NORWEST ADVANTAGE FUNDS, 485BPOS, 1996-09-27

NORWEST ADVANTAGE FUNDS
485BPOS, 1996-09-27

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<PAGE>

As filed with the Securities and Exchange Commission on September 27, 1996

File No. 33-9645
File No. 811-4881

- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Post-Effective Amendment No. 40

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 42

- --------------------------------------------------------------------------------
NORWEST ADVANTAGE FUNDS
(Formerly "Norwest Funds" and prior thereto "Prime Value Funds, Inc.")
(Exact Name of Registrant as Specified in its Charter)

Two Portland Square
Portland, Maine 04101
(Address of Principal Executive Office)

Registrant's Telephone Number, including Area Code: (207) 879-1900

- --------------------------------------------------------------------------------

David I. Goldstein, Esq.
Forum Financial Services, Inc.
Two Portland Square, Portland, Maine 04101
(Name and Address of Agent for Service)

Copies of Communications to:
Anthony C.J. Nuland, Esq.
Seward & Kissel
1200 G Street, N.W.
Washington, D.C. 20005

- --------------------------------------------------------------------------------

It is proposed that this filing will become effective:

immediately upon filing pursuant to Rule 485, paragraph (b)
- -----
x on October 1, 1996 pursuant to Rule 485, paragraph (b)
- -----
60 days after filing pursuant to Rule 485, paragraph (a)(i)
- -----
on [ ] pursuant to Rule 485, paragraph (a)(i)
- -----
75 days after filing pursuant to Rule 485, paragraph (a)(ii)
- -----
on [ ] pursuant to Rule 485, paragraph (a)(ii)
- -----
this post-effective amendment designates a new effective date for a
- ----- previously filed post-effective amendment

Registrant has registered an indefinite number of shares of beneficial interest
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Accordingly, no fee is payable herewith. Registrant filed
a Rule 24f-2 notice for its various portfolios with a May 31 fiscal year end on
July 26, 1996.

SMALL CAP OPPORTUNITIES FUND AND INTERNATIONAL FUND OF REGISTRANT ARE CURRENTLY
STRUCTURED AS MASTER-FEEDER FUNDS. THIS AMENDMENT INCLUDES A MANUALLY EXECUTED
SIGNATURE PAGE FOR THE MASTER FUNDS, SCHRODER U.S. SMALLER COMPANIES PORTFOLIO,
A SERIES OF SCHRODER CAPITAL FUNDS AND INTERNATIONAL PORTFOLIO, A SERIES OF CORE
TRUST (DELAWARE).

<PAGE>

CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))

PART A
(Prospectus offering Shares of Cash Investment Fund, U.S. Government Fund and
Treasury Fund, Institutional Shares and Investor Shares of Municipal Money
Market Fund, and Investor Shares of Ready Cash Investment Fund.)

Form N-1A
Item No. (Caption) Location in Prospectus (Caption)
- --------- ---------------------------- ----------------------------------------

Item 1. Cover Page Cover Page

Item 2. Synopsis Prospectus Summary

Item 3. Condensed Financial
Information Financial Highlights, Other
Information - Performance Information.
Item 4. General Description of
Registrant Prospectus Summary; Investment
Objectives and Policies; Additional
Investment Policies and Risk
Considerations; and Other Information
- The Trust and Its Shares

Item 5. Management of the Fund Prospectus Summary; Management

Item 5A. Management's Discussion of
Fund Performance Not Applicable

Item 6. Capital Stock and
Other Securities Cover; Dividends and Tax Matters; Other
Information - The Trust and Its Shares

Item 7. Purchase of Securities Being
Offered How to Buy Shares; Management -
Management, Administration and
Distribution Services

Item 8. Redemption or Repurchase How to Sell Shares

Item 9. Pending Legal Proceedings Not Applicable

<PAGE>

CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))

PART A
(Prospectus offering A Shares and B Shares of Income Equity Fund, ValuGrowth-SM-
Stock Fund, Diversified Equity Fund, Growth Equity Fund, Small Company Stock
Fund and International Fund.)

Form N-1A
Item No. (Caption) Location in Prospectus (Caption)
- --------- ---------------------------- ----------------------------------------

Item 1. Cover Page Cover Page

Item 2. Synopsis Prospectus Summary

Item 3. Condensed Financial
Information Financial Highlights, Other
Information - Performance Information.

Item 4. General Description of
Registrant Prospectus Summary; Investment
Objectives and Policies; Additional
Investment Policies and Risk
Considerations; and Other Information -
The Trust and Its Shares

Item 5. Management of the Fund Prospectus Summary; Management

Item 5A. Management's Discussion of
Fund Performance Not Applicable

Item 6. Capital Stock and
Other Securities Cover; Dividends and Tax Matters; Other
Information - The Trust and Its Shares

Item 7. Purchase of Securities Being
Offered How to Buy Shares; Management,
Administration and Distribution Services

Item 8. Redemption or Repurchase How to Sell Shares

Item 9. Pending Legal Proceedings Not Applicable

<PAGE>

CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))

PART A
(Prospectus offering A Shares and B Shares of Stable Income Fund, Intermediate
Government Income Fund, Income Fund and Total Return Bond Fund.)

Form N-1A
Item No. (Caption) Location in Prospectus (Caption)
- --------- ---------------------------- ----------------------------------------

Item 1. Cover Page Cover Page

Item 2. Synopsis Prospectus Summary

Item 3. Condensed Financial
Information Financial Highlights, Other
Information - Performance Information.

Item 5. Management of the Fund Prospectus Summary; Management

Item 5A. Management's Discussion of
Fund Performance Not Applicable

Item 6. Capital Stock and
Other Securities Cover; Dividends and Tax Matters; Other
Information - The Trust and Its Shares

Item 7. Purchase of Securities Being
Offered How to Buy Shares; Management,
Administration and Distribution Services

Item 8. Redemption or Repurchase How to Sell Shares

Item 9. Pending Legal Proceedings Not Applicable

<PAGE>

CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))

PART A
(Prospectus offering A Shares and B Shares of Tax-Free Income Fund, Colorado
Tax-Free Fund and Minnesota Tax-Free Fund.)

Form N-1A
Item No. (Caption) Location in Prospectus (Caption)
- --------- ---------------------------- ----------------------------------------

Item 1. Cover Page Cover Page

Item 2. Synopsis Prospectus Summary

Item 3. Condensed Financial
Information Financial Highlights, Other
Information - Performance Information.

Item 5. Management of the Fund Prospectus Summary; Management

Item 5A. Management's Discussion of
Fund Performance Not Applicable

Item 6. Capital Stock and
Other Securities Cover; Dividends and Tax Matters; Other
Information - The Trust and Its Shares

Item 7. Purchase of Securities Being
Offered How to Buy Shares; Management,
Administration and Distribution Services

Item 8. Redemption or Repurchase How to Sell Shares

Item 9. Pending Legal Proceedings Not Applicable
<PAGE>

CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))

PART A
(Prospectus offering A Shares and B Shares of Contrarian Stock Fund.)

Form N-1A
Item No. (Caption) Location in Prospectus (Caption)
- --------- ---------------------------- ----------------------------------------

Item 1. Cover Page Cover Page

Item 2. Synopsis Prospectus Summary

Item 3. Condensed Financial
Information Financial Highlights, Other
Information - Performance Information.

Item 5. Management of the Fund Prospectus Summary; Management

Item 5A. Management's Discussion of
Fund Performance Not Applicable

Item 6. Capital Stock and
Other Securities Cover; Dividends and Tax Matters; Other
Information - The Trust and Its Shares

Item 7. Purchase of Securities Being
Offered How to Buy Shares; Management,
Administration and Distribution Services

Item 8. Redemption or Repurchase How to Sell Shares

Item 9. Pending Legal Proceedings Not Applicable
<PAGE>

CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))

PART A
(Prospectus offering Institutional and Investor Shares of Ready Cash Investment
Fund, Shares of U.S. Government Fund and Treasury Fund, Institutional and
Investor Shares of Municipal Money Market Fund, I Shares of Stable Income Fund,
Intermediate Government Income Fund, Diversified Bond Fund, Income Fund and
Total Return Bond Fund, Limited Term Tax-Free Fund, Tax-Free Income Fund,
Colorado Tax-Free Fund and Minnesota Tax-Free Fund, Conservative Balanced Fund,
Moderate Balanced Fund and Growth Balanced Fund, Index Fund, Income Equity Fund,
ValuGrowth-SM- Stock Fund, Diversified Equity Fund, Growth Equity Fund, Large
Company Growth Fund, Small Company Stock Fund, Small Company Growth Fund, Small
Cap Opportunities Fund, Contrarian Stock Fund and International Fund.)

Form N-1A
Item No. (Caption) Location in Prospectus (Caption)
- --------- ---------------------------- ----------------------------------------

Item 1. Cover Page Cover Page

Item 2. Synopsis Summary

Item 3. Condensed Financial
Information Financial Highlights, Other
Information - Performance Information.

Item 4. General Description of
Registrant Summary; Investment Objectives and
Policies; Additional Investment
Policies and Risk Considerations; and
Other Information - The Trust and Its
Shares; The Trust and Its Shares - Core
Trust Structure.

Item 5. Management of the Fund Summary; Management

Item 5A. Management's Discussion of
Fund Performance Not Applicable

Item 6. Capital Stock and
Other Securities Cover; Dividends, Distributions and Tax
Matters; Other Information - The Trust
and Its Shares; The Trust and Its
Shares - Core Trust Structure.

Item 7. Purchase of Securities Being
Offered Purchases and Redemptions of Shares;
Management, Administration and
Distribution Services

Item 8. Redemption or Repurchase Purchases and Redemptions of Shares

Item 9. Pending Legal Proceedings Not Applicable
<PAGE>

CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))

PART A
(Prospectus offering Exchange Shares of Ready Cash Investment Fund.)

Form N-1A
Item No. (Caption) Location in Prospectus (Caption)
- --------- ---------------------------- ----------------------------------------

Item 1. Cover Page Cover Page

Item 2. Synopsis Prospectus Summary

Item 3. Condensed Financial
Information Financial Highlights, Other
Information - Performance Information.

Item 4. General Description of
Registrant Prospectus Summary; Investment
Objective and Policies; Additional
Investment Policies; and Other
Information - The Trust and Its Shares

Item 5. Management of the Fund Prospectus Summary; Management

Item 5A. Management's Discussion of
Fund Performance Not Applicable

Item 6. Capital Stock and
Other Securities Cover; Dividends and Tax Matters; Other
Information - The Trust and Its Shares

Item 7. Purchase of Securities Being
Offered Purchases of Shares; Management,
Administration and Distribution Services

Item 8. Redemption or Repurchase Redemptions of Shares

Item 9. Pending Legal Proceedings Not Applicable
<PAGE>

CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))

PART A
(All other Prospectuses)

Not Applicable in this Filing
<PAGE>

CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))

PART B
(SAI offering A Shares, B Shares and I Shares of Cash Investment Fund, Ready
Cash Investment Fund (Institutional Shares, Investor Shares, and Exchange
Shares), U.S. Government Fund, Treasury Fund, Municipal Money Market Fund
(Institutional Shares and Investor Shares), and A Shares, B Shares and I Shares
of each of Stable Income Fund, Intermediate U.S. Government Fund, Diversified
Bond Fund, Income Fund, Total Return Bond Fund, Tax-Free Income Fund, Colorado
Tax-Free Fund, Minnesota Tax-Free Fund, Conservative Balanced Fund, Moderate
Balanced Fund, Growth Balanced Fund, Income Equity Fund, Index Fund, ValuGrowth
Stock Fund, Diversified Equity Fund, Growth Equity Fund, Large Company Growth
Fund, Small Company Stock Fund, Small Company Growth Fund, Contrarian Stock Fund
and International Fund.)

Form N-1A Location in Statement of
Item No (Caption) Additional Information (Caption)
- -------- --------------------------- ----------------------------------------
Item 10. Cover Page Cover Page

Item 11. Table of Contents Cover Page

Item 12. General Information and
History Prospectus

Item 13. Investment Objectives and
Policies Investment Policies; Investment
Limitations

Item 14. Management of the Fund Management; Additional Information about
the Trust and the Shareholders of the
Funds

Item 15. Control Persons and Principal
Holders of Securities Additional Information about the Trust;
Shareholdings

Item 16. Investment Advisory and Other
Services Management

Item 17. Brokerage Allocation and
Other Practices Portfolio Transactions

Item 18. Capital Stock and Other
Securities Additional Information about the Trust;
Shareholdings

Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered Additional Purchase and Redemption
Information

Item 20. Tax Status Taxation

Item 21. Underwriters Management - Administration and
Distribution

Item 22. Calculation of Performance
Data Performance and Advertising Data

Item 23 Financial Statements Other Information - Financial Statements

<PAGE>

CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))

PART B
(All other SAIs)

Not Applicable in this Filing

<PAGE>

Money Market Funds

Prospectus

October 1, 1996

Cash Investment Fund
U.S. Government Fund
Treasury Fund
Municipal
Money Market Fund
Ready Cash
Investment Fund

Not FDIC Insured

October 1, 1996

This Prospectus offers shares of Cash Investment Fund, U.S. Government Fund and
Treasury Fund, Institutional Shares and Investor Shares of Municipal Money
Market Fund, and Investor Shares of Ready Cash Investment Fund (each a "Fund"
and collectively the "Funds"). The Funds are separate diversified money market
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") dated October 1, 1996, as may be 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

<PAGE>

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. THERE CAN BE NO ASSURANCE THAT ANY OF
THE FUNDS 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. Prospectus Summary

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
Each Fund seeks to provide high current income (which in the case of Municipal
Money Market Fund is exempt from Federal income taxes) to the extent consistent
with the preservation of capital and the maintenance of liquidity.

Cash Investment Fund and Ready Cash Investment Fund, which have the same
investment policies, invest in a broad spectrum of high quality money market
instruments of United States and foreign issuers.

U.S. Government Fund invests primarily in securities that are issued or
guaranteed by the U.S. Government, its instrumentalities or agencies.

Treasury Fund invests solely in obligations that are issued or guaranteed by the
United States Treasury.

Municipal Money Market Fund invests primarily in tax-exempt municipal
securities.

Investment Adviser

<PAGE>

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 June 30, 1996, managed assets totaling approximately $22 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. ("FFSI"), a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. Forum Administrative Services, LLC
("FAS") provides administrative services for the Funds. See "Management -
Management, Administration and Distribution Services."

Shares of the Funds
Cash Investment Fund, U.S. Government Fund and Treasury Fund offer a single
class of shares. Municipal Money Market Fund offers two classes of shares:
institutional class ("Institutional Shares") and investor class ("Investor
Shares"). Ready Cash Investment Fund offers three classes of shares:
Institutional Shares, Investor Shares and exchange class ("Exchange Shares").
Institutional Shares of a Fund require a higher minimum investment than Investor
Shares and incur lower transfer agency fees. Shares of each Fund offered through
this prospectus are referred to as "Shares." Exchange Shares may be purchased
only in exchange for B class shares of certain funds of the Trust. Shares of
each class of a Fund have identical interests in the investment portfolio of the
Fund and, with certain exceptions, have the same rights. See "Other Information
- - The Trust and Its Shares."

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 of Cash Investment Fund, U.S. Government Fund and
Treasury Fund, and in Institutional Shares of Municipal Money Market Fund is
$100,000; there is no minimum for subsequent investments. The minimum initial
investment in Investor Shares of a Fund is $1,000; the minimum subsequent
investment is $100. See "How to Buy Shares" and "How to Sell Shares."

Exchanges
Holders of Investor Shares of a Fund may exchange their Shares for Investor
Shares of the other Fund and A class shares of certain other funds of the Trust.
Shareholders of Cash Investment Fund, U.S. Government Fund and Treasury Fund and
holders of Institutional Shares of Municipal Money Market Fund may exchange
their Shares among those Funds and that class. See "Other Shareholder Services -
Exchanges."

<PAGE>

Shareholder Features
Each Fund offers an Automatic Withdrawal Plan, a Reinstatement Privilege and
Checkwriting. An Automatic Investment Plan is available to holders of Investor
Shares. See "Other Shareholder Services."

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,
nor can there be any assurance that any Fund will maintain a stable net asset
value. An investment in any Fund involves certain risks, depending on the types
of investments made and the types of investment techniques employed. All
investments made by the Funds entail some risk. Certain investments and
investment techniques, however, entail additional risks, such as investments in
foreign issuers. See "Investment Objectives and Policies - Investment Policies -
Cash Investment Fund and Ready Cash Investment Fund - Foreign Instruments." The
amount of income earned by each Fund will tend to vary with changes in
prevailing interest rates. For more details about each Fund, its investments and
their risks, see "Investment Objectives and Policies."

Expense Information

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

Hypothetical Expense Example
1 Year 3 Years 5 Years 10 Years
Cash Investment Fund $5 $15 $27 $60
U.S. Government Fund $5 $16 $28 $63
Treasury Fund $5 $15 $26 $58
Municipal Money Market Fund
Institutional Shares $5 $15 $26 $58
Investor Shares $7 $21 $37 $82
Ready Cash Investment Fund
Investor Shares $8 $26 $46 $101

<PAGE>

Annual Operating Expenses(1)
(as a percentage of average daily net assets after applicable fee waivers
and Ready Cash expense reimbursements)

<TABLE>
<CAPTION>
Municipal
Cash U.S. Money
Investment Government Treasury Institutional Investor Market
Fund Fund Fund Shares Shares Fund
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.14% 0.15% 0.17% 0.29% 0.29% 0.35%
Other Expenses(2) 0.34% 0.35% 0.29% 0.16% 0.36% 0.47%
Total Operating Expenses 0.48% 0.50% 0.46% 0.45% 0.65% 0.82%
</TABLE>

(1) For a further description of the various expenses associated with the
Shares, see "Management." Expenses associated with other classes of shares of a
Fund differ from those listed in the table. The amounts of expenses are based on
amounts incurred during the Funds' most recent fiscal year ended May 31, 1996.
Absent certain expense reimbursements and fee waivers, during the most recent
fiscal year the expenses of Cash Investment Fund, U.S. Government Fund, Treasury
Fund, Institutional Shares and Investor Shares of Municipal Money Market Fund,
and Investor Shares of Ready Cash Investment Fund would have been: Investment
Advisory Fees, 0.14%, 0.15%, 0.17%, 0.34%, 0.35% and 0.36% respectively; Other
Expenses, 0.35%, 0.36%, 0.39%, 0.38%, 0.53% and 0.51% respectively; and Total
Operating Expenses, 0.49%, 0.51%, 0.56%, 0.72%, 0.88% and 0.87%, respectively.
Expense reimbursements and fee waivers are voluntary and may be reduced or
eliminated at any time.

(2) Other expenses for each Fund (other than Institutional Shares of Municipal
Money Market Fund) include transfer agency fees payable to Norwest at an annual
rate of 0.25% of the respective Fund's average daily net assets attributable to
each class of shares. Other expenses for Institutional Shares of Municipal Money
Market Fund include transfer agency fees payable to Norwest at an annual rate of
0.10% of the Fund's average daily net assets attributable to those Shares plus
reimbursement of certain expenses. In addition, Other Expenses include custody
fees payable to Norwest at an annual rate of up to 0.03% of the average daily
net assets of each of Cash Investment Fund, U.S. Government Fund and Treasury
Fund and at an annual rate of up to 0.05% of the average daily net assets of
each of Municipal Money Market Fund and Ready Cash Investment Fund.

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

<PAGE>

The example is based on the expenses listed in the "Annual Operating Expenses"
table. The 5% 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

The following tables provide financial highlights for each Fund. This
information represents selected data for a single share outstanding of each
class of each Fund for the periods shown. Information for the years ended May
31, 1994, 1995 and 1996, was audited by KPMG Peat Marwick LLP, independent
auditors. The information for prior periods was audited by other independent
auditors. The Funds' financial statements for the fiscal year ended May 31,
1996, and independent auditors' report thereon are contained in the Funds'
Annual Report and are incorporated by reference into the SAI. The Annual Report
may be obtained by shareholders upon request without charge.

Cash Investment Fund

Six Months Ended
Year Ended May 31, May 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value per Share $1.00 $1.00 $1.00 $1.00 $1.00
Net Investment Income 0.054 0.049 0.031 0.033 0.021
Dividends from Net Investment Income (0.054) (0.049) (0.031) (0.033) (0.021)
Ending Net Asset Value per Share $1.00 $1.00 $1.00 $1.00 $1.00
Ratios to Average Net Assets:
Expenses(b) 0.48% 0.48% 0.49% 0.50% 0.50%(c)
Net Investment Income 5.36% 4.87% 3.11% 3.29% 4.23%(c)
Total Return 5.50% 4.96% 3.16% 3.36% 4.29%(c)
Net Assets at the
End of Period (000's omitted) $1,739,549 $1,464,304 $1,381,402 $1,944,948 $1,292,196

Year Ended November 30,
1991 1990 1989 1988 1987(a)
Beginning Net Asset Value per Share $1.00 $1.00 $1.00 $1.00 $1.00
Net Investment Income 0.061 0.079 0.088 0.071 0.009
Dividends from Net Investment Income (0.061) (0.079) (0.088) (0.071) (0.009)
Ending Net Asset Value per Share $1.00 $1.00 $1.00 $1.00 $1.00
Ratios to Average Net Assets:
Expenses(b) 0.51% 0.45% 0.45% 0.43% 0.45%(c)
Net Investment Income 6.11% 7.92% 8.81% 7.00% 7.16%(c)

<PAGE>

Total Return 6.31% 8.22% 9.22% 7.32% 7.40%(c)

Net Assets at the
End of Period (000's omitted) $1,004,979 $747,744 $662,698 $316,349 $53,951

</TABLE>

(a) The Fund commenced operations on October 14, 1987.
(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:

<TABLE>
Six Months
Ended
Year Ended May 31, May 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Expenses 0.49% 0.50% 0.49% 0.51% 0.56%(c)

Year Ended November 30,
1991 1990 1989 1988 1987(a)
Expense 0.54% 0.57% 0.64% 0.74% 1.09%(c)

</TABLE>

<TABLE>

U.S. Government Fund

Six Months
Ended
Year Ended May 31, May 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value per Share $1.00 $1.00 $1.00 $1.00 $1.00
Net Investment Income 0.052 0.047 0.030 0.030 .020
Dividends from Net Investment Income (0.052) (0.047) (0.030) (0.030) (0.020)
Ending Net Asset Value per Share $1.00 $1.00 $1.00 $1.00 $1.00
Ratios to Average Net Assets:
Expenses(b) 0.50% 0.50% 0.47% 0.45% 0.00%(c)
Net Investment Income 5.13% 4.68% 3.02% 3.00% 6.89%(c)
Total Return 5.27% 4.81% 3.07% 3.06% 4.07%(c)
Net Assets at the End of Period
(000's omitted) $1,649,721 $1,159,421 $1,091,141 $903,274 $623,685

Year Ended November 30,
1991 1990 1989 1988 1987(a)
Beginning Net Asset Value per Share $1.00 $1.00 $1.00 $1.00 $1.00
Net Investment Income 0.058 0.077 0.085 0.069 0.003
Dividends from Net Investment Income (0.058) (0.077) (0.085) (0.069) (0.003)
Ending Net Asset Value per Share $1.00 $1.00 $1.00 $1.00 $1.00
Ratios to Average Net Assets:
Expenses(b) 0.45%(c) 0.45% 0.45% 0.45% 0.42%(c)
Net Investment Income 3.99%(c) 5.84% 7.66% 8.51% 6.87%(c)
Total Return 6.00% 7.94% 8.87% 7.13%(c) 7.35%(c)
Net Assets at the End of Period
(000's omitted) $469,487 $500,794 $394,137 $254,104 $4,343

</TABLE>

(a) The Fund commenced operations on November 16, 1987.

<PAGE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses 0.51% 0.52% 0.53% 0.57% 0.61%(c) 0.60% 0.61% 0.65% 0.73% 2.94%(c)

</TABLE>

Treasury Fund

<TABLE>
Six
Months Year
Ended Ended
Year Ended May 31, May 31, Nov. 30,
1996 1995 1994 1993 1992 1991(a)
<S> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value per Share $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Net Investment Income 0.050 0.046 0.028 0.029 0.020 0.058
Dividends from Net Investment Income (0.050) (0.046) (0.028) (0.029) (0.020) (0.058)
Ending Net Asset Value per Share $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Ratios to Average Net Assets:
Expenses(b) 0.46% 0.46% 0.46% 0.47% 0.47%(c) 0.31%(c)
Net Investment Income 4.91% 4.62% 2.81% 2.93% 4.01%(c) 5.62%(c)
Total Return 5.04% 4.65% 2.83% 2.98% 4.07%(c) 6.02%(c)
Net Assets at the End of Period (000's omitted) $802,270 $661,098 $526,483 $384,751 $374,492 $354,200
</TABLE>

(a) The Fund commenced operations on December 3, 1990.
(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:

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Expenses 0.56% 0.57% 0.58% 0.58% 0.59%(c) 0.66%(c)
</TABLE>

Municipal Money Market Fund
<TABLE>
Investor Shares Institutional Shares
Six Months Ended Year Ended
Year Ended May 31, May 31, November 30
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value per Share $1.00 $1.00 $1.00 $1.00 $1.00 $1.00

<PAGE>

Net Investment Income 0.033 0.031 0.021 0.021 0.014 0.042
Net Realized and Unrealized Gain (Loss)
on Investments -- (0.004) -- -- -- --
Dividends from Net Investment Income (0.033) (0.031) (0.021) (0.021) (0.014) (0.042)
Capital Contribution from Adviser -- 0.004 -- -- -- --
Ending Net Asset Value per Share $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Ratios to Average Net Assets:
Expenses(b) 0.65% 0.65% 0.65% 0.65% 0.63%(c) 0.64%
Net Investment Income 3.25% 3.10% 2.03% 2.13% 2.81%(c) 4.10%
Total Return 3.31% 3.13%(d) 2.09% 2.18% 2.89%(c) 4.26%
Net Assets at the End of Period (000's omitted) $57,021 $47,424 $33,554 $75,521 $82,678 $66,327

November 30, Year Ended May 31,
1990 1989 1988(a) 1996 1995 1994(a)
Beginning Net Asset Value per Share $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Net Investment Income 0.053 0.058 0.042 0.035 0.033 0.019
Net Realized and Unrealized Gain (Loss)
on Investments -- -- -- -- (0.004) --
Dividends from Net Investment Income (0.053) (0.058) (0.042) (0.035) (0.033) (0.019)
Capital Contribution from Adviser -- -- -- -- 0.004 --
Ending Net Asset Value per Share $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Ratios to Average Net Assets:
Expenses(b) 0.64% 0.62% 0.62%(c) 0.45% 0.45% 0.45%(c)
Net Investment Income 5.34% 5.78% 4.64%(c) 3.41% 3.37% 2.33%(c)
Total Return 5.48% 5.94% 4.76%(c) 3.52% 3.33%(d) 2.34%(c)
Net Assets at the End of Period (000's omitted) $29,801 $18,639 $8,963 $592,436 $278,953 $190,356
</TABLE>

(a) The Fund commenced operations on January 7, 1988. The Fund's initial class
of shares subsequently became Investor Shares. The Fund commenced the
offering of Institutional Shares on August 3, 1993.

<TABLE>
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Expenses: 0.88% 0.93% 0.99% 0.97% 0.96%(c) 1.08%

1990 1989 1988(a) 1996 1995 1994(a)
1.16% 1.15% 1.20%(c) 0.72% 0.74% 0.77%(c)
</TABLE>

(d) Total return for the year ended May 31, 1995 includes the effect of a
capital contribution from the Adviser. Without the capital contribution,
total return would have been 2.59% for Investor Shares and 2.79% for
Institutional Shares.

Ready Cash Investment Fund

<TABLE>
Investor Shares
Six Months
Ended
Year Ended May 31, May 31, Year Ended November 30,
1996 1995 1994 1993 1992 1991 1990 1989 1988(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00

<PAGE>

Net Investment Income 0.051 0.045 0.027 0.030 0.020 0.058 0.076 0.085 0.059
Dividends from Net Investment
Income (0.051) (0.045) (0.027) (0.030) (0.020) (0.058) (0.076) (0.085) (0.059)
Ending Net Asset Value per
Share $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Ratios to Average Net Assets:
Expenses(b) 0.82% 0.82% 0.82% 0.82% 0.82%(c) 0.82% 0.82% 0.81% 0.77%(c)
Net Investment Income 5.02% 4.64% 2.70% 3.04% 4.01%(c) 5.81% 7.56% 8.51% 7.11%(c)
Total Return 5.17% 4.62% 2.74% 3.08% 4.05%(c) 5.98% 7.83% 8.86% 6.97%(c)
Net Assets at the End of
Period (000's omitted) $473,879 $268,603 $164,138 $162,585 $176,378 $183,775 $166,911 $144,117 $46,736
</TABLE>

(a) The Fund commenced operations on January 20, 1988. The Fund's initial
class of shares subsequently became Investor Shares.

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses 0.87% 0.91% 0.92% 0.94% 0.93%(c) 0.96% 0.97% 0.99% 1.13%(c)
</TABLE>
(c) Annualized.

3. Investment Objectives and Policies

Investment Objectives

The investment objective of each of Cash Investment Fund, Ready Cash
Investment Fund, U.S. Government Fund and Treasury Fund is to provide high
current income to the extent consistent with the preservation of capital and
the maintenance of liquidity.

The investment objective of Municipal Money Market Fund is to provide high
current income which is exempt from Federal income taxes to the extent
consistent with the preservation of capital and the maintenance of liquidity.
As part of its objective, during periods of normal market conditions, the
Fund will have at least 80% of its net assets invested in Federally
tax-exempt instruments

<PAGE>

the income from which may be subject to the Federal alternative minimum tax
("AMT"). See "Dividends and Tax Matters."

There can be no assurance that any Fund will achieve its investment objective
or maintain a stable net asset value.

Investment Policies

Each Fund invests only in high quality, short-term money market instruments
that are determined by the Adviser, pursuant to procedures adopted by the
Trust's Board of Trustees (the "Board"), to be eligible for purchase and to
present minimal credit risks. Each Fund will 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 ("1940 Act")) and will maintain a dollar-weighted average portfolio
maturity of 90 days or less. Securities with ultimate maturities of greater
than 397 days may be purchased in accordance with Rule 2a-7. Under that Rule,
only those long-term instruments that have demand features which comply with
certain requirements and certain variable rate U.S. Government Securities, as
described below, may be purchased. The securities in which the Funds may
invest may have fixed, variable or floating rates of interest.

Except to the limited extent permitted by Rule 2a-7 and except for U.S.
Government Securities, each Fund will not invest more than 5% of its total
assets in the securities of any one issuer. Also, a 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. Those requirements
apply with respect to only 75% of the total assets of Municipal Money Market
Fund. In addition, to ensure adequate liquidity, no Fund may invest more than
10% of its net assets in illiquid securities, including repurchase agreements
maturing in more than seven days. Under the supervision of the Board, the
Adviser determines and monitors the liquidity of portfolio securities.

As used herein, 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, pursuant to guidelines adopted by the
Board, to be of comparable quality. Except for Municipal Money Market Fund,
each Fund will invest at least 95% of its total assets in securities in the
highest rating category as determined pursuant to Rule 2a-7. A description of
the rating categories of Standard & Poor's, Moody's Investors Service and
certain other NRSROs is contained in the SAI.

<PAGE>

The market value of the interest-bearing debt securities held by the Funds,
including municipal securities, will be affected by changes in interest
rates. There is normally an inverse relationship between the market value of
securities sensitive to prevailing interest rates and actual changes in
interest rates; i.e., a decline in interest rates produces an increase in
market value, while an increase in 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.
In addition, 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.
Obligations of issuers of debt securities, including municipal securities,
are also subject to the provisions of bankruptcy, insolvency and other laws
affecting the rights and remedies of creditors. The possibility exists,
therefore, that, as a result of bankruptcy, litigation or other conditions,
the ability of any issuer to pay, when due, the principal of and interest on
its debt securities may be materially affected.

Although each Fund only invests in high quality money market instruments, an
investment in the Fund is subject to risk even if all securities in the
Fund's portfolio are paid in full at maturity. All money market instruments,
including U.S. Government Securities, can change in value as a result of
changes in interest rates and/or the issuer's actual or perceived
creditworthiness.

Cash Investment Fund and Ready Cash Investment Fund

Cash Investment Fund and Ready Cash Investment Fund have identical investment
policies. Each Fund invests in a broad spectrum of high quality money market
instruments of United States and foreign issuers.

Obligations of Financial Institutions. The Funds may invest in obligations of
financial institutions. These include negotiable certificates of deposit,
bank notes, 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.

<PAGE>

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 by the Funds but may be subject to early withdrawal
penalties which could reduce a Fund's yield. Unless there is a readily
available market for them, deposits that are subject to early withdrawal
penalties or that mature in more than seven days are treated as illiquid
securities.

The Funds limit their investments in obligations of financial institutions
(including their branches, agencies and subsidiaries) to institutions which
at the time of investment have total assets in excess of one billion dollars,
or the equivalent in other currencies. The Funds' 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, branches
and subsidiaries located in countries which the Adviser believes do not
present undue risk.

Each 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. Each Fund may not invest more than 25% of its total assets in
any other single industry.

United States Government Securities and Related Zero-Coupon Securities. The
Funds may invest without limit in the types of securities eligible for
purchase by U.S. Government Fund. See "Investment Objectives and Policies -
Investment Policies - U.S. Government Fund."

Foreign Government Securities. The Funds may invest in U.S. dollar
denominated obligations issued or guaranteed by the governments of countries
which the Adviser believes do not present undue risk or of those countries'
political subdivisions, agencies or instrumentalities. The Funds may also
invest in the obligations of supranational organizations such as the
International Bank for Reconstruction and Development (the "World Bank") and
the Inter-American Development Bank.

Municipal Securities. The Funds may invest without limit in the types of
municipal securities eligible for purchase by Municipal Money Market Fund.
See "Investment Objectives and Policies - Investment Policies - Municipal
Money Market Fund."

Corporate Debt Securities. The Funds may invest in corporate debt obligations
of domestic or foreign issuers, including commercial paper (short-term
promissory

<PAGE>

notes) issued by companies to finance their, or their affiliates', current
obligations and corporate notes and bonds. The Funds may invest in privately
issued commercial paper or other corporate instruments which are restricted
as to disposition under the Federal securities laws. Any sale of this paper
may not be made absent registration under the Securities Act of 1933 or the
availability of an appropriate exemption therefrom. Some of these restricted
securities, however, are eligible for resale to institutional investors, and
accordingly, a liquid market may exist for them. Pursuant to guidelines
adopted by the Board, the Adviser will determine whether each such investment
is liquid.

Participation Interests. The Funds may purchase from financial institutions
participations in loans or securities. A participation interest gives a Fund
an undivided interest in the loan or security in the proportion that the
Fund's interest bears to the total principal amount of the security. For
certain participation interests a Fund will have the right to demand payment,
on not more than seven days' notice, for all or a part of the Fund's
participation interest. The Funds intend to exercise any demand rights they
may have only upon default under the terms of the loan or security, to
provide liquidity or to maintain or improve the quality of the Funds'
investment portfolio. No Fund will invest more than 10% of its total assets
in participation interests in which the Fund does not have demand rights.

Foreign Instruments. The Funds' investments in securities of foreign entities
may involve certain risks that are different from investments in domestic
securities. These risks may include unfavorable political and economic
developments; the imposition of foreign withholding taxes on interest income
payable on these securities; the seizure or nationalization of foreign
deposits; the existence of accounting, auditing and financial reporting
standards which are not comparable to those of U.S. issuers; and the
establishment of exchange controls, interest limitations or other foreign
governmental restrictions which affect adversely the payment of principal and
interest on these securities. In addition, there may be less public
information available about foreign issuers. The Adviser considers these
factors when making investments in foreign instruments. The Funds have no
limit on the amount of their foreign assets which may be invested in any one
type of foreign instrument or in any foreign country; however, to the extent
a Fund concentrates its assets in a foreign country, these risks will be
increased.

U.S. Government Fund

U.S. Government Fund invests primarily in obligations issued or guaranteed as
to principal and interest by the United States Government or by any of its
agencies and instrumentalities ("U.S. Government Securities"). The Fund may
also invest in repurchase agreements and certain zero-coupon securities
secured by U.S. Government Securities. Under normal circumstances, however,

<PAGE>

the Fund will invest at least 65% of its total assets in U.S. Government
Securities.

United States Government Securities. The U.S. Government Securities in which
the Fund may invest include U.S. Treasury Securities and obligations issued
or guaranteed by U.S. Government agencies and instrumentalities that are
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 Fund 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.

U.S. Government and Other Related Zero-Coupon Securities. The Fund may invest
in separately traded principal and interest components of securities issued
or guaranteed by the U.S. Treasury under the Treasury's Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. In
addition, the Fund 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"). The Fund will not invest more than
35% of its total assets in zero-coupon securities other than those issued
through the STRIPS program.

Treasury Fund

Treasury Fund invests solely in obligations that are issued or guaranteed by
the U.S. Treasury, such as U.S. Treasury bills, bonds and notes ("U.S.
Treasury Securities"). This may include separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury.
See "Investment Objectives and Policies - Investment Policies - U.S.
Government Fund."

Municipal Money Market Fund

<PAGE>

Municipal Money Market Fund attempts to invest 100% of its assets in the
obligations of the states, territories and possessions of the United States
and of their subdivisions, authorities and corporations, the interest on
which is exempt from Federal income tax ("municipal securities"). The Fund
reserves the right, however, to invest up to 20% of its assets in securities
the interest income on which is subject to taxation. The municipal securities
in which the Fund may invest include short-term municipal bonds and municipal
notes and leases. These municipal securities may have fixed, variable or
floating rates of interest and may be zero-coupon securities.

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

The Fund may invest more than 25% of its assets in industrial development
bonds and in participation interests therein issued by banks. The Fund may
from time to time invest more than 25% of its assets in obligations of
issuers located in one state but, under normal circumstances, will not invest
more than 35% of its assets in obligations of issuers located in one state.
If the Fund concentrates its investments in this manner, it will be more
susceptible to factors adversely affecting issuers of those municipal
securities than would be a more geographically diverse municipal securities
portfolio. These risks arise from the financial condition of the particular
state and its political subdivisions.

Municipal Bonds. Municipal bonds can be classified as either "general
obligation" or "revenue" bonds. General obligation bonds are secured by a
municipality's pledge of its full faith, credit and taxing power for the
payment of principal and interest. Revenue bonds are usually payable only
from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise or other tax, but
not from general tax revenues. Municipal bonds include industrial development
bonds. Municipal bonds may also be "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer is
unable to meet its obligations under the bonds from current revenues, it may
draw on a reserve fund that is backed by the moral commitment (but not the
legal obligation) of the state or municipality that created the issuer.

The Fund may invest in tax-exempt industrial development bonds, which in most
cases are revenue bonds and generally do not have the pledge of the credit of
the municipality. The payment of the principal and interest on these bonds is
dependent solely on the ability of an initial or subsequent user of the
facilities

<PAGE>

financed by the bonds to meet its financial obligations and the pledge, if
any, of real and personal property so financed as security for such payment.
The Fund will acquire private activity securities only if the interest
payments on the security are exempt from Federal income taxation (other than
the Alternative Minimum Tax (AMT)).

Municipal Notes. Municipal notes, which may be either "general obligation" or
"revenue" securities, are intended to fulfill short-term capital needs and
generally have original maturities not exceeding one year. They include tax
anticipation notes, revenue anticipation notes (which generally are issued in
anticipation of various seasonal revenues), bond anticipation notes,
construction loan notes and tax-exempt commercial paper. Tax-exempt
commercial paper generally is issued with maturities of 270 days or less at
fixed rates of interest.

Municipal Leases. Municipal Leases, which may take the form of a lease or an
installment purchase or conditional sale contract, are issued by state and
local governments and authorities to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, telecommunications equipment
and other capital assets. Municipal leases frequently have special risks not
normally associated with general obligation or revenue bonds. Lease and
installment purchase or conditional sale contracts (which normally provide
for title to the leased assets to pass eventually to the government issuer)
have evolved as a means for governmental issuers to acquire property and
equipment without meeting the constitutional and statutory requirements for
the issuance of debt. The debt-issuance limitations of many state
constitutions and statutes are deemed to be inapplicable because of the
inclusion in many leases or contracts of "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future
payments under the lease or contract unless money is appropriated for such
purpose by the appropriate legislative body on a yearly or other periodic
basis. Generally, the Fund will invest in municipal lease obligations through
certificates of participation.

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

The Short-Term Municipal Securities Market. Yields on municipal securities
are dependent on a variety of factors, including the general conditions of
the municipal security markets and the fixed income markets in general, the
size of a particular offering, the maturity of the obligation and the rating
of the issue. The achievement of the Fund's investment objective is dependent
in part on the

<PAGE>

continuing ability of the issuers of municipal securities in which the Fund
invests to meet their obligations for the payment of principal and interest
when due. Under current Federal tax law, interest on certain municipal
securities issued after August 7, 1986 to finance "private activities"
("private activity securities") is a "tax preference item" for purposes of
the AMT applicable to certain individuals and corporations even though such
interest will continue to be fully tax-exempt for regular Federal income tax
purposes. The Fund may purchase private activity securities, the interest on
which may constitute a "tax preference item" for purposes of the AMT.

Although the Fund invests primarily in municipal securities, it is
anticipated that a substantial amount of the securities held by the Fund will
be supported by credit and liquidity enhancements, such as letters of credit
(which are not covered by Federal deposit insurance) or put or demand
features, of third party financial institutions, generally domestic and
foreign banks. Accordingly, the credit quality and liquidity of the Fund will
be dependent in part upon the credit quality of the banks supporting the
Fund's investments. This will result in exposure to risks pertaining to the
banking industry, including the foreign banking industry. See "Investment
Objectives and Policies - Investment Policies - Cash Investment Fund and
Ready Cash Investment Fund - Obligations of Financial Institutions" above.
Brokerage firms and insurance companies also provide certain liquidity and
credit support. The Fund's policy is to purchase municipal securities with
third party credit or liquidity support only after the Adviser has considered
the creditworthiness of the financial institution providing the support and
believes that the security presents minimal credit risk.

The Fund may purchase long term municipal securities with various maturity
shortening provisions. For instance, variable rate demand notes ("VRDN") are
municipal bonds with maturities of up to 40 years that are sold with a demand
feature (an option for the holder of the security to sell the security back
to the issuer) which may be exercised by the security holder at predetermined
intervals, usually daily or weekly. The interest rate on the security is
typically reset by a remarketing or similar agent at prevailing interest
rates. VRDNs may be issued directly by the municipal issuer or created by a
bank, broker-dealer or other financial institution by selling a previously
issued long-term bond with a demand feature attached. Similarly, tender
option bonds (also referred to as certificates of participation) are
municipal securities with relatively long original maturities and fixed rates
of interest that are coupled with an agreement of a third party financial
institution under which the third party grants the security holders the
option to tender the securities to the institution and receive the face value
thereof. The option may be exercised at periodic intervals, usually six
months to a year. As consideration for providing the option, the financial
institution receives a fee equal to the difference between the underlying
municipal security's fixed rate and the rate, as determined by a remarketing
or similar agent, that would cause the securities, coupled with the tender
option, to trade at par on the date of the interest rate determination. These
bonds effectively provide the holder with

<PAGE>

a demand obligation that bears interest at the prevailing short-term
municipal securities interest rate. Tender option bonds are generally held
pursuant to a custodial arrangement.

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

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

Taxable Investments. Although the Fund will attempt to invest 100% of its
assets in municipal securities, the Fund may invest up to 20% of the value of
its net assets in cash and cash equivalents the interest income on which is
subject to Federal taxation. In addition, when business or financial
conditions warrant or when an adequate supply of appropriate municipal
securities is not available, the Fund may assume a temporary defensive
position and invest without limit in cash or cash equivalents the interest
income on which is subject to Federal taxation, which include: (i) short-term
U.S. Government Securities, (ii) certificates of deposit, Bankers'
acceptances and interest-bearing savings deposits, (iii) commercial paper,
(iv) repurchase agreements covering any of the preceding securities and (v)
to the extent permitted by the 1940 Act, money market mutual funds. For a
description of the securities listed in items (i) through (iii), see
"Investment Objectives and Policies - Investment Policies - Cash Investment
Fund and Ready Cash Investment Fund."

<PAGE>

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 the Fund's outstanding voting securities. A majority
of a Fund's outstanding voting securities means the lesser of 67% of the
shares of that Fund present or represented at a meeting at which the holders
of more than 50% of the outstanding shares of the Fund are present or
represented or more than 50% of the outstanding shares of the Fund. Except as
otherwise indicated, investment policies of the Funds may be changed by the
Board without shareholder approval. A further description of the Funds'
investment policies, including additional fundamental policies, is contained
in the SAI.

Each Fund may enter into repurchase agreements (except Treasury Fund), may
enter into reverse repurchase agreements (which are considered borrowings),
may lend their securities and may purchase securities on a forward commitment
basis as described below. 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% of the value of the Fund's total
assets. Borrowing for other than meeting redemption requests will not exceed
5% of the value of a Fund's net assets. Each Fund is permitted to invest in
other investment companies which intend to comply with Rule 2a-7 and have
substantially similar investment objectives and policies.

The Funds' use of repurchase agreements, reverse repurchase agreements,
securities lending and forward commitments 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
in these transactions or a counterparty defaulted on its obligations, a Fund
might suffer a loss. Failure by the other party to deliver a security
purchased by a Fund may result in a missed opportunity to make an alternative
investment. The Adviser monitors the creditworthiness of counterparties to
these transactions and intends to enter into these transactions only when it
believes the counterparties present minimal credit risks and the income to be
earned from the transaction justifies the attendant risks.

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
with a market value at all times at least equal to the amount of a Fund's
forward commitment and reverse repurchase agreement obligations in accordance
with SEC guidelines. As a result of entering forward commitments and reverse
repurchase agreements, as well as lending their portfolio securities, the
Funds are exposed to greater potential fluctuations in the value of their
assets and net asset value per share.
<PAGE>

Repurchase Agreements. Except for Treasury Fund, each Fund may enter into
repurchase agreements, which 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. The Trust's
custodian maintains possession of the underlying collateral, which is
maintained at not less than 100% of the repurchase price.

Lending of Portfolio Securities. Each Fund may lend securities from their
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. The Funds may pay fees to arrange the loans. No Fund may lend
portfolio securities in excess of 33 1/3% of the value of the Fund's total
assets. Generally, the lending of portfolio securities involves risks similar
to, but slightly greater than, those involved in entering into repurchase
agreements.

Forward Commitments. Each Fund may purchase securities on a when-issued or
delayed delivery basis (forward commitments). Securities so purchased are
subject to market price fluctuation from the time of purchase but no interest
on the securities accrues to a Fund until delivery and payment take place.
Accordingly, the value of the securities on the delivery date may be more or
less than the purchase price. Forward commitments will be entered into only
when a Fund has the intention of actually acquiring the securities, but a
Fund may sell the securities before the settlement date if deemed advisable.
In addition, forward commitments will not be entered into if the aggregate of
the commitments exceeds 15% of the value of the Fund's total assets.

Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements, which are 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. 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 specified repurchase date and interest
payments are calculated daily, often based upon the prevailing overnight
repurchase rate. The Funds will use the proceeds of reverse repurchase
agreements only to fund redemptions or to make investments which generally
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 a Fund with those monies.
<PAGE>

Variable and Floating Rate Securities. The securities in which the Funds
invest 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 interest paid on these securities is a function primarily
of the indexes or market rates upon which the interest rate adjustments are
based. Similar to fixed rate debt instruments, variable and floating rate
instruments are subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness. The rate of
interest on securities purchased by a Fund may be tied to Treasury or other
government securities or indices on those securities as well as any other
rate of interest or index.

There may not be an active secondary market for any particular floating or
variable rate instrument which could make it difficult for a Fund to dispose
of the instrument if the issuer defaulted on its repayment obligation 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 Fund's investment
in variable and floating rate instruments, but there can be no guarantee that
an active secondary market will exist.

Cash Investment Fund and Ready Cash Investment Fund also 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 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.

Mortgage- and Asset-Backed Securities. Each Fund (other than Treasury Fund)
may purchase fixed or adjustable rate mortgage or other asset-backed
securities, including securities backed by automobile loans, equipment leases
or credit card receivables. These securities may be U.S. Government
Securities or, in the case of Cash Investment Fund, Ready Cash Investment
Fund or Municipal Money Market Fund, privately issued and directly or
indirectly represent a participation in, or are secured by and payable from,
fixed or adjustable rate mortgage or other loans which may be secured by real
estate or other assets. Unlike traditional debt instruments, payments on
these securities may include both interest and a partial payment of
principal. Prepayments of the principal of underlying loans may shorten the
effective maturities of these securities. Some adjustable rate securities (or
the underlying loans) are subject to caps or floors

<PAGE>

that limit the maximum change in interest rate during a specified period or
over the life of the security. In the case of Municipal Money Market Fund,
these securities will be municipal securities.

Zero-Coupon Securities. Each Fund may invest in zero-coupon securities (such
as Treasury bills), which are securities that are sold at original issue
discount and pay no interest to holders prior to maturity, but a Fund must
include a portion of the original issue discount of the security as income.
Because each Fund distributes substantially all of its net investment income,
a Fund 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. Zero-coupon
securities may be subject to greater fluctuation of market value than the
other securities in which the Fund may invest.

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. The SAI contains
general background information about the Trustees and officers of the Trust.

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, which is located at Norwest Center, Sixth Street and
Marquette, Minneapolis, Minnesota 55479-0063, 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 June 30, 1996,
Norwest Corporation was the 12th 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 $22 billion.

<PAGE>

of Norwest. A lending relationship will not be a factor in
the selection of portfolio securities for a Fund.

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 from Cash Investment Fund, U.S.
Government Fund and Treasury Fund, respectively, an advisory fee at an annual
rate of 0.20% of the average daily net assets for the first $300 million of
net assets of the Fund, 0.16% of the average daily net assets for the next
$400 million net assets of the Fund, and 0.12% of the average daily net
assets of the Fund's remaining net assets. For the Adviser's services,
Norwest receives from Municipal Money Market Fund an advisory fee at an
annual rate of 0.35% of the average daily net assets for the first $500
million of net assets of the Fund, 0.325% of the average daily net assets for
the next $500 million of the net assets of the Fund, and 0.30% of the average
daily net assets of the Fund's remaining net assets. For the Adviser's
services, Norwest receives from Ready Cash Investment Fund an advisory fee at
an annual rate of 0.40% of the average daily net assets for the first $300
million of net assets of the Fund, 0.36% of the average daily net assets for
the next $400 million of the net assets of the Fund, and 0.32% of the average
daily net assets of the Fund's remaining net assets.

Portfolio Managers. Many persons on the advisory staff of the Adviser
contribute to the investment services provided to the Funds. David D.
Sylvester and Laurie R. White are primarily responsible for the day-to-day
management of the Funds. 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 a portfolio manager of the Fund
in 1991.

Management, Administration and Distribution Services

<PAGE>

updates of the Trust's registration statement, prospectuses and statements of
additional information, the Trust's tax returns, and reports to its
shareholders, the SEC and state and other securities administrators, (ii)
preparing proxy and information statements and any other communications to
shareholders, (iii) monitoring the sale of shares and ensuring that such
shares are properly and duly registered with the SEC and applicable state and
other securities commissions and (iv) determining the amount of and
supervising the declaration of dividends and other distributions to
shareholders.

As of October 1, 1996, FFSI and FAS provided management and administrative
services to registered investment companies and collective investment funds
with assets of approximately $16 billion. FFSI is a registered broker-dealer
and investment adviser and is a member of the National Association of
Securities Dealers, Inc. Pursuant to a separate Distribution Services
Agreement, FFSI is the exclusive representative of the Trust to act as
principal underwriter and distributor of the Funds, except under
circumstances specified in that agreement. FFSI receives no payments for its
services as distributor with respect to the Shares. In addition, none of the
Funds has adopted a Rule 12b-1 Plan applicable to the Shares and,
accordingly, no Fund incurs any distribution expenses with respect to the
Shares. From its own resources, FFSI may pay a fee to broker-dealers or other
persons for distribution or other services related to the Funds.

Pursuant to a separate agreement, Forum Financial Corp. ("FFC") provides
portfolio accounting services to each Fund. FFSI, FAS and FFC are members of
the Forum Financial Group of companies which together provide a full range of
services to the investment company and financial services industry. As of
October 31, 1996, FFSI, FAS and FFC were controlled by John Y. Keffer,
President and Chairman of the Trust.

Shareholder Servicing and Custody

<PAGE>

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 FFSI, 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 a Fund 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 Shares of each Fund (other than
Institutional Shares of Municipal Money Market Fund). For its transfer agency
services, the Transfer Agent receives from Municipal Money Market Fund a fee
at an annual rate of 0.10% of the average daily net assets attributable to
Institutional Shares of that Fund and is reimbursed for certain expenses.

Norwest also serves as the Trust's custodian. For its custodial services,
Norwest is compensated at an annual rate of up to 0.03% of the average daily
net assets of each of Cash Investment Fund, U.S. Government Fund and Treasury
Fund and at an annual rate of up to 0.05% of the average daily net assets of
each of Municipal Money Market Fund and Ready Cash Investment Fund.

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, FFSI
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.

Each service provider to the Trust or their agents and affiliates may also
act in various capacities for, and receive compensation from, their customers
who are shareholders of 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 a Fund.

<PAGE>

5. How to Buy Shares

Minimum Investment

For initial purchases of Cash Investment Fund, U.S. Government Fund, Treasury
Fund, and Institutional Shares of Municipal Money Market Fund, there is a
$100,000 minimum; there is no minimum for subsequent purchases. For initial
purchases of Investor Shares of Municipal Money Market Fund and Ready Cash
Investment Fund, there is a $1,000 minimum; there is a $100 minimum for
subsequent purchases. A Fund may in its discretion waive the investment
minimum. Shareholders of Investor Shares of Municipal Money Market Fund and
Ready Cash Investment Fund 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."

An investor's order will not be accepted or invested by a Fund during the
period before the Fund's receipt of immediately available funds.

Purchase orders will be accepted on Fund Business Days only until the times
indicated below.

Order Must be Payment Must be
Fund Received by Received by
Cash Investment Fund 3:00 p.m. 4:00 p.m.
U.S. Government Fund 2:00 p.m. 4:00 p.m.
Treasury Fund 1:00 p.m. 4:00 p.m.
Municipal Money Market Fund 12:00 noon 4:00 p.m.
Ready Cash Investment Fund 3:00 p.m. 4:00 p.m.

Fund shares become entitled to receive dividends on the Fund Business Day 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

<PAGE>

"Account Application" on page 39. 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.

Norwest Bank Minnesota, N.A.
ABA 091 000 019
For Credit to: Norwest Advantage Funds
0844-131
Re: [Name of Fund]
[Designate Investor Shares or
Institutional Shares, if applicable]
Account No.:
Account Name:

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

3. Through Financial Institutions. Shares may be purchased and redeemed
through certain broker-dealers, banks and other financial institutions
("Processing Organizations"). The Transfer Agent, FFSI and their affiliates
may be Processing Organizations. Processing Organizations 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 Fund's
procedures, may have Fund shares transferred into their name.

<PAGE>

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

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.

<PAGE>

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

6. How to Sell Shares

General Information

Fund Shares may be sold (redeemed) at their net asset value on any Fund
Business Day. There is no minimum period of investment and no restriction on
the frequency of redemptions. Fund Shares are redeemed as of the next
determination of a 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).

Redemption orders will be accepted on Fund Business Days only until the times
indicated below.

Order Must be
Fund Received by
Cash Investment Fund 3:00 p.m.
U.S. Government Fund 2:00 p.m.
Treasury Fund 1:00 p.m.
Municipal Money Market Fund 12:00 noon
Ready Cash Investment Fund 3:00 p.m.

Redeemed shares are not entitled to receive dividends declared on or after
the day the redemption becomes effective.

Unless otherwise indicated, redemption proceeds normally are paid by check
mailed to the shareholder's record address. The right of redemption may not
be

<PAGE>

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

Redemption Procedures

Shareholders who have invested through a Processing Organization may redeem
their shares through the Processing Organization as described above.
Shareholders who have invested directly in the Funds may redeem their Shares
as described below. 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 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 "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.

<PAGE>

Redemption proceeds are transmitted by wire on the day after the redemption
request in proper form is received by the Transfer Agent.

Other Redemption Matters

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

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

Due to the cost to the Trust of maintaining smaller accounts, the Trust
reserves the right to redeem, upon not less than 60 days' written notice, all
shares in any Cash Investment Fund, U.S. Government Fund, Treasury Fund or
Institutional Shares of Municipal Money Market Fund account whose aggregate
net asset value is less than $10,000 or in any Investor Shares of Municipal
Money Market Fund or Ready Cash Investment Fund account whose aggregate net
asset value is less than $1,000 immediately following any redemption.

7. Other Shareholder Services

<PAGE>

Exchanges

Holders of Investor Shares of a Fund may exchange their Shares for Investor
Shares of the other Fund and A class shares of certain other funds of the
Trust. Shareholders of Cash Investment Fund, U.S. Government Fund and
Treasury Fund and holders of Institutional Shares of Municipal Money Market
Fund may exchange their Shares among those Funds and that class. The Trust
may in the future create additional funds or classes of funds the shares of
which will be exchangeable with the Shares of the Funds. 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.

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.
If an exchange of Investor Shares is made into a fund that imposes an initial
sales charge, the shareholder is required to pay that Fund's initial sales
charge on the number of shares being acquired in the exchange.

Exchanges may only be made between identically registered accounts or to open
a new account. A new account application is required to open a new account
through an exchange if the new account will not have an identical
registration and the same shareholder privileges as the account from which
the exchange is being made. Shareholders may only exchange into a fund if
that fund's shares may legally be sold in the shareholder's state of
residence.

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

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."

<PAGE>

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 Municipal Money Market Fund's and Ready Cash Investment Fund's
Automatic Investment Plan, holders of Investor Shares may authorize monthly
amounts of $50 or more to be withdrawn automatically from the shareholder's
designated bank account (other than passbook savings) and sent to the
Transfer Agent for investment in the Fund. Shareholders wishing to use this
plan must complete an application which may be obtained by writing or calling
the Transfer Agent. The Trust may modify or terminate the automatic
investment plan with respect to any shareholder in the event that the Trust
is unable to settle any transaction with the shareholder's bank. If the
Automatic Investment Plan is terminated before the shareholder's account
reaches $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

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

Automatic Withdrawal Plan

A shareholder of Cash Investment Fund, U.S. Government Fund, Treasury Fund or
Institutional Shares of Municipal Money Market Fund whose shares in a single
account total $10,000 or more, or a shareholder of Investor Shares 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

<PAGE>

which may be obtained by writing or calling the Trust or 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 $10,000 with respect to Cash Investment Fund, U.S.
Government Fund or Institutional Shares of Municipal Money Market Fund or
$1,000 with respect to Investor Shares at any time.

Checkwriting

Shareholders wishing to establish checkwriting privileges may do so by
completing an application, which may be obtained by writing or calling the
Funds or the Transfer Agent. After the application is properly completed and
returned to a Fund, the shareholder will be supplied with checks which may be
made payable to any person in any amount of $500.00 or more. When a check is
presented for payment, the number of full and fractional shares required to
cover the amount of the check will be redeemed from the shareholder's account
by the Transfer Agent as agent for the shareholder. Any shares for which
certificates have been issued may not be redeemed by check. If the amount of
a check is greater than the value of the uncertificated shares held in the
shareholder's account, the check will not be honored. Fund shares may not be
redeemed until the check used to purchase the shares has cleared (which may
take 15 or more days). A shareholder may not liquidate the shareholder's
entire account by means of a check. Shareholders will be subject to the rules
and regulations of the Transfer Agent pertaining to the checkwriting
privilege as amended from time to time. Checkwriting procedures may be
changed, modified or terminated at any time by the Trust or the Transfer
Agent upon written notification to the shareholder.

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

<PAGE>

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, with respect to
Investor Shares, to direct dividends and distributions to be reinvested in A
Shares or B 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.

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 Investor Shares 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.

<PAGE>

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.

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.

Municipal Money Market Fund. Dividends paid by Municipal Money Market Fund
out of tax-exempt interest income earned by the Fund ("exempt-interest
dividends") generally will not be subject to Federal income tax in the hands
of the Fund's shareholders. However, persons who are "substantial users" or
"related persons" thereof of facilities financed by private activity
securities held by the Fund may be subject to Federal income tax on their pro
rata share of the interest income from such securities and should consult
their tax advisers before purchasing shares of the Fund. Under current
Federal tax law, interest on certain private activity securities issued after
August 7, 1986 is treated as an item of tax preference for purposes of the
AMT imposed on individuals and corporations. In addition, interest on all
tax-exempt obligations is included in the "adjusted current earnings" of
corporations for AMT purposes.

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

Substantially all of the dividends paid by the Fund are anticipated to be
exempt from Federal income taxes. Shortly after the close of each calendar
year, a statement is sent to each shareholder of the Fund advising the
shareholder of the total dividends paid into the shareholder's account for
the year; the portion of the total that is derived from obligations of
issuers in the various states, and for each Fund, the portion of such total
that is exempt from Federal income taxes. This portion is determined by the
ratio of the tax-exempt income to total income realized by the Fund for the
entire year and, thus, is an annual average, rather than a day-by-day
determination for each shareholder.

