares 7,185,782 2,040,062 5,744,543
____________________
(a) The net asset value ("NAV") per share of the I Shares of the
Fund was adjusted through a stock split effected on
March 22, 1996 in order to equalize the NAV per share among
each class of the Fund after consummation of the
Transaction. As a result of the adjustment, there will be
proportionally more I Shares outstanding, and proportionally
fewer A Shares and B Shares outstanding, than presented in
the table above.
Uncovered Distribution Charges. Under the 12b-1 Plan,
uncovered distribution charges are equivalent to all sales
commissions previously due (plus interest), less the amount of
distribution services fees received by Forum pursuant to the
12b-1 Plan and all contingent deferred sales charges previously
paid to Forum. As of November 30, 1995, Forum had incurred
approximately $4,647, with respect to B Shares of Adjustable U.S.
Government Reserve Fund, $258,970, with respect to B Shares of
Government Income Fund, and $274,914, with respect to B Shares of
Income Stock Fund, in distribution expenses under the 12b-1 Plan
that had not been recovered pursuant to the 12b-1 Plan, through
contingent deferred sales charges or otherwise. In connection
with the Transaction, the Board has determined that it would be
appropriate for each Acquiring Fund to assume the uncovered
distribution charges of its Corresponding Transferor Fund.
INFORMATION ABOUT THE FUNDS
Information about the Acquiring Funds is included in the
Acquiring Funds Prospectuses, copies of which are included
herewith, as appropriate. The information in the Acquiring Funds
Prospectuses that pertains to the Acquiring Funds is incorporated
herein by reference. Additional information concerning the
Acquiring Funds is included in the Acquiring Funds Statements of
Additional Information which have been filed as part of the SAI
and are also incorporated herein by reference. A copy of the SAI
can be obtained without charge by writing to Forum at Two
28
<PAGE>
Portland Square, Portland, Maine 04101 or by calling
1-800-338-1348.
Information about the Transferor Funds is included in
the Prospectus offering A Shares and B Shares of Adjustable U.S.
Government Reserve Fund and Government Income Fund, the
Prospectus offering A Shares and B Shares of Income Stock Fund
and the Prospectus offering I Shares of each Transferor Fund,
each dated October 1, 1995 as amended April 1, 1996 (the
"Transferor Funds Prospectuses"), and the Annual Report to
shareholders of the Transferor Funds for the fiscal year ended
May 31, 1995 each of which is available upon request without
charge from Forum at the address and telephone numbers listed
below. The information in the Transferor Funds Prospectuses
pertaining to the Transferor Funds is incorporated herein by
reference. Additional information concerning each Transferor
Fund is included in the Statement of Additional Information of
the Transferor Funds dated October 1, 1995 and is also
incorporated herein by reference. A copy of this information can
be obtained without charge by writing to Forum at Two Portland
Square, Portland, Maine 04101 or by calling 1-800-338-1348.
The Funds file reports, proxy statements and other
information with the Commission. These documents and other
information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of such material can also
be obtained from the Public Reference Branch, Office of Filings
and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549 at prescribed rates.
VOTING INFORMATION
Proxies of the shareholders of the Transferor Funds are
being solicited by the Board for the Special Meeting of
Shareholders to be held on May 13, 1996 (the "Meeting"), at the
offices of Forum at Two Portland Square, Portland, Maine 04101,
at 10:00 a.m., and at all adjournments thereof. A proxy may be
revoked at any time at or before the Meeting by giving notice to
the Secretary of the Trust, at Two Portland Square, Portland,
Maine 04101, by signing another proxy of a later date or by
personally voting at the Meeting. Unless revoked, all valid
proxies will be voted in accordance with the specification
thereon, or in the absence of a specification, for approval of
the Plan and the Transaction. Approval of the Plan and the
Transaction by the shareholders of a Transferor Fund will be
deemed to constitute approval by the shareholders of a temporary
amendment to any investment objective, policy or restriction
(such as with respect to the concentration of investments in a
particular industry) that would otherwise be inconsistent with or
violated upon the Transferor Fund holding shares of the
29
<PAGE>
Corresponding Acquiring Fund prior to distributing the shares to
the shareholders of the Transferor Fund in accordance with the
Plan.
Approval of the Plan and the Transaction, with respect
to a Transferor Fund, requires the affirmative vote of the
holders of a majority of the outstanding shares of the Transferor
Fund. A majority of the outstanding voting securities of a
Transferor Fund means the lesser of 67% of the shares present or
represented at the Meeting at which the holders of more than 50%
of the outstanding shares are present or represented, or more
than 50% of the outstanding shares of the Fund.
Shareholders of record of the Transferor Funds at the
close of business on March 25, 1996 (the "Record Date") will be
entitled to vote at the Meeting or any adjournments thereof.
With respect to each Transferor Fund, the holders of one-third of
the shares outstanding at the close of business on the Record
Date present in person or represented by proxy will constitute a
quorum for purposes of voting on the Plan at the Meeting. Votes
cast by proxy or in person at the Meeting will be counted by the
election inspectors for the Meeting. The election inspectors
will count the total number of votes cast "for" approval of a
proposal for purposes of determining whether sufficient
affirmative votes have been cast. The election inspectors will
count shares represented by proxies that reflect abstentions as
shares that are present and entitled to vote on the matter for
purposes of determining the presence of a quorum. However, an
abstention has the effect of a negative vote on the proposal.
Broker non-votes will be counted as shares present for purposes
of determining whether a quorum is present but will not be voted
for or against any adjournment or counted as votes cast for
purposes of determining whether sufficient votes have been
received to approve a proposal. Broker non-votes are shares held
in street name for which the broker indicates that instructions
have not been received from the beneficial owners or other
persons entitled to vote and for which the broker lacks
discretionary voting authority. Shares that are not voted and
for which no proxy has been given will not be counted as present
at the Meeting. Dissenting shareholders do not have any
appraisal rights in connection with the Transaction.
