NORWEST ADVANTAGE FUNDS, 497, 1996-04-09

NORWEST ADVANTAGE FUNDS
497, 1996-04-09

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PROSPECTUS

MARCH 1, 1996

I Shares - Diversified Equity Fund, Growth Equity Fund, Large Company Growth
Fund, Small Company Growth Fund, International Fund, Income Equity Fund, Index
Fund, Conservative Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund,
Intermediate U.S. Government Fund, Managed Fixed Income Fund and Stable Income
Fund.

OCTOBER 1, 1995, AS AMENDED MARCH 1, 1996

I Shares - Contrarian Stock Fund, Small Company Stock Fund and Total Return Bond
Fund and Institutional Shares - Ready Cash Investment Fund.

This Prospectus offers the above listed shares (the "Shares") of seventeen
separate portfolios (each a "Fund" and collectively the "Funds") of Norwest
Advantage Funds (the "Trust"), an open-end, management investment company (a
mutual fund).

This Prospectus sets forth concisely the information concerning the Trust and
each Fund that a prospective investor should know before investing. Investors
should read this Prospectus and retain it for future reference. The Trust has
filed with the Securities and Exchange Commission ("SEC") a Statement of
Additional Information (the "SAI") with respect to each Fund dated the same date
as the prospectus for the Fund and as may be further amended from time to time,
which contains more detailed information about the Trust and the Fund and which
is incorporated into this Prospectus by reference. The SAI is available without
charge by contacting the transfer agent at 733 Marquette Avenue, Minneapolis,
Minnesota, 55479-0040, (800) 338-1348. Investors should read this Prospectus and
retain it for future reference.

International Fund currently seeks to achieve its investment objective by
investing all of its investment assets in International Portfolio, a separate
portfolio of Core Trust (Delaware) ("Core Trust"), a registered investment
company. International Fund and International Portfolio have identical
investment objectives.

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
FEDERAL 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 A FUND IS SUBJECT TO INVESTMENT RISK, INCLUDING POSSIBLE LOSS
OF PRINCIPAL. THERE CAN BE NO ASSURANCE THAT READY CASH INVESTMENT FUND (WHICH
IS A MONEY MARKET FUND) WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE.

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

1. SUMMARY

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

WHO SHOULD INVEST?

<PAGE>

I Shares of the Funds are offered through this Prospectus to fiduciary, agency
and custodial clients of bank trust departments, trust companies and their
affiliates, including participants in certain qualified and nonqualified
employee benefit plans ("Plans") and to related IRA and KEOGH accounts.
Institutional Shares of Ready Cash Investment Fund are offered to various
investors who are willing to invest at least $100,000. See "Purchases and
Redemptions of Shares." Only certain Funds may be available as investment
alternatives in a Plan; participants in a Plan that invests in the Funds should
consult with their employer or plan sponsor to determine which Funds are offered
through their Plan. While no single Fund is intended to provide a complete or
balanced investment program, each can serve as a component of an investor's
long-term program to accumulate assets for retirement or other major goals.

THE NORWEST ADVANTAGE FUNDS EMPLOYEES AND COMPANIES

Investment Programs and Structures

Each Fund has distinct investment objectives and policies. These investment
objectives and policies are summarized below and more fully described under
"Investment Objectives, Policies and Risk Considerations."

There are nine equity funds (the "Equity Funds"): two Equity Funds, Diversified
Equity Fund and Growth Equity Fund, that invest their assets in several
different equity investment styles according to specified percentages, and seven
Equity Funds that invest in single styles. One of the single-style Equity Funds,
International Fund, invests exclusively in the International Portfolio
("International Portfolio") of Core Trust, a registered open-end management
investment company. There are three balanced funds (the "Balanced Funds"), which
invest specified percentages of their assets in accordance with the investment
styles of Diversified Equity Fund and three to five different fixed income
investment styles. There five fixed income funds (the "Fixed Income Funds"),
including a money market fund, Ready Cash Investment Fund.

EQUITY DIVERSIFIED EQUITY FUND seeks long-term capital appreciation while
FUNDS moderating annual return volatility by diversifying its investments
among five different equity investment styles as indicated:

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

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

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

GROWTH EQUITY FUND ASSUMES A HIGHER LEVEL OF RISK THAN DIVERSIFIED
EQUITY FUND IN ORDER TO SEEK INCREASED RETURNS.

CONTRARIAN STOCK FUND seeks capital appreciation by investing
primarily in common stocks for which the Fund's investment adviser
believes there is significant potential for price appreciation.
Investments are typically focused in undervalued and out of favor
companies.

SMALL COMPANY STOCK FUND seeks long-term capital appreciation by
investing primarily in the common stock of small and medium size
domestic companies

<PAGE>

that have a market capitalization well below that of the average
company in the Standard & Poor's 500 Composite Stock Price Index.

SMALL COMPANY GROWTH FUND seeks long-term capital appreciation by
investing primarily in the common stock of small and medium size
domestic companies that are either growing rapidly or completing a
period of significant change. This Fund currently is not open to new
investors.

LARGE COMPANY GROWTH FUND seeks long-term capital appreciation by
investing in large, high-quality domestic companies that the
investment adviser believes have superior growth potential.

INTERNATIONAL FUND seeks long-term capital appreciation by investing
directly or indirectly in high-quality companies based outside the
United States and currently pursues its investment objective through
investment of all of its investable assets in International Portfolio.

AS INTERNATIONAL FUND INVESTS EXCLUSIVELY IN INTERNATIONAL PORTFOLIO,
THE INVESTMENT EXPERIENCE OF INTERNATIONAL FUND WILL CORRESPOND
DIRECTLY WITH THE INVESTMENT EXPERIENCE OF INTERNATIONAL PORTFOLIO.
SEE "OTHER INFORMATION - CORE TRUST STRUCTURE." INTERNATIONAL
PORTFOLIO HAS THE SAME INVESTMENT OBJECTIVE AND POLICIES AS
INTERNATIONAL FUND AND SELECTS ITS INVESTMENTS ON THE BASIS OF THEIR
POTENTIAL FOR CAPITAL APPRECIATION WITHOUT REGARD TO CURRENT INCOME.

INCOME EQUITY FUND seeks long-term capital appreciation in line with
that of the overall equity securities markets and to provide above-
average dividend income.

INDEX FUND seeks to duplicate the return of the Standard & Poor's 500
Composite Stock Price Index.

BALANCED CONSERVATIVE BALANCED FUND seeks a combination of current income and
FUNDS capital appreciation by diversifying investment of the Fund's assets
among stocks, bonds and other fixed income instruments through
investment in several equity and fixed income investment styles as
indicated:

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

OF THE BALANCED FUNDS, CONSERVATIVE BALANCED FUND MOST EMPHASIZES
SAFETY OF PRINCIPAL THROUGH LIMITED EXPOSURE TO EQUITY SECURITIES.

MODERATE BALANCED FUND seeks a combination of current income and
capital appreciation by diversifying investment of the Fund's
assets among stocks, bonds and other fixed income investments
through investment in several equity and fixed income investment
styles as indicated:

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

MODERATE BALANCED FUND IS MORE EVENLY-BALANCED BETWEEN FIXED INCOME
AND EQUITY SECURITIES THAN THE OTHER BALANCED FUNDS.

<PAGE>

GROWTH BALANCED FUND seeks a combination of current income and capital
appreciation by diversifying investment of the Fund's assets between
stocks and bonds through investment in several equity and fixed income
investment styles as indicated:

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

GROWTH BALANCED FUND HAS THE LARGEST EQUITY COMPONENT OF THE BALANCED
FUNDS.

FIXED INTERMEDIATE U.S. GOVERNMENT FUND seeks income and safety of principal
by INCOME investing primarily in U.S. Government Securities. The Fund
seeks to moderate FUNDS its volatility by using a conservative
approach in structuring the maturities of its investment portfolio.

MANAGED FIXED INCOME FUND seeks to provide consistent fixed income
returns by investing primarily in a portfolio of intermediate
maturity, investment grade fixed income securities.

EFFECTIVE APRIL 1, 1996, MANAGED FIXED INCOME FUND WILL BE RENAMED
"DIVERSIFIED BOND FUND."

TOTAL RETURN BOND FUND seeks total return by investing in a portfolio
of U.S. Government and high-quality corporate fixed income securities.

STABLE INCOME FUND seeks to maintain safety of principal and provide
low volatility total return by investing primarily in short and
intermediate maturity, investment grade fixed income securities.

READY CASH INVESTMENT FUND seeks to provide high current income to the
extent consistent with the preservation of capital and the maintenance
of liquidity.

READY CASH INVESTMENT FUND IS A MONEY MARKET FUND.

Management of the Funds
The investment adviser to each Fund (the "Adviser") is Norwest Investment
Management, a part of Norwest Bank Minnesota, N.A. ("Norwest"). Norwest is a
subsidiary of Norwest Corporation, a multi-bank holding company that was
incorporated under the laws of Delaware in 1929. As of December 31, 1995,
Norwest Corporation was the 11th largest bank holding company in the United
States in terms of assets. As of that date, the Adviser managed or provided
investment advice with respect to assets totaling approximately $23 billion.
Except for International Fund, the Adviser makes investment decisions for the
Funds and continuously reviews, supervises and administers each Fund's
investment program.

Subject to the Adviser's general oversight, Crestone Capital Management, Inc.
("Crestone"), a subsidiary of Norwest, acts as investment subadviser to Small
Company Stock Fund. Subject to the Adviser's general oversight, Schroder Capital
Management International Inc. ("Schroder") acts as investment subadviser to
Diversified Equity Fund, Growth Equity Fund and each Balanced Fund (Schroder,
Crestone and the Adviser are sometimes referred to collectively as the
"Advisers"). Schroder also serves as International Portfolio's investment
adviser.

Norwest serves as the Trust's transfer agent, dividend disbursing agent and
custodian, and provides certain administrative services to International Fund.
The manager of the Trust and distributor of its shares is Forum Financial
Services, Inc. ("Forum"). Forum also serves as administrator of Core Trust. See
"Management of the Funds - Investment Advisory Services" and "Administrative and
Other Services."

<PAGE>

Purchase and Redemption of Shares
Shares of beneficial interest of each Fund are offered without a sales charge
and may be redeemed without charge. Norwest offers investors in the Funds
various periodic investment and redemption services. The minimum initial
investment in each Fund is $1,000, except that the minimum initial investment in
Ready Cash Investment Fund is $100,000. See "Purchases and Redemptions of
Shares."

Certain Risk Factors
There can be no assurance that any Fund will achieve its investment objective or
that Ready Cash Investment Fund will maintain a stable net asset value. Except
for Ready Cash Investment Fund, each Fund's net asset value will fluctuate based
upon changes in the value of the Fund's portfolio securities and, accordingly,
upon redemption an investment in a Fund may be worth more or less than its
original value. The Fixed Income Funds' net asset values will tend to vary
inversely with movements in interest rates and the potential for appreciation in
a Fixed Income Fund in the event of a decline in interest rates may be limited
or negated by increased principal prepayments on certain mortgage-backed
securities held by the Fund. The policy of investing in smaller companies
employed by Small Company Stock Fund, Small Company Growth Fund and the Equity
Funds and Balanced Funds that invest in small company securities entails certain
risks in addition to those normally associated with investments in equity
securities. Similarly, Contrarian Stock Fund's policy of investing in securities
that may be out of favor with many institutional investors and International
Fund's policy of investing directly or indirectly in foreign securities entail
certain risks in addition to those normally associated with investments in
equity securities.

By investing solely in International Portfolio, International Fund may achieve
certain efficiencies and economies of scale. Nonetheless, this investment could
also have potential adverse effects on International Fund. Investors in
International Fund should consider these risks, as described under "Other
Information - Core Trust Structure."

An investment in any Fund involves certain risks, depending on the types of
investments made and the types of investment techniques employed. All
investments by the Funds entail some risk. Certain investments and investment
techniques, however, entail additional risks, such as investments in foreign
issuers, issuers with limited market capitalization, mortgage- or asset-backed
securities, zero-coupon bonds and options, futures contracts, forward contracts
and swap agreements. The use of leverage by certain Funds through borrowings,
margin transactions, short sales, reverse repurchase agreements and other
investment techniques involves additional risks. For more details about each
Fund and its investments and risks, see "Investment Objectives, Policies and
Risk Considerations" and "Appendix A: Investments, Investment Strategies and
Risk Considerations."

EXPENSES OF INVESTING IN THE FUNDS
The purpose of the following table is to assist investors in understanding the
various expenses that an investor in the Funds will bear directly or indirectly.
There are no transaction charges in connection with purchases, redemptions or
exchanges of Shares. None of the Funds has adopted a Rule 12b-1 plan with
respect to the Shares and, accordingly, no Fund incurs distribution expenses
with respect to the Shares.

Annual Fund Operating Expenses
As a percentage of average net assets (after waivers and reimbursements as noted
below)(1)
Investment Total
Advisory Other Operating
Expense Fee Expenses(3)
Diversified Equity Fund(2) 0.65% 0.35% 1.00%
Growth Equity Fund(2) 0.90% 0.35% 1.25%
Contrarian Stock Fund 0.64% 0.56% 1.20%

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Small Company Stock Fund 0.68% 0.52% 1.20%
Small Company Growth Fund 0.90% 0.35% 1.25%
Large Company Growth Fund 0.65% 0.35% 1.00%
International Fund(2) 0.45% 1.05% 1.50%
Income Equity Fund 0.65% 0.35% 1.00%
Index Fund 0.00% 0.25% 0.25%
Conservative Balanced Fund(2) 0.45% 0.35% 0.80%
Moderate Balanced Fund(2) 0.53% 0.35% 0.88%
Growth Balanced Fund(2) 0.58% 0.35% 0.93%
Intermediate U.S. Government Fund 0.33% 0.35% 0.68%
Managed Fixed Income Fund* 0.32% 0.35% 0.67%
Total Return Bond Fund 0.20% 0.55% 0.75%
Stable Income Fund 0.30% 0.35% 0.65%
Ready Cash Investment Fund 0.37% 0.11% 0.48%

*EFFECTIVE APRIL 1, 1996, MANAGED FIXED INCOME FUND WILL BE RENAMED "DIVERSIFIED
BOND FUND."

(1) For a further description of the various expenses incurred in the operation
of the Funds, see "Management of the Funds." For Contrarian Stock Fund, Small
Company Stock Fund, Total Return Bond Fund and Ready Cash Investment Fund, the
amounts of expenses are based on amounts incurred during those Funds' most
recent fiscal year ended May 31, 1995 and for the other Funds during their most
recent fiscal year ended October 31, 1995. With respect to Contrarian Stock
Fund, Small Company Stock Fund, Index Fund and Total Return Bond Fund, expense
information has been restated to reflect current expenses, as if these expenses
had been in effect for each Fund's most recent fiscal year.

The table reflects an increase in Income Equity Fund's advisory fee from 0.50%
which is expected to be approved by that Fund's shareholders at a meeting to be
held in April 1996. Prior to such approval, the Fund will continue to pay an
advisory fee of 0.50% of its average daily net assets.

Absent actual (or, in the case of Contrarian Stock Fund, Small Company Stock
Fund and Total Return Bond Fund, estimated) expense reimbursements and fee
waivers, the Investment Advisory Fees of Contrarian Stock Fund, Small Company
Stock Fund, Managed Fixed Income Fund, Total Return Bond Fund and Ready Cash
Investment Fund would be: 0.80%, 1.00%, 0.35%, 0.50% and 0.38% respectively.
Absent actual (or, in the case of Contrarian Stock Fund, Small Company Stock
Fund, Index Fund and Total Return Bond Fund, estimated) expense reimbursements
and fee waivers, Other Expenses and Total Operating Expenses of each Fund would
be, respectively: Diversified Equity Fund: 0.43% and 1.08%; Growth Equity Fund:
0.44% and 1.34%; Contrarian Stock Fund: 0.77% and 1.57%; Small Company Stock
Fund: 0.81% and 1.81%; Small Company Growth Fund: 0.45% and 1.35%; Large Company
Growth Fund: 0.55% and 1.20%; International Fund: 1.21% and 1.66%; Income Equity
Fund: 0.62% and 1.27; Index Fund: 0.49% and 0.64%; Conservative Balanced Fund:
0.51% and 0.96%; Moderate Balanced Fund: 0.45% and 0.98%; Growth Balanced Fund:
0.45% and 1.03%; Intermediate U.S. Government Fund: 0.60% and 0.93%; Managed
Fixed Income Fund: 0.47% and 0.82%; Total Return Bond Fund: 0.67% and 1.17%;
Stable Income Fund: 0.68% and 0.98%; Ready Cash Investment Fund: 0.35% and
0.73%. Fee waivers are voluntary and may reduced or eliminated at any time.

(2) International Fund's Other Expenses include the Fund's pro rata portion of
the operating expenses of International Portfolio, which will be borne
indirectly by International Fund shareholders. As long as its assets are
invested in International Portfolio, International Fund pays no investment
advisory fees directly. International Fund pays Forum a management fee, and Core
Trust pays Forum an administration fee for its services to International
Portfolio, of which International Fund bears its pro rata portion. The Board of
Trustees of the Trust believes that the aggregate per share expenses of
International Fund and International Portfolio will be approximately equal to
the expenses International Fund would incur if its assets were invested directly
in foreign securities. Pursuant to an exemptive order obtained from the SEC,
Diversified Equity Fund, Growth Equity Fund, Conservative Balanced Fund,
Moderate Balanced Fund and Growth Balanced Fund invest portions of their assets
in other portfolios of Core Trust, each of which bears certain expenses not
reflected in the table. See "Investment Objectives, Policies and Risk
Considerations - Investments in Core Trust" and "Management of the Funds -
Expenses of the Funds."

(3) Other Expenses for the Funds include transfer agency fees payable to Norwest
at annual rates of 0.10% of Ready Cash Investment Fund's average daily net
assets attributable to Institutional Shares and 0.25% of each other Fund's
average daily net assets attributable to I Shares. Other Expenses for Contrarian
Stock Fund, Small Company Stock Fund, Total Return Bond Fund and Ready Cash
Investment Fund also include custodial fees payable to Norwest at a annual rate
of up to 0.05% of each Fund's average daily net assets; Norwest charges no
custodian fees to the other Funds, but they incur subcustodian fees. In
addition, Other Expenses for International Fund include administrative service
fees payable to Norwest of 0.25%.

Example of Expenses
<TABLE>
<CAPTION>

One Three Five Ten
Year Years Years Years

<PAGE>

<S> <C> <C> <C> <C>
Diversified Equity Fund $10 $32 $55 $122
Growth Equity Fund 13 40 69 152
Contrarian Stock Fund 12 38 66 145
Small Company Stock Fund 12 38 66 145
Small Company Growth Fund 13 40 69 152
Large Company Growth Fund 10 32 55 122
International Fund 15 47 82 179
Income Equity Fund 10 32 55 122
Index Fund 3 8 14 32
Conservative Balanced Fund 8 26 44 99
Moderate Balanced Fund 9 28 49 108
Growth Balanced Fund 9 30 51 114
Intermediate U.S. Government Fund 7 22 38 85
Managed Fixed Income Fund 7 21 37 83
Total Return Bond Fund 8 24 41 93
Stable Income Fund 7 21 36 81
Ready Cash Investment Fund 5 15 27 60
</TABLE>

The above table is a hypothetical example that indicates the expenses an
investor would pay assuming a $1,000 investment in each Fund, a 5 percent annual
return, reinvestment of all dividends and distributions, and full redemption at
the end of each period. The example is based on the expenses listed in the
"Annual Fund Operating Expenses" table above. The 5 percent annual return is not
a prediction of and does not represent the Funds' projected returns; rather, it
is required by government regulation. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR RETURN. ACTUAL EXPENSES AND RETURN
MAY BE GREATER OR LESS THAN INDICATED.

2. FINANCIAL HIGHLIGHTS

Information in the Financial Highlights section represents selected data for a
single outstanding Share of each Fund for the periods shown. Information for the
year ended May 31, 1995 for Contrarian Stock Fund, Small Company Stock Fund,
Total Return Bond Fund and Ready Cash Investment Fund and for the fiscal period
from November 11, 1994 (commencement of operations) through October 31, 1995 for
the other Funds has been audited by KMPG Peat Marwick LLP, independent auditors.
The financial statements of Contrarian Stock Fund, Small Company Stock Fund,
Total Return Bond Fund and Ready Cash Investment Fund for the fiscal year ended
May 31, 1995 and the independent auditors' report thereon are contained in the
Annual Report of those Funds and are incorporated by reference into the SAI. The
other Funds' financial statements for the fiscal period ended October 31, 1995
and the independent auditors' report thereon are contained in those Funds'
Annual Report and also are incorporated by reference into the SAI. Further
information about each Fund's performance is contained in the Fund's Annual
Report, which may be obtained from the Trust without charge.
<TABLE>
<CAPTION>

Diversified Growth Contrarian Small Company
Equity Fund Equity Fund Stock Fund Stock Fund
Period Period Year Period Year Period
Ended Ended Ended Ended Ended Ended
October 31 October 31 May 31 May 31 May 31 May 31
1995(a) 1995(a) 1995 1994(a) 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
Beginning Net Asset
Value per Share $ 22.21 $ 22.28 $ 9.71 $ 10.00 $ 9.80 $ 10.00
Net Investment
Income (Loss) 0.22 (0.02) 0.11 0.07 0.12 0.08
Net Realized and
Unrealized Gain (Loss)
on Investments, Foreign
Currency Transactions
and Futures Transactions 5.10 4.71 1.19 (0.29) 0.87 (0.20)

<PAGE>

Dividends from Net
Investment Income -- -- (0.11) (0.07) (0.12) (0.08)
Distributions from Net
Realized Gains -- -- (0.003) -- (0.08) --
Ending Net Asset
Value per Share $ 27.53 $ 26.97 $ 10.90 $ 9.71 $ 10.59 $ 9.80
Ratios to Average Net Assets:
Expenses (b) 1.00%(c)(d) 1.25%(c)(d) 1.12% 0.62%(c) 0.52% 0.20%(c)
Net Investment
Income (Loss) 1.01%(c) (0.11%)(c) 0.91% 1.82%(c) 1.14% 2.03%(c)
Total Return 23.95% 21.10% 13.52% (5.35%)(c) 10.13% (2.93%)(c)
Portfolio Turnover
Rate 10.33% 8.90% 30.32% 2.67% 68.09% 14.98%
Net Assets at the End
of Period/Year (000's Omitted) $ 711,111 $ 564,004 $ 45,832 $ 4,548 $ 54,240 $ 9,251

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

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

Expenses 1.08%(c)(d) 1.34%(c)(d) 1.57% 3.52%(c) 1.82% 4.33%(c)
(c) Annualized.
(d) Excludes expenses related to investment in Core Trust.
</TABLE>

<TABLE>
<CAPTION>
Large Small
Company Company Income
Growth Growth International Equity Index
Fund Fund Fund Fund Fund
Period Ended October 31, 1995(a)
<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value per Share $ 18.50 $ 21.88 $ 17.28 $ 18.90 $ 21.80
Net Investment Income (Loss) (0.05) (0.11) 0.09 0.46 0.45
Net Realized and Unrealized
Gain (Loss) on Investments,
Foreign Currency Transactions
and Futures Transactions 5.14 8.22 0.62 4.66 5.42
Dividends from Net
Investment Income -- -- -- -- --
Distributions from Net Realized Gains -- -- -- -- --
Ending Net Asset Value per Share $ 23.59 $ 29.99 $ 17.99 $ 24.02 $ 27.67
Ratios to Average Net Assets:
Expenses (b) 1.00%(c) 1.25%(c) 1.50%(c)(d) 0.85%(c) 0.50%(c)
Net Investment Income (Loss) (0.23%)(c)(0.47%)(c) 0.54%(c) 2.51%(c) 2.12%(c)
Total Return 27.51% 37.07% 4.11% 27.09% 26.93%
Portfolio Turnover Rate 31.60% 106.55% N/A 7.03% 14.48%
Net Assets at the End of
Period (000's Omitted) $ 63,567 $ 278,058 $91,401 $ 49,000 $ 186,197

(a) Each Fund commenced operations and the offering of I Shares on November
11, 1994.
(b) During the period, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the
ratios of expenses to average net assets would have been:
Expenses 1.20%(c) 1.35%(c) 1.66%(c) 1.12%(c) 0.64%(c)
(c) Annualized.
(d) Includes expenses allocated from International Portfolio of Core Trust of
0.80%, net of waivers of 0.10%.
</TABLE>

Conservative Moderate Growth Total Return
Balanced Balanced Balanced Bond
Fund Fund Fund Fund
Period Period Period Year Period
Ended Ended Ended Ended Ended
October 31 October 31 October 31 May 31 May 31
1995(a) 1995(a) 1995(a) 1995 1994(a)
<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value per Share $ 16.19 $ 17.25 $ 17.95 $ 9.54 $ 10.00
Net Investment Income (Loss) 0.75 0.65 0.47 0.67 0.27
Net Realized and Unrealized
Gain (Loss) on Investments,
Foreign Currency Transactions
and Futures Transactions 1.27 1.94 2.83 0.19 (0.46)
Dividends from Net

<PAGE>

Investment Income -- -- -- (0.67) (0.27)
Distributions from Net Realized Gains -- -- -- ----
Ending Net Asset Value per Share $ 18.21 $ 19.84 $ 21.25 $ 9.73 $9.54
Ratios to Average Net Assets:
Expenses (b) 0.80%(c)(d) 0.88%(c)(d) 0.93%(c)(d) 0.71% 0.46%(c)
Net Investment Income (Loss) 4.67%(c) 3.76%(c) 2.63%(c) 7.04%6.81%(c)
Total Return 12.48% 15.01% 18.38% 9.43% (4.62%)(c)
Portfolio Turnover Rate 65.53% 62.08% 41.04% 35.19% 37.50%
Net Assets at the End of
Period/Year (000's Omitted) $ 136,710 $ 373,998 $ 374,892 $ 96,199 $ 11,694

(a) Total Return Bond Fund commenced the offering of I Shares on December 31,
1993. Each other Fund commenced operations and the offering of I Shares
on November 11, 1994.
(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratios
of expenses to average net assets would have been:
Expenses 0.96%(c)(d) 0.98%(c)(d) 1.03%(c)(d) 1.17% 2.10%(c)
(c) Annualized.
(d)Excludes expenses related to investment in Core Trust.
</TABLE>

<TABLE>
<CAPTION>
Managed Ready
Intermediate Fixed Stable Cash
U.S. Government Income Income Investment
Fund Fund Fund Fund
Period Ended Period Ended Period Ended Year Ended Period Ended
October 31 October 31 October 31 May 31 May 31
1995(a) 1995(a) 1995(a) 1995 1994(a)
<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value per Share $ 55.55 $ 25.08 $ 10.00 $ 1.00 $ 1.00
Net Investment Income (Loss) 4.67 1.65 0.50 0.049 0.013
Net Realized and Unrealized
Gain (Loss) on Investments,
Foreign Currency Transactions
and Futures Transactions 1.76 1.19 0.22 -- --
Dividends from Net
Investment Income -- -- -- (0.049) (0.013)
Distributions from Net
Realized Gains -- -- -- -- --
Ending Net Asset Value per Share $ 61.98 $ 27.92 $ 10.72 $ 1.00 $ 1.00
Ratios to Average Net Assets:
Expenses (b) 0.68%(c) 0.67%(c) 0.65%(c) 0.48% 0.43%(c)
Net Investment Income (Loss) 7.79%(c) 5.87%(c) 5.91%(c) 4.97% 3.12%(c)
Total Return 11.58% 11.32% 7.20% 4.98% 3.17%(c)
Portfolio Turnover Rate 240.90% 58.90% 115.85% -- --
Net Assets at the End of
Period/Year (000's Omitted) $ 50,213 $ 171,453 $ 48,087 $ 506,243 $ 333,464

(a) Ready Cash Investment Fund commenced the offering of Institutional Shares
on January 4, 1994. Each other Fund commenced operations and the offering
of I Shares on November 11, 1994.
(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratios
of expenses to average net assets would have been:
Expenses 0.93%(c) 0.82%(c) 0.98%(c) 0.73% 0.81%(c)
(c) Annualized.
</TABLE>

3. INVESTMENT OBJECTIVES, POLICIES
AND RISK CONSIDERATIONS

The Funds offered through this Prospectus consist of seventeen Funds, each with
distinct investment objectives and policies: nine Equity Funds, three Balanced
Funds and five Fixed Income Funds. Most of the Funds invest their assets in
singular investment styles that correspond to their objectives. Of the Equity
Funds, two Funds - Diversified Equity Fund and Growth Equity Fund - invest their
assets in several different equity investment styles. The use of multiple equity
investment styles by each of these Funds - through percentage allocations
consistent with the Fund's investment objective - is intended to reduce the risk
associated with the use of a single style, which may move in and out of favor
during the course of a market cycle. The Balanced

<PAGE>

Funds invest specified percentages of their assets in accordance with the
investment styles of Diversified Equity Fund and three to five different fixed
income investment styles. The Balanced Funds rebalance their portfolios
periodically and Diversified Equity Fund and Growth Equity Fund rebalance their
portfolios daily to maintain specified percentages of assets invested in
particular investment styles. The percentage of a Fund's assets invested using a
specified investment style may be changed at any time by the Adviser in response
to market or other conditions.

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

INVESTMENT OBJECTIVES

Each of the Funds has its own distinct investment objective which may not be
changed without approval of the Fund's shareholders. There can be no assurance
that any Fund will achieve its investment objective.

Equity Funds
DIVERSIFIED EQUITY FUND'S investment objective is to provide long-term capital
appreciation while moderating annual return volatility by diversifying its
investments in accordance with different equity investment styles.

GROWTH EQUITY FUND'S investment objective is to provide a high level of long-
term capital appreciation while moderating annual return volatility by
diversifying its investments in accordance with different equity investment
styles. Because the Fund seeks increased returns, it is subject to
correspondingly greater risks than Diversified Equity Fund.

CONTRARIAN STOCK FUND'S investment objective is to seek capital appreciation by
investing primarily in common stocks for which the Adviser believes there is
significant potential for price appreciation.

SMALL COMPANY STOCK FUND'S investment objective is long-term capital
appreciation. The Fund pursues this objectve by investing primarily in the
common stock of small and medium-size domestic companies which have a market
capitalization well below that of the average company in the Standard & Poor's
500 Composite Stock Price Index.

SMALL COMPANY GROWTH FUND'S investment objective is to provide long-term capital
appreciation by investing primarily in small and medium-sized domestic companies
that are either growing rapidly or completing a period of significant change.

INTERNATIONAL FUND'S investment objective is to provide long-term capital
appreciation by investing directly or indirectly in high-quality companies based
outside the United States. International Portfolio, in which International Fund
invests all of its assets, has the same investment objective.

LARGE COMPANY GROWTH FUND'S investment objective is to provide long-term capital
appreciation by investing primarily in large, high-quality domestic companies
that the investment adviser believes have superior growth potential.

INCOME EQUITY FUND'S investment objective is to provide both long-term capital
appreciation in line with that of the overall equity securities markets and
above-average dividend income.

INDEX FUND'S investment objective is to duplicate the return of the Standard &
Poor's 500 Composite Stock Price Index.

Balanced Funds
CONSERVATIVE BALANCED FUND'S investment objective is to provide a combination of
current income and capital appreciation by diversifying investment of the Fund's
assets among stocks, bonds and other fixed income investments. The Fund
emphasizes safety of principal through

<PAGE>

limited exposure to equity securities. The Fund has the smallest equity
securities position of the three Balanced Funds.

MODERATE BALANCED FUND'S investment objective is to provide a combination of
current income and capital appreciation by diversifying investment of the Fund's
assets among stocks, bonds and other fixed income investments. The Fund provides
a portfolio more evenly-balanced between fixed income and equity securities than
the other Balanced Funds.

GROWTH BALANCED FUND'S investment objective is to provide a combination of
current income and capital appreciation by diversifying
investment of the Fund's assets between stocks and bonds. The Fund has the
largest equity securities position of the Balanced Funds.

Fixed Income Funds
INTERMEDIATE U.S. GOVERNMENT FUND'S investment objective is to provide income
and safety of principal by investing primarily in U.S. Government Securities.

MANAGED FIXED INCOME FUND'S investment objective is to provide consistent fixed
income returns by investing primarily in a portfolio of intermediate maturity,
investment grade fixed income securities.

EFFECTIVE APRIL 1, 1996, MANAGED FIXED INCOME FUND, IN PURSUING ITS INVESTMENT
OBJECTIVE, WILL BEGIN INVESTING ITS ASSETS IN TWO INVESTMENT STYLES IN ADDITION
TO THE INVESTMENT STYLE CURRENTLY EMPLOYED AND WILL BE RENAMED "DIVERSIFIED BOND
FUND" TO REFLECT THIS CHANGE.

TOTAL RETURN BOND FUND'S investment objective is to seek total return. The Fund
pursues this objective by investing in a portfolio of U.S. Government and
investment grade corporate fixed income investments.

STABLE INCOME FUND'S investment objective is to maintain safety of principal
while providing low-volatility total return.

READY CASH INVESTMENT FUND'S investment objective is to provide high current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity.

INVESTMENTS IN CORE TRUST
International Fund currently seeks to achieve its investment objective by
investing all of its investment assets in International Portfolio, a separate
Portfolio of Core Trust. In addition, the Trust has received an exemptive order
from the SEC under which Diversified Equity Fund, Growth Equity Fund,
Conservative Balanced Fund, Moderate Balanced Fund and Growth Balanced Fund
(collectively the "Blended Funds") currently invest the portions of their assets
that are managed in a small company, an index and an international investment
style, respectively, in Small Company Portfolio, Index Portfolio, and
International Portfolio II (the "Blended Portfolios"). These Portfolios are each
separate portfolios of Core Trust. By pooling their assets in the Blended
Portfolios, the Blended Funds may be able to achieve benefits that they could
not achieve by investing directly in securities. See "Other Information - Core
Trust Structure."

The investment objectives and policies and investment risk considerations for
International Portfolio II and Index Portfolio are identical to the investment
objectives and policies and investment risk considerations of International Fund
and Index Fund. The investment objective of Small Company Portfolio is to
provide long-term capital appreciation by investing primarily in small and
medium-sized domestic companies that are either growing rapidly or completing a
period of significant change. This Portfolio invests its assets in the
investment styles of Small Company Stock Fund and Small Company Growth Fund and
a small company "value" investment style described below; in the future, this
Portfolio may invest its assets in accordance with additional small company
investment styles.

INVESTMENT POLICIES
Equity Funds

<PAGE>

To achieve their investment objectives, the Equity Funds invest primarily in
common stocks and other equity securities. International Fund currently invests
exclusively in International Portfolio which invests primarily in common stocks
and other equity securities of foreign issuers. See "Other Information - Core
Trust Structure." The domestic securities in which an Equity Fund invests are
generally listed on a securities exchange or included in the National
Association of Securities Dealers Automated Quotation (NASDAQ) National Market
System but may be traded in the over-the-counter securities market. Under normal
circumstances, each of the Equity Funds will invest substantially all of its
assets, but not less than 65 percent of its total assets, in equity securities.

DIVERSIFIED EQUITY FUND follows a "multi-style" approach designed to minimize
the volatility and risk of investing in equity securities. The Fund's portfolio
combines five different equity investment styles, those of four of the Equity
Funds - Large Company Growth Fund, International Fund, Income Equity Fund and
Index Fund - and a small company investment style (the "Small Company style")
that in turn utilizes the investment styles of Small Company Stock Fund and
Small Company Growth Fund (the "Small Company Stock Fund style" and the "Small
Company Growth Fund style," respectively) and a small company value investment
style (the "Small Company Value style"). The Fund utilizes different equity
investment styles in order to reduce the risk of price and return volatility
associated with reliance on a single investment style. Because Diversified
Equity Fund blends five equity investment styles, it is anticipated that its
price and return volatility will be less than that of Growth Equity Fund, which
blends three equity investment styles. The Fund generally invests the following
percentages of its total assets in the indicated investment styles:

DIVERSIFIED Index Fund style 25%
EQUITY FUND Income Equity Fund style 25%
ALLOCATION Large Company Growth Fund style 25%
Small Company style 10%
International Fund style 15%
TOTAL FUND ASSETS 100%

Investors should refer to the descriptions below of each of the foregoing Equity
Funds and Small Company style for a discussion of the objectives, policies and
risks involved in the investments and investment techniques of those styles and,
accordingly, of the portions of Diversified Equity Fund invested in those
styles. The management of the Fund's assets is divided among the Fund's six
portfolio managers, including four who are also the portfolio managers for
corresponding Equity Funds. Three portfolio managers jointly co-manage the
assets allocated to the Small Company style. The percentage of a Fund's assets
invested using a particular investment style may be changed at any time by the
Adviser in response to market or other conditions.

GROWTH EQUITY FUND follows a "multi-style" approach designed to reduce the
volatility and risk of investing in equity securities. The Fund's portfolio
combines three different equity investment styles, those of two of the Equity
Funds - Large Company Growth Fund and International Fund - and a small company
investment style (the "Small Company style") that in turn utilizes the
investment styles of Small Company Stock Fund and Small Company Growth Fund (the
"Small Company Stock Fund style" and the "Small Company Growth Fund style,"
respectively) and a small company value investment style (the "Small Company
Value style"). The Fund utilizes different equity investment styles in order to
reduce the risk of price and return volatility associated with reliance on a
single investment style. It is anticipated that the Fund's price and return
volatility will be somewhat greater than those of Diversified Equity Fund, which
blends five equity investment styles. The Fund generally invests the following
percentages of its total assets in the indicated investment styles:

GROWTH Large Company Growth Fund style 35%
EQUITY FUND Small Company style 35%
ALLOCATION International Fund style 30%
TOTAL FUND ASSETS 100%

<PAGE>

Investors should refer to the descriptions below of each of the foregoing Equity
Funds and the Small Company style for a discussion of the objectives, policies
and risks involved in the investments and investment techniques of those styles
and, accordingly, of the portions of Growth Equity Fund invested using those
styles. The management of the Fund's assets is divided among the Fund's four
portfolio managers, including three who are also the portfolio managers for
corresponding Equity Funds. Three portfolio managers jointly co-manage the
assets allocated to the Small Company style. The percentage of a Fund's assets
invested using a particular investment style may be changed at any time by the
Adviser in response to market or other conditions.

CONTRARIAN STOCK FUND invests according to the basic premise of the Adviser's
"contrarian" investment approach: that security prices change more than
fundamental investment values because consensus thinking often results in severe
undervaluation of securities whose immediate problems are obvious and whose
longer term prospects are, therefore, viewed too negatively. This consensus
pessimism can create investment opportunity. Consistent with this underlying
approach, the Adviser will purchase stocks whose prices are temporarily
depressed, either because they are out of favor with, or simply ignored by, the
investment community.

The basis of the Adviser's contrarian investment approach is the comparison of
the value and the price of a security. The Adviser generally analyzes a
security's value in terms of recovery earnings and potential share price over a
three-year investment time horizon. Typically, stocks that the Adviser considers
for purchase will tend to have significantly depressed prices and relatively low
price to book value ratios.

The Fund's policy of investing in securities that may be temporarily out of
favor differs from the investment approach followed by many other mutual funds
with a similar investment objective. Such mutual funds typically do not invest
in securities that have declined sharply in price, are not widely followed, or
are issued by companies that may have reported poor earnings or that may have
suffered a cyclical downturn in business. The Adviser believes, however, that
purchasing securities depressed by temporary factors may provide investment
returns superior to those obtained when premium prices are paid for issues
currently in favor.

The Fund may invest in preferred stock and securities convertible into common
stock and may invest up to 20 percent of its total assets in foreign securities
and in American Depository Receipts and other similar securities of foreign
issuers. See "Investment Policies - Equity Funds - International Fund - Foreign
Investment Risks and Considerations." In addition, the Fund may invest in fixed
income securities that are rated, at the time of purchase, within the three
highest rating categories assigned by a nationally recognized statistical rating
organization such as Moody's Investors Service, Standard & Poor's and Fitch
Investors Service L.P., or which are unrated and determined by the Adviser to be
of comparable quality. These instruments may have fixed, floating or variable
rates of interest. See "Additional Investment Policies - Fixed Income Securities
and Their Characteristics."

SMALL COMPANY STOCK FUND, SMALL COMPANY GROWTH FUND AND THE SMALL COMPANY STYLE
each invest primarily in the common stock of small and medium size domestic
companies which have a market capitalization well below that of the average
company in the Standard & Poor's 500 Composite Stock Price Index. Market
capitalization refers to the total market value of a company's outstanding
shares of common stock. Small Company Stock Fund considers small and medium
companies as those whose market capitalizations are less than $1 billion at the
time of the Fund's purchase, although it is anticipated that investments will be
primarily in companies with capitalizations of less than $750 million. Small
Company Growth Fund considers small and medium companies to be those with market
capitalizations less than $750 million at the time of the Fund's purchase. Under
normal circumstances, Small Company Stock Fund, Small Company Growth Fund and
the components of the other Funds that invest in the Small Company style will
invest at least 65 percent of their total assets in common stock issued by small
and medium size companies.

<PAGE>

In selecting securities for SMALL COMPANY STOCK FUND, the Adviser seeks
securities with significant price appreciation potential, and attempts to
identify companies that show above-average growth, as compared to long-term
overall market growth. The companies in which the Fund invests may be in a
relatively early stage of development or may produce goods and services which
have favorable prospects for growth due to increasing demand or developing
markets. Frequently, such companies have a small management group and single
product or product line expertise that, in the view of the Adviser, may result
in an enhanced entrepreneurial spirit and greater focus which may allow the
firms to be successful. The Adviser believes that such companies may develop
into significant business enterprises and that an investment in such companies
offers a greater opportunity for capital appreciation than an investment in
larger more established entities. Small companies frequently retain a large part
of their earnings for research, development and investment in capital assets,
however, so that the prospects for immediate dividend income are limited.

Small Company Stock Fund may invest in preferred stock and securities
convertible into common stock and may invest up to 20 percent of its total
assets in foreign securities and in American Depository Receipts, European
Depository Receipts and other similar securities of foreign issuers. See
"Investment Policies - Equity Funds - International Fund - Foreign Investment
Risks and Considerations." In addition, the Fund may invest in fixed income
securities of small companies that are rated, at the time of purchase, within
the three highest rating categories assigned by a nationally recognized
statistical rating organization such as Moody's Investors Service, Standard &
Poor's and Fitch Investors Service, L.P., or which are unrated and determined by
the Adviser to be of comparable quality. These instruments may have fixed,
floating or variable rates of interest. See "Additional Investment Policies -
Fixed Income Securities and Their Characteristics."

In selecting securities for SMALL COMPANY GROWTH FUND, the Adviser seeks to
identify companies that are rapidly growing (usually with relatively short
operating histories) or that are emerging from a period of investor neglect by
undergoing a dramatic change. These changes may involve a sharp increase in
earnings, the hiring of new management or measures taken to close the gap
between its share price and takeover/asset value. The Fund may invest up to 10
percent of its total assets in foreign securities and in American Depository
Receipts and other similar securities of foreign issuers. See "Investment
Policies - Equity Funds - International Fund - Foreign Investment Risks and
Considerations." The Fund may not invest more than 10 percent of its total
assets in the securities of a single issuer. The Fund does not currently invest
in preferred stock and securities convertible into common stock but reserves the
right to do so in the future.

In selecting securities allocated to the SMALL COMPANY STYLE component of Growth
Equity Fund, Diversified Equity Fund and the Balanced Funds, the Adviser uses
the Small Company Stock Fund style, the Small Company Growth Fund style and the
Small Company Value style, currently allocating 1/3 of its assets to each style.

PRIOR TO DECEMBER 11, 1995, THE SMALL COMPANY STYLE DID NOT ALLOCATE ANY ASSETS
TO THE SMALL COMPANY VALUE STYLE. THE ALLOCATION OF 1/3 OF ASSETS INVESTED IN
THE SMALL COMPANY STYLE TO THE SMALL COMPANY VALUE STYLE IS EXPECTED TO BE
COMPLETE BY JUNE 1, 1996. THE SMALL COMPANY STYLE MAY IN THE FUTURE ALLOCATE ITS
ASSETS TO ADDITIONAL INVESTMENT STYLES.

In selecting portfolio investments, the SMALL COMPANY VALUE STYLE focuses on
securities that are conservatively valued in the marketplace relative to their
underlying fundamentals. Value investing provides investors with a less
aggressive way to take advantage of growth opportunities of small companies. In
investing in accordance with this style, the Adviser will seek to invest in
stocks priced low relative to the stock of comparable companies, determined by
price/earnings ratios, cash flows or other measures. Value investing therefore
may reduce downside risk while offering potential for capital appreciation as a
stock gains favor among other investors and its stock price rises.

SMALL COMPANY INVESTMENT RISKS AND CONSIDERATIONS. The companies in which Small
Company Stock Fund, Small Company Growth Fund and the Small Company style
components of

<PAGE>

the other Funds invest may be in a relatively early stage of development or may
produce goods and services which have favorable prospects for growth due to
increasing demand or developing markets. Frequently, such companies have a small
management group and single product or product line expertise. These
characteristics may result in an enhanced entrepreneurial spirit and greater
focus which may make those companies successful. The Adviser believes that such
companies may develop into significant business enterprises and that an
investment in such companies offers a greater opportunity for capital
appreciation than an investment in larger more established entities. Small
companies frequently retain a large part of their earnings for research,
development and investment in capital assets, however, so that the prospects for
immediate dividend income are limited.

Investments in smaller companies generally involve greater risks than
investments in larger companies due to the small size of the issuer and the fact
that the issuer may have limited product lines, access to financial markets and
management depth. In addition, many of the securities of smaller companies trade
less frequently and in lower volumes than securities issued by larger firms. The
result is that the short-term price volatility of small company securities is
greater than the short-term price volatility of the securities of larger, more
established companies that are widely held. The securities of small companies
may also be more sensitive to market changes generally than the securities of
large companies. In addition, securities that are traded in the over-the-counter
market or on a regional securities exchange may not be traded every day or in
the volume typical of securities traded on a national securities exchange. As a
result, disposition of a portfolio security, to meet redemptions by shareholders
or otherwise, may require a Fund to sell the security at a discount from market
prices, to sell during periods when disposition is not desirable, or to make
many small sales over an extended period.

While securities issued by smaller companies historically have experienced
greater market appreciation than the securities of larger entities, there is no
assurance that they will continue to do so or that the Fund will be successful
in identifying companies whose securities will appreciate.

LARGE COMPANY GROWTH FUND invests primarily in the common stock of large, high-
quality domestic companies that have superior growth potential. Large companies
are those whose market capitalizations are at least $500 million at the time of
the Fund's purchase and whose equity trading volume would permit the sale or
purchase of a large position in the securities of the company in 2 or 3 trading
days. Market capitalization refers to the total market value of a company's
outstanding shares of common stock. In selecting securities for the Fund, the
Adviser seeks issuers whose stock is attractively valued and whose fundamental
characteristics both are significantly better than the market average and which
support internal earnings growth capability. The Fund's holdings may include the
securities of companies whose growth potential is, in the Adviser's opinion,
generally unrecognized or misperceived by the market. In addition, the Fund may
invest up to 20 percent of its total assets in American Depository Receipts,
European Depository Receipts and other similar securities of large foreign
issuers and may attempt to reduce the overall risk of its foreign investments by
using foreign currency forward contracts. See "Investment Policies - Equity
Funds - International Fund - Foreign Investment Risks and Considerations." Under
normal circumstances, the Fund will not invest more than 10 percent of its total
assets in the securities of a single issuer. The Fund does not currently invest
in preferred stock or securities convertible into common stock but reserves the
right to do so in the future.

INTERNATIONAL FUND is designed for investors who desire to achieve international
diversification of their investments by participating in foreign securities
markets. Because international investments generally involve risks in addition
to those risks associated with investments in the United States, the Fund should
be considered only as a vehicle for international diversification.

As the Fund has the same investment policies as International Portfolio and
currently invests all of its assets in International Portfolio, the following
investment policies are discussed with respect to International Portfolio only.
International Portfolio normally will invest substantially all of its assets in
equity securities of companies domiciled outside the United States.
International Portfolio selects its investments on the basis of their potential
for capital appreciation without regard to

<PAGE>

current income. The Portfolio also may invest in the securities of closed-end
investment companies investing primarily in foreign securities and may invest in
debt obligations of foreign governments or their political subdivisions,
agencies or instrumentalities, and debt obligations of supranational
organizations and foreign corporations. Investment will be diversified among
securities of issuers in foreign countries including, but not limited to, Japan,
Germany, the United Kingdom, France, the Netherlands, Hong Kong, Singapore and
Australia. In general, International Portfolio will invest only in securities of
companies and governments in countries that Schroder, in its judgment, considers
both politically and economically stable. International Portfolio has no limit
on the amount of its foreign assets which may be invested in any one type of
foreign instrument or in any foreign country; however, to the extent
International Portfolio concentrates its assets in a foreign country, it will
incur greater risks.

International Portfolio may purchase preferred stock and securities convertible
into common stock, and may purchase American Depository Receipts, European
Depository Receipts or other similar securities of foreign issuers.
International Portfolio may also enter into foreign exchange contracts,
including forward contracts to purchase or sell foreign currencies, in
anticipation of its currency requirements and to protect against possible
adverse movements in foreign exchange rates. Although such contracts may reduce
the risk of loss to International Portfolio from adverse movements in currency
values, the contracts also limit possible gains from favorable movements.

FOREIGN INVESTMENT RISKS AND CONSIDERATIONS. All investments, domestic and
foreign, involve certain risks. Investments in the securities of foreign issuers
may involve risks in addition to those normally associated with investments in
the securities of U.S. issuers. All foreign investments are subject to risks of
foreign political and economic instability, adverse movements in foreign
exchange rates, the imposition or tightening of exchange controls or other
limitations on repatriation of foreign capital, and changes in foreign
governmental attitudes towards private investment, possibly leading to
nationalization, increased taxation or confiscation of foreign investors'
assets.

Moreover, dividends payable on foreign securities may be subject to foreign
withholding taxes, thereby reducing the income available for distribution to
International Portfolio's shareholders; commission rates payable on foreign
transactions are generally higher than in the United States; foreign accounting,
auditing and financial reporting standards differ from those in the United
States and, accordingly, less information may be available about foreign
companies than is available about issuers of comparable securities in the United
States; and foreign securities may trade less frequently and with lower volume
and may exhibit greater price volatility than U.S. securities.

Changes in foreign exchange rates will also affect the value in U.S. dollars of
all foreign currency-denominated securities held by International Portfolio.
Exchange rates are influenced generally by the forces of supply and demand in
the foreign currency markets and by numerous other political and economic events
occurring outside the United States, many of which may be difficult, if not
impossible, to predict.