<PAGE>

The exemption for Federal income tax purposes of dividends derived from
interest on municipal securities does not necessarily result in an exemption
under the income or other tax laws of any state or local taxing authority.
Shareholders of the Fund may be exempt from state and local taxes on
distributions of tax-exempt interest income derived from obligations of the
state and/or municipalities of the state in which they reside but may be
subject to tax on income derived from the municipal securities of other
jurisdictions. Shareholders are advised to consult with their tax advisers
concerning the application of state and local taxes to investments in the
Fund which may differ from the Federal income tax consequences described
above.

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. FFSI 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 Cash Investment Fund,
Ready Cash Investment Fund, U.S. Government Fund, Treasury Fund and Municipal
Money Market Fund as of 3:00 p.m., 3:00 p.m., 2:00 p.m., 1:00 p.m. and 12:00
noon, Eastern Time, respectively, 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

<PAGE>

the determination is made. The Trust does not determine net asset value on
the following holidays: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veteran's Day, Thanksgiving and Christmas.

In order to maintain a stable net asset value per share of $1.00, each Fund's
portfolio securities are valued at their amortized cost. Amortized cost
valuation involves valuing an instrument at its cost and thereafter assuming
a constant amortization to maturity of any discount or premium. If the market
value of a Fund's portfolio deviates more than 1/2 of 1% from the value
determined on the basis of amortized cost, the Board will consider whether
any action should be initiated to prevent any material dilutive effect on
shareholders.

Performance Information

A Fund's performance may be quoted in advertising in terms of yield, which 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 7-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 7-day period. Municipal Money Market Fund may also quote
tax-equivalent yield, which will show the taxable yield a shareholder would
have to earn to equal the Fund's tax-free yield, after taxes. A
tax-equivalent yield is calculated by dividing a Fund's tax-free yield by one
minus a stated Federal, state or combined Federal and state tax rate.

The Funds' advertisements may reference ratings and rankings among similar
mutual funds by independent evaluators such as Morningstar Inc., Lipper
Analytical Services, Inc. or IBC/Donoghue, Inc. In addition, the performance
of the Funds may be compared to recognized indices of market performance. The
comparative material found in the Funds' advertisements, sales literature or
reports to shareholders may contain performance ratings. This material is not
to be considered representative or indicative of future performance. All
performance information for a Fund is calculated on a class basis.

The Trust and Its Shares

<PAGE>

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
Institutional or Investor Shares), and the costs of doing so will be borne by
the Trust. Currently the authorized shares of the Trust are divided into
twenty-eight separate series.

Other Classes of Shares. In addition to the Shares, each Fund may create and
issue shares of other classes. Cash Investment Fund, U.S. Government Fund and
Treasury Fund currently offer one class of shares. Municipal Money Market
Fund currently offers two classes of shares - Institutional Shares and
Investor Shares. Ready Cash Investment Fund currently offers three classes of
shares -Institutional Shares, Investor Shares and Exchange Shares. Exchange
Shares may be purchased only in exchange for B class shares of certain funds
of the Trust. Each class of a Fund will have a different expense ratio and
may have different sales charges (including distribution fees). Each class'
performance is affected by its expenses and sales charges. For more
information on any other class of shares of the Funds investors may contact
the Transfer Agent at 612-667-8833 or 800-338-1348. Investors may also
contact their Norwest sales representative 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 Investor and Institutional Shares of the
Funds.

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

<PAGE>

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, those shareholders may be able to greatly
affect (if not determine) the outcome of a shareholder vote.

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.

Shareholder Information:
Norwest Bank Minnesota, N.A.
733 Marquette Avenue
Minneapolis, Minnesota 55479-0040
612-667-8833 (Minneapolis/St. Paul)
800-338-1348 (Elsewhere)

- -C-1996 Norwest Advantage Funds
MFBPM001 10/96

<PAGE>

Stock Funds

Prospectus

October 1, 1996

Income Equity Fund
ValuGrowthSM Stock Fund
Diversified Equity Fund
Growth Equity Fund
Small Company Stock Fund
International Fund

Not FDIC Insured

October 1, 1996

This Prospectus offers A Shares and B Shares of Income Equity Fund,ValuGrowthSM
Stock Fund, Diversified Equity Fund, Growth Equity Fund, Small Company 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 October 1, 1996,
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.

1
<PAGE>

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

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
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.

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.

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

2
<PAGE>

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

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 June 30, 1996, managed assets totaling approximately $22 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
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 and Administration
The manager of the Trust and distributor of its shares is Forum Financial
Services, Inc. ("FFSI"), a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. FFSI also serves as administrator of
Core Trust. Forum Administrative Services, LLC ("FAS") provides administrative
services for the Funds. Norwest provides certain administrative services to
International Fund. See "Management - Management, Administration and
Distribution Services."

Shares of the Funds
Each Fund currently offers three separate classes of shares: A class

3
<PAGE>

("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.

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

I Shares are offered by a separate prospectus to fiduciary, agency and custodial
clients of bank trust departments, trust companies and their affiliates. Shares
of each class of 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."

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."

Dividends
Dividends of the net investment income of Diversified Equity Fund, Growth Equity
Fund and International Fund are declared and paid at least annually.

4
<PAGE>

Dividends of the net investment income of Income Equity Fund, ValuGrowth Stock
Fund and Small Company Stock Fund are declared and paid quarterly. 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." As noted under
"Financial Highlights," the portfolio turnover rate for certain Funds may from
time to time be high, resulting in increased brokerage costs or short-term
capital gains or losses. See "Investment Objectives and Policies - Additional
Investment Policies and Risk Considerations - Portfolio Transactions." 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. See
"Investment Objectives and Policies - Small Company Stock Fund."

International Fund's investment 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 these Funds should consider these risks, as described under "Other
Information - Core Trust Structure."

The Trust has received an exemptive order from the SEC under which Diversified
Equity Fund and Growth Equity Fund 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 (collectively, the "Blended Portfolios"). These
Blended Portfolios are each separate portfolios of Core Trust (Delaware). 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. Nonetheless, these investments could have adverse effects on the
Funds, which investors should consider. See "Other Information - Core Trust
Structure."

Expense Information

5
<PAGE>

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)

Income Equity ValuGrowth Stock Diversified Equity
Fund(4) Fund Fund(4)(6)
A B A B A B
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.50% 0.50% 0.79% 0.79% 0.65% 0.65%
Rule 12b-1 Fees(7) None 0.75% None 0.63% None 0.75%
Other Expenses 0.41% 0.47% 0.41% 0.54% 0.31% 0.40%
Total Operating Expenses 0.91% 1.72% 1.20% 1.96% 0.96% 1.80%

Growth Equity Small Company International
Fund(4)(6) Stock Fund Fund(4)(5)
A B A B A B
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees 0.90% 0.90% 0.64% 0.64% 0.45% 0.45%
Rule 12b-1 Fees(7) None 0.75% None 0.57% None 0.75%
Other Expenses 0.43% 0.47% 0.57% 0.75% 1.05% 1.05%
Total Operating Expenses 1.33% 2.12% 1.21% 1.96% 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

6
<PAGE>

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 are based on amounts incurred during the Funds' most recent fiscal year
ended May 31, 1996, except that Rule 12b-1 fees and Other Expenses for B Shares
of Diversified Equity Fund, Growth Equity Fund and International Fund have been
restated to reflect estimated amounts for the current fiscal year. 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
ValuGrowth Stock Fund would be 0.80%.

With respect to A Shares, absent expense reimbursements and fee waivers,
the expenses of Income Equity Fund, ValuGrowth Stock Fund, Diversified Equity
Fund, Growth Equity Fund, Small Company Stock Fund and International Fund would
be: Other Expenses, 1.45%, 0.63%, 1.63%, 1.85%, 0.88% and 2.05%, respectively;
and Total Operating Expenses, 1.95%, 1.43%, 2.28%, 2.75%, 1.88% and 2.50%,
respectively. With respect to B Shares, absent expense reimbursements and fee
waivers the expenses of Income Equity Fund, ValuGrowth Stock Fund, Diversified
Equity Fund, Growth Equity Fund, Small Company Stock Fund and International Fund
would be: Other Expenses, 1.51%, 1.01%, 1.57%, 1.66%, 1.22% and 2.66%,
respectively; and Total Operating Expenses, 2.76%, 2.44%, 2.97%, 3.31%, 2.69%
and 3.86%, 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
and Small Company Stock Fund custody fees payable to Norwest. Expense
reimbursements and fee waivers are voluntary and may be reduced or eliminated at
any time.

(4) Effective with the period commencing October 31, 1995, the fiscal year end
for these Funds was changed from October 31 to May 31. Accordingly the fiscal
period reflected in the table for these Funds is November 1, 1995 through
May 31, 1996.

(5) Other Expenses for International Fund as listed above include the Fund's
pro rata portion of all operating expenses of International Portfolio, which are
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.

(6) Diversified Equity Fund and Growth Equity Fund invest portions of their
assets in the Blended Portfolios, each of which bears certain expenses not
reflected in the table. See "Management - Expenses of the Funds" and "Other
Information - Core Trust Structure." Each of Diversified Equity Fund and Growth
Equity Fund incurs its pro rata share of the Blended Portfolios' expenses, but

7
<PAGE>

only to the extent it invests in a Blended Portfolio. Including the expenses
allocated from the Blended Portfolios to each Fund, the Total Operating Expenses
of each Fund and the Total Operating Expenses of each Fund absent expense
reimbursements or waivers of the Funds and the Blended Portfolios would have
been: Diversified Equity Fund, A Shares, 1.52% and 4.06%, B Shares, 2.37% and
4.95%, and Growth Equity Fund, A Shares, 2.08% and 6.40%, B Shares, 2.92% and
7.44%.

(7) 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
The following 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 should not be considered a representation of past or future expenses
or return. Actual expenses and return may be greater or less than indicated.

(1) 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.

(2) Including expenses allocated from the Blended Portfolios, the expenses that
an investor would pay under this example would have been: Diversified Equity
Fund - A Shares, $60, $93, $127 and $224, B Shares, assuming redemption at the
end of the period, $66, $99, $144 and $283, and assuming no redemption, $25,
$78, $133 and $283; and Growth Equity Fund - A Shares, $66, $110, $156 and $283,
B Shares, assuming redemption at the end of the period, $71, $116, $172 and
$338, and assuming no redemption, $31, $95, $161 and $338, for one year, three
years, five years and ten years, respectively. See Footnote (6) to the "Annual
Operating Expenses" table above.

Hypothetical Expense Example

1 Year 3 Years 5 Years 10 Years
Income Equity Fund
A Shares 54 75 96 159
B Shares
Assuming redemption
at the end of the period 59 88 119 --
Assuming no redemption 19 58 99 --

ValuGrowth Stock Fund
A Shares 57 82 109 185
B Shares
Assuming redemption
at the end of the period 60 92 126 --
Assuming no redemption 20 62 106 --

Diversified Equity Fund
A Shares 54 74 96 158
B Shares
Assuming redemption
at the end of the period 58 87 117 --

8
<PAGE>

Assuming no redemption 18 57 97 --

Growth Equity Fund
A Shares 58 85 115 198
B Shares
Assuming redemption
at the end of the period 62 96 134 --
Assuming no redemption 22 66 114 --

Small Company Stock Fund
A Shares 57 82 109 185
B Shares
Assuming redemption
at the end of the period 60 92 127 --
Assuming no redemption 20 62 107 --

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

The following tables provide financial highlights for the Funds. 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, 1995 and 1996 was audited by KPMG Peat Marwick LLP, independent
auditors. The information for prior periods was audited by other independent
auditors. Each Fund's financial statements for the fiscal year ended May 31,
1996, 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 Funds' Annual
Report, which may be obtained from the Trust without charge. Effective May 31,
1996, Income Equity Fund, Diversified Equity Fund, Growth Equity Fund and
International Fund changed their fiscal year end to May 31. Prior thereto, the
Funds' fiscal year end was November 30.

Income Equity Fund
A Shares B Shares
Year Ended May 31, Year Ended May 31,
1996(a) 1996(a)

Beginning Net Asset Value per Share $26.94 $26.94
Net Investment Income 0.07 0.02

9
<PAGE>

Net Realized and Unrealized Gain (Loss) on Investments 0.55 0.58
Dividends from Net Investment Income -- --
Distributions from Net Realized Gains -- --
Ending Net Asset Value per Share $27.56 $27.54
Ratios to Average Net Assets:
Expenses(b) 0.91%(c) 1.72%(c)
Net Investment Income 3.69%(c) 2.92%(c)
Total Return 2.30% 2.23%
Portfolio Turnover Rate 0.69% 0.69%
Average Commission Rate(d) $0.0942 $0.0942
Net Assets at the End of Period (000's omitted) $31,448 $17,318

(a) Income Equity Fund commenced the offering of A and B Shares on May 2,
1996.

Expenses 1.91%(c) 2.63%(c)

(d) Amount represents the average commission per share paid to brokers on
the purchase or sale of equity securities.

ValuGrowth Stock Fund
A Shares B Shares
Six
Months
Ended
Year Ended May 31, May 31, Year Ended November 30, Year Ended May 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988(a) 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value per
Share $18.82 $17.17 $17.27 $16.30 $14.48 $11.67 $12.67 $10.03 $10.00 $18.65 $17.10 $17.12
Net Investment Income 0.13 0.17 0.10 0.17 0.09 0.18 0.21 0.18 0.15 (0.02) 0.07 0.07
Net Realized and Unrealized Gain
(Loss) on Investments 3.93 1.66 0.19 1.34 1.83 2.82 (0.55) 2.61 0.03 3.87 1.61 0.23
Dividends from Net Investment
Income (0.13) (0.18) (0.17) (0.17) (0.10) (0.19) (0.21) (0.15) (0.15) (0.10) (0.13) (0.10)
Distributions from Net Realized
Gains (0.12) -- (0.22) (0.37) -- -- (0.45) -- -- (0.12) -- (0.22)
</TABLE>

10
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ending Net Asset Value per
Share $22.63 $18.82 $17.17 $17.27 $16.30 $14.48 $11.67 $12.67 $10.03 $22.28 $18.65 $17.10
Ratios to Average Net Assets:
Expenses(b) 1.20% 1.20% 1.20% 1.20% 1.19%(c) 1.19% 1.20% 1.20% 1.19%(c) 1.96% 1.95% 1.95%(c)
Net Investment Income 0.63% 1.01% 1.06% 1.02% 1.34%(c) 1.57% 1.88% 1.58% 1.84%(c) (0.12%) 0.28% 0.25%(c)
Total Return 21.69% 10.72% 1.68% 9.32% 26.46%(c) 25.84% (2.91%) 28.00% 2.04%(c) 20.79% 9.88% 2.36%(c)
Portfolio Turnover Rate 105.43% 63.82% 86.07% 57.34% 29.50% 31.17% 38.67% 65.89% 30.90% 105.43% 63.82% 86.07%
Average Commission Rate(d) $0.0603 -- -- -- -- -- -- -- -- $0.0603 -- --
Net Assets at the End of Period
(000's omitted) $15,232 $12,138 $12,922 $109,669 $68,659 $4,853 $750 $411 $281 $5,130 $3,569 $2,218
</TABLE>

(a) ValuGrowth Stock Fund commenced the offering of A Shares 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses 1.42% 1.43% 1.43% 1.42% 1.64%(c) 4.33% 11.73% 8.38% 2.50%(c) 2.54% 2.51% 2.55%(c)
</TABLE>

(d) Amount represents the average commission per share paid to brokers on
the purchase or sale of equity securities.

Diversified Equity Fund
A Shares B Shares
Year Ended May 31, Year Ended May 31,
1996(a) 1996(a)
Beginning Net Asset Value per Share $29.89 $29.41
Net Investment Income 0.02 0.02
Net Realized and Unrealized Gain (Loss) on Investments 0.65 1.11
Dividends from Net Investment Income -- --
Distributions from Net Realized Gains -- --
Ending Net Asset Value per Share $30.56 $30.54
Ratios to Average Net Assets:
Expenses(b) 1.52%(c)(d) 2.37%(c)(d)
Net Investment Income 1.88%(c) 1.24%(c)

<PAGE>

Total Return 2.24% 3.84%
Portfolio Turnover Rate 5.76% 5.76%
Average Commission Rate(e) $0.0671 $0.0671
Net Assets at the End of Period (000's omitted) $2,699 $2,447

(a) Diversified Equity Fund commenced the offering of A Shares on May 2,
1996, and commenced the offering of B Shares on May 6, 1996.

Expenses 4.06%(c)(d) 4.95%(c)(d)

(d) Includes expenses allocated from Index Portfolio, Small Company
Portfolio and International Portfolio II of Core Trust (Delaware) ("Core
Portfolios") for A Shares and B Shares of 0.62% and 0.70%, respectively, net
of waivers of 1.30% and 1.49%, respectively.

(e) Amount represents the average commission per share paid to brokers on
the purchase or sale of equity securities.

Growth Equity Fund
A Shares B Shares
Year Ended May 31, Year Ended May 31,
1996(a) 1996(a)
Beginning Net Asset Value per Share $28.50 $28.18
Net Investment Income -- --
Net Realized and Unrealized Gain (Loss) on Investments 0.58 0.89
Dividends from Net Investment Income -- --
Distributions from Net Realized Gains -- --
Ending Net Asset Value per Share $29.08 $29.07
Ratios to Average Net Assets:
Expenses(b) 2.08%(c)(d) 2.92%(c)(d)
Net Investment Income (Loss) 0.34%(c) (0.40%)(c)
Total Return 2.04% 3.16%
Portfolio Turnover Rate 7.39% 7.39%
Average Commission Rate(e) $0.0617 $0.0617
Net Assets at the End of Period (000's omitted) $3,338 $703

(a) Growth Equity Fund commenced the offering of A Shares on May 2, 1996,
and commenced the offering of B Shares on May 6, 1996.

Expenses 6.40%(c)(d) 7.44%(c)(d)

<PAGE>

(d) Includes expenses allocated from Index Portfolio, Small Company
Portfolio and International Portfolio II of Core Trust (Delaware) ("Core
Portfolios") for A Shares and B Shares of 0.83% and 0.94%, respectively, net
of waivers of 2.99% and 3.42%, respectively.

(e) Amount represents the average commission per share paid to brokers on
the purchase or sale of equity securities.

Small Company Stock Fund
A Shares B Shares
Year Ended May 31, Year Ended May 31,
1996 1995 1994(a) 1996 1995 1994(a)
Beginning Net Asset Value
per Share $10.64 $ 9.84 $10.00 $10.56 $ 9.82 $10.00
Net Investment Income 0.01 0.12 0.07 (0.08) 0.07 0.06
Net Realized and Unrealized
Gain (Loss) on Investments 3.93 0.87 (0.15) 3.90 0.84 (0.17)
Dividends from Net Investment
Income (0.03) (0.11) (0.08) (0.02) (0.09) (0.07)
Distributions from Net
Realized Gains (0.53) (0.08) -- (0.53) (0.08) --
Ending Net Asset Value
per Share $14.02 $10.64 $ 9.84 $13.83 $10.56 $ 9.82
Ratios to Average Net Assets:
Expenses(b) 1.21% 0.53% 0.22% (c) 1.96% 1.27% 0.98% (c)
Net Investment Income 0.03% 1.14% 1.95% (c) (0.74%) 0.38% 1.27% (c)
Total Return 38.22% 10.19% (1.98%)(c) 37.32% 9.31% (2.77%)(c)
Portfolio Turnover Rate 134.53% 68.09% 14.98% 134.53% 68.09% 14.98%
Average Commission Rate(d) $0.0555 -- -- $0.0555 -- --
Net Assets at the End of
Period (000's omitted) $5,426 $1,540 $265 $4,125 $963 $195

(a) Small Company Stock Fund commenced the offering of A and B Shares on
December 31, 1993.

Expenses 1.87% 2.32% 10.66%(c) 2.96% 3.56% 20.87%(c)

(d) Amount represents the average commission per share paid to brokers on
the purchase or sale of equity securities.

<PAGE>

<TABLE>
<CAPTION>
International Fund
A Shares B Shares
Period Ended Period Ended
May 31, October 31, May 31, October 31,
1996 1995(a) 1996 1995(a)
<S> <C> <C> <C> <C>
Beginning Net Asset Value per Share $17.97 $16.50 $17.91 $16.50
Net Investment Income 0.35 0.01 0.25 0.01
Net Realized and Unrealized Gain (Loss) on Investments 1.83 1.46 1.83 1.40
Dividends from Net Investment Income (0.33) -- (0.28) --
Distributions from Net Realized Gains -- -- -- --
Ending Net Asset Value per Share $19.82 $17.97 $19.71 $17.91
Ratios to Average Net Assets:
Expenses(b) 1.50%(c)(d) 1.32%(c)(d) 2.25% (c)(d) 1.27%(c)d)
Net Investment Income (Loss) 0.92%(c) 0.26%(c) (0.02%)(c) 0.17%(c)
Total Return 12.31% 8.91% 11.79% 8.55%
Portfolio Turnover Rate(e) 14.12% 29.41% 14.12% 29.41%
Average Commission Rate(e) $0.0325 N/A $0.0325 N/A
Net Assets at the End of Period (000's omitted) $1,080 $216 $995 $395
</TABLE>

(a) International Fund commenced operations on November 11, 1994 and
commenced the offering of A and B Shares on April 1, 1995.

Expenses 2.51%(c)(d) 20.95%(c) 3.11%(c)(d) 14.57%(c)

(d) Includes 1995 and 1996 expenses allocated from International Portfolio
of Core Trust (Delaware) of 0.80% and 0.81%, respectively, net of waivers of
0.10% and 0.01%, respectively.

(e) Due to the fact that the Fund invests all of its investable assets in
International Portfolio, these rates reflect the rates of the Portfolio.

3. Investment Objectives and Policies

Income Equity Fund

<PAGE>

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.

15
<PAGE>

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."

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.

In addition to investing directly in securities, the Fund invests a portion
of its assets in shares of other registered investment companies. See
"Additional Investment Policies and Risk Considerations" and "Investments in
Core Trust" below.

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
investment 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 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:

16
<PAGE>
Diversified Equity Fund Allocation

Index style 25%
Income Equity Fund style 25%
Large Company Growth style 25%
Small Company style 10%
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
International Fund - and a large company growth investment style ("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. 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

17
<PAGE>
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 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, the performance of assets
allocated to this investment style can be expected to approximate, but not
equal, 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
18
<PAGE>
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 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, 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. Assets
invested in this style may be invested in the securities of companies whose
growth potential is, in the Adviser's opinion, generally unrecognized or
misperceived by the market. In addition, up to 20% of the total assets
invested in this style may be invested in American Depository Receipts,
European Depository Receipts and other, similar securities of foreign issuers
and

19
<PAGE>
the Adviser may attempt to reduce the overall risk of 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. In using this style, the Adviser does not currently invest in
preferred stock or securities convertible into common stock but reserves the
right to do so in the future.

Small Company 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 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 the 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

<PAGE>

Investment Considerations and Risk Factors." The Adviser will not invest more
than 10% of the 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.

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.

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 markets.
Frequently, such
21
<PAGE>

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.

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."

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.

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

<PAGE>

considered only as a vehicle for international diversification and not as a
complete investment program.

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. Therefore,
although the following discusses the investment policies of the Portfolio, it
applies equally to the Fund. 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

<PAGE>

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.

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.

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,

<PAGE>

auditing and financial reporting standards differ from those in the United
States and, accordingly, less information may be available about foreign
companies than is available about issuers of comparable securities in the
United States; and foreign securities may trade less frequently and with
lower volume and may exhibit greater price volatility than United States
securities.

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

Income from foreign securities will be received and realized in foreign
currencies, and International Portfolio is required to compute and distribute
income in U.S. dollars. Accordingly, a decline in the value of a particular
foreign currency against the U.S. dollar 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 (and International Portfolio'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.

<PAGE>

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. All investment policies relate to each Fund and, unless
otherwise noted, not to a portion of a Fund that invests in a particular
investment style.

Borrowing and Lending. 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 or emergency
purposes, including the meeting of redemption requests, but 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. International Fund may invest up to 100% of its investment assets
in another investment company such as International Portfolio and Diversified
Equity Fund, Growth Equity Fund and Income Equity Fund each 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

<PAGE>

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, generally, 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 a securities exchange or in the over-the-counter market and may not
be traded every day 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. 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.

<PAGE>

The rating categories for convertible sec urities 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.
Currently, the Funds only invest in convertible securities that are
investment grade. 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.

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.

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
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.

<PAGE>

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.

Repurchase Agreements and Lending of Portfolio Securities. Each Fund may
enter into repurchase agreements and may lend 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 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

<PAGE>

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.

An 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
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.

<PAGE>

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 investment advisers 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 and, with respect to their assets invested in the
International Fund style, Diversified Equity Fund with Growth Equity Fund,
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. 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." An annual
portfolio turnover

<PAGE>

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.

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 pursuant to 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 is to duplicate the return of the
Standard & Poor's 500 Composite Stock Price Index. 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. 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 the results of the Funds, monitor
investment activities and practices and discuss other matters affecting the
Funds and the

<PAGE>

Trust. The Board consists of seven persons and the board of trustees of Core
Trust consists of four persons. The SAI contains general background
information about the Trustees and officers of the Trust and of Core Trust.

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, which is
located at Norwest Center, Sixth Street and Marquette, Minneapolis, Minnesota
55479-0063, 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 June 30, 1996, Norwest Corporation was the 12th
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 $22 billion.

As part of its regular banking operations, Norwest Bank Minnesota, N.A. may
make loans to public companies. Thus, it may be possible, from time to time,
for a Fund to hold or acquire the securities of issuers which are also
lending clients of Norwest. A lending relationship will not be a factor in
the selection of portfolio securities for a Fund.

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
Income Equity Fund, Diversified Equity Fund and Growth Equity Fund at an
annual rate of 0.50%, 0.65% and 0.90%, respectively, of each Fund's average
daily net assets. With respect to ValuGrowth 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.

<PAGE>

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 clients, including
institutional investors. As of October 1, 1996, Crestone managed assets with
a value of approximately $405 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. 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.

<PAGE>

plc is the holding company parent of a large worldwide group of banks and
financial services companies (referred to as the "Schroder Group"), with
associated companies and branch and representative offices located in
seventeen countries worldwide. The Schroder Group specializes in providing
investment management services and has assets under management currently in
excess of $100 billion.

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 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 would 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 "
- -Investments in Core Trust," Diversified Equity Fund and Growth Equity Fund
invest 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 and International Portfolio under their
investment advisory agreements.

Portfolio Managers. Many persons on the advisory staffs 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:

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 S. Lunt, CFA and Mr. Roger Henry, CFA. Prior
to joining Norwest in 1992, Mr. Lunt, who leads the ValuGrowth Stock Fund
management team, was a portfolio manager for FirsTier Bank and a securities
analyst for Woodmen Accident and Life Company. Mr. Lunt received a MBA from

<PAGE>

the University of Nebraska at Omaha. Mr. Henry, an institutional portfolio
manager for Norwest, joined Norwest in 1994. For nearly eighteen years, Mr.
Henry served in various capacities, encompassing all aspects of the
investment management business, at the Minnesota State Investment Board. Mr.
Henry also served as President of the Twin Cities Society of Security
Analysts.

Mr. Henry received a MBA from the University of Minnesota.

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/Index Portfolio - 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.

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

<PAGE>

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.

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.

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

Management, Administration and Distribution Services

Pursuant to an Administration Agreement with the Trust, FAS is responsible
for performing certain administrative services necessary for the Trust's
operations with respect to each Fund including, but not limited to (i)
preparing and printing updates of the Trust's registration statement,
prospectuses and statements of additional information, the Trust's tax
returns, and reports to its shareholders, the SEC and state and other
securities administrators, (ii) preparing proxy and information statements
and any other communications to shareholders, (iii) monitoring the sale of
shares and ensuring that such shares are properly and duly registered with
the SEC and applicable state and other securities commissions and (iv)
determining the amount of and supervising the declaration of dividends and
other distributions to shareholders.

<PAGE>

The management and administrative fees payable to FFSI and FAS, respectively,
by the Trust with respect to each Fund are based on the average daily net
assets of the respective Fund at the following rates: ValuGrowth Stock Fund
and Small Company Stock Fund, 0.10%; and Income Equity Fund, Diversified
Equity Fund, Growth Equity Fund, Small Company Growth Fund and International
Fund, 0.05%.

In addition, pursuant to a separate Administrative 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, the investment adviser to the International Portfolio, monitoring
and reporting to the Board on the performance of the International Portfolio
and reimbursing the Fund for certain excess expenses. No fees are payable
under this agreement if the 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 many other mutual
funds, including other funds of the Trust, due in part to the nature of the
Fund's structure and the Fund's investment policies.

Pursuant to a separate agreement, Forum Financial Corp. ("FFC") provides
portfolio accounting services to each Fund. FFSI, FAS, and FCC are members of
the Forum Financial Group of companies which together provide a full range of
services to the investment company and financial services industry. As of
October 1, 1996, FFSI, FAS and FCC were controlled by John Y. Keffer,
President and Chairman of the Trust.

<PAGE>

B Shares to broker-dealers who sell shares of the Funds. Normally, FFSI will
make payments to broker-dealers as discussed under "How to Buy Shares
- -Alternative Distribution Arrangements." From its own resources, FFSI may pay
additional fees to broker-dealers or other persons for distribution or other
services related to the Funds. 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."

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
FFSI, 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 and Small
Company 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.
The Chase Manhatten 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 these Portfolios.

Expenses of the Funds

<PAGE>

Each service provider to the Trust or 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, 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 a Fund.

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 May 31, 1996, as a percentage of average net
assets, were: Small Company Portfolio, 0.15%, Index Portfolio, 0.17% and
International Portfolio II, 0.24%. 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>

Fund shares become entitled to receive dividends and distributions on the
next Fund Business Day after a purchase 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 56. Checks are accepted at full value subject
to collection. If a check does not clear, the purchase order will be canceled
and the investor will be liable for any losses or fees incurred by the Trust,
the Transfer Agent or FFSI.

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>

who purchase A Shares of a Fund, may receive payments from FFSI 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.

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

Account Application

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

Norwest Advantage Funds
[Name of Fund]
Norwest Bank Minnesota, N.A.
Transfer Agent

<PAGE>

733 Marquette Avenue
Minneapolis, MN 55479-0040

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

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>

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

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
Less than $50,000 4.50% 4.71% 4.05%
$50,000 to $99,999 3.50 3.63 3.15
$100,000 to $499,000 2.50 2.56 2.25
$500,000 to $999,000 2.00 2.04 1.80
$1,000,000 and over None None None

* Rounded to the nearest one-hundredth percent

FFSI 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, FFSI will reallow
discounts to selected broker-dealers in the amounts indicated in the table
above. In addition, FFSI may elect to reallow the entire sales charge to
selected broker-dealers for all sales with respect to which orders are placed
with FFSI. The broker-dealers' reallowance may be changed from time to time.
FFSI 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>

In addition, from time to time and at its own expense, FFSI 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: (a) by 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), (b) by
trustees and officers of the Trust; directors, officers and full-time
employees of FFSI, 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, (c) by any registered investment adviser with
whom FFSI has entered into a share purchase agreement and which is acting on
behalf of its fiduciary customer accounts, (d) of A Shares of a Fund made
through the Directed Dividend Option from a fund of the Trust that charges a
front-end sales charge (see "Dividends and Tax Matters,") or (e) of at least
$50,000 through an individual retirement account in A Shares of Diversified
Equity Fund or Growth Equity Fund, when the shareholder makes a non-binding
commitment to subsequently enroll the assets in the Norwest WealthBuilder IRA
program, an asset allocation program offered by Norwest Investment Services,
Inc. ("NISI"). In connection with purchases of A Shares of Diversified Equity
Fund or Growth Equity Fund with no sales charge as described in paragraph
(e), FFSI makes payments to NISI of up to 1.00% of the value of the shares
purchased. Shares sold without a sales charge may not be resold except to the
Funds and share purchases must be made for investment purposes.

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 imposed 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.

<PAGE>

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, FFSI 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 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.

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.

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.

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.

<PAGE>

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.

Contingent Deferred Sales
Charge as a % of Dollar
Amount of Purchase Period Shares Held Amount Subject to Charge
$1,000,000 to $2,499,999 Less than one year 1.00%
One to two years 0.75%
$2,500,000 to $4,999,999 Less than one year 0.50%
Over $5,000,000 Less than one year 0.25%

No contingent deferred sales charge is charged on redemptions to the same extent
as described under "B Shares - Contingent Deferred Sales Charge" below. The
contingent deferred sales charge on shares purchased through an exchange from
another fund of the Trust is based upon the original purchase date and price of
the other Fund's shares. For A shareholders with a Statement of Intention that
do not purchase $1,000,000 of 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 FFSI, to compensate FFSI for its distribution activities. The
distribution payments due to FFSI 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

<PAGE>

distribution charges (as described below). The current sales commission rate
is 4.0% and FFSI 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 distribution services agreement between FFSI and the Trust, FFSI
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 FFSI 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 FFSI 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. FFSI 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 FFSI
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 FFSI. At May 31, 1996, Income Equity Fund,
ValuGrowth Stock Fund, Diversified Equity Fund, Growth Equity Fund, Small
Company Stock Fund and International Fund had uncovered distribution expenses
of $565,223, $138,168, $88,615, $20,558, $117,941 and $34,880, respectively,
or approximately 3.26%, 2.69%, 3.62%, 2.92%, 2.86% and 3.51% 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 FFSI with respect to a Fund is not related directly to
the amount of expenses incurred by FFSI in connection with providing
distribution services to the B Shares and may be higher or lower than those
expenses. FFSI 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 FFSI exceed the
total expenses incurred by FFSI in distributing B Shares.

Pursuant to the Plan, each Fund has agreed also to pay Ffsi 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 Ffsi 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

<PAGE>

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 Ffsi 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.

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 Ffsi (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 Ffsi with respect to those shares in fiscal years subsequent to the
years in which those shares were sold. The payment delay would in turn result
in the incurrence and payment of increased interest fees under the Plan.

Contingent Deferred Sales Charge. B Shares of 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.

<PAGE>

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
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 Fund of shareholder accounts with low account
balances, (iii) redemptions of Shares following the death or disability of a
shareholder if the Fund is notified within one year of the shareholder's death
or disability, (iv) redemptions to effect a distribution (other than a lump sum
distribution) from an IRA, Keogh plan or Section 403(b) custodial account or
from a qualified retirement plan and (v) redemptions by any registered
investment adviser with whom FFSI has entered into a share purchase agreement
and which is acting on behalf of its fiduciary customer accounts. 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

<PAGE>

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
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.

<PAGE>

Redemption Procedures

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

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

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

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

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
Stable Income Fund, Intermediate Government Income Fund, Income Fund, Total
Return Bond Fund, Tax-Free Income Fund, Colorado Tax-Free Fund and Minnesota
Tax-Free 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

<PAGE>

the funds of the Trust that offer shares exchangeable with the Shares of the
Funds, can be obtained through Ffsi by contacting the Transfer Agent.

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.

Exchanges may only be made between identically registered accounts or to open a
new account. A new account application is required to open a new account through
an exchange if the new account will not have an identical registration and the
same shareholder privileges as the account from which the exchange is being
made. Shareholders may only exchange into a fund if that fund's shares may
legally be sold in the shareholder's state of residence.

Under Federal tax law, the 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.

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

<PAGE>

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

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

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

Automatic Investment Plan

Under the 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

<PAGE>

individual's spouse is an active participant in an employer-sponsored
retirement plan and has adjusted gross income above certain levels.

Automatic Withdrawal Plan

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

Reopening Accounts

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. Dividends of net investment income currently are declared
and paid quarterly by Income Equity Fund, ValuGrowth Stock Fund and Small
Company 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.

<PAGE>

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.

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

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.

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

<PAGE>

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 (except International
Fund's) from net investment income will be eligible for the dividends received
deduction for corporations. The amount of such dividends eligible for the
dividends received deduction is limited to the amount of dividends from domestic
corporations received during 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.

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.

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

<PAGE>

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. FFSI 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 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, 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.

<PAGE>

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 a Fund's 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 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.

<PAGE>

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.

The Trust and Its Shares

The Trust was originally organized under the name "Prime Value Funds, Inc." as a
Maryland corporation on August 29, 1986, and on July 30, 1993, was reorganized
as a Delaware business trust under the name "Norwest Funds." On October 1, 1995,
the Trust changed its name to "Norwest Advantage Funds." The Trust has an
unlimited number of authorized shares of beneficial interest. The Board may,
without shareholder approval, divide the authorized shares into an unlimited
number of separate portfolios or series (such as a Fund) and may divide
portfolios or series into classes of shares (such as A Shares), and the costs of
doing so will be borne by the Trust. Currently the authorized shares of the
Trust are divided into twenty-eight separate series.

Other Classes of Shares. The Funds may issue shares of other classes. The Funds
currently issue three classes of shares, I Shares, A Shares and B Shares, and
may in the future create additional class types. I Shares are offered to
fiduciary, agency and custodial clients of bank trust departments, trust
companies and their affiliates without any sales charges. 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.

<PAGE>

International Portfolio normally will not hold meetings of investors except as
required by the Act. Each investor in International Portfolio 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 Act
and other applicable law, International Fund will solicit proxies from
shareholders of International Fund and will vote its interest in International
Portfolio in proportion to the votes cast by its shareholders. As there are
other investors in International Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by International Fund
shareholders will receive a majority of votes cast by all investors in
International Portfolio; indeed, other investors holding a majority interest in
International Portfolio could have voting control of the Portfolio.

As of September 1, 1996, Emseg & Co., a Norwest nominee through which various
customers of Norwest, including employee benefit plans, own shares of the Funds,
may be deemed to have controlled, for purposes of the 1940 Act, Income Equity
Fund, Diversified Equity Fund, Growth Equity Fund, Small Company Stock Fund and
International Fund. As of the same date, Dentru & Co., a nominee of Norwest Bank
Colorado, N.A. through which some of its customers own shares of the Funds,
owned of record more than 25% of the outstanding
B Shares of ValuGrowth Stock Fund. From time to time, these shareholders or
other shareholders may own a large percentage of the shares of a Fund and,

<PAGE>

accordingly, may be able to greatly affect (if not determine) the outcome of
a shareholder vote.

Core Trust Structure

International Fund seeks to achieve its investment objective by investing all of
its investable assets in the International Portfolio, which has the same
investment objective and substantially identical investment policies as the
Fund. Accordingly, International Portfolio directly acquires its own securities
and the Fund acquires an indirect interest in those securities. International
Portfolio is a separate series of Core Trust, a business trust organized under
the laws of the State of Delaware in September 1995. Core Trust is registered
under the Act as an open-end management investment company and currently has
four separate portfolios. The assets of 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 "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. 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
International Fund and will pay a proportionate share of International
Portfolio's expenses. As of October 1, 1996, International Portfolio had one
other investor.

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, and could have different advisory and other fees and expenses than the
International Fund. Therefore, International Fund shareholders may have
different returns than shareholders in another investment company that invests
exclusively in International Portfolio. Information regarding any such funds is
available from Core Trust by calling Ffsi at (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 International Fund that
redeemed its interest in International Portfolio, International Portfolio's
remaining investors (including the

<PAGE>

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 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.

Core Trust Blended Portfolios. Diversified Equity Fund and Growth Equity Fund
are permitted to invest a portion of their assets that are managed using the
Small Company style, Index style and International Fund style 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 previously did not permit a Fund to invest all of its assets in a Blended
Portfolio. Accordingly, International Fund does not currently invest in
International Portfolio II.

Investment decisions by the portfolio managers of the Portfolios are made
independently. Therefore, the portfolio manager of one Portfolio in which a
Blended Fund invests may purchase shares of the same issuer whose shares are
being sold by the portfolio manager of another Portfolio in which the Blended

<PAGE>

Fund invests. This could result in an indirect expense to the Blended Fund
without accomplishing any investment purpose.

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.

Shareholder Information:
Norwest Bank Minnesota, N.A.
733 Marquette Avenue
Minneapolis, Minnesota 55479-0040
667-8833 (Minneapolis/St. Paul)
800-338-1348 (Elsewhere)

- -C-1996 Norwest Advantage Funds
MFBPS003 10/96

<PAGE>

Income Funds

Prospectus

October 1, 1996

Stable Income Fund
Intermediate Government Income Fund
Income Fund
Total Return Bond Fund

Not FDIC Insured

October 1, 1996

This Prospectus offers A Shares and B Shares of Stable Income Fund, Intermediate
Government Income 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.

<PAGE>

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

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 Government Income 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.

<PAGE>

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 June 30, 1996, managed assets totaling approximately $22 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."

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
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

<PAGE>

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.

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."

Shareholder Features

<PAGE>

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."

Dividends
Dividends of Stable Income Fund and Intermediate Government Income Fund's net
investment income are declared and paid monthly. Dividends of Income Fund and
Total Return Bond 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.

<PAGE>

Investment Policies and Risk Considerations - Mortgage-Backed Securities" and
"- Asset-Backed Securities." As noted under "Financial Highlights," the
portfolio turnover rate for certain Funds may from time to time be high,
resulting in increased brokerage costs or short-term capital gains or losses.
See "Additional Investment Policies and Risk Considerations - Portfolio
Transactions."

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.
<TABLE>
<CAPTION>

Shareholder Transaction Expenses
(applicable to each Fund)

Intermediate Total
Government Stable Income Return
Income Fund, Income Fund Fund and Bond Fund
A B A B
Shares(1) Shares(2) Shares(1) Shares(2)
<S> <C> <C> <C> <C>
Maximum sales charge imposed on purchases
(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)
<TABLE>
<CAPTION>

Intermediate
Government Stable Total Return
Income Fund(4) Income Fund(4) Income Fund 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% 0.40% 0.40% 0.50% 0.50%
Rule 12b-1 Fees(5) None 0.75% None 0.75% None 0.55% None 0.53%

<PAGE>

Other Expenses(6) 0.40% 0.56% 0.42% 0.56% 0.35% 0.55% 0.25% 0.47%
Total Operating Expenses 0.70% 1.61% 0.75% 1.64% 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 Government Income 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 expenses are based
on amounts incurred during each Fund's most recent fiscal year ended May 31,
1996, except that the expenses of Total Return Bond Fund and the Rule 12b-1 fees
of Stable Income Fund and Intermediate Government Income Fund have been restated
to reflect the current expenses incurred by those Funds. Absent waivers, the
Investment Advisory Fees for A Shares and B Shares of Income Fund would be
0.50%. With respect to A Shares, absent expense reimbursements and fee waivers,
the expenses of Stable Income Fund, Intermediate Government Income Fund, Income
Fund and Total Return Bond Fund would be: Other Expenses, 1.92%, 1.41%, 0.76%
and 1.08%, respectively; and Total Operating Expenses, 2.22%, 1.74%, 1.16% and
1.58%, respectively. With respect to B Shares, absent expense reimbursements and
fee waivers, the expenses of Stable Income Fund, Intermediate Government Income
Fund, Income Fund and Total Return Bond Fund would

<PAGE>

be: Other Expenses, 2.12%, 1.57%, 1.32% and 1.25%, respectively; and Total
Operating Expenses, 3.07%, 2.65%, 2.27% and 2.50%, respectively. Expense
reimbursements and fee waivers are voluntary and may be reduced or eliminated at
any time.

(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 National Association of
Securities Dealers, Inc.

(6) 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.

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
Stable Income Fund

<PAGE>

A Shares 22 38 56 105
B Shares
Assuming redemption
at the end of the period 31 51 -- --
Assuming no redemption 16 51 -- --

Intermediate Government Income Fund
A Shares 45 61 79 130
B Shares
Assuming redemption
at the end of the period 47 72 89 --
Assuming no redemption 17 52 89 --

Income Fund
A Shares 45 61 78 128
B Shares
Assuming redemption
at the end of the period 45 68 82 --
Assuming no redemption 15 48 82 --

Total Return Bond Fund
A Shares 45 61 78 127
B Shares
Assuming redemption
at the end of the period 45 68 83 --
Assuming no redemption 15 48 83 --

2. Financial Highlights

The following tables provide financial highlights for each 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, 1995 and 1996, was audited by KPMG Peat Marwick LLP, independent
auditors. The information for prior periods was audited by other independent
auditors. Each Fund's financial statements for the fiscal year ended May 31,
1996, 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.

Stable Income Fund
A Shares B Shares
Year Ended May 31, Year Ended May 31,
1996(a) 1996(a)
<S> <C> <C>
Beginning Net Asset Value per Share $10.22 $10.23
Net Investment Income 0.02 0.02
Net Realized and Unrealized Gain (Loss) on Investments -- (0.01)
Dividends from Net Investment Income (0.04) (0.04)
Distributions from Net Realized Gains -- --
Ending Net Asset Value per Share $10.20 $10.20
Ratios to Average Net Assets:
Expenses(b) 0.70%(c) 1.42%(c)
Net Investment Income 5.77%(c) 5.02%(c)
Total Return 0.23% 0.12%
Portfolio Turnover Rate 109.95% 109.95%
Net Assets at the End of Period (000's omitted) $16,256 $867

</TABLE>

(a) The Fund commenced the offering of A Shares on May 2, 1996 and commenced
the offering of
B Shares on May 17, 1996.
(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 2.22%(c) 3.07%(c)
(c) Annualized.

Intermediate Government Income Fund
A Shares B Shares
Year Ended May 31, Year Ended May 31,
1996(a) 1996(a)
<S> <C> <C>

Beginning Net Asset Value per Share $10.89 $10.97
Net Investment Income 0.03 0.03
Net Realized and Unrealized Gain (Loss) on Investments -- (0.08)
Dividends from Net Investment Income (0.03) (0.03)
Distributions from Net Realized Gains -- --
Ending Net Asset Value per Share $10.89 $10.89
Ratios to Average Net Assets:

<PAGE>

Expenses(b) 0.75%(c) 1.35%(c)
Net Investment Income 7.32%(c) 5.56%(c)
Total Return 0.26% 0.49%
Portfolio Turnover Rate 74.64% 74.64%
Net Assets at the End of Period (000's omitted) $16,562 $10,682

</TABLE>

(a) The Fund commenced the offering of A Shares on May 2, 1996 and commenced
the offering of B Shares on May 17, 1996.
(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 1.74%(c) 2.65%(c)
(c) Annualized.

Income Fund
<TABLE>
<CAPTION>

A Shares
Year Ended May 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share 9.63 9.52 10.61 10.52 10.23 9.94 10 9.95 10
Net Investment Income 0.61 0.65 0.7 0.77 0.82 0.89 0.9 0.79 0.66
Net Realized and Unrealized
Gain (Loss) on
Investments -0.36 0.11 -0.83 0.39 0.53 0.29 -0.06 0.05 0.05
Dividends from Net Investment
Income -0.61 -0.65 -0.7 -0.77 -0.82 -0.89 -0.9 -0.79 -0.66
Distributions from Net
Realized Gains -- -- -0.26 -0.3 -0.24 -- -- -- --
Ending Net Asset Value per
Share 9.27 9.63 9.52 10.61 10.52 10.23 9.94 10 9.95
Ratios to Average Net Assets:
Expenses(b) 0.0075 0.0075 0.006 0.006 0.0031 0.0016 0.0019 0.0007 0.70%(c)

</TABLE>

B Shares
Year Ended May 31,
1996 1995 1994(a)

Beginning Net Asset Value per
Share 9.61 9.51 10.67
Net Investment Income 0.54 0.58 0.5
Net Realized and Unrealized
Gain (Loss) on
Investments -0.35 0.1 -0.9
Dividends from Net Investment
Income -0.54 -0.58 -0.5
Distributions from Net Realized
Gains -- -- -0.26
Ending Net Asset Value
per Share 9.26 9.61 9.51
Ratios to Average
Net Assets:
Expenses(b) 0.015 0.015 1.33%(c)

A Shares
Year Ended May 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Net Investment Income 0.0633 0.0702 0.0672 0.0718 0.078 0.0882 0.0898 0.0862 6.92%(c)
Total Return 0.0258 0.0849 -0.0158 0.1146 0.1358 0.1238 0.0871 0.0878 6.45%(c)
Portfolio Turnover Rate 2.7017 0.9883 0.2667 0.8798 0.8424 0.6133 0.4381 0.4808 0
Net Assets at the End of
Period (000's omitted) 5521 6231 6177 85252 63973 50138 37932 27939 2279

</TABLE>
B Shares
Year Ended May 31,
1996 1995 1994(a)

Net Investment Income 0.0557 0.0624 5.82%(c)
Total Return 0.0192 0.0757 (4.82%)(c)
Portfolio Turnover Rate 2.7017 0.9883 0.2667
Net Assets at the End of
Period (000's omitted) 3292 3296 2605

(a) The Fund commenced the offering of A Shares 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:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses 1.16% 1.24% 1.16% 1.10% 1.08% 1.11% 1.13% 1.10% 2.28%(c) 2.27% 2.21% 2.08%(c)

</TABLE>
(c) Annualized.

Total Return Bond Fund
<TABLE>
<CAPTION>

A Shares B Shares
Year Ended May 31, Year Ended May 31,
1996 1995 1994(a) 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value per Share $9.73 $ 9.54 $10.00 $9.73 $ 9.54 $10.00
Net Investment Income 0.64 0.67 0.27 0.57 0.59 0.24
Net Realized and Unrealized Gain (Loss)
on Investments (0.31) 0.19 (0.46) (0.31) 0.19 (0.46)
Dividends from Net Investment Income (0.64) (0.67) (0.27) (0.57) (0.59) (0.24)
Distributions from Net Realized Gains (0.02) -- -- (0.02) -- --
Ending Net Asset Value per Share $9.40 $ 9.73 $ 9.54 $9.40 $ 9.73 $ 9.54
Ratios to Average Net Assets:
Expenses(b) 0.76% 0.64% 0.37%(c) 1.51% 1.41% 1.11%(c)

<PAGE>

Net Investment Income 6.48% 6.94% 6.04%(c) 5.75% 6.17% 5.40%(c)
Total Return 3.41% 9.42% (4.64%)(c) 2.63% 8.59% (5.23%)(c)
Portfolio Turnover Rate 77.49% 35.19% 37.50% 77.49% 35.19% 37.50%
Net Assets at the End of Period (000's omitted) $2,010 $599 $150 $2,098 $919 $186

</TABLE>

(a) The Fund commenced the offering of A and B Shares on December 31, 1993.
(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratio of
expenses to average net assets would have been:
Expenses 1.57% 2.38% 13.29%(c) 2.48% 3.09% 8.29%(c)
(c) Annualized.

3. Investment Objectives and Policies

Stable Income Fund

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

Investment Policies. The Fund seeks to 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

<PAGE>

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.

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.

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 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. These instruments are

<PAGE>

often referred to as "derivatives," which may be defined as financial
instruments whose performance is derived, at least in part, from the performance
of another asset (such as a security, currency or an index of securities). An
option is covered if, so long as the Fund is obligated under the option, it owns
an offsetting position in the underlying security or futures contract or
maintains a segregated account of liquid, high-grade debt instruments with a
value at all times sufficient to cover the Fund's obligations under the option.

Intermediate Government
Income Fund

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

Investment Policies. The Fund seeks to attain its investment objective by
investing primarily in fixed and variable rate U.S. Government Securities. Under
normal circumstances, the Fund intends to invest at least 65% 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% 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

<PAGE>

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 15 years. Under normal circumstances, the Fund's
portfolio of securities will have an average dollar-weighted maturity of between
3 and 10 years. Under normal circumstances, the Fund's portfolio of securities
will have a duration of between 70% and 130% of the duration of a 5-year
Treasury Note. 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>

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. [These instruments
are often referred to as "derivatives," which may be defined as financial
instruments whose performance is derived, at least in part, from the performance
of another asset (such as a security, currency or an index of securities).] 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.

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.

<PAGE>

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.

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 15 years. The Fund's portfolio of securities will normally have a duration
of between 70% and 130% 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

<PAGE>

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 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.

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 (convertible debt and convertible preferred stock),
but may

<PAGE>

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.

<PAGE>

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, Income Fund and Total Return Bond Fund 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, Stable Income Fund and
Intermediate Government Income Fund may borrow money for temporary or emergency
purposes, including the meeting of redemption requests, but not in excess of
331/3% 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, except in the case of Intermediate Government Income Fund.
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. In
addition, from time to time and at its own expense, FFSI 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.

<PAGE>

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. Each of Stable Income
Fund and Intermediate Government Income 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

<PAGE>

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-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

<PAGE>

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.

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

<PAGE>

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 period, to prepay their
outstanding

<PAGE>

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.

<PAGE>

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." 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 short-term capital gains or
losses. It is each Fund's policy to obtain best net results in effecting
portfolio transactions. The Advisers 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.

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

<PAGE>

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 331/3% of the value of its total assets.

<PAGE>

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
Government Income 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,

<PAGE>

during the roll period no payment is made for the securities purchased and no
interest or principal payments on the security accrue to the purchaser, but the
Fund assumes the risk of ownership. A Fund is compensated for entering into
dollar roll transactions by the difference between the current sales price and
the forward price for the future purchase, as well as by the interest earned on
the cash proceeds of the initial sale. Like other when-issued securities or firm
commitment agreements, dollar roll transactions involve the risk that the market
value of the securities sold by the Fund may decline below the price at which a
Fund is committed to purchase similar securities. In the event the buyer of
securities under a dollar roll transaction becomes insolvent, the Fund's use of
the proceeds of the transaction may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. The Funds will engage in roll
transactions for the purpose of acquiring securities for its portfolio and not
for investment leverage. Each of Stable Income Fund and Intermediate Government
Income 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 Government Income 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

<PAGE>

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 Government Income 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.

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

<PAGE>

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.

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.

Purchasing Securities on Margin. Intermediate Government Income 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

<PAGE>

Intermediate Government Income Fund may purchase securities on margin and sell
securities short (other than against the box). Each of these transactions
involves 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 with 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

<PAGE>

asset value per share than if the Fund were not leveraged. In an extreme case,
if the Fund's current investment income were not sufficient to meet the interest
expense of leveraging, it could be necessary for the Fund to liquidate certain
of its investments at an inappropriate time. The use of leverage may be
considered speculative.

Segregated Account. In order to limit the risks involved in various transactions
involving leverage, the Trust's custodian will set aside and maintain in a
segregated account cash, U.S. Government Securities and other liquid, high-grade
debt securities in accordance with SEC guidelines. The accounts value, which is
marked to market daily, will be at least equal to the Fund's commitments under
these transactions. The Fund's commitments may include (i) the Fund's
obligations to repurchase securities under a reverse repurchase agreement,
settle when-issued and forward commitment transactions and make payments under a
cap or floor (see "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.

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.

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

<PAGE>

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. 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

<PAGE>

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 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 5 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

<PAGE>

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 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

<PAGE>

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.

<PAGE>

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 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

<PAGE>

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. Each of Stable Income Fund and Intermediate
Government Income 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. These instruments are often
referred to as "derivatives," which may be defined as financial instruments
whose performance is derived at least in part, from the performance of another
asset (such as a security, currency or an index of securities). The Funds only
may 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. 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

<PAGE>

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.

<PAGE>

Limitations. 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% 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

<PAGE>

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.

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. The SAI contains general background
information about the Trustees and officers of the Trust.

Investment Advisory Services

<PAGE>

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, which is located at Norwest Center, Sixth Street and Marquette,
Minneapolis, Minnesota 55479-0063, 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 June 30, 1996, Norwest Corporation was the
12th 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 $22 billion.

As part of its regular banking operations, Norwest Bank Minnesota, N.A. may make
loans to public companies. Thus, it may be possible, from time to time, for a
Fund to hold or acquire the securities of issuers which are also lending clients
of Norwest. A lending relationship will not be a factor in the selection of
portfolio securities for a Fund.

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 Government Income 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 and Senior Portfolio
Manager of Norwest since 1989 and principal of Galliard Capital Management, Inc.
since 1995. Mr. Tourville has been associated with Norwest since 1985 and has
served as the Fund's portfolio manager since its inception.

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

<PAGE>

Ms. Grace was a portfolio manager of Norwest Bank from 1992-1993; an
Institutional Salesperson with Norwest Investment Services, Inc. from 1991-1992.
Ms. Grace has served as a portfolio manager for each Fund since May 25, 1995.
Total Return Bond Fund - Mr. David B. Kinney. Mr. Kinney, a Vice President and
Senior Portfolio Manager with Norwest, is also a Vice President of United
Capital Management, a part of Norwest Colorado, N.A., and has been associated
with Norwest since 1981. He has served as the Fund's portfolio manager since its
inception.

Management, Administration and Distribution Services

FFSI provides management services for each Fund and, pursuant to a Management
Agreement with the Trust, supervises the overall management of the Trust
(including the Trust's receipt of services for which the Trust is obligated to
pay). In this capacity FFSI provides the Trust with general office facilities,
provides persons satisfactory to the Board to serve as officers of the Trust and
oversees the performance of administrative and professional services rendered to
the Trust by others, including the Trust's custodian, transfer agent, and
administrators, as well as accountants, auditors, legal counsel and others.
Pursuant to an Administration Agreement with the Trust FAS is responsible for
performing certain administrative services necessary for the Trust's operations
with respect to each Fund including, but not limited to
(i) preparing and printing updates of the Trust's registration statement,
prospectuses and statements of additional information, the Trust's tax returns,
and reports to its shareholders, the SEC and state and other securities
administrators, (ii) preparing proxy and information statements and any other
communications to shareholders, (iii) monitoring the sales of shares and
ensuring that such shares are properly and duly registered with the SEC and
applicable state and other securities commissions and (iv) determining the
amount of and supervising the declaration of dividends and other distributions
to shareholders.

<PAGE>

investment adviser and is a member of the National Association of Securities
Dealers, Inc. The management and administrative fees payable to FFSI and FAS,
respectively, by the Trust with respect to each Fund are 0.05%, in the case of
Stable Income Fund and Intermediate Government Income Fund, and 0.10%, in the
case of Income Fund and Total Return Bond Fund, of each Fund's average daily net
assets.

Pursuant to a separate agreement, Forum Financial Corp. ("FFC") provides
portfolio accounting services to each Fund. FFSI, FAS and FFC are members of the
Forum Financial Group of companies which together provide a full range of
services to the investment company and financial services industry. As of
October 31, 1996, FFSI, FAS and FFC were controlled by John Y. Keffer, President
and Chairman of the Trust.

FFSI also acts as the distributor of the Shares pursuant to a Distribution
Services Agreement with the Trust. As the Funds' distributor, FFSI pays a
broker-dealers' reallowance on A Shares and a sales commission on
B Shares to broker-dealers who sell shares of the Funds. Normally, FFSI will
make payments to broker-dealers as discussed under "How to Buy Shares -
Alternative Distribution Arrangements." From its own resources, FFSI may pay
additional fees to broker-dealers or other persons for distribution or other
services related to the Funds. 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."

Shareholder Servicing
and Custody

<PAGE>

may be affiliates of the Transfer Agent or FFSI, 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, FFSI 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.

Each service provider to the Trust or 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, these
entities may elect to credit against the fees payable to them by their customers
or to rebate to

<PAGE>

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

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."

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 50. Checks are accepted at full value subject to
collection. If a check does not clear, the purchase order will be canceled and
the investor will be liable for any losses or fees incurred by the Trust, the
Transfer Agent or FFSI.

<PAGE>

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:

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

3. Through Financial Institutions. Shares may be purchased and redeemed
through certain broker-dealers, banks and other financial institutions
("Processing Organizations"). The Transfer Agent, FFSI 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 FFSI 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.

<PAGE>

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

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

<PAGE>

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

<PAGE>

"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.

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

<PAGE>

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 Government Income Fund,
Income Fund and
Total Return Bond Fund

Broker-Dealers'
Reallowance
Sales Charge As a Percentage of As a 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

FFSI 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, FFSI will reallow discounts to selected
broker-dealers in the amounts indicated in the table above. In addition, FFSI
may elect to reallow the entire sales charge to selected broker-dealers for all
sales with respect to which orders are placed with FFSI. The broker-dealers'
reallowance may be changed from time to time. FFSI 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.

<PAGE>

In addition, from time to time and at its own expense, FFSI 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.

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 imposed on the redeemed
shares at the time of their purchase a sales charge equal to or greater than
that applicable to the A

<PAGE>

Shares of that Fund. Investors should contact the Trust for further information
and to obtain the necessary forms.

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, FFSI 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 Government Income 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

<PAGE>

and the investor's spouse, direct ancestor or direct descendant may be combined
for purposes of ROA.

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%

<PAGE>

Intermediate Government Income 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 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 FFSI, to compensate
FFSI for its distribution activities. The distribution payments due to FFSI 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

<PAGE>

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 FFSI 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 FFSI and the Trust, FFSI 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 FFSI 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 FFSI 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. FFSI 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 FFSI 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 FFSI.
At May 31, 1996, Stable Income Fund, Intermediate Government Income Fund, Income
Fund and Total Return Bond Fund had uncovered distribution expenses of $17,409;
$230,269; $86,309; and $52,580, respectively, or approximately 2.01%, 2.16%,
2.67% and 2.51%, 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 FFSI with respect to a Fund is not related directly to the
amount of expenses

<PAGE>

incurred by FFSI in connection with providing distribution services to the B
Shares and may be higher or lower than those expenses. FFSI 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 FFSI exceed the total expenses incurred by FFSI in
distributing B Shares.