Shareholders are entitled to one vote for each share
held, and each fractional share is entitled to a proportionate
fractional vote. The following table shows the number of
outstanding shares of the Transferor Funds as of March 25, 1996.
30
<PAGE>
Total A Shares B Shares I Shares
Adjustable U.S.
Government
Reserve Fund 3,837,238 1,849,489 42,455 1,945,294
Government Income
Fund 45,618,300 2,275,453 1,300,636 42,042,211
Income Stock Fund 12,753,047 1,895,003 966,642 9,891,403
In the event that sufficient votes in favor of the
proposal set forth in the Notice of Special Meeting are not
received by the time scheduled for the Meeting, the persons named
as proxies may authorize one or more adjournments of the Meeting
to permit further solicitation of proxies with respect to the
proposal. Any such adjournment will require the affirmative vote
of a majority of the votes cast on the question in person or by
proxy at the session of the Meeting to be adjourned. The persons
named as proxies will vote in favor of the adjournment those
proxies which they are entitled to vote in favor of the proposal.
They will vote against any such adjournment those proxies
required to be voted against the proposal.
Votes of the shareholders of the Acquiring Funds are not
being solicited in connection with the Transaction, since their
approval or consent is not necessary for the consummation of the
Transaction.
In addition to the solicitation of proxies by mail or
expedited delivery service, the Board and employees and agents of
Forum may solicit proxies in person or by telephone. Persons
holding shares as nominees will upon request be reimbursed for
their reasonable expenses in sending soliciting material to their
principals. The Trust has engaged the proxy solicitation firm of
ADP Investor Communication Services which, for its solicitation
services, will receive a fee from the Trust estimated at $2,000,
and reimbursement of out of pocket expenses estimated at $6,000.
Share Ownership. As of March 25, 1996, the officers and
Trustees of the Trust as a group beneficially owned less than one
percent of the outstanding A Shares, B Shares or I Shares or each
Transferor Fund and, to the knowledge of the Trust, the following
persons owned of record or beneficially, five percent or more of
the outstanding shares of each Transferor Fund.
31
<PAGE>
Name and Address of % Ownership
Holder of Record A Shares B Shares I Shares Fund
ADJUSTABLE U.S.
GOVERNMENT RESERVE FUND
Anderson Erickson Dairy 6.52% -- -- 3.14%
2229 Hubbell Ave.
Des Moines, IA 50317
BHC Securities, Inc. 7.08% -- -- 3.41%
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-3212
Ramsey Foundation 8.05% -- -- 3.88%
8100 34th Ave. S., P.O. Box 1309
Minneapolis, MN 55440-1309
St. Paul Ramsey Medical Center 16.15% -- -- 7.78%
8100 34th Ave. S., P.O. Box 1309
Minneapolis, MN 55440-1309
Von Maur Investment Co. 6.42% -- -- 3.09%
6565 Brady Street
Davenport, IA 52806
Aspen Medical Group PA 5.35% -- -- 2.58%
1021 Bandana Blvd. E. STE 200
St. Paul, MN 55108
Analysts International 17.12% -- -- 8.25%
Corporation
7615 Metro Blvd.
Minneapolis, MN 55439
Covenant Medical Center 9.21% -- -- 4.44%
3421 W. Ninth
Waterloo, IA 50702
Myrtle Werth Medical Center 6.74% -- -- 3.25%
2321 Stout Road
Menomonie, WI 54751
Mary E. Espe -- 8.29% -- 0.092%
and Williama & James E. Espe
2211 Redfield Street
Lacrosse, WI 54601
32
<PAGE>
Marjorie A. Thiem -- 7.41% -- 0.082%
5400 Vernon Ave. S.
Edina, MN 55436
Benedict M. Lonsky -- 10.06% -- 0.112%
and Bernice T. Lonsky JT TEN
2524 W. Armour Terrace
Minneapolis, MN 55418
John M. Blackburn -- 5.20% -- 0.058%
and Gretory J. Blackburn
JT TEN
1412 Shannon
Green Bay, WI 54304
Fred P. Mattson and -- 20.56% -- 0.230%
Betty J. Mattson JT TEN
P.O. Box 248
Elmwood, WI 54740-0248
BHC Securities, Inc. -- 11.77% -- 0.130%
FBO FAO 52490122
Attn: Mutual Funds Dept.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-3212
Lucy Wu -- 7.30% -- 0.081%
702 14th Ave. SE
Minneapolis, MN 55414
Emseg & CO./IRA -- -- 22.68% 11.50%
Norwest Bank Minnesota, N.A.
733 Marquette Ave. So.
Minneapolis, MN 55479-0050
Stout & Co. -- -- 16.48% 8.36%
Discretionary Cash
1740 Broadway MS 8751
Denver, CO 80274
Norwest Bank Minnesota -- -- 5.66% 2.87%
TRST HRA of the City of
St. Paul
P.O. Box 1450 NW 8477
Minneapolis, MN 55480-8477
33
<PAGE>
Finaba -- -- 28.22% 14.31%
1314 Avenue K
Lubbock, TX 79401
Norwest Bank Minnesota -- -- 5.29% 2.68%
TRST Taylor Corporation
FBO Safeco Insurance Company
P.O. Box 1450 NW8477
Minneapolis, MN 55485-0002
GOVERNMENT INCOME FUND
BHC Securities, Inc. 18.54% -- -- 0.093%
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-3212
Ibrahim M. Madani 5.51% -- -- 0.027%
and Salwa A. Abdulghaffer
JT TEN c/o Bernie Markel
10010 Regency Circle
Omaha, NE 68114
Abott Limited Company 10.39% -- -- 0.052%
1003 S. 24 Street
Omaha, NE 68102
Emseg & CO./IRA -- -- 5.77% 5.32%
Norwest Bank Minnesota, N.A.