Similarly, if the exchange rate declines between the time after International
Portfolio's income has been earned and computed in U.S. dollars and the time it
is paid may require International Portfolio to liquidate portfolio securities to
acquire sufficient U.S. dollars to make a distribution. Similarly, if the
exchange rate declines between the time International Portfolio incurs expenses
in U.S. dollars and the time such expenses are paid, International Portfolio may
be required to liquidate additional foreign securities to purchase the U.S.
dollars required to meet such expenses.

INCOME EQUITY FUND invests primarily in the common stock of large, high-quality
domestic companies 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.

<PAGE>

In selecting securities for the Fund, the Adviser uses various valuation
measures, including above-average dividend yields and below industry average
price to earnings, price to book and price to sales ratios. The Fund considers
large companies to be those whose market capitalizations are at least $600
million at the time of the Fund's purchase. Market capitalization refers to the
total market value of a company's outstanding shares of common stock. The Fund
may also invest in preferred stock and securities convertible into common stock
and may purchase American Depository Receipts, European Depository Receipts and
other similar securities of foreign issuers. See "Investment Policies - Equity
Funds - International Fund - Foreign Investment Risks and Considerations."
Under normal circumstances, the Fund will not invest more than 10 percent of
its total assets in the securities of a single issuer.

INDEX FUND is designed to duplicate the return of the Standard & Poor's 500
Composite Stock Index (the "Index") with minimum tracking error, while also
minimizing transaction costs. Under normal circumstances, the Fund will hold
stocks representing 96 percent or more of the capitalization-weighted market
values of the Index. Portfolio transactions for the Fund generally are executed
only to duplicate the composition of the Index, to invest cash received from
portfolio security dividends or shareholder investments in the Fund, and to
raise cash to fund Share redemptions. The Fund may hold cash or cash equivalents
for the purpose of facilitating payment of the Fund's expenses or Share
redemptions. For these and other reasons, the Fund's performance can be expected
to approximate but not be equal to that of the Index.

The Fund may utilize index futures contracts to a limited extent. Index futures
contracts are bilateral agreements pursuant to which two parties agree to take
or make delivery of an amount of cash equal to a specified dollar amount times
the difference between the index value at the close of trading of the contract
and the price at which the futures contract is originally struck. As no physical
delivery of securities comprising the index is made, a purchaser of index
futures contracts may participate in the performance of the securities contained
in the index without the required capital commitment. Index futures contracts
may be used for several reasons: to simulate full investment in the underlying
index while retaining a cash balance for fund management purposes, to facilitate
trading or to reduce transaction costs. For a description of futures contracts
and their risks see "Appendix A: Investments, Investment Strategies and Risk
Considerations - Futures Contracts and Options."

The Index tracks the total return performance of 500 common stocks which are
chosen for inclusion in the Index by Standard & Poor's ("S&P") on a statistical
basis. The inclusion of a stock in the Index in no way implies that S&P believes
the stock to be an attractive investment. The 500 securities, most of which
trade on the New York Stock Exchange, represent approximately 70 percent of the
total market value of all U.S. common stocks. Each stock in the Index is
weighted by its market value. Because of the market-value weighting, the 50
largest companies in the Index currently account for approximately 45 percent of
its value. The Index emphasizes large-capitalizations and, typically, companies
included in the Index are the largest and most dominant firms in their
respective industries.

The Fund is not sponsored, endorsed, sold or promoted by S&P, nor does S&P make
any representation or warranty, implied or express, to the purchasers of the
Fund or any member of the public regarding the advisability of investing in
index funds or the ability of the Index to track general stock market
performance. S&P does not guarantee the accuracy and/or the completeness of the
Index or any data included therein.

S&P makes no warranty, express or implied, as to the results to be obtained by
the Fund, owners of the Fund, any person or any entity from the use of the Index
or any data included therein. S&P makes no express or implied warranties and
hereby expressly disclaims all such warranties of merchantability or fitness for
a particular purpose for use with respect to the Index or any data included
therein.

Balanced Funds

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CONSERVATIVE BALANCED FUND, MODERATE BALANCED FUND and GROWTH BALANCED FUND each
invest in a balanced portfolio of fixed income and equity securities.
Conservative Balanced Fund has the smallest equity securities component of the
three Funds and is the most conservative Balanced Fund. Growth Balanced Fund has
the largest equity securities component of the three Balanced Funds and is the
most aggressive of these Funds. The equity portion of each Balanced Fund's
portfolio uses the five different equity investment styles of Diversified Equity
Fund. Diversified Equity Fund combines the different equity investment styles of
four of the Equity Funds - Large Company Growth Fund, International Fund, Income
Equity Fund and Index Fund - and investment in a small company investment style
(the "Small Company style") in order to reduce the risk of relying on a single
equity investment style. See "Investment Policies - Equity Funds - Diversified
Equity Fund." The blending of different equity investment styles is intended to
reduce the price and return volatility of the equity portion of the Balanced
Funds.

The fixed income portion of each Balanced Fund's portfolio uses from three to
five different fixed income investment styles. Conservative Balanced Fund uses
five fixed income investment styles - the investment styles of Managed Fixed
Income Fund, Total Return Bond Fund and Stable Income Fund (the "Managed Fixed
Income Fund style," the "Total Return Bond Fund style" and the "Stable Income
Fund style," respectively), a "positive return" investment style (the "Positive
Return style") and a short maturity investment style (the "Short Maturity
style"). Moderate Balanced Fund uses four fixed income investment styles - the
Managed Fixed Income Fund style, the Total Return Bond Fund style, the Stable
Income Fund style and the Positive Return style. Growth Balanced Fund uses three
fixed income investment styles - the Managed Fixed Income Fund style, the Total
Return Bond Fund style and the Positive Return style. The blending of different
fixed income investment styles is intended to reduce the risk associated with
relying on a single fixed income investment style.

The base allocation among investment styles for each Balanced Fund is set forth
below. As market values of the Funds' assets change, the percentage of Fund
assets invested in any style may temporarily deviate from the base allocations.
In response thereto, the Adviser will periodically effect transactions for the
Balanced Funds to restablish their base allocations. In addition, as the
securities markets change, the Adviser may attempt to enhance the returns of any
of the Balanced Funds by changing, within certain limits, the percentage of Fund
assets invested in fixed income and equity securities. The Adviser may, in its
discretion, increase or decrease the fixed income and equity percentages by up
to 5 percent for Conservative Balanced Fund, 10 percent for Moderate Balanced
Fund and 15 percent for Growth Balanced Fund. For example, the Managed Fixed
Income Fund style, the Total Return Bond Fund style and the Positive Return
style of Growth Balanced Fund, each of which is used currently with respect to
11 2/3 percent of that Fund's assets (a total of 35 percent), may each be
increased to 16 2/3 percent (a total of 50 percent) or decreased to 6 2/3
percent (a total of 20 percent) of that Fund's assets. In making these changes,
each Balanced Fund is required to limit its redemptions to no more than 1
percent of a Blended Portfolio's net assets during any period of less than
thirty days. Absent unstable market conditions, the Adviser does not anticipate
making a substantial number of percentage changes. When the Adviser believes a
change in the base allocation percentages is desirable, it will sell and
purchase securities to effect the change. When the Adviser believes that a
change will be temporary (generally, 3 years or less), it may choose to effect
the change by using futures contract strategies as described below in "Temporary
Allocations."

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

The Fund generally invests the following percentages of its total assets in
accordance with the indicated investment styles (as noted under "Investment
Policies - Equity Funds - Diversified

<PAGE>

Equity Fund" above, Diversified Equity Fund generally invests its assets using
five different equity investment styles):

CONSERVATIVE Diversified Equity Fund style 25%
BALANCED FUND INDEX FUND STYLE 25%, INCOME EQUITY FUND STYLE 25%,
ALLOCATION LARGE COMPANY GROWTH FUND STYLE 25%,
SMALL COMPANY STYLE 10%, INTERNATIONAL FUND STYLE 15%
Managed Fixed Income Fund style 16 2/3%
Total Return Bond Fund style 16 2/3%
Positive Return style 16 2/3%
Stable Income Fund style 15%
Short Maturity style 10%
TOTAL FUND ASSETS 100%

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

MODERATE BALANCED FUND is designed for investors seeking roughly equivalent
exposures to fixed income securities and equity securities. The fixed income
portion of the Fund's portfolio uses the Managed Fixed Income Fund style, the
Total Return Bond Fund style, the Stable Income Fund style and the Positive
Return style in order to reduce the risk of relying on a single fixed income
investment style.

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

MODERATE Diversified Equity Fund style 40%
BALANCED FUND INDEX FUND STYLE 25%, INCOME EQUITY FUND STYLE 25%,
ALLOCATION LARGE COMPANY GROWTH FUND STYLE 25%,
SMALL COMPANY STYLE 10%, INTERNATIONAL FUND STYLE 15%
Managed Fixed Income Fund style 15%
Total Return Bond Fund style 15%
Positive Return style 15%
Stable Income Fund style 15%
TOTAL FUND ASSETS 100%

Investors should refer to the descriptions of Diversified Equity Fund (and the
five investment styles used by that Fund), Managed Fixed Income Fund, Total
Return Bond Fund and Stable Income Fund for a discussion of the objectives,
policies and risks involved in the investments and investment techniques of
those Funds and, accordingly, of the portions of Moderate Balanced Fund that are
invested using their investment styles. The investment policies related to the
Positive Return style are listed below. The management of the Fund's assets is
divided among the Fund's ten portfolio managers - the portfolio managers of
Diversified Equity Fund, Managed Fixed Income Fund, Total Return Bond Fund,
Stable Income Fund and the portfolio manager who manages assets allocated to the
Positive Return style. The percentage of a Fund's assets

<PAGE>

invested using a particular investment style may be changed at any time by the
Adviser in response to market or other conditions.

GROWTH BALANCED FUND is designed for investors seeking long-term capital
appreciation in the equity securities market in a balanced fund. The fixed
income portion of the Fund's portfolio uses the Managed Fixed Income Fund style,
the Total Return Bond Fund style and the Positive Return style in order to
reduce the risk of relying on a single fixed income investment style.
The Fund generally invests the following percentages of its total assets in
accordance with the indicated investment styles (as noted under "Investment
Policies - Equity Funds - Diversified Equity Fund" above, Diversified Equity
Fund generally invests its assets using five different equity investment
styles):

GROWTH Diversified Equity Fund style 65%
BALANCED FUND INDEX FUND STYLE 25%, INCOME EQUITY FUND STYLE 25%,
ALLOCATION LARGE COMPANY GROWTH FUND STYLE 25%,
SMALL COMPANY STYLE 10%, INTERNATIONAL FUND STYLE 15%
Managed Fixed Income Fund style 11 2/3%
Total Return Bond Fund style 11 2/3%
Positive Return style 11 2/3%
TOTAL FUND ASSETS 100%

Investors should refer to the descriptions of Diversified Equity Fund (and the
five investment styles used by that Fund), Managed Fixed Income Fund and Total
Return Bond Fund for a discussion of the objectives, policies and risks involved
in the investments and investment techniques of those Funds which relate to the
portions of Growth Balanced Fund that are invested using their investment
styles. The investment policies related to the Positive Return style are listed
below. Management of the Fund's assets is divided among the Fund's nine
portfolio managers - the portfolio managers of Diversified Equity Fund, Managed
Fixed Income Fund and Total Return Bond Fund and the portfolio managers who
manage assets allocated to the Positive Return style. The percentage of a Fund's
assets invested using a particular investment style may be changed at any time
by the Adviser in response to market or other conditions.

The POSITIVE RETURN STYLE seeks positive total return each calendar year
regardless of the bond market by investing in a portfolio of U.S. Government and
corporate fixed income investments. The Adviser's investment with respect to
assets invested in this investment style are divided into two components, short
bonds with maturities of 2 years or less and long bonds with maturities of 25
years or more. Shifts between short bonds and long bonds are made based on
movement in the prices of bonds rather than on the Adviser's forecast of
interest rates. During periods of falling prices (generally, increasing interest
rate environments) long bonds are sold to protect capital and limit losses.
Conversely, when bond prices rise, long bonds are purchased. Accordingly, the
average maturity of the portfolio of securities invested in the Positive Return
style will vary. It is anticipated that under normal circumstances the portfolio
of securities invested in this investment style will have an average dollar-
weighted maturity of between 1 and 30 years.

Under normal circumstances, at least 50 percent of the net assets allocated to
this style will be U.S. Government Securities, including Treasury securities.
All securities allocated to this style will be, at the time of purchase, (i)
rated in one of the two highest long-term rating categories assigned by a
nationally recognized statistical rating organization such as Moody's Investors
Service, Standard & Poor's and Fitch Investors Service, L.P. or (ii) unrated and
determined by the Adviser to be of comparable quality. No more than 25 percent
may be in the second highest rating category. Investments may include zero-
coupon securities, securities with variable or floating rates of interest and
asset-backed securities, but only 25 percent of the net assets allocated to this
investment style, in the aggregate, may be invested in these securities. The
Positive Return style may not invest in convertible securities, mortgage pass-
through securities or private placement securities. Within these constraints,
the Adviser purchases securities that it believes have above-average yields.

<PAGE>

The SHORT MATURITY STYLE seeks to provide a higher total return than is
generally available from money market funds. The assets allocated to the Short
Maturity style will be invested in a portfolio of high-quality fixed and
variable rate fixed income securities. This investment style is managed to
increase income and preserve or enhance total return by actively managing
average portfolio maturity in light of market conditions and trends. Investments
may include a broad spectrum of short-term instruments of United States and
foreign issuers, including U.S. Government Securities, and the debt securities
of financial institutions, corporations, foreign governments, municipal
governments, supranational organizations and others. Investments are limited to
instruments with a remaining maturity of 5 years or less. With respect to assets
allocated to this style, the Fund will maintain a dollar-weighted average
portfolio maturity of 1 year or less and, under normal circumstances, will
maintain 50 percent of the assets in instruments with a maturity of under 1
year. Up to 25 percent of the assets may be non-U.S. dollar denominated and,
with respect to those assets, the Adviser will attempt to hedge currency
fluctuation risk. Investments may include mortgage-backed securities and other
asset-backed securities, limited to not more than 50 percent and 25 percent,
respectively, of the assets allocated to this investment style. The Fund may
enter into "dollar roll" transactions related to these investments and may
purchase stripped mortgage-backed securities. The Fund may invest up to 10
percent of its assets allocated to the style in guaranteed investment contracts
issued by insurance companies. The securities allocated to the style may have
variable or floating rates of interest or principal and may include
participation interests and Municipal Securities. Municipal Securities include
obligations of the states, territories or possessions of the United States and
their subdivisions, authorities and corporations.

All securities allocated to the Short Maturity style will be, at the time of
purchase, (i) rated in one of the two highest short-term rating categories by
two Nationally Recognized Statistical Rating Organizations ("NRSROs") (or, if
only one NRSRO has issued a rating, by that NRSRO), (ii) rated in one of the
three highest long-term rating categories by two NRSROs (or, if only one NRSRO
has issued a rating, by that NRSRO), or (iii) unrated and determined by the
Adviser to be of comparable quality. Of the securities allocated to this style,
no more than 5 percent may be in any of the lowest permissible rating
categories.

In order to manage its exposure to different types of investments, when
investing in this style the Adviser may enter into interest rate, currency and
mortgage swap agreements and may purchase and sell interest rate caps, floors
and collars. With respect to assets invested in this style, the Adviser may also
engage in certain strategies involving options (both exchange-traded and over-
the-counter) to attempt to enhance the return on assets invested in this style
and may attempt to reduce the overall risk of those assets or limit the
uncertainty in the level of future foreign exchange rates (hedge) by using
options and futures contracts and foreign currency forward contracts. The
Adviser's ability to use these strategies with respect to this style may be
limited by market considerations, regulatory limits and tax considerations. In
investing in accordance with this style, the Adviser may write covered call and
put options, buy put and call options, buy and sell interest rate and foreign
currency futures contracts and buy options and write covered options on those
futures contracts. An option is covered if, so long as the respective Fund is
obligated under the option, it owns an offsetting position in the underlying
security or futures contract or maintains a segregated account of liquid, high-
grade debt instruments with a value at all times sufficient to cover the Fund's
obligations under the option.

TEMPORARY ALLOCATIONS. In its discretion, the Adviser may increase or decrease
the percentage of assets of each Balanced Fund that are invested in fixed income
and equity securities. When the Adviser believes that a percentage reallocation
will be of short duration (generally, up to 3 years), the Adviser may determine
to achieve the economic equivalent of a reallocation without incurring
securities transaction costs by using futures contracts rather than selling and
purchasing securities. Under this strategy, to the extent of the percentage
asset allocation change, the Fund would not be invested in nor subject to the
risks related to the types of individual securities purchased in accordance with
the various investment styles used by the Fund. Rather, the Fund would be
invested in and subject to the risks related to futures contracts. For a
description of

<PAGE>

futures contracts and their risks, see "Appendix A: Investments, Investment
Strategies and Risk Considerations - Futures Contracts and Options."

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

INTERMEDIATE U.S. GOVERNMENT FUND seeks to attain its investment objective by
investing primarily in fixed and variable rate U.S. Government Securities. Under
normal circumstances, the Fund intends to invest at least 65 percent of its
assets in U.S. Government Securities and may invest up to 35 percent of its
assets in fixed income securities that are not U.S. Government Securities. The
Fund emphasizes the use of intermediate maturity securities to lessen interest
rate risk, while employing low risk yield enhancement techniques to add to the
Fund's return over a complete economic or interest rate cycle, such as
adjustable rate securities and swap agreements.

The securities in which the Fund invests will include mortgage-backed and other
asset-backed securities, although the Fund will limit these investments to not
more than 50 percent and 25 percent, respectively, of its total assets. As part
of its mortgage-backed securities investments, the Fund may enter into "dollar
roll" transactions. Certain fixed income securities are "zero-coupon" securities
and the Fund will limit its investment in these securities, except those issued
through the U.S. Treasury's STRIPS program, to not more than 10 percent of the
Fund's total assets. The Fund may also invest in securities that are restricted
as to disposition under the Federal securities laws (sometimes referred to as
"private placements" or "restricted securities"). In addition, the Fund may not
invest more than 25 percent of its total assets in securities issued or
guaranteed by any single agency or instrumentality of the U.S. Government,
except the U.S. Treasury. The Fund may make short sales and may purchase
securities on margin (borrow money in order to purchase securities), which are
considered speculative investment techniques. See "Appendix A: Investments,
Investment Strategies and Risk Considerations - Short Sales" and "- Purchasing
Securities on Margin."

The Fund will only purchase securities that are rated, at the time of purchase,
within the two highest rating categories assigned by a nationally recognized
statistical rating organization, such as Moody's Investors Service, Standard &
Poor's or Fitch Investors Services, L.P., or which are unrated and determined by
the Adviser to be of comparable quality. See "Additional Investment Policies -
Rating Matters" below.

The Fund primarily will invest in debt obligations with maturities (or average
life in the case of mortgage-backed and similar securities) ranging from short-
term (including overnight) to 12 years. Under normal circumstances, the Fund's
portfolio of securities will have an average dollar-weighted maturity of between
3 and 7 years. Under normal circumstances, the Fund's portfolio of securities
will have a duration of between 75 percent and 125 percent of the duration of
the Lehman Intermediate Government Bond Index, which is used as the Fund's
benchmark index as described under "Other Information - Fund Performance."
Duration is a measure of a debt security's average life that reflects the
present value of the security's cash flow and, accordingly, is a measure of
price sensitivity to interest rate changes ("duration risk"). Because earlier
payments on a debt security have a higher present value, duration of a security,
except a zero-coupon security, will be less than the security's stated maturity.

<PAGE>

overall risk of its investments ("hedge") by using options and futures
contracts. The Fund's ability to use these strategies may be limited by market
considerations, regulatory limits and tax considerations. The Fund may write
covered call and put options, buy put and call options, buy and sell interest
rate futures contracts, and buy options and write covered options on those
futures contracts. An option is covered if, so long as the Fund is obligated
under the option, it owns an offsetting position in the underlying security or
futures contract or maintains a segregated account of liquid, high-grade debt
instruments with a value at all times sufficient to cover the Fund's obligations
under the option.

IT IS ANTICIPATED THAT, EFFECTIVE MAY 17, 1996, THE FUND WILL CHANGE ITS NAME TO
"INTERMEDIATE GOVERNMENT INCOME FUND."

MANAGED FIXED INCOME FUND seeks to attain its investment objective by investing
primarily in investment grade intermediate term obligations. The Fund invests in
a diversified portfolio of fixed and variable rate U.S. dollar denominated fixed
income securities of a broad spectrum of United States and foreign issuers,
including U.S. Government Securities and the debt securities of financial
institutions, corporations, and others. The Fund emphasizes the use of
intermediate maturity securities to lessen duration risk (as described below),
while employing low risk yield enhancement techniques to add to the Fund's
return over a complete economic or interest rate cycle. Intermediate term
obligations comprise securities with maturities of between 2 and 20 years.

The securities in which the Fund invests include mortgage-backed securities and
other asset-backed securities, although the Fund limits these investments to not
more than 50 percent and 25 percent, respectively, of its total assets. As part
of its asset-backed securities investments, the Fund may enter into "dollar
roll" transactions and may purchase stripped mortgage-backed securities. The
Fund may invest any amount of its assets in U.S. Government Securities, or in
the securities of financial institutions, corporations, and others. The Fund may
invest in securities that are restricted as to disposition under the Federal
securities laws (sometimes referred to as "private placement" or "restricted
securities"). In addition, the Fund may not invest more than 30 percent of its
total assets in the securities issued or guaranteed by any single agency or
instrumentality of the U.S. Government, except the U.S. Treasury.

The Fund may invest up to 10 percent of its total assets in participations
purchased from financial institutions in loans or securities in which the Fund
may invest directly. The Fund may also invest up to 10 percent of its total
assets in each of (i) obligations issued or guaranteed by the governments of
countries which the Adviser believes do not present undue risk or by those
countries' political subdivisions, agencies or instrumentalities, (ii)
obligations of supranational organizations and (iii) obligations of the states,
territories or possessions of the United States and their subdivisions,
authorities and corporations ("municipal securities").

The Fund only purchases securities that are rated, at the time of purchase,
within the four highest long-term or two highest short-term rating categories
assigned by a nationally recognized statistical rating organization, such as
Moody's Investors Service, Standard & Poor's or Fitch Investors Service, L.P.,
or which are unrated and determined by the Adviser to be of comparable quality.
See "Additional Investment Policies - Rating Matters" below.

The Fund invests in debt obligations with maturities (or average life in the
case of mortgage-backed and similar securities) ranging from short-term
(including overnight) to 30 years. Under normal circumstances, the Fund's
portfolio of securities will have an average dollar-weighted portfolio maturity
of between 3 and 12 years and a duration of between 2 and 6 years. Duration is a
measure of a debt security's average life that reflects the present value of the
security's cash flow and, accordingly, is a measure of price sensitivity to
interest rate changes ("duration risk"). Because earlier payments on a debt
security have a higher present value, duration of a security, except a zero-
coupon security, is less than the security's stated maturity.

In order to manage its exposure to different types of investments, the Fund may
enter into interest rate and mortgage swap agreements and may purchase and sell
interest rate caps, floors and

<PAGE>

collars. The Fund may also engage in certain strategies involving options (both
exchange-traded and over-the-counter) to attempt to enhance the Fund's return
and may attempt to reduce the overall risk of its investments ("hedge") by using
options and futures contracts. The Fund's ability to use these strategies may be
limited by market considerations, regulatory limits and tax considerations. The
Fund may write covered call and put options, buy put and call options, buy and
sell interest rate futures contracts and buy options and write covered options
on those futures contracts. An option is covered if, so long as the Fund is
obligated under the option, it owns an offsetting position in the underlying
security or futures contract or maintains a segregated account of liquid, high-
grade debt instruments with a value at all times sufficient to cover the Fund's
obligations under the option.

EFFECTIVE APRIL 1, 1996 THE FUND WILL EMPLOY TWO INVESTMENT STYLES - THE TOTAL
RETURN STYLE AND THE POSITIVE RETURN STYLE - IN ADDITION TO THE INVESTMENT STYLE
CURRENTLY EMPLOYED BY THE FUND (THE "MANAGED FIXED INCOME FUND STYLE") TO THE
EXTENT CONSISTENT WITH THE FUND'S INVESTMENT OBJECTIVE AND POLICIES. IN
ADDITION, TO MORE APPROPRIATELY REFLECT THE UTILIZATION OF THREE DISTINCT
INVESTMENT STYLES IN PURSUIT OF THE FUND'S INVESTMENT OBJECTIVE, EFFECTIVE APRIL
1, 1996 THE FUND WILL BE RENAMED "DIVERSIFIED BOND FUND." UNDER THE FUND'S NEW
"MULTI-STYLE" APPROACH, THE FUND GENERALLY WILL INVEST THE FOLLOWING PERCENTAGES
OF ITS TOTAL ASSETS IN ACCORDANCE WITH THE INDICATED INVESTMENT STYLES:

DIVERSIFIED Managed Fixed Income Fund style 33 1/3%
BOND FUND Total Return style 33 1/3%
ALLOCATION Positive Return style 33 1/3%
TOTAL FUND ASSETS 100%

EACH OF THE TWO NEW INVESTMENT STYLES, BASED ON DISPARATE INVESTMENT CRITERIA,
TENDS TO INVEST IN DEBT OBLIGATIONS WITH EITHER SHORTER OR LONGER MATURITIES
THAN THE FUND'S CURRENT INVESTMENT STYLE. RELIANCE ON MULTIPLE INVESTMENT STYLES
IS INTENDED TO REDUCE THE PRICE AND RETURN VOLATILITY OF THE FUND AND PROVIDE
MORE CONSISTENT FIXED INCOME RETURNS. FOR A DESCRIPTION OF EACH OF THE TOTAL
RETURN BOND STYLE AND THE POSITIVE RETURN STYLE, SEE "INVESTMENT POLICIES -
BALANCED FUNDS."

TOTAL RETURN BOND FUND invests primarily in U.S. Government Securities,
including mortgage-backed securities, and investment grade corporate fixed
income securities. The Adviser's investment decisions are based on its analysis
of major changes in the direction of interest rates rather than on attempts by
the Adviser to predict short-term interest rate fluctuations. The Adviser also
applies a contrarian perspective by looking for undervalued segments of the
fixed income market which the Adviser believes offer opportunities for increased
returns.

In making its investment decisions for the Fund, the Adviser focuses on the
maturity structure and quality structure of the Fund's portfolio. When the
Adviser's outlook is for rising interest rates and falling bond values, the
majority of the Fund's portfolio will be invested in securities with short-term
maturities in an effort to ride interest rates up while minimizing the negative
effect of falling bond prices. When the Adviser anticipates interest rates to
fall and bond prices to increase, the Fund generally will be invested in
securities with long-term maturities in an attempt to lock in high interest
rates and capitalize on bond price appreciation. Accordingly, the average
maturity of the Fund's portfolio will vary from 1 to 30 years.

The Fund may invest an unlimited amount of its assets in either corporate
securities, including corporate bonds, debentures and notes, or U.S. Government
Securities. The Fund will be invested to a greater degree in corporate
securities, however, as the spread between corporate and U.S. Government
Securities offers potential for incremental returns. The Fund limits its
investments in variable or floating rate securities to 5 percent of its net
assets. The Fund does not currently invest in mortgage-backed securities or
enter "dollar roll" transactions, but reserves the right to do so in the future.

The Fund may invest in preferred stocks and securities convertible into common
stock, but may not own the common stock into which a convertible security
converts. The Fund will only purchase securities (including convertible
securities) that are rated, at the time of purchase, within the four

<PAGE>

highest long-term or two highest short-term rating categories assigned by a
nationally-recognized statistical rating organization, such as Moody's Investors
Service, Standard & Poor's and Fitch Investors Services, L.P., or which are
unrated and determined by the Adviser to be of comparable quality.

STABLE INCOME FUND seeks to maintain safety of principal while providing low
volatility total return by investing primarily in investment grade short-term
obligations. The Fund invests in a diversified portfolio of fixed and variable
rate U.S. dollar denominated fixed income securities of a broad spectrum of
United States and foreign issuers, including U.S. Government Securities and the
debt securities of financial institutions, corporations, and others.
The securities in which the Fund invests include mortgage-backed and other
asset-backed securities, although the Fund limits these investments to not more
than 60 percent and 25 percent, respectively, of its total assets. In addition,
the Fund limits its holdings of mortgage-backed securities that are not U.S.
Government Securities to 25 percent of its total assets. The Fund may invest any
amount of its assets in U.S. Government Securities, but under normal
circumstances less than 50 percent of the Fund's total assets are so invested.
The Fund may invest in securities that are restricted as to disposition under
the Federal securities laws (sometimes referred to as "private placements" or
"restricted securities"). In addition, the Fund may not invest more than 25
percent of its total assets in the securities issued or guaranteed by any single
agency or instrumentality of the U.S. Government, except the U.S. Treasury, and
may not invest more than 10 percent of its total assets in the securities of any
other issuer.

The Fund only purchases those securities that are rated, at the time of
purchase, within the three highest long-term or two highest short-term rating
categories assigned by a nationally recognized statistical rating organization,
such as Moody's Investors Service, Standard & Poor's or Fitch Investors
Services, L.P., or which are unrated and determined by the Adviser to be of
comparable quality. See "Additional Investment Policies - Rating Matters" below.

The Fund invests in debt obligations with maturities (or average life in the
case of mortgage-backed and similar securities) ranging from short-term
(including overnight) to 12 years and seeks to maintain an average dollar-
weighted portfolio maturity of between 2 and 5 years.

In order to manage its exposure to different types of investments, the Fund may
enter into interest rate and mortgage swap agreements and may purchase and sell
interest rate caps, floors and collars. The Fund may also engage in certain
strategies involving options (both exchange-traded and over-the-counter) to
attempt to enhance the Fund's income and may attempt to reduce the overall risk
of its investments or limit the uncertainty in the level of future foreign
exchange rates (hedge) by using options and futures contracts and foreign
currency forward contracts. The Fund's ability to use these strategies may be
limited by market considerations, regulatory limits and tax considerations. The
Fund may write covered call and put options, buy put and call options, buy and
sell interest rate and foreign currency futures contracts and buy options and
write covered options on those futures contracts. An option is covered if, so
long as the Fund is obligated under the option, it owns an offsetting position
in the underlying security or futures contract or maintains a segregated account
of liquid, high-grade debt instruments with a value at all times sufficient to
cover the Fund's obligations under the option.

READY CASH INVESTMENT FUND invests in a broad spectrum of high-quality, short-
term money market instruments of United States and foreign issuers that are
determined by the Adviser, pursuant to procedures adopted by the Board, to be
eligible for purchase and to present minimal credit risks. These instruments may
be U.S. Government Securities or the securities of financial institutions,
corporations, foreign governments, municipal governments, supranational
organizations and others. The Fund may invest only in U.S. dollar-denominated
instruments that have a remaining maturity of 397 days or less (as calculated
pursuant to Rule 2a-7 under the Investment Company Act of 1940) and will
maintain a dollar-weighted average portfolio maturity of 90 days or less. The
Fund may purchase securities with ultimate maturities of greater than 397 days
only in accordance with Rule 2a-7. Under that Rule, only those long-term
instruments that

<PAGE>

have demand features which comply with certain requirements and certain variable
rate U.S. Government Securities may be purchased.

The Fund normally will invest more than 25% of its total assets in the
obligations of domestic and foreign financial institutions, their holding
companies, and their subsidiaries. This concentration may result in increased
exposure to risks pertaining to the banking industry. These risks include a
sustained increase in interest rates, which can adversely affect the
availability and cost of a bank's lending activities; exposure to credit losses
during times of economic decline; concentration of loan portfolios in certain
industries; regulatory developments; and competition among financial
institutions. The Fund may not invest more than 25% of its total assets in any
other single industry.

The securities in which the Fund invests will include mortgage-related
securities, asset-backed securities and participation interests and may have
variable or floating rates of interest or principal. Except to the limited
extent permitted by Rule 2a-7 and except for U.S. Government Securities, the
Fund will not invest more than 5 percent of its total assets in the securities
of any one issuer. Also, the Fund may not purchase a security if the value of
all securities held by the Fund and issued or guaranteed by the same issuer
(including letters of credit in support of a security) would exceed 10% of the
Fund's total assets. In addition, to ensure adequate liquidity, the Fund may not
invest more than 10 percent of its net assets in illiquid securities. Under the
supervision of the Board, the Adviser determines and monitors the liquidity of
portfolio securities.

High-quality instruments include those that (i) are rated (or, if unrated, are
issued by an issuer with comparable outstanding short-term debt that is rated)
in one of the two highest rating categories by two nationally recognized
statistical rating organizations ("NRSROs") or, if only one NRSRO has issued a
rating, by that NRSRO or (ii) are otherwise unrated and determined by the
Adviser to be of comparable quality. The Fund will invest at least 95 percent of
its total assets in securities in the highest rating category (as determined
pursuant to Rule 2a-7).

ADDITIONAL INVESTMENT POLICIES
All investment policies of a Fund that are designated as fundamental, and each
Fund's investment objective, may not be changed without approval of the holders
of a majority of the Fund's outstanding voting securities. A majority of a
Fund's outstanding voting securities means the lesser of 67 percent of the
shares of the Fund present or represented at a shareholders' meeting at which
the holders of more than 50 percent of the shares are present or represented, or
more than 50 percent of the outstanding shares of the Fund. Except as otherwise
indicated, investment policies of the Funds are not fundamental and may be
changed by the Board without shareholder approval.

INVESTMENT LIMITATIONS. The Funds have adopted the investment limitations listed
below, each of which is a nonfundamental policy except as noted. These policies
relate to each Fund and, unless otherwise noted, not to a portion of a Fund
invested in a particular investment style. Other investment limitations,
including additional provisions with respect to the limitations listed below,
are described in the SAI.

DIVERSIFICATION. Each Fund is a "diversified" portfolio as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). As a fundamental
policy, with respect to 75 percent of its assets, no Fund may purchase a
security (other than a U.S. Government Security) if, as a result, (i) more than
5 percent of the Fund's total assets would be invested in the securities of a
single issuer or (ii) the Fund would own more than 10 percent of the outstanding
voting securities of any single issuer. International Fund may invest up to 100
percent of its investment assets in the International Portfolio and each other
Fund (except Ready Cash Investment Fund) reserves the right to invest all or a
portion of its assets in another diversified, open-end investment company with
substantially the same investment objective and policies as the Fund.

CONCENTRATION. Except as noted below, each of the Funds is prohibited from
concentrating its assets in the securities of issuers in any industry. As a
fundamental policy, no Fund may purchase

<PAGE>

securities if, immediately after the purchase, more than 25 percent of the value
of the Fund's total assets would be invested in the securities of issuers
conducting their principal business activities in the same industry. This limit
does not apply to investments in U.S. Government Securities, foreign government
securities, repurchase agreements covering U.S. Government Securities or
investment company securities. It is currently anticipated that the Funds will
not concentrate in securities issued by any single foreign government. Under
normal circumstances, Ready Cash Investment Fund will invest more than 25
percent of its total assets in the obligations of domestic and foreign financial
institutions and their holding companies. This concentration may result in
increased exposure to risks pertaining to the financial institution industry.
These risks include a sustained increase in interest rates, which can adversely
affect the availability and cost of a bank's lending activities; exposure to
credit losses during times of economic decline; concentration of loan portfolios
in certain industries; regulatory developments; and competition among financial
institutions.

ILLIQUID SECURITIES. Each of the Funds limits its purchase of illiquid
securities. No Fund may knowingly acquire securities or invest in repurchase
agreements with respect to any securities if, as a result, more than 15 percent
(10 percent for Ready Cash Investment Fund) of the Fund's net assets taken at
current value would be invested in securities which are not readily marketable.
Illiquid investments include securities that are illiquid by virtue of legal or
contractual restrictions on the sale of such securities and repurchase
agreements not entitling the holder to principal within 7 days. Under the
supervision of the Board, the Advisers determine and monitor the liquidity of
portfolio securities.

BORROWING AND LENDING. As a fundamental policy, each Fund may borrow money for
temporary or emergency purposes, including the meeting of redemption requests,
but not in excess of 33 1/3 percent of the value of the Fund's total assets as
computed immediately after the borrowing. Borrowing for other than temporary or
emergency purposes or meeting redemption requests is limited to 5 percent of the
value of each Fund's total assets except in the case of Intermediate U.S.
Government Fund, Managed Fixed Income Fund and, with respect to their assets
invested in the Managed Fixed Income Fund style, the Balanced Funds. When a Fund
establishes a segregated account to limit the amount of leveraging of the Fund
with respect to certain investment techniques, the Fund does not treat those
techniques as involving borrowings (although they may have characteristics and
risks similar to borrowings and result in the Fund's assets being leveraged).
See "Appendix A: Investments, Investment Strategies and Risk Considerations -
Borrowing" and "Techniques Involving Leverage." As a fundamental policy, no Fund
may make loans except for loans of portfolio securities, through the use of
repurchase agreements, and through the purchase of debt securities that are
otherwise permitted investments for the Fund.

MARGIN AND SHORT SALES. Except for Intermediate U.S. Government Fund, no Fund
may purchase securities on margin or make short sales of securities, except
short sales against the box. These prohibitions do not restrict the Funds'
ability to use short-term credits necessary for the clearance of portfolio
transactions and to make margin deposits in connection with permitted
transactions in options and futures contracts.

TEMPORARY DEFENSIVE POSITION. When business or financial conditions warrant,
each Fund may assume a temporary defensive position and invest all or any
portion of their assets in cash or in cash equivalents, including (i) short-term
U.S. Government Securities, (ii) prime quality short-term instruments of
commercial banks, (iii) prime quality commercial paper, (iv) repurchase
agreements with banks and broker-dealers covering any of the securities in which
the Fund may invest directly and (v) shares of money market mutual funds. During
periods when and to the extent that a Fund has assumed a temporary defensive
position, it may not be pursuing its investment objective. The Funds may from
time to time maintain investments in cash and cash equivalents pending
investment in securities. The International Portfolio and, with respect to the
portion of their assets managed by Schroder, Diversified Equity Fund, Growth
Equity Fund and each Balanced Fund, may hold cash and bank instruments
denominated in any major foreign

<PAGE>

currency. Prime quality refers to the two highest short-term ratings of a
nationally recognized statistical rating organization.

COMMON INVESTMENT TECHNIQUES. Each of the Funds may enter into repurchase
agreements (for reasons other than temporary defensive purposes) and reverse
repurchase agreements, may lend their portfolio securities and may purchase
portfolio securities on a when-issued or forward commitment basis. It is
currently anticipated that the Equity Funds will not enter into reverse
repurchase agreements or purchase portfolio securities on a when-issued or
forward commitment basis to any significant extent.

FIXED INCOME SECURITIES AND THEIR CHARACTERISTICS. Although each Fund only
invests in investment grade fixed income securities, including money market
instruments, an investment in a Fund is subject to risk even if all fixed income
securities in the Fund's portfolio are paid in full at maturity. All fixed
income securities, including U.S. Government Securities, can change in value
when there is a change in interest rates or the issuer's actual or perceived
creditworthiness or ability to meet its obligations.

The market value of the interest-bearing debt securities held by the Funds will
be affected by changes in interest rates. There is normally an inverse
relationship between the market value of securities sensitive to prevailing
interest rates and actual changes in interest rates. In other words, an increase
in interest rates produces a decrease in market value. Moreover, the longer the
remaining maturity of a security, the greater will be the effect of interest
rate changes on the market value of that security. Changes in the ability of an
issuer to make payments of interest and principal and in the market's perception
of an issuer's creditworthiness will also affect the market value of the debt
securities of that issuer. The possibility exists, therefore, that, the ability
of any issuer to pay, when due, the principal of and interest on its debt
securities may become impaired.

Fixed income securities include those issued by the governments of foreign
countries or by those countries' political subdivisions, agencies or
instrumentalities as well as by supranational organizations such as the
International Bank for Reconstruction and Development. To the extent otherwise
permitted, the Funds may invest in these securities if the Adviser or Schroder
believes that the securities do not present risks inconsistent with a Fund's
investment objective.

RATING MATTERS. The Fixed Income Funds and, with respect to their assets
invested in fixed income investment styles, the Balanced Funds will invest in
securities rated in the categories specified by their investment policies. The
Funds also may purchase unrated securities if the Adviser determines the
security to be of comparable quality to a rated security that the Fund may
purchase. Unrated securities may not be as actively traded as rated securities.
Each Fund may retain a security whose rating has been lowered below the Fund's
lowest permissible rating category (or that are unrated and determined by the
Adviser to be of comparable quality to securities whose rating has been lowered
below the Fund's lowest permissible rating category) if the Adviser or Schroder,
as appropriate, determines that retaining the security is in the best interests
of the Fund.

The Fund's investments are subject to "credit risk" relating to the financial
condition of the issuers of the securities that the Funds hold. To limit credit
risk, the Funds (other than Ready Cash Investment Fund) may only invest in
securities that are investment grade - rated in the top four long-term
investment grades by a nationally recognized statistical rating organization
("NRSRO") or in the top two short-term investment grades by an NRSRO.
Accordingly, the lowest permissible long-term investment grades for corporate
bonds, including convertible bonds, are Baa in the case of Moody's Investor
Service ("Moody's") and BBB in the case of Standard & Poor's ("S&P") and Fitch
Investors Service, L.P. ("Fitch"); the lowest permissible long-term investment
grades for preferred stock are Baa in the case of Moody's and BBB in the case of
S&P and Fitch; and the lowest permissible short-term investment grades for
short-term debt, including commercial paper, are Prime-2 (P-2) in the case of
Moody's, A-2 in the case of S&P and F-2 in the case of Fitch. A further
description of the rating categories of certain NRSROs is contained in the SAI.
All these ratings are generally considered to be investment grade ratings,
although Moody's indicates that

<PAGE>

securities with long-term ratings of Baa have speculative characteristics. As a
money market fund, Ready Cash Investment Fund has separate rating restrictions.

VARIABLE AND FLOATING RATE SECURITIES. The securities in which the Funds invest
may have variable or floating rates of interest and, under certain limited
circumstances, may have varying principal amounts. These securities pay interest
at rates that are adjusted periodically according to a specified formula,
usually with reference to some interest rate index or market interest rate (the
"underlying index"). The interest paid on these securities is a function
primarily of the underlying index upon which the interest rate adjustments are
based. Such adjustments minimize changes in the market value of the obligation
and, accordingly, enhance the ability of the Fund to maintain a stable net asset
value. Similarly to fixed rate debt instruments, variable and floating rate
instruments are subject to changes in value based on changes in market interest
rates or changes in the issuer's creditworthiness. The rate of interest on
securities purchased by a Fund may be tied to Treasury or other government
securities or indices on those securities as well as any other rate of interest
or index. Certain variable rate securities (including mortgage-backed
securities) pay interest at a rate that varies inversely to prevailing short-
term interest rates (sometimes referred to as inverse floaters). For example,
upon reset the interest rate payable on a security may go down when the
underlying index has risen. During periods when short-term interest rates are
relatively low as compared to long-term interest rates, a Fund may attempt to
enhance its yield by purchasing inverse floaters. Certain inverse floaters may
have an interest rate reset mechanism that multiplies the effects of changes in
the underlying index. While this form of leverage may increase the security's,
and thus the Fund's, yield, it may also increase the volatility of the
security's market value.

There may not be an active secondary market for any particular floating or
variable rate instrument; this could make it difficult for a Fund to dispose of
the instrument during periods of market volatility or economic uncertainty or if
the issuer's credit became impaired at a time when the Fund was not entitled to
exercise any demand rights it might have. A Fund could, for this or other
reasons, suffer a loss with respect to the instrument. The Advisers monitor the
liquidity of the Funds' investments in variable and floating rate instruments,
but there can be no guarantee that an active secondary market will exist at any
time. Ready Cash Investment Fund also may purchase variable and floating rate
demand notes which are unsecured obligations redeemable upon not more than 30
days' notice. These obligations include master demand notes that permit
investment of fluctuating amounts at varying rates of interest pursuant to
direct arrangement with the issuer of the instrument. The issuer of these
obligations often has the right, after a given period, to prepay their
outstanding principal amount of the obligations upon a specified number of days'
notice. These obligations generally are not traded, nor generally is there an
established secondary market for these obligations. To the extent a demand note
does not have a seven day or shorter demand feature and there is no readily
available market for the obligation, it is treated as an illiquid security.

Certain securities may have an initial principal amount that varies over time
based on an interest rate index, and, accordingly, a Fund might be entitled to
less than the initial principal amount of the security upon the security's
maturity. The Funds intend to purchase these securities only when the Adviser
believes the interest income from the instrument justifies any principal risks
associated with the instrument. The Advisers may attempt to limit any potential
loss of principal by purchasing similar instruments that are intended to provide
an offsetting increase in principal. There can be no assurance that an Adviser
will be able to limit the effects of principal fluctuations and, accordingly, a
Fund may incur losses on those securities even if held to maturity without
issuer default.

4. MANAGEMENT OF THE FUNDS
The business of the Trust is managed under the direction of the Board of
Trustees. The Board formulates the general policies of the Funds and generally
meets quarterly to review the results of the Funds, monitor investment
activities and practices and discuss other matters affecting the

<PAGE>

Funds and the Trust. In order to minimize potential conflicts of interest, only
one trustee of Core Trust, John Y. Keffer, is also a trustee of the Trust. The
SAI contains general background information about the trustees and officers of
the Trust and Core Trust. The Board currently consists of seven members.

INVESTMENT ADVISORY SERVICES
NORWEST INVESTMENT MANAGEMENT. The Adviser serves as investment adviser of each
Fund pursuant to investment advisory agreements between Norwest and the Trust.
Subject to the general supervision of the Board, the Adviser makes investment
decisions for each Fund and continuously reviews, supervises and administers
each Fund's investment program or oversees the investment decisions of the
investment subadviser, as applicable. The Adviser is a part of Norwest, which is
a subsidiary of Norwest Corporation, a multi-bank holding company incorporated
under the laws of Delaware in 1929. As of December 31, 1995, Norwest Corporation
was the 11th largest bank holding company in the United States in terms of
assets. Norwest became a subsidiary of Norwest Corporation in 1929 and, as of
December 31, 1995, the Adviser managed or provided investment advice with
respect to assets totaling approximately $23 billion. Except for the fees paid
to Norwest, each investment advisory agreement is the same in all material
respects.

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. Subject to the Adviser's general
oversight, Schroder, through its London, England branch, acts as investment
subadviser to International Fund, Diversified Equity Fund, Growth Equity Fund,
Conservative Balanced Fund, Moderate Balanced Fund and Growth Balanced Fund
pursuant to investment subadvisory agreements among the Trust, Norwest and
Schroder. Under these agreements, Schroder makes investment decisions for each
Fund and continuously reviews, supervises and administers each Fund's investment
program with respect to that portion, if any, of the respective Fund's portfolio
that the Adviser believes should be invested using International Fund's
investment philosophy. Each investment subadvisory agreement is the same in all
material respects. Through its management of International Portfolio, Schroder
manages the entire portfolio of International Fund.

Schroder, whose principal business address is 787 Seventh Avenue, New York, New
York 10019, is registered with the SEC as an investment adviser and is a wholly-
owned U.S. subsidiary of Schroders Incorporated, the wholly-owned U.S. holding
company subsidiary of Schroders plc. Schroders plc is the holding company parent
of a large worldwide group of banks and financial services companies (referred
to as the "Schroder Group") and has associated companies and branch and
representative offices located in seventeen countries worldwide. The Schroder
Group specializes in providing investment management services and has assets
under management currently in excess of $100 billion.

CRESTONE CAPITAL MANAGEMENT, INC. To assist Norwest in carrying out its
obligations under the investment advisory agreement with respect to Small
Company Stock Fund, Norwest has entered into an investment subadvisory agreement
among the Trust, Norwest and Crestone. Crestone, which is located at 7720 East
Belleview Avenue, Suite 220, Englewood, Colorado 80111, is a subsidiary of
Norwest and is registered with the SEC as an investment adviser. Crestone
provides investment advice regarding companies with small capitalizations to
various clients, including institutional investors. As of October 1, 1995,
Crestone managed assets with a value of approximately $300 million.

Pursuant to its agreement, Crestone makes investment decisions for Small Company
Stock Fund and continuously reviews, supervises and administers the Fund's
investment program with respect to that portion, if any, of the Fund's portfolio
that Norwest believes should be invested using Crestone as investment
subadviser. Currently, Crestone manages the entire portfolio of the Fund and has
since the Fund's inception. The Adviser supervises the performance of Crestone,
including Crestone's adherence to the Fund's investment objective and policies
and pays Crestone a fee for its investment subadvisory services.

<PAGE>

INTERNATIONAL FUND. International Fund may withdraw its investment from
International Portfolio, for which Schroder serves as investment adviser, at any
time if the Board determines that it is in the best interests of International
Fund and its shareholders to do so. See "Other Information - Core Trust
Structure." Accordingly, International Fund has retained the Adviser as its
investment adviser and Schroder as its investment subadviser to manage the
Fund's assets in the event International Fund so withdraws its investment.
Neither the Adviser or Schroder will receive any advisory or subadvisory fees
with respect to International Fund as long as International Fund remains
completely invested in International Portfolio or any other investment company.

Schroder acts as investment adviser to International Portfolio pursuant to an
advisory agreement with Core Trust. Subject to the general supervision of Core
Trust's board of trustees, Schroder makes investment decisions for International
Portfolio and continuously reviews, supervises and administers International
Portfolio's investment program. The investment advisory agreement between
Schroder and Core Trust with respect to International Portfolio is the same in
all material respects as the Funds' investment subadvisory agreements except as
to the parties, the circumstances under which fees will be paid and the
jurisdiction whose laws govern the agreement.

CORE TRUST BLENDED PORTFOLIOS. As noted under "Investment Policies - Investment
in Core Trust," the five Blended Funds invest their assets which are managed in
a small company, index and international investment style in three Blended
Portfolios of Core Trust - Small Company Portfolio, Index Portfolio and
International Portfolio II. Each Blended Fund may withdraw its investment from a
Blended Portfolio at any time that the Board determines it is in the best
interests of the Blended Fund and its shareholders to do so. See "Other
Information - Core Trust Structure." Norwest serves as investment adviser to
Small Company Portfolio and Index Portfolio and Schroder serves as investment
adviser to International Portfolio II pursuant to separate advisory agreements
with Core Trust. Subject to the general supervision of Core Trust's board of
trustees, Norwest and Schroder perform services for the Blended Portfolios
similar to those performed for the Trust under its investment advisory
agreements.

PORTFOLIO MANAGERS. Many persons on the advisory staff of each of the Adviser
and Schroder contribute to the investment advisory services provided to the
Funds, International Portfolio and the three Blended Portfolios of Core Trust,
as applicable. The following persons, however, are primarily responsible for the
day-to-day management of the Funds' investment portfolios and, unless otherwise
noted, have been since inception of the Funds:

CONTRARIAN STOCK FUND - W. Lon Schreur, CFA, Vice President of Norwest since
1993. Mr. Schreur is also President of United Capital Management, a part of
Norwest Bank Colorado, N.A., a position which he has held for 16 years.