Pursuant to the Plan, each Fund has agreed also to pay FFSI 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 FFSI 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 FFSI (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

<PAGE>

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 FFSI with respect to those shares in fiscal years subsequent to the years in
which those shares were sold. The payment delay would in turn result in the
incurrence and payment of increased interest fees under the Plan.

Contingent Deferred Sales Charge. B Shares of 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.

Intermediate
Government Income 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

<PAGE>

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).

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

<PAGE>

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.

<PAGE>

is restricted) for any reason other than its customary weekend or holiday
closings, for any period during which an emergency exists as a result of which
disposal by the Fund of its portfolio securities or determination by the Fund of
the value of its net assets is not reasonably practicable and for such other
periods as the SEC may permit.

Redemption Procedures

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

<PAGE>

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

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

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

<PAGE>

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,
Income Equity Fund, ValuGrowthSM Stock Fund, Diversified Equity Fund, Growth
Equity Fund, Small Company Stock Fund, Contrarian Stock Fund and International
Fund. It is anticipated that the Trust may in the future create additional funds
that will offer shares that will be exchangeable with the 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
FFSI by contacting the Transfer Agent.

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.

<PAGE>

Exchanges may only be made between identically registered accounts or to open a
new account. A new account application is required to open a new account through
an exchange if the new account will not have an identical registration and the
same shareholder privileges as the account from which the exchange is being
made. Shareholders may only exchange into a fund if that fund's shares may
legally be sold in the shareholder's state of residence.

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

<PAGE>

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

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

Automatic Investment Plan

<PAGE>

Individual Retirement Accounts

Automatic Withdrawal Plan

Reopening Accounts

<PAGE>

8. Dividends and Tax Matters

Dividends

Dividends of Stable Income Fund and Intermediate Government Income Fund's net
investment income are declared and paid monthly. Dividends of Income Fund and
Total Return Bond Fund's net investment income are declared daily 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.

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.

<PAGE>

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.

<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. FFSI 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.,

<PAGE>

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

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

<PAGE>

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 Trust and Its Shares

The Trust was originally organized under the name "Prime Value Funds, Inc." as a
Maryland corporation on August 29, 1986, and on July 30, 1993, was reorganized
as a Delaware business trust under the name "Norwest Funds." On October 1, 1995,
the Trust changed its name to "Norwest Advantage Funds." The Trust has an
unlimited number of authorized shares of beneficial interest. The Board may,
without shareholder approval, divide the authorized shares into an unlimited
number of separate portfolios or series (such as the Funds) and may divide
portfolios or series into classes of shares (such as A Shares), and the costs of
doing so will be borne by the Trust. Currently the authorized shares of the
Trust are divided into twenty-eight separate series.

Other Classes of Shares. The Funds may issue shares of other classes. The Funds
currently issue three classes of shares: A Shares, B Shares and I Shares, and
may in the future

<PAGE>

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

Shareholder Voting and Other Rights. Each share of each portfolio of the Trust
and each class of shares has equal dividend, distribution, liquidation and
voting rights, and fractional shares have those rights proportionately, except
that expenses related to the distribution of the shares of each class (and
certain other expenses such as transfer agency and administration expenses) are
borne solely by those shares and each class votes separately with respect to the
provisions of any Rule 12b-1 plan which pertain to the class and other matters
for which separate class voting is appropriate under applicable law. Generally,
shares will be voted in the aggregate without 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

<PAGE>

assets and, upon redeeming shares, will receive the portion of the portfolio's
net assets represented by the redeemed shares.

As of September 1, 1996, Emseg & Co., a Norwest nominee through which various
customers of Norwest, including employee benefit plans, own shares of the Funds,
may be deemed to have controlled, for purposes of the 1940 Act, Stable Income
Fund and Intermediate Government Income Fund. As of the same date, Norwest
Income Bond Fund, a Norwest-sponsored collective trust fund that comprises
assets of customers of Norwest, may be deemed to have controlled Income Fund,
and Seret & Co., a nominee of Norwest Bank Colorado, N.A. through which some of
its customers own shares of the Funds, may be deemed to have controlled Total
Return Bond Fund. From time to time, these shareholders or other shareholders
may own a large percentage of the shares of a Fund and, accordingly, may be able
to greatly affect (if not determine) the outcome of a shareholder vote.

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.

Shareholder Information:
Norwest Bank Minnesota, N.A.
733 Marquette Avenue
Minneapolis, Minnesota 55479-0040
667-8833 (Minneapolis/St. Paul)
800-338-1348 (Elsewhere)

- -C-1996 Norwest Advantage Funds
MFBPB002 10/96

<PAGE>

Tax-Free Income Funds

Prospectus

October 1, 1996

Tax-Free Income Fund
Colorado Tax-Free Fund
Minnesota Tax-Free Fund

Not FDIC Insured

October 1, 1996

This Prospectus offers A Shares and B Shares of Tax-Free Income Fund,
Colorado Tax-Free Fund and Minnesota Tax-Free Fund (each a "Fund" and
collectively the "Funds"). The Funds are separate tax-exempt, fixed income
non-diversified portfolios of Norwest Advantage Funds (the "Trust"), which is
a registered open-end management investment company, except for Tax-Free
Income Fund, which is diversified.

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") dated October 1, 1996, as may be 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. Shares of the Colorado and
Minnesota Tax-Free Funds are offered solely to residents of Colorado and
Minnesota, respectively.

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

1
<PAGE>

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

1. Prospectus Summary

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

Tax-Free Income Fund seeks to produce current income exempt from Federal
income taxes. This objective is pursued by investing primarily in a portfolio
of investment grade municipal securities, the interest on which is free from
Federal income tax.

Colorado Tax-Free Fund seeks to provide shareholders with a high level of
current income exempt from both Federal and Colorado state income taxes
(including the alternative minimum tax) consistent with preservation of
capital. This objective is pursued by investing primarily in a portfolio of
investment grade municipal securities of Colorado issuers.

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

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 June 30, 1996, managed assets totaling
approximately $22 billion. See "Management -- Investment Advisory Services."
Norwest serves as

2
<PAGE>

the Trust's transfer agent, dividend disbursing agent and custodian. See
"Management -- Shareholder Servicing and Custody."

Fund Management and Administration
The manager of the Trust and distributor of its shares is Forum Financial
Services, Inc. ("FFSI"), a registered broker-dealer and member of the
National Association of Securities Dealers, Inc. Forum Administrative
Services, LLC ("FAS") provides administrative services for the Funds. See
"Management -- Management, Administration and Distribution Services."

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 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 after the end of
the calendar month in which the B Shares were originally purchased.

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

I Shares are offered by a separate Prospectus to fiduciary, agency and
custodial clients of bank trust departments, trust companies and their
affiliates. Shares of each class of 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."

3
<PAGE>

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."

Dividends
Dividends of each Fund's net investment income are declared daily
and paid monthly. Dividends paid out of tax-exempt interest income generally
will not be subject to Federal income tax and applicable state taxes. 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 Fund's investments are subject to "credit risk" relating
to the financial condition of the issuers of the securities that each Fund
holds. Each Fund (other than Minnesota Tax-Free Fund), however, invests only
in investment grade securities (those rated in the top four grades by a
nationally recognized statistical rating organization ("NRSRO") such as
Standard & Poor's). Minnesota Tax-Free Fund may invest in non-investment
grade municipal securities, which may entail certain risks. See "Investment
Objectives and Policies -- Minnesota Tax-Free Fund -- Non-Investment Grade
Securities."

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, purchasing
when-issued securities and securities on a forward commitment basis and other
investment techniques. See "Investment Objectives and Policies -- Additional
Investment Policies and Risk Considerations." As noted under "Financial
Highlights," the portfolio turnover rate for certain Funds may from time to
time be high, resulting

4
<PAGE>

in increased brokerage costs or short-term capital gains or losses. See
"Additional Investment Policies and Risk Considerations -- Portfolio
Transactions."

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

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)
A B
Shares(1) Shares(2)
Maximum sales charge imposed on purchases
(as a percentage of offering price) 3.75% Zero
Maximum deferred sales charge
(as a percentage of the lesser of original
purchase price or redemption proceeds) Zero 3.0%
Exchange Fee Zero Zero

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

Tax-Free Colorado Minnesota
Income Tax-Free Tax-Free
Fund Fund Fund
-------------- --------------- ---------------
A B A B A B
Shares Shares Shares Shares Shares Shares

Investment Advisory Fees 0.30% 0.30% 0.30% 0.30% 0.30% 0.30%
Rule 12b-1 Fees(4) None 0.70% None 0.75% None 0.75%
Other Expenses(5) 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
Total Operating Expenses 0.50% 1.20% 0.50% 1.25% 0.50% 1.25%

5
<PAGE>

(1) Sales charge waivers and reduced sales charge plans are available for
A Shares. If A Shares purchased without an initial sales charge are redeemed
within two years after purchase, a contingent deferred sales charge of up to
0.75% will be applied to the redemption. See "How to Buy Shares -- Alternative
Distribution Arrangements."

(2) The maximum 3.0% contingent deferred sales charge on B Shares applies
to redemptions during the first year after purchase; the charge declines
thereafter, becoming 2.0% during the second and third years, 1.0% during the
fourth year, and reaches zero the following year. See "How to Buy Shares --
Alternative Distribution Arrangements."

(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 all Funds are based on amounts incurred during the Funds'
most recent fiscal year ended May 31, 1996, except that all amounts have been
restated to reflect the current expenses incurred by the Funds. Absent
waivers, the Investment Advisory Fees for A Shares and B Shares of each Fund
would be 0.50%. With respect to A Shares, absent estimated expense
reimbursements and fee waivers the expenses of Tax-Free Income Fund, Colorado
Tax-Free Fund and Minnesota Tax-Free Fund would be: Other Expenses, 0.56%,
0.64% and 0.77%, respectively; and Total Operating Expenses, 1.06%, 1.14% and
1.27%, respectively. With respect to B Shares, absent estimated expense
reimbursements and fee waivers the expenses of Tax-Free Income Fund, Colorado
Tax-Free Fund and Minnesota Tax-Free Fund would be: Other Expenses, 0.73%,
0.67% and 0.80%, respectively; and Total Operating Expenses, 2.23%, 2.17% and
2.30%, respectively. Expense reimbursements and 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.

(5) Other Expenses include transfer agency and custodial fees payable to
Norwest at a combined annual rate of up to 0.30% of each Fund's average daily
net assets attributable to A Shares and B Shares.

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.

6
<PAGE>

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. 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
Tax-Free Income Fund
A Shares 41 50 59 86
B Shares
Assuming redemption
at the end of the period 42 57 63 --
Assuming no redemption 12 37 63 --
Colorado Tax-Free Fund
A Shares 40 47 54 74
B Shares
Assuming redemption
at the end of the period 41 54 58 --
Assuming no redemption 11 34 58 --
Minnesota Tax-Free Fund
A Shares 42 52 63 96
B Shares
Assuming redemption
at the end of the period 43 59 68 --
Assuming no redemption 13 39 68 --

2. Financial Highlights

The following tables provide financial highlights for each Fund. This
information represents selected data for a single outstanding A and B Share
of each Fund for the periods shown. Information for the years ended May 31,
1994, 1995 and 1996, was audited by KPMG Peat Marwick LLP, independent
auditors. The information for prior periods was audited by other independent
auditors. Each Funds' financial statements for the fiscal year ended May 31,
1996, 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.

<PAGE>

Tax-Free Income Fund

<TABLE>
<CAPTION>
A Shares B Shares
Year Ended May 31, Year Ended May 31,
1996 1995 1994 1993 1992 1991 1990(a) 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value per Share $ 9.82 $ 9.60 $10.06 $ 9.98 $ 9.95 $ 9.78 $10.00 $ 9.82 $ 9.60 $10.17
Net Investment Income 0.55 0.55 0.58 0.66 0.70 0.70 0.57 0.48 0.48 0.39
Net Realized and Unrealized Gain (Loss)
on Investments (0.04) 0.22 (0.39) 0.11 0.04 0.17 (0.22) (0.04) 0.22 (0.50)
Dividends from Net Investment Income (0.55) (0.55) (0.58) (0.66) (0.70) (0.70) (0.57) (0.48) (0.48) (0.39)
Distributions from Net Realized Gains -- -- (0.07) (0.03) (0.01) -- -- -- -- (0.07)
Ending Net Asset Value per Share $ 9.78 $ 9.82 $ 9.60 $10.06 $ 9.98 $ 9.95 $ 9.78 $ 9.78 $ 9.82 $ 9.60
Ratios to Average Net Assets
Expenses(b) 0.40% 0.60% 0.60% 0.60% 0.34% 0.14% 0.03%(c) 1.14% 1.35% 1.31%(c)
Net Investment Income 5.54% 5.87% 5.77% 6.47% 7.03% 7.09% 6.96%(c) 4.77% 5.05% 4.76%(c)
Total Return 5.29% 8.42% 1.74% 7.86% 7.65% 9.16% 4.34%(c) 4.50% 7.61% (0.98%)(c)
Portfolio Turnover Rate 126.20% 130.90% 116.54% 42.81% 73.66% 101.11% 41.16% 126.20% 130.90% 116.54%
Net Assets at the End of Period
(000's omitted) $33,914 $30,786 $34,426 $109,983 $56,250 $35,215 $17,439 $5,897 $3,729 $2,674

(a) The Fund commenced operations on August 1, 1989 and commenced the
offering of B Shares on August 6, 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 1.06% 1.12% 1.14% 1.12% 1.14% 1.08% 0.97%(c) 2.21% 2.21% 2.24%(c)

8
<PAGE>

Colorado Tax-Free Fund
A Shares B Shares
Year Ended May 31, Year Ended May 31,
1996 1995 1994(a) 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value per Share $ 9.90 $ 9.69 $10.00 $ 9.91 $ 9.70 $10.04
Net Investment Income 0.53 0.48 0.51 0.46 0.41 0.35

Net Realized and Unrealized Gain (Loss)
on Investments (0.01) 0.21 (0.30) (0.01) 0.21 (0.33)
Dividends from Net Investment Income (0.53) (0.48) (0.51) (0.46) (0.41) (0.35)
Distributions from Net Realized Gains -- -- (0.01) -- -- (0.01)
Ending Net Asset Value per Share $ 9.89 $ 9.90 $ 9.69 $ 9.90 $ 9.91 $ 9.70
Ratios to Average Net Assets:
Expenses(b) 0.30% 0.30% 0.07%(c) 1.05% 1.05% 0.85%(c)
Net Investment Income 5.30% 5.10% 4.94%(c) 4.64% 4.32% 4.08%(c)
Total Return 5.35% 7.47% 2.02%(c) 4.56% 6.67% 0.27%(c)
Portfolio Turnover Rate 171.41% 47.88% 40.92% 171.41% 47.88% 40.92%
Net Assets at the End of Period
(000's omitted) $26,991 $25,997 $31,724 $6,400 $5,198 $4,494

(a) The Fund commenced operations on June 1, 1993 and commenced the
offering of B Shares on August 2, 1993.

Expenses 1.13% 1.15% 1.23%(c) 2.16% 2.16% 2.24%(c)

<PAGE>

Minnesota Tax-Free Fund
A Shares B Shares
Six
Months
Ended
May 31, Year Ended May 31, Year Ended November 30, Year Ended May 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988(a) 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value per
Share $10.45 $10.15 $10.65 $10.27 $10.20 $10.15 $10.14 $ 9.78 $10.00 $10.44 $10.15 $10.77
Net Investment Income 0.56 0.53 0.53 0.55 0.30 0.61 0.62 0.62 0.55 0.48 0.45 0.35
Net Realized and Unrealized
Gain (Loss) on Investments (0.15) 0.30 (0.31) 0.39 0.11 0.12 0.02 0.36 (0.22) (0.14) 0.29 (0.43)
Dividends from Net Investment
Income (0.56) (0.53) (0.53) (0.55) (0.30) (0.61) (0.62) (0.62) (0.55) (0.48) (0.45) (0.35)
Distributions from Net Realized
Gains -- -- (0.19) (0.01) (0.04) (0.07) (0.01) -- -- -- -- (0.19)
Ending Net Asset Value per
Share $10.30 $10.45 $10.15 $10.65 $10.27 $10.20 $10.15 $10.14 $ 9.78 $10.30 $10.44 $10.15
Ratios to Average Net Assets:
Expenses(b) 0.48% 0.49% 0.61% 0.75% 0.90%(c) 0.90% 0.90% 0.90% 0.76%(c) 1.23% 1.21% 1.31%(c)
Net Investment Income 5.26% 5.25% 4.92% 5.13% 5.86%(c) 6.01% 6.21% 6.21% 6.51%(c) 4.51% 4.52% 3.99%(c)
Total Return 3.97% 8.55% 1.94% 9.35% 8.10%(c) 7.40% 6.50% 10.30% 4.03%(c) 3.28% 7.63 (0.58%)(c)
Portfolio Turnover Rate 77.10% 139.33% 84.23% 44.29% 6.70% 37.32% 30.86% 26.31% 32.34% 77.10% 139.33% 84.23%
Net Assets at the End of
Period (000's omitted) $26,610 $15,559 $10,008 $10,852 $4,896 $4,575 $4,243 $5,309 $5,904 $8,825 $5,090 $2,485

(a) The Fund commenced operations on January 12, 1988 and commenced the
offering of B Shares on August 6, 1993.

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

Expenses 1.26% 1.61% 1.52% 1.79% 2.38%(c) 2.63% 2.37% 1.70% 1.47%(c) 2.29% 2.62% 2.45%(c)

</TABLE>

<PAGE>

3. Investment Objectives and Policies

Tax-Free Income Fund

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

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

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

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

Colorado Tax-Free Fund

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

<PAGE>

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

The yields of Colorado municipal securities depend on, among other things,
conditions in the Colorado municipal bond market and fixed income markets
generally, the size of a particular offering, the maturity of the obligation
and the rating of the issue. In some cases, Colorado issues may have yields
that are slightly less than the yields of municipal obligations of issuers
located in other states because of the favorable Colorado state tax exemption
on Colorado issues.

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

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

Minnesota Tax-Free Fund

<PAGE>

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

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

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

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

<PAGE>

Baa in the case of Moody's Investors Service ("Moody's") and AAA, AA, A
and BBB in the case of Standard & Poor's ("S&P") and Fitch Investors
Services, L.P. ("Fitch"). These securities are generally considered to be
investment grade securities, although Moody's indicates that municipal
securities rated Baa have speculative characteristics. The Fund also may
invest in unrated securities that the Adviser believes are comparable in
quality to rated securities in which the Fund may invest. A description of
the rating categories of certain NRSROs is contained in the SAI.

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

During its most recent fiscal year ended May 31, 1996, the Fund had 93% of
its average annual assets in municipal securities rated by Moody's or S&P and
7.0% of its average annual assets in unrated investments, including cash and
short-term cash equivalents which are typically unrated. During that year,
the Fund had the following percentages of its average annual net assets
invested in rated securities: Aaa/AAA -- 52%, Aa/AA -- 24%, A/A -- 14%, Baa/BBB
- -- 3% and Ba/BB and below -- 0%. For this purpose, securities with different
ratings from Moody"s and S&P were assigned the higher rating. This
information reflects the average composition of the Fund's assets for the
Fund's last fiscal year and is not necessarily representative of the Fund as
of the current fiscal year or any other time.

Additional Investment Policies and Risk Considerations

<PAGE>

50% of the outstanding shares of the Fund are present or represented or more
than 50% of the outstanding shares of the 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 (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.
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, 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.

Municipal Securities. The municipal securities in which the Funds may invest
include municipal bonds, notes and leases. Municipal securities may be
zero-coupon securities. Yields on municipal securities are dependent on a
variety of factors, including the general conditions of the municipal
security markets and the fixed income markets in general, the size of a
particular offering, the maturity of the obligation and the rating of the
issue. The achievement of a Fund's investment objective is dependent in part
on the continuing ability of the issuers of municipal securities in which the
Fund invests to meet their obligations for the payment of principal and
interest when due.

The market value of the interest-bearing debt securities, including municipal
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; e.g., a decline in interest rates produces an increase in
market value, while an increase in rates produces a decrease in market value.
Moreover, the longer the remaining maturity of a security, the greater will
be the affect of interest rate changes on the market value of that security.
In addition, fixed income investments held by the Funds are subject to
"credit risk." Changes in the ability of an issuer to make payments of
interest and principal and the market's perception of an issuer's
creditworthiness will affect the market value of the debt

<PAGE>

securities of that issuer. Obligations of issuers of debt securities,
including municipal issuers, are also subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors which may restrict the ability of any issuer to pay, when due, the
principal of and interest on its debt securities. The possibility exists
that, the ability of any issuer to pay, when due, the principal of and
interest on its debt securities may become impaired.

The Funds may retain securities whose rating has been lowered below the
lowest permissible rating category or, in the case of an unrated security,
determined by the Adviser to be of comparable quality, if the Adviser
determines that retaining such 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.

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

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

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

Participation Interests. The Funds may purchase participation interests in
municipal securities that are held by banks or other financial institutions.
Participation interests usually carry a demand feature backed by a letter of
credit or guarantee of the bank or other financial institution permitting the
holder to tender them back to the bank or other financial institution. Prior
to purchasing
16

<PAGE>

any participation interest, each Fund will obtain appropriate assurances from
counsel that the interest earned by the Fund from the obligations in which it
holds participation interests is exempt from Federal and, in the case of
Colorado Tax-Free Fund and Minnesota Tax-Free Fund, applicable state income
tax.

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

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

Variable and Floating Rate Securities. The securities in which the Funds
invest (including mortgage-related securities) may have variable or floating
rates of interest. These securities pay interest at rates that are adjusted
periodically according to a specified formula, usually with reference to some
interest rate index or market interest rate (the "underlying index"). The
interest paid on these securities is a function primarily of the underlying
index upon which the interest rate adjustments are based. Such adjustments
minimize changes in the market value of the obligation and, accordingly,
enhance the ability of the Fund to maintain a stable net asset value. Similar
to fixed rate debt instruments, variable and floating rate instruments are
subject to changes in value based on changes in market interest rates or
changes in the issuer's creditworthiness. The rate of

<PAGE>

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-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.

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

Zero-Coupon Securities. 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 the original issue discount of the
security as income. Zero-coupon securities may be subject to greater
fluctuation of market value than the other securities in which the Fund's 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.

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.

<PAGE>

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.

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.

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. When-issued securities may include bonds purchased
on a "when, as and if issued" basis under which the issuance of the
securities depends upon the occurrence of a subsequent event.

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 Investment Company Act of
1940

<PAGE>

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

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

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." An annual portfolio turnover rate of 100% would occur if all the
securities in a Fund were replaced once in a period of one year. Higher
portfolio turnover rates may result in increased short-term capital gains,
which are not tax-exempt, and losses. It is each Fund's policy to obtain best
net results in effecting portfolio transactions. The Advisers 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 effect the timing of a Fund's portfolio transactions or its
ability to realize short-term trading profits or establish short-term
positions.

Investment considerations and Risk Factors

Geographic Concentration. Because Colorado Tax-Free Fund and Minnesota
Tax-Free Fund invest principally in municipal securities issued by issuers
within a

<PAGE>

particular state and the state's political subdivisions, those Funds are more
susceptible to factors adversely affecting issuers of those municipal
securities than would be a more geographically diverse municipal securities
portfolio. Tax-Free Income Fund will be subject to similar risks to the
extent it concentrates its investments in a particular jurisdiction. These
risks arise from the financial condition of the state and its political
subdivisions. To the extent state or local governmental entities are unable
to meet their financial obligations, the income derived by a Fund, its
ability to preserve or realize appreciation of its portfolio assets or its
liquidity could be impaired.

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

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

Related Issuers. Some municipal securities are related in such a way that an
economic, business or political development affecting one municipal security
would have a similar effect on another municipal security. For example, the
repayment of different obligations may depend on similar types of projects.
No

<PAGE>

Fund will invest more than 25% of its total assets in securities that are
so related or invest more than 25% of its total assets in a single type of
revenue bond (e.g., electric revenue, housing revenue, etc.) Similarly, under
normal circumstances, Tax-Free Income Fund will not invest more than 25% of
its total assets in issuers located in the same state.

Diversification Matters. Each of Colorado Tax-Free Fund and Minnesota
Tax-Free Fund is non-diversified, which means that it has greater latitude
than a diversified fund with respect to the investment of its assets in the
securities of a relatively few municipal issuers. As non-diversified
portfolios, these Funds may present greater risks than a diversified fund.
However, each Fund intends to comply with applicable diversification
requirements of the Internal Revenue Code. These requirements provide that,
as of the last day of each fiscal quarter, with respect to 50% of its assets,
a Fund may not (i) own the securities of a single issuer, other than a U.S.
Government security, with a value of more than 5% of the Fund's total assets
or (ii) own more than 10% of the outstanding voting securities of a single
issuer. Tax-Free Income Fund is diversified and, therefore, as a fundamental
policy, with respect to 75% of its assets, may not purchase a security (other
than a U.S. Government Security) if, as a result, more than 5% of the Fund's
total assets would be invested in the securities of a single issuer.

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

The "issuer" of securities will be deemed to be the entity whose assets and
revenues secure the securities, whether that entity is a governmental entity
(so long as its revenues and assets are separate from the government which
created it) or a non-governmental user of facilities financed through
industrial development bonds issued by or on behalf of a public authority or
entity.

4. Management

<PAGE>

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, which is located of Norwest Center, Sixth Street and
Marquette, Minneapolis, Minnesota 55479-0063, 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 June 30, 1996,
Norwest Corporation was the 12th 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 $22 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 at an annual rate of
0.50% of the average daily net assets of Tax-Free Income Fund and, with
respect to each of the Colorado Tax-Free Fund and Minnesota Tax-Free Fund, at
an annual rate of 0.50% of the average daily net assets for the first $300
million of the Fund's net assets, 0.46% of the average daily net assets for
the next $400 million of the Fund's net assets and 0.42% of the average daily
net assets for the Fund's remaining 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: Tax-Free Income Fund and Colorado Tax-Free Fund -- Mr. William T.
Jackson. Mr. Jackson, a Vice President of Norwest since 1993, has served as
portfolio manager of the Fund since 1993. Prior thereto, Mr. Jackson was a
Senior Vice President and Institutional Sales Manager with Norwest Investment
Services from 1992-1993; a Vice President and Municipal Bond Trading Manager
from 1991-1992. Minnesota Tax-Free Fund -- Ms. Patricia D. Hovanetz, CFA. Ms.
Hovanetz, a Vice President of Norwest where she has been a municipal bond
fund portfolio manager since 1988, has served as portfolio manager of the
Fund since 1991. Ms. Hovanetz has been associated with Norwest for more than
25 years in various capacities related to municipal bond investments.

<PAGE>

Management, Administration and Distribution Services

FFSI provides management services for each Fund and, pursuant to a Management
Agreement with the Trust, supervises the overall management of the Trust
(including the Trust's receipt of services for which the Trust is obligated
to pay). In this capacity FFSI provides the Trust with general office
facilities, provides persons satisfactory to the Board to serve as officers
of the Trust and oversees the performance of administrative and professional
services rendered to the Trust by others, including the Trust's custodian,
transfer agent, and administrators, as well as accountants, auditors, legal
counsel and others. Pursuant to an Administration Agreement with the Trust,
FAS is responsible for performing certain administrative services necessary
for the Trust's operations with respect to each Fund including, but not
limited to (i) preparing and printing updates of the Trust's registration
statement, prospectuses and statements of additional information, the Trust's
tax returns, and reports to its shareholders, the SEC and state and other
securities administrators, (ii) preparing proxy and information statements
and any other communications to shareholders, (iii) monitoring the sale of
shares and insuring that such shares are properly and duly registered with
the SEC and applicable state and other securities commissions and (iv)
determining the amount of and supervising the declaration of dividends and
other distributions to shareholders.

FFSI also acts as the distributor of the Shares pursuant to a Distribution
Services Agreement with the Trust. As the Funds' distributor, FFSI pays a
broker-dealers' reallowance on A Shares and a sales commission on B Shares to
broker-dealers who sell shares of the Funds. Normally, FFSI will make
payments to broker-dealers as discussed under "How to Buy Shares --
Alternative Distribution Arrangements." From its own resources, FFSI may pay
additional fees to broker-dealers or other persons for distribution or other
services related to the Funds. For further information about the distribution

<PAGE>

services agreement and the distribution plan, including the fees payable
thereunder, see "How to Buy Shares -- Alternative Distribution Arrangements."

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
FFSI, 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 the annual rate of 0.25% of the
average daily net assets attributable to each class of the Fund. The Transfer
Agent also serves as the Trust's custodian and, for its custodial services,
is compensated at an annual rate of up to 0.05% of each Fund's average daily
net assets.

Expenses of the Funds

<PAGE>

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."

Fund shares become entitled to receive dividends and distributions on the
next Fund Business Day after the order is accepted.

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 34. Checks are accepted at full value
subject to collection. If a check does not clear, the purchase order will be
canceled and the investor will be liable for any losses or fees incurred by
the Trust, the Transfer Agent or FFSI.

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

26
<PAGE>

Re: [Name of Fund]
[Designate A Shares or B Shares]
Account No.:
Account Name:

3. Through Financial Institutions. Shares may be purchased and redeemed
through certain broker-dealers, banks and other financial institutions
("Processing Organizations"). The Transfer Agent, FFSI 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 FFSI
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 may also enter purchase
orders with payment to follow.

<PAGE>

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

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

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.

<PAGE>

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.

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 subject to the 3.75% initial
sales charge who elects to reinvest all dividends 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. 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 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):

Sales Charge As a As a Broker-Dealers'
Percentage of Percentage of Reallowance
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

<PAGE>

$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

FFSI 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, FFSI will reallow
discounts to selected broker-dealers in the amounts indicated in the table
above. In addition, FFSI may elect to reallow the entire sales charge to
selected broker-dealers for all sales with respect to which orders are placed
with FFSI. The broker-dealers' reallowance may be changed from time to time.
FFSI may make additional payments (out of its own resources) to selected
broker-dealers of up to 0.75% 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 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 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") may also 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.

Statement of Intention. A Shares investors may also 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

<PAGE>

the account application form. Current Fund shareholders can obtain
a Statement of Intention form by contacting the Transfer Agent.

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 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 (the "Plan") under the 1940 Act 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 FFSI, to compensate FFSI 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

32
<PAGE>

("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% and FFSI currently expects to pay sales commissions to each
broker-dealer at the time of sale of up to 3% 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 FFSI
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 FFSI. At May 31, 1996, unrecovered distribution
expenses for Tax-Free Income Fund, Colorado Tax-Free Fund and Minnesota
Tax-Free Fund were $115,529, $119,334 and $206,736, respectively, or
approximately 1.96%, 1.86%, and 2.34% 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 FFSI 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 FFSI to broker-dealers in an
amount not to

33
<PAGE>

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 to 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 FFSI (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 FFSI with respect to those shares in fiscal years subsequent to the
years in which those shares were sold. The payment delay would in turn result
in the incurrence and payment of increased interest fees under the Plan.

Contingent Deferred Sales Charge. B Shares of a Fund which are redeemed
within six years of purchase 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 shares being redeemed and their net asset value
at

34
<PAGE>

the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition,
no charge will be assessed on shares derived from the reinvestment of
dividends and distributions.

Contingent Deferred Sales
Charge as a % of Dollar
Year Since Purchase Amount Subject to Charge
First 3.0%
Second 2.0%
Third 2.0%
Fourth 1.0%
Fifth None
Sixth 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 Fund of shareholder accounts with low account
balances, (iii) redemptions of shares following the death or disability of a
shareholder if the Fund is notified within one year of the shareholder's
death or disability, (iv) redemptions to effect a distribution (other than a
lump sum distribution) from an IRA, Keogh plan or Section 403(b) custodial
account or from a qualified retirement plan and (v) redemptions by any
registered investment adviser with whom FFSI has entered into a share
purchase agreement and which is acting on behalf of its fiduciary customer
accounts. See the SAI for further information.

Conversion Feature. After six 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"). The conversion will be on the basis of the relative net asset
values of the A and B Shares, without the imposition of any sales load, fee
or other charge. For purposes of conversion, B Shares of a Fund purchased
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, an equal
pro rata portion of those shares in the sub-account will also convert. The
conversion is subject to the continuing availability of certain opinions of
counsel and may be suspended if such an opinion is no longer

<PAGE>

available at the time the conversion is to occur. In that event, no further
conversions would occur, and shares might continue to be subject to
distribution services and maintenance fees for an indefinite period.

6. How to Sell Shares

General Information

Normally, redemption proceeds are paid immediately, but in no event later
than seven days, following acceptance of a redemption order. Proceeds of
redemption requests (and exchanges), however, will not be paid unless any
check to purchase the shares being redeemed has been cleared by the
shareholder's bank, which may take up to 15 days. This delay may be avoided
by paying for shares through wire transfers. Unless otherwise indicated,
redemption proceeds normally are paid by check mailed to the shareholder's
record address. The right of redemption may not be suspended nor the payment
dates postponed for more than seven days after the tender of the shares to 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

Shareholders who have invested through a Processing Organization may redeem
their shares through the Processing Organization as described above.

<PAGE>

Shareholders who have invested directly in a Fund may redeem their Shares as
described below. 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>

guarantee is required, the signature of each person required to sign for the
account must be guaranteed.

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

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
Stable Income Fund, Intermediate Government Income Fund, Income Fund, Total
Return Bond Fund, Income Equity Fund, ValuGrowthSM Stock Fund, Diversified
Equity Fund, Growth Equity Fund, Small Company Stock Fund, Contrarian Stock
Fund and International Fund. It is anticipated that the Trust may in the
future create additional funds that will offer Shares which 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 FFSI 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.

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

<PAGE>

purchased by a shareholder will apply to New Shares resulting from both an
initial and any subsequent exchanges.

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

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

Automatic Investment Plan

Under the 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."

Automatic Withdrawal Plan

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

<PAGE>

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

8. Dividends and Tax Matters

Dividends

Dividends of the Funds' net investment income are declared daily 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.

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.

<PAGE>

Taxes

Dividends paid by a Fund out of tax-exempt interest income earned by the Fund
("exempt-interest dividends") generally will not be subject to Federal income
tax in the hands of the Fund's shareholders. However, persons who are
"substantial users" or "related persons" thereof of facilities financed by
private activity bonds held by a Fund may be subject to Federal income tax on
their pro rata share of the interest income from such bonds and should
consult their tax advisers before purchasing shares of such Fund. Under
current Federal tax law, interest on certain private activity securities
issued after August 7, 1986 is treated as an item of tax preference for
purposes of the AMT imposed on individuals and corporations. In addition,
interest on all tax-exempt obligations is included in the "adjusted current
earnings" of corporations for AMT purposes.

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

Substantially all of the dividends paid by each Fund are anticipated to be
exempt from Federal income taxes. Shortly after the close of each calendar
year, a statement is sent to each shareholder of each Fund advising the
shareholder of the total dividends paid into the shareholder's account for
the year and the portion of such total that is exempt from Federal (and,
except in the case of the Tax-Free Income Fund, state) income taxes. This
portion is determined by the ratio of the tax-exempt income to total income
realized by each Fund for the entire year and, thus, is an annual average,
rather than a day-by-day determination for each shareholder.

<PAGE>

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.

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

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

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

<PAGE>

Minnesota municipal securities in order for any portion of the
exempt-interest dividends paid by the Fund to be exempt from the Minnesota
personal income tax. Exempt-interest dividends paid by the Fund to
shareholders that are corporations are subject to Minnesota franchise tax.

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

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

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. FFSI 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.

<PAGE>

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,
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, which are computed separately for A Shares and B Shares. Both types
are based on historical results and are 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 may also quote tax-equivalent yield,
which will show the taxable yield a shareholder would have to earn to equal
the Fund's tax-free yield, after taxes. A tax-equivalent yield is calculated
by dividing a Fund's tax-free yield by one minus a stated Federal, state or
combined Federal and state tax rate.

<PAGE>

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. In addition, the performance
of the Funds may be compared to recognized indices of market performance. The
comparative material found in the Funds' advertisements, sales literature or
reports to shareholders may contain performance ratings. This material is not
to be considered representative or indicative of future performance. All
performance information for a Fund is calculated on a class basis.

The Trust and Its Shares

The Trust was originally organized under the name "Prime Value Funds, Inc."
as a Maryland corporation on August 29, 1986, and on July 30, 1993, was
reorganized as a Delaware business trust under the name "Norwest Funds."On
October 1, 1995, the Trust changed its name to "Norwest Advantage Funds." The
Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares
into an unlimited number of separate portfolios or series (such as the Funds)
and may divide portfolios or series into classes of shares (such as A
Shares), and the costs of doing so will be borne by the Trust. Currently the
authorized shares of the Trust are divided into twenty-eight separate series.

Other Classes of Shares. The Funds may issue shares of other classes. The
Funds currently issue three classes of shares, A Shares, B Shares and I
Shares, and may in the future create additional class types. I Shares are
offered to fiduciary, agency and custodial clients of bank trust departments,
trust companies and their affiliates without any sales charges. Each class of
a Fund will have a different expense ratio and may have different sales
charges (including distribution fees). Each class' performance is affected by
its expenses and sales charges. For more information on any other class of
shares of the Funds investors may contact the Transfer Agent at 612-667-8833
or 800-338-1348. Investors may also contact their Norwest sales
representative to obtain information about the other classes. Sales personnel
of broker-dealers and other

<PAGE>

financial institutions selling the Fund's shares may receive differing
compensation for selling A Shares, B Shares, and I Shares of the Funds.

As of September 1, 1996, Stout & Co., a nominee of Norwest Bank Colorado,
N.A. through which some of its customers own shares of the Funds, and Dentru
& Co., a nominee of Norwest Bank Colorado, N.A. through which some of its
customers own shares of the Funds, may be deemed to have controlled Colorado
Tax-Free Fund. As of the same date, Norwest Tax-Exempt Bond Fund, a
Norwest-sponsored collective trust fund that comprises assets of customers of
Norwest, may be deemed to have controlled Tax-Free Income Fund. From time to
time, these shareholders or other shareholders may own a large percentage of
the shares of a Fund and, accordingly, may be able to greatly affect (if not
determine) the outcome of a shareholder vote.

<PAGE>

Shareholder Information:
Norwest Bank Minnesota, N.A.
733 Marquette Avenue
Minneapolis, Minnesota 55479-0040
612-667-8833 (Minneapolis/St. Paul)
800-338-1348 (Elsewhere)

48
<PAGE>

CONTRARIAN STOCK FUND

A SHARES
B SHARES

Account Information and
Shareholder Servicing:
Norwest Bank Minnesota, N.A.
Transfer Agent
733 Marquette Avenue
Minneapolis, Minnesota 55479-0040
612-667-8833 or 800-338-1348

PROSPECTUS
October 1, 1996

This Prospectus offers A Shares and B Shares of Contrarian Stock Fund (the
"Fund"). The Fund is a separate diversified equity portfolio of Norwest
Advantage Funds (the "Trust"), which is a registered open-end management
investment company.

This Prospectus sets forth concisely the information concerning the Trust and
the Fund that a prospective investor should know before investing. The Trust has
filed with the Securities and Exchange Commission (the "SEC") a Statement of
Additional Information ("SAI") with respect to the Fund dated October 1, 1996,
as may be further amended from time to time, which contains more detailed
information about the Trust and the Fund and is incorporated into this
Prospectus by reference. An investor may obtain a copy of the SAI without charge
by contacting the Trust's distributor, Forum Financial Services, Inc., at Two
Portland Square, Portland, Maine 04101 or by calling 207-879-1900. Investors
should read this Prospectus and retain it for future reference.

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

<PAGE>

1. PROSPECTUS SUMMARY

HIGHLIGHTS OF THE FUND

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION CONTAINED IN THIS PROSPECTUS.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to seek capital appreciation by investing
primarily in common stocks for which the Fund's investment adviser believes
there is significant potential for price appreciation.

INVESTMENT ADVISER

The Fund's investment adviser (the "Adviser") is Norwest Investment Management,
a part of Norwest Bank Minnesota, N.A. ("Norwest"). The Adviser provides
investment advice to various institutions, pension plans and other accounts and,
as of June 30, 1996, managed assets totaling approximately $22 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 AND ADMINISTRATION

The manager of the Trust and distributor of its shares is Forum Financial
Services, Inc. ("FFSI"), a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. Forum Administrative Services, LLC
("FAS") provides administrative services to the Fund. See "Management -
Management, Administration and Distribution Services."

SHARES OF THE FUND

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

A SHARES. A Shares are offered at a price equal to their net asset value plus a
sales charge imposed at the time of purchase or, in some cases, a contingent
deferred sales charge imposed on redemptions made within two years of purchase.

B SHARES. B Shares are offered at a price equal to their net asset value plus a
contingent deferred sales charge imposed on most redemptions made within six
years of purchase. B Shares pay a distribution services fee at an annual rate of
up to 0.75%, and a maintenance fee in an amount equal to 0.25%, of the B Shares'
average daily net assets. B Shares automatically convert to A

2
<PAGE>

Shares of the 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 the Fund have identical interests in the investment portfolio
of the Fund and, with certain exceptions, have the same rights. See "Other
Information - The Trust and Its Shares."

HOW TO BUY AND SELL SHARES

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

EXCHANGES

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

SHAREHOLDER FEATURES

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

DIVIDENDS

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

3
<PAGE>

CERTAIN INVESTMENT CONSIDERATIONS AND RISK FACTORS

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

All investments made by the Fund entail some risk. Certain investments and
investment techniques, however, entail additional risks, such as the potential
use of leverage through borrowings, securities lending and other investment
techniques. See "Investment Objective and Policies - Additional Investment
Policies and Risk Considerations." The 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."

EXPENSE INFORMATION

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

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

Investment Advisory Fee 0.64% 0.64%
Rule 12b-1 Fees(5) None 0.75%
Other Expenses 0.57% 0.57%
Total Operating Expenses 1.21% 1.96%

4
<PAGE>

(2) The maximum 4.0% contingent deferred sales charge on B Shares applies to
redemptions during the first year after purchase; the charge declines
thereafter, becoming 3.0% during the second and third years, 2.0% during the
fourth and fifth years, 1.0% during the sixth year and reaches zero the
following year. See "How to Buy Shares - Alternative Distribution Arrangements."

(3) For a further description of the various expenses incurred in the operation
of the Fund, see "Management." Expenses associated with the I Shares of the Fund
differ from those of the Shares listed in the table shown above. The amounts of
expenses are based on amounts incurred during the Fund's most recent fiscal year
ended May 31, 1996, except that Rule 12b-1 fees and Other Expenses for B Shares
have been restated to reflect estimated amounts for the current fiscal year.
Absent estimated waivers, the Investment Advisory Fee for A Shares and B Shares
would be 0.80%.

(4) With respect to A Shares, absent expense reimbursements and fee waivers,
the expenses of the Fund would be: Investment Advisory Fees, Other Expenses,
and Total Operating Expenses, 0.80%, 1.46% and 2.26%, respectively. With respect
to B Shares, absent expense reimbursements and fee waivers, the expenses of the
Fund would be: Investment Advisory Fees, Other Expenses, and Total Operating
Expenses, 0.80%, 1.91% and 3.46%, respectively. Other Expenses include transfer
agency fees payable to Norwest at an annual rate of up to 0.25% of the Fund's
average daily net assets attributable to A Shares and B Shares and custody fees
payable to Norwest. Fee waivers and expense reimbursements are voluntary and may
be reduced or eliminated at any time.

(5) Absent waivers, the Rule 12b-1 Fees would be 1.00% for B Shares of the
Fund. Long-term shareholders of B Shares may pay aggregate sales charges
totaling more than the economic equivalent of the maximum front-end sales
charges permitted by the Rules of Fair Practice of the National Association of
Securities Dealers, Inc.

Example

The following is a hypothetical example that indicates the dollar amount of
expenses that an investor would pay, assuming a $1,000 investment in the Fund's
Shares, a 5% annual return and reinvestment of all dividends and distributions.

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

A Shares 57 82 109 185

B Shares
Assuming redemption
at the end of the period 60 92 126 ---
Assuming no redemption 20 62 106 ---

The example is based on the expenses listed in the "Annual Operating Expenses"
table. The 5% annual return is not predictive of and does not represent the
Fund's projected returns; rather, it is required by government regulation. The
example assumes deduction of the maximum initial sales charge for A Shares,
deduction of the contingent deferred sales charge for B Shares applicable to a
redemption at the end of the period and the conversion of B Shares to A Shares
at the end of seven years. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES OR RETURN. ACTUAL EXPENSES AND RETURN MAY BE GREATER
OR LESS THAN INDICATED.

5
<PAGE>

2. FINANCIAL HIGHLIGHTS

The following table provides financial highlights for the Fund. This information
represents selected data for a single outstanding A Share and B Share of the
Fund for the periods shown. Information for the years ended May 31, 1994, 1995
and 1996 was audited by KPMG Peat Marwick LLP, independent auditors. The Fund's
financial statements for the fiscal year ended May 31, 1996, and independent
auditors' report thereon are contained in the Fund's Annual Report and are
incorporated by reference into the SAI. Further information about the Fund's
performance is contained in the Fund's Annual Report, which may be obtained from
the Trust without charge.

A B
Shares Shares
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended May 31 Year Ended May 31
1996 1995 1994(a) 1996 1995 1994(b)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value per Share $10.90 $9.71 $10.00 $10.84 $9.69 $10.00
------ ----- ------ ------ ----- ------
Net Investment Income (Loss) 0.09 0.11 0.06 0.07 0.07 0.05

Net Realized and Unrealized Gain (Loss) on
Investments 1.02 1.19 (0.28) 1.00 1.16 (0.30)

Dividends from Net Investment Income (0.10) (0.11) (0.07) (0.06) (0.08) (0.06)

Distributions from Net Realized Gains (1.09) (0.003) N/A 1.09 (0.003) N/A
------ ----- ------ ------ ----- ------

Ending Net Asset Value per Share $10.82 $10.90 $9.71 $10.70 $10.84 $9.69
------ ----- ------ ------ ----- ------
------ ----- ------ ------ ----- ------

Ratios to Average Net Assets:
Expenses(b) 1.21% 1.01% 0.61%(c) 1.96% 1.78% 1.28%(c)

Net Investment Income (Loss) 0.86% 1.05% 1.77%(c) 0.11% 0.35% 1.14%(c)

Total Return 10.91% 13.52% (5.35)%(c) 10.02% 12.78% (6.05%)(c)

Portfolio Turnover Rate 28.21% 30.32% 2.67% 28.21% 30.32% 2.67%

Average Commission Rate 0.0467 N/A N/A 0.0467 N/A N/A
Net Assets at End of Year/Period $908 $572 $144 $600 $463 $75
(000s omitted)

</TABLE>

(a) The Fund commenced the offering of A Shares and B Shares on December 31,
1993.

(b) During the periods, various fees and expenses were waived and reimbursed,
respectively.

Had these waivers and reimbursements not occurred, the ratio of expenses to
average net assets would have been.

Expenses.......2.26%.....2.96%......7.22%(c).....3.46%.....4.92%.....9.09%(c)

<PAGE>

3. INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES

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

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

The Fund may invest up to 20% of its assets in securities of foreign issuers and
in sponsored and unsponsored American Depository Receipts. For a description of
the investment considerations and risk factors of investing in foreign
securities, see "Investment Objectives and Policies - 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.

RISK CONSIDERATIONS

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.

ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS

The investment objective and all investment policies of the Fund 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. A majority of
outstanding voting securities means the lesser of (i)

7
<PAGE>

67% of the shares present or represented at a shareholder meeting at which the
holders of more than 50% of the outstanding shares are present or represented,
or (ii) more than 50% of outstanding shares. Except as otherwise indicated,
investment policies of the Fund are not deemed to be fundamental and may be
changed by the Board of Trustees of the Trust (the "Board") without shareholder
approval. For more information concerning shareholder voting, see "Other
Information - The Trust and Its Shares - Shareholder Voting and Other Rights." A
further description of the Fund's investment policies, including additional
fundamental policies, is contained in the SAI.

The investment adviser monitors the creditworthiness of counterparties to the
Fund's 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, the 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. Borrowing for
other than temporary or emergency purposes or meeting redemption requests may
not exceed 5% of the value of the Fund's assets. The Fund may enter into reverse
repurchase agreements (which are considered borrowings),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.

DIVERSIFICATION AND CONCENTRATION. The 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, the Fund may not 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. The Fund is prohibited from
concentrating its assets in the securities of issuers in any industry. As a
fundamental policy, the 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. The 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 Fund 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, generally, as to the recovery of
investment. A preferred stockholder is a shareholder in the

8
<PAGE>

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
a securities exchange or in the over-the-counter market and may not be traded
every day 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. 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 Fund 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. Currently, the
Fund only invests in convertible securities that are investment grade.
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.

The 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

9
<PAGE>

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.

AMERICAN DEPOSITORY RECEIPTS. The Fund 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 pass through voting rights.

DEBT SECURITIES. The 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 to be of comparable quality.

REPURCHASE AGREEMENTS AND LENDING OF PORTFOLIO SECURITIES. The Fund may enter
into repurchase agreements and may lend 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 the 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 the 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 Fund may pay fees to arrange
securities loans and the Fund will, as a fundamental policy, limit securities
lending to not more than 33 1/3% of the value of its total assets.

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. The 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

10
<PAGE>

made for the securities purchased and, thus, no interest accrues to the Fund. At
the time the 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 Fund will not purchase
securities on a when-issued or forward commitment basis to any significant
extent.

ILLIQUID SECURITIES. The Fund may not 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). Limitations on resale may have
an adverse effect on the marketability of portfolio securities, and the Fund
might also have to register restricted securities in order to dispose of them,
resulting in expense and delay. The 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 (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. 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, the Fund's holdings of that security may be
illiquid.

TEMPORARY DEFENSIVE POSITION. When business or financial conditions warrant, the
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 the 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
investment adviser to be of comparable quality. Apart from temporary defensive
purposes, the Fund may at any time invest a portion of its assets in cash and
cash equivalents as described above. Except during periods when the Fund assumes
a temporary defensive position, the Fund will have at least 65% of its total
assets invested in common stock.

11
<PAGE>

PORTFOLIO TRANSACTIONS. The investment adviser places orders for the purchase
and sale of assets they manage with brokers and dealers selected by and in the
discretion of the adviser. The investment adviser seeks "best execution" for all
portfolio transactions, but the Fund may pay higher than the lowest available
commission rates when the 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 the Fund
that invests in foreign securities than would be the case for comparable
transactions effected on United States securities exchanges.

Subject to the Fund's policy of obtaining "best execution" the investment
adviser may employ broker-dealer affiliates of the investment adviser
(collectively "Affiliated Brokers") to effect brokerage transactions for the
Fund. The Fund's payment of commissions to Affiliated Brokers is subject to
procedures adopted by the Board to provide that the commissions will not exceed
the usual and customary broker's commissions charged by unaffiliated brokers. No
specific portion of the Fund's brokerage will be directed to Affiliated Brokers
and in no event will a broker affiliated 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 the Fund (the portfolio turnover
rate) will vary from year to year depending on many factors. From time to time
the Fund may engage in active short-term trading to take advantage of price
movements affecting individual issues, groups of issues or markets. The Fund's
portfolio turnover is reported under "Financial Highlights." 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 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.

12
<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 Fund
and meets periodically to review the results of the Fund, monitor investment
activities and practices and discuss other matters affecting the Fund and the
Trust. The Board consists of seven persons. The SAI contains general background
information about the Trustees and officers of the Trust.

INVESTMENT ADVISORY SERVICES

NORWEST INVESTMENT MANAGEMENT. Subject to the general supervision of the Board,
Norwest Investment Management makes investment decisions for the

13
<PAGE>

Fund and continuously reviews, supervises and administers the Fund's investment
program. The Adviser, which is located at Norwest Center, Sixth Street and
Marquette, Minneapolis, Minnesota 55479-0063, 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 June 30, 1996, Norwest
Corporation was the 12th 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 $22 billion.

As part of its regular banking operations, Norwest Bank Minnesota, N.A. may make
loans to public companies. Thus, it may be possible, from time to time, for the
Fund to hold or acquire the securities of issuers which are also lending clients
of Norwest. A lending relationship will not be a factor in the selection of
portfolio securities for the Fund.

The Adviser provides investment management services to the Fund pursuant to
investment advisory agreements between Norwest and the Trust. For the Adviser's
services, 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. 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 the Fund are appropriate given the
Fund's investment policies.

<PAGE>

PORTFOLIO MANAGERS. Many persons on the advisory staff of the adviser contribute
to the investment services provided to the Fund. The following person, however,
is primarily responsible for the day-to-day management of the 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.

MANAGEMENT, ADMINISTRATION AND DISTRIBUTION SERVICES

15
<PAGE>

FFSI provides management services for the Fund and pursuant to a Management
Agreement with the Trust, supervises the overall management of the Trust
(including the trust's receipt of services for which the Trust is obligated to
pay). In this capacity FFSI provides the Trust with general office facilities,
provides persons satisfactory to the Board to serve as officers of the Trust
and oversees the performance of administrative and professional services
rendered to the Trust by others, including the Trust's custodian, transfer
agents, dividend disbursing agent, and administrator, as well as accountants,
auditors, legal counsel and others. Pursuant to an Administration Agreement
with the Trust FAS, is responsible for performing certain administrative
services necessary for the Trust's operations with respect to each Fund
including, but not limited to (i) preparing and printing updates of the
Trust's registration statement, prospectuses and statements of additional
information, the Trust's tax returns, and reports to its shareholders, the SEC
and state and other securities administrators, (ii) preparing proxy and
information statements and any other communications to shareholders, (iii)
monitoring the sale of shares and ensuring that such shares are properly and
duly registered with the SEC and applicable state and other securities
commissions and (iv) determining the amount of and supervising the declaration
of dividends and other distributions to shareholders.

The management and administrative fees payable to FFSI and FAS,
respectively, by the Trust with respect to the Fund are based on the average
daily net assets of the Fund at the rate of 0.10%. From its own resources,
FFSI may pay a fee to broker-dealers or other persons for distribution or
other services related to the Funds.

16
<PAGE>

Pursuant to a separate agreement, Forum Financial Corp. ("FFC") provides
portfolio accounting services to the Fund. FFSI, FAS and FFC are members of
the Forum Financial Group of companies which together provide a full range of
services to the investment company and financial services industry. As of
October 1, 1996, FFSI, FAS and FFC were controlled by John Y. Keffer,
President and Chairman of the Trust.

FFSI also acts as the distributor of the Shares pursuant to a distribution
services agreement with the Trust and in accordance therewith receives and may
reallow the initial sales charge assessed on purchases of A Shares of the
Fund. As authorized by a distribution plan with respect to B Shares of the
Fund and pursuant to the distribution services agreement, FFSI 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."

SHAREHOLDER SERVICING AND CUSTODY

Norwest serves as transfer agent and dividend disbursing agent for the Trust
(in this capacity, the "Transfer Agent") pursuant to a transfer agency
agreement with the Trust. The Transfer Agent maintains an account for each
shareholder of the Trust (unless such accounts are maintained by sub-transfer
agents or processing agents), performs other transfer agency functions and
acts as dividend disbursing agent for the Trust. The Transfer Agent is
permitted to subcontract any or all of its functions with respect to all or
any portion of the Trust's shareholders to one or more qualified sub-transfer
agents or processing agents, which may be its or FFSI's affiliates, who agree
to comply with the terms of the Transfer Agent's agreement with the Trust.
Sub-transfer agents and processing agents may be "Processing Organizations" as
described under "How to Buy Shares - Purchase Procedures." The Transfer Agent
is permitted to compensate those agents for their services; however, no such
compensation may increase the aggregate amount of payments by the Trust to the
Transfer Agent. For its services, the Transfer Agent receives from the Fund a
fee at an annual rate of 0.25% of the average daily net assets attributable to
each class of the Fund and may be reimbursed for certain expenses related to
its transfer agency services.

17
<PAGE>

EXPENSES OF THE FUND

Subject to the obligation of Norwest to reimburse the Trust for certain
expenses of the Fund, the Trust has confirmed its obligation to pay all the
Trust's expenses. The Fund's expenses include Trust expenses attributable to
the Fund, which are allocated to the Fund, and expenses not specifically
attributable to the Fund, which are allocated among the Fund and all other
funds of the Trust in proportion to their average net assets. Norwest, FFSI
and the Transfer Agent may each elect to waive (or continue to waive) all or a
portion of their fees, which are accrued daily and paid monthly. Any such
waivers will have the effect of increasing the Fund's performance 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.

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

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 Fund. The Fund may in its discretion
waive the investment minimums. Shareholders who elect electronic share
purchase privileges such as the Automatic Investment Plan or the Directed
Dividend Option are not subject to the initial investment minimum. See "Other
Shareholder Services - Automatic Investment Plan" and "Dividends and Tax
Matters."

Fund Shares become entitled to receive dividends and distributions on the
next Fund Business Day after a purchase order is accepted.

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

PURCHASE PROCEDURES

INITIAL PURCHASES
There are three ways to purchase shares initially.

1. BY MAIL. Investors may send a check made payable to the Trust along with
a completed account application form to the Trust at the address listed under
"Account Application" on page 17. Checks are accepted at full value subject to
collection. If a check does not clear, the purchase order will be canceled and
the investor will be liable for any losses or fees incurred by the Trust, the
Transfer Agent or FFSI.

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

NORWEST BANK MINNESOTA, N.A.

18
<PAGE>

ABA 091 000 019
FOR CREDIT TO: NORWEST ADVANTAGE FUNDS
0844-131
RE: CONTRARIAN STOCK FUND
[DESIGNATE A SHARES OR B SHARES]
ACCOUNT NO.:
ACCOUNT NAME:

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

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

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

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

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<PAGE>

SUBSEQUENT PURCHASES

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

ACCOUNT APPLICATION

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

NORWEST ADVANTAGE FUNDS
CONTRARIAN STOCK 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

20
<PAGE>

ALTERNATIVE DISTRIBUTION ARRANGEMENTS

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

Because initial sales charges are deducted at the time of purchase, investors
purchasing the Fund's A Shares receive fewer shares than if the sales charge
were not deducted and, accordingly, do not have the entire purchase price
invested. Investors not qualifying for reduced initial sales charges who
expect to maintain their investment for an extended period of time should
consider whether, in light of the initial sales charge and its effect on the
amount of the purchase price invested, purchases of A Shares are more or less
advantageous than purchases of B Shares with their associated accumulated
continuing distribution and maintenance charges. For example, based on
estimated current fees and expenses, an investor purchasing A Shares, which
are subject to a 4.5% initial sales charge, who elects to reinvest all
dividends and distributions would have to hold the A Shares approximately six
years for the B Shares' distribution services fee and maintenance fee to
exceed the initial sales charge imposed when purchasing A Shares. The
foregoing example does not take into account the time value of money,
fluctuations in net asset value or the effects of different performance
assumptions.

A Shares

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

Broker-Dealers'
Sales Charge As a Percentage of Reallowance As a
------------------------------- Percentage of
Amount of Purchase Offering Price Net Asset Value* Offering Price
- ------------------ -------------- ---------------- --------------
<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>

21
<PAGE>

*Rounded to the nearest one-hundredth percent

FFSI 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, FFSI will reallow discounts
to selected broker-dealers in the amounts indicated in the table above. In
addition, FFSI may elect to reallow the entire sales charge to selected
broker-dealers for all sales with respect to which orders are placed with
FFSI. The broker-dealers' reallowance may be changed from time to time. FFSI
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.

22
<PAGE>

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

INVESTORS IN OTHER FUND FAMILIES. No sales charge is assessed on purchases of
A Shares of the Fund with the proceeds of a redemption at net asset value,
within the preceding 60 days, of shares of a mutual fund that imposed on the
redeemed shares at the time of their purchase a sales charge equal to or
greater than that applicable to the A Shares of that Fund. Investors should
contact the Trust for further information and to obtain the necessary forms.

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

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

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

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

STATEMENT OF INTENTION. A Shares investors also may obtain reduced sales
charges based on cumulative purchases by means of a written Statement of
Intention, expressing the investor's intention to invest $50,000 or more in A
Shares of the Fund within a period of 13 months.

23
<PAGE>

Each purchase of shares under a Statement of Intention will be made at net
asset value plus the sales charge applicable at the time of the purchase to a
single transaction of the dollar amount indicated in the Statement.

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

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

Contingent
Deferred Sales
Charge as a % of Dollar
Amount of Purchase Period Shares Held Amount Subject to Charge
- ------------------------------------------------------------------------------------
<S> <C> <C>
$1,000,000 to $2,499,999 Less than one year 1.00%
One to two years 0.75%
$2,500,000 to $4,999,999 Less than one year 0.50%
Over $5,000,000 Less than one year 0.25%

</TABLE>

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

24
<PAGE>

B SHARES

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

Under the distribution services agreement between FFSI and the Trust, FFSI
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 FFSI to compensate
broker-dealers in connection with the sales of the shares. Proceeds from the
contingent deferred sales charge with respect to the Fund are paid to FFSI 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. FFSI may spend the distribution services fees
it receives as it deems appropriate on any activities primarily intended to
result in the sale of B Shares.