733 Marquette Ave. So.
Minneapolis, MN 55479-0050
Stout & Co. -- -- 17.24% 15.89%
Discretionary Cash
1740 Broadway MS 8751
Denver, CO 80274
Norwest Intermediate -- -- 74.15% 68.33%
Mat. Gov't Bond
P.O. Box 1450 NW 8477
Minneapolis, MN 55480-8477
34
<PAGE>
INCOME STOCK FUND
BHC Securities, Inc. 39.02% -- -- 5.80%
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-3212
Emseg & CO./IRA -- -- 37.95% 29.43%
Norwest Bank Minnesota, N.A.
733 Marquette Ave. So.
Minneapolis, MN 55479-0050
Stout & Co. -- -- 36.27% 28.13%
1740 Broadway MS 8751
Denver, CO 80274
Finaba -- -- 16.56% 12.84%
1314 Avenue K
Lubbock, TX 79401
As of March 25, 1996, Norwest controlled or held with
power to vote more than 25% of the outstanding shares of each
Transferor Fund in a trust, agency, custodial or other fiduciary
or representative capacity. Accordingly, Norwest may be deemed
to control each of the Transferor Funds and may be able to
greatly affect (if not determine) the outcome of the shareholder
vote on the Transaction. Norwest is a national bank with its
principal place of business in Minnesota and is a subsidiary of
Norwest Corporation, a bank holding company.
As of January 31, 1996, the officers and Trustees of the
Trust as a group beneficially owned less than one percent of the
outstanding I Shares of each Acquiring Fund and, to the knowledge
of the Trust, the following persons owned of record or
beneficially, five percent or more of the outstanding shares of
each Acquiring Fund.
Name and Address % Ownership
of Holder of Record I Shares
STABLE INCOME FUND
Seventh Farm Credit Dist. Supp. D/B 14.50%
375 Jackson Street
St. Paul, MN 55101
Sheldahl 401(k) 8.15%
1150 Sheldahl Rd.
Northfield, MN 55057-9444
35
<PAGE>
INTERMEDIATE U.S. GOVERNMENT FUND
Patterson Dental Ret. Svgs. 11.52%
1031 Mendola Heights Rd.
St. Paul, MN 55120
Continental Care Ctrs Retirement 8.11%
8401 West Dodge Road
Suite 200
Omaha, NE 68114
INCOME EQUITY FUND
Northland Company 11.20%
3300 W.80th St.
Suite 280
Minneapolis, MN 55431
G&K Services 8.20%
300 S.Highway 169
St. Louis Park, MN 55426
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS
APPROVAL OF THE PLAN.
36
<PAGE>
Exhibit A
NORWEST ADVANTAGE FUNDS
PLAN OF REORGANIZATION AND LIQUIDATION
1. Summary
This Plan of Reorganization and Liquidation (the "Plan")
has been adopted by the Board of Trustees (the "Board") of
Norwest Advantage Funds (the "Trust") for the purpose of
effecting the transfer of the assets and liabilities of three
portfolios of the Trust (each, a "Transferor Fund") to three
other portfolios of the Trust (each, an "Acquiring Fund") as
follows:
Transferor Funds Acquiring Funds
Adjustable U.S. Government
Reserve Fund Stable Income Fund
Government Income Fund Intermediate U.S. Government Fund
Income Stock Fund Income Equity Fund
The transfer of the assets and liabilities of each Transferor
Fund will be made in exchange for A Shares, B Shares and I Shares
(collectively, the "Shares") of the Acquiring Fund to which the
assets and liabilities are transferred and the distribution of
the Shares of the Acquiring Fund to the shareholders of the
Transferor Fund in liquidation of the Transferor Fund. An
Acquiring Fund is sometimes referred to herein as the
"Corresponding Acquiring Fund" of the Transferor Fund from which
assets and liabilities are proposed to be transferred, and a
Transferor Fund when used with respect to its Corresponding
Acquiring Fund is sometimes referred to herein as the
"Corresponding Transferor Fund."
2. Shareholder Approval
The Trust shall call and hold meetings of the
shareholders of each Transferor Fund for the purpose of acting
upon this Plan as it relates to that Transferor Fund and the
transactions contemplated herein. The Trust shall furnish to the
shareholders of each Transferor Fund a prospectus/proxy statement
containing certain information relating to the Corresponding
Acquiring Fund and this Plan in connection with the meeting.
Approval by the shareholders of a Transferor Fund of this Plan
and the transactions contemplated herein shall, to the extent
necessary to permit the consummation of the transactions
contemplated herein without violating any investment objective,
A-1
<PAGE>
policy or restriction of such Transferor Fund, be deemed to
constitute approval by such shareholders of a temporary amendment
of any investment objective, policy or restriction that would
otherwise be inconsistent with or violated upon the consummation
of such transactions. The Plan shall become effective for each
Transferor Fund upon approval of the shareholders of the
Transferor Fund.
3. Reorganization
The transactions described in this section are
hereinafter referred to as the "Reorganization".
(a) Plan of Reorganization and Liquidation.
(i) The Trust shall cause each Transferor Fund to
grant, bargain, sell, convey, assign, transfer and deliver to the
Corresponding Acquiring Fund at the closing provided for in
Section 3(b) (the "Closing") all of the assets, rights, claims
and businesses of every kind, character and description of the
Transferor Fund to the extent they exist on or after the Closing.