SMALL COMPANY STOCK FUND - Mr. Kirk McCown, CFA, founder, President and a
Director of Crestone, which was incorporated in 1990. Prior thereto, Mr. McCown
was Senior Vice President of Reich & Tang, L.P.

SMALL COMPANY GROWTH FUND - Robert B. Mersky, Senior Portfolio Manager and an
Officer of Norwest and President of Peregrine Capital Management, Inc. Mr.
Mersky has held various investment management positions with Norwest or its
affiliates, including Peregrine, since 1977. From 1980 to 1984 he was head of
investments for Norwest.

LARGE COMPANY GROWTH FUND - John S. Dale, Senior Portfolio Manager and an
Officer of Norwest and Senior Vice President of Peregrine Capital Management,
Inc. Mr. Dale has held various investment management positions with Norwest or
its affiliates, including Peregrine, since 1968. From 1984 to 1987 he was a
Senior Vice President and Manager of Equity Advisors for Norwest.

INTERNATIONAL FUND - International Fund invests all of its assets in
International Portfolio and, accordingly, there is currently no portfolio
manager for the Fund. Laura Luckyn-Malone, a Managing Director of Schroder since
October 1995 and a Senior Vice President and Director of Schroder since 1990,
however, is primarily responsible for managing the day-to-day operations of

<PAGE>

International Portfolio. Prior to joining the Schroder Group, Ms. Luckyn-Malone
was a Principal of Scudder, Stevens & Clark, Inc. Ms. Luckyn-Malone has served
as portfolio manager of International Portfolio since February 1995 and also
serves as portfolio manager of International Portfolio II.

INCOME EQUITY FUND - David L. Roberts, Senior Vice President of Norwest since
1991. Mr. Roberts has been associated with Norwest for 20 years in various
investment related capacities.

INDEX FUND - David D. Sylvester and Laurie R. White, Mr. Sylvester has been
associated with Norwest for 15 years, the last 7 years as a Vice President and
Senior Portfolio Manager. He has over 20 years experience in managing securities
portfolios. Ms. White has been a Vice President and Senior Portfolio Manger of
Norwest since 1991; from 1989 to 1991, she was a Portfolio Manager at Richfield
Bank and Trust. Mr. Sylvester and Ms. White began serving as portfolio managers
of Index Fund on January 1, 1996.

INTERMEDIATE U.S. GOVERNMENT FUND - Marjorie H. Grace, Vice President of Norwest
since 1992. Ms. Grace was a portfolio manager of Norwest Bank from 1992-1993; an
Institutional Salesperson with Norwest Investment Services, Inc. from 1991-1992;
a portfolio manager with United Banks of Colorado from 1989-1991; and Vice
President and portfolio manager with Colombia Savings and Loan from 1987-1989.

MANAGED FIXED INCOME FUND - William D. Giese, Senior Portfolio Manager and an
officer of Norwest and Senior Vice President of Peregrine Capital Management,
Inc. Mr. Giese has been a portfolio manager with Peregrine for 10 years and has
approximately 20 years experience in the fixed income securities management
business.

TOTAL RETURN BOND FUND - Mr. David B. Kinney, Vice President and Senior
Portfolio Manager of Norwest, has been associated with Norwest since 1981. Mr.
Kinney commenced serving as a portfolio manager of each Blended Fund on June 1,
1995.

STABLE INCOME FUND - Karl P. Tourville, Vice President of Norwest since 1989.
Mr. Tourville has been associated with Norwest since 1986.

READY CASH INVESTMENT FUND AND SHORT MATURITY STYLE - David D. Sylvester and
Laurie R. White. For descriptions of Mr. Sylvester and Ms. White, see "Index
Fund" above.

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

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

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

As an example, there are five portfolio managers of Growth Equity Fund: Mr.
McCown, Mr. Mersky and Mr. Forester are responsible for the Fund's assets
invested in accordance with the Small Company style, Mr. Dale is responsible for
the Fund's

<PAGE>

assets invested in accordance with the Large Company Growth Fund style and Mr.
Smith of Schroder is responsible for the Fund's assets invested in accordance
with the International Fund style. Cash balances of each Fund, are managed by
Mr. Sylvester and Ms. White, Ready Cash Investment Fund's portfolio managers.

ADVISORY FEES
The investment advisory fees payable to Norwest by the Trust with respect to
each Fund (and payable to Schroder by Core Trust with respect to International
Portfolio) are based on the average daily net assets of the respective Fund (or
International Portfolio) at the following annual rates:
<TABLE>
<CAPTION>

<S> <C> <C>
ADVISORY Diversified Equity Fund 0.65%
FEE RATE Growth Equity Fund 0.90%
Large Company Growth Fund 0.65%
Small Company Growth Fund 0.90%
International Fund 0.45%
Income Equity Fund 0.65%
Index Fund 0.15%
Conservative Balanced Fund 0.45%
Moderate Balanced Fund 0.53%
Growth Balanced Fund 0.58%
Total Return Bond Fund 0.50%
Intermediate U.S. Government Fund 0.33%
Managed Fixed Income Fund 0.35%
Stable Income Fund 0.30%
Contrarian Stock Fund 0.80% (first $300 million of assets)
0.76% (next $400 million of assets)
0.72% (remaining assets)
Small Company Stock Fund 1.00% (first $300 million of assets)
0.96% (next $400 million of assets)
0.92% (remaining assets)
Ready Cash Investment Fund 0.40% (first $300 million of assets)
0.36% (next $400 million of assets)
0.32% (remaining assets)
</TABLE>

The advisory agreement for International Fund provides for an advisory fee
payable to the Adviser of 0.85 percent of the average annual daily net assets of
the Fund in the event that the Fund is not completely invested in International
Portfolio or another investment company. As International Fund currently invests
all of its assets in International Portfolio, no fees are payable under that
agreement. Pursuant to the investment subadvisory agreements, the Adviser (and
not the Trust) pays Schroder a fee for its investment subadvisory services;
however, that compensation does not increase the amount paid by the Trust to the
Adviser pursuant to the Adviser's investment advisory agreements.

With respect to International Portfolio, for services under its advisory
agreement, Schroder receives from Core Trust an advisory fee of 0.45 percent of
International Portfolio's average annual daily net assets.

With respect to Small Company Portfolio and Index Portfolio of Core Trust, for
services under its investment advisory agreements Norwest receives from Core
Trust advisory fees of 0.90 percent and 0.15 percent of the respective
Portfolio's average annual daily net assets. For its services under its
investment advisory agreement with respect to International Portfolio II of Core
Trust, Schroder receives from Core Trust an advisory fee of 0.45 percent of
International Portfolio II's average annual daily net assets. Norwest waives all
of the advisory fees payable by Small Company Portfolio and Index Portfolio.
Schroder does not receive a subadvisory fee from any Blended Fund to the extent
that such Fund's assets are invested in International Portfolio II, and Norwest
reimburses International Portfolio II the amount of the advisory fee the
Portfolio pays to Schroder. Accordingly, duplicative investment advisory fees
are not incurred by any Fund.

<PAGE>

Advisory fees are accrued daily and paid monthly. The advisory fees for Growth
Equity Fund, Contrarian Stock Fund, Small Company Stock Fund and Small Company
Growth Fund and the combined advisory and administrative services fees for
International Fund are higher than those paid by most investment companies of
all types to their advisers, but the Trust believes that the fees are
appropriate for these Funds considering their investment objectives and
policies.

ADMINISTRATIVE AND OTHER SERVICES
ADMINISTRATION AND DISTRIBUTION SERVICES. Subject to the supervision of the
Board, Forum Financial Services, Inc. ("Forum") supervises the overall
management of the Trust (other than portfolio management), including the Trust's
receipt of services for which the Trust is obligated to pay, and provides the
Trust with general office facilities pursuant to a management agreement with the
Trust. Forum provides persons satisfactory to the Board to serve as officers of
the Trust. As of the date of this Prospectus, Forum acted as manager and
distributor of registered investment companies and collective trust funds with
assets of approximately $11 billion. Forum, whose principal business address is
Two Portland Square, Portland, Maine 04101, is a registered broker-dealer and
investment adviser and is a member of the National Association of Securities
Dealers, Inc. As of the date hereof, Forum is controlled by John Y. Keffer,
Chairman and President of the Trust and Core Trust.

For its management services and facilities, Forum receives a fee at an annual
rate of 0.10 percent of the average daily net assets of each Fund (0.20 percent
for Contrarian Stock Fund, Small Company Stock Fund, Total Return Bond Fund and
Ready Cash Investment Fund). Forum also serves as administrator of Core Trust
and provides administrative services for the International Portfolio and each
Blended Portfolio that are similar in nature to those provided to the Funds. For
its administrative services, Forum is compensated by Core Trust at an annual
rate of 0.15 percent of the average daily net assets of International Portfolio
and at an annual rate of 0.10 percent of the average daily net assets of each
Blended Portfolio. Forum will waive the amount of its management fee that it
would otherwise be entitled to receive from a Blended Fund for that portion of
the assets of the Blended Fund invested in a Blended Portfolio. Forum's
management and administration fees are accrued daily and paid monthly.

In addition, pursuant to a separate services agreement, Norwest receives a fee
at an annual rate of 0.25 percent of the average annual daily net assets of
International Fund. Under this agreement, Norwest is responsible for compiling
data for and preparing communications between the Fund and its shareholders,
maintaining requisite information flows between the Fund and the investment
adviser to International Portfolio, monitoring and reporting to the Board on the
performance of International Portfolio and reimbursing the Fund for certain
excess expenses. No fees are payable under this service agreement in the event
that the International Fund is not completely invested in International
Portfolio or another investment company. International Fund incurs total
management and administrative fees at a higher rate than the other Funds due in
part to the nature of the Fund's structure and the Fund's investment policies.

Pursuant to a separate distribution agreement with the Trust, Forum acts as the
agent of the Trust in connection with the offering of the Shares of the Funds.
Forum receives no payments for its services as distributor of the Shares. In
addition, no Fund and no Portfolio of Core Trust has adopted a Rule 12b-1 Plan
applicable to the Shares and, accordingly, no Fund incurs any distribution
expenses with respect to the Shares. Forum also provides accounting services to
the Funds and to Core Trust.

Shareholder Servicing and Custody. Norwest serves as transfer agent and dividend
disbursing agent for the Trust (in this capacity, the "Transfer Agent"). The
Transfer Agent maintains an account for each shareholder of the Trust (unless
such accounts are maintained by sub-transfer agents or processing agents),
performs other transfer agency and shareholder servicing functions for the
Trust, and acts as dividend disbursing agent for the Trust. The Transfer Agent
is permitted to subcontract any or all of its functions with respect to all or
any portion of the Trust's shareholders to one or more qualified sub-transfer
agents or processing agents, which may be its

<PAGE>

or Forum's affiliates, who agree to comply with the terms of the Transfer
Agent's agreement with the Trust. The Transfer Agent is permitted to compensate
those agents for their services; however, no such compensation may increase the
aggregate amount of payments by the Trust to the Transfer Agent. For its
services, Norwest is compensated at the annual rate of 0.25 percent of each
Fund's average annual daily net assets attributable to the Shares. In the case
of Ready Cash Investment Fund, Norwest is compensated at an annual rate of 0.10
percent of the Fund's average annual daily net assets attributable to
Institutional Shares and may be reimbursed for certain expenses related to its
transfer agency services.

Norwest also serves as the Trust's custodian and may appoint subcustodians for
the foreign securities and other assets held in foreign countries. Except as
noted below, Norwest currently receives no additional compensation for its
custodial services, but the Funds will incur the expenses and costs of any
subcustodian. International Fund and, to the extent they invest in the
International Fund style, each Blended Fund indirectly incurs its pro rata
portion of the custodial fees of Core Trust. The Chase Manhattan Bank, N.A.
serves as custodian of International Portfolio and International Portfolio II
and is paid a fee by Core Trust for its services. Norwest serves as custodian of
Small Company Portfolio and Index Portfolio and currently receives no additional
compensation for its custodial services with respect to those Portfolios. For
its custodian services, Norwest is compensated for providing custodian services
to each of the Contrarian Stock Fund, Small Company Stock Fund, Total Return
Bond Fund and Ready Cash Investment Fund at a rate up to 0.05 percent of the
Fund's average annual daily net assets.

EXPENSES OF THE FUNDS
Each Fund (as well as each Portfolio of Core Trust) is obligated to pay for all
of its expenses, although Norwest has agreed to reimburse the Trust for certain
of each Fund's operating expenses which in any year exceed the limits prescribed
by any state in which the Fund's shares are qualified for sale. For more
information about Fund expenses, see "Summary - Expenses of Investing in the
Funds." These expenses include: interest charges; taxes; brokerage fees and
commissions; certain insurance premiums; applicable fees and expenses under the
Trust's or Core Trust's contracts with the Advisers, Forum, the Transfer Agent
and any custodian; fees of pricing, interest, dividend, credit and other
reporting services; costs of membership in trade associations; auditing, legal
and compliance expenses; costs of preparing and printing the Trust's
prospectuses, statements of additional information and shareholder reports and
delivering them to existing shareholders; compensation of certain of the Trust's
or Core Trust's trustees, officers and employees and other personnel performing
services for the Trust or Core Trust; and registration fees and related
expenses.

Each Fund's expenses comprise Trust expenses attributable to the Fund and
expenses not attributable to any particular portfolio of the Trust, which are
allocated among the Funds and all other portfolios of the Trust in proportion to
their average net assets. International Fund's expenses include the Fund's pro
rata share of the operating expenses of International Portfolio, which are borne
indirectly by International Fund's shareholders. Although the Blended Portfolios
do not incur investment advisory fees, they do incur other administrative and
operating expenses. While the Blended Portfolios' expenses are not borne
directly by the Blended Funds, those expenses have the effect of reducing the
net investment income of the Blended Portfolios. Expenses of each Blended
Portfolio for the period ended October 31, 1995, as a percentage of average net
assets, were: Small Company Portfolio, 0.15 percent, Index Portfolio, 0.17
percent and International Portfolio II, 0.25 percent. Each Blended Fund incurs
its pro rata share of the Blended Portfolios' expenses, but only to the extent
it invests in a Blended Portfolio.

The Advisers, Forum, the Transfer Agent and any other service provider to the
Funds, International Portfolio or a Blended Portfolio may elect to waive all or
a portion of their fees. Any such waivers will have the effect of increasing a
Fund's performance for the period during which the waiver was in effect. No fee
waivers may be recouped at a later date. Other than investment advisory fees,
any fee paid by the Trust or Core Trust may be increased by the Board or the
board

<PAGE>

of trustees of Core Trust without shareholder approval. Fee waivers are
voluntary and may be reduced or eliminated at any time.

Each service provider to the Trust or their agents or affiliates may also act in
various capacities for, and receive compensation from, their customers who are
shareholders in a Fund. Under agreements with those customers, these entities
may elect to credit against the fees payable to them by their customers or to
rebate to customers all or a portion of any fee received from the Trust with
respect to assets of those customers invested in the Funds.

5. PURCHASES AND REDEMPTIONS OF SHARES

Shares of each Fund are continuously sold and redeemed at a price equal to their
net asset value on each Fund Business Day (as defined below) without charge. All
transactions in Fund Shares are effected through the Transfer Agent, which
accepts orders for purchases and redemptions only from shareholders of record
and new investors. Shareholders of record receive periodic statements from the
Trust listing all account activity during the statement period. I Shares of a
Fund are offered to fiduciary, agency and custodial clients of bank trust
departments, trust companies and their affiliates.

PURCHASE AND REDEMPTION PROCEDURES
PURCHASES AND REDEMPTIONS THROUGH FINANCIAL INSTITUTIONS. Shares may be
purchased and redeemed (and in the case of Plans, generally will be purchased
and redeemed) through certain broker-dealers, banks, trust companies and their
affiliates, including Norwest and its affiliates ("Processing Organizations").
Processing Organizations may charge their customers a fee for their services and
are responsible for promptly transmitting purchase, redemption and other
requests to the Funds.

Investors who purchase shares through a Processing Organization may be charged a
fee if they effect transactions in Fund Shares through a broker or agent and
will be subject to the procedures of their Processing Organization, which may
include limitations, investment minimums, cutoff times and restrictions in
addition to, or different from, those applicable to shareholders who invest in a
Fund directly. These investors should acquaint themselves with their Processing
Organization procedures and should read this Prospectus in conjunction with any
materials and information provided by their Processing Organization. Customers
who purchase a Fund's shares through a Processing Organization may or may not be
the shareholder of record and, subject to their Processing Organization's and
the Funds' procedures, may have Fund shares transferred into their name. Under
their arrangements with the Trust, broker-dealer Processing Organizations are
not generally required to deliver payment for purchase orders until several
business days after a purchase order has been received by a Fund. Certain other
Processing Organizations may also enter purchase orders with payment to follow.

Certain shareholder services may not be available to shareholders who have
purchased shares through a Processing Organization. These shareholders should
contact their Processing Organization for further information. The Trust may
confirm purchases and redemptions of a Processing Organization's customers
directly to the Processing Organization, which in turn will provide its
customers with such confirmations and periodic statements as may be required by
law or agreed to between the Processing Organization and its customers. The
Trust is not responsible for the failure of any Processing Organization to carry
out its obligations to its customer. Certain states permit shares of the Funds
to be purchased and redeemed only through registered broker-dealers, including
the Funds' distributor.

INITIAL PURCHASES OF SHARES. Investors may obtain the account application form
necessary to open an account by writing the Trust at the address listed on the
cover of this Prospectus.

<PAGE>

terminate any shareholder privilege upon appropriate notice to shareholders and
to charge a fee for certain shareholder services, although no such fees are
currently contemplated. Any privilege and participation in any program may be
terminated by the shareholder at any time by writing to the Trust.

BY MAIL. Investors may send a check made payable to the Trust along with a
completed account application form to the Trust at the address listed below.
Checks are accepted at full value subject to collection. Payment by a check
drawn on any member of the Federal Reserve System can normally be converted into
Federal funds within two business days after receipt of the check. Checks drawn
on some non-member banks may take longer.

BY BANK WIRE. To make an initial investment in a Fund using the wire system for
transmittal of money among banks, an investor should first telephone the Trust
Transfer Agent at 612-667-8833 or 800-338-1348 to obtain an account number. The
investor should then instruct a bank to wire the investor's money immediately
to:

Norwest Bank Minnesota, N.A.
ABA 091 000 019
For Credit to: Norwest Advantage Funds 0844-131
Re: [Name of Fund], [I Shares or Institutional Shares]
Account Number:
Account Name:
The investor should then promptly complete and mail the account application
form. There may be a charge by the investor's bank for transmitting the money by
bank wire, and there also may be a charge for the use of Federal funds. The
Trust does not charge investors for the receipt of wire transfers. Payment by
bank wire is treated as a Federal funds payment when received.

SUBSEQUENT PURCHASES OF SHARES. Subsequent purchases may be made by mailing a
check, by sending a bank wire or through the shareholder's Processing
Organization as indicated above. All payments should clearly indicate the
shareholder's name and account number.

REDEMPTIONS OF SHARES. Shareholders that wish to redeem shares by telephone or
receive redemption proceeds by bank wire must elect these options by properly
completing the appropriate sections of their account application form. These
privileges may not be available until several weeks after a shareholder's
application is received. Shares for which certificates have been issued may not
be redeemed by telephone.

BY MAIL. Shareholders may redeem shares by sending a written request to the
Transfer Agent accompanied by any share certificate that may have been issued to
the shareholder to evidence the shares being redeemed. All written requests for
redemption must be signed by the shareholder with signature guaranteed, and all
certificates submitted for redemption must be endorsed by the shareholder with
signature guaranteed. See "Purchases and Redemptions of Shares - General
Information."

BY TELEPHONE. A shareholder who has elected telephone redemption privileges may
make a telephone redemption request by calling the Transfer Agent at 800-338-
1348 or 612-667-8833 and providing the shareholder's account number, the exact
name in which the shares are registered and the shareholder's social security or
taxpayer identification number. In response to the telephone redemption
instruction, the Trust will mail a check to the shareholder's record address or,
if the shareholder has elected wire redemption privileges, wire the proceeds.
See "Purchases and Redemptions of Shares - General Information."

BY BANK WIRE. For redemptions of more than $5,000, a shareholder who has elected
wire redemption privileges may request a Fund to transmit the redemption
proceeds by Federal funds wire to a bank account designated in writing by the
shareholder. To request bank wire redemptions by telephone, the shareholder also
must have elected the telephone redemption privilege. Redemption proceeds are
transmitted by wire on the day after a redemption request in proper form is
received by the Trust Transfer Agent.

<PAGE>

EXCHANGES. Shareholders of I Shares and Institutional Shares may exchange their
Shares for (i) I Shares or Institutional Shares of the other Funds or certain
other portfolios of the Trust and (ii) shares of U.S. Government Fund and
Treasury Fund of the Trust. The Trust may in the future offer I Shares,
Institutional Shares, or other shares which will be exchangeable with the Shares
of the Funds.

The Funds do not charge for exchanges, and there is currently no limit on the
number of exchanges a shareholder may make; the Funds reserve the right,
however, to limit excessive exchanges by any shareholder. Exchanges are subject
to the fees charged by, and the limitations (including minimum investment
restrictions) of, the Fund into which a shareholder is exchanging.

Exchanges may only be made between identically registered accounts or to open a
new account. A new account application is required to open a new account through
an exchange if the new account will not have an identical registration and the
same shareholder privileges as the account from which the exchange is being
made. Shareholders may only exchange into a fund if that fund's shares may
legally be sold in the shareholder's state of residence. For Federal tax
purposes, an exchange is treated as a redemption and a simultaneous new
purchase. Exchange procedures may be materially amended or terminated by the
Trust at any time upon 60 days' notice to shareholders. See "Additional Purchase
and Redemption Information" in the SAI.

BY MAIL. Exchanges may be made by sending a written request to the Transfer
Agent accompanied by any share certificates for the shares to be exchanged. All
written requests for exchanges must be signed by the shareholder, and all
certificates submitted for exchange must be endorsed by the shareholder with
signature guaranteed. See "Purchases and Redemptions of Shares - General
Redemption Information."

BY TELEPHONE. A shareholder who has elected telephone exchange privileges may
make a telephone exchange by calling the Transfer Agent at 800-338-1348 or 612-
667-8833 and providing the shareholder's account number, the exact name in which
the shareholder's shares are registered and the shareholder's social security or
taxpayer identification number. See "Purchases and Redemptions of Shares -
General Information."

GENERAL INFORMATION
PURCHASING SHARES. Investments in the Funds may be made either through certain
financial institutions or by an investor directly. An investor who invests in a
Fund directly will be the shareholder of record. Fund Shares are issued
immediately following the next determination of net asset value made after
acceptance of an investor's subscription and funds. An investor's funds will not
be accepted or invested during the period before the Fund's receipt of funds on
deposit at a Federal Reserve Bank ("Federal Funds"). The Fund reserves the right
to reject any subscription for the purchase of its shares. Share certificates
are issued only to shareholders of record upon their written request and are not
issued for fractional shares. With approval of the Trust and the Adviser, shares
may be purchased with portfolio securities in lieu of cash.

REDEEMING SHARES. There is no minimum period of investment and no restriction on
the frequency of redemptions. Fund Shares are redeemed as of the next
determination of the Fund's net asset value following acceptance by the Transfer
Agent of the redemption order in proper form (and any supporting documentation
which the Transfer Agent may require). Normally, redemption proceeds are paid
immediately, but in no event later than 7 days, following acceptance of a
redemption order. Proceeds of a redemption request, however, will not be paid
unless any check used for investment has been cleared by the shareholder's bank,
which may take up to 15 days. Unless otherwise indicated, redemption proceeds
normally are paid by check mailed to the shareholder's record address. The right
of redemption may not be suspended nor the payment dates postponed for more than
7 days except when the New York Stock Exchange is closed (or when trading
thereon is restricted) for any reason other than its customary weekend or
holiday closings or under any emergency or other circumstances as determined by
the SEC.

<PAGE>

Shareholders who wish to accomplish redemptions or exchanges by telephone must
elect those privileges. The Trust, the Transfer Agent and Forum are not
responsible for the authenticity of telephone instructions or losses, if any,
resulting from unauthorized telephone redemption or exchange requests which
reasonably are believed to be genuine. The Trust employs reasonable procedures
(including the recording of certain telephone transactions) to insure that
telephone orders are genuine. Shareholders should verify the accuracy of
telephone instructions immediately upon receipt of confirmation statements.

INVESTMENT MINIMUMS. Shares of each Fund are offered without a sales charge and
may be redeemed without charge. The minimum initial investment in I Shares is
$1,000 and in Institutional Shares is $1,000,000. The minimum subsequent
investment is $100 except in the case of Institutional Shares, where there is no
minimum. Shareholders who elect to purchase I Shares through electronic share
purchase privileges such as the Automatic Investment Plan or the Directed
Dividend Option are not subject to the initial investment minimums. See
"Purchases and Redemptions of Shares - General Information - Automatic
Investment Plan" and "Dividends, Distributions and Tax Matters."

IRAS AND KEOGHS. Shares may be a suitable investment vehicle for part or all of
the assets held in certain IRAs or KEOGH accounts. An appropriate account
application form may be obtained by contacting the Trust or, for accounts
rolling over from a Plan, the shareholder's employer. Under current IRA rules,
by directly rolling over a distribution from a Plan, investors can avoid the 20
percent withholding tax imposed on distributions from a Plan. Rollover IRA
assets must be held separately from other IRA assets if the investor wishes to
invest his Rollover IRA in another employer's plan in the future. The amount of
the deductible contribution to an IRA will be reduced if the individual or, in
the case of a married individual filing jointly, either the individual or the
individual's spouse is an active participant in an employer-sponsored retirement
plan and has adjusted gross income above certain levels.

Currently, individuals may make tax-deductible IRA contributions of up to a
maximum of $2,000 annually. However, the deduction will be reduced if the
individual or, in the case of a married individual filing jointly, either the
individual or the individual's spouse is an active participant in an employer-
sponsored retirement plan and has adjusted gross income above certain levels.

SIGNATURE GUARANTEES. A signature guarantee is required for any endorsement on a
share certificate and for instructions to change a shareholder's record name or
address, designated bank account for wire redemptions, Automatic Investment or
Withdrawal Plan, dividend election, telephone redemption or any other option
election in connection with the shareholder's account. Signature guarantees may
be provided by any eligible institution acceptable to the Transfer Agent,
including a bank, a broker, a dealer, a national securities exchange, a credit
union, or a savings association that is authorized to guarantee signatures.
Whenever a signature guarantee is required, each person required to sign for the
account must have that person's signature guaranteed.

OTHER REDEMPTION INFORMATION. Proceeds of redemptions normally are paid in cash.
However, payments may be made wholly or partially in portfolio securities if the
Board determines that payment in cash would be detrimental to the best interests
of the Fund. The Company will only effect a redemption in portfolio securities
if the particular shareholder is redeeming more than $250,000 or 1 percent of
the Fund's total net assets, whichever is less, during any 90-day period. Due to
the cost to the Trust of maintaining smaller accounts, the Trust reserves the
right to redeem, upon not less than 60 days written notice, all shares in any
Fund account with an aggregate net asset value of less than $1,000. The Trust
will not redeem accounts that fall below that amount solely as a result of a
reduction in net asset value.

AUTOMATIC INVESTMENT PLAN. Under the Automatic Investment Plan which is
available to shareholders of I Shares of a Fund, shareholders may authorize
monthly amounts of $50 or more to be withdrawn automatically from the
shareholder's designated bank account (other than passbook savings) and sent to
the Transfer Agent for investment in a Fund. Shareholders wishing to use this
plan must complete an application which may be obtained by writing or calling
the

<PAGE>

Transfer Agent. The Trust may modify or terminate the Automatic Investment Plan
with respect to any shareholder in the event that the Trust is unable to settle
any transaction with the shareholder's bank. If the Automatic Investment Plan is
terminated before the shareholder's account totals $1,000, the Trust reserves
the right to close the account in accordance with the procedures described under
"Other Redemption Information" above.

AUTOMATIC WITHDRAWAL PLAN. A shareholder of I Shares of a Fund whose shares in a
single account total $1,000 or more (or of Institutional Shares whose shares in
a single account total $10,000 or more) may establish a withdrawal plan to
provide for the preauthorized payment from the shareholder's account of $250 or
more on a monthly, quarterly, semi-annual or annual basis. Under the withdrawal
plan, sufficient shares in the shareholder's account are redeemed to provide the
amount of the periodic payment and any taxable gain or loss is recognized by the
shareholder upon redemption of the shares.

Shareholders wishing to utilize the withdrawal plan may do so by completing an
application which may be obtained by writing or calling the Transfer Agent. The
Trust may suspend a shareholder's withdrawal plan without notice if the account
contains insufficient funds to effect a withdrawal or if the account balance is
less than the required minimum amount at any time.

REOPENING ACCOUNTS. Provided that the information on the account application
form on file with the Trust is still applicable, a shareholder may reopen an
account, without filing a new account application form, at any time within one
year after the shareholder's account is closed.

DETERMINATION OF NET ASSET VALUE. The Trust determines the net asset value per
share of each Fund as of 4:00 P.M., Eastern time, on all weekdays, except New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving and Christmas ("Fund Business
Day") by dividing the value of the Fund's net assets (i.e., the value of its
securities and other assets less its liabilities) by the number of Shares
outstanding at the time the determination is made.

Securities owned by a Fund for which market quotations are readily available are
valued at current market value. Securities for which market quotations are not
readily available are valued at fair value as determined by the Board in
accordance with procedures adopted by the Board.

Trading in securities on European, Far Eastern and other international
securities exchanges and over-the-counter markets is normally completed well
before the close of business of each Fund Business Day. In addition, trading in
foreign securities generally or in a particular country or countries may not
take place on all Fund Business Days. Trading does take place in various foreign
markets, however, on days on which the Funds' net asset value is not calculated.
Calculation of the net asset value per share of a Fund may not occur
contemporaneously with the determination of the prices of the foreign securities
used in the calculation. Events affecting the values of foreign securities that
occur after the time their prices are determined and before the Fund's
determination of net asset value will not be reflected in the Fund's calculation
of net asset value unless the Adviser or Schroder determines that the particular
event would materially affect net asset value, in which case an adjustment will
be made.

All assets and liabilities of a Fund denominated in foreign currencies are
valued in U.S. dollars at the mean of the bid and asked prices of such
currencies against the U.S. dollar last quoted by a major bank prior to the time
of the valuation.

6. DIVIDENDS, DISTRIBUTIONS
AND TAX MATTERS

DIVIDENDS AND DISTRIBUTIONS
Except with respect to Ready Cash Investment Fund, Shares become entitled to
receive dividends on the next Fund Business Day after acceptance of an order and
are not entitled to receive dividends declared after the day on which their
redemption becomes effective. Ready Cash Investment Fund Shares become entitled
to receive dividends on the day of the acceptance

<PAGE>

of an order and are not entitled to receive dividends declared on or after the
day on which their redemption becomes effective.

Dividends of net investment income currently are declared and paid at least
annually by each Fund in accordance with the Fund's dividend policy. For
Intermediate U.S. Government Fund, Total Return Bond Fund and Stable Income
Fund, dividends currently are declared and paid monthly and for Ready Cash
Investment Fund are declared daily and paid monthly. Each Fund's net capital
gain, if any, is distributed at least annually, typically in December.

Shareholders may choose to have dividends and distributions of a Fund reinvested
in shares of that Fund (the "Reinvestment Option"), to receive dividends and
distributions in cash (the "Cash Option") or to direct dividends and
distributions to be reinvested in shares of another fund of the Trust (the
"Directed Dividend Option"). Plan, IRA and KEOGH accounts are automatically
assigned the Reinvestment Option. All dividends and distributions are treated in
the same manner for Federal income tax purposes whether received in cash or
reinvested in shares of a fund.

Under the Reinvestment Option, all dividends and distributions of a Fund are
automatically invested in additional Shares of that Fund. All dividends and
distributions are reinvested at a Fund's net asset value as of the payment date
of the dividend or distribution. Shareholders are assigned this option unless
one of the other two options is selected. Under the Cash Option, all dividends
and distributions are paid to the shareholder in cash. Under the Directed
Dividend Option, shareholders of a Fund whose shares in a single account of that
Fund total $10,000 or more may elect to have all dividends and distributions
reinvested in shares of another fund of the Trust, provided that those shares
are eligible for sale in the shareholder's state of residence. For further
information concerning the Directed Dividend Option, shareholders should contact
the Transfer Agent.

TAX MATTERS
TAXATION OF THE FUNDS. Each Fund is treated as a separate corporation for
Federal tax purposes and intends to continue to qualify for each fiscal year as
a regulated investment company under the Internal Revenue Code of 1986, as
amended. In addition, each Fund intends to distribute all of its net investment
income and capital gain each year. Accordingly, it is anticipated that the Funds
will not be liable for Federal income or excise taxes on their net investment
income and capital gain.

INTERNATIONAL FUND-INTERNATIONAL PORTFOLIO. International Portfolio is not
required to pay Federal income taxes on its net investment income and capital
gain, as it is treated as a partnership for Federal tax purposes. All interest,
dividends and gains and losses of International Portfolio are deemed to have
been "passed through" to International Fund in proportion to its holdings of
International Portfolio, regardless of whether such interest, dividends or gains
have been distributed by International Portfolio or losses have been realized by
the International Portfolio. Investment income received by International Fund
from sources within foreign countries may be subject to foreign income or other
taxes. International Fund intends to elect, if eligible to do so, to permit its
shareholders to take a credit (or a deduction) for foreign income and other
taxes paid by International Portfolio. Shareholders of International Fund will
be notified of their share of those taxes and will be required to include that
amount as income. In that event, the shareholder may be entitled to claim a
credit or deduction for those taxes.

SHAREHOLDER TAX MATTERS
GENERAL. Dividends paid by a Fund out of its net investment income (including
any realized net short-term capital gain) are taxable to shareholders as
ordinary income. Distributions by a Fund of realized net long-term capital gain,
if any, are taxable to shareholders as long-term capital gain, regardless of the
length of time the shareholder may have held shares in the Fund at the time of
distribution. If Fund shares are sold at a loss after being held for 6 months or
less, the loss will be treated as long-term capital loss to the extent of any
long-term capital gain distribution received on those shares.

<PAGE>

All capital gain distributions paid by a Fund and all dividends paid by a Fund
(except Total Return Bond Fund and Ready Cash Investment Fund) and received by a
shareholder reduce the net asset value of the shareholder's shares by the amount
of the distribution or dividend. Furthermore, a dividend or distribution made
shortly after the purchase of shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to the
shareholder as described above.

It is expected that a substantial portion of the dividends to shareholders of
each Equity Fund, except International Fund, and a portion of each Balanced
Fund's dividends to shareholders will qualify for the dividends received
deduction for corporations. The amount of such dividends eligible for the
dividends received deduction is limited to the amount of dividends from domestic
corporations received during a Fund's fiscal year. To the extent International
Fund invests in the securities of domestic issuers, the dividends to
shareholders of the Fund may qualify for the dividends received deduction for
corporations.

The Funds may be required by Federal law to withhold 31 percent of reportable
payments (which may include taxable dividends, capital gain distributions and
redemption proceeds) paid to individuals and certain other non-corporate
shareholders. Withholding is not required if a shareholder certifies that the
shareholder's social security or tax identification number provided to the Trust
is correct and that the shareholder is not subject to backup withholding for
prior under-reporting to the Internal Revenue Service.

Reports containing appropriate information with respect to the Federal income
tax status of dividends and distributions paid during the year by the Funds will
be mailed to shareholders shortly after the close of each year.

TAX-DEFERRED ACCOUNTS. Dividends or distributions of net long-term capital gain,
if any, paid with respect to the shares of a Fund held by a tax-deferred account
will not be taxable to that account. Currently, distributions from such accounts
will be taxable to individual participants under applicable tax rules without
regard to the character of the income earned by the account.

7. OTHER INFORMATION

FUND PERFORMANCE
Each Fund's performance may be quoted in advertising in terms of yield or total
return. Both types are based on historical results and are not intended to
indicate future performance. The Funds' advertisements may reference ratings and
rankings among similar funds by independent evaluators such as Morningstar,
Lipper Analytical Services, Inc. and IBC/Donoghue, Inc. In addition, the
performance of a Fund may be compared to recognized indices of market
performance. The comparative material found in the Funds' advertisements, sales
literature or reports to shareholders may contain performance ratings. This
material is not to be considered representative or indicative of future
performance.

YIELD. A Fund's yield is a way of showing the rate of income earned by the Fund
as a percentage of the Fund's share price. Yield is calculated by dividing the
net investment income of the Fund for the stated period by the average number of
shares entitled to receive dividends and expressing the result as an annualized
percentage rate based on the Fund's share price at the end of the period. A Fund
may also quote a compounded annualized yield which assumes the reinvestment of
dividends paid by the Fund and therefore will be somewhat higher than the
annualized yield for the same period.

TOTAL RETURN. Total Return refers to the average annual compounded rates of
return over some representative period that would equate an initial amount
invested at the beginning of a stated period to the ending redeemable value of
the investment, after giving effect to the reinvestment of all dividends and
distributions and deductions of expenses during the period. Because average
annual returns tend to smooth out variations in a Fund's returns, shareholders
should recognize that they are not the same as actual year-by-year results.

<PAGE>

PERFORMANCE BENCHMARKS. Each of the Funds uses a benchmark securities index as a
measure of the Fund's performance. These indices may be comprised of a composite
of various recognized securities indices to reflect the investment policies of
Diversified Equity Fund, Growth Equity Fund and each Balanced Fund, which invest
their assets using different investment styles. These indices are not used in
the management of the Fund but rather are standards by which the Advisers and
shareholders may compare the performance of a Fund to an unmanaged composite of
securities with similar, but not identical, characteristics as the Fund. For
instance, Index Fund's investment objective is to duplicate the return of the
Standard & Poor's 500 Composite Stock Price Index. Accordingly, the Adviser
generally uses that index as a comparison to measure the performance of Index
Fund. The Funds may from time to time advertise a comparison of their
performance against any of these or other indices.

BANKING LAW MATTERS
Federal banking laws and regulations generally permit a bank or bank affiliate
to act as investment adviser, transfer agent and custodian to an investment
company and to purchase shares of the investment company as agent for and upon
the order of a customer. Forum believes that Norwest and any other bank or bank
affiliate that may perform sub-transfer agent or similar services or purchase
shares as agent for its customers may perform the services described in this
Prospectus for the Trust and its shareholders without violating applicable
Federal banking laws or regulations.

Federal or state statutes or regulations and judicial or administrative
decisions or interpretations relating to the activities of banks and their
affiliates, however, could prevent a bank or bank affiliate from continuing to
perform all or a part of the activities contemplated by this Prospectus. If
Norwest or another bank or bank affiliate were prohibited from so acting, its
shareholder customers would be permitted to remain shareholders of the Trust and
alternative means for continuing the servicing of such shareholders would be
sought. In this event, changes in the operation of the Trust might occur and
shareholders serviced by the bank or bank affiliate might no longer be able to
avail themselves of its services. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.

PORTFOLIO TRANSACTIONS
The Advisers place orders for the purchase and sale of assets they manage with
brokers and dealers selected by and in the discretion of the respective Adviser.
The Advisers seek "best execution" for all portfolio transactions, but a Fund
may pay higher than the lowest available commission rates when an Adviser
believes it is reasonable to do so in light of the value of the brokerage,
research and other services provided by the broker effecting the transaction.

Commission rates for brokerage transactions are fixed on many foreign securities
exchanges, and this may cause higher brokerage expenses to accrue to
International Fund and each other Fund that invests in foreign securities than
would be the case for comparable transactions effected on United States
securities exchanges.

Subject to the Funds' policy of obtaining the best price consistent with quality
of execution of transactions, each Adviser may employ Norwest Investment
Services, Inc., Schroder Wertheim & Company and other broker-dealer affiliates
of an Adviser (collectively "Affiliated Brokers") to effect brokerage
transactions for the Funds. The Fund's payment of commissions to Affiliated
Brokers is subject to procedures adopted by the Board and, with respect to the
Portfolios of Core Trust, Core Trust's board of trustees, to provide that the
commissions will not exceed the usual and customary broker's commissions charged
by unaffiliated brokers. No specific portion of a Fund's brokerage will be
directed to Affiliated Brokers and in no event will a broker affiliated with an
Adviser directing the transaction receive brokerage transactions in recognition
of research or other services provided to the Adviser.

Tax rules applicable to short-term trading may affect the timing of a Fund's
portfolio transactions or its ability to realize short-term trading profits or
establish short-term positions.

<PAGE>

For the fiscal period ended October 31, 1995, the annual turnover rates of Small
Company Growth Fund, Intermediate U.S. Government Fund and Stable Income Fund
were 106.55 percent, 240.90 percent and 115.85 percent, respectively. An annual
turnover rate of 100 percent would occur if all of the securities in a Fund were
replaced once in a period of 1 year. Higher portfolio turnover rates may result
in higher taxable income for shareholders and, with respect to Funds that invest
in equity securities, may result in increased brokerage costs to the Fund. For
more information about the portfolio transactions of the Funds and International
Portfolio, see the SAI.

THE TRUST AND ITS SHARES
The Trust was originally organized under the name "Prime Value Funds, Inc." as a
Maryland corporation on August 29, 1986 and on July 30, 1993 was reorganized as
a Delaware business trust under the name "Norwest Funds." The Trust has an
unlimited number of authorized shares of beneficial interest. The Board may,
without shareholder approval, divide the authorized shares into an unlimited
number of separate portfolios or series (such as the Funds) and may divide
portfolios or series into classes of shares (such as I Shares), and the costs of
doing so will be borne by the Trust. Currently the authorized shares of the
Trust are divided into 30 series.

OTHER CLASSES OF SHARES. Each Fund may issue shares of other classes. Funds of
the Trust (except money market funds) currently may issue three classes of
shares, I Shares, A Shares and B Shares, and may in the future create additional
class types. Contrarian Stock Fund, Small Company Stock Fund, International Fund
and Total Return Bond Fund currently offer A Shares and B Shares in addition to
I Shares. Diversified Equity Fund, Growth Equity Fund, Income Equity Fund,
Intermediate U.S. Government Fund and Stable Income Fund plan to offer A Shares
and B Shares in April 1996. I Shares are offered to fiduciary, agency and
custodial clients of bank trust departments, trust companies and their
affiliates without any sales charges. A Shares are sold with front-end sales
charge or, in some cases, a contingent deferred sales charge. B Shares are sold
with a contingent deferred sales charge and pay distribution fees. Ready Cash
Investment Fund currently has two classes of shares outstanding, Institutional
Shares and Investor Shares, and may in the future create additional class types.
Institutional Shares are offered with a minimum investment of $100,000. Investor
Shares are offered with a minimum investment of $1,000 and incur greater
transfer agency and other expenses than Institutional Shares. Each class of a
Fund will have a different expense ratio and may have different sales charges
(including distribution fees). Each class's performance is affected by its
expenses and sales charges. For more information on any other class of shares of
the Funds investors may contact the Transfer Agent at 612-667-8833 or 800-338-
1348. Investors may also contact their Norwest sales representative to obtain
information on the other classes. Sales personnel of broker-dealers and other
financial institutions selling the Fund's shares may receive differing
compensation for selling I Shares, A Shares and B Shares of the Funds.

SHAREHOLDER VOTING AND OTHER RIGHTS. Each share of each portfolio of the Trust
and each class of shares has equal dividend, distribution, liquidation and
voting rights, and fractional shares have those rights proportionately, except
that expenses related to the distribution of the shares of each class (and
certain other expenses such as transfer agency and administration expenses) are
borne solely by those shares and each class votes separately with respect to the
provisions of any Rule 12b-1 plan which pertain to the class and other matters
for which separate class voting is appropriate under applicable law. Generally,
shares will be voted in the aggregate without reference to a particular
portfolio or class, except if the matter affects only one portfolio or class or
voting by portfolio or class is required by law, in which case shares will be
voted separately by portfolio or class, as appropriate. Delaware law does not
require the Trust to hold annual meetings of shareholders, and it is anticipated
that shareholder meetings will be held only when specifically required by
Federal or state law. Shareholders have available certain procedures for the
removal of Trustees. There are no conversion or preemptive rights in connection
with shares of the Trust. All shares when issued in accordance with the terms of
the offering will be fully paid and nonassessable. Shares are redeemable at net
asset value, at the option of the shareholders, subject to any contingent
deferred sales charge that may apply. A shareholder in a portfolio is

<PAGE>

entitled to the shareholder's pro rata share of all dividends and distributions
arising from that portfolio's assets and, upon redeeming shares, will receive
the portion of the portfolio's net assets represented by the redeemed shares.

As an investor in International Portfolio, International Fund will be entitled
to vote in proportion to its relative beneficial interest in International
Portfolio. On most issues subject to a vote of investors, as required by the
1940 Act and other applicable law, the Fund will solicit proxies from
shareholders of the Fund and will vote its interest in International Portfolio
in proportion to the votes cast by its shareholders. If there are other
investors in International Portfolio, there can be no assurance that any issue
that receives a majority of the votes cast by Fund shareholders will receive a
majority of votes cast by all investors in International Portfolio; indeed, if
other investors hold a majority interest in International Portfolio, they could
hold have voting control of International Portfolio.

From time to time, a shareholder may own a large percentage of a Fund.
Accordingly, that shareholder may be able to greatly affect (if not determine)
the outcome of a shareholder vote.

CORE TRUST STRUCTURE
International Fund invests all of its assets in International Portfolio, a
separate series of Core Trust, a business trust organized under the laws of the
State of Delaware in September 1994. Core Trust is registered under the 1940 Act
as an open-end management investment company. Pursuant to an exemptive order
issued by the SEC, the Blended Funds invest portions of their assets in Small
Company Portfolio, International Portfolio II and Index Portfolio of Core Trust.
Core Trust currently consists of eight diversified portfolios. The assets of
each Portfolio of Core Trust belong only to, and the liabilities of each
Portfolio are borne solely by, the respective Portfolio and no other Portfolio
of Core Trust.

INTERNATIONAL PORTFOLIO. International Fund seeks to achieve its investment
objective by investing all of its investable assets in International Portfolio,
which has the same investment objective and policies as the Fund. Accordingly,
International Portfolio directly acquires its own securities and the Fund
acquires an indirect interest in those securities. The investment objective and
fundamental investment policies of International Fund and International
Portfolio can be changed only with shareholder approval. See "Summary,"
"Investment Objectives, Policies and Risk Considerations," "Management of the
Funds" and "Appendix A: Investments, Investment Strategies and Risk
Considerations" for a complete description of International Portfolio's
investment objective, policies, restrictions, management, and expenses.

International Fund's investment in International Portfolio is in the form of a
non-transferable beneficial interest. As of the date of this Prospectus, the
Fund is the only institutional investor that has invested all of its assets in
International Portfolio. International Portfolio may permit other investment
companies or institutional investors to invest in International Portfolio. All
investors in International Portfolio will invest on the same terms and
conditions as International Fund and will pay a proportionate share of
International Portfolio's expenses.

International Portfolio will not sell its shares directly to members of the
general public. Another institutional investor in International Portfolio that
might sell its shares to members of the general public would not be required to
sell its shares at the same public offering price as International Fund, could
have different advisory and other fees and expenses than International Fund, and
might charge a sales commission. Therefore, International Fund shareholders may
have different returns than shareholders in another investment company that
invests exclusively in International Portfolio. There is currently no such other
investment company that offers its shares to members of the general public.
Information regarding any such funds in the future will be available from Core
Trust by calling 207-879-1900.

CERTAIN RISKS OF INVESTING IN INTERNATIONAL PORTFOLIO. International Fund's
investment in International Portfolio may be affected by the actions of other
large investors in International Portfolio, if any. For example, if
International Portfolio had a large investor other than International

<PAGE>

Fund that redeemed its interest in International Portfolio, International
Portfolio's remaining investors (including the Fund) might, as a result,
experience higher pro rata operating expenses, thereby producing lower returns.

International Fund may withdraw its entire investment from International
Portfolio at any time, if the Board determines that it is in the best interests
of International Fund and its shareholders to do so. International Fund might
withdraw, for example, if there were other investors in International Portfolio
with power to, and who did by a vote of the shareholders of all investors
(including the Fund), change the investment objective or policies of
International Portfolio in a manner not acceptable to the Board. A withdrawal
could result in a distribution in kind of portfolio securities (as opposed to a
cash distribution) by International Portfolio. That distribution could result in
a less diversified portfolio of investments for the Fund and could affect
adversely the liquidity of the Fund's portfolio. If International Fund decided
to convert those securities to cash, it usually would incur brokerage fees or
other transaction costs. If International Fund withdrew its investment from
International Portfolio, the Board would consider what action might be taken,
including the management of the Fund's assets in accordance with its investment
objective and policies by the Adviser and Schroder, the Fund's investment
adviser and subadviser, respectively, or the investment of all of the Fund's
investable assets in another pooled investment entity having substantially the
same investment objective as the Fund. The inability of International Fund to
find a suitable replacement investment, in the event the Board decided not to
permit the Adviser and Schroder to manage the Fund's assets, could have a
significant impact on shareholders of the Fund.

Each investor in International Portfolio, including International Fund, will be
liable for all obligations of International Portfolio but not for those of any
other portfolio of Core Trust. The risk to an investor in International
Portfolio of incurring financial loss on account of such liability, however,
would be limited to circumstances in which International Portfolio was unable to
meet its obligations. Upon liquidation of International Portfolio, investors
would be entitled to share pro rata in the net assets of International Portfolio
available for distribution to investors.

CORE TRUST BLENDED PORTFOLIOS. The Blended Funds are permitted to invest a
portion of their assets which are managed by using the small company, index and
international investment styles in Small Company Portfolio, Index Portfolio, and
International Portfolio II pursuant to an exemptive order obtained from the SEC.
The conditions of the Trust's exemptive order do not permit a Fund to invest all
of its assets in a Blended Portfolio. Accordingly, Index Fund does not invest in
Index Portfolio and International Fund does not invest in International
Portfolio II.

The Trust's exemptive order imposes several substantive conditions. On behalf of
each Blended Fund, the Board is required to review at least annually reports
identifying all instances in which a Portfolio in which the Fund invests buys a
security at approximately the same time that another Portfolio in which the Fund
invests sells the same security. The Board will consider whether the duplication
of brokerage costs resulting from these transactions is significant. If the
duplication of brokerage costs becomes significant, the Board will adopt
procedures designed to limit duplication. Conservative Balanced Fund, Moderate
Balanced Fund, and Growth Balanced Fund will limit any redemptions resulting
from a reallocation in their respective equity and fixed income security
positions to no more than 1 percent of a Portfolio during any period of less
than 30 days. The Board will determine, at least annually, that investment in
the Portfolios is in the best interests of the shareholders of each Blended
Fund.