Under the Plan, the Fund will make distribution services fee payments to FFSI
only for periods during which there are outstanding uncovered distribution
charges attributable to the Fund. Uncovered distribution charges are
equivalent to all sales commissions previously due (plus interest), less
amounts received pursuant to the Plan and all contingent deferred sales
charges previously paid to FFSI. At May 31, 1996, the Fund had uncovered
distribution expenses of $24,975, or approximately 4.16% of the Fund's net
assets attributable to B Shares as of the same date.

25
<PAGE>

contingent deferred sales charge payments previously made to FFSI exceed the
total expenses incurred by FFSI in distributing B Shares.

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

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

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

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

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

26
<PAGE>

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
Year Since Purchase Amount Subject to Charge

First 4.0%
Second 3.0%
Third 3.0%
Fourth 2.0%
Fifth 2.0%
Sixth 1.0%
Seventh None

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

No contingent deferred sales charge is imposed on (i) redemptions of Shares
acquired through the reinvestment of dividends and distributions, (ii)
involuntary redemptions by the Fund of shareholder accounts with low account
balances, (iii) redemptions of Shares following the death or disability of a
shareholder if the Fund is notified within one year of the shareholder's death
or disability and (iv) redemptions to effect a distribution (other than a lump
sum distribution) from an IRA, Keogh plan or Section 403(b) custodial account
or from a qualified retirement plan and (v) redemptions by any registered
investment adviser with whom FFSI has entered into a Share purchase agreement
and which is acting on behalf of its fiduciary customer accounts. See the SAI
for further information.

27
<PAGE>

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

6. HOW TO SELL SHARES

GENERAL INFORMATION

Normally, redemption proceeds are paid immediately, but in no event later than
seven days following acceptance of a redemption order. Proceeds of redemption
requests (and exchanges), however, will not be paid unless any check used to
purchase the shares being redeemed has been cleared by the shareholder's bank,
which may take up to 15 days. This delay may be avoided by paying for shares
through wire transfers. Unless otherwise indicated, redemption proceeds
normally are paid by check mailed to the shareholder's record address. The
right of redemption may not be suspended nor the payment date postponed for
more than seven days after the tender of the shares to the Fund, except when
the New York Stock Exchange is closed (or when trading thereon is restricted)
for any reason other than its customary weekend or holiday closings, for any
period during which an emergency exists as a result of which disposal by the
Fund of its portfolio securities or determination by the Fund of the value of
its net assets is not reasonably practicable and for such other periods as the
SEC may permit.

28
<PAGE>

REDEMPTION PROCEDURES

Shareholders who have invested through a Processing Organization may redeem
their shares through the Processing Organization as described above.
Shareholders who have invested directly in the Fund may redeem their Shares as
described below. 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 the Fund to transmit the
redemption proceeds by Federal funds wire to a bank account designated in
writing by the shareholder. To request bank wire redemptions by telephone, the
shareholder also must have elected the telephone redemption privilege.
Redemption proceeds are transmitted by wire on the day after a redemption
request in proper form is received by the Transfer Agent.

OTHER REDEMPTION MATTERS

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

29
<PAGE>

Agent. Whenever a signature guarantee is required, the signature of each
person required to sign for the account must be guaranteed.

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

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

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
Stable Income Fund, Intermediate U.S. Government Fund, Income Fund, Total
Return Bond Fund, Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota
Tax-Free Fund, Income Equity Fund, ValuGrowthSM Stock Fund, Diversified Equity
Fund, Growth Equity Fund, Small Company Stock Fund, Small Cap Opportunities
Fund and International Fund. It is anticipated that the Trust may in the
future create additional funds that will offer shares that will be
exchangeable with the Fund's Shares. In addition, A Shares may be exchanged
for Investor Shares of Ready Cash Investment Fund and Municipal Money Market
Fund of the Trust. B Shares may be exchanged for Exchange Shares of Ready Cash
Investment Fund. Prospectuses for the shares of the funds listed above, as
well as a current list of the funds of the Trust that offer shares
exchangeable with the Shares of the Fund, can be obtained through FFSI by
contacting the Transfer Agent.

The Fund does not charge for exchanges, and there is currently no limit on the
number of exchanges a shareholder may make. The Fund reserves the right,
however, to limit excessive exchanges by any shareholder. Exchanges are
subject to the fees (other than contingent

30
<PAGE>

deferred sales charges) charged by, and the limitations (including minimum
investment restrictions) of, the fund into which a shareholder is exchanging.

Exchanges may only be made between identically registered accounts or to open
a new account. A new account application is required to open a new account
through an exchange if the new account will not have an identical registration
and the same shareholder privileges as the account from which the exchange is
being made. Shareholders may only exchange into a fund if that fund's shares
may legally be sold in the shareholder's state of residence.

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

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

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

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

31
<PAGE>

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

AUTOMATIC INVESTMENT PLAN

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

INDIVIDUAL RETIREMENT ACCOUNTS

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

AUTOMATIC WITHDRAWAL PLAN

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

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<PAGE>

REOPENING ACCOUNTS

8. DIVIDENDS AND TAX MATTERS

DIVIDENDS

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

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

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

TAXES

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<PAGE>

The 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 Fund will not be liable for Federal income and excise
taxes on the net investment income and capital gain distributed to its
shareholders. Because the Fund intends to distribute all of its net investment
income and net capital gain each year, the Fund should thereby avoid all
Federal income and excise taxes.

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

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

Any dividend or distribution received by a shareholder on shares of the Fund
will have the effect of reducing the net asset value of the shares by the
amount of the dividend or distribution. Furthermore, a dividend or
distribution made shortly after the purchase of shares by a shareholder,
although in effect a return of capital to that particular shareholder, would
be taxable to the shareholder as described above.

It is expected that a portion of the Fund's dividends from net investment
income will be eligible for the dividends received deduction for corporations.
The amount of such dividends eligible for the dividends received deduction is
limited to the amount of dividends from domestic corporations received during
the Fund's fiscal year. To the extent the Fund invests in the securities of
domestic issuers, the dividends to shareholders of the Fund may qualify for
the dividends received deduction for corporations.

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

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

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<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, 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. FFSI 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 the Fund as of 4:00
p.m., Eastern Time, on each Fund Business Day by dividing the value of the
Fund's net assets (i.e., the value of its securities and other assets less its
liabilities) by the number of shares outstanding at the time the determination
is made. Securities owned by the Fund 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 pursuant to procedures approved by the
Board. The Trust does not determine net asset value on the following

35
<PAGE>

holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.

The per share net asset values of each class of shares of the Fund are
expected to be substantially the same. Under certain circumstances, however,
the per share net asset value of each class may vary. Due to the higher
expenses of B Shares, the net asset value of B Shares will generally be lower
than the net asset value of the other classes. The per share net asset value
of each class of the Fund eventually will tend to converge immediately after
the payment of dividends, which will differ by approximately the amount of the
expense accrual differential among the classes.

PERFORMANCE INFORMATION

The Fund's performance may be quoted in advertising in terms of yield or total
return. All performance information is based on historical results and is not
intended to indicate future performance. The Fund's yield is a way of showing
the rate of income the Fund earns on its investments as a percentage of the
Fund's share price. To calculate standardized yield, the Fund takes the
interest income it earned from its investments for a 30-day period (net of
expenses), divides it by the average number of shares entitled to receive
dividends, and expresses the result as an annualized percentage rate based on
the Fund's share price at the end of the 30-day period. The Fund's total
return shows its overall change in value, including changes in share price and
assuming all the Fund's dividends and distributions are reinvested. A
cumulative total return reflects the Fund's performance over a stated period
of time. An average annual total return reflects the hypothetical annually
compounded return that would have produced the same cumulative total return if
the Fund's performance had been constant over the entire period. Because
average annual returns tend to smooth out variations in the Fund's returns,
shareholders should recognize that they are not the same as actual
year-by-year results. To illustrate the components of overall performance, the
Fund may separate its cumulative and

36
<PAGE>

average annual returns into income results and capital gain or loss. Published
yield quotations are, and total return figures may be, based on amounts
actually invested in the Fund net of sales loads that may be paid by an
investor. A computation of yield or total return that does not take into
account the sales load paid by an investor will be higher than a computation
based on the public offering price of shares purchased that take into account
payment of the sales load.

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

THE TRUST AND ITS SHARES

The Trust was originally organized under the name "Prime Value Funds, Inc." as
a Maryland corporation on August 29, 1986, and on July 30, 1993, was
reorganized as a Delaware business trust under the name "Norwest Funds." On
October 1, 1995, the Trust changed its name to "Norwest Advantage Funds." The
Trust has an unlimited number of authorized shares of beneficial interest. The
Board may, without shareholder approval, divide the authorized shares into an
unlimited number of separate portfolios or series (such as a Fund) and may
divide portfolios or series into classes of shares (such as A Shares), and the
costs of doing so will be borne by the Trust. Currently the authorized shares
of the Trust are divided into twenty-eight separate series.

OTHER CLASSES OF SHARES. The Fund may issue shares of other classes. The Fund
currently issues three classes of shares: I Shares; A Shares; and B Shares,
and may in the future create additional class types. I Shares are offered to
fiduciary, agency and custodial clients of bank trust departments, trust
companies and their affiliates without any sales charges. Each class of a Fund
will have a different expense ratio and may have different sales charges
(including distribution fees). Each class' performance will be affected by its
expenses and sales charges. For more information on any other class of shares
of the Fund, investors may contact the Transfer Agent at 612-667-8833 or
800-338-1348. Investors also may contact their Norwest sales representative or
the Fund's distributor to obtain

37
<PAGE>

information about the other classes. Sales personnel of broker-dealers and
other financial institutions selling the Fund's shares may receive differing
compensation for selling A, B and I Shares of the Fund.

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

As of September 1, 1996, Stout & Co., and Seret & Co., nominees of Norwest Bank
Colorado, N.A. through which some of their customers may own shares of the
Funds, may be deemed to have controlled, for purposes of the 1940 Act, the Fund.
From time to time, these shareholders or other shareholders may own a large
percentage of the shares of the Fund and, accordingly, may be able to greatly
affect (if not determine) the outcome of a shareholder vote.

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<PAGE>

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

<PAGE>

[LOGO]

PROSPECTUS - October 1, 1996

This Prospectus offers shares of twenty-seven separate portfolios (each a "Fund"
and collectively the "Funds") of Norwest Advantage Funds (the "Trust"), an
open-end, management investment company, as follows: (a) four Money Market Funds
- - Institutional and Investor Shares of Ready Cash Investment Fund, shares of
U.S. Government Fund and Treasury Fund, and Institutional and Investor Shares of
Municipal Money Market Fund, ("the Money Market Funds"); (b) I Shares of five
Fixed Income Funds - Stable Income Fund, Intermediate Government Income Fund,
Diversified Bond Fund, Income Fund and Total Return Bond Fund (the "Fixed Income
Funds"); (c) I Shares of four Tax-Free Fixed Income Funds - Limited Term
Tax-Free Fund, Tax-Free Income Fund, Colorado Tax-Free Fund and Minnesota
Tax-Free Fund, (the "Tax-Free Fixed Income Funds"); (d) I Shares of three
Balanced Funds - Conservative Balanced Fund, Moderate Balanced Fund and Growth
Balanced Fund (the "Balanced Funds"); and (e) I Shares of eleven Equity Funds -
Index Fund, Income Equity Fund, ValuGrowth-SM- Stock Fund, Diversified Equity
Fund, Growth Equity Fund, Large Company Growth Fund, Small Company Stock Fund,
Small Company Growth Fund, Small Cap Opportunities Fund, Contrarian Stock Fund
and International Fund (the "Equity Funds"). The Institutional Shares, Investor
Shares, shares of U.S. Government Fund and Treasury Fund (which offer a single
class of shares) and I Shares, offered in this Prospectus are collectively
referred to as "Shares."

This Prospectus sets forth concisely the information concerning the Trust and
the Funds that a prospective investor should know before investing. The Trust
has filed with the Securities and Exchange Commission (the "SEC") Statements of
Additional Information (the "SAIs") that are dated October 1, 1996, as may be
amended from time to time. The SAIs contain more detailed information about the
Trust and each of the Funds and are incorporated into this Prospectus by
reference. An investor may obtain a copy of the SAI for a Fund without charge by
contacting the Trust. Investors should read this Prospectus and retain it for
future reference.

INTERNATIONAL FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF
ITS INVESTABLE ASSETS IN INTERNATIONAL PORTFOLIO, A SEPARATE PORTFOLIO OF CORE
TRUST (DELAWARE), A REGISTERED OPEN-END MANAGEMENT INVESTMENT COMPANY, WITH AN
IDENTICAL INVESTMENT OBJECTIVE. SIMILARLY, SMALL CAP OPPORTUNITIES FUND SEEKS TO
ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO, A SEPARATE PORTFOLIO OF SCHRODER
CAPITAL FUNDS, A REGISTERED OPEN-END MANAGEMENT INVESTMENT COMPANY, WITH AN
IDENTICAL INVESTMENT OBJECTIVE. ACCORDINGLY, THESE FUNDS' INVESTMENT EXPERIENCE
WILL CORRESPOND DIRECTLY WITH THE INVESTMENT EXPERIENCE OF THE PORTFOLIO IN
WHICH THEY INVEST. (INTERNATIONAL PORTFOLIO AND SCHRODER U.S. SMALLER COMPANIES
PORTFOLIO ARE EACH REFERRED TO AS A "CORE PORTFOLIO" AND COLLECTIVELY AS THE
"CORE PORTFOLIOS." CORE TRUST (DELAWARE) AND SCHRODER CAPITAL FUNDS ARE EACH
REFERRED TO AS A "CORE TRUST" AND COLLECTIVELY AS THE "CORE TRUSTS"). SEE
"SUMMARY" AND "OTHER INFORMATION - CORE TRUST STRUCTURE."

SHARES OF COLORADO TAX-FREE FUND AND MINNESOTA TAX-FREE FUND ARE OFFERED SOLELY
TO RESIDENTS OF COLORADO AND MINNESOTA, RESPECTIVELY.

AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THE MONEY MARKET FUNDS ATTEMPT TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. THERE CAN BE NO ASSURANCE
THAT ANY MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE.

<PAGE>

TABLE OF CONTENTS

PAGE

1. SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . 10

3. INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . 18
Money Market Funds . . . . . . . . . . . . . . . . . . . . . . . . . 18
Fixed Income Funds . . . . . . . . . . . . . . . . . . . . . . . . . 23
Tax-Free Fixed Income Funds. . . . . . . . . . . . . . . . . . . . . 28
Balanced Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Equity Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

4. ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS . . . . . . . 46
General Information . . . . . . . . . . . . . . . . . . . . . . . . 46
Common Policies of the Funds . . . . . . . . . . . . . . . . . . . . 47

5. MANAGEMENT OF THE FUNDS. . . . . . . . . . . . . . . . . . . . . . . 51
Investment Advisory Services . . . . . . . . . . . . . . . . . . . . 51
Management, Administration and Distribution Services . . . . . . . . 57
Shareholder Servicing and Custody. . . . . . . . . . . . . . . . . . 58
Expenses of the Funds. . . . . . . . . . . . . . . . . . . . . . . . 59

6. PURCHASES AND REDEMPTIONS OF SHARES. . . . . . . . . . . . . . . . . 60
General Purchase Information . . . . . . . . . . . . . . . . . . . . 60
Purchase Procedures. . . . . . . . . . . . . . . . . . . . . . . . . 61
General Redemption Information . . . . . . . . . . . . . . . . . . . 62
Redemption Procedures. . . . . . . . . . . . . . . . . . . . . . . . 63
Exchanges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . 64

7. DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS . . . . . . . . . . . . . . 66
Dividends and Distributions. . . . . . . . . . . . . . . . . . . . . 66
Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

8. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 68
Banking Law Matters. . . . . . . . . . . . . . . . . . . . . . . . . 68
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . 69
Performance Information. . . . . . . . . . . . . . . . . . . . . . . 69
The Trust and Its Shares . . . . . . . . . . . . . . . . . . . . . . 70
Core Trust Structure . . . . . . . . . . . . . . . . . . . . . . . . 72

APPENDIX A:
Investments, Investment Strategies and Risk Considerations . . . . . 74

<PAGE>

1. SUMMARY

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

WHO SHOULD INVEST

I Shares are offered to fiduciary, agency and custodial clients of bank trust
departments, trust companies and their affiliates. Institutional Shares and the
single class of shares offered by each of U.S. Government Fund and Treasury Fund
are designed primarily for institutional clients. Investor Shares are designed
for retail investors and incur more expenses than Institutional Shares. See
"Purchases and Redemptions of Shares." While no single Fund is intended to
provide a complete or balanced investment program, each can serve as a component
of an investor's investment program.

THE FUNDS

Shares of twenty-seven Funds are offered by this Prospectus: (a) four MONEY
MARKET FUNDS - Institutional and Investor Shares of Ready Cash Investment Fund,
shares of U.S. Government Fund and Treasury Fund, and Institutional and
Investor Shares of Municipal Money Market Fund, (b) I Shares of five FIXED
INCOME FUNDS - Stable Income Fund, Intermediate Government Income Fund,
Diversified Bond Fund, Income Fund and Total Return Bond Fund; (c) I Shares of
four TAX-FREE FIXED INCOME FUNDS - Limited Term Tax-Free Fund, Tax-Free Income
Fund, Colorado Tax-Free Fund and Minnesota Tax-Free Fund; (d) I Shares of three
BALANCED FUNDS - Conservative Balanced Fund, Moderate Balanced Fund and Growth
Balanced Fund; and (e) I Shares eleven EQUITY FUNDS - Diversified Equity Fund,
Growth Equity Fund, Index Fund, Income Equity Fund, Large Company Growth Fund,
ValuGrowth Stock Fund, Small Company Stock Fund, Small Company Growth Fund,
Small Cap Opportunities Fund, Contrarian Stock Fund and International Fund.
Only the Shares indicated are offered by this Prospectus. Certain Funds
currently offer other classes of shares, which are designed for retail
investors and charge a sales load or incur additional expenses. These classes of
shares are offered by separate prospectuses that may be obtained by contacting
the Trust. Shares of each class of each 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."

MONEY MARKET FUNDS

Each of the Money Market Funds seeks to provide high current income (which in
the case of Municipal Money Market Fund is exempt from Federal income taxes) to
the extent consistent with the preservation of capital and the maintenance of
liquidity. READY CASH INVESTMENT FUND pursues this investment objective by
investing in a broad spectrum of high quality money market instruments of United
States and foreign issuers. U.S. GOVERNMENT FUND seeks its investment objective
by investing primarily in securities that are issued or guaranteed by the U.S.
Government, its agencies and instrumentalities. TREASURY FUND pursues its
investment objective by investing solely in obligations that are issued or
guaranteed by the United States Treasury. MUNICIPAL MONEY MARKET FUND pursues
its investment objective by investing primarily in tax-exempt municipal
securities.

FIXED INCOME FUNDS

STABLE INCOME FUND seeks to maintain safety of principal and provide low
volatility total return by investing primarily in short and intermediate
maturity, investment grade fixed income securities. INTERMEDIATE GOVERNMENT
INCOME FUND seeks income and safety of principal by investing primarily in U.S.
Government Securities. The Fund seeks to moderate its volatility by using a
conservative approach in structuring the maturities of its investment portfolio.
DIVERSIFIED BOND FUND seeks to pro-

1
<PAGE>

vide consistent fixed income returns by investing primarily in a portfolio of
intermediate maturity, investment grade fixed income securities through
investments in several fixed income styles as indicated:

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

INCOME FUND seeks current income and, secondarily, growth of capital. This
objective is pursued by investing in a portfolio of fixed income securities
issued by domestic and foreign issuers. TOTAL RETURN BOND FUND seeks total
return. This objective is pursued by investing in a portfolio of U.S.
Government and investment-grade corporate fixed income securities.

TAX-FREE FIXED INCOME FUNDS

LIMITED TERM TAX-FREE FUND seeks to produce current income exempt from Federal
income taxes. The Fund pursues this objective by investing primarily in a
portfolio of investment grade fixed income securities the interest on which is
free from Federal income tax, and maintains an average dollar weighted portfolio
maturity of between 1 and 5 years. TAX-FREE INCOME FUND seeks to produce current
income exempt from Federal income taxes. The Fund pursues this objective by
investing primarily in a portfolio of investment grade municipal securities the
interest on which is free from Federal income tax. COLORADO TAX-FREE FUND seeks
to provide shareholders with a high level of current income exempt from both
Federal and Colorado state income taxes (including the alternative minimum tax)
consistent with preservation of capital. This objective is pursued by investing
primarily in a portfolio of investment grade municipal securities of Colorado
issuers. MINNESOTA TAX-FREE FUND seeks to provide shareholders with a high
level of current income exempt from both Federal and Minnesota state income
taxes (including the alternative minimum tax) without assuming undue risk. This
objective is pursued by investing primarily in a portfolio of investment grade
municipal securities of Minnesota issuers.

BALANCED FUNDS

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

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

Of the Balanced Funds, Conservative Balanced Fund most emphasizes safety of
principal through limited exposure to equity securities.

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

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

Moderate Balanced Fund is more evenly balanced between fixed income and equity
securities than the other Balanced Funds.

2
<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%
Total Return Bond Fund style 11 2/3%
Managed Fixed Income style 11 2/3%
Positive Return style 11 2/3%
---------------------------- -------
Total Fund Assets 100%

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

EQUITY FUNDS

INDEX FUND seeks to duplicate the return of the Standard & Poor's 500 Composite
Stock Price Index. 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. VALUGROWTH STOCK FUND seeks capital appreciation.
This objective is pursued by investing in a diversified portfolio of common
stock and securities convertible into common stock. The Fund invests primarily
in medium and large capitalization companies that, in the view of the Fund's
investment adviser, possess above average growth prospects and appear to be
undervalued.

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

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

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

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

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

LARGE COMPANY GROWTH FUND seeks long-term capital appreciation by investing in
large, high quality domestic companies that the investment adviser believes have
superior growth potential. SMALL COMPANY STOCK FUND seeks long-term capital
appreciation. This objective is pursued by investing primarily in the common
stock of small and medium size domestic companies that have a market
capitalization well below that of the average company in the Standard & Poor's
500 Composite Stock Price Index. 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. SMALL CAP OPPORTUNITIES FUND seeks capital appreciation. Current
income will be incidental to the objective of capital appreciation. The Fund
currently seeks to achieve its investment objective by investing all of its
investable assets in Schroder U.S. Smaller Companies Portfolio, a series of
Schroder Capital Funds, itself a registered open-end management investment
company. The Portfolio has the same investment objective and substantially
identical investment policies as the Fund. Thus, the investment experience
of the Fund will correspond directly with the investment experience of the
Portfolio. See "Other Information - Core Trust Structure." CONTRARIAN STOCK
FUND seeks capital appreciation. This objec-

3
<PAGE>

tive 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), itself a registered
open-end management investment company. The Portfolio has the same investment
objective and substantially identical investment policies as the Fund. Thus,
the investment experience of the Fund will correspond directly with the
investment experience of the Portfolio. See "Other Information - Core Trust
Structure."

INVESTMENTS IN CORE TRUST

As noted above, International Fund and Small Cap Opportunities Fund seek to
achieve their investment objectives by investing all of their investable assets
in International Portfolio and Schroder U.S. Smaller Companies Portfolio,
respectively. In addition, the Trust has received an exemptive order from the
SEC pursuant to which CONSERVATIVE BALANCED FUND, MODERATE BALANCED FUND, GROWTH
BALANCED FUND, DIVERSIFIED EQUITY FUND and GROWTH EQUITY FUND (collectively, the
"Blended Funds") currently invest the portions of their assets that are managed
in a small company, an index and an international investment style, in Small
Company Portfolio, Index Portfolio, and International Portfolio II, respectively
(collectively, the "Blended Portfolios"). These Blended Portfolios are each
separate portfolios of Core Trust (Delaware). 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. Small Company 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; in the future, this Portfolio may
invest its assets in accordance with additional small company investment
styles.

MANAGEMENT OF THE FUNDS

ADVISORY SERVICES. The investment adviser to each Fund (the "Adviser") is
Norwest Investment Management, a part of Norwest Bank Minnesota, N.A.
("Norwest"). Norwest is a subsidiary of Norwest Corporation, which is a
multi-bank holding company that was incorporated under the laws of Delaware in
1929. As of June 30, 1996, Norwest Corporation was the 12th 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 $22 billion. Except for International Fund and Small Cap
Opportunities Fund, the Adviser makes investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
As International Fund and Small Cap Opportunities Fund invest in their
respective Core Portfolios, investment decisions for the Funds are made by
Schroder Capital Management International Inc. ("Schroder"), investment adviser
to the Core Portfolios. Schroder makes investment decisions for the Core
Portfolios and continuously reviews, supervises and administers the Core
Portfolios' investment programs. In addition, subject to the Adviser's general
oversight, Schroder acts as investment subadviser to International Fund, Small
Cap Opportunities Fund, the Balanced Funds, Diversified Equity Fund and Growth
Equity Fund. Subject to the Adviser's general oversight, Crestone Capital
Management, Inc. ("Crestone"), an investment advisory subsidiary of Norwest,
serves as investment subadviser to Small Company Stock Fund. See, "Management
of the Funds - Investment Advisory Services" for information regarding each
investment adviser, including their fees.

4
<PAGE>

MANAGEMENT, DISTRIBUTION AND OTHER SERVICES. The manager of the Trust and
distributor of its shares is Forum Financial Services, Inc. ("FFSI"), a
registered broker-dealer and member of the National Association of Securities
Dealers, Inc. As manager of the Trust, FFSI, among other things, oversees the
performance of administrative and professional services rendered to the Trust by
others. Forum Administrative Services, LLC ("FAS") serves as the administrator
of the Trust. Norwest serves as the Trust's transfer agent, dividend disbursing
agent and custodian and provides certain administrative services to
International Fund and Small Cap Opportunities Fund. FFSI serves as
administrator of each portfolio of Core Trust (Delaware), and Schroder Fund
Advisors ("Schroder Advisors") serves as administrator of U.S. Smaller Companies
Portfolio, for which FFSI also provides certain administrative services. See
"Management of the Funds - Management, Administrative and Distribution Services"
and " - Shareholder Servicing and Custody" for information regarding each of
these service providers, including their fees.

PURCHASE AND REDEMPTION OF SHARES

Shares may be purchased or redeemed without a sales or other charge. The
minimum initial investment for Institutional Shares and the shares of U.S.
Government Fund and Treasury Fund is $100,000. There is no minimum subsequent
investment for those Shares. The minimum initial investment for Investor Shares
and I Shares is $1,000. The minimum subsequent investment for Investor Shares
and I Shares is $100. See "Purchases and Redemptions of Shares."

EXCHANGES

Holders of Institutional Shares, I Shares and shares of U.S. Government Fund and
Treasury Fund may exchange their Shares among those Funds and those classes.
Holders of Investor Shares of a Fund may exchange their Shares for Investor
Shares of the other Fund and A class shares of certain other Funds of the Trust.
"See Purchases and Redemptions of Shares - Exchanges."

CERTAIN 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 investments in
foreign issuers, issuers with limited market capitalization, mortgage- or
asset-backed securities, zero-coupon bonds and options, futures contracts,
forward contracts and swap agreements and the potential use of leverage by
certain Funds through borrowings, margin transactions, short sales, and other
investment techniques. See "Investment Objectives and Policies," "Additional
Investment Policies and Risk Considerations" and "Appendix A: Investments,
Investment Strategies and Risk Considerations."

Normally, the values of the FIXED INCOME FUNDS' and the TAX-EXEMPT FIXED INCOME
FUNDS' investments vary inversely with changes in interest rates. The
securities in which the Fixed Income Funds and Tax-Exempt Fixed Income Funds
invest are subject to "credit risk" relating to the financial condition of the
issuers of the securities. Each Fund (other than Minnesota Tax-Free Fund),
however, invests only in investment grade securities (those rated in the top
four grades by a nationally recognized statistical rating organization ("NRSRO")
such as Standard & Poor's). MINNESOTA TAX-FREE FUND may invest in
non-investment grade municipal securities, which may entail additional risks.
See "Investment Objectives and Policies - Tax-Free Fixed Income Funds -
Minnesota Tax-Free Fund - Non-Investment Grade Securities." In addition, with
respect to the Fixed Income Funds, the potential for appreciation in the event
of a decline in interest rates may be limited or negated by increased principal
repayments on certain mortgage- and asset-backed securities held by a Fund. The
Fixed Income Funds' use of these securities entails certain risks. See
"Appendix A: Investments, Investment Strategies and Risk Considerations -
Mortgage-Backed Securities" and "- Asset-Backed Securities."

Each of COLORADO TAX-FREE FUND and MINNESOTA TAX-FREE FUND invests principally
in securities issued by the government of and municipalities in the State of
Colorado or Minnesota, respectively, and is

5
<PAGE>

therefore more susceptible to factors adversely affecting issuers of those
states than would be a more geographically diverse municipal securities
portfolio. Each of these Funds is non-diversified, which means that they have
greater latitude than a diversified Fund to invest in fewer issuers and to
invest more of their assets in any one issuer. Non-diversified funds may
present greater risks than diversified funds. See "Investment Objectives and
Policies - Tax-Free Fixed Income Funds - Investment Considerations and Risk
Factors."

The policy of investing in small companies employed by the BALANCED FUNDS,
DIVERSIFIED EQUITY FUND, GROWTH EQUITY FUND, SMALL COMPANY STOCK FUND, SMALL
COMPANY GROWTH FUND and SMALL CAP OPPORTUNITIES FUND, and CONTRARIAN STOCK
FUND'S policy of investing in securities that may be out of favor with many
institutional investors, entail certain risks in addition to those normally
associated with investments in equity securities. The policy of investing in
the securities of foreign issuers employed by READY CASH INVESTMENT FUND, the
BALANCED FUNDS, DIVERSIFIED EQUITY FUND, GROWTH EQUITY FUND and INTERNATIONAL
FUND also entails risks in addition to those normally associated with
investments in securities of domestic issuers. See "Investment Objectives and
Policies - Equity Funds." By investing solely in its Core Portfolio, SMALL CAP
OPPORTUNITIES FUND and INTERNATIONAL FUND may achieve certain efficiencies and
economies of scale. Nonetheless, this investment could also have potential
adverse effects on these Funds. Similarly, by investing in the BLENDED
PORTFOLIOS, the BLENDED FUNDS are subject to similar adverse effects. Investors
in the Blended Funds, Small Cap Opportunities Fund and International Fund should
consider these risks, as described under "Other Information - Core Trust
Structure."

As noted under "Financial Highlights," the portfolio turnover rate for certain
Funds may from time to time be high, resulting in increased brokerage costs or
short-term capital gains or losses. See "Additional Investment Policies and
Risk Considerations - Common Policies of the Funds - Portfolio Transactions."

EXPENSES OF INVESTING IN THE FUNDS

The purpose of the following table is to assist investors in understanding the
expenses that an investor in Shares of a Fund will bear directly or indirectly.
There are no transaction charges in connection with purchases, redemptions or
exchanges of the Shares. No Fund 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 OPERATING EXPENSES

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

Investment Rule Total
Advisory 12b-1 Other Operating
Fees Fees Expenses(5) Expenses
---------- ------ ---------- ----------
MONEY MARKET FUNDS
Ready Cash Investment Fund
Institutional Shares 0.35% None 0.13% 0.48%
Investor Shares 0.35% None 0.47% 0.82%
U.S. Government Fund 0.15% None 0.35% 0.50%
Treasury Fund 0.17% None 0.29% 0.46%
Municipal Money Market Fund
Institutional Shares 0.29% None 0.17% 0.46%
Investor Shares 0.29% None 0.37% 0.66%
FIXED INCOME FUNDS (I SHARES)
Stable Income Fund(2) 0.30% None 0.35% 0.65%
Intermediate Government
Income Fund(2) 0.33% None 0.38% 0.71%

6
<PAGE>

Diversified Bond Fund(2) 0.35% None 0.35% 0.70%
Income Fund 0.40% None 0.35% 0.75%
Total Return Bond Fund 0.50% None 0.25% 0.75%
TAX-FREE FIXED INCOME FUNDS
(I SHARES)
Limited Term Tax-Free Fund 0.50% None 0.15% 0.65%
Tax-Free Income Fund 0.30% None 0.20% 0.50%
Colorado Tax-Free Fund 0.30% None 0.20% 0.50%
Minnesota Tax-Free Fund 0.30% None 0.20% 0.50%
BALANCED FUNDS (I SHARES)
Conservative Balanced
Fund(2)(4) 0.45% None 0.34% 0.79%
Moderate Balanced Fund(2)(4) 0.53% None 0.34% 0.87%
Growth Balanced Fund(2)(4) 0.58% None 0.34% 0.92%
EQUITY FUNDS (I SHARES)
Index Fund(2) 0.04% None 0.27% 0.31%
Income Equity Fund(2) 0.50% None 0.36% 0.86%
ValuGrowth Stock Fund 0.79% None 0.41% 1.20%
Diversified Equity
Fund(2)(4) 0.65% None 0.32% 0.97%
Growth Equity Fund(2)(4) 0.90% None 0.32% 1.22%
Large Company Growth Fund(2) 0.65% None 0.35% 1.00%
Small Company Stock Fund 0.64% None 0.57% 1.21%
Small Company Growth Fund(2) 0.90% None 0.35% 1.25%
Small Cap Opportunities
Fund(3) 0.60% None 0.65% 1.25%
Contrarian Stock Fund 0.64% None 0.56% 1.20%
International Fund(3) 0.45% None 1.05% 1.50%

(1) For a further description of the various expenses incurred in the
operation of the Funds, see "Management of the Funds." Expenses
associated with A and B Shares of the Funds differ from those of I
Shares listed in the table. The amounts of expenses for each Fund,
except as noted below, are based on amounts incurred during the Funds'
most recent fiscal year ended May 31, 1996. The amounts of the expenses
for Limited Term Tax-Free Fund and Small Cap Opportunities Fund are based
on estimated amounts for the Funds' first fiscal year of operations ending
May 31, 1997 and October 31, 1996, respectively. As of October 1, 1996,
Limited Term Tax-Free Fund has not commenced operations. Small Cap
Opportunities Fund commenced operations on August 1, 1996. The expense
information for Total Return Bond Fund, Tax-Free Income Fund, Colorado
Tax-Free Fund and Minnesota Tax-Free Fund has been restated to reflect
the current expenses incurred by these Funds.

Absent actual (or in the case of, Tax-Free Income Fund, Colorado Tax-Free
Fund and Minnesota Tax-Free Fund, estimated) expense reimbursements and
fee waivers, the Investment Advisory Fees of Ready Cash Investment Fund
(Investor Shares), Municipal Money Market Fund (Institutional and Investor
Shares), Income Fund, Tax-Free Income Fund, Colorado Tax-Free Fund,
Minnesota Tax-free Fund, Index Fund, ValuGrowth Stock Fund, Small Company
Stock Fund and Contrarian Stock Fund would be 0.36%, 0.34%, 0.35%, 0.50%,
0.50%, 0.50%, 0.50%, 0.15%, 0.80%, 1.00% and 0.80%, respectively. Absent
actual (or, in the case of Total Return Bond Fund, Limited Term Tax-Free
Fund, Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota Tax-Free
Fund, and Small Cap Opportunities Fund, estimated) expense reimbursements
and fee waivers, Other Expenses and Total Operating Expenses of each Fund
would be, respectively: Ready Cash Investment Fund: Institutional Shares -
0.37% and 0.72% and Investor Shares - 0.52% and 0.87%; U.S. Government
Fund: 0.36% and 0.51%; Treasury Fund: 0.39% and 0.56%; Municipal Money
Market Fund: Institutional Shares - 0.38% and 0.72% and Investor Shares -
0.53% and 0.88%; Stable Income Fund: 0.62% and 0.92%; Intermediate
Government Income Fund: 0.84% and 1.17%; Diversified Bond Fund: 0.42%
and 0.77%; Income Fund: 0.56% and 1.06%; Total

7
<PAGE>

Return Bond Fund: 0.57% and 1.07%; Limited Term Tax-Free Fund: 0.65% and
1.15%; Tax-Free Income Fund: 0.56% and 1.06%; Colorado Tax-Free Fund:
0.63% and 1.13%; Minnesota Tax-Free Fund: 0.80% and 1.30%; Conservative
Balanced Fund: 0.45% and 0.90%; Moderate Balanced Fund: 0.40% and 0.93%;
Growth Balanced Fund: 0.40% and 0.98%; Index Fund: 0.42% and 0.57%;
Income Equity Fund: 0.63% and 1.13%; ValuGrowth Stock Fund: 0.52% and
1.32%; Diversified Equity Fund: 0.39% and 1.04%; Growth Equity Fund: 0.39%
and 1.29%; Large Company Growth Fund: 0.48% and 1.13%; Small Company
Stock Fund: 0.60% and 1.60%; Small Company Growth Fund: 0.39% and 1.29%;
Small Cap Opportunities Fund: 0.98% and 1.58%; Contrarian Stock Fund:
0.65% and 1.45%; and International Fund: 0.97% and 1.52%. Expense
reimbursements and fee waivers are voluntary and may be reduced or
eliminated at any time.

(2) Effective with the period commencing October 31, 1995, the fiscal year end
for these Funds was changed from October 31 to May 31. Accordingly the
fiscal period reflected in the table for these Funds is November 1, 1995
through May 31, 1996.

(3) Other Expenses of International Fund and Small Cap Opportunities Fund
include each Fund's pro rata portion of the operating expenses of the
Portfolio in which they invest, which are borne indirectly by those
Funds' shareholders. As long as a Fund's assets are invested in the
corresponding Portfolio, that Fund pays no investment advisory fees
directly. These Funds and their respective Portfolios pay management
and administration fees. The Board of Trustees of the Trust believes
that the aggregate per share expenses of these two Funds will be
approximately equal to the expenses that the Funds would incur if their
assets were invested directly in securities. Investment Advisory Fees
are those incurred by the Core Portfolios; as long as a Fund's assets are
invested in a Core Portfolio a Fund pays no investment advisory fees
directly.

(4) Conservative Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund,
Diversified Equity Fund and Growth Equity Fund invest portions of their
assets in the Blended Portfolios, each of which bears certain expenses not
reflected in the table. See "Management of the Funds - Expenses of the
Funds" and "Other Information - Core Trust Structure." Each Blended Fund
incurs its pro rata share of the Blended Portfolios' expenses, but only to
the extent it invests in a Blended Portfolio. Including the expenses
allocated from the Blended Portfolios to each Fund, the Total Operating
Expenses of each Fund and the Total Operating Expenses of each Fund absent
expense reimbursements or waivers of the Funds and the Blended Portfolios
would have been: Conservative Balanced Fund, 0.82% and 0.97%; Moderate
Balanced Fund, 0.90% and 1.04%; Growth Balanced Fund, 0.98% and 1.16%;
Diversified Equity Fund, 1.06% and 1.30%, and Growth Equity Fund, 1.35%
and 1.85%.

(5) Other Expenses for I Shares and Investor Shares and for U.S. Government
Fund and Treasury Fund include transfer agency fees payable to Norwest
at an annual rate of 0.25% of each Fund's average daily net assets
attributable to the Shares, and Other Expenses for Institutional Shares
include transfer agency fees payable at an annual rate of 0.10% of the
average daily net assets attributable to those Shares plus reimbursements
and certain expenses. Other Expenses for Ready Cash Investment Fund,
Municipal Money Market Fund, Income Fund, Total Return Bond Fund, Limited
Term Tax-Free Fund, Tax-Free Income Fund, Colorado Tax-Free Fund,
Minnesota Tax-Free Fund, ValuGrowth Stock Fund, Small Company Stock Fund
and Contrarian Stock Fund also include custodial fees payable to Norwest
at an annual rate of up to 0.05% of each Fund's average daily net assets,
and Other Expenses for U.S. Government Fund and Treasury Fund include
custodial fees payable to Norwest at an annual rate of up to 0.03% of each
Fund's average daily net assets; Norwest charges no custodian fees to the
other Funds, but they incur applicable subcustodian fees. In addition,
Other Expenses for Small Cap Opportunities Fund and International Fund
include administrative service fees payable to Norwest of 0.25% of each
Fund's average daily net assets.

8
<PAGE>

EXAMPLE (1)

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

One Three Five Ten
Year Years Years Years
----- ----- ----- -----
Money Market Funds
Ready Cash Investment Fund
Institutional Shares $5 $15 $27 $ 60
Investor Shares 8 26 46 101
U.S. Government Fund 5 16 28 63
Treasury Fund 5 15 26 58
Municipal Money Market Fund
Institutional Shares 5 15 26 58
Investor Shares 7 21 37 82
Fixed Income Funds (I Shares)
Stable Income Fund 7 21 37 82
Intermediate Government
Income Fund 7 23 40 89
Diversified Bond Fund 7 23 40 88
Income Fund 8 24 42 94
Total Return Bond Fund 8 24 42 94
Tax-Free Fixed Income Funds
(I Shares)
Limited Term Tax-Free Fund 7 21 36 81
Tax-Free Income Fund 5 16 28 63
Colorado Tax-Free Fund 5 16 28 63
Minnesota Tax-Free Fund 5 16 28 63
Balanced Funds (I Shares)
Conservative Balanced Fund(2) 8 26 45 100
Moderate Balanced Fund(2) 9 28 48 107
Growth Balanced Fund(2) 9 29 51 113
Equity Funds (I Shares)
Index Fund 3 10 18 41
Income Equity Fund 9 28 49 108
ValuGrowth Stock Fund 12 38 66 147
Diversified Equity Fund(2) 10 32 55 121
Growth Equity Fund(2) 13 39 68 150
Large Company Growth Fund 10 32 56 124
Small Company Stock Fund 12 38 66 147
Small Company Growth Fund 13 40 70 153
Small Cap Opportunities Fund 13 40 69 151
Contrarian Stock Fund 12 38 66 145
International Fund 15 47 82 179

(1) The example is based on the expenses listed in the "Annual Operating
Expenses" table above. The 5% annual return is not predictive of and does
not represent the funds' projected returns; rather, it is required by
government regulation.

(2) Including expenses allocated from the Blended Portfolios, the expenses
that an investor would pay under this example would have been: Conservative
Balanced Fund, $9, $27, $47 and $104; Moderate Balanced Fund, $9, $29, $50
and $112; Growth Balanced Fund, $10, $31, $55 and $121; Diversified Equity
Fund, $11, $34, $59 and $131; and Growth Equity Fund, $14, $43, $75 and
$165, for one year, three years, five years and ten years, respectively.
See, footnote (4) to the "Annual Operating Expenses" table above.

9
<PAGE>

2. FINANCIAL HIGHLIGHTS

The following tables provide financial highlights for each Fund. This
information represents selected data for a single outstanding Share of each Fund
for the periods shown. Information for the years ended May 31, 1994, 1995 and
1996 has been audited by KPMG Peat Marwick LLP, independent auditors. The
information for prior periods was audited by other independent auditors. The
financial statements for each Fund's most recent fiscal year and independent
auditors' report thereon are contained in the Annual Report of the Funds, and
are incorporated by reference into the SAIs. Further information about each
Fund's performance is contained in the Annual Report which may be obtained from
the Trust without charge.

<TABLE>
<CAPTION>
Ready Cash Investment
Fund
(Investor Shares)
Year Period
Ended Ended
May 31, May 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $1.00 $1.00 $1.00 $1.00 $1.00
Net Investment Income 0.051 0.045 0.027 0.030 0.020
Dividends from Net
Net Investment Income (0.051) (0.045) (0.027) (0.030) (0.020)
Ending Net Asset Value
per Share $1.00 $1.00 $1.00 $1.00 $1.00
Ratios to Average Net Assets:
Expenses(a) 0.82% 0.82% 0.82% 0.82% 0.82%(b)
Net Investment Income 5.02% 4.64% 2.70% 3.04% 4.01%(b)
Total Return 5.17% 4.62% 2.74% 3.08% 4.05%(b)
Net Assets at the End of Period
(000's omitted) $473,879 $268,603 $164,138 $162,585 $176,378

(a) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratio
of expenses to average net assets would have been:
Expenses 0.87% 0.91% 0.92% 0.94% 0.93%(b)

(b) Annualized.

</TABLE>

<TABLE>
<CAPTION>
Ready Cash Ready Cash
Investment Investment
Fund Fund
(Investor Shares) (Institutional Shares)
Year Year
Ended Ended
November 30, May 31,
1991 1990 1989 1988(a) 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.058 0.076 0.085 0.059 0.054 0.049 0.013
Dividends from Net
Investment Income (0.058) (0.076) (0.085) (0.059) (0.054 (9) (0.013)
Ending Net Asset Value
per Share $1.00 $1.00 $1.00 $1.00 $1.00 $ 1.00 $ 1.00
Ratios to Average Net Assets
Expenses(b) 0.82% 0.82% 0.81% 0.77%(c) 0.48% 0.48% 0.43%(c)
Net Investment Income 5.81% 7.56% 8.51% 7.11%(c) 5.59% 4.97% 3.12%(c)
Total Return 5.98% 7.83% 8.86% 6.97%(c) 5.53% 4.98% 3.17%(c)
Net Assets at the End of
Period (000's omitted) $183,775 $166,911 $144,117 $46,736 $1,080,255 $506,243 $333,464

(a) Ready Cash Investment Fund commenced operations on January 20, 1988. The
Fund's initial class of shares subsequently became Investor Shares. The
Fund commenced the offering of Institutional Shares on January 4, 1994.

<PAGE>

<TABLE>
<CAPTION>
U.S. Government Fund
Year Period
Ended Ended
May 31, May 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.052 0.047 0.030 0.030 0.020
Dividends from Net
Investment Income (0.052) (0.047) (0.030) (0.030) (0.020)
Ending Net Asset Value
per Share $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Ratios to Average Net Assets
Expenses(a) 0.50% 0.50% 0.47% 0.45% 0.45%(b)
Net Investment Income 5.13% 4.68% 3.02% 3.00% 3.99%(b)
Total Return 5.27% 4.81% 3.07% 3.06% 4.07%(b)
Net Assets at End of
Period (000's omitted) $1,649,721 $1,159,421 $1,091,141 $903,274 $623,685

(b) Annualized.

</TABLE>

<TABLE>
<CAPTION>
U.S. Government Fund
Year
Ended
November 30,
1991 1990 1989 1988 1987(a)
<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.058 0.077 0.085 0.069 0.003
Dividends from Net
Investment Income (0.058) (0.077) (0.085) (0.069) (0.003)
Ending Net Asset Value
per Share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Ratios to Average Net Assets
Expenses(b) 0.45% 0.45% 0.45% 0.42% 0.00%(c)
Net Investment Income 5.84% 7.66% 8.51% 6.87% 6.89%(c)
Total Return 6.00% 7.94% 8.87% 7.13% 7.35%(c)
Net Assets at End of
Period (000's omitted) $469,487 $500,794 $394,137 $254,104 $4,343

(a) U.S. Government Fund commenced operations on November 16, 1987.

Expenses 0.60% 0.61% 0.65% 0.73% 2.94%(c)

</TABLE>

11
<PAGE>

<TABLE>
<CAPTION>
Treasury Fund
Year Period Year
Ended Ended Ended
May 31, May 31, November 30,
1996 1995 1994 1993 1992 1991(a)
<S> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.050 0.046 0.028 0.029 0.020 0.058
Dividends from Net
Investment Income (0.050) (0.046) (0.028) (0.029) (0.020) (0.058)
Ending Net Asset Value
per Share $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Ratios to Average Net Assets
Expenses(b) 0.46% 0.46% 0.46% 0.47% 0.47%(c) 0.31%(c)
Net Investment Income 4.91% 4.62% 2.81% 2.93% 4.01%(c) 5.62%(c)
Total Return 5.04% 4.65% 2.83% 2.98% 4.07%(c) 6.02%(c)
Net Assets at the End of Period
(000's omitted) $802,270 $661,098 $526,483 $384,751 $374,492 $354,200

(a) Treasury Fund commenced operations on December 3, 1990.

</TABLE>

<TABLE>
<CAPTION>
Municipal Money Market Fund
(Investor Shares)
Year Period
Ended Ended
May 31, May 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.033 0.031 0.021 0.021 0.014
Net Realized and Unrealized Gain
(Loss) on Investments -- (0.004) -- -- --
Dividends from Net
Investment Income (0.033) (0.031) (0.021) (0.021) (0.014)
Capital Contribution from Adviser __ 0.004 -- -- --
Ending Net Asset Value
per Share $1.00 $1.00 $1.00 $1.00 $1.00
Ratios to Average Net Assets:
Expenses(a) 0.65% 0.65% 0.65% 0.65% 0.63%(b)
Net Investment Income 3.25% 3.10% 2.03% 2.13% 2.81%(b)
Total Return 3.31% 3.13%(c) 2.09% 2.18% 2.89%(b)
Net Assets at the End of Period (000's omitted) $57,021 $47,424 $33,554 $75,521 $82,678

(b) Annualized.

(c) Total return for the year ended May 31, 1995 includes the effect of a
capital contribution from the Adviser. Without the capital contribution,
total return would have been 2.59% for Investor Shares.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Municipal Money Market Fund
(Investor Shares) (Institutional Shares)
Year Year
Ended Ended
November 30, May 31,
1991 1990 1989 1988(a) 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.042 0.053 0.058 0.042 0.035 0.033 0.019
Net Realized and Unrealized Gain
(Loss) on Investments -- -- -- -- -- (0.004) --
Dividends from Net
Investment Income (0.042) (0.053) (0.058) (0.042) (0.035) (0.033) (0.019)
Capital Contribution from Adviser -- -- -- -- -- 0.004 --
Ending Net Asset Value
per Share $1.00 $1.00 $1.00 $1.00 $1.00 $ 1.00 $ 1.00
Ratios to Average Net Assets:
Expenses(b) 0.64% 0.64% 0.62% 0.62%(c) 0.45% 0.45% 0.45%(c)
Net Investment Income 4.10% 5.34% 5.78% 4.64%(c) 3.41% 3.37%(d) 2.33%(c)
Total Return 4.26% 5.48% 5.94% 4.76%(c) 3.52% 3.33% 2.34%(c)
Net Assets at End of Year/Period
(000's omitted) $66,327 $29,801 $18,639 $8,963 $592,436 $278,953 $190,356

(d) Total return for the year ended May 31, 1995 includes the effect of a
capital contribution from the Adviser. Without the capital contribution,
total return would have been 2.79% for Institutional Shares.

</TABLE>

<TABLE>
<CAPTION>
Stable Intermediate Diversified
Income Government Bond
Fund Income Fund Fund
Year Period Year Period Year Period
Ended Ended Ended Ended Ended Ended
May 31 October 31 May 31 October 31 May 31 October 31
1996 1995(a) 1996 1995(a)(d) 1996 1995(a)
<S> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $10.72 $10.00 $12.40 $11.11 $27.92 $25.08
Net Investment Income 0.28 0.50 0.40 0.93 1.07 1.65
Net Realized and Unrealized Gain
(Loss) on Investments 0.03 0.22 0.53 0.36 (0.99) 1.19
Dividends from Net
Investment Income (0.77) -- (1.32) -- (1.67) --
Distributions from Net
Realized Gains (0.06) -- (1.12) -- (0.30) --
Ending Net Asset Value
Per Share $10.20 $10.72 $10.89 $12.40 $26.03 $27.92
Ratios to Average Net Assets:
Expenses(b) 0.65%(c) 0.65%(c) 0.71%(c) 0.68%(c) 0.70%(c) 0.67%(c)
Net Investment Income (Loss) 5.74%(c) 5.91%(c) 6.71%(c) 7.79%(c) 6.78%(c) 5.87%(c)
Total Return 2.97% 7.20% 0.60% 11.58% 0.22% 11.32%
Portfolio Turnover Rate 109.95% 115.85% 74.64% 240.90% 118.92% 58.90%
Net Assets at End of Year/Period
(000s omitted) $83,404 $48,087 $399,324 $50,213 $167,159 171,453

(a) Each 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: 0.92(c) 0.98%(c) 1.17%(c) 0.93%(c) 0.77%(c) 0.82%(c)

(d) Adjusted for five for one stock split. The Fund declared a stock split as
of the close of business of March 22, 1996, to the shareholders of record
of the Fund as of the close of business on that date. Each shareholder of
the Fund received four additional shares of beneficial interest of the Fund
for each outstanding share of beneficial interest of the Fund held by the
shareholder on that date.

</TABLE>

13
<PAGE>

<TABLE>
<CAPTION>
Total Return
Income Fund Bond Fund
Year Period Year Period
Ended Ended Ended Ended
May 31 May 31 May 31 May 31
1996 1995 1994(a) 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $ 9.62 $ 9.51 $10.68 $ 9.73 $ 9.54 $10.00
Net Investment Income (Loss) 0.61 0.65 0.58 0.64 0.67 0.27
Net Realized and Unrealized Gain
(Loss) on Investments (0.36) 0.11 (0.91) (0.31) 0.19 (0.46)
Dividends from Net
Investment Income (0.61) (0.65) (0.58) (0.64) (0.67) (0.27)
Distributions from
Net Realized Gains -- -- (0.26) (0.02) -- --
Ending Net Asset Value
per Share $ 9.26 $ 9.62 $ 9.51 $ 9.40 $ 9.73 $ 9.54
Ratios to Average Net Assets:
Expenses(b) 0.75% 0.75% 0.61%(c) 0.75% 0.71% 0.46%(c)
Net Investment Income (Loss) 6.30% 7.02% 6.75%(c) 6.57% 7.04% 6.81%(c)
Total Return 2.58% 8.49% (4.04%)(c) 3.41% 9.43% (4.62%)(c)
Portfolio Turnover Rate 270.17% 98.83% 26.67% 77.49% 35.19% 37.50%
Net Assets at End of Year/Period
(000s omitted) $271,157 $109,994 $93,665 $120,767 $96,199 $11,694

(a) Income Fund commenced the offering of I Shares (formerly Trust Shares) on
August 2, 1993. Total Return Bond Fund commenced the offering of I shares
(formerly Trust Shares) on December 31, 1993.

(b) During the period, various fees and expenses were waived and reimbursed,
respectively. Had those waivers and reimbursements not occurred, the ratio
of expenses to average net assets would have been:
Expenses: 1.06% 1.06% 1.09%(c) 1.07% 1.17% 2.10%(c)

<TABLE>
<CAPTION>
Tax-Free Colorado
Income Tax Free
Fund Fund
Year Period Year Period
Ended Ended Ended Ended
May 31 May 31 May 31 May 31
1996 1995 1994(a) 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $ 9.82 $ 9.60 $10.14 $ 9.90 $ 9.69 $10.22
Net Investment Income 0.55 0.55 0.47 0.53 0.48 0.39
Net Realized and Unrealized Gain
(Loss) on Investments (0.04) 0.22 (0.47) (0.01) 0.21 (0.52)
Dividends from Net
Investment Income (0.55) (0.55) (0.47) (0.53) (0.48) (0.39)
Distributions from
Net Realized Gains -- -- (0.07) -- -- (0.01)
Ending Net Asset Value
per Share $9.78 $9.82 $9.60 $9.89 $9.90 $9.69
Ratios to Average Net Assets:
Expenses(b) 0.32% 0.60% 0.60%(c) 0.30% 0.30% 0.11%(c)
Net Investment Income (Loss) 5.57% 5.84% 5.71%(c) 5.30% 5.08% 5.03%(c)
Total Return 5.29% 8.42% (0.21%)(c) 5.35% 7.47% 0.90%(c)
Portfolio Turnover Rate 126.20% 130.90% 116.54% 171.41% 47.88% 40.92%
Net Assets at End of
Year/Period (000s omitted) $276,159 $94,454 $102,084 $24,074 $24,539 $15,153

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

14
<PAGE>

<TABLE>
<CAPTION>
Minnesota Conservative Moderate
Tax-Free Balanced Balanced
Fund Fund Fund
Year Period Year Period Year Period
Ended Ended Ended Ended Ended Ended
May 31 May 31 May 31 October 31 May 31 October 31
1996 1995 1994(a) 1996 1995(a) 1996 1995(a)
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $10.45 $10.16 $10.74 $18.21 $16.19 $19.84 $17.25
Net Investment Income 0.56 0.53 0.43 0.48 0.75 0.46 0.65
Net Realized and Unrealized Gain
(Loss) on Investments (0.15) 0.29 (0.39) 0.42 1.27 0.89 1.94
Dividends from
Net Investment Income (0.56) (0.53) (0.43) (0.76) -- (0.66) --
Distributions from
Net Realized Gains -- -- (0.19) (0.23) -- (0.26) --
Ending Net Asset Value
per Share $10.30 $10.45 $10.16 $18.12 $18.21 $20.27 $19.84
Ratios to Average Net Assets:
Expenses(b) 0.51% 0.48% 0.61%(c) 0.82%(c)(d) 0.82%(c)(d) 0.90%(c)(d) 0.92%(c)(d)
Net Investment Income (Loss) 5.24% 5.29% 4.90%(c) 4.65%(c) 4.67%(c) 3.95%(c) 3.76%(c)
Total Return 3.97% 8.44% 0.29%(c) 5.14% 12.48% 7.03% 15.01%
Portfolio Turnover Rate 77.10% 139.33% 84.23% 56.47% 65.53% 52.71% 62.08
Average Commission Rate(e) N/A N/A N/A $0.0648 N/A $0.0658 N/A
Net Assets at End of
Year/Period (000s omitted) $3,988 $1,799 $ 872 $146,950 $136,710 $398,005 $373,998

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

(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had those waivers and reimbursements not occurred, the ratio
of expenses to average net assets would have been:
Expenses: 1.30% 1.58% 1.54%(c) 0.97%(c)(d) 1.03%(c)(d) 1.04%(c)(d) 1.11%(c)(d)

(d) Includes expenses allocated from the Blended Portfolios as follows:
Conservative Balanced Fund, 0.03%, net of allocated waivers of 0.05%, and
0.02%, net of allocated waivers of 0.05%, for the periods ended May 31,
1996 and October 31, 1995, respectively, and Moderate Balanced Fund, 0.04%,
net of allocated waivers of 0.08%, and 0.04%, net of allocated waivers of
0.09%, for the periods ended May 31, 1996 and October 31, 1995,
respectively.

</TABLE>

<TABLE>
<CAPTION>
Growth Balanced Index Income Equity
Fund Fund Fund
Year Period Year Period Year Period
Ended Ended Ended Ended Ended Ended
May 31 October 31 May 31 October 31 May 31 October 31
1996 1995(a) 1996 1995(a) 1996 1995(a)
<S> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $21.25 $17.95 $27.67 $21.80 $24.02 $18.90
Net Investment Income 0.31 0.47 0.36 0.45 0.29 0.46
Net Realized and Unrealized Gain
(Loss) on Investments 1.95 2.83 4.08 5.42 4.02 4.66
Dividends from
Net Investment Income (0.51) -- (0.43) -- (0.69) --
Distributions from
Net Realized Gains (0.17) -- (0.19) -- (0.08) --
Ending Net Asset Value
per Share $22.83 $21.25 $31.49 $27.67 $27.56 $24.02
Ratios to Average Net Assets:
Expenses(b) 0.98%(c)(d) 0.99%(c)(d) 0.31%(c) 0.50%(c) 0.86%(c) 0.85%(c)
Net Investment Income (Loss) 2.66%(c) 2.63%(c) 2.25%(c) 2.12%(c) 2.72%(c) 2.51%(c)
Total Return 10.87% 18.38% 16.27% 26.93% 18.14% 27.09%
Portfolio Turnover Rate 38.78% 41.04% 9.12% 14.48% 0.69% 7.03%
Average Commission Rate $0.0696 N/A $0.0517 N/A $0.0942 N/A
Net Assets at End of
Year/Period (000s omitted) $484,641 $374,892 $249,644 $186,197 $230,831 $49,000

(a) Each Fund commenced operations and the offering of I shares on November 11,
1994.

(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratio
of expenses to average net assets would have been:
Expenses: 1.16%(c)(d) 1.23%(c)(d) 0.57%(c) 0.64%(c) 1.13%(c) 1.12%(c)

(d) Includes expenses allocated from the Blended Portfolios of 0.06%, net of
allocated waivers of 0.13%, and 0.07%, net of allocated waivers of 0.13%,
for the periods ended May 31, 1996 and October 31, 1995, respectively.