In consideration thereof, at the Closing, the Trust shall cause
each Acquiring Fund to (A) assume and pay, to the extent that
they exist on or after the Closing, all liabilities of the
Corresponding Transferor Fund (whether absolute, accrued,
contingent or otherwise, and whether or not determinable at the
time of the Closing), and (B) deliver to the Corresponding
Transferor Fund the number of full and fractional A Shares,
B Shares and I Shares of beneficial interest of the Acquiring
Fund (the "Acquiring Fund Shares"), equal to that number of full
and fractional A Shares, B Shares and I Shares of beneficial
interest of the Corresponding Transferor Fund (the "Transferor
Fund Shares") determined by multiplying the number of
Corresponding Transferor Fund Shares of that class by the
exchange ratio as computed as set forth below and carrying the
product of such multiplication to the third decimal place. For
purposes of this section, A Shares, B Shares and I Shares of each
Transferor Fund will correspond to A Shares, B Shares and I
Shares, respectively, of the Corresponding Acquiring Fund. The
exchange ratio for each class of Transferor Fund Shares shall be
the number determined by dividing the net asset value per share
of that class of the Transferor Fund Shares by the net asset
value per share of the corresponding class of the Corresponding
Acquiring Fund Shares, in each case such net asset values to be
determined on a consistent basis by the appropriate officers of
the Trust as of the close of business on the last business day
preceding the Closing, using the valuation procedures set forth
in the then current prospectus of the Transferor Fund or
Corresponding Acquiring Fund, as the case may be. The exchange
ratio shall be carried to the fourth decimal place.
A-2
<PAGE>
(ii) At the Closing, each Transferor Fund shall
liquidate and distribute pro rata to the holders of record of
each class of the Transferor Fund Shares as of the Closing the
Corresponding Acquiring Fund Shares of the corresponding class
received by each Transferor Fund pursuant to this Section 3(a).
Such liquidation and distribution shall be accompanied by the
establishment of an open account on the share records of each
Acquiring Fund in the name of each holder of a class of the
Corresponding Transferor Fund Shares and representing the number
of Acquiring Fund Shares of the corresponding class due such
shareholder. Fractional Acquiring Fund Shares shall be carried
to the third decimal place. Simultaneously with such crediting
of Acquiring Fund Shares to the shareholders, Corresponding
Transferor Fund Shares held by such shareholders shall be
canceled. Certificates representing Acquiring Fund Shares shall
be issued in accordance with the then current Acquiring Fund
prospectus; provided, however, that any certificate representing
Acquiring Fund Shares to be issued in replacement of a
certificate representing Transferor Fund Shares shall be issued
only upon the surrender of the certificate representing the
Transferor Fund Shares.
(b) Closing. The Closing shall take place at such time
and on such date as the Trust may determine, provided that the
Closing shall occur after the close of business on the last
business day preceding the Closing, using the valuation
procedures set forth in the then current prospectus of the
Transferor Fund or Corresponding Acquiring Fund, as the case may
be, on a date that is no earlier than the date of the final
adjournment of the meeting of the holders of the Transferor Fund
Shares at which this Plan is approved.
4. Conditions to the Closing
The consummation of the Reorganization, with respect to
a Transferor Fund and the Corresponding Acquiring Fund, is
subject to satisfaction of the following conditions and
undertakings:
(a) Organization, Existence, Etc. The Trust shall be a
business trust duly organized, validly existing and in good
standing under the laws of the State of Delaware and have the
power to carry on its business then being conducted and as
described in its then effective Registration Statement on Form
N-1A. Each Fund shall be qualified to do business under the laws
of every jurisdiction in which such qualification is required,
except where the failure to so qualify would not have a material
adverse effect on the Trust. The Trust and each Fund shall have
all necessary federal, state and local authorizations to own all
of its properties and assets and to carry on its business as now
being conducted and as described in its then effective
A-3
<PAGE>
Registration Statement on Form N-1A. Post-Effective Amendment
Number 33 to the Trust's Registration Statement on Form N-1A
shall have become effective.
(b) Registration as Investment Company. The Trust
shall be registered under the Investment Company Act of 1940 (the
"Act") as an open-end management investment company of the
management type; such registration shall not have been revoked or
rescinded and shall be in full force and effect.
(c) Capitalization. The Trust shall have an unlimited
number of A Shares, B Shares and I Shares of beneficial interest
divided into the number of separate series described in the
Trust's then effective Registration Statement on Form N-1A. All
of the outstanding shares shall have been duly authorized and
shall be validly issued, fully paid and nonassessable.
(d) Shares to be Issued Upon Reorganization. The
Acquiring Fund Shares to be issued in connection with the
Reorganization shall have been duly authorized and upon
consummation of the Reorganization shall be validly issued, fully
paid and nonassessable, and no shareholder of any Acquiring Fund
shall have any preemptive right to subscribe or purchase in
respect thereof.
(e) Taxes. The Trust shall have agreed to file the
federal income tax return of each Acquiring Fund for the taxable
year ended October 31, 1995 and to pay any taxes payable pursuant
thereto prior to their due date. The federal income tax returns
of each Transferor Fund shall have been filed for all taxable
years prior to and including the taxable year ended May 31, 1995
and all taxes payable pursuant to such returns shall have been
paid. Each Acquiring Fund and each Transferor Fund shall have
qualified as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"), in respect of each
taxable year since the commencement of its operations and the
Trust shall have no reason to believe that each Acquiring Fund
and each Transferor Fund will not so qualify in respect of its
current taxable year.
(f) Registration Statement. The Trust shall have filed
with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form N-14 (the "Registration
Statement") under the Securities Act of 1933 (the "Securities
Act") relating to the Acquiring Fund Shares issuable hereunder.
At the time it becomes effective, the Registration Statement
(i) shall comply in all material respects with the provisions of
the Securities Act and the rules and regulations of the
Commission thereunder and (ii) shall not contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
A-4
<PAGE>
therein not misleading; and at the time the Registration
Statement becomes effective, at the time of the shareholders
meeting referred to in Section 2 hereof and at the Closing, the
prospectus (the "Prospectus") and statement of additional
information included therein (the "Statement of Additional
Information"), as amended or supplemented by any amendments or
supplements filed with the Commission by the Trust, shall not
contain an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(g) Portfolio Securities. All securities to be
acquired by each Acquiring Fund in the Reorganization shall have
been approved for acquisition by the President, Vice President or
Secretary of the Trust as consistent with the investment policies
of the Acquiring Fund.
(h) Approval by Shareholders. This Plan and the
transactions contemplated by the Reorganization, with respect to
a Transferor Fund and its Corresponding Acquiring Fund, shall
have been approved by the affirmative vote of a majority of the
outstanding shares of beneficial interest of the Transferor Fund
entitled to be voted with respect thereto.