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

<PAGE>

APPENDIX A
INVESTMENTS, INVESTMENT STRATEGIES
AND RISK CONSIDERATIONS

Common Stock and Preferred Stock
Equity Funds, Balanced Funds, Total Return Bond Fund. Common stockholders are
the owners of the company issuing the stock and, accordingly, vote on various
corporate governance matters such as mergers. They are not creditors of the
company, but rather, upon liquidation of the company are entitled to their pro
rata share of the company's assets after creditors (including fixed income
security holders) and, if applicable, preferred stockholders are paid. Preferred
stock is a class of stock having a preference over common stock as to dividends
and, in the alternative, as to the recovery of investment. A preferred
stockholder is a shareholder in the company and not a creditor of the company as
is a holder of the company's fixed income securities. Dividends paid to common
and preferred stockholders are distributions of the earnings of the company and
not interest payments, which are expenses of the company. Equity securities
owned by a Fund may be traded on national securities exchanges, in the over-the-
counter market or on a regional securities exchange and may not be traded every
day or in the volume typical of securities traded on a major national securities
exchange. As a result, disposition by a Fund of a portfolio security to meet
redemptions by shareholders or otherwise may require the Fund to sell these
securities at a discount from market prices, to sell during periods when
disposition is not desirable, or to make many small sales over an extended
period of time. The market value of all securities, including equity securities,
is based upon the market's perception of value and not necessarily the book
value of an issuer or other objective measure of a company's worth.

Convertible Securities
EQUITY FUNDS, BALANCED FUNDS, TOTAL RETURN BOND FUND. Convertible securities,
which include convertible debt, convertible preferred stock and other securities
exchangeable under certain circumstances for shares of common stock, are fixed
income securities or preferred stock which generally may be converted at a
stated price within a specific amount of time into a specified number of shares
of common stock. A convertible security entitles the holder to receive interest
paid or accrued on debt or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities have characteristics similar to
nonconvertible debt securities in that they ordinarily provide a stream of
income with generally higher yields than those of common stocks of the same or
similar issuers. These securities are usually senior to common stock in a
company's capital structure, but usually are subordinated to non-convertible
debt securities. In general, the value of a convertible security is the higher
of its investment value (its value as a fixed income security) and its
conversion value (the value of the underlying shares of common stock if the
security is converted). As a fixed income security, the value of a convertible
security generally increases when interest rates decline and generally decreases
when interest rates rise. The value of a convertible security is, however, also
influenced by the value of the underlying common stock. Contrarian Stock Fund
and Small Company Stock Fund currently intend to limit their investments in
convertible securities, and the other Funds may only invest in convertible
securities, that are investment grade.

A Fund may invest in equity-linked securities, including Preferred Equity
Redemption Cumulative Stock ("PERCS"), Equity-Linked Securities ("ELKS"), and
Liquid Yield Option Notes ("LYONS"). Equity-Linked Securities are securities
that are convertible into or based upon the value of, equity securities upon
certain terms and conditions. The amount received by an investor at maturity of
these securities is not fixed but is based on the price of the underlying common
stock, which may rise or fall. In addition, it is not possible to predict how
equity-linked securities will trade in the secondary market or whether the
market for them will be liquid or illiquid.

<PAGE>

Warrants
EQUITY FUNDS, BALANCED FUNDS. A Fund may invest in warrants, which are options
to purchase an equity security at a specified price (usually representing a
premium over the applicable market value of the underlying equity security at
the time of the warrant's issuance) and usually during a specified period of
time. Unlike convertible securities and preferred stocks, warrants do not pay a
fixed dividend. Investments in warrants involve certain risks, including the
possible lack of a liquid market for the resale of the warrants, potential price
fluctuations as a result of speculation or other factors and failure of the
price of the underlying security to reach a level at which the warrant can be
prudently exercised (in which case the warrant may expire without being
exercised, resulting in the loss of the Fund's entire investment therein).

ADRs and EDRs
EQUITY FUNDS (EXCEPT INDEX FUND AND SMALL COMPANY GROWTH FUND), BALANCED FUNDS.
A Fund may invest in sponsored and unsponsored American Depository Receipts
("ADRs"), which are receipts issued by an American bank or trust company
evidencing ownership of underlying securities issued by a foreign issuer. ADRs,
in registered form, are designed for use in U.S. securities markets. Unsponsored
ADRs may be created without the participation of the foreign issuer. Holders of
these ADRs generally bear all the costs of the ADR facility, whereas foreign
issuers typically bear certain costs in a sponsored ADR. The bank or trust
company depository of an unsponsored ADR may be under no obligation to
distribute shareholder communications received from the foreign issuer or to
pass through voting rights. A Fund (other than Contrarian Stock Fund and Small
Company Stock Fund) may also invest in European Depository Receipts ("EDRs"),
receipts issued by a European financial institution evidencing an arrangement
similar to that of ADRs, and in other similar instruments representing
securities of foreign companies. EDRs, in bearer form, are designed for use in
European securities markets.

U.S. Government Securities
ALL FUNDS. As used in this Prospectus, the term U.S. Government Securities means
obligations issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities. The U.S. Government Securities in
which a Fund may invest include U.S. Treasury Securities and obligations issued
or guaranteed by U.S. Government agencies and instrumentalities and backed by
the full faith and credit of the U.S. Government, such as those guaranteed by
the Small Business Administration or issued by the Government National Mortgage
Association. In addition, the U.S. Government Securities in which the Funds may
invest include securities supported primarily or solely by the creditworthiness
of the issuer, such as securities of the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation and the Tennessee Valley Authority.
There is no guarantee that the U.S. Government will support securities not
backed by its full faith and credit. Accordingly, although these securities have
historically involved little risk of loss of principal if held to maturity, they
may involve more risk than securities backed by the U.S. Government's full faith
and credit.

Zero-Coupon Securities
FIXED INCOME FUNDS, BALANCED FUNDS. A Fund may invest in separately traded
principal and interest components of securities issued or guaranteed by the U.S.
Treasury. These components are traded independently under the Treasury's
Separate Trading of Registered Interest and Principal of Securities ("STRIPS")
program or as Coupons Under Book Entry Safekeeping ("CUBES"). The Funds may
invest in other types of related zero-coupon securities. For instance, a number
of banks and brokerage firms separate the principal and interest portions of
U.S. Treasury securities and sell them separately in the form of receipts or
certificates representing undivided interests in these instruments. These
instruments are generally held by a bank in a custodial or trust account on
behalf of the owners of the securities and are known by various names, including
Treasury Receipts ("TRs"), Treasury Investment Growth Receipts ("TIGRs") and
Certificates of Accrual on Treasury Securities ("CATS"). Zero-coupon securities
also may be issued by corporations and municipalities.

<PAGE>

Zero-coupon securities are sold at original issue discount and pay no interest
to holders prior to maturity, but a Fund holding a zero-coupon security must
include a portion of the original issue discount of the security as income.
Because of this, zero-coupon securities may be subject to greater fluctuation of
market value than the other securities in which the Funds may invest. The Funds
distribute all of their net investment income, and may have to sell portfolio
securities to distribute imputed income, which may occur at a time when the
Adviser or Schroder would not have chosen to sell such securities and which may
result in a taxable gain or loss.

Corporate Debt Securities

Commercial Paper
CORPORATE DEBT SECURITIES - BALANCED FUNDS, FIXED INCOME FUNDS, CONTRARIAN STOCK
FUND, SMALL COMPANY STOCK FUND. COMMERCIAL PAPER - ALL FUNDS. The corporate debt
securities in which the Funds may invest include corporate bonds and notes and
short-term investments such as commercial paper and variable rate demand notes.
Commercial paper (short-term promissory notes) is issued by companies to finance
their or their affiliates' current obligations and is frequently unsecured.
Variable and floating rate demand notes are unsecured obligations redeemable
upon not more than 30 days' notice. These obligations include master demand
notes that permit investment of fluctuating amounts at varying rates of interest
pursuant to direct arrangement with the issuer of the instrument. The issuer of
these obligations often has the right, after a given period, to prepay the
outstanding principal amount of the obligations upon a specified number of days'
notice. These obligations generally are not traded, nor generally is there an
established secondary market for these obligations. To the extent a demand note
does not have a 7 day or shorter demand feature and there is no readily
available market for the obligation, it is treated as an illiquid security.

Financial Institution Obligations
ALL FUNDS. A Fund may invest in obligations of financial institutions, including
negotiable certificates of deposit, bankers' acceptances and time deposits of
U.S. banks (including savings banks and savings associations), foreign branches
of U.S. banks, foreign banks and their non-U.S. branches (Eurodollars), U.S.
branches and agencies of foreign banks (Yankee dollars), and wholly-owned
banking-related subsidiaries of foreign banks. Short Maturity style of
Conservative Balanced Fund limits these purchases to institutions which at the
time of investment have total assets in excess of 1 billion dollars, or the
equivalent in other currencies.

Certificates of deposit represent an institution's obligation to repay funds
deposited with it that earn a specified interest rate over a given period.
Bankers' acceptances are negotiable obligations of a bank to pay a draft which
has been drawn by a customer and are usually backed by goods in international
trade. Time deposits are non-negotiable deposits with a banking institution that
earn a specified interest rate over a given period. Certificates of deposit and
fixed time deposits, which are payable at the stated maturity date and bear a
fixed rate of interest, generally may be withdrawn on demand but may be subject
to early withdrawal penalties which could reduce the Fund's yield. Deposits
subject to early withdrawal penalties or that mature in more than 7 days are
treated as illiquid securities if there is no readily available market for the
securities. A Fund's investments in the obligations of foreign banks and their
branches, agencies or subsidiaries may be obligations of the parent, of the
issuing branch, agency or subsidiary, or both. Investments in foreign bank
obligations are limited to banks and branches located in countries which the
Advisers believe do not present undue risk.

Participation Interests
BALANCED FUNDS, MANAGED FIXED INCOME FUND, READY CASH INVESTMENT FUND. A Fund
may purchase participation interests in loans or securities in which the Fund
may invest directly that are owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in a loan or
security in the proportion that the Fund's interest bears to the total principal
amount of the security. Participation interests, which may have fixed, floating
or variable rates, may carry a demand feature backed by a letter of credit or
guarantee of the bank or

<PAGE>

institution permitting the holder to tender them back to the bank or other
institution. For certain participation interests the Fund will have the right to
demand payment, on not more than 7 days' notice, for all or a part of the Fund's
participation interest. A Fund will only purchase participation interests from
banks or other financial institutions that the Adviser deems to be creditworthy.
A Fund will not invest more than 10 percent of its total assets in participation
interests in which the Fund does not have demand rights.

Illiquid Securities

Restricted Securities
ILLIQUID SECURITIES - ALL FUNDS. RESTRICTED SECURITIES - INTERNATIONAL FUND,
BALANCED FUNDS, FIXED INCOME FUNDS (EXCEPT READY CASH INVESTMENT FUND). Each
Fund may invest up to 15 percent (10 percent in the case of Ready Cash
Investment Fund) of its net assets in securities that at the time of purchase
are illiquid. Historically, illiquid securities have included securities subject
to contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933 ("restricted securities"),
securities which are otherwise not readily marketable, such as over-the-counter
options, and repurchase agreements not entitling the holder to payment of
principal in 7 days. Limitations on resale may have an adverse effect on the
marketability of portfolio securities and a Fund might also have to register
restricted securities in order to dispose of them, resulting in expense and
delay. A Fund might not be able to dispose of restricted or other securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions. There can be no assurance that a liquid market will
exist for any security at any particular time.

An institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, including repurchase agreements,
commercial paper, foreign securities and corporate bonds and notes.
Institutional investors depend on an efficient institutional market in which the
unregistered security can be readily resold or on the issuer's ability to honor
a demand for repayment of the unregistered security. A securities contractual or
legal restrictions on resale to the general public or to certain institutions
may not be indicative of the liquidity of the security. If such securities are
eligible for purchase by institutional buyers in accordance with Rule 144A under
the Securities Act of 1933 or other exemptions, the Advisers may determine that
such securities are not illiquid securities, under guidelines or other
exemptions adopted by the Board. These guidelines take into account trading
activity in the securities and the availability of reliable pricing information,
among other factors. If there is a lack of trading interest in a particular Rule
144A security, a Fund's holdings of that security may be illiquid.

Borrowing
ALL FUNDS. Each Fund may borrow money for temporary or emergency purposes,
including the meeting of redemption requests, in amounts up to 33 1/3 percent of
the Fund's total assets. Borrowing involves special risk considerations.
Interest costs on borrowings may fluctuate with changing market rates of
interest and may partially offset or exceed the return earned on borrowed funds
(or on the assets that were retained rather than sold to meet the needs for
which funds were borrowed). Under adverse market conditions, a Fund might have
to sell portfolio securities to meet interest or principal payments at a time
when investment considerations would not favor such sales. No Fund, other than
Managed Fixed Income Fund, Intermediate U.S. Government Fund and, to the extent
they invest in the Managed Fixed Income Fund style or the Short Maturity style,
the Balanced Funds may purchase securities for investment while any borrowing
equal to 5 percent or more of the Fund's total assets is outstanding or borrow
for purposes other than meeting redemptions in an amount exceeding 5 percent of
the value of the Fund's total assets. A Fund's use of borrowed proceeds to make
investments would subject the Fund to the risks of leveraging. Reverse
repurchase agreements, short sales not against the box, dollar roll transactions
and other similar investments that involve a form of leverage have
characteristics similar to borrowings but are not considered borrowings if the
Fund maintains a segregated account; the use of these techniques in connection
with a segregated account may

<PAGE>

result in a Fund's assets being 100 percent leveraged. See "Appendix A -
Techniques Involving Leverage."

Purchasing Securities on Margin
INTERMEDIATE U.S. GOVERNMENT FUND. When the Fund purchases securities on margin,
it only pays part of the purchase price and borrows the remainder, typically
from the Fund's broker. As a borrowing, a Fund's purchase of securities on
margin is subject to the limitations and risks described in "Borrowing" above.
In addition, if the value of the securities purchased on margin decreases such
that the Fund's borrowing with respect to the security exceeds the maximum
permissible borrowing amount, the Fund will be required to make margin payments
(additional payments to the broker to maintain the level of borrowing at
permissible levels). A Fund's obligation to satisfy margin calls may require the
Fund to sell securities at an inappropriate time.

Techniques Involving Leverage
ALL FUNDS. Utilization of leveraging involves special risks and may involve
speculative investment techniques. The Funds may borrow for other than temporary
or emergency purposes, lend their securities, enter reverse repurchase
agreements, and purchase securities on a when issued or forward commitment
basis. In addition, certain funds may engage in dollar roll transactions and
Intermediate U.S. Government Fund may purchase securities on margin and sell
securities short (other than against the box). Each of these transactions
involve the use of "leverage" when cash made available to the Fund through the
investment technique is used to make additional portfolio investments. In
addition, the use of swap and related agreements may involve leverage. The Funds
use these investment techniques only when the Adviser to a Fund believes that
the leveraging and the returns available to the Fund from investing the cash
will provide shareholders a potentially higher return.

Leverage exists when a Fund achieves the right to a return on a capital base
that exceeds the Fund's investment. Leverage creates the risk of magnified
capital losses which occur when losses affect an asset base, enlarged by
borrowings or the creation of liabilities, that exceeds the equity base of the
Fund.

The risks of leverage include a higher volatility of the net asset value of the
Fund's shares and the relatively greater effect on the net asset value of the
shares caused by favorable or adverse market movements or changes in the cost of
cash obtained by leveraging and the yield obtained from investing the cash. So
long as a Fund is able to realize a net return on its investment portfolio that
is higher than interest expense incurred, if any, leverage will result in higher
current net investment income being realized by the Fund than if the Fund were
not leveraged. On the other hand, interest rates change from time to time as
does their relationship to each other depending upon such factors as supply and
demand, monetary and tax policies and investor expectations. Changes in such
factors could cause the relationship between the cost of leveraging and the
yield to change so that rates involved in the leveraging arrangement may
substantially increase relative to the yield on the obligations in which the
proceeds of the leveraging have been invested. To the extent that the interest
expense involved in leveraging approaches the net return on the Fund's
investment portfolio, the benefit of leveraging will be reduced, and, if the
interest expense on borrowings were to exceed the net return to shareholders,
the Fund's use of leverage would result in a lower rate of return than if the
Fund were not leveraged. Similarly, the effect of leverage in a declining market
could be a greater decrease in net asset value per share than if the Fund were
not leveraged. In an extreme case, if the Fund's current investment income were
not sufficient to meet the interest expense of leveraging, it could be necessary
for the Fund to liquidate certain of its investments at an inappropriate time.
The use of leverage may be considered speculative.

SEGREGATED ACCOUNT. In order to limit the risks involved in various transactions
involving leverage, the Trust's custodian will set aside and maintain in a
segregated account cash, U.S. Government Securities and other liquid, high-grade
debt securities in accordance with SEC guidelines. The accounts value, which is
marked to market daily, will be at least equal to the

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Fund's commitments under these transactions. The Fund's commitments may include
(i) the Fund's obligations to repurchase securities under a reverse repurchase
agreement, settle when-issued and forward commitment transactions and make
payments under a cap or floor (see "Appendix A - Swap Agreements") and (ii) the
greater of the market value of securities sold short or the value of the
securities at the time of the short sale (reduced by any margin deposit). The
net amount of the excess, if any, of a Fund's obligations over its entitlements
with respect to each interest rate swap will be calculated on a daily basis and
an amount at least equal to the accrued excess will be maintained in the
segregated account. If the Fund enters into an interest rate swap on other than
a net basis, the Fund will maintain the full amount accrued on a daily basis of
the Fund's obligations with respect to the swap in their segregated account. The
use of a segregated account in connection with leveraged transactions may result
in a Fund's portfolio being 100 percent leveraged.

Repurchase Agreements

Securities Lending

Reverse Repurchase Agreements

When-Issued Securities and Forward Commitments

Dollar Roll Transactions
A Fund's use of repurchase agreements, securities lending, reverse repurchase
agreements and forward commitments (including dollar roll transactions) entails
certain risks not associated with direct investments in securities. For
instance, in the event that bankruptcy or similar proceedings were commenced
against a counterparty while these transactions remained open or a counterparty
defaulted on its obligations, the Fund might suffer a loss. Failure by the other
party to deliver a security purchased by the Fund may result in a missed
opportunity to make an alternative investment. The Advisers monitor the
creditworthiness of counterparties to these transactions and intend to enter
into these transactions only when they believe the counterparties present
minimal credit risks and the income to be earned from the transaction justifies
the attendant risks. Counterparty insolvency risk with respect to repurchase
agreements is reduced by favorable insolvency laws that allow the Fund, among
other things, to liquidate the collateral held in the event of the bankruptcy of
the counterparty. Those laws do not apply to securities lending and,
accordingly, securities lending involves more risk than does the use of
repurchase agreements. As a result of entering forward commitments and reverse
repurchase agreements, as well as lending its securities, a Fund may be exposed
to greater potential fluctuations in the value of its assets and net asset value
per share. See "Appendix A - Techniques Involving Leverage."

REPURCHASE AGREEMENTS - ALL FUNDS. A Fund may enter into repurchase agreements,
transactions in which a Fund purchases a security and simultaneously commits to
resell that security to the seller at an agreed-upon price on an agreed-upon
future date, normally 1 to 7 days later. The resale price of a repurchase
agreement reflects a market rate of interest that is not related to the coupon
rate or maturity of the purchased security. The Trust's custodian maintains
possession of the collateral underlying a repurchase agreement, which has a
market value, determined daily, at least equal to the repurchase price, and
which consists of the types of securities in which the Fund may invest directly.
International Portfolio and, with respect to the portion of their assets managed
in the International Fund style, Diversified Equity Fund, Growth Equity Fund and
each Balanced Fund, may enter into repurchase agreements with foreign entities.

SECURITIES LENDING - ALL FUNDS. A Fund may lend securities from its portfolios
to brokers, dealers and other financial institutions. Securities loans must be
continuously secured by cash or U.S. Government Securities with a market value,
determined daily, at least equal to the value of the Fund's securities loaned,
including accrued interest. A Fund receives interest in respect of securities
loans from the borrower or from investing cash collateral. A Fund may pay fees
to

<PAGE>

arrange the loans. No Fund will lend portfolio securities in excess of 33 1/3
percent of the value of the Fund's total assets.

REVERSE REPURCHASE AGREEMENTS - BALANCED FUNDS, FIXED INCOME FUNDS. A Fund may
enter into reverse repurchase agreements, transactions in which the Fund sells a
security and simultaneously commits to repurchase that security from the buyer
at an agreed upon price on an agreed upon future date. The resale price in a
reverse repurchase agreement reflects a market rate of interest that is not
related to the coupon rate or maturity of the sold security. For certain demand
agreements, there is no agreed upon repurchase date and interest payments are
calculated daily, often based upon the prevailing overnight repurchase rate.
Because certain of the incidents of ownership of the security are retained by
the Fund, reverse repurchase agreements may be viewed as a form of borrowing by
the Fund from the buyer, collateralized by the security sold by the Fund. A Fund
will use the proceeds of reverse repurchase agreements to fund redemptions or to
make investments. In most cases these investments either mature or have a demand
feature to resell to the issuer on a date not later than the expiration of the
agreement. Interest costs on the money received in a reverse repurchase
agreement may exceed the return received on the investments made by the Fund
with those monies. Any significant commitment of a Fund's assets to the reverse
repurchase agreements will tend to increase the volatility of the Fund's net
asset value per share.

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS - ALL FUNDS. A Fund may purchase
fixed income securities on a "when-issued" or "forward commitment" basis. When
these transactions are negotiated, the price, which is generally expressed in
yield terms, is fixed at the time the commitment is made, but delivery and
payment for the securities take place at a later date. Normally, the settlement
date occurs within 3 months after the transaction. During the period between a
commitment and settlement, no payment is made for the securities purchased and
no interest on the security accrues to the purchaser. At the time a Fund makes a
commitment to purchase securities in this manner, the Fund immediately assumes
the risk of ownership, including price fluctuation. Failure by the other party
to deliver a security purchased by a Fund may result in a loss or a missed
opportunity to make an alternative investment.

The use of when-issued transactions and forward commitments enables a Fund to
hedge against anticipated changes in interest rates and prices. If the Adviser
or Schroder were to forecast incorrectly the direction of interest rate
movements, however, a Fund might be required to complete these transactions when
the value of the security is lower than the price paid by the Fund. Except for
dollar-roll transactions, a Fund will not purchase securities on a when-issued
or forward commitment basis if, as a result, more than 15 percent (35 percent in
the case of Total Return Bond Fund) of the value of the Fund's total assets
would be committed to such transactions.

When-issued securities and forward commitments may be sold prior to the
settlement date, but the Funds purchase securities on a when-issued and forward
commitment basis only with the intention of actually receiving the securities.
When-issued securities may include bonds purchased on a "when, and if issued"
basis under which the issuance of the securities depends upon the occurrence of
a subsequent event. Commitment of a Fund's assets to the purchase of securities
on a when-issued or forward commitment basis will tend to increase the
volatility of the Fund's net asset value per share.

DOLLAR ROLL TRANSACTIONS - BALANCED FUNDS, FIXED INCOME FUNDS (EXCEPT READY CASH
INVESTMENT FUND). A Fund may enter into dollar roll transactions wherein the
Fund sells fixed income securities, typically mortgage-backed securities, and
makes a commitment to purchase similar, but not identical, securities at a later
date from the same party. Like a forward commitment, during the roll period no
payment is made for the securities purchased and no interest or principal
payments on the security accrue to the purchaser, but the Fund assumes the risk
of ownership. A Fund is compensated for entering into dollar roll transactions
by the difference between the current sales price and the forward price for the
future purchase, as well as by the interest earned on the cash proceeds of the
initial sale. Like other when-issued

<PAGE>

securities or firm commitment agreements, dollar roll transactions involve the
risk that the market value of the securities sold by the Fund may decline below
the price at which a Fund is committed to purchase similar securities. In the
event the buyer of securities under a dollar roll transaction becomes insolvent,
the Fund's use of the proceeds of the transaction may be restricted pending a
determination by the other party, or its trustee or receiver, whether to enforce
the Fund's obligation to repurchase the securities. The Funds will engage in
roll transactions for the purpose of acquiring securities for its portfolio and
not for investment leverage. Each Fund will limit its obligations on dollar roll
transactions to 35 percent of the Fund's net assets.

Swap Agreements
BALANCED FUNDS, INTERMEDIATE U.S. GOVERNMENT FUND, MANAGED FIXED INCOME FUND,
STABLE INCOME FUND. To manage its exposure to different types of investments, a
Fund may enter into interest rate, currency and mortgage (or other asset) swap
agreements and may purchase and sell interest rate "caps," "floors" and
"collars." In a typical interest rate swap agreement, one party agrees to make
regular payments equal to a floating interest rate on a specified amount (the
"notional principal amount") in return for payments equal to a fixed interest
rate on the same amount for a specified period. If a swap agreement provides for
payment in different currencies, the parties may also agree to exchange the
notional principal amount. Mortgage swap agreements are similar to interest rate
swap agreements, except that the notional principal amount is tied to a
reference pool of mortgages. In a cap or floor, one party agrees, usually in
return for a fee, to make payments under particular circumstances. For example,
the purchaser of an interest rate cap has the right to receive payments to the
extent a specified interest rate exceeds an agreed upon level; the purchaser of
an interest rate floor has the right to receive payments to the extent a
specified interest rate falls below an agreed upon level. A collar entitles the
purchaser to receive payments to the extent a specified interest rate falls
outside an agreed upon range.

Swap agreements may involve leverage and may be highly volatile; depending on
how they are used, they may have a considerable impact on the Fund's
performance. See "Appendix A - Techniques Involving Leverage." Swap agreements
involve risks depending upon the counterparties creditworthiness and ability to
perform as well as the Fund's ability to terminate its swap agreements or reduce
its exposure through offsetting transactions. The Adviser monitors the
creditworthiness of counterparties to these transactions and intends to enter
into these transactions only when they believe the counterparties present
minimal credit risks and the income expected to be earned from the transaction
justifies the attendant risks.

Short Sales
INTERMEDIATE U.S. GOVERNMENT FUND. The Fund is authorized to make short sales of
securities it owns or has the right to acquire at no added cost through
conversion or exchange of other securities it owns (referred to as short sales
"against the box") and to make short sales of securities which it does not own
or have the right to acquire. A short sale that is not made "against the box" is
a transaction in which a Fund sells a security it does not own in anticipation
of a decline in the market price for the security. When the Fund makes a short
sale, the proceeds it receives are retained by the broker until the Fund
replaces the borrowed security. In order to deliver the security to the buyer,
the Fund must arrange through a broker to borrow the security and, in so doing,
the Fund becomes obligated to replace the security borrowed at its market price
at the time of replacement, whatever that price may be.

Short sales that are not made "against the box" create opportunities to increase
the Fund's return but, at the same time, involve special risk considerations and
may be considered a speculative technique. Since the Fund in effect profits from
a decline in the price of the securities sold short without the need to invest
the full purchase price of the securities on the date of the short sale, the
Fund's net asset value per share, will tend to increase more when the securities
it has sold short decrease in value, and to decrease more when the securities it
has sold short increase in value, than would otherwise be the case if it had not
engaged in such short sales. Short sales theoretically involve unlimited loss
potential, as the market price of securities sold short may

<PAGE>

continuously increase, although a Fund may mitigate such losses by replacing the
securities sold short before the market price has increased significantly. Under
adverse market conditions a Fund might have difficulty purchasing securities to
meet its short sale delivery obligations and might have to sell portfolio
securities to raise the capital necessary to meet its short sale obligations at
a time when fundamental investment considerations would not favor those sales.
See "Appendix A - Techniques Involving Leverage."

If the Fund makes a short sale "against the box", the Fund would not immediately
deliver the securities sold and would not receive the proceeds from the sale.
The seller is said to have a short position in the securities sold until it
delivers the securities sold, at which time it receives the proceeds of the
sale. The Fund's decision to make a short sale "against the box" may be a
technique to hedge against market risks when the Adviser believes that the price
of a security may decline, causing a decline in the value of a security owned by
the Fund or a security convertible into or exchangeable for such security. In
such case, any future losses in the Fund's long position would be reduced by an
offsetting future gain in the short position. The Fund's ability to enter into
short sales transactions is limited by certain tax requirements. See "Dividends,
Distributions and Taxes" in the SAI.

Mortgage-Backed Securities
FIXED INCOME FUNDS, BALANCED FUNDS. Mortgage-backed securities represent an
interest in a pool of mortgages originated by lenders such as commercial banks,
savings associations and mortgage bankers and brokers. Mortgage-backed
securities may be issued by governmental or government-related entities or by
non-governmental entities such as special purpose trusts created by banks,
savings associations, private mortgage insurance companies or mortgage bankers.

Interests in mortgage-backed securities differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or on specified call dates. In
contrast, mortgage-backed securities provide monthly payments which consist of
interest and, in most cases, principal. In effect, these payments are a "pass-
through" of the monthly payments made by the individual borrowers on their
mortgage loans, net of any fees paid to the issuer or guarantor of the
securities or a mortgage loan servicer. Additional payments to holders of these
securities are caused by prepayments resulting from the sale or foreclosure of
the underlying property or refinancing of the underlying loans.

UNDERLYING MORTGAGES. Pools of mortgages consist of whole mortgage loans or
participations in mortgage loans. The majority of these loans are made to
purchasers of 1-4 family homes, but may be made to purchasers of mobile homes or
other real estate interests. The terms and characteristics of the mortgage
instruments are generally uniform within a pool but may vary among pools. For
example, in addition to fixed-rate, fixed-term mortgages, the Fund may purchase
pools of variable rate mortgages, growing equity mortgages, graduated payment
mortgages and other types. Mortgage servicers impose qualification standards for
local lending institutions which originate mortgages for the pools as well as
credit standards and underwriting criteria for individual mortgages included in
the pools. In addition, many mortgages included in pools are insured through
private mortgage insurance companies.

LIQUIDITY AND MARKETABILITY. The market for mortgage-backed securities has
expanded considerably in recent years. The size of the primary issuance market
and active participation in the secondary market by securities dealers and many
types of investors make government and government-related pass-through pools
highly liquid. The recently introduced private conventional pools of mortgages
(pooled by commercial banks, savings and loan institutions and others, with no
relationship with government and government-related entities) have also achieved
broad market acceptance and consequently an active secondary market has emerged.
However, the market for conventional pools is smaller and less liquid than the
market for government and government-related mortgage pools.

<PAGE>

AVERAGE LIFE AND PREPAYMENTS. The average life of a pass-through pool varies
with the maturities of the underlying mortgage instruments. In addition, a
pool's terms may be shortened by unscheduled or early payments of principal and
interest on the underlying mortgages. Prepayments with respect to securities
during times of declining interest rates will tend to lower the return of a Fund
and may even result in losses to a Fund if the securities were acquired at a
premium. The occurrence of mortgage prepayments is affected by various factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions.

As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of fixed-
rate 30-year mortgages, common industry practice is to assume that prepayments
will result in a 12-year average life. Pools of mortgages with other maturities
or different characteristics will have varying assumptions for average life. The
assumed average life of pools of mortgages having terms of less than 30 years is
less than 12 years, but typically not less than 5 years.

YIELD CALCULATIONS. Yields on pass-through securities are typically quoted by
investment dealers based on the maturity of the underlying instruments and the
associated average life assumption. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgages. Conversely, in periods of rising rates, the rate of
prepayment tends to decrease, thereby lengthening the actual average life of the
pool. Actual prepayment experience may cause the yield to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting the yield of a
Fund.

GOVERNMENT AND GOVERNMENT-RELATED GUARANTORS. The principal government guarantor
of mortgage-backed securities is the Government National Mortgage Association
("GNMA"), a wholly-owned United States Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the United States Government, the timely
payment of principal and interest on securities issued by institutions approved
by GNMA and backed by pools of FHA-insured or VA-guaranteed mortgages.

The Federal National Mortgage Association ("FNMA") is a government-sponsored
corporation owned entirely by private stockholders that is subject to general
regulation by the Secretary of Housing and Urban Development. FNMA purchases
residential mortgages from a list of approved seller-servicers. The Federal Home
Loan Mortgage Corporation ("FHLMC") is a corporate instrumentality of the United
States Government that was created by Congress in 1970 for the purpose of
increasing the availability of mortgage credit for residential housing. Its
stock is owned by the twelve Federal Home Loan Banks. FHLMC issues Participation
Certificates ("PCs") which represent interests in mortgages from FHLMC's
national portfolio. FNMA and FHLMC each guarantee the payment of principal and
interest on the securities they issue. These securities, however, are not backed
by the full faith and credit of the United States Government.

PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. Mortgage-backed securities offered
by private issuers include pass-through securities comprised of pools of
conventional mortgage loans; mortgage-backed bonds which are considered to be
debt obligations of the institution issuing the bonds and which are
collateralized by mortgage loans; and collateralized mortgage obligations.

Mortgage-backed securities issued by non-governmental issuers may offer a higher
rate of interest than securities issued by government issuers because of the
absence of direct or indirect government guarantees of payment. Many non-
governmental issuers or servicers of mortgage-backed securities, however,
guarantee timely payment of interest and principal on such securities. Timely
payment of interest and principal may also be supported by various forms of
insurance, including individual loan, title, pool and hazard policies. There can
be no assurance that the private issuers or insurers will be able to meet their
obligations under the relevant guarantees and insurance policies.

<PAGE>

ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES. Adjustable rate mortgage-backed
securities ("ARMs") are securities that have interest rates that are reset at
periodic intervals, usually by reference to some interest rate index or market
interest rate. Although the rate adjustment feature may act as a buffer to
reduce sharp changes in the value of adjustable rate securities, these
securities are still subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness. Because of the
resetting of interest rates, adjustable rate securities are less likely than
non-adjustable rate securities of comparable quality and maturity to increase
significantly in value when market interest rates fall. Also, most adjustable
rate securities (or the underlying mortgages) are subject to caps or floors.
"Caps" limit the maximum amount by which the interest rate paid by the borrower
may change at each reset date or over the life of the loan and, accordingly,
fluctuation in interest rates above these levels could cause such mortgage
securities to "cap out" and to behave more like long-term, fixed-rate debt
securities.

ARMs may have less risk of a decline in value during periods of rapidly rising
rates, but they may also have less potential for capital appreciation than other
debt securities of comparable maturities due to the periodic adjustment of the
interest rate on the underlying mortgages and due to the likelihood of increased
prepayments of mortgages as interest rates decline. Furthermore, during periods
of declining interest rates, income to a Fund will decrease as the coupon rate
resets to reflect the decline in interest rates. During periods of rising
interest rates, changes in the coupon rates of the mortgages underlying a Fund's
ARMs may lag behind changes in market interest rates. This may result in a
slightly lower net value until the interest rate resets to market rates. Thus,
investors could suffer some principal loss if they sold Fund Shares before the
interest rates on the underlying mortgages were adjusted to reflect current
market rates.

COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized Mortgage Obligations
("CMOs") are debt obligations that are collateralized by mortgages or mortgage
pass-through securities issued by GNMA, FHLMC or FNMA or by pools of
conventional mortgages ("Mortgage Assets"). CMOs may be privately issued or U.S.
Government Securities. Payments of principal and interest on the Mortgage Assets
are passed through to the holders of the CMOs on the same schedule as they are
received, although, certain classes (often referred to as tranches) of CMOs have
priority over other classes with respect to the receipt of payments. Multi-class
mortgage pass-through securities are interests in trusts that hold Mortgage
Assets and that have multiple classes similar to those of CMOs. Unless the
context indicates otherwise, references to CMOs include multi-class mortgage
pass-through securities. Payments of principal of and interest on the underlying
Mortgage Assets (and in the case of CMOs, any reinvestment income thereon)
provide funds to pay debt service on the CMOs or to make scheduled distributions
on the multi-class mortgage pass-through securities. Parallel pay CMOs are
structured to provide payments of principal on each payment date to more than
one class. These simultaneous payments are taken into account in calculating the
stated maturity date or final distribution date of each class, which, as with
other CMO structures, must be retired by its stated maturity date or final
distribution date but may be retired earlier. Planned amortization class
mortgage-based securities ("PAC Bonds") are a form of parallel pay CMO. PAC
Bonds are designed to provide relatively predictable payments of principal
provided that, among other things, the actual prepayment experience on the
underlying mortgage loans falls within a contemplated range. If the actual
prepayment experience on the underlying mortgage loans is at a rate faster or
slower than the contemplated range, or if deviations from other assumptions
occur, principal payments on a PAC Bond may be greater or smaller than
predicted. The magnitude of the contemplated range varies from one PAC Bond to
another; a narrower range increases the risk that prepayments will be greater or
smaller than contemplated. CMOs may have complicated structures and generally
involve more risks than simpler forms of mortgage-backed securities.

The final tranche of a CMO may be structured as an accrual bond (sometimes
referred to as a Z-tranche). Holders of accrual bonds receive no cash payments
for an extended period of time. During the time that earlier tranches are
outstanding, accrual bonds receive accrued interest which is a credit for
periodic interest payments that increases the face amount of the security at a
compounded rate, but is not paid to the bond holder. After all previous tranches
are retired,

<PAGE>

accrual bond holders start receiving cash payments that include both principal
and continuing interest. The market value of accrual bonds can fluctuate widely
and their average life depends on the other aspects of the CMO offering.
Interest on accrual bonds is taxable when accrued even though the holders
receive no accrual payment. The Funds distribute all of their net investment
income, and may have to sell portfolio securities to distribute imputed income,
which may occur at a time when the Adviser would not have chosen to sell such
securities and which may result in a taxable gain or loss.

STRIPPED MORTGAGE-BACKED SECURITIES. Stripped mortgage-backed securities are
classes of mortgage-backed securities that receive different proportions of the
interest and principal distributions from the underlying Mortgage Assets. They
may be may be privately issued or U.S. Government Securities. In the most
extreme case, one class will be entitled to receive all or a portion of the
interest but none of the principal from the Mortgage Assets (the interest-only
or "IO" class) and one class will be entitled to receive all or a portion of the
principal, but none of the interest (the "PO" class). Currently, no fund may
purchase IOs or POs.

Asset-Backed Securities
BALANCED FUNDS, INTERMEDIATE U.S. GOVERNMENT FUND, MANAGED FIXED INCOME FUND,
READY CASH INVESTMENT FUND. Asset-backed securities represent direct or indirect
participations in, or are secured by and payable from, assets other than
mortgage-backed assets such as motor vehicle installment sales contracts,
installment loan contracts, leases of various types of real and personal
property and receivables from revolving credit (credit card) agreements. No Fund
may invest more than 10 percent of its net assets in asset-backed securities
that are backed by a particular type of credit, for instance, credit card
receivables. Asset-backed securities, including adjustable rate asset-backed
securities, have yield characteristics similar to those of mortgage-backed
securities and, accordingly, are subject to many of the same risks.

Assets are securitized through the use of trusts and special purpose
corporations that issue securities that are often backed by a pool of assets
representing the obligations of a number of different parties. Payments of
principal and interest may be guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution. Asset-
backed securities do not always have the benefit of a security interest in
collateral comparable to the security interests associated with mortgage-backed
securities. As a result, the risk that recovery on repossessed collateral might
be unavailable or inadequate to support payments on asset-backed securities is
greater for asset-backed securities than for mortgage-backed securities. In
addition, because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of an interest rate or economic cycle has not been
tested.

Foreign Exchange Contracts and Foreign Currency Forward Contracts
SMALL COMPANY GROWTH FUND, LARGE COMPANY GROWTH FUND, INTERNATIONAL FUND,
BALANCED FUNDS, MANAGED FIXED INCOME FUND. Changes in foreign currency exchange
rates will affect the U.S. dollar values of securities denominated in currencies
other than the U.S. dollar. The rate of exchange between the U.S. dollar and
other currencies fluctuates in response to forces of supply and demand in the
foreign exchange markets. These forces are affected by the international balance
of payments and other economic and financial conditions, government
intervention, speculation and other factors. When investing in foreign
securities a Fund usually effects currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign exchange market.
The Fund incurs foreign exchange expenses in converting assets from one currency
to another.

A Fund may enter into foreign currency forward contracts or currency futures or
options contracts for the purchase or sale of foreign currency to "lock in" the
U.S. dollar price of the securities denominated in a foreign currency or the
U.S. dollar value of interest and dividends to be paid on such securities, or to
hedge against the possibility that the currency of a foreign country in which a
Fund has investments may suffer a decline against the U.S. dollar. The Funds
have no present

<PAGE>

intention to enter into currency futures or options contracts but may do so in
the future. A forward currency contract is an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. This method of attempting to hedge the value of a Fund's
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. Although the
strategy of engaging in foreign currency transactions could reduce the risk of
loss due to a decline in the value of the hedged currency, it could also limit
the potential gain from an increase in the value of the currency. The Funds do
not intend to maintain a net exposure to such contracts where the fulfillment of
the Fund's obligations under such contracts would obligate the Fund to deliver
an amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency. A Fund will not enter
into these contracts for speculative purposes and will not enter into non-
hedging currency contracts. These contracts involve a risk of loss if the
Adviser fails to predict currency values correctly.

Futures Contracts and Options
BALANCED FUNDS, INTERMEDIATE U.S. GOVERNMENT FUND, MANAGED FIXED INCOME FUND,
STABLE INCOME FUND, INDEX FUND. A Fund may seek to enhance its return through
the writing (selling) and purchasing of exchange-traded and over-the-counter
options on fixed income securities or indices. A Fund may also to attempt to
hedge against a decline in the value of securities owned by it or an increase in
the price of securities which it plans to purchase through the use of those
options and the purchase and sale of interest rate futures contracts and options
on those futures contracts. A Fund may only write options that are covered. An
option is covered if, so long as the Fund is obligated under the option, it owns
an offsetting position in the underlying security or futures contract or
maintains cash, U.S. Government Securities or other liquid, high-grade debt
securities in a segregated account with a value at all times sufficient to cover
the Fund's obligation under the option. Certain futures strategies employed by a
Balanced Fund in making temporary allocations may not be deemed to be for bona
fide hedging purposes, as defined by the Commodity Futures Trading Commission. A
Fund may enter into these futures contracts only if the aggregate of initial
margin deposits for open futures contract positions does not exceed 5 percent of
the Fund's total assets.

RISK CONSIDERATIONS. The Fund's use of options and futures contracts subjects
the Fund to certain investment risks and transaction costs to which it might not
otherwise be subject. These risks include: (1) dependence on the Adviser's
ability to predict movements in the prices of individual securities and
fluctuations in the general securities markets; (2) imperfect correlations
between movements in the prices of options or futures contracts and movements in
the price of the securities hedged or used for cover which may cause a given
hedge not to achieve its objective; (3) the fact that the skills and techniques
needed to trade these instruments are different from those needed to select the
other securities in which the Fund invests; (4) lack of assurance that a liquid
secondary market will exist for any particular instrument at any particular
time, which, among other things, may hinder a Fund's ability to limit exposures
by closing its positions; (5) the possible need to defer closing out of certain
options, futures contracts and related options to avoid adverse tax
consequences; and (6) the potential for unlimited loss when investing in futures
contracts or writing options for which an offsetting position is not held.

Other risks include the inability of the Fund, as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise price and the possible loss of the entire premium paid for options
purchased by the Fund. In addition, the futures exchanges may limit the amount
of fluctuation permitted in certain futures contract prices during a single
trading day. A Fund may be forced, therefore, to liquidate or close out a
futures contract position at a disadvantageous price.

<PAGE>

and exchange traded options contracts on fixed income securities. Accordingly,
hedging transactions involving these instruments may entail "cross-hedging." As
an example, a Fund may wish to hedge existing holdings of mortgage-backed
securities, but no listed options may exist on those securities. In that event,
the Adviser may attempt to hedge the Fund's securities by the use of options
with respect to similar fixed income securities. The Fund may use various
futures contracts that are relatively new instruments without a significant
trading history. As a result, there can be no assurance that an active secondary
market in those contracts will develop or continue to exist.

LIMITATIONS. Except for the futures contracts strategies of the Balanced
Funds used for making temporary allocations among fixed-income and equity
securities, the Funds have no current intention of investing in futures
contracts and options thereon for purposes other than hedging. No Fund may
purchase any call or put option on a futures contract if the premiums
associated with all such options held by the Fund would exceed 5 percent of
the Fund's total assets as of the date the option is purchased. No Fund may
sell a put option if the exercise value of all put options written by the
Fund would exceed 50 percent of the Fund's total assets or sell a call option
if the exercise value of all call options written by the Fund would exceed
the value of the Fund's assets. In addition, the current market value of all
open futures positions held by a Fund will not exceed 50 percent of its total
assets.

OPTIONS ON SECURITIES. A call option is a contract pursuant to which the
purchaser of the call option, in return for a premium paid, has the right to buy
the security underlying the option at a specified exercise price at any time
during the term of the option. The writer of the call option, who receives the
premium, has the obligation upon exercise of the option to deliver the
underlying security against payment of the exercise price during the option
period. A put option gives its purchaser, in return for a premium, the right to
sell the underlying security at a specified price during the term of the option.
The writer of the put, who receives the premium, has the obligation to buy the
underlying security, upon exercise at the exercise price during the option
period. The amount of premium received or paid is based upon certain factors,
including the market price of the underlying security or index, the relationship
of the exercise price to the market price, the historical price volatility of
the underlying security or index, the option period, supply and demand and
interest rates.

OPTIONS ON STOCK INDICES. A stock index assigns relative values to the stock
included in the index, and the index fluctuates with changes in the market
values of the stocks included in the index. Stock index options operate in the
same way as the more traditional stock options except that exercises of stock
index options are effected with cash payments and do not involve delivery of
securities. Thus, upon exercise of stock index options, the purchaser will
realize and the writer will pay an amount based on the differences between the
exercise price and the closing price of the stock index.

INDEX FUTURES CONTRACTS. Bond and stock index futures contracts are bilateral
agreements pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the bond or stock index value at the close of trading of the contract and the
price at which the futures contract is originally struck. No physical delivery
of the securities comprising the index is made. Generally, these futures
contracts are closed out prior to the expiration date of the contract.

OPTIONS ON FUTURES CONTRACTS. Options on futures contracts are similar to stock
options except that an option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract rather than to purchase or sell stock, at a specified exercise price at
any time during the period of the option. Upon exercise of the option, the
delivery of the futures position to the holder of the option will be accompanied
by transfer to the holder of an accumulated balance representing the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
future.

<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE SAI AND THE
FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFERING OF FUND SHARES,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT
LAWFULLY BE MADE.

<PAGE>

Prospectus

April 1, 1996 / October 1, 1995
as amended April 1, 1996

This Prospectus offers A Shares and B Shares of Stable Income Fund, Intermediate
U.S. Government Fund, Income Fund and Total Return Bond Fund (each a "Fund" and
collectively the "Funds"). The Funds are separate diversified fixed income
portfolios of Norwest Advantage Funds (the "Trust"), which is a registered open-
end management investment company.

This Prospectus sets forth concisely the information concerning the Trust and
the Funds that a prospective investor should know before investing. The Trust
has filed with the Securities and Exchange Commission (the "SEC") a Statement of
Additional Information ("SAI") with respect to each Fund dated the same date as
the prospectus for the Fund and as may be further amended from time to time,
which contains more detailed information about the Trust and each of the Funds
and is incorporated into this Prospectus by reference. An investor may obtain a
copy of the SAI without charge by contacting the Trust's distributor, Forum
Financial Services, Inc., at Two Portland Square, Portland, Maine 04101 or by
calling 207-879-1900. Investors should read this Prospectus and retain it for
future reference.

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

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

1. Prospectus Summary

<PAGE>

Highlights of the Funds

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

Investment Objectives and Policies
Stable Income Fund seeks to maintain safety of principal while providing low-
volatility total return. This objective is pursued by investing primarily in
short and intermediate maturity, investment grade fixed income securities.

Intermediate U.S. Government Fund seeks to provide income and safety of
principal by investing primarily in U.S. Government Securities. This objective
is pursued by investing primarily in U.S. Government Securities. The Fund seeks
to moderate its volatility by using a conservative approach to structuring the
maturities of its investment portfolio.

Income Fund seeks current income and, secondarily, growth of capital. These
objectives are pursued by investing in a portfolio of fixed income securities
issued by domestic and foreign issuers.

Total Return Bond Fund seeks total return. This objective is pursued by
investing in a portfolio of U.S. Government and investment grade corporate fixed
income securities.

Investment Adviser
The Funds' investment adviser (the "Adviser") is Norwest Investment Management,
a part of Norwest Bank Minnesota, N.A. ("Norwest"). The Adviser provides
investment advice to various institutions, pension plans and other accounts and,
as of December 31, 1995, managed assets totaling approximately $23 billion. See
"Management - Investment Advisory Services." Norwest serves as the Trust's
transfer agent, dividend disbursing agent and custodian. See "Management -
Shareholder Servicing and Custody."

Fund Management
The manager of the Trust and distributor of its shares is Forum Financial
Services, Inc. ("Forum"), a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. See "Management - Management and
Distribution Services."

Shares of the Funds
Each Fund currently offers three separate classes of shares: A class
("A Shares"), B class ("B Shares") and I class ("I Shares"). A Shares and B
Shares are sold through this Prospectus and are collectively referred to as the
"Shares."

<PAGE>

A Shares. A Shares are offered at a price equal to their net asset value
plus a sales charge imposed at the time of purchase or, in some cases, a
contingent deferred sales charge imposed on redemptions made within two years of
purchase.
B Shares. B Shares are offered at a price equal to their net asset value
plus a contingent deferred sales charge imposed on most redemptions made within
four years (two years in the case of Stable Income Fund) of purchase. B Shares
pay a distribution services fee at an annual rate of up to 0.75%, and a
maintenance fee in an amount equal to 0.25%, of the
B Shares' average daily net assets. B Shares automatically convert to A Shares
of the same Fund six years (four years in the case of Stable Income Fund) after
the end of the calendar month in which the B Shares were originally purchased.

The choice of A Shares or B Shares permits each investor to purchase those
shares that the investor believes to be most beneficial given the amount
purchased, the length of time the investor expects to hold the shares and other
circumstances. A Shares will normally be more beneficial to the investor who
qualifies for reduced initial sales charges as described below. See "How to Buy
Shares - Alternative Distribution Arrangements."

I Shares are offered by separate prospectuses to fiduciary, agency and custodial
clients of bank trust departments, trust companies and their affiliates. Shares
of each class of a Fund have identical interests in the investment portfolio of
the Fund and, with certain exceptions, have the same rights. See "Other
Information - The Trust and Its Shares."