</TABLE>

15
<PAGE>

<TABLE>
<CAPTION>
ValuGrowth Growth
Stock Diversified Equity Equity
Fund Fund Fund
Year Period Year Period Year Period
Ended Ended Ended Ended Ended Ended
May 31 May 31 May 31 October 31 May 31 October 31
1996 1995 1994(a) 1996 1995(a) 1996 1995(a)
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $18.80 $17.16 $16.91 $27.53 $22.21 $26.97 $22.28
Net Investment Income (Loss) 0.14 0.18 0.13 0.16 0.22 -- (0.02)
Net Realized and Unrealized Gain
(Loss) on Investments 3.91 1.64 0.46 4.25 5.10 4.09 4.71
Dividends from
Net Investment Income (0.12) (0.18) (0.12) (0.42) -- (0.12) --
Distributions from
Net Realized Gains (0.12) -- (0.22) (0.97) -- (0.86) --
Ending Net Asset Value
per Share $22.61 $18.80 $17.16 $30.55 $27.53 $29.08 $26.97
Ratios to Average Net Assets:
Expenses(b) 1.20% 1.20% 1.20%(c) 1.06%(c)(d) 1.09%(c)(d) 1.35%(c)(d) 1.38%(c)(d)
Net Investment Income (Loss) 0.62% 1.02% 0.92%(c) 1.00%(c) 1.01%(c) 0.01%(c) (0.11%)(c)
Total Return 21.72% 10.67% 2.99%(c) 16.38% 23.95% 15.83% 21.10%
Portfolio Turnover Rate 105.43% 63.82% 86.07% 5.76% 10.33% 7.39% 8.90%
Average Commission Rate $0.0603 N/A N/A $0.0671 N/A $0.0617 N/A
Net Assets at End of Year/Period
(000s omitted) $156,553 $136,589 $113,061 $907,223 $711,111 $735,728 $564,004

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

(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratio
of expenses to average net assets would have been:
Expenses: 1.32% 1.33% 1.39%(c) 1.30(c)(d) 1.37%(c)(d) 1.85%(c)(d) 1.92%(c)(d)

(d) Includes expenses allocated from the Blended Portfolios as follows:
Diversified Equity Fund, 0.09%, net of allocated waivers of 0.28%, and
0.09%, net of allocated waivers of 0.20%, for the periods ended May 31,
1996 and October 31, 1995, respectively, and Growth Equity Fund, 0.13%, net
of allocated waivers of 0.44%, and 0.13%, net of allocated waivers of
0.45%, for the periods ended May 31, 1996 and October 31, 1995,
respectively.

</TABLE>

<TABLE>
<CAPTION>
Large Company Small Company Small Company
Growth Fund Stock Fund Growth Fund
Year Period Year Period Year Period
Ended Ended Ended Ended Ended Ended
May 31 October 31 May 31 May 31 May 31 October 31
1996 1995(a) 1996 1995 1994(a) 1996 1995(a)
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $23.59 $18.50 $10.59 $9.80 $10.00 $29.99 $21.88
Net Investment Income (Loss) (0.04) (0.05) 0.01 0.12 0.08 (0.07) (0.11)
Net Realized and Unrealized Gain
(Loss) on Investments 3.64 5.14 3.93 0.87 (0.20) 5.94 8.22
Dividends from
Net Investment Income -- -- (0.03) (0.12) (0.08) -- --
Distributions from
Net Realized Gains (0.22) -- (0.54) (0.08) -- (2.86) --
Ending Net Asset Value
per Share $26.97 $23.59 $13.96 $10.59 $9.80 $33.00 $29.90
Ratios to Average Net Assets:
Expenses(b) 1.00%(c) 1.00%(c) 1.21% 0.52% 0.20%(c) 1.25%(c) 1.25%(c)
Net Investment Income (Loss) (0.30%)(c) (0.23%)(c) 0.05% 1.14% 2.03%(c) (0.41%)(c) (0.47%)(c)
Total Return 15.40% 27.51% 38.30% 10.13% (2.93%)(c) 21.43% 37.07%
Portfolio Turnover Rate 16.93% 31.60% 134.53% 68.09% 14.98% 62.06% 106.55%
Average Commission Rate $0.0616 N/A $0.0555 N/A N/A $0.0583 N/A
Net Assets at End of Year/Period
(000s omitted) $82,114 $63,567 $125,986 $54,240 $9,251 $378,546 $278,058

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

(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: 1.13%(c) 1.20%(c) 1.80% 1.82% 4.33%(c) 1.29%(c) 1.35%(c)

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Contrarian
Stock International
Fund Fund
Year Period Year Period
Ended Ended Ended Ended
May 31 May 31 May 31 October 31
1996 1995 1994(a) 1996 1995(a)
<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value
per Share $10.90 $ 9.71 $10.00 $17.99 $17.28
Net Investment Income (Loss) 0.10 0.11 0.07 0.14 0.09
Net Realized and Unrealized Gain
(Loss) on Investments 1.01 1.19 (0.29) 2.04 0.62
Dividends from
Net Investment Income (0.10) (0.11) (0.07) (0.33) --
Distributions from
Net Realized Gains (1.09) (0.003) -- -- --
Ending Net Asset Value
per Share $10.82 $10.90 $9.71 $19.84 $17.99
Ratios to Average Net Assets:
Expenses(b) 1.20% 1.12% 0.62%(c) 1.50%(c)(d) 1.50%(c)(d)
Net Investment Income (Loss) 0.87% 0.91% 1.82%(c) 0.60%(c) 0.54%(c)
Total Return 10.90% 13.52% (5.35%)(c) 12.31% 4.11%
Portfolio Turnover Rate 28.21% 30.32% 2.67% 14.12%(c)(e) N/A
Average Commission Rate(e) $0.0467 N/A N/A 0.0325%(c)(e) N/A
Net Assets at End of
Year/Period (000s omitted) $36,020 $45,832 $4,548 $143,643 $91,401

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

(d) Includes expenses allocated from International Portfolio of 0.80%, net of
allocated waivers of 0.02%, and 0.80%, net of allocated waivers of 0.10%
for the periods ended May 31, 1996 and October 31, 1995, respectively.

(e) Because International Fund invests all of its assets in International
Portfolio, Portfolio Turnover rate and Average Commission Rate are not
incidental to the Fund itself. These figures reflect the Portfolio Turnover
Rate and Average Commission Rate of International Portfolio.

</TABLE>

<PAGE>

3. INVESTMENT OBJECTIVES AND POLICIES

The twenty-seven Funds offered through this Prospectus each have distinct
investment objectives and policies. Most of the Funds invest their assets in a
single investment style that corresponds to the Fund's investment objective. Of
the Fixed Income Funds, DIVERSIFIED BOND FUND invests its assets in three
different fixed-income investment styles through percentage allocations
consistent with the Fund's investment objective. Reliance on multiple
investment styles is intended to reduce the price and return volatility of the
Fund and provide more consistent fixed income returns. THE BALANCED FUNDS
invest specified percentages of their assets in accordance with the investment
styles of Diversified Equity Fund and three to five different fixed income
investment styles. Of the Equity Funds, two Funds - DIVERSIFIED EQUITY FUND and
GROWTH EQUITY FUND - invest their assets in several different equity investment
style. The use of multiple equity investment styles by each of these Funds -
through percentage allocations consistent with the Funds' investment objective -
is intended to reduce the risk associated with the use of a single style, which
may move in and out of favor during the course of a market cycle. In addition,
by investing the portions of their assets managed in a small company, an index
and an international investment style in a corresponding Blended Portfolio, the
Balanced Funds, Diversified Equity Fund and Growth Equity Fund may achieve
benefits that they could not achieve by investing directly in securities.
Nonetheless, investment in the Blended Portfolios could also have potential
adverse effects. See, "Other Information-Core Trust Structure" for a discussion
of the benefits and risks of investing in the Blended Portfolios. Diversified
Bond Fund and the Balanced Funds rebalance their portfolios periodically and
diversified Equity Fund ands 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 identified below and additional risk considerations
associated with those investments and techniques, see "Additional Investment
Policies and Risk Considerations," "Appendix A: Investments, Investment
Strategies and Risk Considerations," and the SAIs.

MONEY MARKET fUNDS

GENERAL. Each Money Market Fund invests only in high quality, short-term money
market instruments that are determined by the Adviser, pursuant to procedures
adopted by the Trust's Board of Trustees (the "Board"), to be eligible for
purchase and to present minimal credit risks. Each Fund will 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 ("1940 Act")) and will maintain a dollar-weighted average portfolio
maturity of 90 days or less. Securities with ultimate maturities of greater than
397 days may be purchased in accordance with Rule 2a-7. Under that Rule, only
those long-term instruments that have demand features which comply with certain
requirements and certain variable rate U.S. Government Securities, as described
below, may be purchased. The securities in which the Funds may invest may have
fixed, variable or floating rates of interest.

Except to the limited extent permitted by Rule 2a-7 and except for U.S.
Government Securities, each Fund will not invest more than 5% of its total
assets in the securities of any one issuer. Also, a 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. Those requirements apply
with respect to only 75% of the total assets of Municipal Money Market Fund. In
addition, to ensure adequate liquidity, no Fund may invest more than 10% of its
net assets in illiquid securities, including repurchase agreements maturing in
more than seven days.

<PAGE>

NRSRO has issued a rating, by that NRSRO or (ii) are otherwise unrated and
determined by the Adviser, pursuant to guidelines adopted by the Board, to be of
comparable quality. Except for Municipal Money Market Fund, each Fund will
invest at least 95% of its total assets in securities in the highest rating
category as determined pursuant to Rule 2a-7. A description of the rating
categories of Standard & Poor's, Moody's Investors Service and certain other
NRSROs is contained in the SAI.

The market value of the interest-bearing debt securities held by the Funds,
including municipal securities, will be affected by changes in interest rates.
There is normally an inverse relationship between the market value of securities
sensitive to prevailing interest rates and actual changes in interest rates;
i.e., a decline in interest rates produces an increase in market value, while an
increase in 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. In addition, 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. Obligations of issuers of debt
securities, including municipal securities, are also subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. The possibility exists, therefore, that, as a result of bankruptcy,
litigation or other conditions, the ability of any issuer to pay, when due, the
principal of and interest on its debt securities may be materially affected.

Although each Fund only invests in high quality money market instruments, an
investment in the Fund is subject to risk even if all securities in the Fund's
portfolio are paid in full at maturity. All money market instruments, including
U.S. Government Securities, can change in value as a result of changes interest
rates and/or the issuer's actual or perceived creditworthiness.

READY CASH INVESTMENT FUND

INVESTMENT OBJECTIVE. The investment objective of Ready Cash Investment Fund is
to provide high current income to the extent consistent with the preservation of
capital and the maintenance of liquidity. There can be no assurance that the
Fund will achieve its investment objective or maintain a stable net asset
value.

INVESTMENT POLICIES. Ready Cash Investment Fund pursues its investment
objective by investing in a broad spectrum of high quality money market
instruments of United States and foreign issuers. The Fund may invest in
obligations of financial institutions. These include negotiable certificates of
deposit, bank notes, 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.

Certificates of deposit represent an institution's obligation to repay funds
deposited with it that earn a specified interest rate over a given period. Bank
notes are a debt obligation of a bank. 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 by the Fund but may be subject to early withdrawal penalties
which could reduce the Fund's yield. Unless there is a readily available market
for them, deposits that are subject to early withdrawal penalties or that mature
in more than seven days are treated as illiquid securities.

The Fund limits its investments in obligations of financial institutions
(including their branches, agencies and subsidiaries) to institutions which at
the time of investment have total assets in excess of one billion dollars, or
the equivalent in other currencies. The 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, branches and subsidiaries located
in countries which the Adviser believes do not present undue risk.

<PAGE>

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. Although the Fund invests in dollar-denominated
obligations, the foreign securities in which the Fund invests also involve
certain risks. See "Investment Policies - Equity Funds - International Fund -
Foreign Investment Considerations and Risk Factors." The Fund may invest
without limit in the types of securities eligible for purchase by U.S.
Government Fund, as well as in the types of securities eligible for purchase by
Municipal Money Market Fund. See "Investment Objectives and Policies - Money
Market Funds - U.S. Government Fund" and " - Municipal Money Market Fund." The
Fund may invest in corporate debt securities, including commercial paper and
privately issued instruments, see "Appendix A - Corporate Debt Securities and
Commercial Paper," and may invest in participation interests, see "Appendix A -
Participation Interests." The Fund will not invest more than 10% of its total
assets in participation interests in which the Fund does not have demand
rights.

U.S. GOVERNMENT FUND

INVESTMENT OBJECTIVE The investment objective of U.S. Government Fund, is to
provide high current income to the extent consistent with the preservation of
capital and the maintenance of liquidity. There can be no assurance that the
Fund will achieve its investment objective or maintain a stable net asset value.

INVESTMENT POLICIES. U.S. Government Fund invests primarily in obligations
issued or guaranteed as to principal and interest by the United States
Government or by any of its agencies and instrumentalities ("U.S. Government
Securities"). The Fund may also invest in repurchase agreements and certain
zero-coupon securities secured by U.S. Government Securities. Under normal
circumstances, however, the Fund will invest at least 65% of its total assets in
U.S. Government Securities.

The U.S. Government Securities in which the Fund may invest include obligations
that are issued or guaranteed by the U.S. Treasury, such as U.S. Treasury bills,
bonds and notes ("U.S. Treasury Securities") and obligations issued or
guaranteed by U.S. Government agencies and instrumentalities that are 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 Fund 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. See "Appendix A - U.S. Government Securities."

The Fund may invest in separately traded principal and interest components of
securities issued or guaranteed by the U.S. Treasury under the Treasury's
Separate Trading of Registered Interest and Principal of Securities ("STRIPS")
program. In addition, the Fund 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"). The Fund will not invest more than 35% of its total assets
in zero-coupon securities other than those issued through the STRIPS program.
See "Appendix A - U.S. Government Securities - Zero Coupon Securities."

<PAGE>

TREASURY FUND

INVESTMENT OBJECTIVE. The investment objective of Treasury Fund, is to provide
high current income to the extent consistent with the preservation of capital
and the maintenance of liquidity. There can be no assurance that the Fund will
achieve its investment objective or maintain a stable net asset value.

INVESTMENT POLICIES. Treasury Fund pursues its investment objective by
investing solely in U.S. Treasury Securities. This may include separately
traded principal and interest components of securities issued or guaranteed by
the U.S. Treasury. See "Investment Objectives and Policies - Money Market Funds
- - U.S. Government Fund - Investment Policies" and "Appendix A - U.S. Government
Securities."

MUNICIPAL MONEY MARKET FUND

INVESTMENT OBJECTIVE. The investment objective of Municipal Money Market Fund
is to provide high current income which is exempt from Federal income taxes to
the extent consistent with the preservation of capital and the maintenance of
liquidity. As part of its objective, during periods of normal market conditions,
the Fund will have at least 80% of its net assets invested in Federally
tax-exempt instruments the income from which may be subject to the Federal
alternative minimum tax ("AMT"). See "Dividends, Distributions and Tax Matters -
Tax Matters." There can be no assurance that the Fund will achieve its
investment objective or maintain a stable net asset value.

INVESTMENT POLICIES. Municipal Money Market Fund attempts to invest 100% of
its assets in the obligations of the states, territories and possessions of the
United States and of their subdivisions, authorities and corporations, the
interest on which is exempt from Federal income tax ("municipal securities").
The Fund reserves the right, however, to invest up to 20% of its assets in
securities the interest income on which is subject to taxation. The municipal
securities in which the Fund may invest include short-term municipal bonds and
municipal notes and leases. These municipal securities may have fixed, variable
or floating rates of interest and may be zero-coupon securities.

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

The Fund may invest more than 25% of its assets in industrial development bonds
and in participation interests therein issued by banks. Industrial development
bonds are in most cases revenue bonds and generally do not have the pledge of
the municipality. The payment of the principal and interest on these bonds is
dependent solely on the ability of an initial or subsequent user of the
facilities financed by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as security for such
payment. The Fund will acquire private activity securities only if the interest
payments on the security are exempt from Federal income taxation (other than the
AMT). The Fund may from time to time invest more than 25% of its assets in
obligations of issuers located in one state but, under normal circumstances,
will not invest more than 35% of its assets in obligations of issuers located in
any one state. If the Fund concentrates its investments in this manner, it will
be more susceptible to factors adversely affecting issuers of those municipal
securities than would be a more geographically diverse municipal securities
portfolio. These risks arise from the financial condition of the particular
state and its political subdivisions.

For a description of particular types of municipal securities, such municipal
bonds, notes and leases and participation interests, in which the Fund invests,
see "Appendix A - Municipal Securities."

THE SHORT-TERM MUNICIPAL SECURITIES MARKET. Yields on municipal securities are
dependent on a variety of factors, including the general conditions of the
municipal security markets and the fixed income markets in general, the size of
a particular offering, the maturity of the obligation and the rating of the
issue. The achievement of the Fund's investment objective is dependent in part
on the

<PAGE>

continuing ability of the issuers of municipal securities in which the
Fund invests to meet their obligations for the payment of principal and interest
when due. Under current Federal tax law, interest on certain municipal
securities issued after August 7, 1986 to finance "private activities" ("private
activity securities") is a "tax preference item" for purposes of the AMT
applicable to certain individuals and corporations even though such interest
will continue to be fully tax-exempt for regular Federal income tax purposes.
The Fund may purchase private activity securities, the interest on which may
constitute a "tax preference item" for purposes of the AMT.

Although the Fund invests primarily in municipal securities, it is anticipated
that a substantial amount of the securities held by the Fund will be supported
by credit and liquidity enhancements, such as letters of credit (which are not
covered by Federal deposit insurance) or put or demand features, of third party
financial institutions, generally domestic and foreign banks. Accordingly, the
credit quality and liquidity of the Fund will be dependent in part upon the
credit quality of the banks supporting the Fund's investments. This will result
in exposure to risks pertaining to the banking industry, including the foreign
banking industry. See "Investment Objectives and Policies - Money Market Funds-
Ready Cash Investment Fund." Brokerage firms and insurance companies also
provide certain liquidity and credit support. The Fund's policy is to purchase
municipal securities with third party credit or liquidity support only after the
Adviser has considered the creditworthiness of the financial institution
providing the support and if the adviser believes that the security presents
minimal credit risk.

The Fund may purchase long term municipal securities with various maturity
shortening provisions. For instance, variable rate demand notes ("VRDN") are
municipal bonds with maturities of up to 40 years that are sold with a demand
feature (an option for the holder of the security to sell the security back to
the issuer) which may be exercised by the security holder at predetermined
intervals, usually daily or weekly. The interest rate on the security is
typically reset by a remarketing or similar agent at prevailing interest rates.
VRDNs may be issued directly by the municipal issuer or created by a bank,
broker-dealer or other financial institution by selling a previously issued
long-term bond with a demand feature attached. Similarly, tender option bonds
(also referred to as certificates of participation) are municipal securities
with relatively long original maturities and fixed rates of interest that are
coupled with an agreement of a third party financial institution under which the
third party grants the security holders the option to tender the securities to
the institution and receive the face value thereof. The option may be exercised
at periodic intervals, usually six months to a year. As consideration for
providing the option, the financial institution receives a fee equal to the
difference between the underlying municipal security's fixed rate and the rate,
as determined by a remarketing or similar agent, that would cause the
securities, coupled with the tender option, to trade at par on the date of the
interest rate determination. These bonds effectively provide the holder with a
demand obligation that bears interest at the prevailing short-term municipal
securities interest rate. Tender option bonds are generally held pursuant to a
custodial arrangement.

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

The Fund may purchase municipal securities together with the right to resell
them to the seller or a third party at an agreed-upon price or yield within
specified periods prior to their maturity dates. Such a right to resell is
commonly known as a "stand-by commitment," and the aggregate price which the
Fund pays for securities with a stand-by commitment may be higher than the price
which otherwise would be paid. The primary purpose of this practice is to permit
the Fund to be as fully invested as practicable in municipal securities while
preserving the necessary flexibility and liquidity to meet unanticipated
redemptions. In this regard, the Fund acquires stand-by commitments solely to
facilitate portfolio liquidity and does not exercise its rights thereunder for
trading purposes. Stand-by

<PAGE>

commitments involve certain expenses and risks, including the inability of the
issuer of the commitment to pay for the securities at the time the commitment is
exercised, non-marketability of the commitment, and differences between the
maturity of the underlying security and the maturity of the commitment.

TAXABLE INVESTMENTS. Although the Fund will attempt to invest 100% of its
assets in municipal securities, the Fund may invest up to 20% of the value of
its net assets in cash and cash equivalents the interest income on which is
subject to Federal taxation. In addition, when business or financial conditions
warrant or when an adequate supply of appropriate municipal securities is not
available, the Fund may assume a temporary defensive position and invest without
limit in cash or cash equivalents the interest income on which is subject to
Federal taxation, which include: (i) short-term U.S. Government Securities, (ii)
certificates of deposit, bankers' acceptances and interest-bearing savings
deposits, (iii) commercial paper, (iv) repurchase agreements covering any of the
preceding securities and (v) to the extent permitted by the 1940 Act, money
market mutual funds.

FIXED INCOME FUNDS

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

STABLE INCOME FUND

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

INVESTMENT POLICIES. The Fund seeks to maintain safety of principal while
providing low volatility total return by investing primarily in investment grade
short-term obligations. The Fund invests in a diversified portfolio of fixed
and variable rate U.S. dollar denominated fixed income securities of a broad
spectrum of United States and foreign issuers, including U.S. Government
Securities and the debt securities of financial institutions, corporations, and
others.

The securities in which the Fund invests include mortgage-backed and other
asset-backed securities, although the Fund limits these investments to not more
than 60 percent and 25 percent, respectively, of its total assets. In addition,
the Fund limits its holdings of mortgage-backed securities that are not U.S.
Government Securities to 25 percent of its total assets. The Fund may invest
any amount of its assets in U.S. Government Securities, but under normal
circumstances less than 50 percent of the Fund's total assets are so invested.
The Fund may invest in securities that are restricted as to disposition under
the Federal securities laws (sometimes referred to as "private placements" or
"restricted securities"). In addition, the Fund may not invest more than 25
percent of its total assets in the securities issued or guaranteed by any single
agency or instrumentality of the U.S. Government, except the U.S. Treasury, and
may not invest more than 10 percent of its total assets in the securities of any
other issuer.

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

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

<PAGE>

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

INTERMEDIATE GOVERNMENT INCOME FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide income
and safety of principal by investing primarily in U.S. Government Securities.
There can be no assurance that the Fund will achieve its investment objective.
PRIOR TO MAY 17, 1996, THE FUND WAS NAMED INTERMEDIATE U.S. GOVERNMENT FUND.

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

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

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

The Fund primarily will invest in debt obligations with maturities (or average
life in the case of mortgage-backed and similar securities) ranging from
short-term (including overnight) to 12 years. Under normal circumstances, the
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

<PAGE>

sensitivity to interest rate changes ("duration risk"). Because earlier
payments on a debt security have a higher present value, duration of a security,
except a zero-coupon security, will be less than the security's stated maturity.

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

DIVERSIFIED BOND FUND

INVESTMENT OBJECTIVE. The Fund's investment objective is to provide consistent
fixed income returns by investing primarily in a portfolio of intermediate
maturity, investment grade fixed income securities. There can be no assurance
that the Fund will achieve its investment objective. PRIOR TO APRIL 1, 1996,
THE FUND WAS NAMED MANAGED FIXED INCOME FUND.

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

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

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

MANAGED FIXED INCOME STYLE. In managing assets in accordance with the Managed
Fixed Income style, the Adviser seeks consistent fixed income returns by
investing primarily in investment grade intermediate-term obligations. The
Adviser invests assets allocated to this style in a diversified portfolio of
fixed and variable rate U.S. dollar denominated, fixed income securities of a
broad spectrum of United States and foreign issuers, including U.S. Government
Securities and the debt securities of financial institutions, corporations, and
others. The Adviser emphasizes the use of intermediate maturity securities to
lessen duration risk (as described below), while employing low risk yield
enhancement techniques to enhance return over a complete economic or interest
rate cycle. Intermediate-term obligations comprise securities with maturities
of between 2 and 20 years.

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

<PAGE>

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

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

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

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

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

Under normal circumstances, at least 50 percent of the net assets allocated to
this style will be U.S. Government Securities, including Treasury securities.
All securities allocated to this style will be, at the time of purchase, (i)
rated in one of the two highest long-term rating categories assigned by a
nationally recognized statistical rating organization such as Moody's Investors
Service, Standard & Poor's and Fitch Investors Services, L.P. or (ii) unrated
and determined by the Adviser to be of comparable quality. No more than 25
percent of those securities may be in the second highest rating category.
Investments may include zero-coupon securities, securities with variable or
floating rates of

<PAGE>

interest and asset-backed securities, but only 25 percent of the net assets
allocated to this investment style may be invested in each of these types of
securities. The assets allocated to the Positive Return style may not be
invested 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.

TOTAL RETURN BOND FUND STYLE. In managing assets in accordance with the Total
Return Bond Fund Style, the Adviser invests as described under "Investment
Objectives and Policies - Fixed Income Funds - Total Return Bond Fund."

INCOME FUND

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

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

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

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

The Fund will invest primarily in securities with maturities (or average life in
the case of mortgage-backed and similar securities) ranging from short-term
(including overnight) to 30 years, and it is anticipated that the Fund's
portfolio of securities will have an average dollar-weighted maturity of between
3 and 15 years. The Fund's portfolio of securities will normally have a
duration of between 70% and 130% of the duration of the Lipper Corporate A-Rated
Debt Average. Duration is a measure of a debt security's average life that
reflects the present value of the security's cash flow and, accordingly, is a
measure of price sensitivity to interest rate changes ("duration risk").
Because earlier payments on a debt security have a higher present value,
duration of a security, except a zero-coupon security, will be less than the
security's stated maturity.

The Fund may invest in debt securities registered and sold in the United States
by foreign issuers (Yankee Bonds) and debt securities sold outside the United
States by foreign or U.S. issuers (Euro-bonds). The Fund intends to restrict
its purchases of debt securities to issues denominated and payable in United
States dollars. For a description of the risks involved in investments in
foreign securi-

<PAGE>

ties, see "Investment Objectives and Policies - Equity Funds - International
Fund - Investment Policies - Foreign Investment Considerations and Risk
Factors." The 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.

TOTAL RETURN BOND FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to seek total
return. The Fund pursues this objective by investing primarily in U.S.
Government Securities, including mortgage-backed securities and investment grade
corporate fixed income securities. There can be no assurance that the Fund will
achieve its investment objective.

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

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

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

The Fund may also invest in preferred stocks and securities convertible into
common stock, but may not own the common stock into which a convertible security
converts. The Fund will only purchase securities (including convertible
securities) that are rated, at the time of purchase, within the four highest
rating categories assigned by an NRSRO, such as Moody's Investors Service
("Moody's"), Standard & Poor's or Fitch Investors Services, L.P., or which are
unrated and determined by the Adviser to be of comparable quality. Securities
rated in these categories are generally considered to be investment grade
securities, although Moody's indicates that securities rated Baa (the fourth
highest category) have speculative characteristics. A description of the rating
categories of various NRSROs is contained in the SAI of the Fund.

TAX-FREE FIXED INCOME FUNDS

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

<PAGE>

LIMITED TERM TAX-FREE FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to produce
current income exempt from Federal income taxes. The Fund pursues this
objective by investing primarily in a portfolio of investment grade fixed income
securities the interest on which is free from Federal income tax and maintains
an average dollar weighted portfolio maturity of between 1 and 5 years. There
can be no assurance that the Fund will achieve its investment objective.

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

The average dollar-weighted maturity of the Fund's assets normally will be
between 1 and 5 years. In general, the longer the maturity of a municipal
security, the higher the rate of interest it pays. However, a shorter maturity
is generally associated with a lower level of volatility in the market value of
a security. Because the Fund's objective is to provide current income, the Fund
will invest in municipal securities with an emphasis on income. The average
maturity of the Fund's portfolio will vary depending on anticipated market
conditions.

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

TAX-FREE INCOME FUND

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

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

<PAGE>

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

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

COLORADO TAX-FREE FUND

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

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

The yields of Colorado municipal securities depend on, among other things,
conditions in the Colorado municipal bond market and fixed income markets
generally, the size of a particular offering, the maturity of the obligation and
the rating of the issue. In some cases, Colorado issues may have yields that
are slightly less than the yields of municipal obligations of issuers located in
other states because of the favorable Colorado state tax exemption on Colorado
issues.

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

<PAGE>

securities rated Baa have speculative characteristics. The Fund also may invest
in unrated securities that the Adviser believes are comparable in quality to
rated securities in which the Fund may invest. A description of the rating
categories of certain NRSROs is contained in the SAI of the Fund.

MINNESOTA TAX-FREE FUND

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

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

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

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

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

NON-INVESTMENT GRADE SECURITIES. The Fund may invest up to 25% of its total
assets in municipal bonds rated in the fifth highest rating category by an NRSRO
(Ba by Moody's or BB by S&P or Fitch), or which are unrated and judged by the
Adviser to be of comparable quality to securities rated in the fifth highest
category. Such securities (commonly referred to as "junk bonds") are not
considered to be investment grade and have speculative or predominantly
speculative characteristics. Non-investment grade, high risk securities provide
poor protection for payment of principal and interest but may

<PAGE>

have greater potential for capital appreciation than do higher quality
securities. These lower rated securities involve greater risk of default or
price changes due to changes in the issuers' creditworthiness than do higher
quality securities. The market for these securities may be thinner and less
active than that for higher quality securities, which may affect the price at
which the lower rated securities can be sold. In addition, the market prices of
lower rated securities may fluctuate more than the market prices of higher
quality securities and may decline significantly in periods of general economic
difficulty or rising interest rates.

During its most recent fiscal year ended May 31, 1996, the Fund had 93.0% of its
average annual assets in municipal securities rated by Moody's or S&P and 7.0%
of its average annual assets in unrated investments, including cash and
short-term cash equivalents which are typically unrated. During that year, the
Fund had the following percentages of its average annual net assets invested in
rated securities: Aaa/AAA-52.0%, Aa/AA-24.0%, A/A-14.0%, Baa/BBB-3.0% and Ba/BB
and below-0.0%. For this purpose, securities with different NRSRO ratings were
assigned the higher rating. This information reflects the average composition
of the Fund's assets for the Fund's last fiscal year and is not necessarily
representative of the Fund as of the current fiscal year or any other time.

TAXABLE INVESTMENTS

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

INVESTMENT CONSIDERATIONS AND RISK FACTORS

GEOGRAPHIC CONCENTRATION. Because COLORADO TAX-FREE FUND and MINNESOTA TAX-FREE
FUND invest principally in municipal securities issued by issuers within a
particular state and the state's political subdivisions, those Funds are more
susceptible to factors adversely affecting issuers of those municipal securities
than would be a more geographically diverse municipal securities portfolio. In
addition, to the extent they may concentrate their investments in a particular
jurisdiction, LIMITED TERM TAX-FREE FUND and TAX-FREE INCOME FUND will be
subject to similar risks. These risks arise from the financial condition of the
state and its political subdivisions. To the extent state or local governmental
entities are unable to meet their financial obligations, the income derived by a
Fund, its ability to preserve or realize appreciation of its portfolio assets or
its liquidity could be impaired.

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

<PAGE>

In 1992, the Colorado constitution was amended to restrict the ability of the
state and local governments to increase taxes, revenues, debt and spending. In
particular, prior voter approval is now required to impose any new tax or tax
rate increase or to issue any multiple-fiscal year debt and revenues collected
in excess of certain limits must be refunded unless voters authorize their
retention. The future impact on the financial operations and obligations of the
state and local governments cannot be determined at this time. The Adviser will
continue to monitor the situation closely and will, if necessary, seek the
advice of counsel concerning its effect on instruments being considered for
purchase by the Colorado Tax-Free Fund. A further discussion of potential risks
of investment in Colorado municipal securities is contained in the SAI of the
Fund.

RELATED ISSUERS. Some municipal securities are related in such a way that an
economic, business or political development affecting one municipal security
would have a similar effect on another municipal security. For example, the
repayment of different obligations may depend on similar types of projects.
Except as otherwise noted, no Fund will not invest more than 25% of its total
assets in securities that are so related or invest more than 25% of its total
assets in a single type of revenue bond (e.g., electric revenue, housing
revenue, etc.). Similarly, under normal circumstances, Limited Term Tax-Free
Fund and Tax-Free Income Fund will not invest more than 25% of their total
assets in issuers located in the same state.

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

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

Tax-Free Income Fund and Limited Term Tax-Free Fund are diversified and,
therefore, as a fundamental policy, with respect to 75% of their assets, may not
purchase a security (other than a U.S. Government Security) if, as a result,
more than 5% of the Fund's total assets would be invested in the securities of a
single issuer. When the assets and revenues of an issuing agency, authority,
instrumentality or other political subdivision are separate from those of the
government creating the issuing entity and a security is backed only by the
assets and revenues of the entity, the entity will be deemed to be the sole
issuer of the security. Similarly, in the case of a security issued by or on
behalf of public authorities to finance various privately operated facilities,
such as an industrial development bond, that is backed only by the assets and
revenues of the non-governmental user, the non-governmental user will be viewed
as the sole issuer of the bond. For more information concerning diversification
matters see "Additional Investment Policies and Risk Considerations - Common
Policies of the Funds - Diversification and Concentration."

BALANCED FUNDS

Conservative Balanced Fund, Moderate Balanced Fund and Growth Balanced Fund each
invest in a balanced portfolio of fixed income and equity securities.
Conservative Balanced Fund has the smallest equity securities component of the
three Funds and is the most conservative Balanced Fund. Growth Balanced Fund
has the largest equity securities component of the three Balanced Funds and is
the most aggressive of these Funds. The equity portion of each Balanced Fund's
portfolio uses the five different equity investment styles of Diversified Equity
Fund. Diversified Equity Fund combines the different

<PAGE>

equity investment styles of four of the Equity Funds - Income Equity Fund,
Index Fund, Large Company Growth Fund and International Fund - with investment
in a small company investment style (the "Small Company style") in order to
reduce the risk of relying on a single equity investment style. See "Investment
Objectives and Policies - Equity Funds - Diversified Equity Fund." The blending
of different equity investment styles is intended to reduce the price and return
volatility of the equity portion of the Balanced Funds.

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

The base allocation among investment styles for each Balanced Fund is set forth
below. As market values of the Fund's assets change, the percentage of Fund
assets invested in any style may temporarily deviate from the base allocations.
In response thereto, the Adviser will periodically effect transactions for the
Balanced Funds to reestablish their base allocations. In addition, as the
securities markets change, the Adviser may attempt to enhance the returns of any
of the Balanced Funds by changing, within certain limits, the percentage of Fund
assets invested in fixed income and equity securities. The Adviser may, in its
discretion, increase or decrease the fixed income and equity percentages by up
to 5 percent for Conservative Balanced Fund, 10 percent for Moderate Balanced
Fund and 15 percent for Growth Balanced Fund. For example, the Total Return
Bond Fund style, the Managed Fixed Income style and the Positive Return style of
Growth Balanced Fund, each of which is used currently with respect to 11 2/3
percent of that Fund's assets (a total of 35 percent), may each be increased to
16 2/3 percent (a total of 50 percent) or decreased to 6 2/3 percent (a total of
20 percent) of that Fund's assets. 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 under "Temporary Allocations."

CONSERVATIVE BALANCED FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide a
combination of current income and capital appreciation by diversifying
investment of its assets among stocks, bonds and other fixed income investments.
The Fund emphasizes safety of principal through limited exposure to equity
securities and has the smallest equity securities position of the three Balanced
Funds. There can be no assurance that the Fund will achieve its investment
objective.

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

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

<PAGE>

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

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

SHORT MATURITY STYLE. 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 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.

<PAGE>

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.

MODERATE BALANCED FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide a
combination of current income and capital appreciation by diversifying
investment of the Fund's assets among stocks, bonds and other fixed income
investments. The Fund provides a portfolio more evenly-balanced between fixed
income and equity securities than the other Balanced Funds. There can be no
assurance that the Fund will achieve its investment objective.

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

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

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

<PAGE>

GROWTH BALANCED FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide a
combination of current income and capital appreciation by diversifying
investment of the Fund's assets between stocks and bonds. The Fund has the
largest equity securities position of the Balanced Funds. There can be no
assurance that the Fund will achieve its investment objective.

INVESTMENT POLICIES. The Fund is designed for investors seeking long-term
capital appreciation in the equity securities market in a balanced fund. The
fixed income portion of the Fund's portfolio uses the Total Return Bond Fund
style, Managed Fixed Income style and the Positive Return style in order to
reduce the risk of relying on a single fixed income investment style.

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

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

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

TEMPORARY ALLOCATIONS

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

EQUITY FUNDS

To achieve their investment objectives, the Equity Funds invest primarily in
common stocks and other equity securities. International Fund and Small Cap
Opportunities Fund currently invest all of their investable assets in their
respective Core Portfolios, which invest primarily in common stocks and other
equity securities, and the Funds acquire an indirect interest in those
securities. 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

<PAGE>

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.

INDEX FUND

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

INVESTMENT POLICIES. The Fund is designed to duplicate the return of the
Standard & Poor's 500 Composite Stock Index (the "Index") with minimum tracking
error, while also minimizing transaction costs. Under normal circumstances, the
Fund will hold stocks representing 96 percent or more of the
capitalization-weighted market values of the Index. Portfolio transactions for
the Fund generally are executed only to duplicate the composition of the Index,
to invest cash received from portfolio security dividends or shareholder
investments in the Fund, and to raise cash to fund redemptions. The Fund may
hold cash or cash equivalents for the purpose of facilitating payment of the
Fund's expenses or 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. The Fund does not invest in
futures contracts for speculative reasons or to leverage the Fund. 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 47 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.

INCOME EQUITY FUND

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

<PAGE>

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

VALUGROWTH STOCK FUND

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

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

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

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

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

DIVERSIFIED EQUITY FUND

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

<PAGE>

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

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

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

GROWTH EQUITY FUND

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

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

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

Investors should refer to the descriptions below of each of the foregoing Equity
Funds and the Small Company style for a discussion of the objectives, policies
and risks involved in the investments and investment techniques of those styles
and, accordingly, of the portions of Growth Equity Fund in-

<PAGE>

vested using those styles. The management of the Fund's assets is divided among
the Fund's five portfolio managers, including two who are also the portfolio
managers for corresponding Equity Funds. Three portfolio managers jointly
co-manage the assets allocated to the Small Company style. The percentage of a
Fund's assets invested using a particular investment style may be changed at any
time by the Adviser in response to market or other conditions.

LARGE COMPANY GROWTH FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide
long-term capital appreciation by investing primarily in large, high-quality
domestic companies that the investment adviser believes have superior growth
potential. There can be no assurance that the Fund will achieve its investment
objective.

INVESTMENT POLICIES. The Fund invests primarily in the common stock of large,
high-quality domestic companies that have superior growth potential. Large
companies are those whose market capitalizations are at least $500 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
assets may be invested in 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 foreign issuers and may attempt to reduce the overall risk of its
foreign investments by using foreign currency forward contracts. See
"Investment Objectives and Policies - Equity Funds - International Fund -
Foreign Investment Risks and Considerations." Under normal circumstances, the
Fund will not invest more than 10 percent of its total assets in the securities
of a single issuer. The Fund does not currently invest in preferred stock or
securities convertible into common stock but reserves the right to do so in the
future.

SMALL COMPANY GROWTH FUND, SMALL COMPANY STOCK FUND AND THE SMALL COMPANY STYLE

INVESTMENT OBJECTIVES. SMALL COMPANY STOCK FUND'S investment objective is
long-term capital appreciation. The Fund pursues this objective by investing
primarily in the common stock of small and medium size domestic companies that
have market capitalizations well below that of the average company in the
Standard & Poor's 500 Composite Stock Price Index. 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. There can be no assurance
that the Funds will achieve their investment objectives. The SMALL COMPANY style
also seeks to provide long-term capital appreciation by investing primarily in
small and medium sized domestic companies. See "Investment Objectives and
Policies - Equity Funds - Small Company Investment Risks and Considerations"
below for a discussion of the risks of investing in small companies.

INVESTMENT POLICIES. SMALL COMPANY STOCK FUND, SMALL COMPANY GROWTH FUND and
the SMALL COMPANY style invest primarily in the common stock of small and medium
size domestic companies that have market capitalizations well below that of the
average company in the Standard & Poor's 500 Composite Stock Price Index.
Market capitalization refers to the total market value of a company's
outstanding shares of common stock. Small Company Stock Fund considers small
and medium size companies to be those whose market capitalizations are less than
$1 billion at the time of the Fund's purchase, although it is anticipated that
investments will be primarily in companies with capitalizations of less than
$750 million. 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

<PAGE>

components of the other Funds that invest in the Small Company style will invest
at least 65 percent of their total assets in common stock issued by small and
medium size companies.

In selecting securities for SMALL COMPANY STOCK FUND, the Adviser seeks
securities with significant price appreciation potential, and attempts to
identify companies that show above-average growth, as compared to long-term
overall market growth. 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 Objectives and Policies - Equity Funds - International Fund -
Foreign Investment Risks and Considerations." In addition, the Fund may invest
in fixed income securities of small companies that are rated, at the time of
purchase, within the three highest rating categories assigned by an NRSRO, such
as Moody's Investors Service, Standard & Poor's and Fitch Investors Services,
L.P., or which are unrated and determined by the Adviser to be of comparable
quality. These instruments may have fixed, floating or variable rates of
interest. See "Additional Investment Policies and Risk Considerations - Fixed
Income Investments and Their Characteristics." The convertible securities may
be rated in any category by an NRSRO or may be unrated.

In selecting securities for the 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 Adviser may invest up to
10 percent of the total assets allocated to this style in foreign securities and
in American Depository Receipts and other similar securities of foreign issuers.
See "Investment Objectives and Policies - Equity Funds - International Fund -
Foreign Investment Risks and Considerations." The Adviser may not invest more
than 10 percent of the total assets allocated to this style in the securities of
a single issuer. In investing assets in accordance with this style, the Adviser
does not currently invest in preferred stock and securities convertible into
common stock but reserves the right to do so in the future.

In selecting securities allocated to the SMALL COMPANY style component of GROWTH
EQUITY FUND, DIVERSIFIED EQUITY FUND and the BALANCED FUNDS, the Adviser
invests in accordance with the Small Company Stock Fund style, the Small
Company Growth style (each of which is described above) and the Small Company
Value style, currently allocating 1/3 of its assets to each style. 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
small and medium size companies whose securities are conservatively valued in
the marketplace relative to their underlying fundamentals. Value investing
provides investors with a less aggressive way to take advantage of growth
opportunities of small companies. In investing in accordance with this style,
the Adviser will seek to invest in stocks priced low relative to the stock of
comparable companies, determined by price/earnings ratios, cash flows or other
measures. Value investing therefore may reduce downside risk while offering
potential for capital appreciation as a stock gains favor among other investors
and its stock price rises. In selecting securities for the Small Company Value
style, the Adviser considers small and medium size companies to be those whose
market capitalizations are less than $1 billion at the time the securities of
the company are purchased.

42
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SMALL CAP OPPORTUNITIES FUND

INVESTMENT OBJECTIVE. The Fund's investment objective is capital appreciation.
Current income will be incidental to the objective of capital appreciation. The
Fund currently seeks to achieve its investment objective by investing all of its
investable assets in Schroder U.S. Smaller Companies Portfolio, which has the
same investment objective and substantially identical investment policies as the
Fund. Therefore, although the following discusses the investment policies of
the Portfolio, it applies equally to the Fund. There can be no assurance that
the Fund or the Portfolio will achieve its investment objective.

INVESTMENT POLICIES. Schroder U.S. Smaller Companies Portfolio seeks to achieve
its investment objective by investing, under normal market conditions, at least
65% of its total assets in equity securities of companies domiciled in the
United States that, at the time of purchase, have market capitalizations of $1.5
billion or less. Market capitalization refers to the total market value of a
company's outstanding shares of common stock. See "Investment Objectives and
Policies - Equity Funds - Small Company Investment Risks and Considerations"
below for a discussion of the risks of investing in small companies. In its
investment approach, Schroder will attempt to identify securities of companies
which it believes can generate above average earnings growth, selling at
favorable prices in relation to book values and earnings. As part of Schroder's
assessment of the competency of an issuer's management will be an important
consideration. These criteria are not rigid, and other investments may be
included in the Portfolio if they may help the Portfolio to attain its
objective.

The Portfolio will invest principally in equity securities (common stocks,
securities convertible into common stocks or, subject to special limitations,
rights or warrants to subscribe for or purchase common stocks). The Portfolio
may also invest to a limited degree in non-convertible debt securities and
preferred stocks when, in the opinion of Schroder, such investments are
warranted to achieve the Portfolio"s investment objective. A convertible
security is a bond, debenture, note, preferred stock or other security that may
be converted into or exchanged for a prescribed amount of common stock of the
same or a different issuer within a particular period of time at a specified
price or formula.

The Portfolio may invest in securities of small, unseasoned companies (which,
together with any predecessors, have been in operation for less than three
years), as well as in securities of more established companies. In view of the
volatility of price movements of the former, the Portfolio currently intends to
invest no more than 5% of its total assets in securities of small, unseasoned
issuers.

Although there is no minimum rating for debt securities (convertible or non-
convertible) in which the Portfolio may invest, it is the present intention of
the Portfolio to invest no more than 5% of its net assets in debt securities
rated below Baa by Moody's Investors Service ("Moody's") or BBB by Standard &
Poor's ("S&P"), such securities being commonly known as "high yield/high risk"
securities or "junk bonds," and it will not invest in debt securities that are
in default. See "Investment Objectives and Policies - Tax-Free Fixed Income
Funds - Minnesota Tax-Free Fund - Non-Investment Grade Securities" and the SAI.

SMALL COMPANY INVESTMENT RISKS AND CONSIDERATIONS.

The companies in which SMALL COMPANY STOCK FUND, SMALL COMPANY GROWTH FUND,
SMALL CAP OPPORTUNITIES FUND and the SMALL COMPANY style components of the other
Funds invest may be in a relatively early stage of development or may produce
goods and services which have favorable prospects for growth due to increasing
demand or developing markets. Frequently, such companies have a small
management group and single product or product line expertise. These
characteristics may result in an enhanced entrepreneurial spirit and greater
focus which may make those companies successful. The investment advisers of the
Funds and Schroder U.S. Smaller Companies Portfolio believe 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.

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

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

CONTRARIAN STOCK FUND

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

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

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

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

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

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

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INTERNATIONAL FUND

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 and
substantially identical investment policies as the Fund. Therefore, although
the following discusses the investment policies of the Portfolio, it applies
equally to the Fund. There can be no assurance that the Fund or the 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. The
Portfolio selects its investments on the basis of their potential for capital
appreciation without regard to current income. The Portfolio may also invest in
the securities of domestic closed-end investment companies investing primarily
in foreign securities and may invest in debt obligations of foreign governments
or their political subdivisions, agencies or instrumentalities, of supranational
organizations and of foreign corporations. The Portfolio's investments will be
diversified among securities of issuers in foreign countries including, but not
limited to, Japan, Germany, the United Kingdom, France, The Netherlands, Hong
Kong, Singapore and Australia. In general, the Portfolio will invest only in
securities of companies and governments in countries that Schroder, in its
judgment, considers both politically and economically stable. The Portfolio has
no limit on the amount of its assets which may be invested in any one type of
foreign instrument or in any foreign country; however, to the extent the
Portfolio concentrates its assets in a foreign country, it will incur greater
risks.

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

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

The Portfolio may enter into foreign currency forward contracts or currency
futures or options contracts for the purchase or sale of foreign currency to
"lock in" the U.S. dollar price of the securities denominated in a foreign
currency or the U.S. dollar value of interest and dividends to be paid on such
securities, or to "hedge" against the possibility that the currency of a foreign
country in which the Portfolio has investments may suffer a decline against the
U.S. dollar. A forward currency contract is an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. This method of attempting to hedge the value of portfolio
securities against a decline in the

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value of a currency does not eliminate fluctuations in the underlying prices of
the securities. Although the strategy of engaging in foreign currency
transactions could reduce the risk of loss due to a decline in the value of the
hedged currency, it could also limit the potential gain from an increase in the
value of the currency. The Portfolio does not intend to maintain a net exposure
to such contracts where the fulfillment of the Portfolio's obligations under
such contracts would obligate the Portfolio to deliver an amount of foreign
currency in excess of the value of the Portfolio's portfolio securities or other
assets denominated in the currency. The Portfolio will not enter into these
contracts for speculative purposes and will not enter into non-hedging currency
contracts. These contracts involve a risk of loss if Schroder fails to predict
currency values correctly. The Portfolio has no present intention to enter into
currency futures or options contracts but may do so in the future.

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

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

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

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

4. ADDITIONAL INVESTMENT POLICIES AND
RISK CONSIDERATIONS

GENERAL INFORMATION

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

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Trustees (the "Board") without shareholder approval. Likewise, non-fundamental
investment policies of the Core Portfolios may be changed by the respective Core
Trust's board of trustees without shareholder approval. Unless otherwise
indicated below, the discussion below of the investment policies of the Funds
refers, in the case of International Fund and Small Cap Opportunities Fund, to
the investment policies of their respective Core Portfolios. For more
information concerning shareholder voting, see "Other Information - The Trust
and Its Shares - Shareholder Voting and Other Rights" and "Other Information -
Core Trust Structure." A further description of the Funds' investment policies,
including additional fundamental policies, is contained in the SAIs.

Each investment adviser monitors the creditworthiness of counterparties to the
Funds' transactions and intends to enter into a transaction only when it
believes that the counterparty presents minimal credit risks and the benefits
from the transaction justify the attendant risks. As used herein, the term U.S.
Government Securities means obligations issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities. These
policies relate to each Fund and, unless otherwise noted, not to a portion of a
Fund invested in a particular investment style.

COMMON POLICIES OF THE FUNDS

BORROWING

As a fundamental policy, Income Fund, Total Return Bond Fund, the Tax-Free Fixed
Income Funds, ValuGrowth Stock Fund, Small Company Stock Fund, U.S. Smaller
Companies Portfolio, and Contrarian Stock 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. As a
fundamental policy, the Money Market Funds, Stable Income Fund, Intermediate
Government Income Fund, Diversified Bond Fund, the Balanced Funds, Index Fund,
Income Equity Fund, Diversified Equity Fund, Growth Equity Fund, Large Company
Growth Fund, Small Company Growth Fund and International Portfolio may borrow
money for temporary or emergency purposes, including the meeting of redemption
requests, but not in excess of 33 1/3% of the value of a Fund's net assets. For
each Fund and the Core Portfolios, borrowing for other than temporary or
emergency purposes or meeting redemption requests may not exceed 5% of the value
of each Fund's assets except in the case of Intermediate Government Income Fund,
Diversified Bond Fund and, with respect to their assets invested in Managed
Fixed Income style, the Balanced Funds. Each Fund may enter into reverse
repurchase agreements. When a Fund establishes a segregated account to limit
the amount of leveraging of the Fund with respect to certain investment
techniques, such as reverse repurchase agreements, 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."

REPURCHASE AGREEMENTS AND LENDING OF PORTFOLIO SECURITIES

Each Fund may enter into repurchase agreements (except for Treasury Fund) and
may lend 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

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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 net assets, except U.S. Small Companies Portfolio, which, as a
non-fundamental policy, limits securities lending to not more than 25% of the
value of its net assets.

MARGIN AND SHORT SALES

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

DIVERSIFICATION AND CONCENTRATION

Each Fund (other than Colorado Tax-Free Fund and Minnesota Tax-Free Fund) is
diversified as that term is defined in the Investment Company Act of 1940 (the
"1940 Act"). As a fundamental policy, with respect to 75% of its assets, none
of the Funds that are diversified may purchase a security (other than a U.S.
Government Security or shares of investment companies) if, as a result, (i) more
than 5% of the Fund's total assets would be invested in the securities of a
single issuer or (ii) the Fund would own more than 10% of the outstanding voting
securities of any single issuer. Each Fund is prohibited from concentrating its
assets in the securities of issuers in any industry. As a fundamental policy,
no Fund may purchase securities if, immediately after the purchase, more than
25% of the value of the Fund's total assets would be invested in the securities
of issuers conducting their principal business activities in the same industry.
This limit does not apply to investments in U.S. Government Securities, foreign
government securities or repurchase agreements covering U.S. Government
Securities. International Fund and Small Cap Opportunities Fund may invest up
to 100% of their investable assets in another investment company such as the
Core Portfolios and each Fund, except for Income Fund, Tax-Free Income Fund,
Colorado Tax-Free Fund, Minnesota Tax-Free Fund and ValuGrowth Stock Fund,
reserves the right to invest - through a structure similar to that of
International Fund and Small Cap Opportunities Fund - all or a portion of its
assets in shares of an open-end, management investment company with
substantially the same investment objective and investment policies as the
Fund.

ILLIQUID SECURITIES

Each of the Funds limits its purchase of illiquid securities. No Fund may
knowingly acquire securities or invest in repurchase agreements with respect to
any securities if, as a result, more than 15 percent of the Fund's net assets
(10% in the case of the Money Market Funds) taken at current value would be
invested in securities which are not readily marketable. Illiquid securities
are securities that cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which the Fund has valued the
securities and include, among other things, repurchase agreements not entitling
the holder to payment within seven days and restricted securities (other than
those determined to be liquid pursuant to guidelines established by the Board
or, in the case of the Core Portfolios, by the respective Core Trust's board of
trustees). Under the supervision of the Board or the respective Core Trust's
Board of Trustees, the investment advisers determine and monitor the liquidity
of the portfolio securities.

FIXED INCOME INVESTMENTS AND THEIR CHARACTERISTICS

Although each Fund (other than Minnesota Tax-Free Fund) only invests in
investment grade fixed income securities, including money market instruments, an
investment in a Fund is subject to risk even if all fixed income securities in
the Fund's portfolio are paid in full at maturity. The Fixed Income Funds and,
with respect to their assets invested in fixed income investment styles, the
Balanced Funds, will invest in securities rated in the categories specified by
their investment policies. All fixed income securities, including U.S.
Government Securities, can change in value when there is a change in interest
rates or the issuers actual or perceived creditworthiness or ability to meet its
obligations.

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the market value of securities sensitive to prevailing interest rates and actual
changes in interest rates. In other words, an increase in interest rates
produces a decrease in market value. Moreover, the longer the remaining
maturity (and duration) of a security, the greater will be the effect of
interest rate changes on the market value of that security. Changes in the
ability of an issuer to make payments of interest and principal and in the
markets' perception of an issuer's creditworthiness will also affect the market
value of the debt securities of that issuer. Obligations of issuers of debt
securities, including municipal issuers, are also subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors which may restrict the ability of any issuer to pay, when due, the
principal of and interest on its debt securities. The possibility exists that
the ability of any issuer to pay, when due, the principal of and interest on its
debt securities may become impaired.

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

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

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

The Funds, except U.S Government Fund and Treasury Fund, also 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 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.

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

RATING MATTERS

The Funds' investments are subject to credit risk relating to the financial
condition of the issuers of the securities that each Fund holds. To limit
credit risk, each Fund (other than Minnesota Tax-Free Fund) will generally buy
debt securities that are rated in the top four long-term rating categories by an
NRSRO or in the top two short-term rating categories by an NRSRO, although
certain Funds have greater restrictions. Accordingly, the lowest permissible
long-term investment grades for corporate bonds, including convertible bonds,
are Baa in the case of Moody's Investor Service ("Moody's") and BBB in the case
of Standard & Poor's ("S&P") and Fitch Investors Services, L.P. ("Fitch"); the
lowest permissible long-term investment grades for preferred stock are Baa in
the case of Moody's and BBB in the case of S&P and Fitch; and the lowest
permissible short-term investment grades for short-term debt, including
commercial paper, are Prime-2 (P-2) in the case of Moody's, A-2 in the case of
S&P and F-2 in the case of Fitch.

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 investment adviser to
be of comparable quality. Apart from temporary defensive purposes, a Fund may
at any time invest a portion of its assets in cash and cash equivalents as
described above. Except during periods when the Fund assumes a temporary
defensive position, each Equity Fund will have at least 65% of its total assets
invested in common stock. The Core Portfolios and, with respect to the portion
of their assets managed by Schroder, Diversified Equity Fund, Growth Equity Fund
and each Balanced Fund, may hold cash and bank instruments denominated in any
major foreign currency.

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

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PORTFOLIO TRANSACTIONS

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

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

Subject to the Funds' policy of obtaining the best price consistent with quality
of execution of transactions, each investment adviser may employ broker-dealer
affiliates of the investment adviser (collectively "Affiliated Brokers") to
effect brokerage transactions for the Funds. The Fund's payment of commissions
to Affiliated Brokers is subject to procedures adopted by the Board and, with
respect to the Core Portfolios and the Blended Portfolios, the Core Trusts'
boards of trustees, to provide that the commissions will not exceed the usual
and customary broker's commissions charged by unaffiliated brokers. No specific
portion of a Fund's brokerage will be directed to Affiliated Brokers and in no
event will a broker affiliated with the investment adviser directing the
transaction receive brokerage transactions in recognition of research services
provided to the adviser. The investment advisers may effect transactions for
the Funds (or the Portfolios) through brokers who sell Fund shares. The Funds
have no obligation to deal with any specific broker or dealer in the execution
of portfolio transactions.

The frequency of portfolio transactions of a Fund (the portfolio turnover rate)
will vary from year to year depending on many factors. From time to time a
Fixed Income Fund or Tax-Exempt Fixed Income Fund may engage in active
short-term trading to take advantage of price movements affecting individual
issues, groups of issues or markets. The Funds' portfolio turnover is reported
under Financial Highlights. Schroder anticipates that the annual portfolio
turnover rate of U.S. Small Companies Portfolio, and Norwest anticipates that
the annual portfolio turnover rate of Limited Term Tax-Free Fund, will be less
than 100% in those Funds' first year of operations. 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 a Fund or a Portfolio and a possible
increase in short-term capital gains or losses. Tax rules applicable to
short-term trading may effect the timing of a Fund's portfolio transactions or
its ability to realize short-term trading profits or establish short-term
positions.

5. MANAGEMENT OF THE FUNDS

The business of the Trust is managed under the direction of the Board and the
business of each Core Trust is managed under the direction of that Core Trust's
board of trustees. The Board formulates the general policies of the Funds and
meets periodically to review the results of the Funds, monitor investment
activities and practices and discuss other matters affecting the Funds and the
Trust. The Board consists of seven members, the board of trustees of the Core
Trust (Delaware) consists of four members, and the board of trustees of Schroder
Capital Funds consists of seven members. The SAIs contain general background
information about the Trustees and officers of the Trust and of the Core Trusts.

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 Small
Cap Opportunities Fund) and continu-

<PAGE>

ously reviews, supervises and administers each Fund's investment program or
oversees the investment decisions of the investment subadviser, as applicable.
The Adviser, which is located at Norwest Center, Sixth Street and Marquette,
Minneapolis, Minnesota 55479-0063, is a part of Norwest, a subsidiary of Norwest
Corporation since 1929, which is a multi-bank holding company that was
incorporated under the laws of Delaware in 1929. As of June 30, 1996, Norwest
Corporation was the 12th 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 $22 billion.

As a part of its regular banking operations, Norwest Bank Minnesota, N.A. may
make loans to public companies. Thus, it may be possible, from time to time,
for a Fund to hold or acquire the securities of issuers which are also lending
clients of Norwest. A lending relationship will not be factor in the selection
of portfolio securities for a Fund.

CRESTONE CAPITAL MANAGEMENT, INC.

To assist Norwest in carrying out its obligations with respect to Small Company
Stock Fund, Norwest has entered into an investment subadvisory agreement among
the Trust, Norwest and Crestone. Crestone, which is located at 7720 East
Belleview Avenue, Suite 220, Englewood, Colorado 80111, is a subsidiary of
Norwest and is registered with the SEC as an investment adviser. Crestone
provides investment advice regarding companies with small capitalizations to
various clients, including institutional investors. As of October 1, 1996,
Crestone managed assets with a value of approximately $405 million.

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

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC.

Subject to the general supervision of the boards of trustees of the Core Trusts,
Schroder, through its London, England branch, makes investment decisions for the
Core Portfolios (and thus indirectly for International Fund and Small Cap
Opportunities Fund) and continuously reviews, supervises and administers each
Core Portfolio's investment program. Schroder acts as investment adviser to the
Core Portfolios pursuant to separate advisory agreements with the Core Trusts.
In this regard, it is the responsibility of Schroder to make decisions relating
to the Core Portfolios' investments and to place purchase and sale orders
regarding such investments with brokers or dealers selected in its discretion.
In addition, subject to the Adviser's general oversight, Schroder acts as
investment subadviser to CONSERVATIVE BALANCED FUND, MODERATE BALANCED FUND,
GROWTH BALANCED FUND, DIVERSIFIED EQUITY FUND, GROWTH EQUITY FUND, SMALL CAP
OPPORTUNITIES FUND and INTERNATIONAL 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 style. Each investment
subadvisory agreement is the same in all material respects. The investment
advisory agreements between Schroder and each Core Trust with respect to the
relevant Core Portfolios are the same in all material respects as the Funds'
investment subadvisory agreements 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

<PAGE>

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.

THE BLENDED PORTFOLIOS.

The five Blended Funds invest their assets that are managed in a small company,
index and international investment style in three Blended Portfolios of Core
Trust (Delaware) - 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 (Delaware). 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 and the Core Portfolios under their
investment advisory agreements.

PORTFOLIO MANAGERS

Many persons on the advisory staffs of the Adviser, Crestone and Schroder
contribute to the investment services provided to the Funds, the Core Portfolios
and the three Blended Portfolios, as applicable. The following persons, however,
are primarily responsible for the day-to-day management of the Funds and
Portfolios and, unless otherwise noted, have been since inception of the Funds:

READY CASH INVESTMENT FUND - David D. Sylvester and Laurie R. White. Mr.
Sylvester has been associated with Norwest for 15 years, the last 7 years as a
Vice President and Senior Portfolio Manager. He has over 20 years' experience in
managing 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. Ms. White began serving as a portfolio
manager of the Fund in 1991.