(i) Regulatory Approval. The Registration Statement
shall have been declared effective by the Commission and no stop
order under the Securities Act pertaining thereto shall have been
issued; all necessary orders or exemptions under the Act with
respect to the transactions contemplated hereby shall have been
granted by the Commission; and all necessary approvals,
registrations, and exemptions under federal and state laws shall
have been obtained.
(j) Shares to Be Issued Upon Reorganization. The
shares of each Acquiring Fund to be issued in connection with the
Reorganization shall have been duly authorized and upon
consummation of the Reorganization shall be validly issued, fully
paid, and nonassessable.
(k) Tax Opinion. The Trust shall have received the
opinion of Seward & Kissel, dated as of the Closing, addressed to
it and in form and substance satisfactory to the Trust, as to
certain of the federal income tax consequences of the
Reorganization under the Code to the Acquiring Funds, the
Transferor Funds and the Transferor Funds' shareholders. For
purposes of rendering the opinion, Seward & Kissel may rely
exclusively and without independent verification as to factual
matters upon the statements made in this Plan and the
Registration Statement, and upon such other written
representations as to matters of fact as an executive officer of
the Trust shall have verified as of the Closing. The opinion of
A-5
<PAGE>
Seward & Kissel with respect to each Transferor Fund and its
Corresponding Acquiring Fund shall be to the effect that, based
on the facts and assumptions stated therein, for federal income
tax purposes: (i) the Reorganization shall constitute a
reorganization within the meaning of Section 368(a)(1) of the
Code and that the Transferor Fund and the Acquiring Fund shall
each be a party to a reorganization within the meaning of Section
368(b) of the Code; (ii) neither the Transferor Fund nor the
Acquiring Fund shall recognize any gain or loss upon the transfer
of all the assets of the Transferor Fund to the Acquiring Fund in
exchange for Acquiring Fund Shares and the assumption by the
Acquiring Fund of all the liabilities of the Transferor Fund
pursuant to this Plan and upon distribution (whether actual or
constructive) of the Acquiring Fund Shares to shareholders of the
Transferor Fund in exchange for their respective Transferor Fund
Shares; (iii) the shareholders of the Transferor Fund who receive
Acquiring Fund Shares pursuant to the Reorganization shall not
recognize any gain or loss upon the exchange (whether actual or
constructive) of their Transferor Fund Shares for Acquiring Fund
Shares (including any fractional share interests they are deemed
to have received) in the Reorganization; (iv) the aggregate tax
basis of the Acquiring Fund Shares received (whether actually or
constructively) by each shareholder of the Transferor Fund shall
be the same as the aggregate tax basis of the Transferor Fund
Shares surrendered in the exchange; (v) the holding period of the
Acquiring Fund Shares received (whether actually or
constructively) by each shareholder of the Transferor Fund shall
include the holding period of the Transferor Fund Shares that are
surrendered in exchange therefor, provided that the relevant
Transferor Fund Shares constitute capital assets of such
shareholder at the Closing; (vi) the holding period and tax basis
of the assets of the Transferor Fund acquired by the Acquiring
Fund shall be the same as the holding period and tax basis that
the Transferor Fund had in such assets immediately prior to the
Reorganization; and (vii) the use by the Acquiring Fund of any
capital loss carryovers may be subject to limitation under
Section 383 of the Code.
(l) Opinion of Counsel. The Trust shall have received
the opinion of Seward & Kissel, as counsel for the Trust, dated
as of the Closing, addressed to and in form and substance
satisfactory to the Trust, to the effect that: (i) the Trust is a
business trust duly organized and validly existing under the laws
of the State of Delaware; (ii) the Trust is an open-end
investment company of the management type registered under the
Act; (iii) this Plan and the Reorganization provided for herein
have been duly authorized and approved by requisite action of the
Trust and the Plan is a valid and binding obligation of the
Trust, subject to applicable bankruptcy, insolvency, fraudulent
conveyance and similar laws or court decisions regarding
enforcement of creditors rights generally, and to general
A-6
<PAGE>
principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity); (iv) the
Registration Statement has been declared effective under the
Securities Act and to Seward & Kissel's knowledge no stop order
has been issued or threatened suspending its effectiveness;
(v) to Seward & Kissel's knowledge, no consent, approval, order
or other authorization of any federal or state court or
administrative or regulatory agency is required for the Trust to
carry out the terms of the Plan that will not have been obtained
by the Closing, other than as may be required under the
securities or blue sky laws of any state and other than where the
failure to obtain any such consent, approval, order or
authorization would not have a material adverse effect on the
operations of the Trust; and (vi) the A Shares, B Shares and
I Shares of beneficial interest of each Acquiring Fund to be
issued in the Reorganization have been duly authorized and upon
issuance thereof in accordance with this Plan will be validly
issued, fully paid and nonassessable, and no shareholder of the
Trust has any preemptive right to subscribe or purchase in
respect thereof.
5. Amendments; Termination
(a) Amendments. The Plan may be amended by the Board
at any time before or after approval hereof by the shareholders
of each Transferor Fund, but after such approval, no amendment
shall be made that materially alters the obligations of either
party hereto. In addition, the officers of the Trust may amend
the Plan at any time prior to the closing, notwithstanding
shareholder approval of the Plan, provided that no amendment
shall have a material adverse effect on the interests of the
shareholders of any Transferor Fund or its Corresponding
Acquiring Fund.
(b) Termination. The Board may terminate the Plan at
any time prior to the Closing without liability on the part of
the Trust or its Trustees or officers or the shareholders of the
Transferor Funds or Acquiring Funds. Termination of the Plan by
the Board may relate to one or more of the Transferor Funds and
Corresponding Acquiring Funds without effect on the survival of
the Plan with respect to any other Transferor Fund and
Corresponding Acquiring Fund.