How to Buy and Sell Shares
Shares may be purchased or redeemed by mail, by bank wire and through an
investor's broker-dealer or other financial institution. The minimum initial
investment in Shares is $1,000 ($5,000 in the case of Stable Income Fund). The
minimum subsequent investment is $100. See "How to Buy Shares" and "How to Sell
Shares."

Exchanges
Shareholders may exchange A Shares and B Shares for A Shares and
B Shares, respectively, of certain other funds of the Trust. In addition, A
Shares may be exchanged for investor class shares of certain money market funds
of the Trust and B Shares may be exchanged for exchange class shares of Ready
Cash Investment Fund of the Trust. See "Other Shareholder Services - Exchanges."

Shareholder Features
Each Fund offers an Automatic Investment Plan, Automatic Withdrawal Plan and
Directed Dividend Option. Purchases of A Shares may be subject to Rights of
Accumulation, Cumulative Quantity Discounts or a Reinstatement Privilege. See
"Other Shareholder Services" and "How to Buy Shares - Alternative Distribution
Arrangements."

<PAGE>

Dividends
Dividends of each Fund's net investment income are declared daily and paid
monthly. Each Fund's net capital gain, if any, is distributed annually. All
dividends and distributions are reinvested in additional Fund shares unless the
shareholder elects to have them paid in cash.
See "Dividends and Tax Matters."

Certain Investment Considerations
and Risk Factors
There can be no assurance that any Fund will achieve its investment objective,
and a Fund's net asset value and total return will fluctuate based upon changes
in the value of its portfolio securities. Normally, the value of a Fund's
investments varies inversely with changes in interest rates. Upon redemption, an
investment in a Fund may be worth more or less than its original value. The
Funds' investments are subject to "credit risk" relating to the financial
condition of the issuers of the securities that each Fund holds. Each Fund,
however, invests only in investment grade securities (those rated in the top
four grades by a nationally recognized statistical rating organization ("NRSRO")
such as Standard & Poor's.

Expense Information

The purpose of the following tables is to assist investors in understanding the
expenses that an investor in Shares of a Fund will bear directly or indirectly.

Shareholder Transaction Expenses
(applicable to each Fund) Intermediate
U.S. Government Fund,
Stable Income Fund and
Income Fund Total Return Bond Fund
A B A B
Shares(1) Shares(2) Shares(1) Shares(2)
Maximum sales charge imposed on purchases

<PAGE>
<S> <C> <C> <C> <C>
(as a percentage of public offering price) 1.5% Zero 3.75% Zero
Maximum deferred sales charge (as a percentage of the lesser
of original purchase price or redemption proceeds) Zero 1.5% Zero 3.0%
Exchange Fee Zero Zero Zero Zero
</TABLE>

Annual Operating Expenses(3)
(as a percentage of average daily net assets after applicable fee waivers and
expense reimbursements)

Stable Intermediate
Income Fund U.S. Government Fund Income Fund Total Return Bond Fund
A B A B A B A B
Shares Shares Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.30% 0.30% 0.33% 0.33% 0.37% 0.37% 0.20% 0.20%
Rule 12b-1 Fees(4) None 0.75% None 0.75% None 0.75% None 0.75%
Other Expenses 0.35% 0.35% 0.35% 0.35% 0.38% 0.38% 0.55% 0.55%
Total Operating Expenses 0.65% 1.40% 0.68% 1.43% 0.75% 1.50% 0.75% 1.50%
</TABLE>

(1) Sales charge waivers and reduced sales charge plans are available for A
Shares. 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% (0.50% in the case of Stable
Income Fund) will be applied to the redemption. See "How To Buy Shares -
Alternative Distribution Arrangements."
(2) The maximum 3.0% contingent deferred sales charge on B Shares of
Intermediate U.S. Government Fund, Total Return Bond Fund, and Income Fund
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. With respect to Stable Income
Fund, 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."
(3) For a further description of the various expenses associated with the
Shares, see "Management." Expenses associated with I Shares of a Fund differ
from those of the Shares listed in the table. The amounts of estimated expenses
for Stable Income Fund and Intermediate U.S. Government Fund are based on
amounts incurred during each Fund's most recent fiscal year ended October 31,
1995. The amounts of expenses for Income Fund are based on amounts incurred
during each Funds' most recent fiscal year ended May 31, 1995. With respect to
Total Return Bond Fund, expense information has been restated to reflect current
expenses, as if these expenses had been in effect for the Fund's fiscal year
ended May 31, 1995. Absent waivers (which are estimated in the case of Total
Return Bond Fund), the Investment Advisory Fee for A Shares and B Shares of
Income Fund and Total Return Bond Fund would be 0.50%. With respect to A Shares,
absent

<PAGE>

expense reimbursements and fee waivers (which are estimated in the case of
Stable Income Fund, Intermediate U.S. Government Fund and Total Return Bond
Fund), the expenses of Stable Income Fund, Intermediate U.S. Government Fund,
Income Fund and Total Return Bond Fund would be: Other Expenses, 0.66%, 0.58%,
0.74% and 1.88%, respectively; and Total Operating Expenses, 0.96%, 0.91%, 1.24%
and 2.38%, respectively. With respect to B Shares, absent expense reimbursements
and fee waivers (which are estimated in the case of Stable Income Fund,
Intermediate U.S. Government Fund and Total Return Bond Fund), the expenses of
Stable Income Fund, Intermediate U.S. Government Fund, Income Fund and Total
Return Bond Fund would be: Other Expenses, 0.66%, 0.58%, 0.71% and 1.59%,
respectively; and Total Operating Expenses, 1.96%, 1.91%, 2.21% and 3.09%,
respectively. Other Expenses include transfer agency fees payable to Norwest at
an annual rate of up to 0.25% of each Fund's average daily net assets
attributable to
A Shares and B Shares and, in the case of Income Fund and Total Return Bond
Fund, custody fees payable to Norwest. Fee waivers are voluntary and may be
reduced or eliminated at any time.
(4) Absent waivers, the Rule 12b-1 Fees would be 1.00% for B Shares of each
Fund. Long-term shareholders of B Shares may pay aggregate sales charges
totaling more than the economic equivalent of the maximum front-end sales
charges permitted by the Rules of Fair Practice of National Association of
Securities Dealers, Inc.

Example
At right is a hypothetical example that 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.

The example is based on the expenses listed in the "Annual Operating Expenses"
table. The 5% annual return is not predictive of and does not represent the
Funds' projected returns; rather, it is required by government regulation. The
example assumes deduction of the maximum initial sales charge for A Shares,
deduction of the contingent deferred sales charge for B Shares applicable to a
redemption at the end of the period and the conversion of B Shares to A Shares
at the end of six years (four years in the case of Stable Income Fund). The
example should not be considered a representation of past or future expenses or
return. Actual expenses and return may be greater or less than indicated.

Hypothetical Expense Example
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
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 -- --
Intermediate

<PAGE>

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 --
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 --
Total Return Bond 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 --
</TABLE>

2. Financial Highlights

The following tables provide financial highlights for Income Fund and Total
Return Bond Fund. This information represents selected data for a single
outstanding A Share and B Share of each Fund for the periods shown. Information
for the years ended May 31, 1994, and May 31, 1995, was audited by KPMG Peat
Marwick LLP, independent auditors. The information for prior periods was audited
by Deloitte & Touche LLP, independent auditors, except that, with respect to
Income Fund, the information for the periods prior to 1992 was audited in
conjunction with an audit of the financial statements of that Fund's predecessor
by Coopers & Lybrand LLP, independent auditors. Each Fund's financial statements
for the fiscal year ended May 31, 1995, and independent auditors' report thereon
are contained in the Funds' Annual Report and are incorporated by reference into
the SAI. Further information about each Fund's performance is contained in the
Annual Report, which may be obtained from the Trust without charge. Financial
highlights are not provided with respect to A Shares and B Shares of Stable
Income Fund and Intermediate U.S. Government Fund because, prior to the date of
this Prospectus, those Funds had not yet offered those classes.

Income Fund
A Shares B Shares
Year Ended May 31 Year Ended May 31
1995 1994 1993 1992 1991 1990 1989 1988(a) 1995 1994(a)

<PAGE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Net Asset
Value per Share $ 9.52 $10.61 $10.52 $10.23 $ 9.94 $10.00 $ 9.95 $10.00 $ 9.51 $10.67
Net Investment Income 0.65 0.70 0.77 0.82 0.89 0.90 0.79 0.66 0.58 0.50
Net Realized and Unrealized
Gain (Loss) on Investments 0.11 (0.83) 0.39 0.53 0.29 (0.06) 0.05 0.05 0.10 (0.90)
Dividends from Net
Investment Income (0.65) (0.70) (0.77) (0.82) (0.89) (0.90) (0.79) (0.66) (0.58) (0.50)
Distributions from Net
Realized Gains -- (0.26) (0.30) (0.24) -- -- -- -- -- (0.26)
Ending Net Asset Value per Share $ 9.63 $ 9.52 $10.61 $10.52 $10.23 $ 9.94 $10.00 $ 9.95 $ 9.61 $ 9.51
Ratios to Average Net Assets:
Expenses(b) 0.75% 0.60% 0.60% 0.31% 0.16% 0.19% 0.07% 0.70%(c) 1.50% 1.33%(c)
Net Investment Income 7.02% 6.72% 7.18% 7.80% 8.82% 8.98% 8.62% 6.92%(c) 6.24% 5.82%(c)
Total Return 8.49% (1.58%) 11.46% 13.58% 12.38% 8.71% 8.78% 6.45%(c) 7.57% (4.82%)(c)
Portfolio Turnover Rate 98.83% 26.67% 87.98% 84.24% 61.33% 43.81% 48.08% 0.00% 98.83% 26.67%
Net Assets at the End of
Period (000's omitted) $6,231 $6,177 $85,252 $63,973 $50,138 $37,932 $27,939 $2,279 $3,296 $2,605

(a) Income Fund commenced operations on June 9, 1987 and commenced the offering of B Shares on August 5, 1993.
(b) During the periods, various fees and expenses were waived and reimbursed, respectively. Had these waivers and reimbursements
not occurred, the ratio of expenses to average net assets would have been:
Expenses 1.24% 1.16% 1.10% 1.08% 1.11% 1.13% 1.10% 2.28%(c) 2.21% 2.08%(c)
(c) Annualized.
</TABLE>

Total Return Bond Fund
A Shares B Shares
Year Ended May 31 Year Ended May 31
1995 1994(a) 1995 1994(a)

<PAGE>
<S> <C> <C> <C> <C>
Beginning Net Asset Value per Share $ 9.54 $10.00 $ 9.54 $10.00
Net Investment Income 0.67 0.27 0.59 0.24
Net Realized and Unrealized Gain
(Loss) on Investments 0.19 (0.46) 0.19 (0.46)
Dividends from Net Investment Income (0.67) (0.27) (0.59) (0.24)
Distributions from Net Realized Gains -- -- -- --
Ending Net Asset Value per Share $ 9.73 $ 9.54 $ 9.73 $ 9.54
Ratios to Average Net Assets:
Expenses(b) 0.64% 0.37%(c) 1.41% 1.11%(c)
Net Investment Income 6.94% 6.04%(c) 6.17% 5.40%(c)
Total Return 9.42% (4.64%)(c) 8.59% (5.23%)(c)
Portfolio Turnover Rate 35.19% 37.50% 35.19% 37.50%
Net Assets at the End of
Period (000's omitted) $599 $150 $919 $186

(a) Total Return Bond Fund commenced operations on December 31, 1993.
(b) During the periods, various fees and expenses were waived and reimbursed, respectively. Had these waivers and reimbursements
not occurred, the ratio of expenses to average net assets would have been:
Expenses 2.38% 13.29%(c) 3.09% 8.29%(c)
(c) Annualized.
</TABLE>

3. Investment Objectives and Policies

Stable Income Fund

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

Investment Policies. The Fund seeks to attain its investment objective by
investing primarily in investment grade short-term obligations. The Fund invests
in a diversified portfolio of fixed and variable rate U.S. dollar denominated
fixed income securities of a broad spectrum of United States and foreign
issuers, including U.S. Government Securities and the debt securities of
financial institutions, corporations, and others.

The securities in which the Fund invests include mortgage-backed and other
asset-backed securities, although the Fund limits these investments to not more
than 60% and 25%, respectively, of its total assets. In addition, the Fund
limits its holdings of mortgage-backed securities that are not U.S. Government
Securities to 25% of its total assets. The Fund may invest any amount of its
assets in U.S. Government Securities, but under normal circumstances less than
50% of the Fund's total assets are so invested. The Fund may invest in
securities that are restricted as to disposition under the Federal securities
laws (sometimes referred to as "private placements" or "restricted securities").
In addition, the Fund may not invest more than 25% 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% of
its total assets in the securities of any other issuer.

<PAGE>

The Fund only purchases those securities that are rated, at the time of
purchase, within the three highest long-term or two highest short-term rating
categories assigned by an NRSRO, such as Moody's Investors Service, Standard &
Poor's or Fitch Investors Service, L.P., or which are unrated and determined by
the Adviser to be of comparable quality. A description of the rating categories
of various NRSROs is contained in the SAI.

In order to manage its exposure to different types of investments, the Fund may
enter into interest rate and mortgage swap agreements and may purchase and sell
interest rate caps, floors and collars. The Fund also may engage in certain
strategies involving options (both exchange-traded and over-the-counter) to
attempt to enhance the Fund's income and may attempt to reduce the overall risk
of its investments or limit the uncertainty in the level of future foreign
exchange rates (hedge) by using options and futures contracts and foreign
currency forward contracts. The Fund's ability to use these strategies may be
limited by market considerations, regulatory limits and tax considerations. The
Fund may write covered call and put options, buy put and call options, buy and
sell interest rate and foreign currency futures contracts and buy options and
write covered options on those futures contracts. An option is covered if, so
long as the Fund is obligated under the option, it owns an offsetting position
in the underlying security or futures contract or maintains a segregated account
of liquid, high-grade debt instruments with a value at all times sufficient to
cover the Fund's obligations under the option.

Intermediate U.S. Government Fund

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

Investment Policies. The Fund seeks to attain its investment objective by
investing primarily in fixed and variable rate U.S. Government Securities. Under
normal circumstances, the Fund intends to invest at least 65% of its assets in
U.S. Government Securities and may invest up to 35% of its assets in fixed
income securities that are not U.S. Government Securities. The Fund emphasizes
the use of intermediate maturity securities to lessen interest rate risk, while
employing low risk yield enhancement techniques to add to the Fund's return over
a complete economic or interest rate cycle, such as adjustable rate securities
and swap agreements.

The securities in which the Fund invests will include mortgage-backed and other
asset-backed securities, although the Fund will limit these investments to not
more than 50%

<PAGE>

and 25%, respectively, of its total assets. As part of its mortgage-backed
securities investments, the Fund may enter into "dollar roll" transactions.
Certain fixed income securities are "zero-coupon" securities and the Fund will
limit its investment in these securities, except those issued through the U.S.
Treasury's STRIPS program, to not more than 10% of the Fund's total assets. The
Fund also may invest in securities that are restricted as to disposition under
the Federal securities laws (sometimes referred to as "private placements" or
"restricted securities"). In addition, the Fund may not invest more than 25% of
its total assets in securities issued or guaranteed by any single agency or
instrumentality of the U.S. Government, except the U.S. Treasury. The Fund may
make short sales and may purchase securities on margin (borrow money in order to
purchase securities), which are considered speculative investment techniques.
See "Investment Objectives and Policies Additional Investment Policies and Risk
Considerations - Short Sales" and "- Purchasing Securities on Margin."

The Fund will only purchase securities that are rated, at the time of purchase,
within the two highest rating categories assigned by an NRSRO, such as Moody's
Investors Service, Standard & Poor's or Fitch Investors Service, L.P., or which
are unrated and determined by the Adviser to be of comparable quality. A
description of the rating categories of various NRSROs is contained in the SAI.

The Fund primarily will invest in debt obligations with maturities (or average
life in the case of mortgage-backed and similar securities) ranging from short-
term (including overnight) to 12 years. Under normal circumstances, the Fund's
portfolio of securities will have an average dollar-weighted maturity of between
3 and 7 years. Under normal circumstances, the Fund's portfolio of securities
will have a duration of between 75% and 125% of the duration of the Lehman
Intermediate Government Bond Index, which is used as the Fund's benchmark index
as described under "Other Information - Performance Information." Duration is a
measure of a debt security's average life that reflects the present value of the
security's cash flow and, accordingly, is a measure of price sensitivity to
interest rate changes ("duration risk"). Because earlier payments on a debt
security have a higher present value, duration of a security, except a zero-
coupon security, will be less than the security's stated maturity.

In order to manage its exposure to different types of investments, the Fund may
enter into interest rate and mortgage swap agreements and may purchase and sell
interest rate caps, floors and collars. The Fund also may engage in certain
strategies involving options (both exchange-traded and over-the-counter) to
attempt to enhance the Fund's return and may attempt to reduce the overall risk
of its investments ("hedge") by using options and futures contracts. The Fund's
ability to use these strategies may be limited by market considerations,
regulatory limits and tax considerations. The Fund may write covered call and
put options, buy put and call options, buy and sell interest rate futures
contracts, and buy options and write covered options on those futures contracts.
An option is covered if, so long as the Fund is obligated under the option, it
owns an offsetting position in the underlying security or futures contract or
maintains a segregated account of liquid, high-

<PAGE>

grade debt instruments with a value at all times sufficient to cover the Fund's
obligations under the option.

It is anticipated that, effective May 17, 1996, the Fund will change its name to
Intermediate Government Income Fund.

Income Fund

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

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

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

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

<PAGE>

The Fund will invest primarily in securities with maturities (or average life in
the case of mortgage-backed and similar securities) ranging from short-term
(including overnight) to 30 years, and it is anticipated that the Fund's
portfolio of securities will have an average dollar-weighted maturity of between
3 and 12 years. The Fund's portfolio of securities will normally have a duration
of between 75% and 125% of the duration of the Lehman Brothers Aggregate Index.
Duration is a measure of a debt security's average life that reflects the
present value of the security's cash flow and, accordingly, is a measure of
price sensitivity to interest rate changes ("duration risk"). Because earlier
payments on a debt security have a higher present value, duration of a security,
except a zero-coupon security, will be less than the security's stated maturity.

Total Return Bond Fund

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

Investment Policies. The Fund invests primarily in U.S. Government Securities,
including mortgage-backed securities, and investment grade corporate fixed
income securities, although the Fund may invest an unlimited amount of its
assets in either corporate securities or U.S. Government Securities.

The Adviser's investment decisions are based on its analysis of major changes in
the direction of interest rates rather than an attempt by the Adviser to predict
short-term interest rate fluctuations. The Adviser also applies a contrarian
perspective by looking for undervalued segments of the fixed income market which
the Adviser believes offer opportunities for increased returns.

The average maturity of the Fund's portfolio will vary, generally, from 1 to 30
years. In making its investment decisions for the Fund, the Adviser focuses on
the maturity structure and quality structure of the Fund's portfolio. When the
Adviser's outlook is for rising interest rates and falling bond values, the
majority of the Fund's portfolio will be invested in securities with short-term
maturities in an effort to ride interest rates up while minimizing the negative
effect of falling bond prices. When the Adviser anticipates interest rates to
fall and bond prices increase, the Fund generally will be invested in securities
with long-term maturities in an attempt to lock in high interest rates and
capitalize on bond price appreciation.

The Fund will be invested to a greater degree in corporate securities, however,
as the spread between corporate and U.S. Government issues offers potential for
incremental returns. The corporate securities in which the Fund may invest
include debt securities (corporate bonds, debentures and notes), preferred stock
and convertible securities

<PAGE>

(convertible debt and convertible preferred stock), but may not own the common
stock into which a convertible security converts.

The Fund reserves the right, upon notice to shareholders, to invest all or a
portion of its assets in shares of another diversified, open-end management
investment company that has an investment objective and investment policies
substantially similar to its own.

Additional Investment Policies and Risk Considerations

Each Fund's investment objective and all investment policies of the Funds that
are designated as fundamental may not be changed without approval of the holders
of a majority of that Fund's outstanding voting securities. A majority of a
Fund's outstanding voting securities means the lesser of 67% of the shares of a
Fund present or represented at a shareholders' meeting at which the holders of
more than 50% of the shares are present or represented, or more than 50% of the
outstanding shares of a Fund. Except as otherwise indicated, investment policies
of the Funds are not deemed to be fundamental and may be changed by the Board of
Trustees of the Trust (the "Board") without shareholder approval. A further
description of the Funds' investment policies, including additional fundamental
policies, is contained in the SAI.

The Adviser monitors the creditworthiness of counterparties to the Funds'
transactions and intends to enter into a transaction only when it believes that
the counterparty presents minimal credit risks and the benefits from the
transaction justify the attendant risks. No Fund may invest more than 15% of its
net assets in illiquid securities, including repurchase agreements not entitling
the Fund to payment within seven days. As used herein, the term U.S. Government
Securities means obligations issued or guaranteed as to principal and interest
by the U.S. Government, its agencies or instrumentalities.

Borrowing. As a fundamental policy, each Fund may borrow money from banks or by
entering into reverse repurchase agreements and will limit borrowings to amounts
not in excess of 33 1/3% of the value of the Fund's total assets. Borrowings
for other than temporary or emergency purposes or meeting redemption requests
may not exceed 5% of the value of any Fund's assets. Each Fund may enter into
reverse repurchase agreements, transactions in which a Fund sells a security and
simultaneously commits to repurchase that security from the buyer at an agreed
upon price on an agreed upon future date.

<PAGE>

Diversification and Concentration. Each Fund is diversified as that term is
defined in the Investment Company Act of 1940 (the "1940 Act"). As a fundamental
policy, with respect to 75% of its assets, no Fund may purchase a security
(other than a U.S. Government Security or shares of investment companies) if, as
a result, (i) more than 5% of the Fund's total assets would be invested in the
securities of a single issuer or (ii) the Fund would own more than 10% of the
outstanding voting securities of any single issuer. Each Fund is prohibited from
concentrating its assets in the securities of issuers in any industry. As a
fundamental policy, each Fund may not purchase securities if, immediately after
the purchase, more than 25% of the value of the Fund's total assets would be
invested in the securities of issuers conducting their principal business
activities in the same industry. This limit does not apply to investments in
U.S. Government Securities, foreign government securities or repurchase
agreements covering U.S. Government Securities, although it is not currently
anticipated that any Fund will concentrate in securities issued by a single
foreign government. Each of Stable Income Fund and Intermediate U.S. Government
Fund reserves the right to invest all or a portion of its assets in another
diversified, open-end investment company with substantially the same investment
objective and policies as the Fund.

Fixed Income Securities and Their Characteristics. Although each Fund only
invests in investment grade fixed income securities, including money market
instruments, an investment in a Fund is subject to risk even if all fixed income
securities in the Fund's portfolio are paid in full at maturity. All fixed
income securities, including U.S. Government Securities, can change in value
when there is a change in interest rates or the issuer's actual or perceived
creditworthiness or ability to meet its obligations.

The market value of the interest-bearing debt securities held by the Funds will
be affected by changes in interest rates. There is normally an inverse
relationship between the market value of securities sensitive to prevailing
interest rates and actual changes in interest rates. In other words, an increase
in interest rates produces a decrease in market value. Moreover, the longer the
remaining maturity (and duration) of a security, the greater will be the effect
of interest rate changes on the market value of that security. Changes in the
ability of an issuer to make payments of interest and principal and in the
market's perception of an issuer's creditworthiness will also affect the market
value of the debt securities of that issuer. The possibility exists that, the
ability of any issuer to pay, when due, the principal of and interest on its
debt securities may become impaired.

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

<PAGE>

term investment grades for preferred stock are Baa in the case of Moody's and
BBB in the case of S&P and Fitch; and the lowest permissible short-term
investment grades for short-term debt, including commercial paper, are Prime-2
(P-2) in the case of Moody's, A-2 in the case of S&P and F-2 in the case of
Fitch.

The Funds also may purchase unrated securities if the Adviser determines the
security to be of comparable quality to a rated security that the Fund may
purchase. Unrated securities may not be as actively traded as rated securities.
Each Fund may retain a security whose rating has been lowered below the Fund's
lowest permissible rating category (or that are unrated and determined by the
Adviser to be of comparable quality to securities whose rating has been lowered
below the Fund's lowest permissible rating category) if the Adviser determines
that retaining the security is in the best interests of the Fund. Because a
downgrade often results in a reduction in the market price of the security, sale
of a downgraded security may result in a loss.

Variable and Floating Rate Securities. The securities in which the Funds invest
(including mortgage-backed securities) may have variable or floating rates of
interest. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate
index or market interest rate (the "underlying index"). The interest paid on
these securities is a function primarily of the underlying index upon which the
interest rate adjustments are based. Such adjustments minimize changes in the
market value of the obligation and, accordingly, enhance the ability of the Fund
to maintain a stable net asset value. Similar to fixed rate debt instruments,
variable and floating rate instruments are subject to changes in value based on
changes in market interest rates or changes in the issuer's creditworthiness.
The rate of interest on securities purchased by a Fund may be tied to various
rates of interest or indices. Certain variable rate securities (including
mortgage-related securities) pay interest at a rate that varies inversely to
prevailing short-term interest rates (sometimes referred to as inverse
floaters). For instance, upon reset the interest rate payable on a security may
go down when the underlying index has risen. During times when short-term
interest rates are relatively low as compared to long-term interest rates a Fund
may attempt to enhance its yield by purchasing inverse floaters. Certain inverse
floaters may have an interest rate reset mechanism that multiplies the effects
of changes in the underlying index. This form of leverage may have the effect of
increasing the volatility of the security's market value while increasing the
security's, and thus the Fund's, yield. Total Return Bond Fund limits its
investment in variable and floating rate securities to 5% of its assets.

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

<PAGE>

U.S. Government Securities. As used in this Prospectus, the term U.S. Government
Securities means obligations issued or guaranteed as to principal and interest
by the United States Government, its agencies or instrumentalities. The U.S.
Government Securities in which a Fund may invest include U.S. Treasury
securities and obligations issued or guaranteed by U.S. Government agencies and
instrumentalities and backed by the full faith and credit of the U.S.
Government, such as those guaranteed by the Small Business Administration or
issued by the Government National Mortgage Association ("Ginnie Mae"). In
addition, the U.S. Government Securities in which the Funds may invest include
securities supported primarily or solely by the creditworthiness of the issuer,
such as securities of the Federal National Mortgage Association ("Fannie Mae"),
the Federal Home Loan Mortgage Corporation ("Freddie Mac") and the Tennessee
Valley Authority. There is no guarantee that the U.S. Government will support
securities not backed by its full faith and credit. Accordingly, although these
securities have historically involved little risk of loss of principal if held
to maturity, they may involve more risk than securities backed by the U.S.
Government's full faith and credit.

Zero-Coupon Securities. A Fund may invest in separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury.
These components are traded independently under the Treasury's Separate Trading
of Registered Interest and Principal of Securities ("STRIPS") program or as
Coupons Under Book Entry Safekeeping ("CUBES"). The Funds may invest in other
types of related zero-coupon securities. For instance, a number of banks and
brokerage firms separate the principal and interest portions of U.S. Treasury
securities and sell them separately in the form of receipts or certificates
representing undivided interests in these instruments. These instruments are
generally held by a bank in a custodial or trust account on behalf of the owners
of the securities and are known by various names, including Treasury Receipts
("TRs"), Treasury Investment Growth Receipts ("TIGRs") and Certificates of
Accrual on Treasury Securities ("CATS"). Zero-coupon securities also may be
issued by corporations and municipalities.

Zero-coupon securities are sold at original issue discount and pay no interest
to holders prior to maturity, but a Fund holding a zero-coupon security must
include a portion of the original issue discount of the security as income.
Because of this, zero-coupon securities may be subject to greater fluctuation of
market value than the other securities in which the Funds may invest. The Funds
distribute all of their net investment income, and may have to sell portfolio
securities to distribute imputed income, which may occur at a time when the
Adviser would not have chosen to sell such securities and which may result in a
taxable gain or loss.

Demand Notes. The Funds may purchase variable and floating rate demand notes of
corporations, which are unsecured obligations redeemable upon not more than 30
days' notice. These obligations include master demand notes that permit
investment of fluctuating amounts at varying rates of interest pursuant to
direct arrangement with the issuer of the instrument. The issuers of these
obligations often have the right, after a given

<PAGE>

period, to prepay their outstanding principal amount of the obligations upon a
specified number of days' notice. These obligations generally are not traded,
nor generally is there an established secondary market for these obligations. To
the extent a demand note does not have a seven day or shorter demand feature and
there is no readily available market for the obligation, it is treated as an
illiquid security. Although a Fund would generally not be able to resell a
master demand note to a third party, the Fund is entitled to demand payment from
the issuer at any time. The Adviser continuously monitors the financial
condition of the issuer to determine the issuer's likely ability to make payment
on demand.

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

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

Portfolio Transactions. The frequency of portfolio transactions of each Fund
(the portfolio turnover rate) will vary from year to year depending on many
factors. From time to time a Fund may engage in active short-term trading to
take advantage of price movements affecting individual issues, groups of issues
or markets. The Funds' portfolio turnover is reported under "Financial
Highlights." It is each Fund's policy to obtain best net results in effecting
portfolio transactions. The Adviser may effect transactions for the Funds
through brokers who sell Fund shares. The Funds have no obligation to deal with
any specific broker or dealer in the execution of portfolio transactions.

Tax rules applicable to short-term trading may affect the timing of a Fund's
portfolio transactions or its ability to realize short-term trading profits or
establish short-term positions.

<PAGE>

Convertible Securities and Preferred Stock. Convertible securities, which
include convertible debt, convertible preferred stock and other securities
exchangeable under certain circumstances for shares of common stock, are fixed
income securities or preferred stock which generally may be converted at a
stated price within a specific amount of time into a specified number of shares
of common stock. A convertible security entitles the holder to receive interest
paid or accrued on debt or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities have characteristics similar to
nonconvertible debt securities in that they normally provide a stream of income
with generally higher yields than those of common stocks of the same or similar
issuers. These securities are usually senior to common stock in a company's
capital structure, but usually are subordinated to non-convertible debt
securities. In general, the value of a convertible security is the higher of its
investment value (its value as a fixed income security) and its conversion value
(the value of the underlying shares of common stock if the security is
converted). As a fixed income security, the value of a convertible security
generally increases when interest rates decline and generally decreases when
interest rates rise. The value of a convertible security is, however, also
influenced by the value of the underlying common stock.

Preferred stock is a class of stock having priority over common stock as to
dividends or the recovery of investment or both. The owner of preferred stock is
a shareholder in a business and not, like a bondholder, a creditor. Dividends
paid to preferred stockholders are distributions of earnings of a business in
contrast to interest payments to bondholders which are expenses of a business.

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

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

<PAGE>

When-Issued Securities and Forward Commitments. Each Fund may purchase
securities offered on a "when-issued" basis and may purchase securities on a
"forward commitment" basis. When such transactions are negotiated, the price is
fixed at the time the commitment is made, but delivery and payment for the
securities take place at a later date. Normally, the settlement date occurs
within three months after the transaction, but delayed settlements beyond three
months may be negotiated.

During the period between a commitment and settlement, no payment is made for
the securities purchased and, thus, no interest accrues to the Fund. At the time
a Fund makes a commitment to purchase securities in this manner, however, the
Fund immediately assumes the risk of ownership, including price fluctuation.
Failure by the other party to deliver or pay for a security purchased or sold by
the Fund may result in a loss or a missed opportunity to make an alternative
investment. Any significant commitment of a Fund's assets committed to the
purchase of securities on a when-issued or forward commitment basis may increase
the volatility of its net asset value. Except for dollar roll transactions,
which are described below, each of Stable Income Fund and Intermediate U.S.
Government Fund limits its investments in when-issued and forward commitment
securities to 15% of the value of the Fund's total assets. Total Return Bond
Fund limits its investments in when-issued and forward commitment securities to
35% of the value of the Fund's total assets.

The use of when-issued transactions and forward commitments enables a Fund to
hedge against anticipated changes in interest rates and prices. If the Adviser
were to forecast incorrectly the direction of interest rate movements, however,
a Fund might be required to complete when-issued or forward transactions at
prices inferior to the current market values. The Funds enter into when-issued
and forward commitments only with the intention of actually receiving the
securities, but a Fund may sell the securities before the settlement date if
deemed advisable. If a Fund chooses to dispose of the right to acquire a when-
issued security prior to its acquisition or to dispose of its right to deliver
or receive against a forward commitment, it can incur a gain or loss.

Dollar Roll Transactions. A Fund may enter into dollar roll transactions wherein
the Fund sells fixed income securities, typically mortgage-backed securities,
and makes a commitment to purchase similar, but not identical, securities at a
later date from the same party. Like a forward commitment, during the roll
period no payment is made for the securities purchased and no interest or
principal payments on the security accrue to the purchaser, but the Fund assumes
the risk of ownership. A Fund is compensated for entering into dollar roll
transactions by the difference between the current sales price and the forward
price for the future purchase, as well as by the interest earned on the cash
proceeds of the initial sale. Like other when-issued securities or firm
commitment agreements, dollar roll transactions involve the risk that the market
value of the securities sold by the Fund may decline below the price at which a
Fund is committed to purchase similar securities. In the event the buyer of
securities under a dollar roll transaction becomes insolvent, the Fund's use of
the proceeds of the transaction may be restricted

<PAGE>

pending a determination by the other party, or its trustee or receiver, whether
to enforce the Fund's obligation to repurchase the securities. The Funds will
engage in roll transactions for the purpose of acquiring securities for its
portfolio and not for investment leverage. Each of Stable Income Fund and
Intermediate U.S. Government Fund will limit its obligations on dollar roll
transactions to 35% of the Fund's net assets.

Swap Agreements. To manage their exposure to different types of investments,
Stable Income Fund and Intermediate U.S. Government Fund may enter into interest
rate and mortgage (or other asset) swap agreements and may purchase interest
rate caps, floors and collars. In a typical interest rate swap agreement, one
party agrees to make regular payments equal to a floating interest rate on a
specified amount (the "notional principal amount") in return for payments equal
to a fixed interest rate on the same amount for a specified period. Mortgage
swap agreements are similar to interest rate swap agreements, except that the
notional principal amount is tied to a reference pool of mortgages. In a cap or
floor, one party agrees, usually in return for a fee, to make payments under
particular circumstances. For example, the purchaser of an interest rate cap has
the right to receive payments to the extent a specified interest rate exceeds an
agreed upon level; the purchaser of an interest rate floor has the right to
receive payments to the extent a specified interest rate falls below an agreed
upon level. A collar entitles the purchaser to receive payments to the extent a
specified interest rate falls outside an agreed upon range.

Swap agreements may involve leverage and may be highly volatile; depending on
how they are used, they may have a considerable impact on the Fund's
performance. Swap agreements involve risks depending upon the counterparty's
creditworthiness and ability to perform as well as the Fund's ability to
terminate its swap agreements or reduce its exposure through offsetting
transactions.

Short Sales. Intermediate U.S. Government Fund may make short sales of
securities it owns or has the right to acquire at no added cost through
conversion or exchange of other securities it owns (referred to as short sales
"against the box") and to make short sales of securities which it does not own
or have the right to acquire. A short sale that is not made "against the box" is
a transaction in which a Fund sells a security it does not own in anticipation
of a decline in the market price for the security. When the Fund makes a short
sale, the proceeds it receives are retained by the broker until the Fund
replaces the borrowed security. In order to deliver the security to the buyer,
the Fund must arrange through a broker to borrow the security and, in so doing,
the Fund becomes obligated to replace the security borrowed at its market price
at the time of replacement, whatever that price may be.

<PAGE>

securities it has sold short increase in value, than would otherwise be the case
if it had not engaged in such short sales. Short sales theoretically involve
unlimited loss potential, as the market price of securities sold short may
continuously increase, although a Fund may mitigate such losses by replacing the
securities sold short before the market price has increased significantly. Under
adverse market conditions a Fund might have difficulty purchasing securities to
meet its short sale delivery obligations and might have to sell portfolio
securities to raise the capital necessary to meet its short sale obligations at
a time when fundamental investment considerations would not favor those sales.

Purchasing Securities on Margin. Intermediate U.S. Government Fund may purchase
securities on margin. When the Fund purchases securities on margin, it only pays
part of the purchase price and borrows the remainder, typically from the Fund's
broker. As a borrowing, a Fund's purchase of securities on margin is subject to
the limitations and risks described in "Borrowing" above. In addition, if the
value of the securities purchased on margin decreases such that the Fund's
borrowing with respect to the security exceeds the maximum permissible borrowing
amount, the Fund will be required to make margin payments (additional payments
to the broker to maintain the level of borrowing at permissible levels). A
Fund's obligation to satisfy margin calls may require the Fund to sell
securities at an inappropriate time.

Techniques Involving Leverage. Utilization of leveraging involves special risks
and may involve speculative investment techniques. The Funds may borrow for
other than temporary or emergency purposes, lend their securities, enter reverse
repurchase agreements, and purchase securities on a when issued or forward
commitment basis. In addition, certain funds may engage in dollar roll
transactions and Intermediate U.S. Government Fund may purchase securities on
margin and sell securities short (other than against the box). Each of these
transactions involve the use of "leverage" when cash made available to the Fund
through the investment technique is used to make additional portfolio
investments. In addition, the use of swap and related agreements may involve
leverage. The Funds use these investment techniques only when the Adviser to a
Fund believes that the leveraging and the returns available to the Fund from
investing the cash will provide shareholders a potentially higher return.

<PAGE>

Segregated Account. In order to limit the risks involved in various transactions
involving leverage, the Trust's custodian will set aside and maintain in a
segregated account cash, U.S. Government Securities and other liquid, high-grade
debt securities in accordance with SEC guidelines. The accounts value, which is
marked to market daily, will be at least equal to the Fund's commitments under
these transactions. The Fund's commitments may include (i) the Fund's
obligations to repurchase securities under a reverse repurchase agreement,
settle when-issued and forward commitment transactions and make payments under a
cap or floor (see "Swap Agreements" above) and (ii) the greater of the market
value of securities sold short or the value of the securities at the time of the
short sale (reduced by any margin deposit). The net amount of the excess, if
any, of a Fund's obligations over its entitlements with respect to each interest
rate swap will be calculated on a daily basis and an amount at least equal to
the accrued excess will be maintained in the segregated account. If the Fund
enters into an interest rate swap on other than a net basis, the Fund will
maintain the full amount accrued on a daily basis of the Fund's obligations with
respect to the swap in their segregated account. The use of a segregated account
in connection with leveraged transactions may result in a Fund's portfolio being
100% leveraged.

<PAGE>

Mortgage-Backed Securities. Mortgage-backed securities represent an interest in
a pool of mortgages originated by lenders such as commercial banks, savings
associations and mortgage bankers and brokers. Mortgage-backed securities may be
issued by governmental or government-related entities or by non-governmental
entities such as special purpose trusts created by banks, savings associations,
private mortgage insurance companies or mortgage bankers.

Underlying Mortgages. Pools of mortgages consist of whole mortgage loans or
participations in mortgage loans. The majority of these loans are made to
purchasers of 1-4 family homes, but may be made to purchasers of mobile homes or
other real estate interests. The terms and characteristics of the mortgage
instruments are generally uniform within a pool but may vary among pools. For
example, in addition to fixed-rate, fixed-term mortgages, the Fund may purchase
pools of variable rate mortgages, growing equity mortgages, graduated payment
mortgages and other types. Mortgage servicers impose qualification standards for
local lending institutions which originate mortgages for the pools as well as
credit standards and underwriting criteria for individual mortgages included in
the pools. In addition, many mortgages included in pools are insured through
private mortgage insurance companies.

Liquidity and Marketability. Generally, government and government-related pass-
through pools are highly liquid. While private conventional pools of mortgages
(pooled by non-government-related entities) have also achieved broad market
acceptance and an active secondary market has emerged, the market for
conventional pools is smaller and less liquid than the market for government and
government-related mortgage pools.

Average Life and Prepayments. The average life of a pass-through pool varies
with the maturities of the underlying mortgage instruments. In addition, a
pool's terms may be shortened by unscheduled or early payments of principal and
interest on the underlying mortgages. Prepayments with respect to securities
during times of declining interest rates will tend to lower the return of the
Fund and may even result in losses to the Fund if the securities were acquired
at a premium. The occurrence of mortgage prepayments is affected by various
factors including the level of interest rates, general economic conditions, the
location and age of the mortgage and other social and demographic conditions. As
prepayment rates of individual pools vary widely, it is not possible to

<PAGE>

accurately predict the average life of a particular pool. The assumed average
life of pools of mortgages having terms of 30 years or less is typically between
five and 12 years.

Yield Calculations. Yields on pass-through securities are typically quoted based
on the maturity of the underlying instruments and the associated average life
assumption. In periods of falling interest rates the rate of prepayment tends to
increase, thereby shortening the actual average life of a pool of mortgages.
Conversely, in periods of rising rates the rate of prepayment tends to decrease,
thereby lengthening the actual average life of the pool. Actual prepayment
experience may cause the yield to differ from the assumed average life yield.
Reinvestment of prepayments may occur at higher or lower interest rates than the
original investment, thus affecting the yield of the Fund.

Government and Government-Related Guarantors. The principal government guarantor
of mortgage-backed securities is Ginnie Mae, a wholly-owned United States
Government corporation within the Department of Housing and Urban Development.
Mortgage-backed securities are also issued by Fannie Mae, a government-sponsored
corporation owned entirely by private stockholders that is subject to general
regulation by the Secretary of Housing and Urban Development, and Freddie Mac, a
corporate instrumentality of the United States Government. While Fannie Mae and
Freddie Mac each guarantee the payment of principal and interest on the
securities they issue, unlike Ginnie Mae securities, their securities are not
backed by the full faith and credit of the United States Government.

Privately Issued Mortgage-Backed Securities. Mortgage-backed securities offered
by private issuers include pass-through securities comprised of pools of
conventional mortgage loans; mortgage-backed bonds (which are considered to be
debt obligations of the institution issuing the bonds and which are
collateralized by mortgage loans); and collateralized mortgage obligations
("CMOs"), which are described below. Mortgage-backed securities issued by non-
governmental issuers may offer a higher rate of interest than securities issued
by government issuers because of the absence of direct or indirect government
guarantees of payment. Many non-governmental issuers or servicers of mortgage-
backed securities, however, guarantee timely payment of interest and principal
on these securities. Timely payment of interest and principal also may be
supported by various forms of insurance, including individual loan, title, pool
and hazard policies.

Adjustable Rate Mortgage-Backed Securities. Adjustable rate mortgage-backed
securities ("ARMs") are securities that have interest rates that are reset at
periodic intervals, usually by reference to some interest rate index or market
interest rate. Although the rate adjustment feature may act as a buffer to
reduce sharp changes in the value of adjustable rate securities, these
securities are still subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness. Because of the
resetting of interest rates, adjustable rate securities are less likely than
non-adjustable rate securities of comparable quality and maturity to increase
significantly in value when market interest rates fall. Also, most adjustable
rate securities (or the underlying mortgages) are subject to caps or floors.
"Caps" limit the maximum amount by which the

<PAGE>

interest rate paid by the borrower may change at each reset date or over the
life of the loan and, accordingly, fluctuation in interest rates above these
levels could cause such mortgage securities to "cap out" and to behave more like
long-term, fixed-rate debt securities. ARMs may have less risk of a decline in
value during periods of rapidly rising rates, but they also may have less
potential for capital appreciation than other debt securities of comparable
maturities due to the periodic adjustment of the interest rate on the underlying
mortgages and due to the likelihood of increased prepayments of mortgages as
interest rates decline. Furthermore, during periods of declining interest rates,
income to the Fund will decrease as the coupon rate resets along with the
decline in interest rates. During periods of rising interest rates, changes in
the coupon rates of the mortgages underlying the Fund's ARMs may lag behind
changes in market interest rates. This may result in a lower value until the
interest rate resets to market rates.

Collateralized Mortgage Obligations. CMOs are debt obligations collateralized by
mortgages or mortgage pass-through securities issued by Ginnie Mae, Freddie Mac
or Fannie Mae or by pools of conventional mortgages ("Mortgage Assets"). CMOs
may be privately issued or U.S. Government Securities. Payments of principal and
interest on the Mortgage Assets are passed through to the holders of the CMOs on
the same schedule as they are received, although, certain classes (often
referred to as tranches) of CMOs have priority over other classes with respect
to the receipt of payments. Multi-class mortgage pass-through securities are
interests in trusts that hold Mortgage Assets and that have multiple classes
similar to those of CMOs. Unless the context indicates otherwise, references to
CMOs include multi-class mortgage pass-through securities. Payments of principal
of and interest on the underlying Mortgage Assets (and in the case of CMOs, any
reinvestment income thereon) provide funds to pay debt service on the CMOs or to
make scheduled distributions on the multi-class mortgage pass-through
securities. Parallel pay CMOs are structured to provide payments of principal on
each payment date to more than one class. These simultaneous payments are taken
into account in calculating the stated maturity date or final distribution date
of each class, which, as with other CMO structures, must be retired by its
stated maturity date or final distribution date but may be retired earlier.
Planned amortization class mortgage-based securities ("PAC Bonds") are a form of
parallel pay CMO. PAC Bonds are designed to provide relatively predictable
payments of principal provided that, among other things, the actual prepayment
experience on the underlying mortgage loans falls within a contemplated range.
If the actual prepayment experience on the underlying mortgage loans is at a
rate faster or slower than the contemplated range, or if deviations from other
assumptions occur, principal payments on a PAC Bond may be greater or smaller
than predicted. The magnitude of the contemplated range varies from one PAC Bond
to another; a narrower range increases the risk that prepayments will be greater
or smaller than contemplated. CMOs may have complicated structures and generally
involve more risks than simpler forms of mortgage-related securities.

Asset-Backed Securities. Asset-backed securities represent direct or indirect
participations in, or are secured by and payable from, assets other than
mortgage-related assets such as motor vehicle installment sales contracts,
installment loan contracts, leases

<PAGE>

of various types of real and personal property and receivables from revolving
credit (credit card) agreements. No Fund may invest more than 15% (10% in the
case of Income Fund and Total Return Bond Fund) of its net assets in asset-
backed securities that are backed by a particular type of credit, for instance,
credit card receivables. Asset-backed securities, including adjustable rate
asset-backed securities, have yield characteristics similar to those of
mortgage-related securities and, accordingly, are subject to many of the same
risks.

Assets are securitized through the use of trusts and special purpose
corporations that issue securities that are often backed by a pool of assets
representing the obligations of a number of different parties. Payments of
principal and interest may be guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution. Asset-
backed securities do not always have the benefit of a security interest in
collateral comparable to the security interests associated with mortgage-related
securities. As a result, the risk that recovery on repossessed collateral might
be unavailable or inadequate to support payments on asset-backed securities is
greater for asset-backed securities than for mortgage-related securities. In
addition, because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of an interest rate or economic cycle has not been
tested.

Foreign Securities. Stable Income Fund and Income Fund may invest in debt
securities registered and sold in the United States by foreign issuers (Yankee
Bonds) and debt securities sold outside the United States by foreign or U.S.
issuers (Euro-bonds). Each Fund intends to restrict its purchases of debt
securities to issues denominated and payable in United States dollars.
Investments in foreign companies involve certain risks, such as exchange rate
fluctuations, political or economic instability of the issuer or the country of
issue and the possible imposition of exchange controls, withholding taxes on
interest payments, confiscatory taxes or expropriation. Foreign securities also
may be subject to greater fluctuations in price than securities of domestic
corporations denominated in U.S. dollars. Foreign securities and their markets
may not be as liquid as domestic securities and their markets, and foreign
brokerage commissions and custody fees are generally higher than those in the
United States. In addition, less information may be publicly available about a
foreign company than about a domestic company, and foreign companies may not be
subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies.

Futures Contracts and Options. Stable Income Fund and Intermediate U.S.
Government Fund may (and the other Funds may in the future) seek to enhance its
return through the writing (selling) and purchasing exchange-traded and over-
the-counter options on fixed income securities or indices. These Funds also may
attempt to hedge against a decline in the value of securities owned by it or an
increase in the price of securities which it plans to purchase through the use
of those options and the purchase and sale of interest rate futures contracts
and options on those futures contracts. The Funds only may write options that
are covered. An option is covered if, so long as the Fund is obligated under

<PAGE>

the option, it owns an offsetting position in the underlying security or futures
contract or maintains cash, U.S. Government Securities or other liquid, high-
grade debt securities in a segregated account with a value at all times
sufficient to cover the Fund's obligation under the option. A Fund may enter
into these futures contracts only if the aggregate of initial deposits for open
futures contract positions does not exceed 5% of the Fund's total assets.

Risk Considerations. A Fund's use of options and futures contracts subjects the
Fund to certain investment risks and transaction costs to which it might not
otherwise be subject. These risks include: (1) dependence on the Adviser's
ability to predict movements in the prices of individual securities and
fluctuations in the general securities markets; (2) imperfect correlations
between movements in the prices of options or futures contracts and movements in
the price of the securities hedged or used for cover which may cause a given
hedge not to achieve its objective; (3) the fact that the skills and techniques
needed to trade these instruments are different from those needed to select the
other securities in which the Fund invests; (4) lack of assurance that a liquid
secondary market will exist for any particular instrument at any particular
time, which, among other things, may limit a Fund's ability to limit exposures
by closing its positions; (5) the possible need to defer closing out of certain
options, futures contracts and related options to avoid adverse tax
consequences; and (6) the potential for unlimited loss when investing in futures
contracts or writing options for which an offsetting position is not held.

Other risks include the inability of a Fund, as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise price and the possible loss of the entire premium paid for options
purchased by the Fund. In addition, the futures exchanges may limit the amount
of fluctuation permitted in certain futures contract prices during a single
trading day. A Fund may be forced, therefore, to liquidate or close out a
futures contract position at a disadvantageous price.

There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out a futures position or that a counterparty in an over-the-
counter option transaction will be able to perform its obligations. There are a
limited number of options on interest rate futures contracts and exchange traded
options contracts on fixed income securities. Accordingly, hedging transactions
involving these instruments may entail "cross-hedging." As an example, a Fund
may wish to hedge existing holdings of mortgage-backed securities, but no listed
options may exist on those securities. In that event, the Adviser may attempt to
hedge the Fund's securities by the use of options with respect to similar fixed
income securities. The Fund may use various futures contracts that are
relatively new instruments without a significant trading history. As a result,
there can be no assurance that an active secondary market in those contracts
will develop or continue to exist.

Limitations. The Funds have no current intention of investing in futures
contracts and options thereon for purposes other than hedging. Each Fund may not
purchase any call or put option on a futures contract if the premiums associated
with all such options held by

<PAGE>

the Fund would exceed 5% of the Fund's total assets as of the date the option is
purchased. No Fund may sell a put option if the exercise value of all put
options written by the Fund would exceed 50% of the Fund's total assets or sell
a call option if the exercise value of all call options written by the Fund
would exceed the value of the Fund's assets. In addition, the current market
value of all open futures positions held by a Fund will not exceed 50% of its
total assets.