U.S GOVERNMENT FUND - David D. Sylvester and Laurie R. White. For a description
of Mr. Sylvester and Ms. White see "Ready Cash Investment Fund" above. Ms.
White began serving as a portfolio manager of the Fund in 1991.

TREASURY FUND - David D. Sylvester and Laurie R. White. For a description of
Mr. Sylvester and Ms. White see "Ready Cash Investment Fund" above. Ms. White
began serving as a portfolio manager of the Fund in 1991.

MUNICIPAL MONEY MARKET FUND - David D. Sylvester. For a description of Mr.
Sylvester see "Ready Cash Investment Fund" above.

STABLE INCOME FUND - Karl P. Tourville, Vice President and Senior Portfolio
Manager of Norwest since 1989 and principal of Galliand Capital Management, Inc.
since 1995. Mr. Tourville has been associated with Norwest since 1986.

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

DIVERSIFIED BOND FUND - There are three portfolio managers of Diversified Bond
Fund: Mr. David B. Kinney is responsible for the Fund's assets invested in
accordance with the Total Return Bond Fund style, and Mr. William D. Giese is
responsible for the Fund's assets invested in accordance with the Positive
Return style. Mr. Richard Merriam, an officer and Senior Portfolio Manager of
Norwest since 1995 and a principal of Galliard Capital Management, Inc. since
1995, is responsible for the Fund's assets invested in accordance with the
Managed Fixed Income style. Mr Merriam has been associated with Norwest since
1995. Prior to his association with Norwest, Mr. Merriam was a Chief

<PAGE>

Investment Officer of Insight Investment Management and prior to that was
associated with Washington Square Capital. Mr. Merriam began serving as a
portfolio manager of the Fund in 1995. Cash balances of the Fund are managed by
Mr. David D. Sylvester and Ms. Laurie R. White, portfolio managers of Ready
Cash Investment Fund. The backgrounds of Mr. Kinney, Mr. Giese, Mr. Sylvester
and Ms. White are listed under the descriptions relating to the Funds and styles
indicated.

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

TOTAL RETURN BOND FUND - Mr. David B. Kinney. Mr. Kinney, a Vice President and
Senior Portfolio Manager with Norwest, is also a Vice President of United
Capital Management, a part of Norwest Bank Company, N.A., and has been
associated with Norwest since 1981.

LIMITED TERM TAX-FREE FUND - Mr. William T. Jackson is primarily responsible for
the day-to-day management of the Fund. Mr. Jackson, portfolio manager of the
Fund since its inception, has been a Vice President of Norwest since 1993.
Prior thereto, Mr. Jackson was a Senior Vice President and Institutional Sales
Manager with Norwest Investment Services from 1992-1993; a Vice President and
Municipal Bond Trading Manager from 1991-1992; and a Vice President and
Municipal Bond Trader with Kemper Securities, Inc., from 1984-1991.

TAX-FREE INCOME FUND - Mr. William T. Jackson. Mr. Jackson, a Vice President of
Norwest since 1993, has served as portfolio manager of the Fund since 1993. For
a description of Mr. Jackson, see "Limited Term Tax-Free Fund" above.

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

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

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

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

INDEX FUND - David D. Sylvester and Laurie R. White. Mr. Sylvester and Ms. White
began serving as portfolio managers of the Fund on January 1, 1996. For a
description of Mr. Sylvester and Ms. White see "Ready Cash Investment Fund"
above.

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.

VALUGROWTH STOCK FUND -Mr. David S. Lunt, CFA and Mr. Roger Henry, CFA. Prior
to joining Norwest in 1992 Mr. Lunt, who leads the ValuGrowth Stock Fund
management team, was a portfolio manager for FirsTier Bank and a securities
analyst for Woodmen Accident and Life Company. Mr. Lunt received an MBA from
the University of Nebraska at Omaha. Mr. Henry, an institutional portfolio

<PAGE>

manager for Norwest, joined Norwest in 1994. For nearly eighteen years, Mr.
Henry served in various capacities, encompassing all aspects of the investment
management business, at the Minnesota State Investment Board. Mr. Henry also
served as President of the Twin Cities Society of Security Analysts. Mr. Henry
received an MBA from the University of Minnesota.

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

SMALL COMPANY STOCK FUND - Kirk McCown, CFA. Mr. McCown is founder, President
and a Director of Crestone, which was incorporated in 1990.

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.

SMALL CAP OPPORTUNITIES FUND/SCHRODER U.S. SMALLER COMPANIES PORTFOLIO - Small
Cap Opportunities Fund invests all of its assets in Schroder U.S. Smaller
Companies Portfolio and, accordingly, there is currently no portfolio manager
for the Fund. The investment management team of Fariba Talebi, a Vice President
of the Schroder Capital Funds and a Group Vice President of Schroder, and Ira
Unschuld, a Vice President of the Schroder Capital Funds and of Schroder, with
the assistance of an investment committee, is primarily responsible for the
day-to-day management of the Portfolio's investments and has so managed the
Portfolio since its inception. Ms. Talebi and Mr. Unschuld have been employed
by Schroder in the investment research and portfolio management areas since 1987
and 1990, respectively.

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

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

SMALL COMPANY STYLE AND SMALL COMPANY PORTFOLIO - Robert B. Mersky, Kirk McCown
and Thomas H. Forester. For descriptions of Mr. McCown and Mr. Mersky, see
"Small Company Stock Fund" above and "Small Company Growth style" 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.

SMALL COMPANY GROWTH STYLE - Robert B. Mersky, Senior Portfolio Manager and an
Officer of Norwest and President of Peregrine Capital Management, Inc. For a
description of Mr. Mersky see "Small Company Growth Fund" above.

MANAGED FIXED INCOME STYLE - Richard Merriam, an officer and Senior Portfolio
Manager of Norwest since 1995. For a description of Mr. Merriam see
"Diversified Bond Fund" above.

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

<PAGE>

SHORT MATURITY STYLE - David D. Sylvester and Laurie R. White. For descriptions
of Mr. Sylvester and Ms. White, see "Ready Cash Investment Fund" above.

ADVISORY FEES

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

<S> <C> <C>
ADVISORY Ready Cash Investment Fund 0.40% (first $300 million of assets)
FEE RATES 0.36% (next $400 million of assets)
0.32% (remaining assets)

U.S. Government Fund and 0.20% (first $300 million of assets)
Treasury Fund 0.16% (next $400 million of assets)
0.12% (remaining assets)

Municipal Money Market Fund 0.35% (first $500 million of assets)
0.325% (next $500 million of assets)
0.30% (remaining assets)

Stable Income Fund 0.30%
Intermediate Government Income Fund 0.33%
Diversified Bond Fund 0.35%
Income Fund 0.50%
Total Return Bond Fund 0.50%
Limited Term Tax-Free Fund 0.50%
Tax-Free Income Fund 0.50%

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

Conservative Balanced Fund 0.45%
Moderate Balanced Fund 0.53%
Growth Balanced Fund 0.58%
Index Fund 0.15%
Income Equity Fund 0.50%
Diversified Equity Fund 0.65%
Growth Equity Fund 0.90%
Large Company Growth Fund 0.65%

ValuGrowth 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)

Small Company Growth Fund 0.90%
Small Cap Opportunities Fund 0.60%

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

International Fund 0.45%

</TABLE>

The advisory agreements for International Fund and Small Cap Opportunities Fund
provide for an advisory fee payable to the Adviser of 0.85% and 0.925%,
respectively, of the average annual daily net assets of the respective Fund in
the event that the Fund is not completely invested in the respective

<PAGE>

Core Portfolio or another investment company. As International Fund and Small
Cap Opportunities Fund currently invest all of their assets in International
Portfolio and Schroder U.S. Smaller Companies Portfolio, respectively, no fees
are payable under those agreements. The Funds would not be completely invested
in their respective Core Portfolios or another investment company only upon a
determination by the Board that it is no longer in the best interests of the
Fund to be so invested. Schroder would assist 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.
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 and Schroder U.S. Smaller Companies
Portfolio, for services under their advisory agreements, Schroder receives from
Core Trust (Delaware) and Schroder Capital Funds an advisory fee of 0.45% and
0.60%, respectively of the relevant Portfolio's average annual daily net
assets.

With respect to Small Company Portfolio and Index Portfolio of Core Trust
(Delaware), for services under its investment advisory agreements, Norwest
receives from Core Trust (Delaware) advisory fees of 0.90% and 0.15% 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 (Delaware), Schroder receives from the Core Trust an advisory fee of
0.45% 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.

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

MANAGEMENT, ADMINISTRATION AND DISTRIBUTION SERVICES

FFSI provides management services for each Fund and, pursuant to a Management
Agreement with the Trust, supervises the overall management of the Trust
(including the trust's receipt of services for which the Trust is obligated to
pay). In this capacity FFSI provides the Trust with general office facilities,
provides persons satisfactory to the Board to serve as officers of the Trust and
oversees the performance of administrative and professional services rendered to
the Trust by others, including the Trust's custodian, transfer agent and
administrators, as well as accountants, auditors, legal counsel and others.
Pursuant to an Administration Agreement with the Trust, FAS is responsible for
performing certain administrative services necessary for the Trust's operations
with respect to each Fund including, but not limited to (i) preparing and
printing updates of the Trust's registration statement, prospectuses and
statements of additional information, the Trust's tax returns, and reports to
its shareholders, the SEC and state and other securities administrators, (ii)
preparing proxy and information statements and any other communications to
shareholders, (iii) monitoring the sale of shares and ensuring that such shares
are properly and duly registered with the SEC and applicable state and other
securities commission and (iv) determining the amount of and supervising the
declaration of dividends and other distributions to shareholders.

<PAGE>

circumstances specified in that agreement. FFSI receives no payments for its
services as distributor with respect to the Shares. In addition, none of the
Funds has adopted a Rule 12b-1 Plan applicable to the Shares and, accordingly,
no Fund incurs any distribution expenses with respect to the Shares. From its
own resources, FFSI may pay a fee to broker-dealers or other persons for
distribution or other services related to the Funds.

The management and administrative fees payable to FFSI and FAS, respectively, by
the Trust with respect to each Fund are based on the average daily net assets of
the respective Fund at the following rates: U.S. Government Fund and Treasury
Fund, 0.05% (first $300 million of assets), 0.0375% (next $400 million of
assets) and 0.025% (remaining assets); Ready Cash Investment Fund, Municipal
Money Market Fund, Income Fund, Total Return Bond Fund, Tax-Free Income Fund,
Colorado Tax-Free Fund, Minnesota Tax-Free Fund, ValuGrowth Stock Fund, Small
Company Stock Fund and Contrarian Stock Fund, 0.10% and Stable Income Fund,
Intermediate Government Income Fund, Diversified Bond Fund, Limited Term
Tax-Free Fund, Conservative Balanced Fund, Moderate Balanced Fund, Growth
Balanced Fund, Income Equity Fund, Index Fund, Diversified Equity Fund, Growth
Equity Fund, Large Company Growth Fund, Small Cap Opportunities Fund, Small
Company Growth Fund and International Fund, 0.05%.

FFSI also serves as an administrator of Core Trust (Delaware) and provides
administrative services for International Portfolio and each Blended Portfolio
that are similar to those provided to the Funds by FFSI and FAS. For its
administrative services FFSI is compensated by Core Trust at an annual rate of
0.15% of the average daily net assets of International Portfolio and at an
annual rate of 0.10% of the average daily net assets of each Blended Portfolio.
FFSI 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. With respect to U.S. Smaller
Companies Portfolio, Schroder Capital Funds has entered into separate
administrative services contracts with FFSI and with Schroder Advisors, 787
Seventh Avenue, New York, New York 10019, a wholly-owned subsidiary of Schroder.
FFSI and Schroder Advisors provide certain management and administrative
services necessary to Schroder U.S. Smaller Companies Portfolio's operations,
other than the services provided by Schroder as adviser. For their
administrative services for U.S. Smaller Companies Portfolio, Schroder Advisors
receives no fee and FFSI is compensated at an annual rate of 0.075% of the
average daily net assets of that Portfolio.

In addition, pursuant to a separate Administrative Services Agreement, Norwest
receives a fee at an annual rate of 0.25% of the average daily net assets of
each of International Fund and Small Cap Opportunities Fund. Under these
agreements, Norwest is responsible for compiling data and preparing
communications between the Funds and their shareholders, maintaining requisite
information flows between the Funds and Schroder, the investment adviser to the
Core Portfolios, monitoring and reporting to the Board on the performance of the
Core Portfolios and reimbursing the Funds for certain excess expenses. No fees
are payable under this agreement with respect to a Fund in the event that the
Fund is not completely invested in its respective Portfolio or another
investment company.

Pursuant to a separate agreement, Forum Financial Corp. ("FFC") provides
portfolio accounting services to each Fund. FFSI, FAS and FFC are members of
the Forum Financial Group of companies which together provide a full range of
services to the investment company and financial services industry. As of
October 1, 1996, FFSI, FAS and FFC were controlled by John Y. Keffer, President
and Chairman of the Trust.

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-

<PAGE>

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 FFSI, who
agree to comply with the terms of the Transfer Agency Agreement. Sub-transfer
agents and processing agents may be Processing Organizations as described under
"Purchases and Redemptions of Shares - Purchase Procedures." The Transfer Agent
is permitted to compensate those agents for their services; however, that
compensation may not increase the aggregate amount of payments by the Trust to
the Transfer Agent. For its transfer agency services, the Transfer Agent
receives from each Fund a fee at an annual rate of 0.25% of the average daily
net assets attributable to I Shares and Investor Shares and 0.25% of the daily
net assets of U.S. Government Fund and Treasury Fund. The Transfer Agent
receives a fee at an annual rate of 0.10% of the average daily net assets
attributable to Institutional Shares plus certain out-of-pocket costs.

Norwest also serves as the Trust's custodian and may appoint subcustodians for
the foreign securities and other assets held in foreign countries. For its
custodial services, Norwest is compensated at an annual rate of up to 0.05% of
the average daily net assets of Ready Cash Investment Fund, Municipal Money
Market Fund, Income Fund, Total Return Bond Fund, Limited Term Tax-Free Fund,
Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota Tax-Free Fund,
ValuGrowth Stock Fund, Small Company Stock Fund and Contrarian Fund. Norwest is
compensated at an annual rate of up to 0.03% of the average daily net assets of
U.S. Government Fund and Treasury Fund. Norwest currently receives no fee for
its custodial services provided to Stable Income Fund, Intermediate Government
Income Fund, Diversified Bond Fund, Conservative Balanced Fund, Moderate
Balanced Fund, Growth Balanced Fund, Income Equity Fund, Index Fund, Diversified
Equity Fund, Growth Equity Fund, Large Company Growth Fund, Small Cap
Opportunities Fund, Small Company Growth Fund and International Fund, but these
Funds will incur the expenses and costs of any subcustodian. In addition,
International Fund and, to the extent they invest in the International Fund
style, each Blended Fund, indirectly incurs its pro rata portion of the
custodial fees of Core Trust (Delaware). Similarly, Small Cap Opportunities
Fund indirectly incurs its pro rata portion of the custodial fees of Schroder
Capital Funds. The Chase Manhattan Bank, N.A. serves as custodian of the Core
Portfolios and International Portfolio II and is paid a fee by the Core Trusts
for its services. Norwest serves as custodian of Small Company Portfolio and
Index Portfolio and currently receives no additional compensation for its
custodial services with respect to those Portfolios.

EXPENSES OF THE FUNDS

Each Fund (as well as the Core Portfolios and the Blended Portfolios) is
obligated to pay for all of its expenses, although Norwest has agreed to
reimburse the Trust for certain of each Fund's operating expenses which in any
year exceed the limits prescribed by any state in which the Fund's shares are
qualified for sale. For more information about Fund expenses, see "Summary -
Expenses of Investing in the Funds." These expenses include but are not limited
to: interest charges; taxes; brokerage fees and commissions; certain insurance
premiums; applicable fees and expenses under the Trust's, or the Core Trusts'
contracts with the investment Advisers, FFSI, FAS and the Transfer Agent; 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 the Core Trusts'
trustees, officers and employees and other personnel performing services for the
Trust, or the Core Trusts; 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 and Small Cap Opportunities
Fund's expenses include each Fund's pro rata share of the operating expenses of
International Portfolio and Schroder U.S. Smaller Companies Portfolio,
respectively, which are borne indirectly by

<PAGE>

International Fund's and Small Cap Opportunities 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 May 31,
1996, as a percentage of average net assets, were: Small Company Portfolio,
0.15%, Index Portfolio, 0.17% and International Portfolio II, 0.23%. 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, FFSI, FAS, the Transfer Agent and any other service provider to
the Funds, the Portfolios 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 the Core Trusts, may be increased by the Board or
the board of trustees of the Core Trusts without shareholder approval. Fee
waivers and expense reimbursements are voluntary and may be reduced or
eliminated at any time.

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

6. PURCHASES AND REDEMPTIONS OF SHARES

I Shares are offered to fiduciary, agency and custodial clients of bank trust
departments, trust companies and their affiliates. Institutional Shares and the
single class of shares offered by each of U.S. Government Fund and Treasury Fund
are designed primarily for institutional clients. Investor Shares are offered to
retail customers. Shares are continuously sold and redeemed at a price equal to
their net asset value next-determined after acceptance of an order on every
weekday except customary national holidays and Good Friday ("Fund Business
Day").

GENERAL PURCHASE INFORMATION

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

Shares of each Fund are offered without a sales charge and may be redeemed
without charge. The minimum investment in Investor Shares and I Shares is
$1,000; the minimum subsequent investment in Investor Shares and I Shares is
$100. The minimum investment amount in Institutional Shares and for Shares of
U.S. Government Fund and Treasury Fund is $100,000 and there is no minimum
subsequent investment for those Shares. Shareholders who elect to purchase I
Shares through electronic share purchase privileges such as the Automatic
Investment Plan or the Directed Dividend Option are not subject to the initial
investment minimums. See "Purchases and Redemptions of Shares - Shareholder
Services - Automatic Investment Plan" and "Dividends, Distributions and Tax
Matters."

Shares of the Funds become entitled to receive dividends on the next Fund
Business Day after a purchase or order for the Shares is accepted, except that
Shares of the Money Market Funds become entitled to receive dividends on the
Fund Business Day that a purchase order is accepted. With respect to the Money
Market Funds, an investor's order will not be accepted or invested by a Fund

<PAGE>

during the period before the Fund's receipt of immediately available funds. For
the Money Market Funds, purchase and redemption orders will be accepted on Fund
Business Days only until the times indicated below.

Order Must Be Payment Must Be
Money Market Fund Received By Received By
----------------- ----------- -----------

Ready Cash Investment Fund 3:00 p.m. 4:00 p.m.
U.S. Government Fund 2:00 p.m. 4:00 p.m.
Treasury Fund 1:00 p.m. 4:00 p.m.
Municipal Money Market Fund 12:00 p.m. 4:00 p.m.

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

PURCHASE PROCEDURES

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

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

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

BY MAIL. Investors may send a check made payable to the Trust along with a
completed account application form to the Trust at the address listed above.
Checks are accepted at full value subject to collection. Payment by a check
drawn on any member of the Federal Reserve System can normally be converted into
Federal funds within two business days after receipt of the check. Checks drawn
on some non-member banks may take longer. If a check does not clear, the
purchase order will be canceled and the investor will be liable for any losses
or fees incurred by the Trust, the Transfer Agent or FFSI.

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

Norwest Bank Minnesota, N.A.
ABA 091 000 019
For Credit to: Norwest Advantage Funds 0844-131
Re: [Name of Fund] [Name of Shares if applicable]
Account Number:
Account Name:

<PAGE>

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

THROUGH FINANCIAL INSTITUTIONS. Shares may be purchased and redeemed through
certain broker-dealers, banks and other financial institutions ("Processing
Organizations"). The Transfer Agent, FFSI or their affiliates may be Processing
Organizations. Financial institutions, including Processing Organizations, may
charge their customers a fee for their services and are responsible for promptly
transmitting purchase, redemption and other requests to the Funds.

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

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

SUBSEQUENT PURCHASES OF SHARES

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

GENERAL REDEMPTION INFORMATION

Fund shares may be redeemed at their net asset value on any Fund Business Day.
There is no minimum period of investment and no restriction on the frequency of
redemptions.

Fund shares are redeemed as of the next determination of the Fund's net asset
value following acceptance by the Transfer Agent of the redemption order in
proper form (and any supporting documentation which the Transfer Agent may
require). Redeemed shares are not entitled to receive dividends after the day
on which the redemption is effective, except that Shares of the Money Market
Funds are not entitled to receive dividends on the day on with the redemption is
effective. For the Money Market Funds, redemption orders are accepted up to the
times indicated under "Purchases and Redemptions of Shares - General Purchase
Information."

<PAGE>

postponed for more than seven days after the tender of the shares to the Fund
except when the New York Stock Exchange is closed (or when trading thereon is
restricted) for any reason other than its customary weekend or holiday closings,
for any period during which an emergency exists as a result of which disposal by
the Fund of its portfolio securities or determination by the Fund of the value
of its net assets is not reasonably practicable and for such other periods as
the SEC may permit.

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

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.

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 under "Purchases and Redemptions of Shares - Purchase Procedures -
Through Financial Institutions." Shareholders that wish to redeem shares by
telephone or receive redemption proceeds by bank wire must elect these options
by properly completing the appropriate sections of their account application
form. These privileges may not be available until several weeks after a
shareholder's application is received. Shares for which certificates have been
issued may not be redeemed by telephone.

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

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

BY BANK WIRE. For redemptions of more than $5,000, a shareholder who has
elected wire redemption privileges may request a Fund to transmit the redemption
proceeds by Federal funds wire to a bank

<PAGE>

account designated in writing by the shareholder. To request bank wire
redemptions by telephone, the shareholder also must have elected the telephone
redemption privilege. Redemption proceeds are transmitted by wire on the day
after a redemption request in proper form is received by the Transfer Agent.

EXCHANGES

Shareholders of I Shares and Institutional Shares and shareholders of U.S
Government Fund and Treasury Fund may exchange their Shares for I Shares, for
Institutional and for Shares of U.S. Government Fund and Treasury Fund.
Shareholders of Investor Shares may exchange their Shares for Investor Shares of
the other Fund and A class shares of certain other funds of the Trust. The
Trust may in the future create additional classes of funds the shares of which
will be exchangeable with the Shares of the Funds. 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.

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

Exchanges may only be made between identically registered accounts or to open a
new account. A new account application is required to open a new account
through an exchange if the new account will not have an identical registration
and the same shareholder privileges as the account from which the exchange is
being made. Shareholders may only exchange into a Fund if that Fund's shares
may legally be sold in the shareholder's state of residence.

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

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

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

SHAREHOLDER SERVICES

AUTOMATIC INVESTMENT PLAN

Under the Automatic Investment Plan which is available to shareholders that
invest in I Shares of each Fund and to shareholders of Investor Shares of Ready
Cash Investment Fund and Municipal Money Market Fund, shareholders may authorize
monthly amounts of $50 or more to be withdrawn automatically from the
shareholder's designated bank account (other than passbook savings) and sent to
the Transfer Agent for investment in a Fund. Shareholders wishing to use this
plan must complete an application which may be obtained by writing or calling
the Transfer Agent. The Trust may modify or terminate the Automatic Investment
Plan with respect to any shareholder in the event that the Trust is

<PAGE>

unable to settle any transaction with the shareholder's bank. If the Automatic
Investment Plan is terminated before the shareholders account totals $1,000, the
Trust reserves the right to close the account in accordance with the procedures
described under "General Redemption Information."

INDIVIDUAL RETIREMENT ACCOUNTS

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

AUTOMATIC WITHDRAWAL PLAN

A shareholder of a Fund, other than a shareholder of U.S. Government Fund,
Treasury Fund and Institutional Shares of Ready Cash Investment Fund or
Municipal Money Market Fund, whose shares in a single account total $1,000 or
more may establish a withdrawal plan to provide for the preauthorized payment
from the shareholder's account of $250 or more on a monthly, quarterly,
semi-annual or annual basis. A shareholder of U.S. Government Fund, Treasury
Fund or Institutional Shares of Ready Cash Investment Fund or Municipal Money
Market Fund 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 amounts at any time.

CHECKWRITING

Shareholders of the Money Market Funds wishing to establish checkwriting
privileges may do so by completing an application, which may be obtained by
writing or calling the Funds or the Transfer Agent. After the application is
properly completed and returned to a Fund, the shareholder will be supplied with
checks which may be made payable to any person in any amount of $500.00 or more.
When a check is presented for payment, the number of full and fractional shares
required to cover the amount of the check will be redeemed from the
shareholder's account by the Transfer Agent as agent for the shareholder. Any
shares for which certificates have been issued may not be redeemed by check. If
the amount of a check is greater than the value of the uncertificated shares
held in the shareholder's account, the check will not be honored. Fund shares
may not be redeemed until the check used to purchase the shares has cleared
(which may take 15 or more days). A shareholder may not liquidate the
shareholder's entire account by means of a check. Shareholders will be subject
to the rules and regulations of the Transfer Agent pertaining to the
checkwriting privilege as amended from time to time. Checkwriting procedures
may be changed, modified or terminated at any time by the Trust or the Transfer
Agent upon written notification to the shareholder.

REOPENING ACCOUNTS

<PAGE>

7. DIVIDENDS, DISTRIBUTIONS
AND TAX MATTERS

DIVIDENDS AND DISTRIBUTIONS

Dividends of net investment income currently are declared and paid at least
annually by each Fund. Dividends of net investment income of each Money Market
Fund, Fixed Income Fund (other than Diversified Bond Fund) and each Tax Exempt
Fixed Income Fund currently are declared daily and paid monthly. Dividends of
net investment income are declared and paid quarterly in the case of Income
Equity Fund, ValuGrowth Stock Fund, Small Company Stock Fund and Contrarian
Stock Fund, and annually in the case of all other Funds. 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"). Retirement accounts, including IRAs and KEOGHs,
are automatically assigned the Reinvestment Option. All dividends and
distributions are treated in the same manner for Federal income tax purposes
whether received in cash or reinvested in shares of a fund.

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

TAX MATTERS

Each Fund intends to 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.

Any dividend or distribution received by a shareholder on shares of Diversified
Bond Fund or a Balanced Fund or an Equity Fund will have the effect of reducing
the net asset value of the shares by the amount of the dividend or distribution.
Furthermore, a dividend (with respect to Diversified Bond Fund and a Balanced
Fund or Equity Fund) or distribution (for any Fund) made shortly after the
purchase of shares by a shareholder, although in effect a return of capital to
that particular shareholder, would be taxable to the shareholder as described
above.

<PAGE>

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

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

INTERNATIONAL FUND - INTERNATIONAL PORTFOLIO AND
SMALL CAP OPPORTUNITIES FUND - SCHRODER U.S. SMALLER COMPANIES PORTFOLIO

The Core Portfolios are not required to pay Federal income taxes on their net
investment income and capital gain, as they are treated as partnerships for
Federal income tax purposes. All interest, dividends and gains and losses of
the Core Portfolios are deemed to have been "passed through" to the respective
Funds in proportion to each Fund's holdings of the Core Portfolios, regardless
of whether such interest, dividends or gains have been distributed by the
Portfolios or losses have been realized by the Portfolios. 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.

TAX EXEMPT DISTRIBUTIONS

Dividends paid by Municipal Money Market Fund or by a Tax-Exempt Fixed Income
Fund out of tax-exempt interest income earned by the Fund ("exempt-interest
dividends") generally will not be subject to Federal income tax in the hands of
the Fund's shareholders. However, persons who are substantial users or related
persons thereof of facilities financed by private activity bonds held by a Fund
may be subject to Federal income tax on their pro rata share of the interest
income from such bonds and should consult their tax advisers before purchasing
shares of such Fund. Under current Federal tax law, interest on certain private
activity securities issued after August 7, 1986 is treated as an item of tax
preference for purposes of the AMT imposed on individuals and corporations. In
addition, interest on all tax-exempt obligations is included in the "adjusted
current earnings" of corporations for AMT purposes.

Interest on indebtedness incurred by shareholders to purchase or carry shares of
a Fund generally is not deductible for Federal income tax purposes. Under rules
of the Internal Revenue Service for determining when borrowed funds are used for
purchasing or carrying particular assets, shares of a Fund may be considered to
have been purchased or carried with borrowed funds even though those funds are
not directly linked to the shares. Substantially all of the dividends paid by
each Tax-Exempt Fixed Income Fund are anticipated to be exempt from Federal
income taxes.

MUNICIPAL MONEY MARKET FUND, LIMITED TAX-FREE FUND AND TAX-FREE INCOME FUND.
Substantially all of the dividends paid by the Fund are anticipated to be exempt
from Federal income taxes. The exemption for Federal income tax purposes of
dividends derived from interest on municipal securities does not necessarily
result in an exemption under the income or other tax laws of any state or local
taxing authority. Shareholders of the Fund may be exempt from state and local
taxes on distributions of tax-exempt interest income derived from obligations of
the state and/or municipalities of the state in which they reside but may be
subject to tax on income derived from the municipal securities of other
jurisdictions. Shareholders are advised to consult with their tax advisers
concerning the application of state and local taxes to investments in the Fund
which may differ from the Federal income tax consequences described above.

<PAGE>

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

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

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

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

MISCELLANEOUS

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

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

8. OTHER INFORMATION

BANKING LAW MATTERS

<PAGE>

ment company as agent for and upon the order of a customer. FFSI believes that
Norwest and any other bank or bank affiliate that may perform sub-transfer agent
or similar services or purchase shares as agent for its customers may perform
the services described in this Prospectus for the Trust and its shareholders
without violating applicable Federal banking laws or regulations.

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

DETERMINATION OF NET ASSET VALUE

The Trust determines the net asset value per share of each Fund, except the
Money Market Funds, 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. The Trust determines the net asset value
per share of Ready Cash Investment Fund, U.S. Government Fund, Treasury Fund and
Municipal Money Market Fund as of 3:00 p.m., 2:00 p.m., 1:00 p.m. and 12:00 p.m.
Eastern Time, respectively, in the same manner as indicated above. Securities
owned by a Fund (other than a Money Market Fund) for which market quotations are
readily available are valued at current market value or, in their absence, at
fair value as determined by the Board. The Trust does not determine net asset
value on the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.

In order to maintain a stable net asset value per share of $1.00, each Money
Market Funds' portfolio securities are valued at their amortized cost. Amortized
cost valuation involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium. If the
market value of a Fund's portfolio deviates more than 1/2 of 1% from the value
determined on the basis of amortized cost, the Board will consider whether any
action should be initiated to prevent any material dilutive effect on
shareholders.

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 a Fund's 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 denominated in foreign currencies are converted into
U.S. dollars at the mean of the bid and asked prices of such currencies against
the U.S. dollar last quoted by a major bank prior to the time of conversion.

PERFORMANCE INFORMATION

<PAGE>

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 for
the Money Market Funds, a Fund takes the interest income it earned from its
investments for a 7-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
7-day period. With respect to each of the other Funds, 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.
Municipal Money Market Fund and the Tax-Exempt Fixed Income Funds may also quote
tax- equivalent yields, which show the taxable yields a shareholder would have
to earn to equal the Fund's tax-free yield after taxes. A tax equivalent yield
is calculated by dividing the Fund's tax-free yield by one minus a stated
Federal, state or combined Federal and state tax rate.

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

The Funds' advertisements may reference ratings and rankings among similar
mutual funds by independent evaluators such as Morningstar, Inc., Lipper
Analytical Services, Inc. and IBC/Donoghue, Inc. The comparative material found
in the Funds' advertisements, sales literature or reports to shareholders may
contain performance ratings. This material is not to be considered
representative or indicative of future performance. All performance information
for a Fund is calculated on a class basis. Each of the Funds uses a benchmark
securities index as a measure of the Fund's performance. These indices may be
comprised of a composite of various recognized securities indices to reflect the
investment policies of Diversified Bond Fund, Diversified Equity Fund, Growth
Equity Fund and each Balanced Fund, which invest their assets using different
investment styles. These indices are not used in the management of the Fund but
rather are standards by which the Advisers and shareholders may compare the
performance of a Fund to an unmanaged composite of securities with similar, but
not identical, characteristics as the Fund. For instance, Index Fund's
investment objective is to duplicate the return of the Standard & Poor's 500
Composite Stock Price Index. Accordingly, the Adviser generally uses that index
as a comparison to measure the performance of Index Fund. The Funds may from
time to time advertise a comparison of their performance against any of these or
other indices.

THE TRUST AND ITS SHARES

The Trust was originally organized under the name Prime Value Funds, Inc. as a
Maryland corporation on August 29, 1986, and on July 30, 1993, was reorganized
as a Delaware business trust with the name Norwest Funds. On October 1, 1995,
the Trust changed its name to Norwest Advantage Funds. The Trust has an
unlimited number of authorized shares of beneficial interest. The Board may,
without shareholder approval, divide the authorized shares into an unlimited
number of separate portfolios or series (such as the Funds) and may divide
portfolios or series into classes of shares (such as I Shares), and the costs of
doing so will be borne by the Trust. Currently the authorized shares of the
Trust are divided into twenty-eight separate series.

OTHER CLASSES OF SHARES

In addition to the Shares, each Fund may create and issue shares of other
classes of securities. U.S. Government Fund and Treasury Fund currently offer
one class of shares. Ready Cash Investment

<PAGE>

Fund currently offers three classes of shares - Institutional Shares,
Investor Shares and Exchange Shares. Municipal Money Market Fund currently
offers two classes of shares - Institutional Shares and Investor Shares.
Except with respect to Exchange Shares, there are no transaction charges in
connection with purchases, redemptions and exchanges of Shares of the Money
Market Funds. Exchange Shares may be purchased only in exchange for B class
shares of certain funds of the Trust and are subject to a contingent deferred
sales charge. Stable Income Fund, Intermediate Government Income Fund, Income
Fund, Total Return Bond Fund, the Tax-Free Fixed Income Funds, Income Equity
Fund, ValuGrowth Stock Fund, Diversified Equity Fund, Growth Equity Fund,
Small Cap Opportunities Fund, Small Company Stock Fund, Contrarian Stock Fund
and International Fund currently offer three classes of shares: A Shares, B
Shares, and I Shares. A Shares are each sold with a maximum sales charge of
4.5%, in the case of the Equity Funds, and 3.75%, in the case of the Fixed
Income Funds (1.50% in the case of Stable Income Fund) and Tax-Exempt Fixed
Income Funds imposed at the time of purchase or, in some cases, a maximum
contingent deferred sales charge of 1.0% imposed on redemptions made within
two years of purchase. B Shares are sold with a maximum contingent deferred
sales charge of 4.0%, in the case of the Equity Funds, and 3.0%, in the case
of the Fixed Income Funds (1.50% in the case of Stable Income Fund) and
Tax-Exempt Fixed Income Funds imposed on most redemptions made within a
specified period after their purchase (two to six years depending upon the
Fund). Pursuant to a distribution plan, B Shares of each Fund and Exchange
Shares pay a distribution services fee at an annual rate not to exceed 0.75%
and a maintenance fee in an amount equal to 0.25% of the B Shares' or
Exchange Shares' average daily net assets.

Each class of a Fund may have a different expense ratio and different sales
charges (including distribution fees) and the performance of each class will be
affected by its expenses and sales charges. For more information on other
classes of shares of the Funds, investors may contact the Transfer Agent at
612-667-8833 or 800-338-1348. Investors may also contact their sales
representative or the Funds' distributor to obtain information about the other
classes. Sales personnel of broker-dealers and other financial institutions
selling the Funds' shares may receive differing compensation for selling
A Shares, B Shares and I Shares of the Funds.

SHAREHOLDER VOTING AND OTHER RIGHTS

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

As of September 1, 1996, Emseg & Co., a Norwest nominee through which various
customers of Norwest, including employee benefit plans, own shares of the Funds,
may be deemed to have controlled, for purposes of the 1940 Act, Stable Income
Fund, Intermediate Government Income Fund, Diversified Bond Fund, Conservative
Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund, Index Fund, Income
Equity Fund, ValuGrowth Stock Fund, Diversified Equity Fund, Growth Equity Fund,
Large Company Growth Fund, Small Company Growth, Small Cap Opportunities Fund
and International Fund. As of the same date, Stout & Co. and Dentru & Co.,
nominees of Norwest

<PAGE>

Bank Colorado, N.A. through which some of its customers own shares of the Funds
and Dentru & Co., may be deemed to have controlled Colorado Tax-Free Fund and,
Dentru & Co. owned of record more than 25% of the outstanding I Shares of
ValuGrowth Stock Fund. As of the same date, Norwest Income Bond Fund and
Norwest Tax-Exempt Bond Fund, Norwest-sponsored collective trust funds that
comprise assets of customers of Norwest, may be deemed to have controlled Income
Fund and Tax-Free Income Fund, respectively. In addition, as of September 1,
1996, Seret & Co., a nominee of Norwest Bank Colorado, N.A. through which some
of its customers own shares of the Funds, may be deemed to have controlled Total
Return Bond Fund, and Seret & Co. and Stout & Co. may be deemed to have
controlled Contrarian Stock Fund. From time to time, these shareholders
or other shareholders may own a large percentage of the shares of a Fund and,
accordingly, may be able to greatly affect (if not determine) the outcome of a
shareholder vote.

The Core Portfolios normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in the Core Portfolios, such as
International Fund and Small Cap Opportunity Fund, will be entitled to vote in
proportion to its relative beneficial interest in the respective Portfolio. On
most issues subject to a vote of investors, as required by the 1940 Act and
other applicable law, each Fund will solicit proxies from its shareholders and
will vote its interest in the Portfolio in proportion to the votes cast by its
shareholders. If there are other investors in a Portfolio, there can be no
assurance that any issue that receives a majority of the votes cast by Fund
shareholders will receive a majority of votes cast by all investors in the
Portfolio; indeed, if other investors hold a majority interest in the Portfolio,
they could hold have voting control of the Portfolio.

CORE TRUST STRUCTURE

International Fund seeks to achieve its investment objective by investing all of
its assets in International Portfolio, a separate series of Core Trust
(Delaware), a business trust organized under the laws of the State of Delaware
in September 1994. Similarly, Small Cap Opportunities Fund seeks to achieve its
investment objective by investing all of its investable assets in Schroder U.S.
Smaller Companies Portfolio, a separate series of Schroder Capital Funds, a
business trust organized under the laws of the State of Delaware in September
1995. The Core Portfolios have the same investment objective and substantially
identical investment policies as the Funds that invest in them. Accordingly,
the Core Portfolios directly acquire their own investment securities and the
Funds acquire an indirect interest in those securities. The Core Trusts are
registered under the 1940 Act as an open-end management investment companies.
Core Trust (Delaware) currently has eight separate portfolios. Schroder Capital
Funds currently has four separate portfolios. The assets of the Core
Portfolios, belong only to, and the liabilities of the Core Portfolios are borne
solely by, the Portfolio and no other portfolio of the Core Trusts.

THE CORE PORTFOLIOS

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

International Fund's and Small Cap Opportunities Fund's investment in their
respective Core Portfolio is in the form of a non-transferable beneficial
interest. As of October 1, 1996, International Fund is the only institutional
investor that has invested all of its assets in International Portfolio and
Schroder U.S. Smaller Companies Portfolio had one other institutional investor
(another mutual fund) in addition to Small Cap Opportunities Fund. The
Portfolios may permit other investment companies or institutional investors to
invest in them. All investors in the Portfolios will invest on the same terms
and conditions as the Funds and will pay a proportionate share of the respective
Portfolios' expenses.

The Core Portfolios will not sell their shares directly to members of the
general public. Another investor in a 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 Funds

<PAGE>

and could have different advisory and other fees and expenses than the Funds.
Therefore, Fund shareholders may have different returns than shareholders in
another investment company that invests exclusively in a Portfolio. Information
regarding any such funds is available from Core Trust (Delaware) by calling
207-879-1900 and from Schroder Capital Funds by calling (207) 879-8903.

CERTAIN RISKS OF INVESTING IN THE CORE PORTFOLIOS. The Funds' investments in
the Core Portfolios may be affected by the actions of other large investors in
the Portfolios, if any. For example, if a Portfolio had a large investor other
than the Fund that redeemed its interest in the Portfolio, the Portfolio's
remaining investors (including the Fund) might, as a result, experience higher
pro rata operating expenses, thereby producing lower returns.

Either Fund may withdraw its entire investment from the Portfolio in which it
invests at any time, if the Board determines that it is in the best interests of
the Fund and its shareholders to do so. A Fund might withdraw, for example, if
there were other investors in the Portfolio with power to, and who did by a vote
of the shareholders of all investors (including the Fund), change the investment
objective or policies of the Portfolio in a manner not acceptable to the Board.
A withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by the Portfolio. That distribution could
result in a less diversified portfolio of investments for the Fund and could
affect adversely the liquidity of the Fund's portfolio. If a Fund decided to
convert those securities to cash, it usually would incur brokerage fees or other
transaction costs. If a Fund withdrew its investment from the Portfolio, the
Board would consider what action might be taken, including the management of the
Fund's assets in accordance with its investment objective and policies by the
Adviser and Schroder or the investment of all of the Fund's investable assets
in another pooled investment entity having substantially the same investment
objective as the Fund. The inability of a 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 a Core Portfolio, including the Funds, will be liable for all
obligations of the Portfolio in which it invests, but not any other portfolio of
the respective Core Trust. The risk to investors in the Core Portfolios of
incurring financial loss on account of such liability, however, would be limited
to circumstances in which a Portfolio was unable to meet its obligations. Upon
liquidation of a Portfolio, investors would be entitled to share pro rata in the
net assets of the Portfolio available for distribution to investors.

BLENDED PORTFOLIOS OF CORE TRUST (DELAWARE)

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 previously did not permit a Fund to invest all of its
assets in a Blended Portfolio. Accordingly, currently Index Fund does not
invest in Index Portfolio and International Fund does not invest in
International Portfolio II.

Investment decisions by the portfolio managers of the Portfolios are made
independently. Therefore, the portfolio manager of a Portfolio in which a
Blended Fund invests may purchase shares of the same issuer whose shares are
being sold by the portfolio manager of another Portfolio in which the Blended
Fund invests. This could result in an indirect expense to the Blended Fund
without accomplishing any investment purpose.

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

<PAGE>

APPENDIX A

INVESTMENTS, INVESTMENT STRATEGIES
AND RISK CONSIDERATIONS

COMMON STOCKS, WARRANTS AND PREFERRED STOCK

COMMON STOCKS AND WARRANTS - BALANCED FUNDS, EQUITY FUNDS. PREFERRED STOCK
- -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,
generally, 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 a securities exchange or in the
over-the-counter market 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. 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).

CONVERTIBLE SECURITIES

INCOME FUND, TOTAL RETURN BOND FUND, BALANCED FUNDS, EQUITY FUNDS.
Convertible securities, which include convertible debt, convertible preferred
stock and other securities exchangeable under certain circumstances for
shares of common stock, are fixed income securities or preferred stock which
generally may be converted at a stated price within a specific amount of time
into a specified number of shares of common stock. A convertible security
entitles the holder to receive interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Before conversion, convertible securities
have characteristics similar to non-convertible 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. Except for Small Cap Opportunities Fund, the
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").

<PAGE>

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.

ADRS AND EDRS

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

ALL 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>

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 AND COMMERCIAL PAPER

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

FINANCIAL INSTITUTION OBLIGATIONS

ALL FUNDS (EXCEPT TREASURY FUND). 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

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

READY CASH INVESTMENT FUND, DIVERSIFIED BOND FUND, BALANCED FUNDS. A Fund may
purchase participation interests in loans or securities in which the Fund may
invest directly that are owned by banks or other financial institutions. A
participation interest gives the Fund an undivided interest in a loan or
security in the proportion that the Fund's interest bears to the total principal
amount of the security. Participation interests, which may have fixed, floating
or variable rates, may carry a demand feature backed by a letter of credit or
guarantee of the bank or institution permitting the holder to tender them back
to the bank or other institution. For certain participation interests the Fund
will have the right to demand payment, on not more than 7 days notice, for all
or a part of the Fund's participation interest. A Fund will only purchase
participation interests from banks or other financial institutions that the
Adviser deems to be creditworthy. A Fund will not invest more than 10 percent
of its total assets in participation interests in which the Fund does not have
demand rights.

ILLIQUID SECURITIES AND RESTRICTED SECURITIES

ILLIQUID SECURITIES - ALL FUNDS. Restricted Securities - Money Market Funds,
Fixed Income Funds, Balanced Funds, Small Cap Opportunities Fund and
International Fund. Each Fund may invest up to 15 percent of its net assets in
securities that at the time of purchase are illiquid. Historically, illiquid

<PAGE>

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 security's contractual
or legal restrictions on resale to the general public or to certain institutions
may not be indicative of the liquidity of the security. If such securities are
eligible for purchase by institutional buyers in accordance with Rule 144A under
the Securities Act of 1933 or other exemptions, the Advisers may determine that
such securities are not illiquid securities, under guidelines or other
exemptions adopted by the Board (or, in the case of the Core Portfolios, the
Core Trusts' board of trustees). These guidelines take into account trading
activity in the securities and the availability of reliable pricing information,
among other factors. If there is a lack of trading interest in a particular
Rule 144A security, a Fund's holdings of that security may be illiquid.

BORROWING

ALL FUNDS. Income Fund, Total Return Bond Fund, the Tax-Free Fixed Income
Funds, ValuGrowth Stock Fund, Small Company Stock Fund, U.S. Smaller
Companies Portfolio, and Contrarian Stock 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.
The Money Market Funds, Stable Income Fund, Intermediate Government Income
Fund, Diversified Bond Fund, the Balanced Funds, Index Fund, Income Equity
Fund, Diversified Equity Fund, Growth Equity Fund, Large Company Growth Fund,
Small Company Growth Fund and International Portfolio may borrow money for
temporary or emergency purposes, including the meeting of redemption
requests, but not in excess of 33 1/3% of the value of a Fund's total assets.
Borrowing involves special risk considerations. Interest costs on borrowings
may fluctuate with changing market rates of interest and may partially offset
or exceed the return earned on borrowed funds (or on the assets that were
retained rather than sold to meet the needs for which funds were borrowed).
Under adverse market conditions, a Fund might have to sell portfolio
securities to meet interest or principal payments at a time when investment
considerations would not favor such sales. No Fund, other than Intermediate
Government Income Fund and, to the extent they invest in the Short Maturity
style, the Balanced Funds or Diversified Bond Fund, may purchase securities
for investment while any borrowing equal to 5 percent or more of the Fund's
total assets is outstanding or borrow for purposes other than meeting
redemptions in an amount exceeding 5 percent of the value of the Fund's total
assets. A Fund's use of borrowed proceeds to make investments would subject
the Fund to the risks of leveraging. Reverse repurchase agreements, short
sales not against the box, dollar roll transactions and other similar
investments that involve a form of leverage have characteristics similar to
borrowings but are not considered borrowings if the Fund maintains a
segregated account; the use of these techniques in connection with a
segregated account may result in a Fund's assets being 100 percent leveraged.
See "Appendix A - Techniques Involving Leverage."

PURCHASING SECURITIES ON MARGIN

INTERMEDIATE GOVERNMENT INCOME FUND. When the Fund purchases securities on
margin, it only pays part of the purchase price and borrows the remainder. 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

<PAGE>

the security exceeds the maximum permissible borrowing amount, the Fund will be
required to make margin payments (additional payments to the broker to maintain
the level of borrowing at permissible levels). A Fund's obligation to satisfy
margin calls may require the Fund to sell securities at an inappropriate time.

TECHNIQUES INVOLVING LEVERAGE

ALL FUNDS. Utilization of leveraging involves special risks and may involve
speculative investment techniques. The Funds may borrow for other than
temporary or emergency purposes, lend their securities, enter reverse repurchase
agreements, and purchase securities on a when-issued or forward commitment
basis. In addition, certain funds may engage in dollar roll transactions and
Intermediate Government Income Fund may purchase securities on margin 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.

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

<PAGE>

REPURCHASE AGREEMENTS, SECURITIES LENDING, REVERSE REPURCHASE
AGREEMENTS, WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS
AND DOLLAR ROLL TRANSACTIONS

A Fund's use of repurchase agreements, securities lending, reverse repurchase
agreements and forward commitments (including "dollar roll" transactions)
entails certain risks not associated with direct investments in securities. For
instance, in the event that bankruptcy or similar proceedings were commenced
against a counterparty while these transactions remained open or a counterparty
defaulted on its obligations, the Fund might suffer a loss. Failure by the
other party to deliver a security purchased by the Fund may result in a missed
opportunity to make an alternative investment. The Advisers monitor the
creditworthiness of counterparties to these transactions and intend to enter
into these transactions only when they believe the counterparties present
minimal credit risks and the income to be earned from the transaction justifies
the attendant risks. Counterparty insolvency risk with respect to repurchase
agreements is reduced by favorable insolvency laws that allow the Fund, among
other things, to liquidate 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 (EXCEPT TREASURY FUND). 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 arrange the loans. Schroder U.S. Smaller Companies Portfolio will not lend
portfolio securities in excess of 25% of the value of the Portfolio's total
assets. No other Fund will lend portfolio securities in excess of 33 1/3
percent of the value of the Fund's total assets.

REVERSE REPURCHASE AGREEMENTS - ALL 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.

<PAGE>

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 Funds net asset value per share.

DOLLAR ROLL TRANSACTIONS - FIXED INCOME FUNDS AND BALANCED FUNDS. A Fund may
enter into "dollar roll" transactions wherein the Fund sells fixed income
securities, typically mortgage-backed securities, and makes a commitment to
purchase similar, but not identical, securities at a later date from the same
party. Like a forward commitment, during the roll period no payment is made for
the securities purchased and no interest or principal payments on the security
accrue to the purchaser, but the Fund assumes the risk of ownership. A Fund is
compensated for entering into dollar roll transactions by the difference between
the current sales price and the forward price for the future purchase, as well
as by the interest earned on the cash proceeds of the initial sale. Like other
when-issued securities or firm commitment agreements, dollar roll transactions
involve the risk that the market value of the securities sold by the Fund may
decline below the price at which a Fund is committed to purchase similar
securities. In the event the buyer of securities under a dollar roll
transaction becomes insolvent, the Funds use of the proceeds of the transaction
may be restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Funds obligation to repurchase the securities.
The Funds will engage in roll transactions for the purpose of acquiring
securities for its portfolio and not for investment leverage. Each Fund will
limit its obligations on dollar roll transactions to 35 percent of the Fund's
net assets.

SWAP AGREEMENTS

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

<PAGE>

exceeds an agreed upon level; the purchaser of an interest rate floor has the
right to receive payments to the extent a specified interest rate falls below an
agreed upon level. A collar entitles the purchaser to receive payments to the
extent a specified interest rate falls outside an agreed upon range.

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

MUNICIPAL SECURITIES

MUNICIPAL MONEY MARKET FUND, TAX-EXEMPT FIXED INCOME FUNDS. The municipal
securities in which the Funds may invest include municipal bonds, notes and
leases. Municipal securities may be zero-coupon securities. Yields on
municipal securities are dependent on a variety of factors, including the
general conditions of the municipal security markets and the fixed income
markets in general, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The achievement of a Fund's investment
objective is dependent in part on the continuing ability of the issuers of
municipal securities in which the Fund invests to meet their obligations for the
payment of principal and interest when due.

MUNICIPAL BONDS. Municipal bonds can be classified as either "general
obligation" bonds or "revenue" bonds. General obligation bonds are secured by a
municipality's pledge of its full faith, credit and taxing power for the payment
of principal and interest. Revenue bonds are usually payable only from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other tax, but not from general
tax revenues. Municipal bonds may also be "moral obligation" bonds, which may
be issued by special purpose public authorities. If the issuer is unable to
meet its obligations under the bonds from current revenues, it may draw on a
reserve fund or other resources (but without having a legal obligation to do
so).

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

MUNICIPAL NOTES AND LEASES. Municipal notes, which may be either general
obligation or revenue securities, are intended to fulfill the short-term capital
needs of the issuer and generally have original maturities not exceeding one
year. They include tax anticipation notes, revenue anticipation notes (which
generally are issued in anticipation of various seasonal revenues), bond
anticipation notes, construction loan notes and tax-exempt commercial paper.
Municipal leases, which may take the form of a lease or an installment purchase
or conditional sale contract, are issued by state and local governments and
authorities to acquire a wide variety of equipment and facilities such as fire
and sanitation vehicles, telecommunications equipment and other capital assets.
Municipal leases frequently have special risks not normally associated with
general obligation or revenue bonds. Lease and installment purchase or
conditional sale contracts (which normally provide for title to the leased
assets to pass eventually to the government issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting the
consitutional and statuory requirements for the issuance of debt. The
debt-issuance limitations of many state constitutions and statutes are deemed to
be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis.

<PAGE>

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

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

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

SHORT SALES

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

Short sales that are not made "against the box" create opportunities to increase
the Fund's return but, at the same time, involve special risk considerations and
may be considered a speculative technique. Since the Fund in effect profits
from a decline in the price of the securities sold short without the need to
invest the full purchase price of the securities on the date of the short sale,
the Fund's net asset value per share, will tend to increase more when the
securities it has sold short decrease in value, and to decrease more when the
securities it has sold short increase in value, than would otherwise be the case
if it had not engaged in such short sales. Short sales theoretically involve
unlimited loss potential, as the market price of securities sold short may
continuously increase, although a Fund may mitigate such losses by replacing the
securities sold short before the market price has increased significantly.
Under adverse market conditions a Fund might have difficulty purchasing
securities to meet its short sale delivery obligations and might have to sell
portfolio securities to raise the capital necessary to meet its short sale
obligations at a time when fundamental investment considerations would not favor
those sales. See "Appendix A - Techniques Involving Leverage."

<PAGE>

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

MORTGAGE-BACKED SECURITIES

MONEY MARKET FUNDS, 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 of mortgages. Mortgage servicers impose qualification
standards for local lending institutions which originate mortgages for the pools
as well as credit standards and underwriting criteria for individual mortgages
included in the pools. In addition, many mortgages included in pools are
insured through private mortgage insurance companies.

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

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

As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of
fixed-rate 30-year mortgages, common industry practice is to

<PAGE>

assume that prepayments will result in a 12-year average life. Pools of
mortgages with other maturities or different characteristics will have varying
assumptions for average life. The assumed average life of pools of mortgages
having terms of less than 30 years is less than 12 years, but typically not less
than 5 years.

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

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

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

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

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

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

<PAGE>

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, 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

<PAGE>

to receive all or a portion of the principal, but none of the interest (the "PO"
class). Currently, no fund may purchase IOs or POs.

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

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

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

A Fund may enter into foreign currency forward contracts or currency futures or
options contracts for the purchase or sale of foreign currency to "lock in" the
U.S. dollar price of the securities denominated in a foreign currency or the
U.S. dollar value of interest and dividends to be paid on such securities, or to
hedge against the possibility that the currency of a foreign country in which a
Fund has investments may suffer a decline against the U.S. dollar. Like foreign
exchange contracts and foreign currency forward contracts, these instruments are
often referred to as derivatives, which may be defined as financial instruments
whose performance is derived, at least in part, from the performance of another
asset (such as a security, currency or an index of securities. The Funds have
no present intention to enter into currency futures or options contracts but may
do so in the future. A forward currency contract is an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. This method of attempting to hedge the value of a
Funds portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. Although the
strategy of engaging in foreign currency transactions could reduce the risk of
loss due to a decline in the value of the hedged currency, it could also limit
the potential gain from an increase in the value of the currency. No Fund
intends to maintain a net exposure to such contracts where the fulfillment of
the Funds obligations under such contracts would obligate the Fund to deliver an
amount of foreign currency in excess of the value of the Funds portfolio
securities or other assets denominated in that currency. A Fund will not enter
into these contracts for speculative pur-

<PAGE>

poses and will not enter into non-hedging currency contracts. These contracts
involve a risk of loss if the Adviser fails to predict currency values
correctly.

FUTURES CONTRACTS AND OPTIONS
STABLE INCOME FUND, INTERMEDIATE GOVERNMENT INCOME FUND, DIVERSIFIED BOND FUND,
BALANCED FUNDS, INDEX FUND, SMALL CAP OPPORTUNITIES 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. These instruments are
often referred to as "derivatives," which may be defined as financial
instruments whose performance is derived, at least in part, from the performance
of another asset (such as a security, currency or an index of securities. 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 Funds 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 Funds total
assets.

RISK CONSIDERATIONS. The Funds 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 Advisers
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 Funds ability to limit exposures
by closing its positions; (5) the possible need to defer closing out of certain
options, futures contracts and related options to avoid adverse tax
consequences; and (6) the potential for unlimited loss when investing in futures
contracts or writing options for which an offsetting position is not held.

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

There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out a futures position or that a counterparty in an over-the-
counter option transaction will be able to perform its obligations. There are a
limited number of options on interest rate futures contracts and exchange traded
options contracts on fixed income securities. Accordingly, hedging transactions
involving these instruments may entail "cross-hedging." As an example, a Fund
may wish to hedge existing holdings of mortgage-backed securities, but no listed
options may exist on those securities. In that event, the Adviser may attempt
to hedge the Funds 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. Schroder U.S.

<PAGE>

Smaller Companies Portfolio may purchase a call or put only if, after such
purchase, the value of all put and call options held by the Portfolio would not
exceed 5% of the Portfolios total assets. No other 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 Funds 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
Funds 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 Funds 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. In
addition to the Funds listed at the beginning of this section, "Futures
Contracts and Options," a Fund using the Index Fund investment style may invest
in index futures contracts to a limited extent.

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

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

<PAGE>

READY CASH INVESTMENT FUND
EXCHANGE SHARES

PROSPECTUS

October 1, 1996

- --------------------------------------------------------------------------------
Norwest Advantage Funds (the "Trust") is registered as an open-end management
investment company. This Prospectus offers Exchange Shares of Ready Cash
Investment Fund (the "Fund"), a separate diversified money market portfolio of
the Trust.

THE FUND seeks to provide high current income to the extent consistent with
the preservation of capital and the maintenance of liquidity by investing
in a broad spectrum of high quality money market instruments.

This Prospectus sets forth concisely the information concerning the Trust and
the Fund that a prospective investor should know before investing. The Trust has
filed with the Securities and Exchange Commission (the "SEC") a Statement of
Additional Information ("SAI") dated October 1, 1996, as may be amended from
time to time, which contains more detailed information about the Trust and the
Fund and is incorporated into this Prospectus by reference. An investor may
obtain a copy of the SAI without charge by contacting the Trust's distributor,
Forum Financial Services, Inc., at Two Portland Square, Portland, Maine 04010 or
by calling 207-879-1900. Investors should read this Prospectus and retain it for
future reference.

- --------------------------------------------------------------------------------

TABLE OF CONTENTS

1. Prospectus Summary. . . . . . . . . 2 6. Redemptions of Shares. . . . 15
2. Financial Highlights. . . . . . . . 4 7. Exchanges. . . . . . . . . . 17
3. Investment Objective and Policies . 4 8. Dividends and Tax Matters. . 17
4. Management. . . . . . . . . . . . . 9 9. Other Information. . . . . . 18
5. Purchases of Shares . . . . . . . . 11

- --------------------------------------------------------------------------------

AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO ASSURANCE THAT THE
FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

1. PROSPECTUS SUMMARY

HIGHLIGHTS OF THE FUND

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

INVESTMENT OBJECTIVE AND POLICIES. The Fund seeks to provide high current income
to the extent consistent with the preservation of capital and the maintenance of
liquidity. The Fund invests in a broad spectrum of high quality money market
instruments of United States and foreign issuers. See "Investment Objective and
Policies".

INVESTMENT ADVISER. The Fund's investment adviser (the "Adviser") is Norwest
Investment Management, a part of Norwest Bank Minnesota, N.A. ("Norwest"). The
Adviser provides investment advice to various institutions, pension plans and
other accounts and, as of June 30, 1996, managed assets totaling approximately
$22 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."

MANAGEMENT AND ADMINISTRATION. The manager of the Trust and distributor of its
shares is Forum Financial Services, Inc. ("FFSI"), a registered broker-dealer
and member of the National Association of Securities Dealers, Inc. Forum
Administrative Services, Inc. ("FAS") provides administrative services for the
Fund. See "Management - Management, Administration and Distribution Services."

SHARES OF THE FUND. This prospectus offers exchange class shares ("Exchange
Shares") of the Fund. The Fund offers two other separate classes of shares:
investor class shares ("Investor Shares") and institutional class shares
("Institutional Shares"). Investor and Institutional Shares are offered by
separate prospectuses. Shares of each class of the Fund have identical interests
in the investment portfolio of the Fund and, with certain exceptions, have the
same rights. See "Other Information - The Trust and Its Shares."