6. Expenses
The Transferor Funds and the Acquiring Funds shall bear
all expenses incurred in connection with this Plan, and all
transactions contemplated hereby, whether or not the
Reorganization is consummated, pro rata on the basis of their net
assets.
A-7
<PAGE>
7. General
The Board and the shareholders of each Acquiring and
Transferor Fund shall not be liable for any obligations of the
Trust or of the Acquiring and Transferor Funds under this Plan.
A-8
<PAGE>
Exhibit B - Performance Information
STABLE INCOME FUND As of October 31, 1995
Managed by: Karl P. Tourville
The last year has been a profitable one for bond market investors
as slowing economic momentum fueled one of the largest bond
market rallies in history. The fiscal year ended October 31,
1995 saw a considerable flattening in the yield curve as long
treasury yields declined approximately 1.75% throughout the
course of the year. Economic fundamentals continued to
strengthen through the latter half of 1994 as strong gross
domestic product (GDP) and capacity utilization levels
exacerbated bond market inflationary fears. However, the bulls
charged through the gate as the economy dramatically slowed
through a holiday season that was expected to be brisk. It has
taken the better part of 1995 to correct an inventory build-up
which constrained GDP numbers through the first half of 1995. In
addition, slowing consumer spending levels and a lack of
inflationary pressure has further supported the rally in interest
rates. Yields on the 1-year Treasury Bills fell from 6.22% on
November 1, 1994 to 5.54% on October31, 1995, while the benchmark
30-year bond yields declined from 8.06% to 6.33% over the same
time period. This rally resulted in investors more than
recouping losses experienced during the 1994 bear market.
Investors in the short end of the yield curve benefited from the
favorable interest rate environment and tightening spread levels.
Stable Income Fund's continued emphasis on a diversified
portfolio of quality mortgage backed, asset backed and corporate
securities resulted in significant outperformance over the last
year. The Fund returned 7.20% versus 6.18% for the One Year
Treasury Bill Index during this time period.
The following chart reflects a comparison of a change in value of
a $10,000 investment in I shares of STABLE INCOME FUND, including
reinvested dividends and distributions, and the performance of
the U.S. Treasury Bills Index. Investment return and principal
value of an investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than
their original cost. Past performance is not predictive nor a
guarantee of future results.
B-1
<PAGE>
I SHARES OF STABLE INCOME FUND
VS.
ONE YEAR U.S. TREASURY BILLS INDEX
VALUE ON 10/31/95
Stable Income Fund $10,720
One Year U.S. Treasury Bills Index $10,597
Date Stable Inc. Treasury Bills Index
10/31/94 $10,000 $10,000
Nov-94 $10,030 $10,051
Dec-94 $10,070 $10,107
Jan-95 $10,120 $10,163
Feb-95 $10,200 $10,216
Mar-95 $10,280 $10,267
Apr-95 $10,340 $10,317
May-95 $10,450 $10,366
Jun-95 $10,510 $10,411
Jul-95 $10,550 $10,457
Aug-95 $10,610 $10,504
Sep-95 $10,660 $10,550
Oct-95 $10,720 $10,597
AVERAGE ANNUAL TOTAL RETURN
I Shares of Stable One Year U.S.
Income Fund Treasury Bills Index
Since Inception
on 10/31/94 7.39% 5.97%
Performance information includes the performance of the Fund's
predecessor collective trust fund for periods before the Fund's
registration statement became effective on November 11, 1994.
Performance for the collective trust fund has been adjusted to
include the effect of estimated expenses based upon the mutual
fund expense ratio as stated in the Fund's current prospectus.
Index returns do not reflect expenses, which have been deducted
from the Funds return. The collective trust fund was not
registered under the Investment Company Act of (the "1940 Act")
or subject to certain investment restrictions that are imposed by
the 1940 Act. If the collective trust fund had been registered
under the 1940 act, its performance may have been adversely
affected.
B-2
<PAGE>
INTERMEDIATE U.S. GOVERNMENT
FUND As of October 31, 1995
Managed by: Marjorie H. Grace
The fiscal year ended October 31, 1995, with yields significantly
lower across the Treasury curve, as economic data began to show
that the economy was losing steam. The largest move of the 1995
bond rally began in mid-January and ended in the first part of
June. In early July, the market was disappointed when the Fed
lowered rates by only 0.25%, causing yields to spike half of a
point upward in one week alone. For the remainder of the summer,
the bulls and bears fought it out before either view emergedas
dominant. The market continued its volatile trading range, with
the bulls winning out, pushing yields even lower by the end of
October. We have implemented a team management approach during
1995 to add additional portfolio management depth. Our goal is
to provide improved and consistent positive total returns for our
shareholders.
The following chart reflects a comparison of a change in value of
a $10,000 investment in I Shares of INTERMEDIATE U.S. GOVERNMENT
FUND, including reinvested dividends and distributions, and the
performance of the Lehman Intermediate Government Index.
Investment return and principal value of an investment in the
Fund will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Past
performance is not predictive nor a guarantee of future results.
B-3
<PAGE>
I SHARES OF INTERMEDIATE U.S. GOVERNMENT FUND
VS.
LEHMAN INTERMEDIATE GOVERNMENT INDEX
VALUE ON 10/31/95
Intermediate U.S. Government Fund $20,289
Lehman Intermediate Government Index $23,264
Date Intermediate U.S. Government Index
Oct-85 $10,000 $10,000
Oct-86 $10,910 $11,636
Oct-87 $11,400 $12,012
Oct-88 $12,259 $13,082
Oct-89 $13,354 $14,444
Oct-90 $14,315 $15,574
Oct-91 $16,176 $17,648
Oct-92 $17,687 $19,386
Oct-93 $19,509 $21,171
Oct-94 $18,225 $20,809
Oct-95 $20,289 $23,264
AVERAGE ANNUAL TOTAL RETURN
I Shares of Lehman
Intermediate Intermediate
Government Fund Government Index
One Year 11.31% 11.79%
Five Year 7.21% 8.36%
Ten Year 7.33% 8.81%
Performance information includes the performance of the Fund's
predecessor collective trust fund for periods before the Fund's
registration statement became effective on November 11, 1994.