Options on Securities. A call option is a contract pursuant to which the
purchaser of the call option, in return for a premium paid, has the right to buy
the security underlying the option at a specified exercise price at any time
during the term of the option. The writer of the call option, who receives the
premium, has the obligation upon exercise of the option to deliver the
underlying security against payment of the exercise price during the option
period. A put option gives its purchaser, in return for a premium, the right to
sell the underlying security at a specified price during the term of the option.
The writer of the put, who receives the premium, has the obligation to buy the
underlying security, upon exercise at the exercise price during the option
period. The amount of premium received or paid is based upon certain factors,
including the market price of the underlying security or index, the relationship
of the exercise price to the market price, the historical price volatility of
the underlying security or index, the option period, supply and demand and
interest rates.

Options on Stock Indices. A stock index assigns relative values to the stock
included in the index, and the index fluctuates with changes in the market
values of the stocks included in the index. Stock index options operate in the
same way as the more traditional stock options except that exercises of stock
index options are effected with cash payments and do not involve delivery of
securities. Thus, upon exercise of a stock index options, the purchaser will
realize and the writer will pay an amount based on the differences between the
exercise price and the closing price of the stock index.

Index Futures Contracts. Bond and stock index futures contracts are bilateral
agreements pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the bond or stock index value at the close of trading of the contract and the
price at which the futures contract is originally struck. No physical delivery
of the fixed income or equity securities comprising the index is made.
Generally, futures contracts are closed out prior to the expiration date of the
contract.

Options on Futures Contracts. Options on futures contracts are similar to stock
options except that an option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract rather than to purchase or sell stock, at a specified exercise price at
any time during the period of the option. Upon exercise of the option, the
delivery of the futures position to the holder of the option will be accompanied
by transfer to the holder of an accumulated balance representing the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
future.

<PAGE>

4. Management

The business of the Trust is managed under the direction of the Board of
Trustees (the "Board"). The Board formulates the general policies of the Funds
and meets periodically to review the results of the Funds, monitor investment
activities and practices and discuss other matters affecting the Funds and the
Trust. The Board consists of seven persons.

Investment Advisory Services

Norwest Investment Management. Subject to the general supervision of the Board,
Norwest Investment Management makes investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
The Adviser is a part of Norwest, a subsidiary of Norwest Corporation, which is
a multi-bank holding company that was incorporated under the laws of Delaware in
1929. As of December 31, 1995, Norwest Corporation was the 11th largest bank
holding company in the United States in terms of assets. As of that date, the
Adviser managed or provided investment advice with respect to assets totaling
approximately $23 billion.

The Adviser provides investment management services to each Fund pursuant to
investment advisory agreements between Norwest and the Trust. For the Adviser's
services, Norwest receives an advisory fee with respect to each of Stable Income
Fund, Intermediate U.S. Government Fund, Income Fund and Total Return Bond Fund,
at annual rates of 0.30%, 0.33%, 0.50% and 0.50%, respectively, of each Fund's
average daily net assets.

Portfolio Managers. Many persons on the advisory staff of the Adviser contribute
to the investment services provided to the Funds. The following persons,
however, are primarily responsible for the day-to-day management of the Funds:
Stable Income Fund - Karl P. Tourville, Vice President of Norwest since 1989.
Mr. Tourville has been associated with Norwest since 1986 and has served as the
Fund's portfolio manager since its inception.
Intermediate U.S. Government Fund and Income Fund - Marjorie H. Grace, Vice
President of Norwest since 1992.
Ms. Grace was a portfolio manager of Norwest Bank from 1992-1993; an
Institutional Salesperson with Norwest Investment Services, Inc. from 1991-1992;
a portfolio manager with United Banks of Colorado from 1989-1991; and Vice
President and portfolio manager with Colombia Savings and Loan from 1987-1989.
Ms. Grace has served as a portfolio manager for each Fund since May 25, 1995.

<PAGE>

Total Return Bond Fund - Mr. David B. Kinney. Mr. Kinney, a Vice President and
Senior Portfolio Manager at Norwest, has been associated with Norwest since
1981. He has served as the Fund's portfolio manager since its inception.

Management and
Distribution Services

Forum supervises the overall management of the Trust (including the Trust's
receipt of services for which the Trust is obligated to pay) and provides the
Trust with general office facilities pursuant to a Management Agreement with the
Trust. Forum provides persons satisfactory to the Board to serve as officers of
the Trust. Those officers, as well as certain other officers and Trustees of the
Trust, may be directors, officers or employees of (and persons providing
services to the Trust may include) Forum, its affiliates or certain non-banking
affiliates of Norwest. As of the date of this Prospectus, Forum provided
management and administrative services to registered investment companies and
collective investment funds with assets of approximately $14 billion. Forum is a
registered broker-dealer and investment adviser and is a member of the National
Association of Securities Dealers, Inc. As of the date of this Prospectus, Forum
is controlled by John Y. Keffer, President and Chairman of the Trust. For its
services and facilities, Forum receives from each Fund a management fee at an
annual rate of 0.10% (0.20% in the case of Income Fund and Total Return Bond
Fund) of the average daily net assets attributable to each class of the Fund.
From its own resources, Forum may pay a fee to broker-dealers or other persons
for distribution or other services related to the Funds.

Forum also acts as the distributor of the Shares pursuant to a distribution
services agreement with the Trust and in accordance therewith receives and may
reallow the initial sales charge assessed on purchases of A Shares of a Fund. As
authorized by a distribution plan with respect to B Shares of each Fund and
pursuant to the distribution services agreement, Forum receives a distribution
services fee as compensation for its distribution expenses with respect to B
Shares and a maintenance fee for its or certain broker-dealer's shareholder
services with respect to
B Shares. For further information about the distribution services agreement and
the distribution plan, including the fees payable thereunder, see "How to Buy
Shares - Alternative Distribution Arrangements." Pursuant to a separate
agreement, Forum also provides portfolio accounting services to each Fund.

Shareholder Servicing
and Custody

<PAGE>

accounts are maintained by sub-transfer agents or processing agents), performs
other transfer agency functions and acts as dividend disbursing agent for the
Trust. The Transfer Agent is permitted to subcontract any or all of its
functions with respect to all or any portion of the Trust's shareholders to one
or more qualified sub-transfer agents or processing agents, which may be
affiliates of the Transfer Agent or Forum, who agree to comply with the terms of
the Transfer Agency Agreement. Sub-transfer agents and processing agents may be
"Processing Organizations" as described under "How to Buy Shares - Purchase
Procedures." The Transfer Agent is permitted to compensate those agents for
their services; however, that compensation may not increase the aggregate amount
of payments by the Trust to the Transfer Agent. For its transfer agency
services, the Transfer Agent receives from each Fund a fee at an annual rate of
0.25% of the average daily net assets attributable to each class of the Fund.
Norwest also serves as the Trust's custodian. For its custodial services with
respect to Income Fund and Total Return Bond Fund, Norwest is compensated at an
annual rate of up to 0.05% of each Fund's average daily net assets. Norwest
currently receives no additional compensation for its custodial services with
respect to the other Funds, but the Funds will incur the expenses and costs of
any subcustodian.

Expenses of the Funds

Subject to the obligation of Norwest to reimburse the Trust for certain expenses
of the Funds, the Trust has confirmed its obligation to pay all the Trust's
expenses. The Funds' expenses include Trust expenses attributable to the Funds,
which are allocated to each Fund, and expenses not specifically attributable to
the Funds, which are allocated among the Funds and all other funds of the Trust
in proportion to their average net assets. Norwest, Forum and the Transfer Agent
may each elect to waive (or continue to waive) all or a portion of their fees,
which are accrued daily and paid monthly. Any such waivers will have the effect
of increasing a Fund's performance for the period during which the waiver is in
effect. No fee waivers may be recouped at a later date. Fee waivers are
voluntary and may be reduced or eliminated at any time.

Norwest and Forum and their agents and affiliates also may act in various
capacities for, and receive compensation from, their customers who are
shareholders of a Fund. Under agreements with those customers, Norwest and Forum
may elect to credit against the fees payable to them by their customers or to
rebate to customers all or a portion of any fee received from the Trust with
respect to assets of those customers invested in a Fund.

5. How to Buy Shares

Minimum Investment

<PAGE>

There is a $1,000 minimum for initial purchases ($5,000 in the case of Stable
Income Fund) and a $100 minimum for subsequent purchases of Shares of the Funds.
A Fund may in its discretion waive the investment minimums. Shareholders who
elect electronic share purchase privileges such as the Automatic Investment Plan
or the Directed Dividend Option are not subject to the initial investment
minimum. See "Other Shareholder Services - Automatic Investment Plan" and
"Dividends and Tax Matters."

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

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

Purchase Procedures

Initial Purchases
There are three ways to purchase shares initially.

1. By Mail. Investors may send a check made payable to the Trust along with a
completed account application form to the Trust at the address listed under
"Account Application" on page 45. Checks are accepted at full value subject to
collection. Payment by a check drawn on any member of the Federal Reserve System
can normally be converted into Federal funds within two business days after
receipt of the check. Checks drawn on some non-member banks may take longer.

2. By Bank Wire. Investors may make an initial investment in a Fund using the
wire system for transmittal of money among banks. The investor should first
telephone the Transfer Agent at 612-667-8833 or 800-338-1348 to obtain an
account number. The investor should then instruct a bank to wire the investor's
money immediately to:
Norwest Bank Minnesota, N.A.
ABA 091 000 019
For Credit to: Norwest Advantage Funds
0844-131
Re: [Name of Fund]
[Designate A Shares or B Shares]
Account No.:
Account Name:

<PAGE>

investors for the receipt of wire transfers. Payment by bank wire is treated as
a Federal funds payment when received.

3. Through Financial Institutions. Shares may be purchased and redeemed
through certain broker-dealers, banks and other financial institutions
("Processing Organizations"). The Transfer Agent, Forum and their affiliates may
be Processing Organizations. Processing Organizations may receive as a broker-
dealer's reallowance a portion of the sales charge paid by their customers who
purchase A Shares of a Fund, may receive payments from Forum with respect to
sales of B Shares and may receive payments as a processing agent from the
Transfer Agent. In addition, financial institutions, including Processing
Organizations, may charge their customers a fee for their services and are
responsible for promptly transmitting purchase, redemption and other requests to
the Funds.

Investors who purchase shares through a Processing Organization will be subject
to the procedures of their Processing Organization, which may include charges,
limitations, investment minimums, cutoff times and restrictions in addition to,
or different from, those applicable to shareholders who invest in a Fund
directly. These investors should acquaint themselves with their institution's
procedures and should read this Prospectus in conjunction with any materials and
information provided by their institution. Customers who purchase a Fund's
shares through a Processing Organization may or may not be the shareholder of
record and, subject to their institution's and the Funds' procedures, may have
Fund shares transferred into their name. There is typically a three-day
settlement period for purchases and redemptions through broker-dealers. Certain
Processing Organizations also may enter purchase orders with payment to follow.

Certain shareholder services may not be available to shareholders who have
purchased shares through a Processing Organization. These shareholders should
contact their Processing Organization for further information. The Trust may
confirm purchases and redemptions of a Processing Organization's customers
directly to the Processing Organization, which in turn will provide its
customers with confirmations and periodic statements. The Trust is not
responsible for the failure of any Processing Organization to carry out its
obligations to its customer. Certain states, such as Texas, permit shares of the
Funds to be purchased and redeemed only through registered broker-dealers,
including the Funds' distributor.

Subsequent Purchases
Subsequent purchases may be made by mailing a check, by sending a bank wire or
through a shareholder's Processing Organization as indicated above. All payments
should clearly indicate the shareholder's name and account number.

Account Application

<PAGE>

Investors may obtain the account application form necessary to open an account
by writing the Trust at the following address:
Norwest Advantage Funds
[Name of Fund]
Norwest Bank Minnesota, N.A.
Transfer Agent
733 Marquette Avenue
Minneapolis, MN 55479-0040

To participate in shareholder services not referenced on the account application
form and to change information on a shareholder's account (such as addresses),
investors or existing shareholders should contact the Trust. The Trust reserves
the right in the future to modify, limit or terminate any shareholder privilege
upon appropriate notice to shareholders and to charge a fee for certain
shareholder services, although no such fees are currently contemplated. Any
privilege and participation in any program may be terminated by the shareholder
at any time by writing to the Trust.

General Information

Fund shares are continuously sold on every weekday except customary national
business holidays and Good Friday ("Fund Business Day"). The purchase price for
Fund shares equals their net asset value next-determined after acceptance of an
order plus, in the case of the
A Shares, any applicable sales charge imposed at the time of purchase.

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

Alternative Distribution Arrangements

Investors should compare sales charges and fees before selecting a particular
class of shares. Investors should consider whether, during the anticipated life
of their investment in a Fund, the accumulated distribution services fee and
maintenance fee and contingent deferred sales charges on B Shares prior to
conversion would be less than the initial sales charge on A Shares purchased at
the same time and whether that differential would be offset by the higher yield
of A Shares. A summary of the charges applicable to shares of each Fund is
listed under "Prospectus Summary - Expense Information." Sales personnel of
selected broker-dealers distributing a Fund's shares may receive differing
compensation for selling A Shares and B Shares.

<PAGE>

Because initial sales charges are deducted at the time of purchase, investors
purchasing a Fund's A Shares receive fewer shares than if the sales charge were
not deducted and, accordingly, do not have the entire purchase price invested.
Investors not qualifying for reduced initial sales charges who expect to
maintain their investment for an extended period of time should consider
whether, in light of the initial sales charge and its effect on the amount of
the purchase price invested, purchases of A Shares are more or less advantageous
than purchases of B Shares with their associated accumulated continuing
distribution and maintenance charges. For example, based on estimated current
fees and expenses, an investor in each Fund other than Stable Income Fund
subject to the 3.75% initial sales charge who elects to reinvest all dividends
and distributions would have to hold the shareholder's investment approximately
five years for the B Shares' distribution services fee and maintenance fee to
exceed the initial sales charge. An investor in Stable Income Fund subject to
the 1.50% initial sales charge who elects to reinvest all dividends and
distributions would have to hold the shareholder's investment approximately two
years for the B Shares' distribution services fee and maintenance fee to exceed
the initial sales charge. The foregoing examples do not take into account the
time value of money, fluctuations in net asset value or the effects of different
performance assumptions.

A Shares

The public offering price of A Shares is their next-determined net asset value
plus an initial sales charge assessed as follows (no sales charge is assessed on
the reinvestment of dividends or distributions):

Stable Income Fund
Broker-Dealers'
Reallowance
Sales Charge As a As a
Percentage of Percentage of
Amount of Purchase Offering Price Net Asset Value* Offering Price
Less than $50,000 1.50% 1.52% 1.35%
$50,000 to $99,999 1.00 1.01 0.90
$100,000 to $499,000 0.75 0.76 0.70
$500,000 to $999,000 0.50 0.50 0.45
$1,000,000 and over None None None

* Rounded to the nearest one-hundredth percent

Intermediate U.S. Government Fund,
Income Fund and
Total Return Bond Fund
Broker-Dealers'
Reallowance

<PAGE>

Sales Charge As a As a
Percentage of Percentage of
Amount of Purchase Offering Price Net Asset Value* Offering Price
Less than $50,000 3.75% 3.90% 3.40%
$50,000 to $99,999 3.25 3.36 2.95
$100,000 to $499,000 2.25 2.30 2.05
$500,000 to $999,000 1.75 1.78 1.60
$1,000,000 and over None None None

* Rounded to the nearest one-hundredth percent

Forum may pay a broker-dealers' reallowance to selected broker-dealers
purchasing shares as principal or agent, which may include banks, bank
affiliates and Processing Organizations. Normally, Forum will reallow discounts
to selected broker-dealers in the amounts indicated in the table above. In
addition, Forum may elect to reallow the entire sales charge to selected broker-
dealers for all sales with respect to which orders are placed with Forum. The
broker-dealers' reallowance may be changed from time to time. Forum may make
additional payments (out of its own resources) to selected broker-dealers of up
to 0.75% (0.50% in the case of Stable Income Fund) of the value of Fund shares
purchased at net asset value.

In addition, from time to time and at its own expense, Forum may provide
compensation, including financial assistance, to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns or other dealer-sponsored special events.
Compensation may include: (i) the provision of travel arrangements and lodging,
(ii) tickets for entertainment events and (iii) merchandise.

No sales charge is assessed on purchases by: (a) any bank, trust company or
other institution acting on behalf of its fiduciary customer accounts or any
other account maintained by its trust department (including a pension, profit
sharing or other employee benefit trust created pursuant to a plan qualified
under Section 401 of the Internal Revenue Code of 1986, as amended) and (b)
trustees and officers of the Trust; directors, officers and full-time employees
of Forum, of Norwest Corporation or of any of their affiliates; the spouse,
direct ancestor or direct descendant (collectively, "relatives") of any such
person; any trust or individual retirement account or self-employed retirement
plan for the benefit of any such person or relative; or the estate of any such
person or relative. These shares may not be resold except to the Funds and share
purchases under clause (b) must be made for investment purposes.

In addition, no sales charge is assessed on purchases (a) by any registered
investment adviser with whom Forum has entered into a Share purchase agreement
and which is acting on behalf of its fiduciary customer accounts, or (b) of A
Shares of a Fund made through the Directed Dividend Option from a fund that
charges a front-end sales charge. See "Dividends and Tax Matters."

<PAGE>

Reinstatement Privilege. An investor who has redeemed A Shares of a Fund may,
within 60 days following the redemption, purchase without a sales charge A
Shares in an amount up to the amount of the redemption. Investors who desire to
exercise this "Reinstatement Privilege" should contact the Trust for further
information.

Investors in Other Fund Families. No sales charge is assessed on purchases of A
Shares of a Fund with the proceeds of a redemption at net asset value, within
the preceding 60 days, of shares of a mutual fund that does not impose on the
redeemed shares at the time of their purchase a sales charge equal to or greater
than that applicable to the
A Shares of that Fund. Investors should contact the Trust for further
information and to obtain the necessary forms.

Reduced Initial Sales Charges. To qualify for a reduced sales charge, an
investor or the investor's Processing Organization must notify the Transfer
Agent at the time of purchase of the investor's intention to qualify and must
provide the Transfer Agent with sufficient information to verify that the
purchase qualifies for the reduced sales charge. Reduced sales charges may be
modified or terminated at any time and are subject to confirmation of an
investor's holdings. Further information about reduced sales charges is
contained in the SAI.

Self-Directed 401(k) Programs. Purchases of A Shares of a Fund through self-
directed 401(k) programs and other qualified retirement plans offered by
Norwest, Forum or their affiliates in accumulated amounts of less than $100,000
are subject to a reduced sales charge applicable to a single purchase of
$100,000.

Cumulative Quantity Discount (Right of Accumulation). An investor's purchase of
additional A Shares of a Fund may qualify for rights of accumulation ("ROA")
under which the applicable sales charge will be based on the total of the
investor's current purchase and the net asset value (at the end of the previous
Fund Business Day) of all A Shares of that Fund held by the investor. For
example, if an investor in Intermediate U.S. Government Fund, Income Fund or
Total Return Bond Fund owned A Shares of the Fund worth $500,000 at the then
current net asset value and purchased A Shares of that Fund worth an additional
$50,000, the sales charge for the $50,000 purchase would be at the 1.75% rate
applicable to a $550,000 purchase, rather than at the 3.25% rate applicable to a
$50,000 purchase.

In addition, an investor in a Fund that has previously purchased
A Shares of any other fund of the Trust that is sold with a sales charge equal
to or greater than the sales charge imposed on the A Shares of the Fund
("Eligible Fund") also may qualify for ROA and may aggregate existing
investments in A Shares of Eligible Funds with current purchases of A Shares of
the Fund to determine the applicable sales charge. In addition, purchases of A
Shares of a Fund by an investor and the investor's spouse, direct ancestor or
direct descendant may be combined for purposes of ROA.

<PAGE>

Statement of Intention. Investors in A Shares also may obtain reduced sales
charges based on cumulative purchases by means of a written Statement of
Intention, expressing the investor's intention to invest $50,000 or more in A
Shares of a Fund within a period of 13 months. Each purchase of shares under a
Statement of Intention will be made at net asset value plus the sales charge
applicable at the time of the purchase to a single transaction of the dollar
amount indicated in the Statement.

Investors wishing to enter into a Statement of Intention in conjunction with
their initial investment in shares of a Fund should complete the appropriate
portion to the account application form. Current Fund shareholders can obtain a
Statement of Intention form by contacting the Transfer Agent.

Contingent Deferred Sales Charge. A Shares of a Fund on which no initial sales
charge was assessed due to the amount purchased in a single transaction or
pursuant to the Cumulative Quantity Discount or a Statement of Intention and
that are redeemed (including certain redemptions in connection with an exchange)
within specified periods after the purchase date of the shares will be subject
to contingent deferred sales charges equal to the percentages set forth below of
the dollar amount subject to the charge. The charge will be assessed on an
amount equal to the lesser of the cost of the shares being redeemed and their
net asset value at the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial purchase price. In
addition, no charge will be assessed on shares derived from the reinvestment of
dividends and distributions.

Stable Income Fund
Contingent Deferred Sales
Charge as a % of Dollar
Amount of Purchase Period Shares Held Amount Subject to Charge
$1,000,000 to $4,999,999 Less than one year 0.50%
One to two years 0.25%
Over $5,000,000 Less than one year 0.25%

Intermediate U.S. Government Fund,
Income Fund and
Total Return Bond Fund
Contingent Deferred Sales
Charge as a % of Dollar
Amount of Purchase Period Shares Held Amount Subject to Charge
$1,000,000 to $2,499,999 Less than one year 0.75%
One to two years 0.50%
$2,500,000 to $4,999,999 Less than one year 0.50%
Over $5,000,000 Less than one year 0.25%

No contingent deferred sales charge is charged on redemptions to the same extent
as described under "B Shares - Contingent Deferred Sales Charge" below. The
contingent

<PAGE>

deferred sales charge on shares purchased through an exchange from another fund
of the Trust is based upon the original purchase date and price of the other
fund's shares. For A shareholders with a Statement of Intention that do not
purchase $1,000,000 of a Fund's A Shares pursuant to their Statement, no
contingent deferred sales charge is imposed. The Statement of Intention provides
for a contingent deferred sales charge in certain other cases. Further
information about the contingent deferred sales charge is contained in the SAI.

B Shares

Distribution Plan. B Shares are sold at their net asset value per share without
the imposition of a sales charge at the time of purchase. With respect to B
Shares, each Fund has adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act (the "Plan") providing for distribution payments, at an annual rate
of up to 0.75% of the average daily net assets of the Fund attributable to B
Shares (the "distribution services fee"), by each Fund to Forum, to compensate
Forum for its distribution activities. The distribution payments due to Forum
from each Fund comprise (i) sales commissions at levels set from time to time by
the Board ("sales commissions") and (ii) an interest fee calculated by applying
the rate of 1% over the prime rate to the outstanding balance of uncovered
distribution charges (as described below). The current sales commission rate is
3% (1.5% in the case of Stable Income Fund) and Forum currently expects to pay
sales commissions to each broker-dealer at the time of sale of up to 3% (1.5% in
the case of Stable Income Fund) of the purchase price of B Shares of each Fund
sold by the broker-dealer.

Under the distribution services agreement between Forum and the Trust, Forum
will receive, in addition to the distribution services fee, all contingent
deferred sales charges due upon redemptions of B Shares. The combined contingent
deferred sales charge and distribution services fee on B Shares are intended to
finance the distribution of those shares by permitting an investor to purchase
shares through broker-dealers without the assessment of an initial sales charge
and, at the same time, permitting Forum to compensate broker-dealers in
connection with the sales of the shares. Proceeds from the contingent deferred
sales charge with respect to a Fund are paid to Forum to defray the expenses
related to providing distribution-related services in connection with the sales
of B Shares, such as the payment of compensation to broker-dealers selling B
Shares. Forum may spend the distribution services fees it receives as it deems
appropriate on any activities primarily intended to result in the sale of B
Shares.

Under the Plan, a Fund will make distribution services fee payments to Forum
only for periods during which there are outstanding uncovered distribution
charges attributable to that Fund. Uncovered distribution charges are equivalent
to all sales commissions previously due (plus interest), less amounts received
pursuant to the Plan and all contingent deferred sales charges previously paid
to Forum. At May 31, 1995, Income Fund and Total Return Bond Fund had uncovered
distribution expenses of $84,881 and

<PAGE>

$20,863, respectively, or approximately 2.58%, and 2.27% of each respective
Fund's net assets attributable to B Shares as of the same date.

The amount of distribution services fees and contingent deferred sales charge
payments received by Forum with respect to a Fund is not related directly to the
amount of expenses incurred by Forum in connection with providing distribution
services to the B Shares and may be higher or lower than those expenses. Forum
may be considered to have realized a profit under the Plan if, at any time, the
aggregate amounts of all distribution services fees and contingent deferred
sales charge payments previously made to Forum exceed the total expenses
incurred by Forum in distributing B Shares.

Pursuant to the Plan, each Fund has agreed also to pay Forum a maintenance fee
in an amount equal to 0.25% of the average daily net assets of the Fund
attributable to the B Shares for providing personal services to shareholder
accounts. The maintenance fee may be paid by Forum to broker-dealers in an
amount not to exceed 0.25% of the value of B Shares held by the customers of the
broker-dealers. The distribution services fee and the maintenance fee are each
accrued daily and paid monthly and will cause a Fund's B Shares to have a higher
expense ratio and to pay lower dividends than A Shares of that Fund.
Notwithstanding the discontinuation of distribution services fees with respect
to a Fund, the Fund may continue to pay maintenance fees.

A Fund does not accrue future distribution services fees as a liability of the
Fund with respect to the B Shares or reduce the Fund's current net assets in
respect of distribution services fees which may become payable under the Plan in
the future.

In the event that the Plan is terminated or not continued with respect to a
Fund, the Fund may, under certain circumstances, continue to pay distribution
services fees to Forum (but only with respect to sales that occurred prior to
the termination or discontinuance of the Plan). Those circumstances are
described in detail in the SAI. In deciding whether to purchase B Shares of a
Fund, investors should consider that payments of distribution services fees
could continue until such time as there are no uncovered distribution charges
under the Plan attributable to that Fund. In approving the Plan, the Board
determined that there was a reasonable likelihood that the Plan would benefit
each Fund and its B shareholders.

Periods with a high level of sales of B Shares of a Fund accompanied by a low
level of redemptions of those shares that are subject to contingent deferred
sales charges will tend to increase uncovered distribution charges. Conversely,
periods with a low level of sales of B Shares of a Fund accompanied by a high
level of redemptions of those shares that are subject to contingent deferred
sales charges will tend to reduce uncovered distribution charges. A high level
of sales of B Shares during the first few years of operations, coupled with the
limitation on the amount of distribution services fees payable by a Fund with
respect to B Shares during any fiscal year, would cause a large portion of the
distribution services fees attributable to a sale of the B Shares to be accrued
and paid by the Fund to Forum with respect to those shares in fiscal years
subsequent to the years in

<PAGE>

which those shares were sold. The payment delay would in turn result in the
incurrence and payment of increased interest fees under the Plan.

Contingent Deferred Sales Charge. B Shares of a Fund that are redeemed within
four years of purchase (two years of purchase in the case of the Stable Income
Fund) will be subject to contingent deferred sales charges equal to the
percentages set forth below of the dollar amount subject to the charge. The
amount of the contingent deferred sales charge, if any, will vary depending on
the number of years between the payment for the purchase of B Shares of a Fund
and their redemption.

The contingent deferred sales charge will be assessed on an amount equal to the
lesser of the cost of the B Shares being redeemed and their net asset value at
the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
charge will be assessed on B Shares derived from the reinvestment of dividends
and distributions.

Contingent Deferred Sales Charge as a %
of Dollar Amount Subject to Charge
Intermediate
U.S. Government Fund,
Stable Income Fund and
Year Since Purchase Income Fund Total Return Bond Fund
First 1.5% 3.0%
Second 0.75% 2.0%
Third None 2.0%
Fourth None 1.0%
Fifth None None
Sixth None None

Redemptions of Shares will be effected in the manner that results in the
imposition of the lowest deferred sales charge. Redemptions with respect to a
shareholder's investment in a Fund will automatically be made first from any A
Shares in the Fund, second from B Shares of the Fund acquired pursuant to
reinvestment of dividends and distributions, third from B Shares of the Fund
held for over four years (two years in the case of the Stable Income Fund), and
fourth from the longest outstanding B Shares of the Fund held for less than four
years (two years in the case of the Stable Income Fund).

No contingent deferred sales charge is imposed on (i) redemptions of Shares
acquired through the reinvestment of dividends and distributions, (ii)
involuntary redemptions by a Fund of shareholder accounts with low account
balances, (iii) redemptions of Shares following the death or disability of a
shareholder if the Fund is notified within one year of the shareholder's death
or disability and (iv) redemptions to effect a distribution (other than a lump
sum distribution) from an IRA, Keogh plan or Section 403(b) custodial account or
from a qualified retirement plan. See the SAI for further information.

<PAGE>

Conversion Feature. After six years (four years in the case of Stable Income
Fund) from the end of the calendar month in which the shareholder's purchase
order for B shares was accepted, the Shares will automatically convert to A
Shares of that Fund. The conversion will be on the basis of the relative net
asset values of the Shares, without the imposition of any sales load, fee or
other charge. For purposes of conversion, B Shares of a Fund purchased by a
shareholder through the reinvestment of dividends and distributions will be
considered to be held in a separate sub-account. Each time any B Shares in the
shareholder's account (other than those in the sub-account) convert, a
corresponding pro rata portion of those shares in the sub-account will also
convert. The conversion of B Shares to A Shares is subject to the continuing
availability of certain opinions of counsel and the conversion of a Fund's B
Shares to A Shares may be suspended if such an opinion is no longer available at
the time the conversion is to occur. In that event, no further conversions of
the Fund's B Shares would occur, and shares might continue to be subject to a
distribution services and maintenance fee for an indefinite period.

6. How to Sell Shares

General Information

Fund Shares may be sold (redeemed) at their net asset value on any Fund Business
Day subject to a contingent deferred sales charge imposed, in the case of A
Shares, on some redemptions made within two years of purchase and, in the case
of B Shares, on most redemptions made within four years of purchase (two in the
case of Stable Income Fund). There is no minimum period of investment and no
restriction on the frequency of redemptions.

Fund shares are redeemed as of the next determination of the Fund's net asset
value following acceptance by the Transfer Agent of the redemption order in
proper form (and any supporting documentation that the Transfer Agent may
require). Redeemed shares are not entitled to receive dividends declared after
the day the redemption becomes effective.

Proceeds of redemption requests (and exchanges), however, will not be paid
unless any check used to purchase the shares being redeemed has been cleared by
the shareholder's bank, which may take up to 15 days. This delay may be avoided
by paying for shares through wire transfers. Unless otherwise indicated,
redemption proceeds normally are paid by check mailed to the shareholder's
record address. The right of redemption may not be suspended nor the payment
dates postponed for more than seven days after the tender of the shares to a
Fund, except when the New York Stock Exchange is closed (or when trading thereon
is restricted) for any reason other than its customary weekend or holiday
closings, for any period during which an emergency exists as a result of which
disposal by the Fund of its portfolio securities or determination by the Fund of
the value

<PAGE>

of its net assets is not reasonably practicable and for such other periods as
the SEC may permit.

Redemption Procedures

Shareholders who have invested directly in a Fund may redeem their Shares as
described below. Shareholders who have invested through a Processing
Organization may redeem their shares through the Processing Organization as
described above. Shareholders who wish to redeem shares by telephone or receive
redemption proceeds by bank wire must elect these options by properly completing
the appropriate sections of their account application form. These privileges may
not be available until several weeks after a shareholder's application is
received. Shares for which certificates have been issued may not be redeemed by
telephone.

1. By Mail. Shareholders may redeem shares by sending a written request to the
Transfer Agent accompanied by any share certificate that may have been issued to
the shareholder to evidence the shares being redeemed. All written requests for
redemption must be signed by the shareholder with signature guaranteed, and all
certificates submitted for redemption must be endorsed by the shareholder with
signature guaranteed. See "How to Sell Shares - Other Redemption Matters."

2. By Telephone. A shareholder who has elected telephone redemption privileges
may make a telephone redemption request by calling the Transfer Agent at 800-
338-1348 or 612-667-8833 and providing the shareholder's account number, the
exact name in which his shares are registered and the shareholder's social
security or taxpayer identification number. In response to the telephone
redemption instruction, the Trust will mail a check to the shareholder's record
address or, if the shareholder has elected wire redemption privileges, wire the
proceeds. See "How to Sell Shares - Other Redemption Matters."

3. By Bank Wire. For redemptions of more than $5,000, a shareholder who has
elected wire redemption privileges may request a Fund to transmit the redemption
proceeds by Federal funds wire to a bank account designated in writing by the
shareholder. To request bank wire redemptions by telephone, the shareholder also
must have elected the telephone redemption privilege. Redemption proceeds are
transmitted by wire on the day after a redemption request in proper form is
received by the Transfer Agent.

Other Redemption Matters

<PAGE>

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

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

Due to the cost to the Trust of maintaining smaller accounts, the Trust reserves
the right to redeem, upon not less than 60 days' written notice, all shares in
any Fund account whose aggregate net asset value is less than $1,000 ($5,000 in
the case of Stable Income Fund) immediately following any redemption.

7. Other Shareholder Services

Exchanges

Shareholders of A Shares and B Shares may exchange their shares for A Shares and
B Shares, respectively, of the other funds of the Trust that offer those shares.
As of the date of this Prospectus, the funds of the Trust that offer A Shares
and B Shares, which are offered through separate prospectuses, are Tax-Free
Income Fund, Colorado Tax-Free Fund, Minnesota Tax-Free Fund, Diversified Equity
Fund, Growth Equity Fund, Income Equity Fund, ValuGrowthSM Stock Fund, Small
Company Stock Fund, Contrarian Stock Fund and International Fund. It is
anticipated that the Trust may in the future create additional funds that will
offer shares that will be exchangeable with the Funds' Shares. In addition, A
Shares may be exchanged for Investor Shares of Ready Cash Investment Fund and
Municipal Money Market Fund of the Trust. B Shares may be exchanged for Exchange
Shares of Ready Cash Investment Fund. Prospectuses for the shares of the funds
listed above, as well as a current list of the funds of the Trust that offer
shares exchangeable with the Shares of the Funds, can be obtained through Forum
by contacting the Transfer Agent.

<PAGE>

The Funds do not charge for exchanges, and there is currently no limit on the
number of exchanges a shareholder may make. The Funds reserve the right,
however, to limit excessive exchanges by any shareholder. Exchanges are subject
to the fees (other than contingent deferred sales charges) charged by, and the
limitations (including minimum investment restrictions) of, the fund into which
a shareholder is exchanging.

The Funds and Federal tax law treat an exchange as a redemption and a purchase.
Accordingly, a shareholder may realize a capital gain or loss depending on
whether the value of the shares redeemed is more or less than the shareholder's
basis in the shares at the time of the exchange transaction. Exchange procedures
may be amended materially or terminated by the Trust at any time upon 60 days'
notice to shareholders. See "Additional Purchase and Redemption Information" in
the SAI.

Sales Charges. The exchange of A Shares may result in additional sales charges.
If an exchange of A Shares is made into a fund that imposes an initial sales
charge, the shareholder is required to pay an amount equal to any excess of that
fund's initial sales charge attributable to the number of shares being acquired
in the exchange over any initial sales charge paid by the shareholder for the
shares being exchanged. For example, if a shareholder paid a 2% initial sales
charge in connection with a purchase of shares and then exchanged those shares
into A Shares of another fund with a 3% initial sales charge, the shareholder
would pay an additional 1% sales charge on the exchange. A Shares acquired
through the reinvestment of dividends or distributions are deemed to have been
acquired with a sales charge rate equal to that applicable to the shares on
which the dividends or distributions were paid.

Shares of a Fund ("Original Shares") may be exchanged without the payment of any
contingent deferred sales charge. A and B Shares acquired as a result of such
exchange ("New Shares") and subsequently redeemed will nonetheless be subject to
the contingent deferred sales charge applicable to the Original Shares as if
those shares were being redeemed at that time. For purposes of computing both
the contingent deferred sales charge payable upon redemption of the New Shares
and, in the case of B Shares, the time remaining before the New B Shares convert
to A Shares of that Fund, the deferred sales charge and the time remaining
applicable to the Original Shares will apply to the New Shares rather than the
deferred sales charge and time remaining that would otherwise apply. The
deferred sales charge and time remaining applicable to Shares first purchased by
a shareholder will apply to New Shares resulting from both an initial and any
subsequent exchanges.

<PAGE>

1. Exchanges By Mail. Exchanges may be made by sending a written request to
the Transfer Agent accompanied by any share certificates for the shares to be
exchanged. All written requests for exchanges must be signed by the shareholder,
and all certificates submitted for exchange must be endorsed by the shareholder
with signature guaranteed. See "How to Sell Shares - Other Redemption Matters."

2. Exchanges By Telephone. A shareholder who has elected telephone exchange
privileges may make a telephone exchange request by calling the Transfer Agent
at 800-338-1348 or 612-667-8833 and providing the shareholder's account number,
the exact name in which the shareholder's shares are registered and the
shareholder's social security or taxpayer identification number. See "How to
Sell Shares - Other Redemption Matters."

Automatic Investment Plan

Under the Funds' Automatic Investment Plan, shareholders may authorize monthly
amounts of $50 or more to be withdrawn automatically from the shareholder's
designated bank account (other than passbook savings) and sent to the Transfer
Agent for investment in either A or
B Shares of a Fund. Shareholders wishing to use this plan must complete an
application which may be obtained by writing or calling the Transfer Agent. The
Trust may modify or terminate the automatic investment plan with respect to any
shareholder in the event that the Trust is unable to settle any transaction with
the shareholder's bank. If the Automatic Investment Plan is terminated before
the shareholder's account totals $1,000, the Trust reserves the right to close
the account in accordance with the procedures described under "How to Sell
Shares - Other Redemption Matters."

Individual Retirement Accounts

The Funds may be a suitable investment vehicle for part or all of the assets
held in individual retirement accounts ("IRAs"). An IRA account application form
may be obtained by contacting the Trust at 800-338-1348 or 612-667-8833.
Individuals may make tax-deductible IRA contributions of up to a maximum of
$2,000 annually. However, the deduction will be reduced if the individual or, in
the case of a married individual filing jointly, either the individual or the
individual's spouse is an active participant in an employer-sponsored retirement
plan and has adjusted gross income above certain levels.

Automatic Withdrawal Plan

<PAGE>

A shareholder whose Shares in a single account total $1,000 or more may
establish a withdrawal plan to provide for the preauthorized payment from the
shareholder's account of $250 or more on a monthly, quarterly, semi-annual or
annual basis. Under the withdrawal plan, sufficient shares in the shareholder's
account are redeemed to provide the amount of the periodic payment and any
taxable gain or loss is recognized by the shareholder upon redemption of the
shares. Shareholders wishing to utilize the withdrawal plan may do so by
completing an application which may be obtained by writing or calling the
Transfer Agent. The Trust may suspend a shareholder's withdrawal plan without
notice if the account contains insufficient funds to effect a withdrawal or if
the account balance is less than $1,000 at any time.

Reopening Accounts

A shareholder may reopen an account, without filing a new account application
form, at any time within one year after the shareholder's account is closed,
provided that the information on the account application form on file with the
Trust is still applicable.

8. Dividends and Tax Matters

Dividends

Dividends of the Funds' net investment income are declared and paid monthly.
Distributions of net capital gain, if any, realized by a Fund are distributed
annually. Dividends paid by a Fund with respect to each class of shares of the
Fund will be calculated in the same manner at the same time on the same day. The
per share dividends on a Fund's
B Shares will be lower than the per share dividends on A Shares as a result of
the distribution services fees and maintenance fees applicable to B Shares.

Shareholders may choose to have dividends and distributions of a Fund reinvested
in shares of that Fund (the "Reinvestment Option"), to receive dividends and
distributions in cash (the "Cash Option") or to direct dividends and
distributions to be reinvested in shares of another fund of the Trust (the
"Directed Dividend Option"). All dividends and distributions are treated in the
same manner for Federal income tax purposes whether received in cash or
reinvested in shares of a Fund.

<PAGE>

shareholder in cash. Under the Directed Dividend Option, shareholders of a Fund
whose shares in a single account of that Fund total $10,000 or more may elect to
have all dividends and distributions reinvested in shares of another fund of the
Trust, provided that those shares are eligible for sale in the shareholder's
state of residence. For further information concerning the Directed Dividend
Option, shareholders should contact the Transfer Agent.

Taxes

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

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

Distributions of net long-term capital gain, if any, realized by a Fund are
taxable to shareholders of the Fund as long-term capital gain, regardless of the
length of time the shareholder may have held shares in the Fund at the time of
distribution. If a shareholder holds shares for six months or less and during
that period receives a distribution taxable to the shareholder as long-term
capital gain, any loss realized on the sale of the shares during that six-month
period would be a long-term capital loss to the extent of the distribution. Any
distribution of capital gain received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of the shares by the amount of
the distribution. Furthermore, a distribution made shortly after the purchase of
shares by a shareholder, although in affect a return of capital to that
particular shareholder, would be taxable to the shareholder as described above.

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

Reports containing appropriate information with respect to the Federal income
tax status of dividends and distributions paid during the year by each Fund will
be mailed to shareholders shortly after the close of each year.

<PAGE>

9. Other Information

Banking Law Matters

Federal banking laws and regulations generally permit a bank or bank affiliate
to act as investment adviser, transfer agent, and custodian to an investment
company and to purchase shares of the investment company as agent for and upon
the order of a customer and, in connection therewith, to retain a sales charge
or similar payment. Counsel to the Trust believes that Norwest and any other
bank or bank affiliate that may serve as a Processing Organization or perform
sub-transfer agent or similar services or purchase shares as agent for its
customers may perform the services described in this Prospectus for the Trust
and its shareholders without violating applicable Federal banking laws or
regulations.

Federal or state statutes or regulations and judicial or administrative
decisions or interpretations relating to the activities of banks and their
affiliates, however, could prevent a bank or bank affiliate from continuing to
perform all or a part of the activities contemplated by this Prospectus. If a
bank or bank affiliate were prohibited from so acting, changes in the operation
of the Trust could occur and a shareholder serviced by a bank or bank affiliate
may no longer be able to avail itself of those services. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences.

Determination of Net Asset Value

The Trust determines the net asset value per share of each Fund as of 4:00 P.M.,
Eastern time, on each Fund Business Day by dividing the value of the Fund's net
assets (i.e., the value of its securities and other assets less its liabilities)
by the number of shares outstanding at the time the determination is made.
Securities owned by a Fund for which market quotations are readily available are
valued at current market value or, in their absence, at fair value as determined
by the Board. The Trust does not determine net asset value on the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and
Christmas.

The per share net asset values of each class of shares of a Fund are expected to
be substantially the same. Under certain circumstances, however, the per share
net asset value of each class may vary.

Performance Information

A Fund's performance may be quoted in advertising in terms of yield or total
return. All performance information is based on historical results and is not
intended to indicate

<PAGE>

future performance. A Fund's yield is a way of showing the rate of income the
Fund earns on its investments as a percentage of the Fund's share price. To
calculate standardized yield, a Fund takes the interest income it earned from
its investments for a 30-day period (net of expenses), divides it by the average
number of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on the Fund's share price at the end of the 30-
day period. A Fund's total return shows its overall change in value, including
changes in share price and assuming all the Fund's dividends and distributions
are reinvested. A cumulative total return reflects a Fund's performance over a
stated period of time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same cumulative total
return if the Fund's performance had been constant over the entire period.
Because average annual returns tend to smooth out variations in the Funds'
returns, shareholders should recognize that they are not the same as actual
year-by-year results. To illustrate the components of overall performance, a
Fund may separate its cumulative and average annual returns into income results
and capital gain or loss. Published yield quotations are, and total return
figures may be, based on amounts actually invested in a Fund net of sales loads
that may be paid by an investor. A computation of yield or total return that
does not take into account the sales load paid by an investor will be higher
than a computation based on the public offering price of shares purchased that
take into account payment of the sales load.

The Funds' advertisements may reference ratings and rankings among similar
mutual funds by independent evaluators such as Morningstar, Inc., Lipper
Analytical Services, Inc. and IBC/Donoghue, Inc. The comparative material found
in the Funds' advertisements, sales literature or reports to shareholders may
contain performance ratings. This material is not to be considered
representative or indicative of future performance. All performance information
for a Fund is calculated on a class basis. In addition, a Fund may use a
benchmark securities index as a measure of the Fund's performance. These indices
are not used in the management of the Fund but rather are standards by which the
Adviser and shareholders may compare the performance of a Fund to an unmanaged
composite of securities with similar, but not identical, characteristics as the
Fund. The Funds may from time to time advertise a comparison of their
performance against any of these or other indices.

The Trust and Its Shares

The Trust was originally organized under the name "Prime Value Funds, Inc." as a
Maryland corporation on August 29, 1986, and on July 30, 1993, was reorganized
as a Delaware business trust under the name "Norwest Funds." The Trust has an
unlimited number of authorized shares of beneficial interest. The Board may,
without shareholder approval, divide the authorized shares into an unlimited
number of separate portfolios or series (such as the Funds) and may divide
portfolios or series into classes of shares (such as A and B Shares), and the
costs of doing so will be borne by the Trust. Currently the authorized shares of
the Trust are divided into thirty-one separate series.

<PAGE>

Other Classes of Shares. In addition to the Shares, each Fund may create and
issue shares of other classes of securities. Each Fund currently offers three
classes of shares: A Shares; B Shares; and I Shares.
I Shares are offered to fiduciary, agency and custodial clients of bank trust
departments, trust companies and their affiliates without any sales charges or
distribution service or maintenance fees. Each class of a Fund may have a
different expense ratio and different sales charges (including distribution
fees) and each class' performance will be affected by its expenses and sales
charges. For more information on any other class of shares of the Funds
investors may contact the Transfer Agent at 612-667-8833 or 800-338-1348.
Investors also may contact their Norwest sales representative or the Funds'
distributor to obtain information about the other classes. Sales personnel of
broker-dealers and other financial institutions selling the Fund's shares may
receive differing compensation for selling A, B and I Shares of the Funds.

Shareholder Voting and Other Rights. Each share of each fund of the Trust and
each class of shares has equal dividend, distribution, liquidation and voting
rights, and fractional shares have those rights proportionately, except that
expenses related to the distribution of the shares of each class (and certain
other expenses such as transfer agency and administration expenses) are borne
solely by those shares and each class votes separately with respect to the
provisions of any Rule 12b-1 plan which pertain to the class and other matters
for which separate class voting is appropriate under applicable law. Generally,
shares will be voted in the aggregate without reference to a particular
portfolio or class, except if the matter affects only one portfolio or class or
voting by portfolio or class is required by law, in which case shares will be
voted separately by portfolio or class, as appropriate. Delaware law does not
require the Trust to hold annual meetings of shareholders, and it is anticipated
that shareholder meetings will be held only when specifically required by
Federal or state law. Shareholders have available certain procedures for the
removal of Trustees. There are no conversion or preemptive rights in connection
with shares of the Trust. All shares when issued in accordance with the terms of
the offering will be fully paid and nonassessable. Shares are redeemable at net
asset value, at the option of the shareholders, subject to any contingent
deferred sales charge that may apply. A shareholder in a portfolio is entitled
to the shareholder's pro rata share of all dividends and distributions arising
from that portfolio's assets and, upon redeeming shares, will receive the
portion of the portfolio's net assets represented by the redeemed shares.

From time to time, certain shareholders may own a large percentage of the Shares
of a Fund. Accordingly, these shareholders may be able to greatly affect (if not
determine) the outcome of a shareholder vote.

<PAGE>

AS HAVING BEEN AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT
LAWFULLY BE MADE.