PURCHASES OF SHARES. The minimum initial investment in Exchange Shares is
$1,000. The minimum subsequent investment is $100. Exchange Shares may be
purchased only through an exchange privilege available to shareholders of B
class shares of certain funds of the Trust ("B Shares") and are offered at a
price equal to their net asset value on each business day of the Fund solely to
those shareholders in exchange for B Shares held by the shareholders. Exchange
Shares are subject to a contingent deferred sales charge imposed on most
redemptions made within a certain number of years of the purchase of the B
Shares that were first purchased by the shareholder and then exchanged, either
directly or indirectly through a series of exchanges, for the Exchange Shares
(the "original B Shares"). Exchange Shares pay a distribution services fee at an
annual rate not to exceed 0.75%, and a maintenance fee in an amount equal to
0.25%, of the Exchange Shares' average daily net assets. Exchange Shares
automatically convert to Investor Shares of the Fund a certain number of years
after the end of the calendar month in which the original B Shares were
purchased. See "Purchases of Shares - Distribution Arrangements."

REDEMPTIONS. Exchange Shares may be redeemed at their net asset value on each
business day of the Fund but are subject to any applicable contingent deferred
sales charge. See "Redemptions of Shares."

EXCHANGES. Shareholders may exchange Exchange Shares for B Shares of certain
other funds of the Trust. See "Exchanges."

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

CERTAIN INVESTMENT CONSIDERATIONS AND RISK FACTORS. There can be no assurance
that the Fund will achieve its investment objective, nor can there be any
assurance that the Fund will maintain a stable net asset value. An investment
in the Fund involves certain risks, depending on the types of investments
made and the types of investment techniques employed. All investments made by
the Fund entail some risk. Certain investments and

<PAGE>

investment techniques, however, entail additional risks, such as investments
in foreign issuers. See "Investment Objective and Policies - Investment
Policies - Foreign Instruments." The amount of income earned by the Fund will
tend to vary with changes in prevailing interest rates. For more details
about the Fund, its investments and their risks, see "Investment Objective
and Policies."

EXPENSE INFORMATION

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

SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum sales charge imposed on purchases
(as a percentage of offering price) Zero
Maximum deferred sales charge
(as a percentage of the lesser of original
purchase price or redemption proceeds) 4.0%
Exchange Fee Zero

ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets after applicable fee
waivers and expense reimbursements)

Investment Advisory Fees 0.35%
Rule 12b-1 Fees 0.00%
Other Expenses(3) 1.22%
----
Total Operating Expenses 1.57%

(1) The maximum 4.0% contingent deferred sales charge imposed on Exchange Shares
applies to redemptions of Exchange Shares that were purchased in exchange of
original B Shares of certain funds of the Trust. The maximum contingent deferred
sales charge imposed on B Shares of other funds of the Trust is 4.0%. The charge
declines from its maximum after the first year following the purchase of the
original B Shares and declines continuously thereafter, reaching zero after a
certain number of years. The amount of the contingent deferred sales change
applicable to any Exchange Share will depend upon the deferred sales charge
schedule applicable to the original B Shares which is contained in the
applicable fund's prospectus. See "Purchases of Shares - Distribution
Arrangements."

(2) For a further description of the various expenses associated with the Fund's
Exchange Shares, see "Management." Expenses associated with Institutional and
Investor Shares of the Fund differ from those of Exchange Shares listed in the
table. The amounts of expenses are based on amounts incurred during the Fund's
most recent fiscal year ended May 31, 1996. Other Expenses include transfer
agency and custodial fees payable to Norwest at a combined annual rate of up to
0.30% of the Fund's average daily net assets attributable to Exchange Shares.
Absent expense reimbursements and fee waivers, the expenses of Exchange Shares
of the Fund would have been: Investment Advisory Fees, 0.36%; Rule 12b-1 Fees,
1.00%; Other Expenses, 6.88%; and Total Operating Expenses, 8.24%. Expense
reimbursements and fee waivers are voluntary and may be reduced or eliminated at
any time.

(3) Long-term shareholders of Exchange 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.

<PAGE>

EXAMPLE

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Assuming redemption at the end
of the period $56 $80 $106 --
Assuming no redemption $16 $50 $86 --

The example is based on the expenses listed in the "Annual Operating Expenses"
table. The example assumes deduction of the maximum contingent deferred sales
charge applicable to a redemption at the end of the period and the conversion of
Exchange Shares to Investor Shares at the end of seven years and utilizes a
contingent deferred sales charge schedule of: 4.0% during the first year after
purchase of the original B Shares, 3.0% during the second and third years, 2.0%
during the fourth and fifth years, 1.0% during the sixth year and zero after
seven years. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RETURN. ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS
THAN INDICATED.

2. FINANCIAL HIGHLIGHTS

The following table provides financial highlights for the Fund. This
information represents selected data for a single Exchange Share outstanding
for the periods shown. This information was audited by KPMG Peat Marwick LLP,
independent auditors. The Fund's financial statements for the fiscal year
ended May 31, 1996, and independent auditors' report thereon are contained in
the Fund's Annual Report and are incorporated by reference into the SAI. The
Annual Report may be obtained by shareholders upon request without charge.

Year Ended May 31,
------------------
1996 1995 1994(a)
---- ---- ----

Beginning Net Asset Value per Share $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.043 0.038 0.001
Dividends from Net Investment Income (0.043) (0.038) (0.001)
------- ------- -------
Ending Net Asset Value per Share $ 1.00 $ 1.00 $ 1.00
------- ------- -------
------- ------- -------
Ratios to Average Net Assets:
Expenses(b) 1.57% 1.57% 1.53%(c)
Net Investment Income 4.32% 3.62% 2.48%(c)
Total Return 4.38% 3.69% 2.51%(c)
Net Assets at End of Period (000s omitted) $ 129 $ 160 $ 151

(a) The Fund commenced the offering of Exchange Shares on May 9, 1994.
(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratio
of expenses to average net assets would have been:
Expenses 8.24% 6.32% 1.85%(c)
(c) Annualized.

3. INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide high current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity. There can be no assurance that the Fund will achieve its investment
objective or maintain a stable net asset value.

<PAGE>

INVESTMENT POLICIES

The Fund invests only in high quality, short-term money market instruments that
are determined by the Adviser, pursuant to procedures adopted by the Trust's
Board of Trustees (the "Board"), to be eligible for purchase and to present
minimal credit risks. The Fund will 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 ("1940 Act")) and
will maintain a dollar-weighted average portfolio maturity of 90 days or less.
Securities with ultimate maturities of greater than 397 days may be purchased in
accordance with Rule 2a-7. Under that Rule, only those long-term instruments
that have demand features which comply with certain requirements and certain
variable rate U.S. Government Securities, as described below, may be purchased.
The securities in which the Fund may invest may have fixed, variable or floating
rates of interest.

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% 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% of its net assets in illiquid securities,
including repurchase agreements not entitling the Fund to payment within seven
days. Under the supervision of the Board, the Adviser determines and monitors
the liquidity of portfolio securities.

As used herein, 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, pursuant to guidelines adopted by the Board, to be of comparable
quality. The Fund will invest at least 95% of its total assets in securities in
the highest rating category as determined pursuant to Rule 2a-7. A description
of the rating categories of Standard & Poor's, Moody's Investors Service, and
certain other NRSROs is contained in the SAI.

The market value of the interest-bearing debt securities held by the Fund 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; i.e., a decline in interest
rates produces an increase in market value, while an increase in 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. In addition, 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. Obligations of issuers of debt securities, including municipal
securities, are also subject to the provisions of bankruptcy, insolvency and
other laws affecting the rights and remedies of creditors. The possibility
exists, therefore, that, as a result of bankruptcy, litigation or other
conditions, the ability of any issuer to pay, when due, the principal of and
interest on its debt securities may be materially affected.

Although the Fund only invests in high quality money market instruments, an
investment in the Fund is subject to risk even if all securities in the Fund's
portfolio are paid in full at maturity. All money market instruments, including
U.S. Government Securities, can change in value as a result of changes in
interest rates and/or the issuer's actual or perceived creditworthiness.

The Fund invests in a broad spectrum of high quality money market instruments of
United States and foreign issuers.

OBLIGATIONS OF FINANCIAL INSTITUTIONS. The Fund may invest in obligations of
financial institutions. These include negotiable certificates of deposit, bank
notes, 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.

<PAGE>

UNITED STATES GOVERNMENT SECURITIES. The U.S. Government Securities in which the
Fund may invest include U.S. Treasury Securities and obligations issued or
guaranteed by U.S. Government agencies and instrumentalities that are 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 Fund 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.

U.S. GOVERNMENT AND OTHER RELATED ZERO-COUPON SECURITIES. The Fund may invest in
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury under the Treasury's Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. In addition,
the Fund 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"). The Fund
will not invest more than 35% of its total assets in zero-coupon securities
other than those issued through the STRIPS program.

FOREIGN GOVERNMENT SECURITIES. The Fund may invest in U.S. dollar denominated
obligations issued or guaranteed by the governments of countries which the
Adviser believes do not present undue risk or of those countries' political

subdivisions, agencies or instrumentalities. The Fund may also invest in the
obligations of supranational organizations such as the International Bank for
Reconstruction and Development (the "World Bank") and the Inter-American
Development Bank.

<PAGE>

MUNICIPAL SECURITIES. The Fund may invest in obligations of the states,
territories or possessions of the United States and their subdivisions,
authorities and corporations. These obligations may pay interest that is or is
not exempt from Federal income taxation.

CORPORATE DEBT SECURITIES. The Fund may invest in corporate debt obligations of
domestic or foreign issuers, including commercial paper (short-term promissory
notes) issued by companies to finance their, or their affiliates', current
obligations and corporate notes and bonds. The Fund may invest in privately
issued commercial paper or other corporate instruments which are restricted as
to disposition under the Federal securities laws. Any sale of this paper may not
be made absent registration under the Securities Act of 1933 or the availability
of an appropriate exemption therefrom. Some of these restricted securities,
however, are eligible for resale to institutional investors, and accordingly, a
liquid market may exist for them. Pursuant to guidelines adopted by the Board,
the Adviser will determine whether each such investment is liquid.

PARTICIPATION INTERESTS. The Fund may purchase from financial institutions
participations in loans or securities. A participation interest gives the Fund
an undivided interest in the loan or security in the proportion that the Fund's
interest bears to the total principal amount of the security. For certain
participation interests the Fund will have the right to demand payment, on not
more than seven days' notice, for all or a part of the Fund's participation
interest. The Fund intends to exercise any demand rights it may have only upon
default under the terms of the loan or security, to provide liquidity or to
maintain or improve the quality of the Fund's investment portfolio. The Fund
will not invest more than 10% of its total assets in participation interests in
which the Fund does not have demand rights.

FOREIGN INSTRUMENTS. The Fund's investments in securities of foreign entities
may involve certain risks that are different from investments in domestic
securities. These risks may include unfavorable political and economic
developments; the imposition of foreign withholding taxes on interest income
payable on these securities; the seizure or nationalization of foreign deposits;
the existence of accounting, auditing and financial reporting standards which
are not comparable to those of U.S. issuers; and the establishment of exchange
controls, interest limitations or other foreign governmental restrictions which
affect adversely the payment of principal and interest on these securities. In
addition, there may be less public information available about foreign issuers.
The Adviser considers these factors when making investments in foreign
instruments. The Fund has no limit on the amount of their foreign assets which
may be invested in any one type of foreign instrument or in any foreign country;
however, to the extent the Fund concentrates its assets in a foreign country,
these risks will be increased.

ADDITIONAL INVESTMENT POLICIES

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

The Fund may enter into repurchase agreements, may enter into reverse
repurchase agreements (which are considered borrowings), may lend its
securities and may purchase securities on a forward commitment basis as
described below. As a fundamental policy, the Fund may borrow money for
temporary or emergency purposes (including the meeting of redemption
requests), but not in excess of 33 1/3% of the value of the Fund's total
assets. Borrowing for other than meeting redemption requests will not exceed
5% of the value of the Fund's net assets. The Fund is permitted to invest in
other investment companies which intend to comply with Rule 2a-7 and have
substantially similar investment objectives and policies. The Fund's use of
repurchase agreements, reverse repurchase agreements, securities lending and
forward commitments 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 in these
transactions or a counterparty defaulted on its obligations, the Fund might
suffer a loss. Failure by the other party to deliver a security purchased

<PAGE>

by the Fund may result in a missed opportunity to make an alternative
investment. The Adviser monitors the creditworthiness of counterparties to
these transactions and intends to enter into these transactions only when it
believes the counterparties present minimal credit risks and the income to be
earned from the transaction justifies the attendant risks.

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 with a
market value at all times at least equal to the amount of the Fund's forward
commitment and reverse repurchase agreement obligations in accordance with SEC
guidelines. As a result of entering forward commitments and reverse repurchase
agreements, as well as lending their portfolio securities, the Fund is exposed
to greater potential fluctuations in the value of its assets and net asset value
per share.

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which are
transactions in which the 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. The Trust's custodian maintains possession of the
underlying collateral, which is maintained at not less than 100% of the
repurchase price.

LENDING OF PORTFOLIO SECURITIES. The Fund may lend securities from its portfolio
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. The Fund receives interest in respect of securities
loans from the borrower or from investing cash collateral. The Fund may pay fees
to arrange the loans. The Fund may not lend portfolio securities in excess of 33
1/3% of the value of the Fund's total assets. Generally, the lending of
portfolio securities involves risks similar to, but slightly greater than, those
involved in entering into repurchase agreements.

FORWARD COMMITMENTS. The Fund may purchase securities on a when-issued or
delayed delivery basis (forward commitments). Securities so purchased are
subject to market price fluctuation from the time of purchase but no interest on
the securities accrues to the Fund until delivery and payment take place.
Accordingly, the value of the securities on the delivery date may be more or
less than the purchase price. Forward commitments will be entered into only when
the Fund has the intention of actually acquiring the securities, but the Fund
may sell the securities before the settlement date if deemed advisable. In
addition, forward commitments will not be entered into if the aggregate of the
commitments exceeds 15% of the value of the Fund's total assets.

REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements, which are 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 specified repurchase date and interest payments are calculated
daily, often based upon the prevailing overnight repurchase rate. The Fund will
use the proceeds of reverse repurchase agreements only to fund redemptions or to
make investments which generally 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.

VARIABLE AND FLOATING RATE SECURITIES. The securities in which the Fund invest
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
interest paid on these securities is a function primarily of the indexes or
market rates upon which the interest rate adjustments are based. 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 the
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.

There may not be an active secondary market for any particular floating or
variable rate instrument which could make it difficult for the Fund to dispose
of the instrument if the issuer defaulted on its repayment obligation during

<PAGE>

periods that the Fund is not entitled to exercise any demand rights it may have.
The Fund could, for this or other reasons, suffer a loss with respect to an
instrument. The Adviser monitors the liquidity of the Fund's investment in
variable and floating rate instruments, but there can be no guarantee that an
active secondary market will exist.

The Fund also 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 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.

MORTGAGE- AND ASSET-BACKED SECURITIES. The Fund may purchase fixed or adjustable
rate mortgage or other asset-backed securities, including securities backed by
automobile loans, equipment leases or credit card receivables. These securities
may be U.S. Government Securities or privately issued and directly or indirectly
represent a participation in, or are secured by and payable from, fixed or
adjustable rate mortgage or other loans which may be secured by real estate or
other assets. Unlike traditional debt instruments, payments on these securities
may include both interest and a partial payment of principal. Prepayments of the
principal of underlying loans may shorten the effective maturities of these
securities. Some adjustable rate securities (or the underlying loans) are
subject to caps or floors that limit the maximum change in interest rate during
a specified period or over the life of the security.

ZERO-COUPON SECURITIES. The Fund may invest in zero-coupon securities (such as
Treasury bills), which are securities that are sold at original issue discount
and pay no interest to holders prior to maturity, but the Fund must include a
portion of the original issue discount of the security as income. Because the
Fund distributes substantially all of its net investment income, the Fund 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. Zero-coupon securities may be
subject to greater fluctuation of market value than the other securities in
which the Fund may invest.

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 Fund and the
Trust. The Board consists of seven persons. The SAI contains general
background information about the Trustees and officers of the Trust.

ADVISER

Subject to the general control of the Board, Norwest Investment Management makes
investment decisions for the Fund and continuously reviews, supervises and
administers the Fund's investment program. Norwest Investment Management 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
June 30, 1996, Norwest Corporation was the 12th 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 $22
billion.

Norwest Investment Management serves as investment adviser of the Fund pursuant
to an Investment Advisory Agreement between Norwest and the Trust. For the
Adviser's services under the Investment Advisory Agreement,
<PAGE>

Norwest receives from the Fund an advisory fee at an annual rate of 0.40% of
the average daily net assets for the first $300 million of net assets of the
Fund, 0.36% of the average daily net assets for the next $400 million of the
Fund's net assets, and 0.32% of the average daily net assets of the Fund's
remaining net assets.

MANAGEMENT, ADMINISTRATION AND DISTRIBUTION SERVICES

FFSI provides management services for the Fund and pursuant to a Management
Agreement with the Trust, supervises the overall management of the Trust
(including the trust's receipt of services for which the Trust is obligated to
pay). In this capacity FFSI provides the Trust with general office facilities,
provides persons satisfactory to the Board to serve as officers of the Trust and
oversees the performance of administrative and professional services rendered to
the Trust by others, including the Trust's custodian, transfer agents, dividend
disbursing agent, and administrator, as well as accountants, auditors, legal
counsel and others. Pursuant to an Administration Agreement with the Trust FAS
is responsible for performing certain administrative services necessary for the
Trust's operations with respect to the Fund including, but not limited to (i)
preparing and printing updates of the Trust's registration statement,
prospectuses and statements of additional information, the Trust's tax returns,
and reports to its shareholders, the SEC and state and other securities
administrators, (ii) preparing proxy and information statements and any other
communications to shareholders, (iii) monitoring the sale of shares and ensuring
that such shares are properly and duly registered with the SEC and applicable
state and other securities commissions, and (iv) determining the amount of and
supervising the declaration of dividends and other distributions to
shareholders.

The management and administrative fees payable to FFSI and FAS, respectively, by
the Trust with respect to the Fund are based on the average daily net assets of
the Fund at the rate of 0.10%.

FFSI also acts as the distributor of Exchange Shares pursuant to a Distribution
Services Agreement with the Trust. As authorized by a distribution plan and
pursuant to the Distribution Services Agreement, FFSI receives a distribution
services fee as compensation for its distribution expenses and a maintenance fee
for its or certain broker-dealer's shareholder services. See "Purchase of
Shares." From its own resources, FFSI may pay a fee to broker-dealers or other
persons for distribution or other services related to the Funds. For further
information about the distribution services agreement and the distribution plan,
including the fees payable thereunder, see ""Purchases of Shares - Distribution
Arrangements."

Pursuant to a separate agreement, Forum Financial Corp. ("FFC") provides
portfolio accounting services to the Fund. FFSI, FAS and FFC are members of the
Forum Financial Group of companies which together provide a full range of
services to the investment company and financial services industry. As of
October 1, 1996, FFSI, FAS and FFC were controlled by John Y. Keffer, President
and Chairman of the Trust.

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 for each shareholder of record an
account (unless such accounts are maintained by sub-transfer agents or
processing agents) to which all shares purchased are credited, together with any
distributions that are reinvested in additional shares. The Transfer Agent also
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 FFSI, who agree to comply with the terms of
the Transfer Agency Agreement. Sub-transfer agents and processing agents may be
"Processing Organizations" as described under "Purchases of Shares -
<PAGE>

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 Fund to the Transfer Agent pursuant to
the Transfer Agency Agreement. The Transfer Agent also serves as the Trust's
custodian and, for its custodial and transfer agency services, is compensated
at an aggregate annual rate of up to 0.30% of the Fund's average daily net
assets attributable to Exchange Shares.

EXPENSES OF THE FUND

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 Fund's expenses include Trust expenses attributable to the Fund,
which are allocated to the Fund, and expenses not specifically attributable to
the Fund, which are allocated among the Fund and all other funds of the Trust in
proportion to their average net assets. Norwest, FFSI and the Transfer Agent
may each elect to waive (or continue to waive) all or a portion of their fees,
which are accrued daily and paid monthly. Any such waivers will have the effect
of increasing the Fund's performance for the period during which the waiver is
in effect. No fee waivers may be recouped at a later date.

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

5. PURCHASES OF SHARES

GENERAL INFORMATION

Exchange Shares are continuously sold only through an exchange privilege
available to shareholders of B Shares of certain other portfolios of the Trust
at a price equal to their net asset value next-determined after acceptance of an
order on every weekday except customary national business holidays and Good
Friday ("Fund Business Day").

Investments in the Fund may be made either through certain financial
institutions or by an investor directly. An investor who invests in the Fund
directly will be the shareholder of record. All transactions in Exchange 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. There is a $1,000 minimum for initial
purchases and a $100 minimum for subsequent purchases of Exchange Shares. The
Fund may in its discretion waive the investment minimums. Shareholders who elect
the Directed Dividend Option are not subject to the initial investment minimum.
See "Dividends and Tax Matters."

An investor's order will not be accepted or invested by the Fund during the
period before the Fund's receipt of Federal funds. Fund shares become entitled
to receive dividends on the Fund Business Day the order is accepted.

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

<PAGE>

PURCHASE PROCEDURES

Investors who exchange B shares for Exchange Shares will have an account opened
for them automatically.

To participate in shareholder services not referenced on the shareholder's
original account application form and to change information on a shareholder's
account (such as addresses), investors or existing shareholders should contact
the Trust at the following address:

Norwest Advantage Funds
Ready Cash Investment Fund
Norwest Bank Minnesota, N.A.
Transfer Agent
733 Marquette Avenue
Minneapolis, MN 55479-0040

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

BY MAIL. Exchange purchases may be accomplished by written instructions to the
Transfer Agent accompanied by any share certificate that may have been issued to
the shareholder to evidence the B Shares being exchanged. All written exchange
requests must be signed by the shareholder, and all certificates submitted for
exchange must be endorsed by the shareholder with signature guaranteed. See
"Redemptions of Shares - Other Redemption Matters."

BY TELEPHONE. Exchange purchases may be accomplished by telephone by any
shareholder of B Shares of the Fund of the Trust that has elected telephone
exchange privileges 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. See
"Redemptions of Shares - Other Redemption Matters."

THROUGH FINANCIAL INSTITUTIONS. Shares may be exchanged and redeemed through
certain broker-dealers, banks and other financial institutions ("Processing
Organizations"). The Transfer Agent, FFSI and their affiliates may be Processing
Organizations. Processing Organizations 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 the Fund
directly. These investors should acquaint themselves with their institution's
procedures and should read this Prospectus in conjunction with any materials and
information provided by their institution. Customers who purchase the Fund's
shares through a Processing Organization may or may not be the shareholder of
record and, subject to their institution's and the Fund's procedures, may have
Fund shares transferred into their name.

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
funds to be purchased and redeemed only through registered broker-dealers,
including the Fund's distributor.
<PAGE>

SUBSEQUENT EXCHANGES OF SHARES. Subsequent exchanges of B Shares of certain
other Funds for the Trust for Exchange Shares may be made by mailing
instructions, by telephone or through the shareholder's Processing Organization
as indicated above

INDIVIDUAL RETIREMENT ACCOUNTS

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

DISTRIBUTION ARRANGEMENTS

Exchange 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 Exchange
Shares, the Fund has adopted a distribution plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act providing for distribution payments at an annual rate
of no more than 0.75% of the average daily net assets of the Fund attributable
to the Exchange Shares (the "distribution services fee") by the Fund to FFSI, to
compensate FFSI for its distribution activities. The distribution payments due
to FFSI from the Exchange Shares comprise (i) the unpaid balance of, at the time
the Exchange shares are acquired, sales commissions equal to a certain
percentage of the amount received by the Fund for each original B Share
exchanged for the Exchange Shares (excluding reinvestment of dividends and
distributions) ("sales commissions") and (ii) an interest fee calculated by
applying the rate of 1% over the prime rate then reported in The Wall Street
Journal to the outstanding balance of uncovered distribution charges (as
described below). FFSI currently expects to pay sales commissions to each
broker-dealer at the time of sale of original B Shares of up to 4% of the
purchase price of

the original B Shares sold by the broker-dealer. No additional sales commissions
are due to FFSI at the time of an exchange of the original B Shares for Exchange
Shares.

Under the distribution services agreement between FFSI and the Trust, FFSI will
receive, in addition to the distribution services fee, all contingent deferred
sales charges due upon redemptions of Exchange Shares. The combined contingent
deferred sales charge and distribution services fee on Exchange Shares are
intended to finance the distribution of original B 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 FFSI to compensate
broker-dealers in connection with the sales of the shares. Proceeds from the
contingent deferred sales charge with respect to the Fund are paid to FFSI to
defray the expenses related to providing distribution-related services in
connection with the sales of original B Shares, such as the payment of
compensation to broker-dealers selling original B Shares. The distribution
services agreement provides that FFSI may spend the distribution services fees
it receives as it deems appropriate on any activities primarily intended to
result in the sale of those shares.

Under the Plan, the Fund will make distribution services fee payments to FFSI
only for periods during which there are outstanding uncovered distribution
charges attributable to the Fund. Uncovered distribution charges are calculated
daily and are equivalent on any given day to all sales commissions previously
due, less amounts received pursuant to the Plan, plus the interest fee to which
FFSI is entitled under the Plan, less all contingent deferred sales charges
previously paid to FFSI. At May 31, 1996, uncovered distribution expenses for
the Fund were $1,356 or approximately 0.10% of the Fund's net assets
attributable to Exchange Shares as of the same date.

The amount of distribution services fees and contingent deferred sales charge
payments received by FFSI with respect to the Fund is not related directly to
the amount of expenses incurred by FFSI in connection with providing
distribution services to the original B Shares and may be higher or lower than
those expenses. FFSI 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 FFSI exceed the
total expenses incurred by FFSI in distributing original B Shares. Total
expenses for this purpose include interest expenses, carrying charges or other
financing costs or allocations of FFSI's overhead; the Fund is not obligated to
reimburse FFSI for those
<PAGE>

expenses. The amount of contingent deferred sales charges paid to FFSI by the
Fund may affect the amount of (i) uncovered distribution charges calculated
under the Plan with respect to the Fund and (ii) the distribution services
fee payable to FFSI under the Plan with respect to the Fund.

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

The distribution services fee payable to FFSI by the Fund with respect to each
day is accrued on that day as a liability of the Fund with respect to the
Exchange Shares and as a result of the accrual reduces the net assets of the
Exchange Shares. However, the Fund does not accrue future distribution services
fees as a liability of the Fund with respect to the Exchange 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 the
Exchange Shares of the Fund, the Fund may, under certain circumstances, continue
to pay distribution services fees to FFSI (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 Exchange Shares, investors should consider that payments of
distribution services fees could continue until such time as there are no
uncovered distribution charges under the Plan attributable to the Fund.

Periods with a high level of sales of Exchange Shares 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 Exchange Shares 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 Exchange Shares during the next few years of the Fund's operations
coupled with the limitation on the amount of distribution services fee payable
by the Fund with respect to Exchange Shares during any fiscal year, would cause
a large portion of the distribution services fees attributable to a sale of the
Exchange Shares to be accrued and paid by the Fund to FFSI with respect to those
shares in fiscal years subsequent to the years in which those shares were sold.
The payment delay would in turn result in the incurrence and payment of
increased interest fees under the Plan.

In approving the Plan, the Board determined that there was a reasonable
likelihood that the Plan would benefit the Fund and its Exchange shareholders.
Information with respect to distribution services fees, maintenance fees and
other revenues and expenses of FFSI will be presented to the Board each year for
their consideration in connection with their deliberations as to the continuance
of the Plan with respect to the Fund. In its review of the Plan, the Board takes
into consideration the distribution and maintenance expenses incurred by the
Fund. The distribution services fee or maintenance fee of the Exchange Shares
will not be used to subsidize the provision of distribution services or
personal services with respect to any other shares of the Fund.

CONTINGENT DEFERRED SALES CHARGE. Exchange Shares which are redeemed within a
certain number of years of the purchase of the original B Shares will be subject
to contingent deferred sales charges applicable to the original B Shares as if
the original B Shares were being redeemed at the time of redemption of the
Exchange Shares. 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 the original B Shares and the redemption of the Exchange Shares.

The contingent deferred sales charge will be assessed on an amount equal to the
lesser of the cost of the original B Shares and the net asset value of the
Exchange Shares being redeemed at the time of redemption. Accordingly, no
<PAGE>

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 reinvestment of dividends or capital gains distributions.

Redemptions of shares will be effected in the manner that results in the
imposition of the lowest deferred sales charge. Redemptions with respect to a
shareholder's investment in the Fund will automatically be made first from any
Investor Shares in the Fund, second from Exchange Shares acquired pursuant to
reinvestment of dividends and distributions, third from Exchange Shares held for
longer than the time period for which a contingent deferred sales charge is
imposed on the original B Shares, and fourth from the longest outstanding
Exchange Shares held for less than that time period.

No contingent deferred sales charge is imposed on (i) redemptions of shares
acquired through the reinvestment of dividends and distributions, (ii)
involuntary redemptions by the Fund of shareholder accounts with low account
balances, (iii) redemptions of shares following the death or disability of a
shareholder if the Fund is notified within one year of the shareholder's death
or disability, (iv) redemptions to effect a distribution (other than a lump sum
distribution) from an IRA, Keogh plan or Section 403(b) custodial account or
from a qualified retirement plan and (v) by any registered investment adviser
with whom FFSI has entered into a Share purchase agreement and which is acting
on behalf of its fiduciary customer accounts. See the SAI for further
information.

CONVERSION FEATURE. After a certain number of years from the end of the
calendar month in which the shareholder's purchase order for the original B
Shares was accepted, the shareholder's Exchange Shares will automatically
convert to Investor Shares of the Fund. The conversion will be on the basis
of the relative net asset values of Investor Shares and Exchange Shares,
without the imposition of any sales load, fee or other charge. For purposes
of conversion to Investor Shares, Exchange Shares purchased through the
reinvestment of dividends and distributions paid in respect of Exchange
Shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Exchange Shares in the shareholder's account
(other than those in the sub-account) convert, an equal pro-rata portion of
those shares in the sub-account will also convert. The conversion is subject
to the continuing availability of certain opinions of counsel and 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 would occur,
and shares might continue to be subject to distribution services and
maintenance fees for an indefinite period.

6. REDEMPTIONS OF SHARES

GENERAL INFORMATION

Fund shares may be redeemed at their net asset value on any Fund Business Day
subject to a contingent deferred sales charge imposed on most redemptions made
within a certain number of years of purchase of the original B 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). Redeemed shares are not entitled to receive dividends declared on
or after the day the redemption becomes effective.

Normally, redemption proceeds are paid immediately, but in no event later than
seven days, following acceptance of a redemption order. Proceeds of redemption
requests (and exchanges), however, will not be paid unless any check to purchase
the shares being redeemed has been cleared by the shareholder's bank, which may
take up to 15 days. This delay may be avoided by paying for shares through wire
transfers. Unless otherwise indicated, redemption proceeds normally are paid by
check mailed to the shareholder's record address. The right of redemption may
not be suspended nor the payment dates postponed for more than seven days after
the tender of the shares to the Fund except when the New York Stock Exchange is
closed (or when trading thereon is restricted) for any reason other than its
customary weekend or holiday closings, for any period during which an emergency
exists as a result of which disposal by the Fund of its portfolio securities or
determination by the Fund of the value of its net assets is not reasonably
practicable and for such other periods as the SEC may permit to protect the
Fund's shareholders.
<PAGE>

REDEMPTION PROCEDURES

Shareholders who have invested through a Processing Organization may redeem
their shares through the Processing Organization as described above.
Shareholders who have invested directly in the Fund may redeem their shares as
described below. 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 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 "Redemptions of Shares - Other Redemption Matters."

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

OTHER REDEMPTION MATTERS

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, 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.

<PAGE>

7. EXCHANGES

Shareholders of Exchange Shares may exchange their shares for B Shares of
Stable Income Fund, Intermediate Government Income Fund, Income Fund, Total
Return Bond Fund, Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota
Tax-Free Fund, Income Equity Fund, ValuGrowth-Registered Trademark- Stock
Fund, Contrarian Stock Fund, Small Company Stock Fund and International Fund
of the Trust. Those shares are offered through separate prospectuses. It is
anticipated that the Trust may in the future create additional funds which
will offer B Shares that are exchangeable with Exchange Shares. Prospectuses
for these funds, as well as a current list of the Funds of the Trust that
offer shares exchangeable with Exchange Shares, can be obtained through FFSI
by contacting the Transfer Agent.

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

Exchange Shares may be exchanged without the payment of any contingent
deferred sales charge. B Shares acquired as a result of such exchange and
subsequently redeemed will nonetheless be subject to the contingent deferred
sales charge applicable to the Exchange Shares as if those shares were being
redeemed at that time. For purposes of computing both the contingent deferred
sales charge payable upon redemption of the B Shares and the time remaining
before the B Shares convert to Investor A Shares of that fund, the deferred
sales charge and the time remaining applicable to the Exchange Shares will
apply to the B Shares rather than the deferred sales charge and time
remaining that would otherwise apply. The deferred sales charge and time
remaining applicable to Exchange Shares will apply to new B Shares resulting
from both an initial and any subsequent exchanges.

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 the Fund if that fund's shares may
legally be sold in the shareholder's state of residence.

The Fund and Federal tax law treat an exchange as a redemption and a
simultaneous new 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 modified materially or terminated by the
Trust at any time upon 60 days' notice to shareholders. See "Additional Purchase
and Redemption Information" in the SAI.

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 "Redemptions of Shares - Other
Redemption Matters."

8. DIVIDENDS AND TAX MATTERS

DIVIDENDS

Dividends of the Fund's net investment income are declared daily and paid
monthly. Distributions of net capital gain, if any, realized by the Fund are
distributed annually. Dividends paid by the Fund with respect to each class of
<PAGE>

shares of the Fund will be calculated in the same manner at the same time on the
same day. The per share dividends on Exchange Shares will be lower than the per
share dividends on other classes of the Fund as a result of the distribution
services fees and maintenance fees applicable to B Shares.

Shareholders may choose to have dividends and distributions reinvested in
Exchange Shares of the Fund (the "Reinvestment Option") or to receive dividends
and distributions in cash (the "Cash 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 the Fund. Under the Reinvestment Option, all
dividends and distributions of the Fund are automatically invested in additional
shares of the Fund. All dividends and distributions are reinvested at the Fund's
net asset value as of the payment date of the dividend or distribution.
Shareholders are assigned this option unless the Cash Option is selected. Under
the Cash Option, all dividends and distributions are paid to the shareholder in
cash.

TAXES

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

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

Distributions of net long-term capital gain, if any, realized by the Fund are
taxable to the 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.

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

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. FFSI 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.

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 the Fund as of 3:00 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. The
Trust does not determine net asset value on the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving and
Christmas.

In order to maintain a stable net asset value per share of $1.00, the Fund's
portfolio securities are valued at their amortized cost. Amortized cost
valuation involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium. If the market
value of the a Fund's portfolio deviates more than 1/2 of 1% from the value
determined on the basis of amortized cost, the Board will consider whether any
action should be initiated to prevent any material dilutive effect on
shareholders.

PERFORMANCE INFORMATION

The Fund's performance may be quoted in advertising in terms of yield, which is
based on historical results and is not intended to indicate future performance.
The Fund's yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the Fund's share price. To calculate yield, the
Fund takes the interest income it earned from its portfolio of investments for a
7 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 7 day period
or loss.

The Fund's advertisements may reference ratings and rankings among similar
mutual funds by independent evaluators such as Morningstar, Lipper Analytical
Services, Inc. or IBC/Donoghue, Inc. In addition, the performance of the Fund
may be compared to recognized indices of market performance. The comparative
material found in the Fund's advertisements, sales literature or reports to
shareholders may contain performance ratings. This material is not to be
considered representative or indicative of future performance. All performance
information for the Fund is calculated on a class basis.

THE TRUST AND ITS SHARES

The Trust was originally organized under the name "Prime Value Funds, Inc." as a
Maryland corporation on August 29, 1986 and on July 30, 1993 was reorganized as
a Delaware business trust under the name "Norwest Funds." On October 1, 1995,
the Trust changed its name to "Norwest Advantage Funds." The Trust has an
unlimited number of authorized shares of beneficial interest. The Board may,
without shareholder approval, divide the authorized shares into an unlimited
number of separate portfolios or series (such as the Fund) and may divide
portfolios or series into classes of shares (such as Exchange Shares), and the
costs of doing so will be borne by the Trust. Currently the authorized shares of
the Trust are divided into twenty-eight separate series.

OTHER CLASSES OF SHARES. In addition to Exchange Shares, the Fund may create and
issue shares of other classes of securities. The Fund currently offers three
classes of shares: Institutional Shares, Investor Shares and Exchange Shares.
Institutional Shares are offered by separate prospectuses to investors who
invest a minimum of $100,000 without any sales charges or distribution services
or maintenance fees. Investor Shares are offered by separate prospectus to
investors who invest a minimum of $1,000 without any sales charges or
distribution services 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 Fund,
investors may contact the Transfer Agent at 612-667-8833 or 800-338-1348.
Investors may also contact their Norwest sales representative or the Fund's
distributor to obtain information about the other classes. Sales personnel of
broker-dealers and other financial institutions selling the Fund's shares may
receive differing compensation for selling Exchange, Investor and Institutional
Shares.
<PAGE>

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

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

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

<PAGE>

NORWEST ADVANTAGE FUNDS

STATEMENT OF ADDITIONAL INFORMATION

OCTOBER 1, 1996

CASH INVESTMENT FUND CONSERVATIVE BALANCED FUND
READY CASH INVESTMENT FUND MODERATE BALANCED FUND
U.S. GOVERNMENT FUND GROWTH BALANCED FUND
TREASURY FUND INCOME EQUITY FUND
MUNICIPAL MONEY MARKET FUND INDEX FUND
STABLE INCOME FUND VALUGROWTH-SM- STOCK FUND
INTERMEDIATE GOVERNMENT INCOME FUND DIVERSIFIED EQUITY FUND
DIVERSIFIED BOND FUND GROWTH EQUITY FUND
INCOME FUND LARGE COMPANY GROWTH FUND
TOTAL RETURN BOND FUND SMALL COMPANY STOCK FUND
LIMITED TERM TAX-FREE FUND SMALL COMPANY GROWTH FUND
TAX-FREE INCOME FUND CONTRARIAN STOCK FUND
COLORADO TAX-FREE FUND INTERNATIONAL FUND
MINNESOTA TAX-FREE FUND

<PAGE>

NORWEST ADVANTAGE FUNDS
STATEMENT OF ADDITIONAL INFORMATION

OCTOBER 1, 1996

ACCOUNT INFORMATION AND
SHAREHOLDER SERVICING: DISTRIBUTION:
Norwest Bank Minnesota, N.A. Forum Financial Services, Inc.
Transfer Agent Manager and Distributor
733 Marquette Avenue Two Portland Square
Minneapolis, MN 55479-0040 Portland, Maine 04101
(612) 667-8833/(800) 338-1348 (207) 879-1900

Norwest Advantage Funds is registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended.

This Statement of Additional Information supplements the Prospectuses dated
October 1, 1996, offering the following classes of shares of the separate
portfolios of Norwest Advantage Funds: Cash Investment Fund, Ready Cash
Investment Fund (Institutional Shares, Investor Shares and Exchange Shares),
U.S. Government Fund, Treasury Fund, Municipal Money Market Fund (Institutional
Shares and Investor Shares), and A Shares, B Shares and I Shares of each of
Stable Income Fund, Intermediate U.S. Government Fund, Diversified Bond Fund,
Income Fund, Total Return Bond Fund, Tax-Free Income Fund, Colorado Tax-Free
Fund, Minnesota Tax-Free Fund, Conservative Balanced Fund, Moderate Balanced
Fund, Growth Balanced Fund, Income Equity Fund, Index Fund, ValuGrowth Stock
Fund, Diversified Equity Fund, Growth Equity Fund, Large Company Growth Fund,
Small Company Stock Fund, Small Company Growth Fund, Contrarian Stock Fund and
International Fund.

THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ ONLY IN CONJUNCTION WITH
A CORRESPONDING PROSPECTUS, COPIES OF WHICH MAY BE OBTAINED BY AN INVESTOR
WITHOUT CHARGE BY CONTACTING THE TRUST'S DISTRIBUTOR AT THE ADDRESS LISTED
ABOVE.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
<PAGE>

TABLE OF CONTENTS

Page
----

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Investment Policies. . . . . . . . . . . . . . . . . . . . . . . . . .
Ratings as Investment Criteria. . . . . . . . . . . . . . . . . . .
Money Market Fund Matters . . . . . . . . . . . . . . . . . . . . .
Fixed Income Investments. . . . . . . . . . . . . . . . . . . . . .
Municipal Securities. . . . . . . . . . . . . . . . . . . . . . . .
Variable and Floating Rate Securities . . . . . . . . . . . . . . .
Hedging Strategies. . . . . . . . . . . . . . . . . . . . . . . . .
Equity Securities and Additional Information Concerning the
Equity Funds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign Investments . . . . . . . . . . . . . . . . . . . . . . . .
Illiquid Securities and Restricted Securities . . . . . . . . . . .
Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Investments . . . . . . . . . . . . . . . . . . . . . . . . .
2. Information Concerning Colorado and Minnesota. . . . . . . . . . . . .
Colorado. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . .
4. Performance and Advertising Data . . . . . . . . . . . . . . . . . . .
SEC Yield Calculations. . . . . . . . . . . . . . . . . . . . . . .
Total Return Calculations . . . . . . . . . . . . . . . . . . . . .
Multiclass, Collective Trust Fund and Master-Feeder Performance . .
Other Advertisement Matters . . . . . . . . . . . . . . . . . . . .
5. Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . .
Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subadviser - Small Company Stock Fund . . . . . . . . . . . . . . .
Manager and Distributor . . . . . . . . . . . . . . . . . . . . . .
Distribution Services . . . . . . . . . . . . . . . . . . . . . . .
Transfer Agent. . . . . . . . . . . . . . . . . . . . . . . . . . .
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio Accounting. . . . . . . . . . . . . . . . . . . . . . . .
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . .
7. Additional Purchase and Redemption Information . . . . . . . . . . . .
Statement of Intention. . . . . . . . . . . . . . . . . . . . . . .
Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent Deferred Sales Charge (A Shares) . . . . . . . . . . . .
Contingent Deferred Sales Charge (A Shares and B Shares) . . . . .
Conversion of B Shares. . . . . . . . . . . . . . . . . . . . . . .
8. Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Additional Information About the Trust and the Shareholders of
the Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Determination of Net Asset Value. . . . . . . . . . . . . . . . . .
Counsel and Auditors. . . . . . . . . . . . . . . . . . . . . . . .
General Information . . . . . . . . . . . . . . . . . . . . . . . .
Recent Mergers. . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholdings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . .
Registration Statement. . . . . . . . . . . . . . . . . . . . . . .

Appendix A - Description of Securities Ratings . . . . . . . . . . . . .A-1
Appendix B - Miscellaneous Tables. . . . . . . . . . . . . . . . . . . .B-1
Appendix C - Performance Data. . . . . . . . . . . . . . . . . . . . . .C-1

<PAGE>

INTRODUCTION

The Trust was originally organized under the name Prime Value Funds, Inc. as a
Maryland corporation on August 29, 1986. On July 30, 1993, pursuant to a
shareholder vote, the Trust was reorganized as a Delaware business trust under
the name "Norwest Funds." On October 1, 1995 the Trust changed its name to
"Norwest Advantage Funds." On October 1, 1995 the Trust also changed the name
of its various classes of shares as follows: Investor A class was renamed A
class ("A Shares"); Investor B class was renamed B class ("B Shares"); Trust
class was renamed I class ("I Shares"); and Advantage class, also was renamed I
Shares.

Each Fund's investment adviser is Norwest Investment Management, a part of
Norwest Bank Minnesota, N.A. Norwest, which serves as the Trust's transfer
agent and custodian, is a subsidiary of Norwest Corporation. Forum Financial
Services, Inc., a registered broker-dealer, serves as the Trust's manager and as
distributor of the Trust's shares. Forum Administrative Services, LLC serves as
each Fund's administrator. Schroder Capital Management International Inc.
serves as investment subadviser to Conservative Balanced Fund, Moderate Balanced
Fund, Growth Balanced Fund, Diversified Equity Fund, Growth Equity Fund and
International Fund. Schroder also serves as investment adviser to International
Portfolio, in which International Fund currently invests all of its assets.
Crestone Capital Management, Inc. serves as investment sub-adviser to Small
Company Stock Fund.

As used in this SAI, the following terms shall have the meanings listed:

"Adviser" shall mean Norwest Investment Management, a part of Norwest Bank
Minnesota, N.A.

"Investment Advisers" shall mean, collectively, the Adviser, Schroder and
Crestone, as applicable.

"Board" shall mean the Board of Trustees of the Trust.

"CFTC" shall mean the U.S. Commodities Futures Trading Commission.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

"Core Trust" shall mean Core Trust (Delaware), an open-end, management
investment company registered under the 1940 Act.

"Core Trust Board" shall mean the Board of Trustees of Core Trust.

"Crestone" shall mean Crestone Capital Management, Inc.

"Custodian" shall mean Norwest acting in its capacity as custodian of a
Fund.

"Equity Funds" shall mean each of Conservative Balanced Fund, Moderate
Balanced Fund, Growth Balanced Fund, Income Equity Fund, Index Fund,
ValuGrowth Stock Fund, Diversified Equity Fund, Growth Equity Fund, Large
Company Growth Fund, Small Company Stock Fund, Small Company Growth Fund,
Contrarian Stock Fund and International Fund.

"FFC" shall mean Forum Financial Corp., the Trust's fund accountant.

"Fitch" shall mean Fitch Investors Service, Inc.

"Fixed Income Funds" shall mean each of Stable Income Fund, Intermediate
U.S. Government Fund, Diversified Bond Fund, Income Fund, Total Return Bond
Fund, Tax-Free Income Fund, Colorado Tax-Free Fund and Minnesota Tax-Free
Fund

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<PAGE>

"Forum" shall mean Forum Financial Services, Inc., the Trust's manager and
distributor of the Trust's shares.

"Forum Administrative" shall mean Forum Administrative Services, LLC, the
Trust's administrator.

"Fund" shall mean each of the twenty-eight separate portfolios of the Trust
to which this Statement of Additional Information relates as identified on
the cover page.

"Money Market Funds" shall mean each of Cash Investment Fund, Ready Cash
Investment Fund, U.S. Government Fund, Treasury Fund and Municipal Money
Market Fund

"Moody's" shall mean Moody's Investors Service, Inc.

"Norwest Bank" shall mean Norwest Bank Minnesota, N.A., a subsidiary of
Norwest Corporation.

"NRSRO" shall mean a nationally recognized statistical rating organization.

"Portfolio" shall mean International Portfolio, International Portfolio II,
Small Company Portfolio and Index Portfolio, four separate portfolios of
Core Trust.

"Schroder" shall mean Schroder Capital Management Inc., the investment
subadviser to Diversified Equity Fund, Growth Equity Fund, International
Fund, Conservative Balanced Fund, Moderate Balanced Fund and Growth
Balanced Fund and investment adviser to International Portfolio and
International Portfolio II.

"SEC" shall mean the U.S. Securities and Exchange Commission.

"S&P" shall mean Standard & Poor's Rating Group.

"Transfer Agent" shall mean Norwest Bank acting in its capacity as transfer
and dividend disbursing agent of the a Fund.

"Trust" shall mean Norwest Advantage Funds, an open-end management
investment company registered under the 1940 Act.

"U.S. Government Securities" shall mean obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.

"1933 Act" shall mean the Securities Act of 1933, as amended.

"1940 Act" shall mean the Investment Company Act of 1940, as amended.

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1. INVESTMENT POLICIES

The following discussion is intended to supplement the disclosure in each
Prospectus concerning each Fund's investments, investment techniques and
strategies and the risks associated therewith. No Fund may make any investment
or employ any investment technique or strategy not referenced in the Prospectus
which relates to that Fund. For example, while the SAI describes "swap"
transactions below, only those Funds whose investment policies, as described in
the Prospectus, allow the Fund to invest in swap transactions may do so.
References to the investment policies and investment limitations of
International Fund also pertain to the International Portfolio, in which that
Fund currently invests all of its assets. In addition, references to the Funds
which include International Fund also pertain to International Portfolio.

RATINGS AS INVESTMENT CRITERIA

Moody's, S&P and other NRSROs are private services that provide ratings of the
credit quality of debt obligations, including convertible securities. A
description of the range of ratings assigned to various types of bonds and other
securities by several NRSROs is included in Appendix A to this SAI. The Funds
may use these ratings to determine whether to purchase, sell or hold a security.
It should be emphasized, however, that ratings are general and are not absolute
standards of quality. Consequently, securities with the same maturity, interest
rate and rating may have different market prices. If an issue of securities
ceases to be rated or if its rating is reduced after it is purchased by a Fund
(neither event requiring sale of such security by a Fund - except in certain
cases with respect to the Money Market Funds), the Investment Adviser of the
Fund will determine whether the Fund should continue to hold the obligation. To
the extent that the ratings given by a NRSRO may change as a result of changes
in such organizations or their rating systems, the Investment Adviser will
attempt to substitute comparable ratings. Credit ratings attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also, rating agencies may fail to make timely
changes in credit ratings. An issuer's current financial condition may be
better or worse than a rating indicates.

A Fund may purchase unrated securities if its Investment 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.
A Fund may retain securities whose rating has been lowered below the lowest
permissible rating category (or that are unrated and determined by its
Investment Adviser to be of comparable quality to securities whose rating has
been lowered below the lowest permissible rating category) if the Investment
Adviser determines that retaining such security is in the best interests of the
Fund.

To limit credit risks, International Portfolio may only invest in securities
that are investment grade (rated in the top four long-term investment grades by
an 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 and BBB in
the case of S&P and 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. All these ratings are
generally considered to be investment grade ratings, although Moody's indicates
that securities with long-term ratings of Baa have speculative characteristics.

MONEY MARKET FUND MATTERS

Pursuant to Rule 2a-7 adopted under the 1940 Act, each of the Money Market Funds
may invest only in "eligible securities" as defined in that Rule. Generally, an
eligible security is a security that (i) is denominated in U.S. Dollars and has
a remaining maturity of 397 days or less; (ii) is rated, or is issued by an
issuer with short-term debt outstanding that is rated, in one of the two highest
rating categories by two NRSROs or, if only one NRSRO has issued a rating, by
that NRSRO; and (iii) has been determined by the Investment Adviser to present
minimal credit risks pursuant to procedures approved by the Board. In addition,
the Money Market Funds will maintain a dollar-weighted average maturity of 90
days or less. Unrated securities may also be eligible securities if the
Investment

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<PAGE>

Adviser determines that they are of comparable quality to a rated eligible
security pursuant to guidelines approved by the Board.

Under Rule 2a-7, except for Municipal Money Market Fund, a Money Market Fund may
not invest more than five percent of its total assets in the securities of any
one issuer other than U.S. Government Securities, provided that in certain cases
a Fund may invest 5% of its assets in a single issuer for a period of up to
three business days. Municipal Money Market Fund is, however, subject to the
issuer diversification rules described in paragraph (1) under "Investment
Restrictions." Except for Municipal Money Market Fund, a Money Market Fund may
not invest in a security that has received, or is deemed comparable in quality
to a security that has received, the second highest rating by the requisite
number of NRSROs (a "second tier security") if immediately after the acquisition
thereof the Fund would have invested more than (A) the greater of one percent of
its total assets or one million dollars in securities issued by that issuer
which are second tier securities, or (B) five percent of its total assets in
second tier securities.

Immediately after the acquisition of any put, no more than five percent of a
Money Market Fund's total assets may be invested in securities issued by or
subject to conditional puts from the same institution and no more than ten
percent of a Money Market Fund's total assets may be invested in securities
issued by or subject to unconditional puts (including guarantees) from the same
institution. However, these restriction only apply with respect to 75% of the
Municipal Money Market Fund's total assets.

INVESTMENT BY FEDERAL CREDIT UNIONS

U.S. Government Fund and Treasury Fund limit their investments, as described in
the Prospectus for those Funds, to investments that are legally permissible for
Federally chartered credit unions under applicable provisions of the Federal
Credit Union Act (including 12 U.S.C. Section 1757(7), (8) and (15)) and the
applicable rules and regulations of the National Credit Union Administration
(including 12 C.F.R. Part 703, Investment and Deposit Activities), as such
statutes and rules and regulations may be amended. Treasury Fund limits its
investments to Treasury obligations, including Treasury STRIPS with a maturity
of less than 13 months. U.S. Government Fund limits its investments to U.S.
Government Securities (including Treasury STRIPS), repurchase agreements fully
collateralized by U.S. Government Securities and other government related zero-
coupon securities, such as TIGRs and CATs. All zero-coupon securities in which
the Fund invests will have a maturity of less than 13 months. Certain U.S.
Government Securities owned by the Fund may be mortgage or asset backed, but,
except to reduce interest rate risk, no such security will be (i) a stripped
mortgage backed security ("SMBS"), (ii) a collateralized mortgage obligation
("CMO") or real estate mortgage investment conduit ("REMIC") that meets any of
the tests outlined in 12 C.F.R. Section 703.5(g) or (iii) a residual interest in
a CMO or REMIC. In order to reduce interest rate risk the Fund may purchase a
SMBS, CMO, REMIC or residual interest in a CMO or REMIC but only in accordance
with 12 C.F.R. Section 703.5(i). Each Fund also may invest in reverse
repurchase agreements in accordance with 12 C.F.R. 703.4(e).

FIXED INCOME INVESTMENTS

GENERAL INFORMATION CONCERNING FIXED INCOME SECURITIES

Yields on fixed income securities, including municipal securities, are dependent
on a variety of factors including the general conditions of the money market and
other fixed income securities markets, the size of a particular offering, the
maturity of the obligation and the rating of the issue. Fixed income securities
with longer maturities tend to produce higher yields and are generally subject
to greater price movements than obligations with shorter maturities. 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 will generally reduce the market
value of portfolio investments, and a decline in interest rates will generally
increase the value of portfolio investments.

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<PAGE>

The achievement of a Fund's investment objective is dependent in part on the
continuing ability of the issuers of the fixed income securities in which the
Fund invests to meet their obligations for the payment of principal and interest
when due.

Obligations of issuers of fixed income securities (including municipal
securities) are subject to the provisions of bankruptcy, insolvency, and other
laws affecting the rights and remedies of creditors, such as the Federal
Bankruptcy Reform Act of 1978. In addition, the obligations of municipal
issuers may become subject to laws enacted in the future by Congress, state
legislatures, or referenda extending the time for payment of principal and/or
interest, or imposing other constraints upon enforcement of such obligations or
upon the ability of municipalities to levy taxes. 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.

U.S. GOVERNMENT SECURITIES

In addition to obligations of the U.S. Treasury, each of the Funds (except
Treasury Fund) may invest in U.S. Government Securities. Obligations of certain
agencies and instrumentalities of the U.S. government are supported 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; others are supported by the right of the issuer to borrow from the
Treasury; others are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations; and still others are 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. No assurance can be given that
the U.S. government would provide financial support to U.S. government-sponsored
agencies or instrumentalities if it is not obligated to do so by law.
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. A Fund will
invest in the obligations of such agencies or instrumentalities only when the
Adviser believes that the credit risk with respect thereto is consistent with
the Fund's investment policies.

BANK OBLIGATIONS

Each Fund may, in accordance with the policies described in its Prospectus,
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. 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 Fund's Adviser believes do not present undue risk.

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 by the
Fund but may be subject to early withdrawal penalties which vary depending upon
market conditions and the remaining maturity of the obligation and could reduce
the Fund's yield. Although fixed-time deposits do not in all cases have a
secondary market, there are no contractual restrictions on the Fund's right to
transfer a beneficial interest in the deposits to third parties. Deposits
subject to early withdrawal penalties or that mature in more than seven days are
treated as illiquid securities if there is no readily available market for the
securities.

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<PAGE>

The Funds may invest in Euro dollar certificates of deposit, which are U.S.
dollar denominated certificates of deposit issued by offices of foreign and
domestic banks located outside the United States; Yankee certificates of
deposit, which are certificates of deposit issued by a U.S. branch of a foreign
bank denominated in U.S. dollars and held in the United States; Eurodollar time
deposits ("ETDs"), which are U.S. dollar denominated deposits in a foreign
branch of a U.S. bank or a foreign bank; and Canadian time deposits, which are
basically the same as ETDs except they are issued by Canadian offices of major
Canadian banks.

Investments that a Fund may make in securities of foreign banks, branches or
subsidiaries may involve certain risks, including future political and economic
developments, the possible imposition of foreign withholding taxes on interest
income payable on such securities, the possible seizure or nationalization of
foreign deposits, differences from domestic banks in applicable accounting,
auditing and financial reporting standards, and the possible establishment of
exchange controls or other foreign governmental laws or restrictions applicable
to the payment of certificates of deposit or time deposits which might affect
adversely the payment of principal and interest on such securities held by the
Fund.

COMMERCIAL PAPER

Except for the Money Market Funds, each Fund may assume a temporary defensive
position and may invest without limit in commercial paper that is rated in one
of the two highest rating categories by an NRSRO or, if not rated, determined by
the Adviser to be of comparable quality. Certain Funds may invest in commercial
paper as an investment and not as a temporary defensive position. Commercial
paper (short-term promissory notes) consists of unsecured promissory notes
issued by companies to finance their or their affiliates' current obligations.
Except as noted below with respect to variable master demand notes, issues of
commercial paper normally have maturities of less than nine months and fixed
rates of return.

Variable amount master demand notes are unsecured demand notes that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate according to the terms of the instrument. Because master demand
notes are direct lending arrangements between a the Fund and the issuer, they
are not normally traded. Although there is no secondary market in the notes,
the Fund may demand payment of principal and accrued interest at any time.
Variable amount master demand notes must satisfy the same criteria as set forth
above for commercial paper. The Adviser will consider the earning power, cash
flow and other liquidity ratios of the issuers of such notes and will
continuously monitor their financial status and ability to meet payment on
demand.

GUARANTEED INVESTMENT CONTRACTS

The Fixed Income Funds may invest in guaranteed investment contracts ("GICs")
issued by insurance companies. Pursuant to such contracts, the Fund makes cash
contributions to a deposit fund of the insurance company's general account. The
insurance company then credits to the deposit fund on a monthly basis guaranteed
interest at a rate based on an index. The GICs provide that this guaranteed
interest will not be less than a certain minimum rate. The insurance company
may assess periodic charges against a GIC for expense and service costs
allocable to it, and these charges will be deducted from the value of the
deposit fund. 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 in which the Fund may otherwise invest. Because a Fund
may not receive the principal amount of a GIC from the insurance company on
seven days' notice or less, a GIC may be considered an illiquid investment. The
term of a GIC will be one year or less. In determining the average weighted
portfolio maturity of a Fund, a GIC will be deemed to have a maturity equal to
the period of time remaining until the next readjustment of the guaranteed
interest rate. The interest rate on a GIC may be tied to a specified market
index and is guaranteed not to be less than a certain minimum rate.

ZERO COUPON SECURITIES

Zero coupon securities are sold at original issue discount and pay no interest
to holders prior to maturity. Accordingly, these securities usually trade at a
deep discount from their face or par value and will be subject to greater
fluctuations of market value in response to changing interest rates than debt
obligations of comparable

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<PAGE>

maturities which make current distributions of interest. Federal tax law
requires that a Fund accrue a portion of the discount at which a zero-coupon
security was purchased as income each year even though the Fund receives no
interest payment in cash on the security during the year. Interest on these
securities, however, is reported as income by the Fund and must be distributed
to its shareholders. 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.

Currently U.S. Treasury securities issued without coupons include Treasury bills
and separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury. These stripped 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"). 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"). In addition, corporate debt securities may be zero coupon
securities. For the purpose solely of an investment policy of investing at
least 65% of a Fund's assets in U.S. Government Securities, such securities are
currently not deemed to be U.S. Government Securities but rather securities
issued by the bank or brokerage firm involved.

MUNICIPAL SECURITIES

Municipal securities are issued by the States, territories and possessions of
the United States, their political subdivisions (such as cities, counties and
towns) and various authorities (such as public housing or redevelopment
authorities), instrumentalities, public corporations and special districts (such
as water, sewer or sanitary districts) of the States, territories and
possessions of the United States or their political subdivisions. In addition,
municipal securities include securities issued by or on behalf of public
authorities to finance various privately operated facilities, such as industrial
development bonds, that are backed only by the assets and revenues of the non-
governmental user (such as hospitals and airports).

Municipal securities historically have not been subject to registration with the
Securities and Exchange Commission, although there have been proposals which
would require registration in the future.

MUNICIPAL NOTES. Municipal notes, which may be either "general obligation" or
"revenue" securities are intended to fulfill the short-term capital needs of the
issuer and generally have maturities not exceeding one year. They include the
following: tax anticipation notes, revenue anticipation notes, bond
anticipation notes, construction loan notes and tax-exempt commercial paper. Tax
anticipation notes are issued to finance working capital needs of
municipalities, and are payable from various anticipated future seasonal tax
revenues, such as income, sales, use and business taxes. Revenue anticipation
notes are issued in expectation of receipt of other types of revenues, such as
federal revenues available under various federal revenue sharing programs. Bond
anticipation notes are issued to provide interim financing until long-term
financing can be arranged and are typically payable from proceeds of the long-
term bonds. Construction loan notes are sold to provide construction financing.
After successful completion and acceptance, many such projects receive permanent
financing through the Federal Housing Administration under the Federal National
Mortgage Association or the Government National Mortgage Association. Tax-
exempt commercial paper is a short-term obligation with a stated maturity of 365
days or less. It is issued by agencies of state and local governments to
finance seasonal working capital needs or as short-term financing in
anticipation of longer term financing. Municipal notes also include longer term
issues that are remarketed to investors periodically, usually at one year
intervals or less.