Performance for the collective trust fund has been adjusted to
include the effect of estimated expenses based upon the mutual
fund expense ratio as stated in the Fund's current prospectus.
Index returns do not reflect expenses, which have been deducted
from the Funds return. The collective trust fund was not
registered under the Investment Company Act of 1940 (the "1940
Act") or subject to certain investment restrictions that are
imposed by the 1940 Act. If the collective trust fund had been
registered under the 1940 Act, its performance may have been
adversely affected.
B-4
<PAGE>
INCOME EQUITY FUND As of October 31, 1995
Managed by: David L. Roberts
The Fund's performance was in line with the general market (as
measured by the S&P 500 Index), advancing 27.1% over the last
year. The technology sector was the most significant contributor
to Fund performance. The Fund's largest technology holding
virtually doubled over the past year. Other sectors that helped
performance included health care, consumer staples and finance.
Health care is a good example of our taking advantage of out-of-
favor companies and industries over a market cycle as a means to
add value. The finance sector is another example of an
overweight that performed well. As of the end of the Fund's
fiscal year, the Fund's five largest common stock holdings were
AT&T, Hewlett Packard, Dun & Bradstreet, Eastman Kodak and
Honeywell.
The following chart reflects a comparison of a change in value of
a $10,000 investment in I shares of INCOME EQUITY FUND, including
reinvested dividends and distributions, and the performance of
the Standard & Poor's 500 Index. Investment return and principal
value of an investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than
their original cost. Past performance is not predictive nor a
guarantee of future results.
I SHARES OF INCOME EQUITY FUND
VS.
STANDARD & POOR'S 500 INDEX
VALUE ON 10/31/95
Income Equity Fund $40,624
Standard & Poor's 500 Index $42,070
Date Income S&P 500
Oct-85 $10,000 $10,000
Oct-86 $12,758 $13,319
Oct-87 $15,981 $14,171
Oct-88 $15,447 $16,262
Oct-89 $19,570 $20,548
Oct-90 $19,140 $19,011
Oct-91 $24,878 $25,364
Oct-92 $27,148 $27,887
Oct-93 $30,483 $32,045
Oct-94 $32,241 $33,281
Oct-95 $40,624 $42,070
B-5
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
I Shares of S&P 500
Income Equity Fund Index
One Year 25.99% 26.41%
Five Year 16.23% 17.22%
Ten Year 15.05% 15.45%
Performance information includes the performance of the Fund's
predecessor collective trust Fund for periods before the Fund's
registration statement became effective on November 11, 1994.
Index returns do not reflect expenses, which have been deducted
from the Funds return. Performance for the collective trust fund
has been adjusted to include the effect of estimated expenses
based on the Funds expense ratio during the fiscal year ended
October 31, 1995. The Funds current expense ratio may be greater
or less than that reflected in the chart. The collective trust
fund was not registered under the Investment Company Act of 1940
(the "1940 Act") or subject to certain investment restrictions
that are imposed by the 1940 Act. If the collective trust fund
had been registered under the 1940 Act, its performance may have
been adversely affected.
B-6
<PAGE>
(LOGO) NORWEST
ADVANTAGE FUNDS
PROXY SERVICES
POST OFFICE BOX 9156
FARMINGDALE, NY 117935-9858
NORWEST ADVANTAGE FUNDS
Adjustable U.S. Government Reserve Fund
Two Portland Square
Portland, Maine 04101
PROXY
This Proxy is solicited on behalf of the Board of Trustees.
Revoking any such prior appointments, the undersigned hereby
appoints each of David I. Goldstein and Thomas G. Sheehan as
proxies, each with the power to appoint his substitute, and
authorizes each of them to represent and to vote all of the
shares of beneficial interest of Adjustable U.S. Government
Reserve Fund (the "Fund"), a series of Norwest Advantage Funds
(the "Trust"), registered in the name of the undersigned at the
Special Meeting of the Shareholders of the Fund to be held at the
offices of Forum Financial Services, Inc. at Two Portland Square,
Portland, Maine 04101, on May 13, 1996 at 10:00 a.m. Eastern
time, and at any adjournment thereof (the "Meeting") in
accordance with the instructions below. The shares represented
by this Proxy will be voted in accordance with the instructions
given by the undersigned. If no specific instructions are given,
such shares will be voted FOR the Proposal set forth below and in
the discretion of the proxies on any other matter that may come
before the Meeting.
The Board of Trustees recommends a vote "FOR" the Proposal listed
below.
1
<PAGE>
TO SAVE FURTHER SOLICITATION EXPENSE, PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY USING THE ENCLOSED POSTAGE-PREPAID
ENVELOPE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS
FOLLOWS /X/
KEEP THIS PORTION FOR YOUR RECORDS
NORWEST Adjustable U.S. Government Reserve Fund
DETACH AND RETURN THIS PORTION ONLY.
VOTE FOR PROPOSAL
FOR AGAINST ABSTAIN 1. To approve a Plan of
/ / / / / / Reorganization and Liquidation
providing for the transfer of
all the assets of the Fund in
exchange for shares of Stable
Income Fund of the Trust and
the assumption by Stable Income
Fund of all the liabilities of
the Fund, the distribution of
such shares to shareholders of
the Fund in liquidation of the
Fund.
FOR AGAINST ABSTAIN 2. To transact such other business
/ / / / / / as may properly come before the
Meeting or any adjournment or
adjustments thereof.
Receipt is acknowledged of the Prospectus/Proxy Statement.
(NOTE: Checking the box labeled ABSTAIN will result in the shares
covered by the Proxy being treated as if they were voted AGAINST
the Proposal.)
IMPORTANT: Please sign and date this proxy in the space provided.