<PAGE>

Prospectus

April 1, 1996 / October 1, 1995
as amended April 1, 1996

This Prospectus offers A Shares and B Shares of Diversified Equity Fund, Growth
Equity Fund, Income Equity Fund, ValuGrowthSM Stock Fund, Small Company Stock
Fund, Contrarian Stock Fund and International Fund (each a "Fund" and
collectively the "Funds"). The Funds are separate diversified equity portfolios
of Norwest Advantage Funds (the "Trust"), which is a registered open-end
management investment company.
This Prospectus sets forth concisely the information concerning the Trust and
the Funds that a prospective investor should know before investing. The Trust
has filed with the Securities and Exchange Commission (the "SEC") a Statement of
Additional Information ("SAI") with respect to each Fund dated the same date as
the Prospectus for the Fund and as may be further amended from time to time,
which contains more detailed information about the Trust and each of the Funds
and is incorporated into this Prospectus by reference. An investor may obtain a
copy of the SAI without charge by contacting the Trust's distributor, Forum
Financial Services, Inc., at Two Portland Square, Portland, Maine 04101 or by
calling 207-879-1900. Investors should read this Prospectus and retain it for
future reference.
International Fund seeks to achieve its investment objective by investing all of
its investable assets in International Portfolio, a separate portfolio of a
registered open-end management investment company with the same investment
objective. See "Prospectus Summary" and "Other Information - Core Trust
Structure."
NORWEST ADVANTAGE FUNDS IS A FAMILY OF OPEN-END INVESTMENT COMPANIES COMMONLY
KNOWN AS MUTUAL FUNDS. THE SHARES OF MUTUAL FUNDS ARE NOT INSURED OR GUARANTEED
BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE SYSTEM OR ANY OTHER
GOVERNMENT AGENCY. THE SHARES ALSO ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF,
OR ENDORSED OR GUARANTEED BY, NORWEST BANK MINNESOTA, N.A. OR ANY OTHER BANK OR
BANK AFFILIATE.
AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

1. Prospectus Summary

<PAGE>

Highlights of the Funds
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
Investment Objectives and Policies
Diversified Equity Fund seeks to provide long-term capital appreciation while
moderating annual return volatility by diversifying its investments in
accordance with different equity investment styles.
Growth Equity Fund seeks to provide a high level of long-term capital
appreciation while moderating annual return volatility by diversifying its
investments in accordance with different equity investment styles. Because the
Fund seeks increased returns, it is subject to correspondingly greater risks
than Diversified Equity Fund.
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. This objective is pursued by investing primarily in the common stock of
large, high-quality domestic companies that have above-average return potential
and pay current dividends.
ValuGrowth Stock Fund seeks capital appreciation. This objective is pursued by
investing in a diversified portfolio of common stock and securities convertible
into common stock. The Fund invests primarily in medium- and large-
capitalization companies that, in the view of the Fund's investment adviser,
possess above-average growth prospects and appear to be undervalued.
Small Company Stock Fund seeks long-term capital appreciation. This objective is
pursued by investing primarily in the common stock of small- and medium-size
domestic companies that have a market capitalization well below that of the
average company in the Standard & Poor's 500 Composite Stock Price Index.
Contrarian Stock Fund seeks capital appreciation. This objective is pursued by
investing primarily in common stocks for which the Fund's investment adviser
believes there is significant potential for price appreciation.
International Fund seeks long-term capital appreciation. This objective is
pursued by investing, directly or indirectly, in high quality companies based
outside the United States. The Fund currently seeks to achieve its investment
objective by investing all of its investable assets in International Portfolio,
a series of Core Trust (Delaware) ("Core Trust"), itself a registered open-end
management investment company. Accordingly, the investment experience of the
Fund will correspond directly with the investment experience of International
Portfolio. See "Other Information - Core Trust Structure." International
Portfolio has the same investment objective and policies as the Fund.
Investment Advisers
The Funds' investment adviser (the "Adviser") is Norwest Investment Management,
a part of Norwest Bank Minnesota, N.A. ("Norwest"). The Adviser provides
investment advice to various institutions, pension plans and other accounts and,
as of December 31, 1995, managed assets totaling approximately $23 billion. See
"Management - Investment Advisory Services." Norwest serves as the Trust's
transfer agent, dividend disbursing agent and custodian. See "Management -
Shareholder Servicing and Custody."
Small Company Stock Fund. Crestone Capital Management, Inc. ("Crestone"), an
investment advisory subsidiary of Norwest, is the investment subadviser of Small

<PAGE>

Company Stock Fund. Crestone provides investment advice regarding companies with
small capitalization to various clients, including institutional investors. See
"Management - Investment Advisory Services."
International Fund. As International Fund invests all of its assets in
International Portfolio, the Fund does not actively employ the Adviser to manage
an investment portfolio. Rather, all investment advisory services are conducted
for International Portfolio by Schroder Capital Management International Inc.
("Schroder"), International Portfolio's investment adviser. Schroder, a
registered investment adviser under the Investment Advisers Act of 1940,
specializes in providing international investment advice to various clients. See
"Management - Investment Advisory Services."
Schroder, Crestone and the Adviser are sometimes referred to collectively as the
"Advisers."
Fund Management
The manager of the Trust and distributor of its shares is Forum Financial
Services, Inc. ("Forum"), a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. Forum also serves as administrator of
Core Trust. Norwest provides certain administrative services to International
Fund. See "Management - Management and Distribution Services."
Shares of the Funds
Each Fund currently offers three separate classes of shares: A class
("A Shares"), B class ("B Shares") and I class ("I Shares"). A Shares and B
Shares are sold through this Prospectus and are collectively referred to as the
"Shares."
A Shares. A Shares are offered at a price equal to their net asset value plus a
sales charge imposed at the time of purchase or, in some cases, a contingent
deferred sales charge imposed on redemptions made within two years of purchase.
B Shares. B Shares are offered at a price equal to their net asset value plus a
contingent deferred sales charge imposed on most redemptions made within six
years of purchase. B Shares pay a distribution services fee at an annual rate of
up to 0.75%, and a maintenance fee in an amount equal to 0.25%, of the B Shares'
average daily net assets. B Shares automatically convert to
A Shares of the same Fund seven years after the end of the calendar month in
which the B Shares were originally purchased.

I Shares are offered by a separate prospectus to fiduciary, agency and custodial
clients of bank trust departments, trust companies and their affiliates. Shares
of each class of a Fund have identical interests in the investment portfolio of
the Fund and, with certain exceptions, have the same rights. See "Other
Information - The Trust and Its Shares."

How to Buy and Sell Shares

<PAGE>

Shares may be purchased or redeemed by mail, by bank wire and through an
investor's broker-dealer or other financial institution. The minimum initial
investment in Shares is $1,000. The minimum subsequent investment is $100. See
"How to Buy Shares" and "How to Sell Shares."

Dividends
Dividends of each of the Fund's net investment income are declared and paid at
least annually. Each Fund's net capital gain, if any, is distributed annually.
All dividends and distributions are reinvested in additional Fund shares unless
the shareholder elects to have them paid in cash. See "Dividends and Tax
Matters."

Certain Investment Considerations and Risk Factors
There can be no assurance that any Fund will achieve its investment objective,
and each Fund's net asset value and total return will fluctuate based upon
changes in the value of its portfolio securities. Upon redemption, an investment
in a Fund may be worth more or less than its original value.

All investments made by the Funds entail some risk. Certain investments and
investment techniques, however, entail additional risks, such as the potential
use of leverage by certain Funds through borrowings, securities lending and
other investment techniques. See "Investment Objectives and Policies -
Additional Investment Policies and Risk Considerations." The policy of investing
in securities of smaller companies employed by Small Company Stock Fund and by
Diversified Equity Fund and Growth Equity Fund, which invest a portion of their
assets in these securities, entails certain risks in addition to those normally
associated with investments in equity securities. Similarly, Contrarian Stock
Fund's policy of investing in securities that may be out of favor with many
institutional investors entails certain risks in addition to those normally
associated with investments in equity securities. See "Investment Objectives and
Policies - Small Company Stock Fund" and " - Contrarian Stock Fund."

<PAGE>

International Fund's policy of investing directly or indirectly in foreign
issuers entails certain risks in addition to those normally associated with
investments in equity securities. See "Investment Objectives and Policies -
International Fund - Foreign Investment Considerations
and Risk Factors." By investing solely in International Portfolio, International
Fund may achieve certain efficiencies and economies of scale. Nonetheless, this
investment could also have adverse effects on the Fund. Investors in the Fund
should consider these risks, as described under "Other Information - Core Trust
Structure."

Expense Information

The purpose of the table below and the table to the right is to assist investors
in understanding the expenses that an investor in Shares of a Fund will bear
directly or indirectly.

Shareholder Transaction Expenses
(applicable to each Fund)
A B
Shares(1) Shares(2)
Maximum sales charge imposed on purchases
(as a percentage of public offering price) 4.5% Zero
Maximum deferred sales charge
(as a percentage of the lesser of original purchase
price or redemption proceeds) Zero 4.0%
Exchange Fee Zero Zero

Annual Operating Expenses(3)
(as a percentage of average daily net assets after applicable fee waivers and
expense reimbursements)

Diversified Equity Growth Equity Income Equity

Fund(4) Fund(4) Fund
A B A B A B
Shares Shares Shares Shares Shares Shares
Investment Advisory Fees 0.65% 0.65% 0.90% 0.90% 0.65% 0.65%
Rule 12b-1 Fees(5) None 0.75% None 0.75% None 0.75%
Other Expenses 0.35% 0.35% 0.35% 0.36% 0.35% 0.35%
Total Operating Expenses 1.00% 1.75% 1.25% 2.01% 1.00% 1.75%

ValuGrowth Stock Small Company Contrarian Stock International
Fund Stock Fund Fund Fund(4)
A B A B A B A B
Shares Shares Shares Shares Shares Shares Shares Shares

<PAGE>

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.80% 0.80% 0.68% 0.68% 0.64% 0.64% 0.45% 0.45%
Rule 12b-1 Fees(5) None 0.75% None 0.61% None 0.75% Zero 0.75%
Other Expenses 0.40% 0.40% 0.52% 0.66% 0.56% 0.56% 1.05% 1.05%
Total Operating Expenses 1.20% 1.95% 1.20% 1.95% 1.20% 1.95% 1.50% 2.25%
</TABLE>

(1) Sales charge waivers and reduced sales charge plans are available for A
Shares. If A Shares purchased without an initial sales charge (purchases of
$1,000,000 or more) are redeemed within two years after purchase, a
contingent deferred sales charge of up to 1.0% will be applied to the
redemption. See "How to Buy Shares - Alternative Distribution Arrangements."
(2) The maximum 4.0% contingent deferred sales charge on B Shares applies to
redemptions during the first year after purchase; the charge declines
thereafter, becoming 3.0% during the second and third years, 2.0% during the
fourth and fifth years, 1.0% during the sixth year and reaches zero the
following year. See "How to Buy Shares - Alternative Distribution
Arrangements." (3) For a further description of the various expenses
associated with the Shares, see "Management." Expenses associated with the I
Shares of a Fund differ from those of the Shares listed in the table shown
above. The amounts of expenses for International Fund and the amounts of
estimated expenses for Diversified Equity Fund, Growth Equity Fund and Income
Equity Fund are based on amounts incurred during each Fund's most recent
fiscal year ended October 31, 1995. The amounts of expenses for ValuGrowth
Stock Fund are based on amounts incurred during the Fund's most recent fiscal
year ended May 31, 1995. With respect to Small Company Stock Fund and
Contrarian Stock Fund, expense information has been restated to reflect
current expenses, as if these expenses had been in effect for each Fund's
fiscal year ended May 31, 1995. Absent estimated waivers, the Investment
Advisory Fee for A Shares and B Shares of Small Company Stock Fund would be
1.00% and for A Shares and B Shares of Contrarian Stock Fund would be 0.80%.
Fee waivers are voluntary and may be reduced or eliminated at any time.
The table reflects an anticipated increase in Income Equity Fund's advisory
fee from 0.50% which is expected to be approved by that Fund's shareholders
at a meeting to be held in April 1996. Prior to such approval, the Fund will
continue to pay an advisory fee of 0.50% of its average daily net assets.
With respect to A Shares, absent expense reimbursements and fee waivers
(which are estimated in the case of Diversified Equity Fund, Growth Equity
Fund, Income Equity Fund, Small Company Stock Fund and Contrarian Stock
Fund), the expenses of Diversified Equity Fund, Growth Equity Fund, Income
Equity Fund, ValuGrowth Stock Fund, Small Company Stock Fund, Contrarian
Stock and International Fund would be: Other Expenses, 0.35%, 0.42%, 0.59%,
0.63%, 1.32%, 2.16% and 20.50%, respectively; and Total Operating Expenses,
1.07%, 1.32%, 1.24%, 1.43%, 2.32%, 2.96% and 20.95%, respectively. With
respect to B Shares, absent expense reimbursements and fee waivers (which are
estimated in the case of Diversified Equity Fund, Growth Equity Fund, Income
Equity Fund, Small Company Stock Fund and Contrarian Stock Fund), the
expenses of Diversified Equity Fund, Growth Equity Fund, Income Equity Fund,
ValuGrowth Stock

<PAGE>

Fund, Small Company Stock Fund, Contrarian Stock Fund and International Fund
would be: Other Expenses, 0.35%, 0.42%, 0.59%, 0.71%, 1.56%, 3.12% and
13.12%, respectively; and Total Operating Expenses, 2.07%, 2.32%, 2.24%,
2.51%, 3.56%, 4.92% and 14.57%, respectively. Other Expenses include transfer
agency fees payable to Norwest at an annual rate of up to 0.25% of each
Fund's average daily net assets attributable to A Shares and B Shares and, in
the case of ValuGrowth Stock Fund, Small Company Stock Fund and Contrarian
Stock Fund, custody fees payable to Norwest. Fee waivers are voluntary and
may be reduced or eliminated at any time.
(4) The expenses for International Fund as listed above include the Fund's pro
rata portion of all operating expenses of International Portfolio, which will be
borne indirectly by Fund shareholders. The Trust's Board of Trustees believes
that the aggregate per share expenses of International Fund and International
Portfolio will be approximately equal to the expenses the Fund would incur if
its assets were invested directly in foreign securities. Investment Advisory
Fees are those incurred by International Portfolio; as long as its assets are
invested in International Portfolio, the Fund pays no investment advisory fees
directly. Pursuant to an exemptive order obtained from the SEC, Diversified
Equity Fund and Growth Equity Fund invest portions of their assets in other
portfolios of Core Trust, each of which bears certain expenses not reflected in
the table. See "Investment Objectives and Policies - Investment in Core Trust"
and "Management - Expenses of the Funds."
(5) Absent waivers, the Rule 12b-1 Fees would be 1.00% for B Shares of each
Fund. Long-term shareholders of B Shares may pay aggregate sales charges
totaling more than the economic equivalent of the maximum front-end sales
charges permitted by the Rules of Fair Practice of the National Association of
Securities Dealers, Inc.

Example
At right is a hypothetical example that 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.

The example is based on the expenses listed in the "Annual Operating Expenses"
table. The 5% annual return is not predictive of and does not represent the
Funds' projected returns; rather, it is required by government regulation. The
example assumes deduction of the maximum initial sales charge for A Shares,
deduction of the contingent deferred sales charge for B Shares applicable to a
redemption at the end of the period and the conversion of B Shares to A Shares
at the end of seven years. The example should not be considered a representation
of past or future expenses or return. Actual expenses and return may be greater
or less than indicated.

Hypothetical Expense Example
1 Year 3 Years 5 Years 10 Years
Diversified Equity Fund
A Shares 55 75 98 162

<PAGE>

B Shares
Assuming redemption
at the end of the period 58 85 115 --
Assuming no redemption 18 55 95 --
Growth Equity Fund
A Shares 57 83 111 189
B Shares
Assuming redemption
at the end of the period 60 93 128 --
Assuming no redemption 20 63 108 --
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 --
ValuGrowth Stock Fund
A Shares 57 81 108 184
B Shares
Assuming redemption
at the end of the period 60 91 125 --
Assuming no redemption 20 61 105 --
Small Company Stock Fund
A Shares 57 81 108 184
B Shares
Assuming redemption
at the end of the period 60 91 125 --
Assuming no redemption 20 61 105 --
Contrarian Stock Fund
A Shares 57 81 108 184
B Shares
Assuming redemption
at the end of the period 60 91 125 --
Assuming no redemption 20 61 105 --
International Fund
A Shares 60 90 123 216
B Shares
Assuming redemption
at the end of the period 63 100 140 --
Assuming no redemption 23 70 120 --

2. Financial Highlights

<PAGE>

The following tables provide financial highlights for ValuGrowth Stock Fund,
Small Company Stock Fund, Contrarian Stock Fund and International Fund. This
information represents selected data for a single outstanding A Share and B
Share of each Fund for the periods shown. Information for the years ended May
31, 1994 and 1995 and the period ended October 31, 1995 was audited by KPMG
Peat Marwick LLP, independent auditors. The information for prior periods was
audited by Deloitte & Touche LLP, independent auditors. The financial
statements of ValuGrowth Stock Fund, Small Company Stock Fund and Contrarian
Stock Fund for the fiscal year ended May 31, 1995 and independent auditors'
report thereon are contained in the Annual Report of those Funds and are
incorporated by reference into the SAI. The financial statements of
International Fund for the fiscal period ended October 31, 1995 and
independent auditors' report thereon are contained in the Fund's Annual
Report and are incorporated by reference into the SAI. Further information
about each Fund's performance is contained in the Fund's Annual Report, which
may be obtained from the Trust without charge. Effective May 31, 1992,
ValuGrowth Stock Fund changed its fiscal year end to May 31. Prior thereto,
the Fund's fiscal year end was November 30. Financial highlights are not
provided with respect to A Shares and B Shares of Diversified Equity Fund,
Growth Equity Fund and Income Equity Fund because, prior to the date of this
Prospectus, those Funds had not yet offered those classes.
<TABLE>
<CAPTION>

ValuGrowth Stock Fund
A Shares B Shares
Six
Months
Ended
Year Ended May 31 May 31 Year Ended November 30 Year Ended May 31

1995 1994 1993 1992 1991 1990 1989 1988(a) 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $17.17 $17.27 $16.30 $14.48 $11.67 $12.67 $10.03 $10.00 $17.10 $17.12
Net Investment Income 0.17 0.10 0.17 0.09 0.18 0.21 0.18 0.15 0.07 0.07
Net Realized and Unrealized
Gain (Loss) on Investments 1.66 0.19 1.34 1.83 2.82 (0.55) 2.61 0.03 1.61 0.23
Dividends from Net Investment
Income (0.18) (0.17) (0.17) (0.10) (0.19) (0.21) (0.15) (0.15) (0.13) (0.10)
Distributions from Net Realized
Gains -- (0.22) (0.37) -- -- (0.45) -- -- -- (0.22)
Ending Net Asset Value per Share $18.82 $17.17 $17.27 $16.30 $14.48 $11.67 $12.67 $10.03 $18.65 $17.10
Ratios to Average Net Assets:

<PAGE>

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses(b) 1.20% 1.20% 1.20% 1.19%(c) 1.19% 1.20% 1.20% 1.19%(c) 1.95% 1.95%(c)
Net Investment Income 1.01% 1.06% 1.02% 1.34%(c) 1.57% 1.88% 1.58% 1.84%(c) 0.28% 0.25%(c)
Total Return 10.72% 1.68% 9.32% 26.46%(c) 25.84% (2.91%) 28.00% 2.04%(c) 9.88% 2.36%(c)
Portfolio Turnover Rate 63.82% 86.07% 57.34% 29.50% 31.17% 38.67% 65.89% 30.90% 63.82% 86.07%
Net Assets at the End of
Period (000's omitted) $12,138 $12,922 $109,669 $68,659 $4,853 $750 $411 $281 $3,569 $2,218
</TABLE>

(a) ValuGrowth Stock Fund commenced operations on January 8, 1988 and commenced
the offering of B Shares on August 5, 1993.
(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratio of
expenses to average net assets would have been:

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses 1.43% 1.43% 1.42% 1.64%(c) 4.33% 11.73% 8.38% 2.50%(c) 2.51% 2.55%(c)
</TABLE>

Small Company Stock Fund
A Shares B Shares
Year Ended May 31 Year Ended May 31
1995 1994(a) 1995 1994(a)
<S> <C> <C> <C> <C>
Beginning Net Asset Value per Share $9.84 $10.00 $9.82 $10.00
Net Investment Income 0.12 0.07 0.07 0.06
Net Realized and Unrealized Gain (Loss) on Investments 0.87 (0.15) 0.84 (0.17)
Dividends from Net Investment Income (0.11) (0.08) (0.09) (0.07)
Distributions from Net Realized Gains (0.08) -- (0.08) --
Ending Net Asset Value per Share $10.64 $9.84 $10.56 $9.82
Ratios to Average Net Assets:
Expenses(b) 0.53% 0.22%(c) 1.27% 0.98%(c)
Net Investment Income 1.14% 1.95%(c) 0.38% 1.27%(c)
Total Return 10.19% (1.98%)(c) 9.31% (2.77%)(c)
Portfolio Turnover Rate 68.09% 14.98% 68.09% 14.98%
Net Assets at the End of Period (000's omitted) $1,540 $265 $963 $195
</TABLE>

(a) Small Company Stock Fund commenced operations on December 31, 1993.
(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratio of
expenses to average net assets would have been:
Expenses 2.32% 7.22%(c) 3.56% 9.09%(c)
(c) Annualized.

Contrarian Stock Fund
A Shares B Shares
Year Ended May 31 Year Ended May 31
1995 1994(a) 1995 1994(a)
<S> <C> <C> <C> <C>
Beginning Net Asset Value per Share $9.71 $10.00 $9.69 $10.00
Net Investment Income 0.11 0.06 0.07 0.05
Net Realized and Unrealized Gain (Loss) on Investments 1.19 (0.28) 1.16 (0.30)
Dividends from Net Investment Income (0.11) (0.07) (0.08) (0.06)
Distributions from Net Realized Gains (0.003) -- (0.003) --
Ending Net Asset Value per Share $10.90 $9.71 $10.84 $9.69
Ratios to Average Net Assets:
Expenses(b) 1.01% 0.61%(c) 1.78% 1.28%(c)
Net Investment Income 1.05% 1.77%(c) 0.35% 1.14%(c)
Total Return 13.52% (5.35%)(c) 12.78% (6.05%)(c)
Portfolio Turnover Rate 30.32% 2.67% 30.32% 2.67%
Net Assets at the End of Year (000's omitted) $572 $144 $463 $75
</TABLE>

(a) Contrarian Stock Fund commenced operations on December 31, 1993.
(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratio of
expenses to average net assets would have been:
Expenses 2.96% 10.66%(c) 4.92% 20.87%(c)
(c) Annualized.

International Fund
A Shares B Shares
Period Ended October 31 Period Ended October 31
1995(a) 1995(a)
<S> <C> <C>
Beginning Net Asset Value per Share $16.50 $16.50
Net Investment Income 0.01 0.01
Net Realized and Unrealized Gain (Loss) on Investments 1.46 1.40
Dividends from Net Investment Income -- --
Distributions from Net Realized Gains -- --
Ending Net Asset Value per Share $17.97 $17.91
Ratios to Average Net Assets:
Expenses(b) 1.32%(c)(d) 1.27%(c)d)
Net Investment Income 0.26%(c) 0.17%(c)
Total Return 8.91% 8.55%
Portfolio Turnover Rate N/A N/A
Net Assets at the End of Period (000's omitted) $216 $395
</TABLE>

<PAGE>

(a) International Fund, the fiscal year end of which is October 31, commenced
operations on November 11, 1994 and commenced the offering of A Shares and B
Shares on April 1, 1995.
(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratio of
expenses to average net assets would have been:
Expenses 20.95%(c) 14.57%(c)
(c) Annualized.
(d) Includes expenses allocated from International Portfolio of Core Trust
(Delaware) of 0.80%, net of waivers of 0.10%.

3. Investment Objectives and Policies

Diversified Equity Fund

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

Investment Policies. The Fund follows a "multi-style" approach designed to
minimize the volatility and risk of investing in equity securities. The Fund's
portfolio combines five different equity investment styles, those of two of the
Funds - Income Equity Fund and International Fund - and an index style (the
"Index style"), a large company growth investment style (the "Large Company
Growth style"), and a small company investment style (the "Small Company
style"). The Small Company style in turn utilizes the investment style of Small
Company Stock Fund, a small company growth investment style (the "Small Company
Growth style") and a small company value investment style (the "Small Company
Value style"). The Fund utilizes different equity investment styles in order to
reduce the risk of price and return volatility associated with reliance on a
single investment style. Because Diversified Equity Fund blends five equity
investment styles, it is anticipated that its price and return volatility will
be less than that of Growth Equity Fund, which blends three equity investment
styles. The Fund will generally invest the following percentages of its total
assets in accordance with the indicated investment styles:

Diversified Equity Fund Allocation

Index style 25%
Income Equity Fund style 25%
Large Company Growth style 25%
Small Company style 10%

<PAGE>

International Fund style 15%
TOTAL FUND ASSETS 100%

Investors should refer to the descriptions below under "Investment Objectives
and Policies - Investment Style Descriptions" for a discussion of the policies
and risks involved in the investments and investment techniques of each
investment style and, accordingly, of the portions of the Fund invested in a
particular style. The management of the Fund's assets is divided among the
Fund's eight portfolio managers. See "Management - Investment Advisory Services
- - Portfolio Managers." The percentage of the Fund's assets invested using a
specified investment style may be changed at any time by the Adviser in response
to market or other conditions.

Growth Equity Fund

Investment Objective. Growth Equity Fund's investment objective is to provide a
high level of long-term capital appreciation while moderating annual return
volatility by diversifying its investments in accordance with different equity
investment styles. There can be no assurance that the Fund will achieve its
investment objective. Because the Fund seeks increased returns, it is subject to
correspondingly greater risks than Diversified Equity Fund.

Investment Policies. The Fund follows a "multi-style" approach designed to
reduce the volatility and risk of investing in equity securities. The Fund's
portfolio combines three different equity investment styles, those of two of the
Equity Funds - Large Company Growth Fund and International Fund - and a small
company investment style (the "Small Company style") that in turn utilizes the
investment style of Small Company Stock Fund, a small company growth investment
style (the "Small Company Growth style") and a small company value investment
style (the "Small Company Value style"). The Fund utilizes different equity
investment styles in order to reduce the risk of price and return volatility
associated with reliance on a single investment style. It is anticipated that
the Fund's price and return volatility will be somewhat greater than those of
Diversified Equity Fund, which blends five equity investment styles. The Fund
will generally invest the following percentages of its total assets in
accordance with the indicated investment styles:

Growth Equity Fund Allocation

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

Investors should refer to the descriptions below of the three investment styles
in which Growth Equity Fund invests for a discussion of the objectives, policies
and risks involved

<PAGE>

in the investments and investment techniques of those styles and, accordingly,
of the portions of Growth Equity Fund invested using those styles. The
management of the Fund's assets is divided among the Fund's five portfolio
managers. See "Management - Investment Advisory Services - Portfolio Managers."
The percentage of the Fund's assets invested using a specified investment style
may be changed at any time by the Adviser in response to market or other
conditions.

Investment Style Descriptions

Index Style - In investing assets in this style, the Adviser seeks to duplicate
the return of the Standard & Poor's 500 Composite Stock Index (the "Index") with
minimum tracking error, while also minimizing transaction costs. Under normal
circumstances, the assets allocated to this investment style will be invested in
stocks representing 96% or more of the capitalization-weighted market values of
the Index. Portfolio transactions with respect to this style generally are
executed only to duplicate the composition of the Index, to invest cash received
from portfolio security dividends or from shareholder investments, and to raise
cash for fund management purposes. For this and other reasons, assets allocated
to this investment style can be expected to approximate but not be equal to the
performance of the Index.
In managing assets allocated to the Index style, the Adviser may utilize index
futures contracts to a limited extent. Index futures contracts are bilateral
agreements pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the index value at the close of trading of the contract and the price at which
the futures contract is originally struck. As no physical delivery of the
securities comprising the index is made, a purchaser of index futures contracts
may participate in the performance of the securities contained in the index
without the required capital commitment.
Index futures contracts may be used for several reasons: to simulate full
investment in the underlying index while retaining a cash balance for fund
management purposes, to facilitate trading or to reduce transactions costs. For
a description of futures contracts and their risks see "Additional Investment
Policies and Risk Considerations - Index Futures Contracts."
The Index tracks the total return performance of 500 common stocks that are
chosen for inclusion in the Index by Standard & Poor's ("S&P") on a statistical
basis. The inclusion of a stock in the Index in no way implies that S&P believes
the stock to be an attractive investment. The 500 securities, most of which
trade on the New York Stock Exchange, represent approximately 70% of the total
market value of all U.S. common stocks. Each stock in the Index is weighted by
its market value. Because of the market-value weighting, the 50 largest
companies in the Index currently account for approximately 45% of its value. The
Index emphasizes large capitalizations and, typically, companies included in the
Index are the largest and most dominant firms in their respective industries.
The Index style is not sponsored, endorsed or promoted by S&P, nor does S&P make
any representation or warranty, implied or express, to the purchasers of any
fund using the

<PAGE>

Index style or any member of the public regarding the advisability of investing
in index funds or the ability of the Index to track general stock market
performance. S&P does not guarantee the accuracy and/or the completeness of the
Index or any data included therein.
S&P makes no warranty, express or implied, as to the results to be obtained by a
fund using the Index style, any person or any entity from the use of the Index
or any data included therein. S&P makes no express or implied warranties and
hereby expressly disclaims all such warranties of merchantability or fitness for
a particular purpose for use with respect to the Index or any data included
therein.

Income Equity Fund Style - In investing assets in this investment style, the
Adviser seeks to provide both long-term capital appreciation in line with that
of the overall equity securities markets and above-average dividend income. In
investing in this style, the Adviser adheres to Income Equity Fund's investment
objective and policies, which are described below under "Investment Objectives
and Policies - Income Equity Fund."

Large Company Growth Style - In investing assets in this investment style, the
Adviser invests primarily in the common stock of large, high-quality domestic
companies that have superior growth potential. Large companies are those whose
market capitalization is at least $500 million at the time of the Fund's
purchase and whose equity trading volume would permit the sale or purchase of a
large position in the securities of the company in 2 or 3 trading days. Market
capitalization refers to the total market value of a company's outstanding
shares of common stock. In selecting securities for the Fund, the Adviser seeks
issuers whose stock is attractively valued and whose fundamental characteristics
both are significantly better than the market average and which support internal
earnings growth capability. The Fund's holdings may include the securities of
companies whose growth potential is, in the Adviser's opinion, generally
unrecognized or misperceived by the market. In addition, the Fund may invest up
to 20% of its total assets in American Depository Receipts, European Depository
Receipts and other, similar securities of large foreign issuers and may attempt
to reduce the overall risk of its foreign investments by using foreign currency
forward contracts. See "Investment Objectives and Policies - International Fund
- - Foreign Investment Considerations and Risk Factors." Under normal
circumstances, no more than 10% of the assets allocated to this style will be
invested in the securities of a single issuer. The Fund does not currently
invest in preferred stock or securities convertible into common stock with
respect to assets invested in this style, but reserves the right to do so in the
future.

Small Company Style - In investing assets in this style, the Adviser employs the
investment style of Small Company Stock Fund, the Small Company Growth style and
the Small Company Value style, currently allocating 1/3 of assets to each style.
The Small Company style may in the future allocate its assets to additional
investment styles.
Assets allocated to the Small Company style are invested primarily in the common
stock of small- and medium-size domestic companies that have a market
capitalization well below that of the average company in the Standard & Poor's
500 Composite Stock Price Index. Market capitalization refers to the total
market value of a company's outstanding shares of common stock. Generally, small
and medium companies are those companies

<PAGE>

with market capitalizations of less than $1 billion at the time the Adviser
purchases the company's stock. Small Company Growth style considers small and
medium companies to be those with market capitalizations of less than $750
million at the time of purchase. In addition, it is anticipated that assets
allocated to the Small Company Stock Fund style will be invested primarily in
companies with capitalizations of less than $750 million. Under normal
circumstances, at least 65% of total assets allocated to the Small Company style
will be invested in common stock issued by small and medium size companies.
Investing in smaller companies entails certain risks in addition to those
normally associated with investments in equity securities. For a discussion of
these risks, see "Investment Objectives and Policies - Small Company Stock Fund
- - Additional Investment Considerations and Risk Factors."
In investing assets in the Small Company Stock Fund style, the Adviser seeks
long-term capital appreciation by investing primarily in the common stock of
small- and medium-size domestic companies. In investing in this investment
style, the Adviser adheres to Small Company Stock Fund's investment objective
and policies, which are described below under "Investment Objectives and
Policies - Small Company Stock Fund."
In investing assets in the Small Company Growth style, the Adviser seeks to
identify companies that are rapidly growing (usually with relatively short
operating histories) or that are emerging from a period of investor neglect
after undergoing a dramatic change. These changes may involve a sharp increase
in earnings, the hiring of new management or measures taken to close the gap
between its share price and takeover/asset value. The Adviser may invest up to
10% of assets allocated to this style in foreign securities and in American
Depository Receipts, European Depository Receipts and other similar securities
of foreign issuers. See "Investment Objectives and Policies - International Fund
- - Foreign Investment Considerations and Risk Factors." The Adviser will not
invest more than 10% of total assets invested in this style in the securities of
a single issuer. In investing in accordance with this style, the Adviser
currently does not invest in preferred stock and securities convertible into
common stock, but reserves the right to do so in the future.
In investing assets in the Small Company Value style, the Adviser focuses on
securities that are conservatively valued in the marketplace relative to their
underlying fundamentals. Value investing provides investors with a less
aggressive way to take advantage of growth opportunities of small companies. In
investing in accordance with this style, the Adviser will seek to invest in
stocks priced low relative to the stock of comparable companies, determined by
price/earnings ratios, cash flows or other measures. Value investing therefore
may reduce downside risk while offering potential for capital appreciation as a
stock gains favor among other investors and its stock price rises.
Prior to December 11, 1995 the Small Company style did not allocate any assets
to the Small Company Value style. The allocation of 1/3 of the assets invested
in the Small Company style to the Small Company Value style is expected to be
complete by June 1, 1996.

<PAGE>

International Fund Style - In investing assets in this investment style,
Schroder seeks to provide long-term capital appreciation through direct or
indirect investment in high-quality companies based outside the United States.
Assets allocated to this style
are invested in accordance with International Fund's investment objective and
policies, which are described below. See "Investment Objectives and Policies -
International Fund" below.

Income Equity Fund

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

Investment Policies. The Fund expects to invest primarily in the common stock of
large, high-quality domestic companies that have above-average return potential
based on current market valuations. Primary emphasis is placed on investing in
securities of companies with above-average dividend income. In selecting
securities for the Fund, the Adviser uses various valuation measures, including
above-average dividend yields and below industry average price to earnings,
price to book and price to sales ratios. The Fund considers large companies to
be those whose market capitalization is at least $600 million at the time of the
Fund's purchase. Market capitalization refers to the total market value of a
company's outstanding shares of common stock. The Fund also may invest in
preferred stock and securities convertible into common stock and may purchase
American Depository Receipts, European Depository Receipts and other similar
securities of foreign issuers. See "Investment Objectives and Policies -
International Fund - Foreign Investment Considerations and Risk Factors." Under
normal circumstances, the Fund will not invest more than 10% of its total assets
in the securities of a single issuer.

ValuGrowth Stock Fund

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

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

<PAGE>

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

The Fund also may invest in selected companies that the Adviser regards as
"special situations." Special situation companies often have the potential for
significant future earnings growth but have not performed well in the recent
past. These situations may include management turnarounds, corporate or asset
restructurings, or significantly undervalued assets. Such investments are the
exception, not the rule, and must satisfy the Adviser's valuation parameters. In
addition, the Fund may invest up to 20% of its assets in securities of foreign
issuers and in sponsored and unsponsored American Depository Receipts. For a
description of the investment considerations and risk factors of investing in
foreign securities, see "Investment Objectives and Policies - International Fund
- - Foreign Investment Considerations and Risk Factors."

Small Company Stock Fund

Investment Objective. The Fund's investment objective is long-term capital
appreciation. There can be no assurance that the Fund will achieve its
investment objective.

Investment Policies. The Fund invests primarily in the common stock of small-
and medium-size domestic companies that have a market capitalization well below
that of the average company in the Standard & Poor's 500 Composite Stock Price
Index. Small and medium companies are those whose market capitalization is less
than $1 billion at the time of the Fund's purchase, although it is anticipated
that investments primarily will be in companies with capitalization of less than
$750 million. Market capitalization refers to the total market value of a
company's outstanding shares of common stock, calculated by multiplying the
market value of the company's shares by the total number of shares outstanding.

In selecting securities for the Fund, the Adviser seeks securities with
significant price appreciation potential, and attempts to identify companies
that show above-average growth, as compared to long-term overall market growth.
The companies in which the Fund invests may be in a relatively early stage of
development or may produce goods and services that have favorable prospects for
growth due to increasing demand or developing

<PAGE>

markets. Frequently, such companies have a small management group and single
product or product line expertise, which, in the view of the Adviser, may result
in an enhanced entrepreneurial spirit and greater focus, thereby allowing such
companies to be successful. The Adviser believes that such companies may develop
into significant business enterprises and that an investment in such companies
offers a greater opportunity for capital appreciation than an investment in
larger, more established entities. Small companies frequently retain a large
part of their earnings for research, development and investment in capital
assets, however, so the prospects for immediate dividend income are limited.

The securities in which the Fund invests may be listed on a securities exchange,
included in the National Association of Securities Dealers Automated Quotation
(NASDAQ) National Market System, or traded in the over-the-counter securities
market. Equity securities owned by the Fund that are traded in the over-the-
counter market or on a regional securities exchange may not be traded every day
or in the volume typical of securities trading on a national securities
exchange. As a result, disposition by the Fund of a portfolio security, to meet
redemption requests by shareholders or otherwise, may require the Fund to sell
these securities at a discount from market prices, to sell during periods when
disposition is not desirable, or to make many small sales over a lengthy period
of time.

Additional Investment Considerations and Risk Factors. Investments in smaller
companies generally involve greater risks than investments in larger companies
due to the small size of the issuer and the fact that the issuer may have
limited product lines, less access to financial markets and less management
depth. In addition, many of the securities of these firms trade less frequently
and in lower volumes than securities issued by larger firms. The result is that
the short-term price volatility of those small company securities is greater
than the price volatility of the securities of larger, more established
companies that are widely held. The securities of small companies also may be
more sensitive to market changes generally than the securities of large
companies.

Contrarian Stock Fund

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

<PAGE>

Investment Policies. The basic premise of the Adviser's "contrarian" investment
approach is to purchase stocks whose prices are temporarily depressed, either
because they are out-of-favor with, or simply ignored by, the investment
community. The Adviser believes that security prices change more than
fundamental investment values, as consensus thinking often results in severe
undervaluation of securities whose immediate problems are obvious and whose
longer term prospects are, therefore, viewed too negatively. This consensus
pessimism can create investment opportunity.

The basis of the Adviser's contrarian investment approach is the comparison of
the value and the price of a security. The Adviser generally analyzes a
security's value in terms of recovery of earnings and the potential share price
over a three-year investment time horizon. Typically, stocks that the Adviser
considers for purchase will tend to have significantly depressed prices and
relatively low price/book value ratios.

The Fund also may invest up to 20% of its assets in securities of foreign
issuers and in sponsored and unsponsored American Depository Receipts. For a
description of the investment considerations and risk factors of investing in
foreign securities, see "Investment Objectives and Policies - International Fund
- - Foreign Investment Considerations and Risk Factors." In addition, the Fund may
invest in corporate debt obligations that are rated, at the time of purchase,
within the three highest rating categories assigned by a nationally recognized
statistical rating organization.

Additional Investment Considerations and Risk Factors. The Fund's policy of
investing in securities that may be temporarily out of favor differs from the
investment approach followed by many other mutual funds with a similar
investment objective. Such mutual funds typically do not invest in securities
that have declined sharply in price, are not widely followed, or are issued by
companies that may have reported poor earnings or that may have suffered a
cyclical downturn in business. The Adviser believes, however, that purchasing
securities depressed by temporary factors may provide investment returns
superior to those obtained when premium prices are paid for issues currently in
favor.

International Fund

The Fund is designed for investors who desire to achieve international
diversification of their investments by participating in foreign securities
markets. Because international investments generally involve risks in addition
to those risks associated with investments in the United States, the Fund should
be considered only as a vehicle for international diversification and not as a
complete investment program. The following investment objective and policies are
those of the Fund and of International Portfolio. As the Fund has the same
investment policies as International Portfolio and currently invests all of its
assets in International Portfolio, investment policies are discussed with
respect to International Portfolio only.

<PAGE>

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

Investment Policies. Under normal circumstances, International Portfolio will
invest substantially all of its assets, but not less than 65% of its net assets,
in equity securities of companies domiciled outside the United States.
International Portfolio selects its investments on the basis of their potential
for capital appreciation without regard to current income. International
Portfolio also may invest in the securities of domestic closed-end investment
companies investing primarily in foreign securities and may invest in debt
obligations of foreign governments or their political subdivisions, agencies or
instrumentalities, of supranational organizations and of foreign corporations.
International Portfolio's investments will be diversified among securities of
issuers in foreign countries including, but not limited to, Japan, Germany, the
United Kingdom, France, the Netherlands, Hong Kong, Singapore and Australia. In
general, International Portfolio will invest only in securities of companies and
governments in countries that Schroder, in its judgment, considers both
politically and economically stable. International Portfolio has no limit on the
amount of its assets that may be invested in any one type of foreign instrument
or in any foreign country; however, to the extent International Portfolio
concentrates its assets in a foreign country, it will incur greater risks.

International Portfolio may purchase preferred stock and convertible debt
securities, including convertible preferred stock, and may purchase American
Depository Receipts, European Depository Receipts or other similar securities of
foreign issuers. International Portfolio also may enter into foreign exchange
contracts, including forward contracts to purchase or sell foreign currencies,
in anticipation of its currency requirements and to protect against possible
adverse movements in foreign exchange rates. Although such contracts may reduce
the risk of loss to International Portfolio from adverse movements in currency
values, the contracts also limit possible gains from favorable movements.

Foreign Exchange Contracts. Changes in foreign currency exchange rates will
affect the U.S. dollar values of securities denominated in currencies other than
the U.S. dollar. The rate of exchange between the U.S. dollar and other
currencies fluctuates in response to forces of supply and demand in the foreign
exchange markets. These forces are affected by the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors. When investing in foreign securities,
International Portfolio usually effects currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign exchange market.
International Portfolio incurs foreign exchange expenses in converting assets
from one currency to another.

<PAGE>

International Portfolio may enter into foreign currency forward contracts or
currency futures or options contracts for the purchase or sale of foreign
currency to "lock in" the U.S. dollar price of the securities denominated in a
foreign currency or the U.S. dollar value of interest and dividends to be paid
on such securities, or to hedge against the possibility that the currency of a
foreign country in which International Portfolio has investments may suffer a
decline against the U.S. dollar. A forward currency contract is an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. This method of attempting to hedge the
value of portfolio securities against a decline in the value of a currency does
not eliminate fluctuations in the underlying prices of the securities. Although
the strategy of engaging in foreign currency transactions could reduce the risk
of loss due to a decline in the value of the hedged currency, it could also
limit the potential gain from an increase in the value of the currency.
International Portfolio does not intend to maintain a net exposure to such
contracts where the fulfillment of International Portfolio's obligations under
such contracts would obligate International Portfolio to deliver an amount of
foreign currency in excess of the value of International Portfolio's portfolio
securities or other assets denominated in the currency. International Portfolio
will not enter into these contracts for speculative purposes and will not enter
into non-hedging currency contracts. These contracts involve a risk of loss if
Schroder fails to predict currency values correctly. International Portfolio has
no present intention to enter into currency futures or options contracts but may
do so in the future.

Foreign Investment Considerations and Risk Factors. All investments, domestic
and foreign, involve certain risks. Investments in the securities of foreign
issuers may involve risks in addition to those normally associated with
investments in the securities of U.S. issuers. All foreign investments are
subject to risks of foreign political and economic instability, adverse
movements in foreign exchange rates, the imposition or tightening of exchange
controls or other limitations on repatriation of foreign capital, and changes in
foreign governmental attitudes towards private investment, possibly leading to
nationalization, increased taxation or confiscation of foreign investors'
assets.

<PAGE>

and by numerous other political and economic events occurring outside the United
States, many of which may be difficult, if not impossible, to predict.

Income from foreign securities will be received and realized in foreign
currencies, and International Portfolio is required to compute and distribute
income in U.S. dollars. Accordingly, a decline in the value of a particular
foreign currency against the U.S. dollar occurring after International
Portfolio's income has been earned and computed in U.S. dollars may require
International Portfolio to liquidate portfolio securities to acquire sufficient
U.S. dollars to make a distribution. Similarly, if the exchange rate declines
between the time International Portfolio incurs expenses in U.S. dollars and the
time such expenses are paid, International Portfolio may be required to
liquidate additional foreign securities to purchase the U.S. dollars required to
meet such expenses.

Additional Investment Policies and Risk Considerations

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

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

Borrowing. As a fundamental policy, each Fund (other than International
Portfolio) may borrow money from banks or by entering into reverse repurchase
agreements and will limit borrowings to amounts not in excess of 331/3% of the
value of the Fund's total assets. As a fundamental policy, International
Portfolio may borrow money for temporary

<PAGE>

or emergency purposes, including the meeting of redemption requests, and will
limit borrowings to amounts not in excess of 331/3% of the value of
International Portfolio's total assets. Borrowing for other than temporary or
emergency purposes or meeting redemption requests may not exceed 5% of the value
of any Fund's assets. Each Fund may enter reverse repurchase agreements (which
are considered borrowings by each Fund but not International Portfolio),
transactions in which a Fund sells a security and simultaneously commits to
repurchase that security from the buyer at an agreed upon price on an agreed
upon future date.

Diversification and Concentration. Each Fund is diversified as that term is
defined in the Investment Company Act of 1940 (the "1940 Act"). As a fundamental
policy, with respect to 75% of its assets, no Fund may purchase a security
(other than a U.S. Government Security or shares of investment companies) if, as
a result, (i) more than 5% of the Fund's total assets would be invested in the
securities of a single issuer or (ii) the Fund would own more than 10% of the
outstanding voting securities of any single issuer. Each Fund is prohibited from
concentrating its assets in the securities of issuers in any industry. As a
fundamental policy, each Fund may not purchase securities if, immediately after
the purchase, more than 25% of the value of the Fund's total assets would be
invested in the securities of issuers conducting their principal business
activities in the same industry. This limit does not apply to investments in
U.S. Government Securities, foreign government securities or repurchase
agreements covering U.S. Government Securities, although it is not currently
anticipated that any Fund will concentrate in securities issued by a single
foreign government. International Fund may invest up to 100% of its investment
assets in International Portfolio and each of Diversified Equity Fund, Growth
Equity Fund and Income Equity Fund reserves the right to invest all or a portion
of its assets in another diversified, open-end investment company with
substantially the same investment objective and policies as the Fund.

Common and Preferred Stock. The Funds may invest in common and preferred stock.
Common stockholders are the owners of the company issuing the stock and,
accordingly, vote on various corporate governance matters such as mergers. They
are not creditors of the company, but rather, upon liquidation of the company,
are entitled to their pro rata share of the company's assets after creditors
(including fixed income security holders) and, if applicable, preferred
stockholders are paid. Preferred stock is a class of stock having a preference
over common stock as to dividends and, in the alternative, as to the recovery of
investment. A preferred stockholder is a shareholder in the company and not a
creditor of the company as is a holder of the company's fixed income securities.
Dividends paid to common and preferred stockholders are distributions of the
earnings of the company and not interest payments, which are expenses of the
company. Equity securities owned by a Fund may be traded in the over-the-counter
market or on a securities exchange and may not be traded every day or in the
volume typical of securities traded on a major U.S. national securities
exchange. As a result, disposition by a Fund of a portfolio security to meet
redemptions by interest holders or otherwise may require the Fund to sell these
securities at a discount from market prices, to sell during periods when
disposition is not desirable, or to make many small sales over a lengthy period
of time.

<PAGE>

The market value of all securities, including equity securities, is based upon
the market's perception of value and not necessarily the book value of an issuer
or other objective measure of a company's worth. The Funds may invest in
warrants, which are options to purchase an equity security at a specified price
(usually representing a premium over the applicable market value of the
underlying equity security at the time of the warrant's issuance) and usually
during a specified period of time.

Convertible Securities. The Funds may invest in convertible securities,
including convertible debt and convertible preferred stock, which may be
rated by a nationally recognized statistical rating organization ("NRSRO") or
may be unrated. Convertible securities are fixed income securities that may
be converted at a stated price within a specific amount of time into a
specified number of shares of common stock. A convertible security entitles
the holder to receive interest paid or accrued on debt or the dividend paid
on preferred stock until the convertible security matures or is redeemed,
converted or exchanged. Before conversion, convertible securities have
characteristics similar to nonconvertible debt securities in that they
ordinarily provide a stream of income with generally higher yields than those
of common stocks of the same or similar issuers. Convertible securities rank
senior to common stock in a corporation's capital structure but are usually
subordinate to comparable nonconvertible securities. In general, the value of
a convertible security is the higher of its investment value (its value as a
fixed income security) and its conversion value (the value of the underlying
shares of common stock if the security is converted). As a fixed income
security, the value of a convertible security generally increases when
interest rates decline and generally decreases when interest rates rise. The
value of convertible securities, however, is also influenced by the value of
the underlying common stock.

The rating categories for convertible securities range from Aaa to C, in the
case of Moody's Investors Service ("Moody's'), and from AAA to D, in the case of
Standard & Poor's ("S&P"), and for convertible preferred stock range from aaa to
c, in the case of Moody's, and from AAA to D, in the case of S&P. Securities in
the lowest rating categories are characterized by Moody's as having extremely
poor prospects of ever attaining any real investment standing and by S&P as
being in default, in the case of debt, and non-paying with debt in default, in
the case of preferred stock. Unrated securities may not be as actively traded as
rated securities. A further description of the ratings used by Moody's, S&P and
certain other NRSROs is contained in the SAI.

American Depository Receipts and European Depository Receipts. The Funds may
invest in sponsored and unsponsored American Depository Receipts ("ADRs"), which
are receipts issued by American banks or trust companies evidencing ownership of
underlying securities issued by a foreign issuer. ADRs, in registered form, are
designed for use in U.S. securities markets. Unsponsored ADRs may be created
without the participation of the foreign issuer. Holders of these ADRs generally
bear all the costs of the ADR facility, whereas foreign issuers typically bear
certain costs in a sponsored ADR. The bank or trust company depository of an
unsponsored ADR may be under no obligation to distribute shareholder
communications received from the foreign issuer or to

<PAGE>

pass through voting rights. Diversified Equity Fund, Growth Equity Fund, Income
Equity Fund and International Portfolio also may invest in European Depository
Receipts ("EDRs"), which are receipts issued by a European financial institution
evidencing an arrangement similar to that of ADRs, and in other similar
instruments representing securities of foreign companies. EDRs, in bearer form,
are designed for use in European securities markets.

Debt Securities. The Funds (other than ValuGrowth Stock Fund) may invest in
corporate debt obligations and U.S. Government Securities. These instruments may
have fixed, floating or variable rates of interest. These debt securities must
be rated in one of the three highest rating categories by an NRSRO or, if
unrated by any NRSRO, judged by the Adviser (or Crestone, as appropriate) to be
of comparable quality.

Index Futures Contracts. A Fund using the Index style may invest in index
futures contracts to a limited extent. Index futures contracts are bilateral
agreements pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the index value at the close of trading of the contract and the price at which
the futures contract is originally struck. No physical delivery of the
securities comprising the index is made. Generally, these futures contracts are
closed out prior to the expiration date of the contract.

A Fund's investment in futures contracts in accordance with the Index style
subjects the Fund to certain investment risks and transaction costs to which it
might not otherwise be subject. These risks include:
(1) imperfect correlations between movements in the prices of futures contracts
and movements in the price of the securities hedged which may cause a given
hedge not to achieve its objective; (2) the fact that the skills and techniques
needed to trade futures are different from those needed to select the other
securities in which the Fund invests; (3) lack of assurance that a liquid
secondary market will exist for any particular instrument at any particular
time, which, among other things, may hinder a Fund's ability to limit exposures
by closing its positions; and (4) the possible need to defer closing out of
certain futures contracts to avoid adverse tax consequences.

<PAGE>

security. When a Fund lends a security it receives interest from the borrower or
from investing cash collateral. The Trust maintains possession of the purchased
securities and any underlying collateral in these transactions, the total market
value of which on a continuous basis is at least equal to the repurchase price
or value of securities loaned, plus accrued interest. The Funds may pay fees to
arrange securities loans and each Fund will, as a fundamental policy, limit
securities lending to not more than 331/3% of the value of its total assets.

When-Issued Securities and Forward Commitments. Each of the Funds may purchase
securities offered on a "when-issued" basis and may purchase securities on a
"forward commitment" basis. When such transactions are negotiated, the price is
fixed at the time the commitment is made, but delivery and payment for the
securities take place at a later date. Normally, the settlement date occurs
within three months after the transaction, but delayed settlements beyond three
months may be negotiated. During the period between a commitment and settlement,
no payment is made for the securities purchased and, thus, no interest accrues
to the Fund. At the time a Fund makes a commitment to purchase securities in
this manner, however, the Fund immediately assumes the risk of ownership,
including price fluctuation. It is currently anticipated that the Funds will not
purchase securities on a when-issued or forward commitment basis to any
significant extent.

Illiquid Securities. No Fund may invest more than 15% of its net assets in
illiquid securities. Illiquid securities are securities that cannot be disposed
of within seven days in the ordinary course of business at approximately the
amount at which the Fund has valued the securities and include, among other
things, repurchase agreements not entitling the holder to payment within seven
days and restricted securities (other than those determined to be liquid
pursuant to guidelines established by the Board or, in the case of International
Portfolio, Core Trust's board of trustees). Limitations on resale may have an
adverse effect on the marketability of portfolio securities, and a Fund might
also have to register restricted securities in order to dispose of them,
resulting in expense and delay. A Fund might not be able to dispose of
restricted or other securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions. There can be no assurance
that a liquid market will exist for any security at any particular time.

A domestic institutional market has developed for certain securities that are
not registered under the Securities Act of 1933 (the "1933 Act"), including
repurchase agreements and foreign securities. Institutional investors depend on
an efficient institutional market in which the unregistered security can be
readily resold or on the issuer's ability to honor a demand for repayment of the
unregistered security. A security's contractual or legal restrictions on resale
to the general public or to certain institutions may not be indicative of the
liquidity of the security. If such securities are eligible for purchase by
institutional buyers in accordance with Rule 144A under the 1933 Act, the
investment advisers may determine that such securities are not illiquid
securities under guidelines adopted by the Board (or, in the case of
International Portfolio, Core Trust's board of trustees). These guidelines take
into account trading activity in the securities and the availability of

<PAGE>

reliable pricing information, among other factors. If there is a lack of trading
interest in a particular Rule 144A security, a Fund's holdings of that security
may be illiquid.

Temporary Defensive Position. When business or financial conditions warrant,
each Fund may assume a temporary defensive position and invest without limit in
cash or prime quality cash equivalents, including (i) short-term U.S. Government
Securities, (ii) certificates of deposit, bankers' acceptances and interest-
bearing savings deposits of commercial banks doing business in the United
States, (iii) commercial paper, (iv) repurchase agreements and (v) shares of
"money market funds" registered under the 1940 Act within the limits specified
therein. During periods when and to the extent that a Fund has assumed a
temporary defensive position, it may not be pursuing its investment objective.
Prime quality instruments are those that are rated in one of the two highest
short-term rating categories by an NRSRO or, if not rated, determined by the
Adviser to be of comparable quality. Apart from temporary defensive purposes, a
Fund may at any time invest a portion of its assets in cash and cash equivalents
as described above. Except during periods when a Fund assumes a temporary
defensive position, each Fund will have at least 65% of its total assets
invested in common stock. International Portfolio may hold cash and bank
instruments denominated in any major foreign currency.

Portfolio Transactions. The investment advisers place orders for the purchase
and sale of assets they manage with brokers and dealers selected by and in the
discretion of the respective adviser. The investment advisers seek "best
execution" for all portfolio transactions, but a Fund may pay higher than the
lowest available commission rates when an investment adviser believes it is
reasonable to do so in light of the value of the brokerage and research services
provided by the broker effecting the transaction.

Commission rates for brokerage transactions are fixed on many foreign securities
exchanges, and this may cause higher brokerage expenses to accrue to a Fund that
invests in foreign securities than would be the case for comparable transactions
effected on United States securities exchanges.

Subject to the Funds' policy of obtaining "best execution" each investment
adviser may employ broker-dealer affiliates of the investment adviser
(collectively "Affiliated Brokers") to effect brokerage transactions for the
Funds. The Funds' payment of commissions to Affiliated Brokers is subject to
procedures adopted by the Board and, with respect to International Portfolio,
Core Trust's board of trustees, to provide that the commissions will not exceed
the usual and customary broker's commissions charged by unaffiliated brokers. No
specific portion of a Fund's brokerage will be directed to Affiliated Brokers
and in no event will a broker affiliated with the investment adviser directing
the transaction receive brokerage transactions in recognition of research
services provided to the adviser.

The frequency of portfolio transactions of a Fund (the portfolio turnover rate)
will vary from year to year depending on many factors. The Funds' portfolio
turnover is reported under "Financial Highlights." Schroder anticipates that the
annual portfolio turnover rate

<PAGE>

in International Portfolio will be less than 100%. An annual portfolio turnover
rate of 100% would occur if all of the securities in a Fund were replaced once
in a period of one year. Higher portfolio turnover rates may result in increased
brokerage costs to International Portfolio and a possible increase in short-term
capital gains or losses.

Tax rules applicable to short-term trading may affect the timing of a Fund's
portfolio transactions or its ability to realize short-term trading profits or
establish short-term positions.

Investment in Core Trust

International Fund currently seeks to achieve its investment objective by
investing all of its investment assets in International Portfolio, a separate
Portfolio of Core Trust. In addition, the Trust has received an exemptive order
from the SEC under which Diversified Equity Fund and Growth Equity Fund
(collectively, the "Blended Funds") currently invest the portions of their
assets that are managed in the Small Company style, the Index style and the
International Fund style, respectively, in Small Company Portfolio, Index
Portfolio, and International Portfolio II (the "Blended Portfolios"). The
Blended Portfolios are each separate portfolios of Core Trust. By pooling their
assets in the Blended Portfolios, the Blended Funds may be able to realize
benefits that they could not realize by investing directly in securities. See
"Other Information - Core Trust Structure."

The investment objectives and policies and investment risk considerations for
International Portfolio II are identical to the investment objectives and
policies and investment risk considerations of International Fund. The
investment objective of Index Portfolio, consistent with the Index style, is to
duplicate the return of the Standard & Poor's 500 Composite Stock Price Index.
Consistent with the Small Company style, the investment objective of Small
Company Portfolio is to provide long-term capital appreciation by investing
primarily in small and medium-sized domestic companies that are either growing
rapidly or completing a period of significant change. Like the Small Company
style, Small Company Portfolio invests its assets in the Small Company Stock
Fund style, the Small Company Growth style and the Small Company Value style; in
the future, this Portfolio may invest its assets in accordance with additional
small company investment styles.

4. Management

The business of the Trust is managed under the direction of the Board of
Trustees, and the business of Core Trust is managed under the direction of Core
Trust's board of trustees. The Board formulates the general policies of the
Funds and meets periodically to review

<PAGE>

the results of the Funds, monitor investment activities and practices and
discuss other matters affecting the Funds and the Trust. The SAI contains
general background information about the Trustees and Officers of the Trust and
of Core Trust. The Board consists of seven persons.

Investment Advisory Services

Norwest Investment Management. Subject to the general supervision of the Board,
Norwest Investment Management makes investment decisions for the Funds (except
International Fund) and continuously reviews, supervises and administers each
Fund's investment program or oversees the investment decisions of the investment
subadviser, as applicable. The Adviser is a part of Norwest, a subsidiary of
Norwest Corporation, which is a multi-bank holding company that was incorporated
under the laws of Delaware in 1929. As of December 31, 1995, Norwest Corporation
was the 11th largest bank holding company in the United States in terms of
assets. As of that date, the Adviser managed or provided investment advice with
respect to assets totaling approximately $23 billion.

The Adviser provides investment management services to each Fund pursuant to
investment advisory agreements between Norwest and the Trust. For the Adviser's
services, Norwest receives an advisory fee with respect to each of Diversified
Equity Fund and Growth Equity Fund at an annual rate of 0.65% and 0.90%,
respectively, of each Fund's average daily net assets. With respect to Income
Equity Fund, Norwest receives a fee equal to 0.50% of the Fund's average daily
net assets although it is anticipated that shareholders will approve an increase
in the fee to 0.65% in April 1996. With respect to ValuGrowth Stock Fund and
Contrarian Stock Fund, Norwest receives an advisory fee at an annual rate of
0.80% of the average daily net assets for the first $300 million of the Fund's
net assets, 0.76% of the average daily net assets for the next $400 million of
the Fund's net assets and 0.72% of the average daily net assets for the Fund's
remaining net assets. With respect to Small Company Stock Fund, Norwest receives
an advisory fee at an annual rate of 1.00% of the average daily net assets for
the first $300 million of the Fund's net assets, 0.96% of the average daily net
assets for the next $400 million of the Fund's net assets and 0.92% of the
average daily net assets for the Fund's remaining net assets. To the extent
advisory fees are 0.75% or more, the fees are higher than those paid by most
investment companies of all types to their advisers, but the Board believes that
the fees charged for each Fund are appropriate given the Fund's investment
policies.

Small Company Stock Fund. To assist Norwest in carrying out its obligations with
respect to Small Company Stock Fund, Norwest has entered into an investment
subadvisory agreement among the Trust, Norwest and Crestone. Crestone, which is
located at 7720 East Belleview Avenue, Suite 220, Englewood Colorado 80111, is a
subsidiary of Norwest and is registered with the SEC as an investment adviser.
Crestone provides investment advice regarding companies with small
capitalization to various

<PAGE>

clients, including institutional investors. As of the date of this Prospectus,
Crestone managed assets with a value of approximately $300 million.

Pursuant to the investment subadvisory agreement, Crestone makes investment
decisions for the Small Company Stock Fund and continuously reviews, supervises
and administers the Fund's investment program with respect to that portion, if
any, of the Fund's portfolio that Norwest believes should be invested using
Crestone as investment subadviser. Currently, Crestone manages the entire
portfolio of the Fund and has since the Fund's inception. The Adviser supervises
the performance of Crestone, including Crestone's adherence to the Fund's
investment objective and policies and pays Crestone a fee for its investment
subadvisory services. This compensation does not increase the amount paid by the
Trust to the Adviser pursuant to the Adviser's investment advisory agreement.

International Fund. International Fund currently invests all of its assets in
International Portfolio. The Fund may withdraw its investment from International
Portfolio, for which Schroder serves as investment adviser, at any time if the
Board determines that it is in the best interests of the Fund and its
shareholders to do so. See "Other Information - Core Trust Structure."
Accordingly, the Fund has retained the Adviser as its investment adviser and
Schroder as its investment subadviser to manage the Fund's assets in the event
the Fund so withdraws its investment. Neither the Adviser nor Schroder will
receive any advisory or subadvisory fees with respect to the Fund as long as the
Fund remains completely invested in International Portfolio or any other
investment company.

Schroder acts as investment adviser to International Portfolio pursuant to an
advisory agreement with Core Trust. Subject to the general control of Core
Trust's board of trustees, Schroder makes investment decisions for International
Portfolio and continuously reviews, supervises and administers International
Portfolio's investment program. Schroder also assists the Adviser in carrying
out the Adviser's obligations under the investment advisory agreement pursuant
to an investment subadvisory agreement among the Trust, Norwest and Schroder.
The investment advisory agreement between Schroder and Core Trust with respect
to International Portfolio is the same in all material respects as the Fund's
investment subadvisory agreement except as to the parties, and the circumstances
under which fees will be paid.

Schroder, whose principal business address is 787 Seventh Avenue, New York, New
York 10019, is a wholly-owned U.S. subsidiary of Schroders Incorporated, the
wholly-owned U.S. holding company subsidiary of Schroders plc. Schroders plc is
the holding company parent of a large worldwide group of banks and financial
services companies (referred to as the "Schroder Group"), with associated
companies and branch and representative offices located in seventeen countries
worldwide. The Schroder Group specializes in providing investment management
services and as of October 31, 1995, had assets under management in excess of
$100 billion.

Schroder receives an advisory fee from Core Trust with respect to International
Portfolio at an annual rate of 0.45% of the average daily net assets of
International Portfolio. The

<PAGE>

investment advisory agreement for the Fund provides for an investment advisory
fee payable to Norwest by the Trust at an annual rate of 0.85% of the average
daily net assets of the Fund in the event that the Fund is not completely
invested in International Portfolio or another investment company. Pursuant to
the Fund's investment subadvisory agreement, the Adviser (and not the Trust)
pays Schroder a fee for its investment subadvisory services. This compensation
does not increase the amount paid by the Trust to the Adviser pursuant to the
Adviser's investment advisory agreement.

Core Trust Blended Portfolios. As noted under "Investment Objectives and
Policies - Additional Investment Policies and Risk Considerations" and " -
Investment in Core Trust," Diversified Equity Fund and Growth Equity Fund invest
those of their respective assets that are managed in the Small Company style,
the Index style and the International Fund style in three Blended Portfolios of
Core Trust: Small Company Portfolio, Index Portfolio and International Portfolio
II. Each Blended Fund may withdraw its investment from a Blended Portfolio at
any time that the Board determines it is in the best interests of the Blended
Fund and its shareholders to do so. See "Other Information - Core Trust
Structure." Norwest serves as investment adviser to Small Company Portfolio and
Index Portfolio and Schroder serves as investment adviser to International
Portfolio II pursuant to separate advisory agreements with Core Trust. Subject
to the general supervision of Core Trust's board of trustees, Norwest and
Schroder perform services for the Blended Portfolios similar to those performed
for the Trust under its investment advisory agreements.

Portfolio Managers. Many persons on the advisory staff of Adviser, Crestone and
Schroder contribute to the investment services provided to the Funds. The
following persons, however, are primarily responsible for the day-to-day
management of the Funds:
Diversified Equity Fund and Growth Equity Fund - The day-to-day management of
the portfolios of these two Blended Funds is performed by the portfolio managers
listed below with respect to the portion of the Fund's portfolio that is
invested using a particular investment style. As an example, there are five
portfolio managers of Growth Equity Fund: the three portfolio managers
responsible for the Fund's assets invested in the Small Company style, the
portfolio manager responsible for the Fund's assets invested in the Large
Company Growth style and the portfolio manager responsible for the Fund's assets
invested in the International Fund style.
Index style - David D. Sylvester and Laurie R. White. Mr. Sylvester has been
associated with Norwest for 15 years, the last 7 years as a Vice President and
Senior Portfolio Manager. He has over 20 years experience in managing securities
portfolios. Ms. White has been a Vice President and Senior Portfolio Manager of
Norwest since 1991; from 1989 to 1991, she was a Portfolio Manager at Richfield
Bank and Trust. Mr. Sylvester and Ms. White began serving as portfolio managers
of each Blended Fund on January 1, 1996.
Income Equity Fund style - David L. Roberts. Mr. Roberts has served as a
portfolio manager of each Blended Fund since its inception. For a description of
Mr. Roberts, see "Income Equity Fund" below.

<PAGE>

Large Company Growth style - John S. Dale, Senior Portfolio Manager and an
Officer of Norwest and Senior Vice President of Peregrine Capital Management,
Inc. Mr. Dale has held various investment management positions with Norwest or
its affiliates, including Peregrine, since 1968. From 1984 to 1987 he was a
Senior Vice President and Manager of Equity Advisors for Norwest. He has served
as a portfolio manager of each Blended Fund since its inception.
Small Company style/Small Company Portfolio - Robert B. Mersky, Kirk McCown and
Thomas H. Forester. Mr. Mersky has held various investment management positions
with Norwest or its affiliates, including Peregrine, since 1977. From 1980 to
1984 he was head of investments for Norwest.
Mr. McCown is founder, President and a Director of Crestone Capital Management,
Inc., a subsidiary of Norwest which is investment subadviser to Small Company
Stock Fund, another fund of the Trust. Prior thereto, Mr. McCown was Senior Vice
President of Reich & Tang, L.P. Mr. Forester is an officer of Norwest and Senior
Vice President of Peregrine Capital Management, Inc. Mr. Forester joined
Peregrine in 1995. From 1992 to 1995 he was Vice President of Lord Asset
Management, an investment adviser. For a description of Mr. McCown, see "Small
Company Stock Fund" below. Mr. Mersky has served as a portfolio manager of each
Blended Fund since its inception. Mr. McCown commenced serving as a portfolio
manager in June 1995; Mr. Forester commenced serving as a portfolio manager in
December 1995.
International style/International Portfolio II - Laura Luckyn-Malone. Ms.
Luckyn-Malone commenced serving as a portfolio manager of each Blended Fund in
February 1995. For a description of Ms. Luckyn-Malone, see "International Fund"
below.
Income Equity Fund - David L. Roberts, Senior Vice President of Norwest since
1991. Mr. Roberts has been associated with Norwest for 20 years in various
investment related capacities and has served as the Fund's portfolio manager
since its inception.
ValuGrowth Stock Fund - Mr. David A. Beeck, CFA and
Ms. Anne C. Whitin, CFA. Mr. Beeck, a Vice President of Norwest since 1981, has
served as portfolio manager of the Fund since its inception. Ms. Whitin, a Vice
President of Norwest since 1990, has served as portfolio manager of the Fund
since 1990. From 1987 to 1989, Ms. Whitin was a Vice President and portfolio
manager with Delafield, Harvey, Tabell, Inc.
Small Company Stock Fund - Mr. Kirk McCown, CFA.
Mr. McCown, founder, President and a Director of Crestone, which was
incorporated in 1990, has served as portfolio manager for the Fund since its
inception. Prior to 1990, Mr. McCown was Senior Vice President of Reich & Tang,
L.P.
Contrarian Stock Fund - Mr. W. Lon Schreur, CFA. Mr. Schreur, a Vice President
of Norwest since 1993, is also President of United Capital Management, a part of
Norwest Bank Colorado, N.A., a position which he has held for sixteen years. Mr.
Schreur has served as portfolio manager of the Fund since its inception.
International Fund/International Portfolio - International Fund invests all of
its assets in International Portfolio and, accordingly, there is currently no
portfolio manager for the Fund. Laura Luckyn-Malone, a Managing Director of
Schroder since October 1995 and a Senior Vice President and Director of Schroder
since 1990, however, is primarily responsible for managing the day-to-day
operations of International Portfolio. Prior to

<PAGE>

joining the Schroder Group, Ms. Luckyn-Malone was a Principal of Scudder,
Stevens & Clark, Inc. Ms. Luckyn-Malone has served as portfolio manager of
International Portfolio since February 1995 and also serves as portfolio manager
of International Portfolio II.

Management and
Distribution Services

Forum supervises the overall management of the Trust (including the Trust's
receipt of services for which the Trust is obligated to pay) and provides the
Trust with general office facilities pursuant to a Management Agreement with the
Trust. Forum provides persons satisfactory to the Board to serve as officers of
the Trust. Those officers, as well as certain other officers and Trustees of the
Trust, may be directors, officers or employees of (and persons providing
services to the Trust may include) Forum, its affiliates or certain non-banking
affiliates of Norwest. As of the date of this Prospectus, Forum provided
management and administrative services to registered investment companies and
collective investment funds with assets of approximately $14 billion. Forum is a
registered broker-dealer and investment adviser and is a member of the National
Association of Securities Dealers, Inc. As of the date of this Prospectus, Forum
is controlled by John Y. Keffer, President and Chairman of the Trust. For its
services and facilities, Forum receives from each Fund a management fee at an
annual rate of 0.10% (0.20% in the case of ValuGrowth Stock Fund, Small Company
Stock Fund and Contrarian Stock Fund) of the average daily net assets
attributable to each class of the Fund. From its own resources, Forum may pay a
fee to broker-dealers or other persons for distribution or other services
related to the Funds.

Forum also serves as administrator of Core Trust and provides administrative
services for International Portfolio that are similar to those provided to the
Fund. For its administrative services Forum is compensated by Core Trust with
respect to International Portfolio at an annual rate of 0.15% of the average
daily net assets of International Portfolio. In addition, pursuant to a separate
services agreement, Norwest receives a fee at an annual rate of 0.25% of the
average daily net assets of International Fund. Under this agreement, Norwest is
responsible for compiling data and preparing communications between the Fund and
its shareholders, maintaining requisite information flows between the Fund and
Schroder, as investment adviser to International Portfolio, monitoring and
reporting to the Board on the performance of International Portfolio and
reimbursing the Fund for certain excess expenses. No fees are payable under this
service agreement if the Fund is completely invested in International Portfolio
or another investment company. International Fund incurs total management and
administrative fees at a higher rate than many other mutual funds, including
other funds of the Trust, due in part to the nature of the Fund's structure and
the Fund's policy of investing in the securities of foreign issuers.

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

<PAGE>

the aggregate amount of payments by the Trust to Forum pursuant to the
management agreement.

Forum also acts as the distributor of the Shares pursuant to a distribution
services agreement with the Trust and in accordance therewith receives and may
reallow the initial sales charge assessed on purchases of A Shares of a Fund. As
authorized by a distribution plan with respect to B Shares of each Fund and
pursuant to the distribution services agreement, Forum receives a distribution
services fee as compensation for its distribution expenses with respect to B
Shares and a maintenance fee for its or certain broker-dealer's shareholder
services with respect to
B Shares. For further information about the distribution services agreement and
the distribution plan, including the fees payable thereunder, see "How to Buy
Shares - Alternative Distribution Arrangements." Pursuant to separate
agreements, Forum also provides portfolio accounting services to each Fund and
to International Portfolio.

Shareholder Servicing
and Custody

Norwest serves as transfer agent and dividend disbursing agent for the Trust (in
this capacity, the "Transfer Agent") pursuant to a Transfer Agency Agreement
with the Trust. The Transfer Agent maintains an account for each shareholder of
the Trust (unless such accounts are maintained by sub-transfer agents or
processing agents), performs other transfer agency functions and acts as
dividend disbursing agent for the Trust. The Transfer Agent is permitted to
subcontract any or all of its functions with respect to all or any portion of
the Trust's shareholders to one or more qualified sub-transfer agents or
processing agents, which may be affiliates of the Transfer Agent or Forum, who
agree to comply with the terms of the Transfer Agency Agreement. Sub-transfer
agents and processing agents may be "Processing Organizations" as described
under "How to Buy Shares - Purchase Procedures." The Transfer Agent is permitted
to compensate those agents for their services; however, that compensation may
not increase the aggregate amount of payments by the Trust to the Transfer
Agent. For its transfer agency services, the Transfer Agent receives from each
Fund a fee at an annual rate of 0.25% of the average daily net assets
attributable to each class of the Fund.

Norwest also serves as the Trust's custodian and may appoint subcustodians for
the foreign securities and other assets held in foreign countries. For its
custodial services with respect to ValuGrowth Stock Fund, Small Company Stock
Fund and Contrarian Stock Fund, Norwest is compensated at an annual rate of up
to 0.05% of each Fund's average daily net assets. Norwest currently receives no
additional compensation for its custodial services with respect to the other
Funds, but the Funds will incur the expenses and costs of any subcustodian.

Expenses of the Funds

<PAGE>

International Fund's expenses include the Fund's pro rata share of the operating
expenses of International Portfolio, which are borne indirectly by International
Fund's shareholders. Although the Blended Portfolios do not incur investment
advisory fees, they do incur other administrative and operating expenses. While
the Blended Portfolios' expenses are not borne directly by the Blended Funds,
those expenses have the effect of reducing the net investment income of the
Blended Portfolios. Expenses of each Blended Portfolio for the period ended
October 31, 1995, as a percentage of average net assets, were: Small Company
Portfolio, 0.15 percent, Index Portfolio, 0.17 percent and International
Portfolio II, 0.25 percent. To the extent a Blended Fund invests in a particular
Blended Portfolio, the Blended Fund incurs its pro rata share of the Blended
Portfolio's expenses.

5. How to Buy Shares

Minimum Investment

There is a $1,000 minimum for initial purchases and a $100 minimum for
subsequent purchases of Shares of the Funds. A Fund may in its discretion waive
the investment minimums. Shareholders who elect electronic share purchase
privileges such as the Automatic Investment Plan or the Directed Dividend Option
are not subject to the initial investment minimum. See "Other Shareholder
Services - Automatic Investment Plan" and "Dividends and Tax Matters."

<PAGE>

Purchase Procedures

Initial Purchases
There are three ways to purchase shares initially.

1. By Mail. Investors may send a check made payable to the Trust along with a
completed account application form to the Trust at the address listed under
"Account Application" on page 52. Checks are accepted at full value subject to
collection. Payment by a check drawn on any member of the Federal Reserve System
can normally be converted into Federal funds within two business days after
receipt of the check. Checks drawn on some non-member banks may take longer.

The investor should then promptly complete and mail the account application
form. There may be a charge by the investor's bank for transmitting the money by
bank wire, and there also may be a charge for the use of Federal funds. The
Trust does not charge investors for the receipt of wire transfers. Payment by
bank wire is treated as a Federal funds payment when received.

<PAGE>

portion of the sales charge paid by their customers who purchase A Shares of a
Fund, may receive payments from Forum with respect to sales of
B Shares and may receive payments as a processing agent from the Transfer Agent.
In addition, financial institutions, including Processing Organizations, may
charge their customers a fee for their services and are responsible for promptly
transmitting purchase, redemption and other requests to the Funds.

Certain shareholder services may not be available to shareholders who have
purchased shares through a Processing Organization. These shareholders should
contact their Processing Organization for further information. The Trust may
confirm purchases and redemptions of a Processing Organization's customers
directly to the Processing Organization, which in turn will provide its
customers with confirmations and periodic statements. The Trust is not
responsible for the failure of any Processing Organization to carry out its
obligations to its customer. Certain states, such as Texas, permit shares of the
Funds to be purchased and redeemed only through registered broker-dealers,
including the Funds' distributor.

Subsequent Purchases
Subsequent purchases may be made by mailing a check, by sending a bank wire or
through the shareholder's Processing Organization as indicated above. All
payments should clearly indicate the shareholder's name and account number.

Account Application

<PAGE>

General Information

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

Alternative Distribution Arrangements

<PAGE>

A Shares are more or less advantageous than purchases of B Shares with their
associated accumulated continuing distribution and maintenance charges. For
example, based on estimated current fees and expenses, an investor purchasing A
Shares, which are subject to a 4.5% initial sales charge, who elects to reinvest
all dividends and distributions would have to hold the A Shares approximately
six years for the B Shares' distribution services fee and maintenance fee to
exceed the initial sales charge imposed when purchasing A Shares. The foregoing
example does not take into account the time value of money, fluctuations in net
asset value or the effects of different performance assumptions.

A Shares

The public offering price of each Fund's A Shares is their next-determined net
asset value plus an initial sales charge assessed as follows (no sales charge is
assessed on the reinvestment of dividends or distributions):

Broker-Dealers'
Reallowance
Sales Charge As a As a
Percentage of Percentage of
Amount of Purchase Offering Price Net Asset Value* Offering Price
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.05%
$50,000 to $99,999 3.50 3.63 3.15
$100,000 to $499,000 2.50 2.56 2.25
$500,000 to $999,000 2.00 2.04 1.80
$1,000,000 and over None None None
</TABLE>

* Rounded to the nearest one-hundredth percent

Forum may pay a broker-dealers' reallowance to selected broker-dealers
purchasing shares as principal or agent, which may include banks, bank
affiliates and Processing Organizations. Normally, Forum will reallow discounts
to selected broker-dealers in the amounts indicated in the table above. In
addition, Forum may elect to reallow the entire sales charge to selected broker-
dealers for all sales with respect to which orders are placed with Forum. The
broker-dealers' reallowance may be changed from time to time. Forum may make
additional payments (out of its own resources) to selected broker-dealers of up
to 1.00% of the value of Fund shares purchased at net asset value.

<PAGE>

Cumulative Quantity Discount (Right of Accumulation). An investor's purchase of
additional A Shares of a Fund may qualify for rights of accumulation ("ROA")
under

<PAGE>

which the applicable sales charge will be based on the total of the investor's
current purchase and the net asset value (at the end of the previous Fund
Business Day) of all A Shares of that Fund held by the investor. For example, if
an investor owned
A Shares of a Fund worth $500,000 at the then current net asset value and
purchased A Shares of that Fund worth an additional $50,000, the sales charge
for the $50,000 purchase would be at the 2.0% rate applicable to a $550,000
purchase, rather than at the 3.5% rate applicable to a $50,000 purchase.

Statement of Intention. A Shares investors also may obtain reduced sales charges
based on cumulative purchases by means of a written Statement of Intention,
expressing the investor's intention to invest $50,000 or more in A Shares of a
Fund within a period of 13 months. Each purchase of shares under a Statement of
Intention will be made at net asset value plus the sales charge applicable at
the time of the purchase to a single transaction of the dollar amount indicated
in the Statement.

Contingent Deferred Sales
Charge as a % of Dollar
Amount of Purchase Period Shares Held Amount Subject to Charge
$1,000,000 to $2,499,999 Less than one year 1.00%
One to two years 0.75%

<PAGE>

$2,500,000 to $4,999,999 Less than one year 0.50%
Over $5,000,000 Less than one year 0.25%

No contingent deferred sales charge is charged on redemptions to the same extent
as described under "B Shares - Contingent Deferred Sales Charge" below. The
contingent deferred sales charge on shares purchased through an exchange from
another fund of the Trust is based upon the original purchase date and price of
the other Fund's shares. For A shareholders with a Statement of Intention that
do not purchase $1,000,000 of a Fund's A Shares pursuant to their Statement, no
contingent deferred sales charge is imposed. The Statement of Intention provides
for a contingent deferred sales charge in certain other cases. Further
information about the contingent deferred sales charge is contained in the SAI.

B Shares

Distribution Plan. B Shares of a Fund are sold at their net asset value per
share without the imposition of a sales charge at the time of purchase. With
respect to B Shares, each Fund has adopted a distribution plan pursuant to Rule
12b-1 under the 1940 Act (the "Plan") providing for distribution payments, at an
annual rate of up to 0.75% of the average daily net assets of the Fund
attributable to the B Shares (the "distribution services fee"), by each Fund to
Forum, to compensate Forum for its distribution activities. The distribution
payments due to Forum from each Fund comprise (i) sales commissions at levels
set from time to time by the Board ("sales commissions") and (ii) an interest
fee calculated by applying the rate of 1% over the prime rate to the outstanding
balance of uncovered distribution charges (as described below). The current
sales commission rate is 4.0% and Forum currently expects to pay sales
commissions to each broker-dealer at the time of sale of up to 4.0% of the
purchase price of B Shares of each Fund sold by the broker-dealer.

Under the Plan, a Fund will make distribution services fee payments to Forum
only for periods during which there are outstanding uncovered distribution
charges attributable to

<PAGE>

that Fund. Uncovered distribution charges are equivalent to all sales
commissions previously due (plus interest), less amounts received pursuant to
the Plan and all contingent deferred sales charges previously paid to Forum. At
May 31, 1995, ValuGrowth Stock Fund, Small Company Stock Fund and Contrarian
Stock Fund had uncovered distribution expenses of $120,114, $33,652 and $16,433,
respectively, or approximately 3.37%, 3.49% and 3.55% of each respective Fund's
net assets attributable to B Shares as of
the same date.

Pursuant to the Plan, each Fund has agreed also to pay Forum a maintenance fee
in an amount equal to 0.25% of the average daily net assets of the Fund
attributable to B Shares for providing personal services to shareholder
accounts. The maintenance fee may be paid by Forum to broker-dealers in an
amount not to exceed 0.25% of the value of the B Shares held by the customers of
the broker-dealers. The distribution services fee and the maintenance fee are
each accrued daily and paid monthly and will cause a Fund's B Shares to have a
higher expense ratio and to pay lower dividends than A Shares of that Fund.
Notwithstanding the discontinuation of distribution services fees with respect
to a Fund, the Fund may continue to pay maintenance fees.

The distribution services fees payable to Forum by a Fund each day are accrued
on that day as a liability of the Fund with respect to the B Shares and, as a
result, reduce the net assets of the B Shares. However, a Fund does not accrue
future distribution services fees as a liability of the Fund with respect to the
B Shares or reduce the Fund's current net assets in respect of distribution
services fees that may become payable under the Plan in the future.

<PAGE>

Contingent Deferred Sales Charge. B Shares of a Fund that are redeemed within
six years of purchase will be subject to contingent deferred sales charges equal
to the percentages set forth on the next page of the dollar amount subject to
the charge. The amount of the contingent deferred sales charge, if any, will
vary depending on the number of years between the payment for the purchase of B
Shares of a Fund and their redemption.

Contingent Deferred Sales
Charge as a % of Dollar
Year Since Purchase Amount Subject to Charge
First 4.0%
Second 3.0%
Third 3.0%
Fourth 2.0%
Fifth 2.0%
Sixth 1.0%
Seventh None

Redemptions of Shares will be effected in the manner that results in the
imposition of the lowest deferred sales charge. Redemptions with respect to a
shareholder's investment in a Fund will automatically be made first from any A
Shares in the Fund, second from B Shares of the Fund acquired pursuant to
reinvestment of dividends and distributions, third from B Shares of the Fund
held for over six years and fourth from the longest outstanding B Shares of the
Fund held for less than six years.

No contingent deferred sales charge is imposed on (i) redemptions of Shares
acquired through the reinvestment of dividends and distributions, (ii)
involuntary redemptions by a

<PAGE>

Fund of shareholder accounts with low account balances, (iii) redemptions of
Shares following the death or disability of a shareholder if the Fund is
notified within one year of the shareholder's death or disability and (iv)
redemptions to effect a distribution (other than a lump sum distribution) from
an IRA, Keogh plan or Section 403(b) custodial account or from a qualified
retirement plan. See the SAI for further information.

Conversion Feature. After seven years from the end of the calendar month in
which the shareholder's purchase order for B shares was accepted, the B Shares
will automatically convert to A Shares of that Fund. The conversion will be on
the basis of the relative net asset values of the Shares, without the imposition
of any sales load, fee or other charge. For purposes of conversion, B Shares of
a Fund purchased by a shareholder through the reinvestment of dividends and
distributions will be considered to be held in a separate sub-account. Each time
any B Shares in the shareholder's account (other than those in the sub-account)
convert, a corresponding pro rata portion of those shares in the sub-account
will also convert. The conversion of B Shares to A Shares is subject to the
continuing availability of certain opinions of counsel and the conversion of a
Fund's B Shares to A Shares may be suspended if such an opinion is no longer
available at the time the conversion is to occur. In that event, no further
conversions of the Fund's B Shares would occur, and shares might continue to be
subject to a distribution services and maintenance fee for an indefinite period.

6. How to Sell Shares

General Information

Fund Shares may be sold (redeemed) at their net asset value on any Fund Business
Day subject to a contingent deferred sales charge imposed, in the case of A
Shares, on some redemptions made within two years of purchase and, in the case
of B Shares, on most redemptions made within six years of purchase. There is no
minimum period of investment and no restriction on the frequency of redemptions.

Normally, redemption proceeds are paid immediately, but in no event later than
seven days following acceptance of a redemption order. Proceeds of redemption
requests (and exchanges), however, will not be paid unless any check used to
purchase the shares being redeemed has been cleared by the shareholder's bank,
which may take up to 15 days. This delay may be avoided by paying for shares
through wire transfers. Unless otherwise indicated, redemption proceeds normally
are paid by check mailed to the shareholder's

<PAGE>

record address. The right of redemption may not be suspended nor the payment
date postponed for more than seven days after the tender of the shares to a
Fund, except when the New York Stock Exchange is closed (or when trading thereon
is restricted) for any reason other than its customary weekend or holiday
closings, for any period during which an emergency exists as a result of which
disposal by the Fund of its portfolio securities or determination by the Fund of
the value of its net assets is not reasonably practicable and for such other
periods as the SEC may permit.

Redemption Procedures

<PAGE>

Other Redemption Matters

Signature Guarantee. A signature guarantee is required for the following: any
endorsement on a share certificate and for instructions to change a
shareholder's record name or address, designated bank account for wire
redemptions, Automatic Investment or Withdrawal Plan, dividend election,
telephone redemption or exchange option election or any other option election in
connection with the shareholder's account. Signature guarantees may be provided
by any bank, broker-dealer, national securities exchange, credit union, savings
association or other eligible institution that is authorized to guarantee
signatures, and is acceptable to the Transfer Agent. Whenever a signature
guarantee is required, the signature of each person required to sign for the
account must be guaranteed.

7. Other Shareholder Services

Exchanges

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the Trust. B Shares may be exchanged for Exchange Shares of Ready Cash
Investment Fund. Prospectuses for the shares of the funds listed above, as well
as a current list of the funds of the Trust that offer shares exchangeable with
the Shares of the Funds, can be obtained through Forum by contacting the
Transfer Agent.

Under Federal tax law, the Funds treat an exchange as a redemption and a
purchase. Accordingly, a shareholder may realize a capital gain or loss
depending on whether the value of the shares redeemed is more or less than the
shareholder's basis in the shares at the time of the exchange. Exchange
procedures may be amended materially or terminated by the Trust at any time upon
60 days' notice to shareholders. See "Additional Purchase and Redemption
Information" in the SAI.

Sales Charges. The exchange of A Shares may result in additional sales charges.
If an exchange of A Shares is made into a fund that imposes an initial sales
charge, the shareholder is required to pay an amount equal to any excess of that
Fund's initial sales charge attributable to the number of shares being acquired
in the exchange over any initial sales charge paid by the shareholder for the A
Shares being exchanged. For example, if a shareholder paid a 2% initial sales
charge in connection with a purchase of shares and then exchanged those shares
into A Shares of another fund with a 3% initial sales charge, the shareholder
would pay an additional 1% sales charge on the exchange. A Shares acquired
through the reinvestment of dividends or distributions are deemed to have been
acquired with a sales charge rate equal to that applicable to the shares on
which the dividends or distributions were paid.

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Shares rather than the deferred sales charge and time remaining that would
otherwise apply. The deferred sales charge and time remaining applicable to
Shares first purchased by a shareholder will apply to New Shares resulting from
both an initial and any subsequent exchanges.

Automatic Investment Plan

Individual Retirement Accounts

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Automatic Withdrawal Plan

Reopening Accounts

8. Dividends and Tax Matters

Dividends

Dividends of each Fund's net investment income are declared and paid at least
annually. Distributions of net capital gain, if any, realized by a Fund are
distributed annually. Currently, dividends of net investment income are declared
and paid monthly by Income Equity Fund, ValuGrowth Stock Fund, Small Company
Stock Fund and Contrarian Stock Fund and annually by the other Funds. Dividends
paid by a Fund with respect to each class of shares of the Fund will be
calculated in the same manner at the same time on the same day. The per share
dividends on a Fund's B Shares will be lower than the per share dividends on A
Shares as a result of the distribution services fees and maintenance fees
applicable to B Shares.

Shareholders may choose to have dividends and distributions of a Fund reinvested
in shares of that Fund (the "Reinvestment Option"), to receive dividends and
distributions in cash (the "Cash Option") or to direct dividends and
distributions to be reinvested in shares of another fund of the Trust (the
"Directed Dividend Option"). All dividends and distributions are treated in the
same manner for Federal income tax purposes whether received in cash or
reinvested in shares of a Fund.

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Under the Reinvestment Option, all dividends and distributions of a Fund are
automatically invested in additional shares of that Fund. All dividends and
distributions are reinvested at a Fund's net asset value as of the payment date
of the dividend or distribution. Shareholders are assigned this option unless
one of the other two options is selected. Under the Cash Option, all dividends
and distributions are paid to the shareholder in cash. Under the Directed
Dividend Option, shareholders of a Fund whose shares in a single account of that
Fund total $10,000 or more may elect to have all dividends and distributions
reinvested in shares of another fund of the Trust, provided that those shares
are eligible for sale in the shareholder's state of residence. For further
information concerning the Directed Dividend Option, shareholders should contact
the Transfer Agent.

Taxes

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

Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of the shares by the amount of
the dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to the
shareholder as described above.

It is expected that a portion of each Fund's dividends from net investment
income will be eligible for the dividends received deduction for corporations
except for International Fund. The amount of such dividends eligible for the
dividends received deduction is limited to the amount of dividends from domestic
corporations received during a Fund's

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fiscal year. To the extent International Fund invests in the securities of
domestic issuers, the dividends to shareholders of the Fund may qualify for the
dividends received deduction for corporations.

International Fund/International Portfolio. International Portfolio is not
required to pay Federal income taxes on its net investment income and capital
gain, as it is treated as a partnership for Federal income tax purposes. All
interest, dividends and gains and losses of International Portfolio are deemed
to have been "passed through" to the Fund in proportion to its holdings of
International Portfolio, regardless of whether such interest, dividends or gains
have been distributed by International Portfolio or losses have been realized by
International Portfolio. Investment income received by the Fund from sources
within foreign countries may be subject to foreign income or other taxes. The
Fund intends to elect, if eligible to do so, to permit its shareholders to take
a credit (or a deduction) for foreign income and other taxes paid by
International Portfolio. Shareholders of the Fund will be notified of their
share of those taxes and will be required to include that amount as income. In
that event, the shareholder may be entitled to claim a credit or deduction for
those taxes.

9. Other Information

Banking Law Matters

Federal banking laws and regulations generally permit a bank or bank affiliate
to act as investment adviser, transfer agent, or custodian to an investment
company and to purchase shares of the investment company as agent for and upon
the order of a customer and, in connection therewith, to retain a sales charge
or similar payment. Counsel to the Trust believe that Norwest and any other bank
or bank affiliate that may serve as a Processing Organization or perform sub-
transfer agent or similar services or purchase shares as agent for its customers
may perform the services described in this Prospectus for the Trust and its
shareholders without violating applicable Federal banking laws or regulations.

<PAGE>

Federal or state statutes or regulations and judicial or administrative
decisions or interpretations relating to the activities of banks and their
affiliates, however, could prevent a bank or bank affiliate from continuing to
perform all or a part of the activities contemplated by this Prospectus. If a
bank or bank affiliate were prohibited from so acting, changes in the operation
of the Trust could occur and a shareholder serviced by a bank or bank affiliate
may no longer be able to avail itself of those services. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences.

Determination of Net Asset Value

The Trust determines the net asset value per share of each Fund as of 4:00 P.M.,
Eastern time, on each Fund Business Day by dividing the value of the Fund's net
assets (i.e., the value of its securities and other assets less its liabilities)
by the number of shares outstanding at the time the determination is made.
Securities owned by a Fund or International Portfolio for which market
quotations are readily available are valued at current market value or, in their
absence, at fair value as determined by the Board or the Core Trust board of
trustees or pursuant to procedures approved by the Board or the Core Trust board
of trustees, as applicable. The Trust does not determine net asset value on the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and
Christmas.

The per share net asset values of each class of shares of a Fund are expected to
be substantially the same. Under certain circumstances, however, the per share
net asset value of each class may vary. Due to the higher expenses of B Shares,
the net asset value of B Shares will generally be lower than the net asset value
of the other classes. The per share net asset value of each class of a Fund
eventually will tend to converge immediately after the payment of dividends,
which will differ by approximately the amount of the expense accrual
differential among the classes.

Trading in securities on European, Far Eastern and other international
securities exchanges and over-the-counter markets is normally completed well
before the close of business of each Fund Business Day. In addition, trading in
foreign securities generally or in a particular country or countries may not
take place on all Fund Business Days. Trading does take place in various foreign
markets, however, on days on which the Fund's net asset value is not calculated.
Calculation of the net asset value per share of the Fund may not occur
contemporaneously with the determination of the prices of the foreign securities
used in the calculation. Events affecting the values of foreign securities that
occur after the time their prices are determined and before the Fund's
determination of net asset value will not be reflected in the Fund's calculation
of net asset value unless the Adviser or Schroder determines that the particular
event would materially affect net asset value, in which case an adjustment will
be made.

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All assets and liabilities denominated in foreign currencies are converted into
United States dollars at the mean of the bid and asked prices of such currencies
against the United States dollar last quoted by a major bank prior to the time
of conversion.

Performance Information

A Fund's performance may be quoted in advertising in terms of yield or total
return. All performance information is based on historical results and is not
intended to indicate future performance. A Fund's yield is a way of showing the
rate of income the Fund earns on its investments as a percentage of the Fund's
share price. To calculate standardized yield, a Fund takes the interest income
it earned from its investments for a 30-day period (net of expenses), divides it
by the average number of shares entitled to receive dividends, and expresses the
result as an annualized percentage rate based on the Fund's share price at the
end of the 30-day period. A Fund's total return shows its overall change in
value, including changes in share price and assuming all the Fund's dividends
and distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if the Fund's performance had been constant
over the entire period. Because average annual returns tend to smooth out
variations in the Funds' returns, shareholders should recognize that they are
not the same as actual year-by-year results. To illustrate the components of
overall performance, a Fund may separate its cumulative and average annual
returns into income results and capital gain or loss. Published yield quotations
are, and total return figures may be, based on amounts actually invested in a
Fund net of sales loads that may be paid by an investor. A computation of yield
or total return that does not take into account the sales load paid by an
investor will be higher than a computation based on the public offering price of
shares purchased that take into account payment of the sales load.

The Funds' advertisements may reference ratings and rankings among similar
mutual funds by independent evaluators such as Morningstar, Inc., Lipper
Analytical Services, Inc. and IBC/Donoghue, Inc. The comparative material found
in the Funds' advertisements, sales literature or reports to shareholders may
contain performance ratings. This material is not to be considered
representative or indicative of future performance. All performance information
for a Fund is calculated on a class basis. In addition, a Fund may use a
benchmark securities index as a measure of the Fund's performance. These indices
may be comprised of a composite of various recognized securities indices to
reflect the investment policies of Diversified Equity Fund and Growth Equity
Fund, which invest their assets using different investment styles. These indices
are not used in the management of the Fund but rather are standards by which the
Adviser and shareholders may compare the performance of a Fund to an unmanaged
composite of securities with similar, but not identical, characteristics as the
Fund. The Funds may from time to time advertise a comparison of their
performance against any of these or other indices.

<PAGE>

The Trust and Its Shares

Other Classes of Shares. In addition to the Shares, each Fund may create and
issue shares of other classes of securities. Each Fund currently offers three
classes of shares: A Shares; B Shares; and I Shares. I Shares are offered to
fiduciary, agency and custodial clients of bank trust departments, trust
companies and their affiliates without any sales charges or distribution service
or maintenance fees. Each class of a Fund may have a different expense ratio and
different sales charges (including distribution fees) and each class'
performance will be affected by its expenses and sales charges. For more
information on any other class of shares of the Funds investors may contact the
Transfer Agent at 612-667-8833 or 800-338-1348. Investors also may contact their
Norwest sales representative or the Funds' distributor to obtain information
about the other classes. Sales personnel of broker-dealers and other financial
institutions selling the Fund's shares may receive differing compensation for
selling A, B and I Shares of the Funds.

<PAGE>

shares, will receive the portion of the portfolio's net assets represented by
the redeemed shares.

From time to time, certain shareholders may own a large percentage of the shares
of a Fund. Accordingly, those shareholders may be able to greatly affect (if not
determine) the outcome of a shareholder vote.

International Portfolio normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in International Portfolio, such as
International Fund, will be entitled to vote in proportion to its relative
beneficial interest in International Portfolio. On most issues subject to a vote
of investors, as required by the 1940 Act and other applicable law, the Fund
will solicit proxies from shareholders of the Fund and will vote its interest in
International Portfolio in proportion to the votes cast by its shareholders. If
there are other investors in International Portfolio, there can be no assurance
that any issue that receives a majority of the votes cast by Fund shareholders
will receive a majority of votes cast by all investors in International
Portfolio; indeed, if other investors hold a majority interest in International
Portfolio, they could have voting control of International Portfolio.

Core Trust Structure

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

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

International Fund's investment in International Portfolio is in the form of a
non-transferable beneficial interest. As of the date of this Prospectus, the
Fund is the only institutional investor that has invested all of its assets in
International Portfolio. International Portfolio may permit other investment
companies or institutional investors to invest in it. All investors in
International Portfolio will invest on the same terms and conditions as the Fund
and will pay a proportionate share of International Portfolio's expenses.

<PAGE>

International Portfolio will not sell its shares directly to members of the
general public. Another investor in International Portfolio, such as an
investment company, that might sell its shares to members of the general public
would not be required to sell its shares at the same public offering price as
the Fund, could have different advisory and other fees and expenses than the
Fund. Therefore, Fund shareholders may have different returns than shareholders
in another investment company that invests exclusively in International
Portfolio. There is currently no such other investment company that offers its
shares to members of the general public. Information regarding any such funds in
the future will be available from Core Trust by calling 207-879-1900.

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

The Fund may withdraw its entire investment from International Portfolio at any
time, if the Board determines that it is in the best interests of the Fund and
its shareholders to do so. The Fund might withdraw, for example, if there were
other investors in International Portfolio with power to, and who did by a vote
of the shareholders of all investors (including the Fund), change the investment
objective or policies of International Portfolio in a manner not acceptable to
the Board. A withdrawal could result in a distribution in kind of portfolio
securities (as opposed to a cash distribution) by International Portfolio. That
distribution could result in a less diversified portfolio of investments for the
Fund and could affect adversely the liquidity of the Fund's portfolio. If the
Fund decided to convert those securities to cash, it usually would incur
brokerage fees or other transaction costs. If the Fund withdrew its investment
from International Portfolio, the Board would consider what action might be
taken, including the management of the Fund's assets in accordance with its
investment objective and policies by the Adviser and Schroder, the Fund's
investment adviser and subadviser, respectively, or the investment of all of the
Fund's investable assets in another pooled investment entity having
substantially the same investment objective as the Fund. The inability of the
Fund to find a suitable replacement investment, in the event the Board decided
not to permit the Adviser and Schroder to manage the Fund's assets, could have a
significant impact on shareholders of the Fund.

Each investor in International Portfolio, including the Fund, will be liable for
all obligations of International Portfolio, but not any other portfolio of Core
Trust. The risk to an investor in International Portfolio of incurring financial
loss on account of such liability, however, would be limited to circumstances in
which International Portfolio was unable to meet its obligations. Upon
liquidation of International Portfolio, investors would be entitled to share pro
rata in the net assets of International Portfolio available for distribution to
investors.

<PAGE>

Core Trust Blended Portfolios. The two Blended Funds, Diversified Equity Fund
and Growth Equity Fund, are permitted to invest a portion of their assets that
are managed in the Small Company style, the Index style and the International
Fund style, in the Blended Portfolios Small Company Portfolio, Index Portfolio,
and International Portfolio II pursuant to an exemptive order obtained from the
SEC. The conditions of the Trust's exemptive order do not permit a Fund to
invest all of its assets in a Blended Portfolio. Accordingly, International Fund
does not invest in International Portfolio II.

The Trust's exemptive order imposes several substantive conditions. On behalf of
each Blended Fund, the Board is required to review at least annually reports
identifying all instances in which a Portfolio in which the Fund invests buys a
security at approximately the same time that another Portfolio in which the Fund
invests sells the same security. The Board will consider whether the duplication
of brokerage costs resulting from these transactions is significant. If the
duplication of brokerage costs becomes significant, the Board will adopt
procedures designed to limit duplication. Conservative Balanced Fund, Moderate
Balanced Fund, and Growth Balanced Fund will limit any redemptions resulting
from a reallocation in their respective equity and fixed income security
positions to no more than 1% of a Portfolio during any period of less than 30
days. The Board will determine, at least annually, that investment in the
Blended Portfolios is in the best interests of the shareholders of each Blended
Fund.

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION AND THE FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF THE FUNDS' SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO
ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.