Execution by shareholders who are not individuals must be made by
an authorized signatory. Executors, administrators, trustees,
guardians or others signing in a representative capacity should
give their full title as such.
________________ _______________________ ____________
SIGNATURE SIGNATURE (JOINT OWNERS) DATE
2
<PAGE>
(LOGO) NORWEST
ADVANTAGE FUNDS
PROXY SERVICES
POST OFFICE BOX 9156
FARMINGDALE, NY 117935-9858
NORWEST ADVANTAGE FUNDS
Government Income Fund
Two Portland Square
Portland, Maine 04101
PROXY
This Proxy is solicited on behalf of the Board of Trustees.
Revoking any such prior appointments, the undersigned hereby
appoints each of David I. Goldstein and Thomas G. Sheehan as
proxies, each with the power to appoint his substitute, and
authorizes each of them to represent and to vote all of the
shares of beneficial interest of Government Income Fund
(the "Fund"), a series of Norwest Advantage Funds (the "Trust"),
registered in the name of the undersigned at the Special Meeting
of the Shareholders of the Fund to be held at the offices of
Forum Financial Services, Inc. at Two Portland Square, Portland,
Maine 04101, on May 13, 1996 at 10:00 a.m. Eastern time, and at
any adjournment thereof (the "Meeting") in accordance with the
instructions below. The shares represented by this Proxy will be
voted in accordance with the instructions given by the
undersigned. If no specific instructions are given, such shares
will be voted FOR the Proposal set forth below and in the
discretion of the proxies on any other matter that may come
before the Meeting.
The Board of Trustees recommends a vote "FOR" the Proposal listed
below.
1
<PAGE>
TO SAVE FURTHER SOLICITATION EXPENSE, PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY USING THE ENCLOSED POSTAGE-PREPAID
ENVELOPE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS
FOLLOWS /X/
KEEP THIS PORTION FOR YOUR RECORDS
NORWEST Government Income Fund
DETACH AND RETURN THIS PORTION ONLY.
VOTE FOR PROPOSAL
FOR AGAINST ABSTAIN 1. To approve a Plan of
/ / / / / / Reorganization and Liquidation
providing for the transfer of
all the assets of the Fund in
exchange for shares of
Intermediate U.S. Government
Fund the Trust and the
assumption by Intermediate U.S.
Government Fund of all the
liabilities of the Fund, the
distribution of such shares to
shareholders of the Fund in
liquidation of the Fund.
FOR AGAINST ABSTAIN 2. To transact such other business
/ / / / / / as may properly come before the
Meeting or any adjournment or
adjustments thereof.
Receipt is acknowledged of the Prospectus/Proxy Statement.
(NOTE: Checking the box labeled ABSTAIN will result in the shares
covered by the Proxy being treated as if they were voted AGAINST
the Proposal.)
IMPORTANT: Please sign and date this proxy in the space provided.
Execution by shareholders who are not individuals must be made by
an authorized signatory. Executors, administrators, trustees,
guardians or others signing in a representative capacity should
give their full title as such.
________________ _______________________ ____________
SIGNATURE SIGNATURE (JOINT OWNERS) DATE
2
<PAGE>
(LOGO) NORWEST
ADVANTAGE FUNDS
PROXY SERVICES
POST OFFICE BOX 9156
FARMINGDALE, NY 117935-9858
NORWEST ADVANTAGE FUNDS
Income Stock Fund
Two Portland Square
Portland, Maine 04101
PROXY
This Proxy is solicited on behalf of the Board of Trustees.
Revoking any such prior appointments, the undersigned hereby
appoints each of David I. Goldstein and Thomas G. Sheehan as
proxies, each with the power to appoint his substitute, and
authorizes each of them to represent and to vote all of the
shares of beneficial interest of Income Stock Fund (the "Fund"),
a series of Norwest Advantage Funds (the "Trust"), registered in
the name of the undersigned at the Special Meeting of the
Shareholders of the Fund to be held at the offices of Forum
Financial Services, Inc. at Two Portland Square, Portland, Maine
04101, on May 13, 1996 at 10:00 a.m. Eastern time, and at any
adjournment thereof (the "Meeting") in accordance with the
instructions below. The shares represented by this Proxy will be
voted in accordance with the instructions given by the
undersigned. If no specific instructions are given, such shares
will be voted FOR the Proposal set forth below and in the
discretion of the proxies on any other matter that may come
before the Meeting.
The Board of Trustees recommends a vote "FOR" the Proposal listed
below.
1
<PAGE>
TO SAVE FURTHER SOLICITATION EXPENSE, PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY USING THE ENCLOSED POSTAGE-PREPAID
ENVELOPE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS
FOLLOWS /X/
KEEP THIS PORTION FOR YOUR RECORDS
NORWEST Income Stock Fund
DETACH AND RETURN THIS PORTION ONLY.
VOTE FOR PROPOSAL
FOR AGAINST ABSTAIN 1. To approve a Plan of
/ / / / / / Reorganization and Liquidation
providing for the transfer of
all the assets of the Fund in
exchange for shares of Income
Equity Fund the Trust and the
assumption by Income Equity
Fund of all the liabilities of
the Fund, the distribution of
such shares to shareholders of
the Fund in liquidation of the
Fund.
FOR AGAINST ABSTAIN 2. To transact such other business
/ / / / / / as may properly come before the
Meeting or any adjournment or
adjustments thereof.
Receipt is acknowledged of the Prospectus/Proxy Statement.
(NOTE: Checking the box labeled ABSTAIN will result in the shares
covered by the Proxy being treated as if they were voted AGAINST
the Proposal.)
IMPORTANT: Please sign and date this proxy in the space provided.
Execution by shareholders who are not individuals must be made by
an authorized signatory. Executors, administrators, trustees,
guardians or others signing in a representative capacity should
give their full title as such.
________________ _______________________ ____________
SIGNATURE SIGNATURE (JOINT OWNERS) DATE
2
47180012.AF0