MUNICIPAL BONDS. Municipal bonds meet longer term capital needs of a municipal
issuer and generally have maturities of more than one year when issued. General
obligation bonds are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. General obligation bonds are secured by the issuer's pledge of its
full faith and credit and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt service may be
limited or

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<PAGE>

unlimited as to the rate or amount. Revenue bonds in recent years have come to
include an increasingly wide variety of types of municipal obligations. As with
other kinds of municipal obligations, the issuers of revenue bonds may consist
of virtually any form of state or local governmental entity. Generally, revenue
bonds are secured by the revenues or net revenues derived from a particular
facility, class of facilities, or, in some cases, from the proceeds of a special
excise or other specific revenue source, but not from general tax revenues.
Revenue bonds are issued to finance a wide variety of capital projects including
electric, gas, water and sewer systems; highways, bridges, and tunnels; port and
airport facilities; colleges and universities; and hospitals. Many of these
bonds are additionally secured by a debt service reserve fund which can be used
to make a limited number of principal and interest payments should the pledged
revenues be insufficient. Various forms of credit enhancement, such as a bank
letter of credit or municipal bond insurance, may also be employed in revenue
bond issues. Revenue bonds issued by housing authorities may be secured in a
number of ways, including partially or fully insured mortgages, rent subsidized
and/or collateralized mortgages, and/or the net revenues from housing or other
public projects. Some authorities provide further security in the form of a
state's ability (without obligation) to make up deficiencies in the debt service
reserve fund. In recent years, revenue bonds have been issued in large volumes
for projects that are privately owned and operated, as discussed below.

Private activity bonds are considered municipal bonds if the interest paid
thereon is exempt from Federal income tax and are issued by or on behalf of
public authorities to raise money to finance various privately operated
facilities for business and manufacturing, housing, and health care and other
nonprofit or charitable purposes. These bonds are also used to finance public
facilities such as airports, mass transit systems and ports. The payment of the
principal and interest on such bonds is dependent solely on the ability of the
facility's user to meet its financial obligations and the pledge, if any, of
real and personal property as security for such payment.

While at one time the pertinent provisions of the Internal Revenue Code
permitted private activity bonds to bear tax-exempt interest in connection with
virtually any type of commercial or industrial project (subject to various
restrictions as to authorized costs, size limitations, state per capita volume
restrictions, and other matters), the types of qualifying projects under the
Code have become increasingly limited, particularly since the enactment of the
Tax Reform Act of 1986. Under current provisions of the Code, tax-exempt
financing remains available, under prescribed conditions, for certain privately
owned and operated facilities of a organization described in Section 501(c)(3)
of the Internal Revenue Code, rental multi-family housing facilities, airports,
docks and wharves, mass commuting facilities and solid waste disposal projects,
among others, and for the refunding (that is, the tax-exempt refinancing) of
various kinds of other private commercial projects originally financed with tax-
exempt bonds. In future years, the types of projects qualifying under the Code
for tax-exempt financing are expected to become increasingly limited.

Because of terminology formerly used in the Internal Revenue Code, virtually any
form of private activity bond may still be referred to as an "industrial
development bond," but more and more frequently revenue bonds have become
classified according to the particular type of facility being financed, such as
hospital revenue bonds, nursing home revenue bonds, multifamily housing revenues
bonds, single family housing revenue bonds, industrial development revenue
bonds, solid waste resource recovery revenue bonds, and so on.

OTHER MUNICIPAL OBLIGATIONS. Other municipal obligations, incurred for a
variety of financing purposes, include municipal leases, which may take the form
of a lease or an installment purchase or conditional sale contract. Municipal
leases are entered into by state and local governments and authorities to
acquire a wide variety of equipment and facilities such as fire and sanitation
vehicles, telecommunications equipment and other capital assets. Municipal
leases frequently have special risks not normally associated with general
obligation or revenue bonds. Leases and installment purchase or conditional
sale contracts (which normally provide for title to the leased asset to pass
eventually to the government issuer) have evolved as a means for governmental
issuers to acquire property and equipment without being required to meet the
constitutional and statutory requirements for the issuance of debt. The debt-
issuance limitations of many state constitutions and statutes are deemed to be
inapplicable because of the inclusion in many leases or contracts of "non-
appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis.

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ALTERNATIVE MINIMUM TAX. Municipal securities are also categorized according to
whether the interest is or is not includable in the calculation of alternative
minimum taxes imposed on individuals, according to whether the costs of
acquiring or carrying the bonds are or are not deductible in part by banks and
other financial institutions, and according to other criteria relevant for
Federal income tax purposes. Due to the increasing complexity of Internal
Revenue Code and related requirements governing the issuance of tax-exempt
bonds, industry practice has uniformly required, as a condition to the issuance
of such bonds, but particularly for revenue bonds, an opinion of nationally
recognized bond counsel as to the tax-exempt status of interest on the bonds.

PUTS AND STANDBY COMMITMENTS ON MUNICIPAL SECURITIES. The Funds may acquire
"puts" with respect to municipal securities. A put gives the Fund the right to
sell the municipal security at a specified price at any time on or before a
specified date. The Funds may sell, transfer or assign a put only in
conjunction with its sale, transfer or assignment of the underlying security or
securities. The amount payable to a Fund upon its exercise of a "put" is
normally (i) the Fund's acquisition cost of the municipal securities (excluding
any accrued interest which the Fund paid on their acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Fund owned the securities, plus (ii) all interest accrued
on the securities since the last interest payment date during that period.

Puts may be acquired by the Funds to facilitate the liquidity of its portfolio
assets. Puts may also be used to facilitate the reinvestment of a Fund's assets
at a rate of return more favorable than that of the underlying security. The
Funds expect that they will generally acquire puts only where the puts are
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, the Funds may pay for a put either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to the puts (thus reducing the yield to maturity otherwise available for the
same securities). The Funds intend to enter into puts only with dealers, banks
and broker-dealers which, in the Adviser's opinion, present minimal credit
risks.

Puts may, under certain circumstances, also be used to shorten the maturity of
underlying variable rate or floating rate securities for purposes of calculating
the remaining maturity of those securities and the dollar-weighted average
portfolio maturity of a Fund's assets.

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

The acquisition of a stand-by commitment does not affect the valuation or
maturity of the underlying municipal securities which continue to be valued in
accordance with the amortized cost method. Stand-by commitments acquired by the
Fund are valued at zero in determining net asset value. When a Fund pays
directly or indirectly for a stand-by commitment, its cost is reflected as
unrealized depreciation for the period during which the commitment is held.
Stand-by commitments do not affect the average weighted maturity of the Fund's
portfolio of securities.

VARIABLE AND FLOATING RATE SECURITIES

The securities in which the Funds invest (including municipal securities or
mortgage- and asset-backed securities, as applicable) 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 accordingly to a specified formula, usually with reference
to one or more interest rate indices or market interest

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rates (the "underlying index"). The interest paid on these securities is a
function primarily of the underlying index upon which the interest rate
adjustments are based. Such adjustments minimize changes in the market value of
the obligation and, accordingly, enhance the ability of the Fund to maintain a
stable net asset value. Similar to fixed rate debt instruments, variable and
floating rate instruments are subject to changes in value based on changes in
market interest rates or changes in the issuer's creditworthiness. The rate of
interest on securities purchased by a Fund may be tied to Treasury or other
government securities or indices on those securities as well as any other rate
of interest or index. Certain variable rate securities (including mortgage-
related securities or mortgage-backed 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. Money
Market Funds may not invest in inverse floaters.

There may not be an active secondary market for any particular floating or
variable rate instruments (particularly inverse floaters and similar
instruments) which could make it difficult for a Fund to dispose of the
instrument if the issuer defaulted on its repayment obligation 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 Investment Advisers, as applicable, monitor the liquidity of the Funds'
investment in variable and floating rate instruments, but there can be no
guarantee that an active secondary market will exist.

Many variable rate instruments include the right of the holder to demand
prepayment of the principal amount of the obligation prior to its stated
maturity and the right of the issuer to prepay the principal amount prior to
maturity. The payment of principal and interest by issuers of certain
securities purchased by the Funds may be guaranteed by letters of credit or
other credit facilities offered by banks or other financial institutions. Such
guarantees will be considered in determining whether a municipal security meets
the Funds' investment quality requirements.

Variable rate obligations purchased by the Funds may include participation
interests in variable rate obligations purchased by the Funds from banks,
insurance companies or other financial institutions that are backed by
irrevocable letters of credit or guarantees of banks. The Funds can exercise
the right, on not more than thirty days' notice, to sell such an instrument back
to the bank from which it purchased the instrument and draw on the letter of
credit for all or any part of the principal amount of a Fund's participation
interest in the instrument, plus accrued interest, but will do so only (i) as
required to provide liquidity to a Fund, (ii) to maintain a high quality
investment portfolio, or (iii) upon a default under the terms of the demand
instrument. Banks and other financial institutions retain portions of the
interest paid on such variable rate obligations as their fees for servicing such
instruments and the issuance of related letters of credit, guarantees and
repurchase commitments.

The Funds will not purchase participation interests in variable rate obligations
unless it is advised by counsel or receives a ruling of the Internal Revenue
Service that interest earned by the Funds from the obligations in which it holds
participation interests is exempt from Federal income tax. The Internal Revenue
Service has announced that it ordinarily will not issue advance rulings on
certain of the Federal income tax consequences applicable to securities, or
participation interests therein, subject to a put. The Adviser monitors the
pricing, quality and liquidity of variable rate demand obligations and
participation interests therein held by the Fund on the basis of published
financial information, rating agency reports and other research services to
which the Investment Adviser may subscribe.

Certain securities may have an initial principal amount that varies over time
based on an interest rate index, and, accordingly, International Portfolio might
be entitled to less than the initial principal amount of the security upon the
security's maturity. International Portfolio intends to purchase such securities
only when International Portfolio's Investment Adviser believes the interest
income from the instrument justifies any principal risks associated with the
instrument. International Portfolio 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 International
Portfolio will be able to limit principal fluctuations and, accordingly,
International Portfolio may incur losses on those securities even if held to
maturity without issuer default.

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MORTGAGE-BACKED AND ASSET-BACKED SECURITIES

TYPES OF CREDIT ENHANCEMENT

To lessen the effect of failures by obligors on Mortgage Assets (as defined in
the Prospectus) to make payments, mortgage-backed securities may contain
elements of credit enhancement. Credit enhancement falls into two categories:
(1) liquidity protection; and (2) protection against losses resulting after
default by an obligor on the underlying assets and collection of all amounts
recoverable directly from the obligor and through liquidation of the collateral.
Liquidity protection refers to the provisions of advances, generally by the
entity administering the pool of assets (usually the bank, savings association
or mortgage banker that transferred the underlying loans to the issuer of the
security), to ensure that the receipt of payments on the underlying pool occurs
in a timely fashion. Protection against losses resulting after default and
liquidation ensures ultimate payment of the obligations on at least a portion of
the assets in the pool. Such protection may be provided through guarantees,
insurance policies or letters of credit obtained by the issuer or sponsor from
third parties, through various means of structuring the transaction or through a
combination of such approaches. The Funds will not pay any additional fees for
such credit enhancement, although the existence of credit enhancement may
increase the price of security.

Examples of credit enhancement arising out of the structure of the transaction
include (i) "senior-subordinated securities" (multiple class securities with one
or more classes subordinate to other classes as to the payment of principal
thereof and interest thereon, with the result that defaults on the underlying
assets are borne first by the holders of the subordinated class), (ii) creation
of "spread accounts" or "reserve funds" (where cash or investments, sometimes
funded from a portion of the payments on the underlying assets are held in
reserve against future losses) and (iii) "over-collateralization" (where the
scheduled payments on, or the principal amount of, the underlying assets exceeds
that required to make payment of the securities and pay any servicing or other
fees). The degree of credit enhancement provided for each issue generally is
based on historical information regarding the level of credit risk associated
with the underlying assets. Delinquency or loss in excess of that covered by
credit enhancement protection could adversely affect the return on an investment
in such a security.

OTHER GOVERNMENTAL RELATED MORTGAGE-BACKED SECURITIES

The Resolution Trust Corporation ("RTC"), which was organized by the U.S.
Government in connection with the savings and loan crisis, holds assets of
failed savings associations as either a conservator or receiver for such
associations, or it acquires such assets in its corporate capacity. These
assets include, among other things, single family and multi-family mortgage
loans, as well as commercial mortgage loans. In order to dispose of such assets
in an orderly manner, RTC has established a vehicle registered with the SEC
through which it sells mortgage-backed securities. RTC mortgage-backed
securities represent pro rata interests in pools of mortgage loans that RTC
holds or has acquired, as described above, and are supported by one or more of
the types of private credit enhancements used by Private Mortgage Lenders.

It is anticipated that in the future the Federal Deposit Insurance Corporation
(which also holds mortgage loans as a conservator or receiver of insolvent banks
or in its corporate capacity) or other governmental agencies or
instrumentalities may establish vehicles for the issuance of mortgage-backed
securities that are similar in structure and in types of credit enhancements to
RTC securities.

ASSET-BACKED SECURITIES

A Fund may invest in asset-backed securities, which have structural
characteristics similar to mortgage-backed securities but have underlying assets
that are not mortgage loans or interests in mortgage loans. Asset-backed
securities are securities that represent direct or indirect participations in,
or are secured by and payable from, assets such as motor vehicle installment
sales contracts, installment loan contracts, leases of

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various types of real and personal property and receivables from revolving
credit (credit card) agreements. Such assets are securitized through the use of
trusts and special purpose corporations.

Asset-backed securities 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 present certain risks that are not presented by
mortgage-backed debt securities or other securities in which a Fund may invest.
Primarily, these securities do not always have the benefit of a security
interest in comparable collateral. Credit card receivables are generally
unsecured and the debtors are entitled to the protection of a number of state
and Federal consumer credit laws, many of which give such debtors the right to
set off certain amounts owed on the credit cards, thereby reducing the balance
due. Automobile receivables generally are secured by automobiles. Most issuers
of automobile receivables permit the loan servicers to retain possession of the
underlying obligations. If the servicer were to sell these obligations to
another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the asset-backed securities. In addition,
because of the large number of vehicles involved in a typical issuance and the
technical requirements under state laws, the trustee for the holders of the
automobile receivables may not have a proper security interest in the underlying
automobiles. Therefore, there is the possibility that recoveries on repossessed
collateral may not, in some cases, be available to support payments on these
securities. 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 the market cycle has not been tested.

INTEREST-ONLY AND PRINCIPAL-ONLY SECURITIES

Some tranches of mortgage-backed securities, including CMOs, are structured so
that investors receive only principal payments generated by the underlying
collateral. Principal only ("POs") securities usually sell at a deep discount
from face value on the assumption that the purchaser will ultimately receive the
entire face value through scheduled payments and prepayments; however, the
market values of POs are extremely sensitive to prepayment rates, which, in
turn, vary with interest rate changes. If interest rates are falling and
prepayments accelerate, the value of the PO will increase. On the other hand,
if rates rise and prepayments slow, the value of the PO will drop.

Interest only ("IOs") securities result from the creation of POs; thus, CMOs
with PO tranches also have IO tranches. IO securities sell at a deep discount
to their "notional" principal amount, namely the principal balance used to
calculate the amount of interest due. They have no face or par value and, as
the notional principal amortizes and prepays, the IO cash-flow declines.

Unlike POs, IOs increase in value when interest rates rise and prepayment rates
slow; consequently they are often used to "hedge" portfolios against interest
rate risk. If prepayment rates are high, a Fund may receive less cash back than
it initially invested.

INTEREST RATE PROTECTION TRANSACTIONS

Certain Funds may enter into interest rate protection transactions, including
interest rate swaps, caps, collars and floors. Interest rate swap transactions
involve an agreement between two parties to exchange interest payment streams
that are based, for example, on variable and fixed rates that are calculated on
the basis of a specified amount of principal (the "notional principal amount")
for a specified period of time. Interest rate cap and floor transactions
involve an agreement between two parties in which the first party agrees to make
payments to the counterparty when a designated market interest rate goes above
(in the case of a cap) or below (in the case of a floor) a designated level on
predetermined dates or during a specified time period. Interest rate collar
transactions involve an agreement between two parties in which the payments are
made when a designated market interest rate either goes above a designated
ceiling or goes below a designated floor on predetermined dates or during a
specified time period.

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<PAGE>

A Fund expects to enter into interest rate protection transactions to preserve a
return or spread on a particular investment or portion of its portfolio or to
protect against any increase in the price of securities it anticipates
purchasing at a later date. The Funds intend to use these transactions as a
hedge and not as a speculative investment.

A Fund may enter into interest rate protection transactions on an asset-based
basis, depending on whether it is hedging its assets or its liabilities, and
will usually enter into interest rate swaps on a net basis, i.e., the two
payment streams are netted out, with the Fund receiving or paying, as the case
may be, only the net amount of the two payments. Inasmuch as these interest
rate protection transactions are entered into for good faith hedging purposes,
and inasmuch as segregated accounts will be established with respect to such
transactions, the Funds believe such obligations do not constitute senior
securities. 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 accrued on a
daily basis and an amount of cash, U.S. Government Securities or other liquid
high grade debt obligations having an aggregate net asset value at least equal
to the accrued excess will be maintained in a segregated account by a custodian
that satisfies the requirements of the 1940 Act. The Funds also will establish
and maintain such segregated accounts with respect to its total obligations
under any interest rate swaps that are not entered into on a net basis and with
respect to any interest rate caps, collars and floors that are written by the
Fund.

A Fund will enter into interest rate protection transactions only with banks and
other institutions believed by the Investment Adviser to the Fund to present
minimal credit risks. If there is a default by the other party to such a
transaction, the Fund will have to rely on its contractual remedies (which may
be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements
related to the transaction.

The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. Caps, collars and floors are more
recent innovations for which documentation is less standardized and,
accordingly, they are less liquid than swaps.

HEDGING AND OPTION INCOME STRATEGIES

Other than the Money Market Funds, each Fund may (i) purchase or sell (write)
put and call options on securities to enhance the Fund's performance and (ii)
seek 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
writing and purchase of exchange-traded and over-the-counter options on
individual securities or securities or financial indices and through the
purchase and sale of financial futures contracts and related options. Whether
or not used for hedging purposes, these investments techniques involve risks
that are different in certain respects from the investment risks associated with
the other investments of a Fund. To the extent a Fund invests in foreign
securities, it may also invest in options on foreign currencies, foreign
currency futures contracts and options on those futures contracts. Use of these
instruments is subject to regulation by the SEC, the several options and futures
exchanges upon which options and futures are traded or the Commodities Futures
Trading Commission.

No assurance can be given, however, that any hedging or option income strategy
will succeed in achieving its intended result.

Except as otherwise noted in the Prospectus or herein, the Funds will not use
leverage in their option income and hedging strategies. In the case of
transactions entered into as a hedge, a Fund will hold securities, currencies or
other options or futures positions whose values are expected to offset ("cover")
its obligations thereunder. A Fund will not enter into a hedging strategy that
exposes it to an obligation to another party unless it owns either (i) an
offsetting ("covered") position or (ii) cash, U.S. Government Securities or
other liquid, high-grade debt securities (or other assets as may be permitted by
the SEC) with a value sufficient at all times to cover its potential
obligations. When required by applicable regulatory guidelines, the Funds will
set aside cash, U.S. Government Securities or other liquid, high-grade debt
securities (or other assets as may be permitted by the SEC) in a segregated
account with its custodian in the prescribed amount. Any assets used for cover
or held in a

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<PAGE>

segregated account cannot be sold or closed out while the hedging or option
income strategy is outstanding, unless they are replaced with similar assets. As
a result, there is a possibility that the use of cover or segregation involving
a large percentage of a Fund's assets could impede portfolio management or the
Fund's ability to meet redemption requests or other current obligations.

OPTIONS STRATEGIES

A Fund may purchase put and call options written by others and sell put and call
options covering specified individual securities, securities or financial
indices or currencies. A put option (sometimes called a "standby commitment")
gives the buyer of the option, upon payment of a premium, the right to deliver a
specified amount of currency to the writer of the option on or before a fixed
date at a predetermined price. A call option (sometimes called a "reverse
standby commitment") gives the purchaser of the option, upon payment of a
premium, the right to call upon the writer to deliver a specified amount of
currency on or before a fixed date, at a predetermined price. The predetermined
prices may be higher or lower than the market value of the underlying currency.
A Fund may buy or sell both exchange-traded and over-the-counter ("OTC")
options. A Fund will purchase or write an option only if that option is traded
on a recognized U.S. options exchange or if the Adviser believes that a liquid
secondary market for the option exists. When a Fund purchases an OTC option, it
relies on the dealer from which it has purchased the OTC option to make or take
delivery of the currency underlying the option. Failure by the dealer to do so
would result in the loss of the premium paid by the Fund as well as the loss of
the expected benefit of the transaction. OTC options and the securities
underlying these options currently are treated as illiquid securities by the
Funds.

Upon selling an option, a Fund receives a premium from the purchaser of the
option. Upon purchasing an option the Fund pays a premium to the seller of the
option. The amount of premium received or paid by the Fund is based upon certain
factors, including the market price of the underlying securities, index or
currency, the relationship of the exercise price to the market price, the
historical price volatility of the underlying assets, the option period, supply
and demand and interest rates.

Certain Funds may purchase call options on debt securities that the Adviser
intends to include in the Fund's portfolio in order to fix the cost of a future
purchase. Call options may also be purchased as a means of participating in an
anticipated price increase of a security on a more limited risk basis than would
be possible if the security itself were purchased. In the event of a decline in
the price of the underlying security, use of this strategy would serve to limit
the potential loss to the Fund to the option premium paid; conversely, if the
market price of the underlying security increases above the exercise price and
the Fund either sells or exercises the option, any profit eventually realized
will be reduced by the premium paid. A Fund may similarly purchase put options
in order to hedge against a decline in market value of securities held in its
portfolio. The put enables the Fund to sell the underlying security at the
predetermined exercise price; thus the potential for loss to the Fund is limited
to the option premium paid. If the market price of the underlying security is
lower than the exercise price of the put, any profit the Fund realizes on the
sale of the security would be reduced by the premium paid for the put option
less any amount for which the put may be sold.

An Adviser may write call options when it believes that the market value of the
underlying security will not rise to a value greater than the exercise price
plus the premium received. Call options may also be written to provide limited
protection against a decrease in the market price of a security, in an amount
equal to the call premium received less any transaction costs.

Certain Funds may purchase and write put and call options on fixed income or
equity security indexes in much the same manner as the options discussed above,
except that index options may serve as a hedge against overall fluctuations in
the fixed income or equity securities markets (or market sectors) or as a means
of participating in an anticipated price increase in those markets. The
effectiveness of hedging techniques using index options will depend on the
extent to which price movements in the index selected correlate with price
movements of the securities which are being hedged. Index options are settled
exclusively in cash.

FOREIGN CURRENCY OPTIONS AND RELATED RISKS

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<PAGE>

A Fund may take positions in options on foreign currencies in order to hedge
against the risk of foreign exchange fluctuation on foreign securities the Fund
holds in its portfolio or which it intends to purchase. Options on foreign
currencies are affected by the factors discussed in "Hedging and Option Income
Strategies -- Options Strategies" and "Foreign Currency Transactions" which
influence foreign exchange sales and investments generally.

The value of foreign currency options is dependent upon the value of the foreign
currency relative to the U.S. dollar and has no relationship to the investment
merits of a foreign security. Because foreign currency transactions occurring
in the interbank market involve substantially larger amounts than those that may
be involved in the use of foreign currency options, a Fund may be disadvantaged
by having to deal in an odd lot market (generally consisting of transactions of
less than $1 million) for the underlying foreign currencies at prices that are
less favorable than for round lots.

To the extent that the U.S. options markets are closed while the market for the
underlying currencies remains open, significant price and rate movements may
take place in the underlying markets that cannot be reflected in the options
markets.

SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING

A Fund may effectively terminate its right or obligation under an option
contract by entering into a closing transaction. For instance, if the Fund
wished to terminate its potential obligation to sell securities or currencies
under a call option it had written, a call option of the same type would be
purchased by the Fund. Closing transactions essentially permit the Fund to
realize profits or limit losses on its options positions prior to the exercise
or expiration of the option. In addition:

(1) The successful use of options depends upon the Investment Adviser's
ability to forecast the direction of price fluctuations in the underlying
securities or currency markets, or in the case of an index option, fluctuations
in the market sector represented by the index.

(2) Options normally have expiration dates of up to nine months. Options
that expire unexercised have no value. Unless an option purchased by a Fund is
exercised or unless a closing transaction is effected with respect to that
position, a loss will be realized in the amount of the premium paid.

(3) A position in an exchange-listed option may be closed out only on an
exchange which provides a market for identical options. Most exchange-listed
options relate to equity securities. Exchange markets for options on foreign
currencies are relatively new, and the ability to establish and close out
positions on the exchanges is subject to the maintenance of a liquid secondary
market. Closing transactions may be effected with respect to options traded in
the over-the-counter markets (currently the primary markets for options on
foreign currencies) only by negotiating directly with the other party to the
option contract or in a secondary market for the option if such market exists.
There is no assurance that a liquid secondary market will exist for any
particular option at any specific time. If it is not possible to effect a
closing transaction, a Fund would have to exercise the option which it purchased
in order to realize any profit. The inability to effect a closing transaction on
an option written by a Fund may result in material losses to the Fund.

(4) A Fund's activities in the options markets may result in a higher
portfolio turnover rate and additional brokerage costs.

FUTURES STRATEGIES

A futures contract is a bilateral agreement wherein one party agrees to accept,
and the other party agrees to make, delivery of cash, an underlying debt
security or the currency as called for in the contract at a specified future
date and at a specified price. For futures contracts with respect to an index,
delivery is of an amount of

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cash equal to a specified dollar amount times the difference between the index
value at the time of the contract and the close of trading of the contract.

A Fund may sell interest rate futures contracts in order to continue to receive
the income from a fixed income security, while endeavoring to avoid part of or
all of a decline in the market value of that security which would accompany an
increase in interest rates.

A Fund may purchase index futures contracts for several reasons: to simulate
full investment in the underlying index while retaining a cash balance for fund
management purposes, to facilitate trading, to reduce transactions costs, or to
seek higher investment returns when a futures contract is priced more
attractively than securities in the index.

A Fund may purchase call options on a futures contract as a means of obtaining
temporary exposure to market appreciation at limited risk. This strategy is
analogous to the purchase of a call option on an individual security, in that it
can be used as a temporary substitute for a position in the security itself.

A Fund may sell foreign currency futures contracts to hedge against possible
variations in the exchange rate of the foreign currency in relation to the U.S.
dollar. In addition, a Fund may sell foreign currency futures contracts when its
Investment Adviser anticipates a general weakening of foreign currency exchange
rates that could adversely affect the market values of the Fund's foreign
securities holdings. A Fund may purchase a foreign currency futures contract to
hedge against an anticipated foreign exchange rate increase pending completion
of anticipated transactions. Such a purchase would serve as a temporary measure
to protect the Fund against such increase. A Fund may also purchase call or put
options on foreign currency futures contracts to obtain a fixed foreign exchange
rate at limited risk. A Fund may write call options on foreign currency futures
contracts as a partial hedge against the effects of declining foreign exchange
rates on the value of foreign securities.

SPECIAL CHARACTERISTICS AND RISKS OF FUTURES AND RELATED OPTIONS TRADING

No price is paid upon entering into futures contracts; rather, a Fund is
required to deposit with its custodian in a segregated account in the name of
the futures broker an amount of cash or U.S. Government Securities generally
equal to 5% or less of the contract value. This amount is known as initial
margin. Subsequent payments, called variation margin, to and from the broker,
would be made on a daily basis as the value of the futures position varies. When
writing a call on a futures contract, variation margin must be deposited in
accordance with applicable exchange rules. The initial margin in futures
transactions is in the nature of a performance bond or good-faith deposit on the
contract that is returned to the Fund upon termination of the contract, assuming
all contractual obligations have been satisfied.

Holders and writers of futures and options on futures contracts can enter into
offsetting closing transactions, similar to closing transactions on options, by
selling or purchasing, respectively, a futures contract or related option with
the same terms as the position held or written. Positions in futures contracts
may be closed only on an exchange or board of trade providing a secondary market
for such futures contracts.

Under certain circumstances, futures exchanges may establish daily limits in the
amount that the price of a futures contract or related option may vary either up
or down from the previous day's settlement price. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. Prices could move to the daily limit for several consecutive
trading days with little or no trading and thereby prevent prompt liquidation of
positions. In such event, it may not be possible for a Fund to close a position,
and in the event of adverse price movements, it would have to make daily cash
payments of variation margin. In addition:

(1) Successful use by a Fund of futures contracts and related options will
depend upon the Investment Adviser's ability to predict movements in the
direction of the overall securities and currency markets, which requires
different skills and techniques than predicting changes in the prices of
individual

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<PAGE>

securities. Moreover, futures contracts relate not to the current level of the
underlying instrument but to the anticipated levels at some point in the future;
thus, for example, trading of stock index futures may not reflect the trading of
the securities which are used to formulate an index or even actual fluctuations
in the relevant index itself.

(2) The price of futures contracts may not correlate perfectly with
movement in the price of the hedged currencies due to price distortions in the
futures market or otherwise. There may be several reasons unrelated to the value
of the underlying currencies which causes this situation to occur. As a result,
a correct forecast of general market trends may still not result in successful
hedging through the use of futures contracts over the short term.

(3) There is no assurance that a liquid secondary market will exist for
any particular contract at any particular time. In such event, it may not be
possible to close a position, and in the event of adverse price movements, the
Fund would continue to be required to make daily cash payments of variation
margin.

(4) Like other options, options on futures contracts have a limited life.
A Fund will not trade options on futures contracts on any exchange or board of
trade unless and until, in the Adviser's opinion, the market for such options
has developed sufficiently that the risks in connection with options on futures
transactions are not greater than the risks in connection with futures
transactions.

(5) Purchasers of options on futures contracts pay a premium in cash at
the time of purchase. This amount and the transaction costs is all that is at
risk. Sellers of options on futures contracts, however, must post an initial
margin and are subject to additional margin calls which could be substantial in
the event of adverse price movements.

(6) A Fund's activities in the futures markets may result in a higher
portfolio turnover rate and additional transaction costs in the form of added
brokerage commissions.

(7) Buyers and sellers of foreign currency futures contracts are subject
to the same risks that apply to the buying and selling of futures generally. In
addition, there are risks associated with foreign currency futures contracts and
their use as a hedging device similar to those associated with options on
foreign currencies described above. In addition, settlement of foreign currency
futures contracts must occur within the country issuing that currency. Thus, a
Fund must accept or make delivery of the underlying foreign currency in
accordance with any U.S. or foreign restrictions or regulations regarding the
maintenance of foreign banking arrangements by U.S. residents, and the Fund may
be required to pay any fees, taxes or charges associated with such delivery
which are assessed in the issuing country.

COMMODITY FUTURES CONTRACTS AND COMMODITY OPTIONS

A Fund may invest in certain financial futures contracts and options contracts
in accordance with the policies described in the Prospectus and above. A Fund
will only invest in futures contracts, options on futures contracts and other
options contracts that are subject to the jurisdiction of the CFTC after filing
a notice of eligibility and otherwise complying with the requirements of Section
4.5 of the rules of the CFTC. Under that section the Fund would be permitted to
purchase such futures or options contracts only for bona fide hedging purposes
within the meaning of the rules of the CFTC; provided, however that in addition,
with respect to positions in commodity futures and option contracts not for bona
fide hedging purposes the Fund represents that the aggregate initial margin and
premiums required to establish these positions (subject to certain exclusions)
will not exceed 5% of the liquidation value of the Fund's assets after taking
into account unrealized profits and losses on any such contract the Fund has
entered into.

FOREIGN CURRENCY TRANSACTIONS

Investments in foreign companies will usually involve the currencies of foreign
countries. In addition, a Fund may temporarily hold funds in bank deposits in
foreign currencies pending the completion of certain investment

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<PAGE>

programs. Accordingly, the value of the assets of a Fund, as measured in U.S.
dollars, may be affected by changes in foreign currency exchange rates and
exchange control regulations. In addition, the Fund may incur costs in
connection with conversions between various currencies. A Fund may conduct
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market or by entering
into foreign currency forward contracts ("forward contracts") to purchase or
sell foreign currencies. A forward contract involves an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days (usually less than one year) from the date of the contract agreed upon by
the parties, at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers and involve the risk that
the other party to the contract may fail to deliver currency when due, which
could result in losses to the Fund. A forward contract generally has no deposit
requirement, and no commissions are charged at any stage for trades. Foreign
exchange dealers realize a profit based on the difference between the price at
which they buy and sell various currencies.

A Fund may enter into forward contracts under two circumstances. First, with
respect to specific transactions, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, it may desire
to "lock in" the U.S. dollar price of the security. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars, of the amount
of foreign currency involved in the underlying security transactions, the Fund
may be able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date the security is purchased or sold
and the date on which payment is made or received.

Second, a Fund may enter into forward contracts in connection with existing
portfolio positions. For example, when an Investment Adviser believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar, the Fund may enter into a forward contract to sell, for
a fixed amount of dollars, the amount of foreign currency approximating the
value of some or all of the Fund's investment securities denominated in such
foreign currency.

The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The projection of short-term currency
market movement is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward contracts involve the risk
of inaccurate predictions of currency price movements, which may cause the Fund
to incur losses on these contracts and transaction costs. The Advisers do not
intend to enter into forward contracts on a regular or continuous basis and will
not do so if, as a result, a Fund will have more than 25 percent of the value of
its total assets committed to such contracts or the contracts would obligate the
Fund to deliver an amount of foreign currency in excess of the value of the
Fund's investment securities or other assets denominated in that currency.

At or before the settlement of a forward contract, a Fund may either make
delivery of the foreign currency or terminate its contractual obligation to
deliver the foreign currency by purchasing an offsetting contract. If the Fund
chooses to make delivery of the foreign currency, it may be required to obtain
the currency through the conversion of assets of the Fund into the currency.
The Fund may close out a forward contract obligating it to purchase a foreign
currency by selling an offsetting contract. If the Fund engages in an
offsetting transaction, it will realize a gain or a loss to the extent that
there has been a change in forward contract prices. Additionally, although
forward contracts may tend to minimize the risk of loss due to a decline in the
value of the hedged currency, at the same time they tend to limit any potential
gain which might result should the value of such currency increase.

There is no systematic reporting of last sale information for foreign
currencies, and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Quotation information available is generally representative of very large
transactions in the interbank market. The interbank market in foreign
currencies is a global around-the-clock market.

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<PAGE>

When required by applicable regulatory guidelines, a Fund will set aside cash,
U.S. Government Securities or other liquid, high-grade debt securities in a
segregated account with its custodian in the prescribed amount.

EQUITY SECURITIES AND ADDITIONAL INFORMATION CONCERNING THE EQUITY FUNDS

CONTRARIAN STOCK FUND

Contrarian Stock Fund invests primarily in common stocks which may be out of
favor with the investment community when purchased but for which the Adviser
believes there is significant potential for price appreciation. The basic
premise to the Adviser's "contrarian" investment approach is that security
prices change more than fundamental investment values. The Adviser monitors a
universe of depressed issues as a starting point in making investment decisions
for the Fund. It then projects the earnings of these depressed companies in
normal and peak years and estimates how the market might value these earnings.
Analysis of possible investments is intensive and fundamental, with emphasis on
the quality of a firm's assets and its ability to earn good returns on those
assets.

COMMON STOCK 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 regional securities exchange and may not be traded every
day or in the volume typical of securities trading on a 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 a lengthy period
of time. The market value of all securities, including equity securities, is
based upon the market's perception of value and not necessarily the book value
of an issuer or other objective measure of a company's worth.

CONVERTIBLE SECURITIES

A Fund may invest in convertible securities. A convertible security is a bond,
debenture, note, preferred stock or other security that may be converted into or
exchanged for a prescribed amount of common stock of the same or a different
issuer within a particular period of time at a specified price or formula. 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 stable 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 subordinated to comparable nonconvertible securities. Although no
securities investment is without some risk, investment in convertible securities
generally entails less risk than in the issuer's common stock. However, the
extent to which such risk is reduced depends in large measure upon the degree to
which the convertible security sells above its value as a fixed income security.
Convertible securities have unique investment characteristics in that they
generally (1) have higher yields than common stocks, but lower yields than
comparable non-convertible securities, (2) are less subject to fluctuation in
value than the underlying stocks since they have fixed income characteristics
and (3) provide the potential for capital appreciation if the market price of
the underlying common stock increases.

The value of a convertible security is a function of its "investment value"
(determined by a comparison of its yield with the yields of other securities of
comparable maturity and quality that do not have a conversion

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<PAGE>

privilege) and its "conversion value" (the security's worth, at market value, if
converted into the underlying common stock). The investment value of a
convertible security is influenced by changes in interest rates, with investment
value declining as interest rates increase and increasing as interest rates
decline. The credit standing of the issuer and other factors also may have an
effect on the convertible security's investment value. The conversion value of
a convertible security is determined by the market price of the underlying
common stock. If the conversion value is low relative to the investment value,
the price of the convertible security is governed principally by its investment
value and generally the conversion value decreases as the convertible security
approaches maturity. To the extent the market price of the underlying common
stock approaches or exceeds the conversion price, the price of the convertible
security will be increasingly influenced by its conversion value. In addition,
a convertible security generally will sell at a premium over its conversion
value determined by the extent to which investors place value on the right to
acquire the underlying common stock while holding a fixed income security.

A convertible security may be subject to redemption at the option of the issuer
at a price established in the convertible security's governing instrument. If a
convertible security held by the Fund is called for redemption, the Fund will be
required to permit the issuer to redeem the security, convert it into the
underlying common stock or sell it to a third party.

EQUITY-LINKED SECURITIES

Equity-linked securities are securities that are convertible into or based upon
the value of, equity securities upon certain terms and conditions. The following
are three examples of equity-linked securities. A fund may invest in the
securities described below or other similar equity-linked securities.

Preferred Equity Redemption Cumulative Stock ("PERCS") technically are preferred
stock with some characteristics of common stock. PERCS are mandatorily
convertible into common stock after a period of time, usually three years,
during which the investors' capital gains are capped, usually at 30%. Commonly,
PERCS may be redeemed by the issuer at any time or if the issuer's common stock
is trading at a specified price level or better. The redemption price starts at
the beginning of the PERCS' duration period at a price that is above the cap by
the amount of the extra dividends the PERCS holder is entitled to receive
relative to the common stock over the duration of the PERCS and declines to the
cap price shortly before maturity of the PERCS. In exchange for having the cap
on capital gains and giving the issuer the option to redeem the PERCS at any
time or at the specified common stock price level, a Fund may be compensated
with a substantially higher dividend yield than that on the underlying common
stock. Funds that seek current income find PERCS attractive because a PERCS
provides a higher dividend income than that paid with respect to a company's
common stock.

Equity-Linked Securities ("ELKS") differ from ordinary debt securities, in that
the principal amount received at maturity is not fixed but is based on the price
of the issuer's common stock. ELKS are debt securities commonly issued in fully
registered form for a term of three years under an indenture trust. At
maturity, the holder of ELKS will be entitled to receive a principal amount
equal to the lesser of a cap amount, commonly in the range of 30% to 55% greater
than the current price of the issuer's common stock, or the average closing
price per share of the issuer's common stock, subject to adjustment as a result
of certain dilution events, for the 10 trading days immediately prior to
maturity. Unlike PERCS, ELKS are commonly not subject to redemption prior to
maturity. ELKS usually bear interest during the three-year term at a
substantially higher rate than the dividend yield on the underlying common
stock. In exchange for having the cap on the return that might have been
received as capital gains on the underlying common stock, the Investment Fund
may be compensated with the higher yield, contingent on how well the underlying
common stock does. Funds that seek current income find ELKS attractive because
ELKS provide a higher dividend income than that paid with respect to a company's
common stock.

Liquid Yield Option Notes ("LYONs") differ from ordinary debt securities, in
that the amount received prior to maturity is not fixed but is based on the
price of the issuer's common stock. LYONs are zero-coupon notes that sell at a
large discount from face value. For an investment in LYONs, a Fund will not
receive any

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<PAGE>

interest payments until the notes mature, typically in 15 or 20 years, when the
notes are redeemed at face, or par, value. The yield on LYONs, typically, is
lower-than-market rate for debt securities of the same maturity, due in part to
the fact that the LYONs are convertible into common stock of the issuer at any
time at the option of the holder of the LYON. Commonly, LYONs are redeemable by
the issuer at any time after an initial period or if the issuer's common stock
is trading at a specified price level or better, or, at the option of the
holder, upon certain fixed dates. The redemption price typically is the
purchase price of the LYONs plus accrued original issue discount to the date of
redemption, which amounts to the lower-than-market yield. A Fund will receive
only the lower-than-market yield unless the underlying common stock increases in
value at a substantial rate. LYONs are attractive to investors when it appears
that they will increase in value due to the rise in value of the underlying
common stock.

WARRANTS

A warrant is an option 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. To the extent that the market
value of the security that may be purchased upon exercise of the warrant rises
above the exercise price, the value of the warrant will tend to rise. To the
extent that the exercise price equals or exceeds the market value of such
security, the warrants will have little or no market value. If a warrant is not
exercised within the specified time period, it will become worthless and the
Fund will lose the purchase price paid for the warrant and the right to purchase
the underlying security.

ILLIQUID SECURITIES AND RESTRICTED SECURITIES

Each Fund may invest up to 15 percent (ten percent in the case of the Money
Market Funds) 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 1933 Act ("restricted securities"), 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 which
are otherwise not readily marketable and includes, among other things, purchased
over-the-counter (OTC) options and repurchase agreements not entitling the
holder to repayment within seven days. The Board and, in the case of
International Fund, the Core Trust Board, has the ultimate responsibility for
determining whether specific securities are liquid or illiquid and has delegated
the function of making day-to-day determinations of liquidity to the Investment
Adviser of each Fund, pursuant to guidelines approved by the applicable Board.
The Advisers take into account a number of factors in reaching liquidity
decisions, including but not limited to: (1) the frequency of trades and
quotations for the security; (2) the number of dealers willing to purchase or
sell the security and the number of other potential buyers; (3) the willingness
of dealers to undertake to make a market in the security; and (4) the nature of
the marketplace trades, including the time needed to dispose of the security,
the method of soliciting offers and the mechanics of the transfer. The Advisers
monitor the liquidity of the securities held by each Fund and report
periodically on such decisions to the Board or Core Trust Board, as applicable.

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 institutional market has developed for certain securities that are not
registered under the 1933 Act, including repurchase agreements, commercial
paper, foreign securities and corporate bonds and notes. Institutional
investors depend on an efficient institutional market in which the unregistered
security can be readily resold or on the issuer's ability to honor a demand for
repayment of the unregistered security. A security's contractual or legal
restrictions

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<PAGE>

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 under
guidelines adopted by the Board or the Core Trust Board, the Advisers may
determine that such securities are not illiquid securities. 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

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. Except as otherwise noted, no Fund
may purchase securities for investment while any borrowing equaling five percent
or more of the Fund's total assets is outstanding or borrow for purposes other
than meeting redemptions in an amount exceeding five 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.

OTHER TECHNIQUES INVOLVING LEVERAGE

Utilization of leveraging involves special risks and may involve speculative
investment techniques. Certain 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. 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. The Funds use these investment techniques only when the Adviser
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 investment the Fund has invested. 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. Leverage may involve the creation of a liability that requires the
Fund to pay interest (for instance, reverse repurchase agreements) or the
creation of a liability that does not entail any interest costs (for instance,
forward commitment transactions).

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<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 Securities and Exchange Commission guidelines. The account's
value, which is marked to market daily, will be at least equal to the Fund's
commitments under these transactions. The Fund's commitments include the Fund's
obligations to repurchase securities under a reverse repurchase agreement and
settle when-issued and forward commitment transactions.

MARGIN AND SHORT SALES

Certain Funds may enter into short sales as described in the prospectus of that
Fund. The Funds may short sales of securities against the box. A short sale is
"against the box" to the extent that the Fund contemporaneously owns or has the
right to obtain at no added cost securities identical to those sold short.
Prohibitions on entering short sales other than against the box does not
restrict a Fund's ability to use short-term credits necessary for the clearance
of portfolio transactions and to make margin deposits in connection with
permitted transactions in options and futures contracts.

REVERSE REPURCHASE AGREEMENTS

Reverse repurchase agreements are 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. 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.
Counterparties to a Money Market Fund's reverse repurchase agreements must be a
primary dealer that reports to the Federal Reserve Bank of New York ("primary
dealers") or one of the largest 100 commercial banks in the United States.

Generally, a reverse repurchase agreement enables the Fund to recover for the
term of the reverse repurchase agreement all or most of the cash invested in the
portfolio securities sold and to keep the interest income associated with those
portfolio securities. Such transactions are only advantageous if the interest
cost to the Fund of the reverse repurchase transaction is less than the cost of
obtaining the cash otherwise. In addition, interest costs on the money received
in a reverse repurchase agreement may exceed the return received on the
investments made by a Fund with those monies. The use of reverse repurchase
agreement proceeds to make investments may be considered to be a speculative
technique.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

Certain Funds may purchase or sell portfolio securities on a when-issued or
delayed delivery basis. When-issued or delayed delivery transactions arise when
securities are purchased by a Fund with payment and delivery to take place in
the future in order to secure what is considered to be an advantageous price and
yield to the Fund at the time it enters into the transaction. In those cases,
the purchase price and the interest rate payable on the securities are fixed on
the transaction date and delivery and payment may take place a month or more
after the date of the transaction. When a Fund enters into a delayed delivery
transaction, it becomes obligated to purchase securities and it has all of the
rights and risks attendant to ownership of the security, although delivery and
payment occur at a later date. To facilitate such acquisitions, the Fund will
maintain with its custodian a separate account with portfolio securities in an
amount at least equal to such commitments.

At the time a Fund makes the commitment to purchase securities on a when-issued
or delayed delivery basis, the Fund will record the transaction as a purchase
and thereafter reflect the value each day of such securities in determining its
net asset value. The value of the fixed income securities to be delivered in
the future will fluctuate as interest rates and the credit of the underlying
issuer vary. On delivery dates for such transactions, the Fund will meet its
obligations from maturities, sales of the securities held in the separate
account or from other available

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<PAGE>

sources of cash. A Fund generally has the ability to close out a purchase
obligation on or before the settlement date, rather than purchase the security.
If a Fund chooses to dispose of the right to acquire a when-issued security
prior to its acquisition, it could, as with the disposition of any other
portfolio obligation, realize a gain or loss due to market fluctuation.

To the extent a Fund engages in when-issued or delayed delivery transactions, it
will do so for the purpose of acquiring securities consistent with the Fund's
investment objectives and policies and not for the purpose of investment
leverage or to speculate in interest rate changes. A Fund will only make
commitments to purchase securities on a when-issued or delayed delivery basis
with the intention of actually acquiring the securities, but the Fund reserves
the right to dispose of the right to acquire these securities before the
settlement date if deemed advisable.

The use of when-issued transactions and forward commitments enables the 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. When-issued securities and
forward commitments may be sold prior to the settlement date, but a Fund enters
into when-issued and forward commitments only with the intention of actually
receiving or delivering the securities, as the case may be. In some instances,
the third-party seller of when-issued or forward commitment securities may
determine prior to the settlement date that it will be unable to meet its
existing transaction commitments without borrowing securities. If advantageous
from a yield perspective, a Fund may, in that event, agree to resell its
purchase commitment to the third-party seller at the current market price on the
date of sale and concurrently enter into another purchase commitment for such
securities at a later date. As an inducement for a Fund to "roll over" its
purchase commitment, the Fund may receive a negotiated fee. When-issued
securities may include bonds purchased on a "when, as and if issued" basis under
which the issuance of the securities depends upon the occurrence of a subsequent
event. Any significant commitment of a Fund's assets to the purchase of
securities on a "when, as and if issued" basis may increase the volatility of
the Fund's net asset value. For purposes of the Funds' investment policies, the
purchase of securities with a settlement date occurring on a Public Securities
Association approved settlement date is considered a normal delivery and not a
when-issued or forward commitment purchase.

REPURCHASE AGREEMENTS

The Funds maintain procedures for evaluating and monitoring the creditworthiness
of vendors of repurchase agreements. In addition, each Fund that may enter into
repurchase agreements requires continual maintenance of collateral held by its
custodian with a market value at least equal to the repurchase price.
Counterparties to a Money Market Fund's repurchase agreements must be a primary
dealer that reports to the Federal Reserve Bank of New York ("primary dealers")
or one of the largest 100 commercial banks in the United States.

Under the terms of a repurchase agreement, a Fund purchases securities from
registered broker-dealers, banks or their affiliates subject to the seller's
agreement to repurchase such securities at a mutually agreed-upon date and
price. The repurchase price generally equals the price paid by the Fund plus
interest negotiated on the basis of current short-term rates, which may be more
or less than the rate on the underlying portfolio securities. The seller under
a repurchase agreement is required to maintain the value of collateral held
pursuant to the agreement at not less than the repurchase price (including
accrued interest). If the seller were to default on its repurchase obligation
or become insolvent, the Fund holding such obligation would suffer a loss to the
extent that the proceeds from a sale of the underlying portfolio securities were
less than the repurchase price under the agreement, or to the extent that the
disposition of such securities by the Fund were delayed pending court action.
Additionally, there is no controlling legal precedent confirming that a Fund
would be entitled, as against a claim by such seller or its receiver or trustee
in bankruptcy, to retain the underlying securities, although the Fund's believe
that, under the regular procedures normally in effect for custody of a Fund's
securities subject to repurchase agreements, and under Federal laws, a court of
competent jurisdiction would rule in favor of the Fund if presented with the
question. Securities subject to repurchase agreements will be held by the
Fund's custodian or another qualified

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custodian or in the Federal Reserve book-entry system. Repurchase agreements
are considered to be loans by a Fund for certain purposes under the 1940 Act.

TEMPORARY DEFENSIVE POSITION

When a Fund, in accordance with the policies described in its Prospectus,
assumes a temporary defensive position, it may invest in (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 that have, at the time of investment, total assets in excess of
one billion dollars and that are insured by the Federal Deposit Insurance
Corporation, (iii) commercial paper of prime quality rated Prime-2 or higher by
Moody's or A-2 or higher by S&P or, if not rated, determined by the Adviser to
be of comparable quality, (iv) repurchase agreements covering any of the
securities in which the Fund may invest directly and (v) money market mutual
funds.

Except as may be permitted by the SEC, the Funds may invest in the securities of
other investment companies within the limits prescribed by the 1940 Act. Under
normal circumstances, each Fund intends to invest less than 5% of the value of
its net assets in the securities of other investment companies. International
Fund invests al of its investable assets in International Portfolio and
Conservative Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund,
Diversified Equity Fund and Growth Equity Fund invest in various investment
companies in accordance with an exemptive order issued by the SEC. In addition
to the Fund's expenses (including the various fees), as a shareholder in another
investment company, a Fund would bear its pro rata portion of the other
investment company's expenses (including fees).

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2. INFORMATION CONCERNING COLORADO AND MINNESOTA

Following is a brief summary of some of the factors that may affect the
financial condition of the State of Colorado and the State of Minnesota and
their respective political subdivisions. It is not a complete or comprehensive
description of these factors or an analysis of financial conditions and may not
be indicative of the financial condition of issuers of obligations held by
Colorado and Minnesota Tax-Free Funds or any particular projects financed with
the proceeds of such obligations. Many factors not included in the summary,
such as the national economy, social and environmental policies and conditions,
and the national and international markets for products produced in each state
could have an adverse impact on the financial condition of a State and its
political subdivisions, including the issuers of obligations held by a Fund. It
is not possible to predict whether and to what extent those factors may affect
the financial condition of a State and its political subdivisions, including the
issuers of obligations held by a Fund.

The State of Colorado's political subdivisions include approximately 1,600 units
of local government in Colorado, including counties, statutory cities and towns,
home-rule cities and counties, school districts and a variety of water,
irrigation, and other special districts and special improvement districts, all
with various constitutional and statutory authority to levy taxes and incur
indebtedness.

The following summary is based on publicly available information that has not
been independently verified by the Trust or its legal counsel.

COLORADO

THE COLORADO STATE ECONOMY

Among the most significant sectors of the State's economy are services, trade,
manufacture of durable and non-durable goods and tourism. Between late 1984 and
mid-1987, the State's economy was adversely affected by numerous factors,
including the contraction of the energy sector, layoffs by advanced technology
firms and an excess supply of both residential and nonresidential buildings
causing employment in the construction sector to decline. As a result of these
conditions, certain areas of the State experienced particularly high
unemployment. Furthermore, in 1986, for the first time in 32 years, job
generation in the State was negative and, in 1986, for the first time in 21
years, the State experienced negative migration, with more people leaving the
State than moving in.

From 1987 through 1995, there has been moderate but steady improvement in the
Colorado economy: per-capita income increased approximately 48.4% (4.4% in
1995) and retail trade sales increased approximately 63.3% (5.2% in 1995). The
State's estimated growth rate is above the national growth rate and the State's
unemployment rate is still below the national unemployment rate (in 1995 the
State's unemployment rate was 4.2% and the United State's unemployment rate was
5.6%).

STATE REVENUES

The State operates on a fiscal year beginning July 1 and ending June 30. Fiscal
year 1995 refers to the fiscal year ended June 30, 1995.

The State derives all of its General Fund revenues from taxes. The two most
important sources of these revenues are sales and use taxes and personal income
taxes, which accounted for approximately 31.2% and 53.3%, respectively, of total
General Fund revenues during fiscal year 1994 and approximately 31.5% and 53.2%,
respectively, of total General Fund revenues during fiscal year 1995. The
ending General Fund balance for fiscal year 1994 was $405.1 million and for
fiscal year 1995 was approximately $396.7 million.

The Colorado Constitution contains strict limitations on the ability of the
State to create debt except under certain very limited circumstances. However,
the constitutional provision has been interpreted not to limit the ability of
the State to issue certain obligations which do not constitute debt, including
short-term obligations which do not extend

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beyond the fiscal year in which they are incurred and lease purchase obligations
which are subject to annual appropriation. The State is authorized pursuant to
State statutes to issue short-term notices to alleviate temporary cash flow
shortfalls. The most recent issue of such notes, issued on July 1, 1996, was
given the highest rating available for short-term obligations by S&P, which is a
division of The McGraw-Hill Companies, Inc. (SP-1+) and Fitch Investors Service,
Inc. (F-1+) (A rating on such notes was not requested from, and consequently no
rating was given by, Moody's) Because of the short-term nature of such notes,
their ratings should not be considered necessarily indicative of the State's
general financial condition.

TAX AND SPENDING LIMITATION AMENDMENT

On November 3, 1992, the Colorado voters approved a State constitutional
amendment (the "Amendment") that restricts the ability of the State and local
governments to increase taxes, revenues, debt and spending. The Amendment
provides that its provisions supersede conflicting State constitutional, State
statutory, charter or other State or local provisions.

The provisions of the Amendment apply to "districts", which are defined in the
Amendment as the State or any local government, with certain exclusions. Under
the terms of the Amendment, districts must have prior voter approval to impose
any new tax, tax rate increase, mill levy increase, valuation for assessment
ratio increase and extension of an expiring tax. Such prior voter approval is
also required, except in certain limited circumstances, for the creation of "any
multiple-fiscal year direct or indirect district debt or other financial
obligation." The Amendment prescribes the timing and procedures for any
elections required by the Amendment.

Because the Amendment's voter approval requirements apply to any "multiple
fiscal year" debt or financial obligation, short-term obligations which do not
extend beyond the fiscal year in which they are incurred are exempt from the
voter approval requirements of the Amendment. In addition, the Colorado Court
of Appeals has determined that lease purchase obligations subject to annual
appropriation are not subject to the voter approval requirements of the
Amendment. The Amendment's voter approval requirements and other limitations
(discussed in the following paragraph) do not apply to "enterprises," which are
defined in the Amendment as follows: "a government-owned business authorized to
issue its own revenue bonds and receiving under 10% of annual revenue in grants
from all Colorado state and local governments combined."

Among other provisions, the Amendment requires the establishment of emergency
reserves, limits increases in district revenues and limits increases in district
fiscal year spending. As a general matter, annual State fiscal year spending
may change not more than inflation plus the percentage change in State
population in the prior calendar year. Annual local district fiscal year
spending may change no more than inflation in the prior calendar year plus
annual local growth, as defined in and subject to the adjustments provided in
the Amendment. The Amendment provides that annual district property tax
revenues may change no more than inflation in the prior calendar year plus
annual local growth, as defined in and subject to the adjustments provided in
the Amendment. District revenues in excess of the limits prescribed by the
Amendment are required, absent voter approval, to be refunded by any reasonable
method, including temporary tax credits or rate reductions. In addition, the
Amendment prohibits new or increased real property transfer taxes, new State
real property taxes and new local district income taxes. The Amendment also
provides that a local district may reduce or end its subsidy to any program
(other than public education through grade 12 or as required by federal law)
delegated to it by the State General Assembly for administration.

This description is not intended to constitute a complete description of all of
the provisions of the Amendment. Furthermore, many provisions of the Amendment
and their application are unclear. Several statutes have been enacted since the
passage of the Amendment attempting to clarify the application of the Amendment
with respect to certain governmental entities and activities and numerous court
decisions have been rendered interpreting certain of the Amendment's provisions.
However, many provisions of the Amendment may require further legislative or
judicial clarification. The future impact of the Amendment on the financial
operations and obligations of the State and local governments in the State
cannot be determined at this time. Attempts to apply the provisions of the
Amendment to obligations issued prior to the approval of the Amendment may be
challenged as violation of protections afforded by the federal constitution
against impairment of contracts.

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MINNESOTA

The following information has been derived from the ECONOMIC REPORT TO THE
GOVERNOR for 1993 and 1994, prepared by the Economic Resource Group, and COMPARE
MINNESOTA: AN ECONOMIC AND STATISTICAL FACT BOOK 1994/1995 by the Minnesota
Department of Trade and Economic Development. More recent editions of such
publications were not available at the time this prospectus was prepared.

THE STRUCTURE OF THE MINNESOTA STATE'S ECONOMY

Diversity and a significant natural resource base are two important
characteristics of the State's economy.

When viewed in 1993 on an aggregate level, the structure of the State's economy
parallels the structure of the United States economy as a whole. State
employment in 10 major sectors was distributed in approximately the same
proportions as national employment. In all sectors, the share of total State
employment was within 2 percentage points of national employment share.

Some unique characteristics of the State's economy are apparent in employment
concentrations in industries that comprise the durable goods and non-durable
goods manufacturing categories. In the durable goods industries, the State's
employment in 1993 was highly concentrated in industrial machinery, fabricated
metals, instruments and miscellaneous categories. Of particular importance is
the industrial machinery category in which 32.6 percent of the State's durable
goods employment was concentrated in 1993, as compared to 18.9 percent for the
United States as a whole. The emphasis is partly explained by the location in
the State of Ceridian, Unisys, IBM, Cray Research, and other computer equipment
manufacturers which are included in the industrial machinery classification.

The importance of the State's resource base for overall employment is apparent
in the employment mix in non-durable goods industries. In 1993, 29.4 percent of
the State's non-durable goods employment was concentrated in food and kindred
industries, and 19.1 percent in paper and allied industries. This compares to
21.4 percent and 8.8 percent, respectively, for comparable sectors in the
national economy. Both of these rely heavily on renewable resources in the
State. Over half of the State's acreage is devoted to agricultural purposes,
and nearly one-third to forestry. Printing and publishing is also relatively
more important in the State than in the U.S.

Mining is currently a less significant factor in the State economy than it once
was. Mining employment, primarily in the iron ore or taconite industry, dropped
from 17.3 thousand in 1979 to 7.4 thousand in 1993. It is not expected that
mining employment will return to 1979 levels. However, Minnesota retains
significant quantities of taconite as well as copper, nickel, cobalt, and peat
which may be utilized in the future.

EMPLOYMENT GROWTH IN THE STATE

In the period 1980 to 1993, overall employment growth in Minnesota lagged behind
national growth. However, manufacturing has been a strong sector, with
Minnesota employment outperforming its U.S. counterpart in both the 1980-1990
and 1990-1993 periods. Over 40 percent of the total increase in Minnesota
employment between the years 1983-1992 resulted from a 50.2 percent increase in
employees in the services industry during this period. Mining was the only
industry where employment decreased between 1983-1992 in both Minnesota and the
United States, dropping by almost 14 percent in Minnesota and 33 percent in the
United States.

In spite of a strong manufacturing sector, during the 1980 to 1990 period total
employment in Minnesota increased 18.1 percent while increasing 20.1 percent
nationally. Most of Minnesota's relatively slower growth is associated with
declining agricultural employment and with the two recessions in the U.S.
economy during the early 1980's which were more severe in Minnesota than
nationwide. Minnesota non-farm employment growth generally kept pace with the
nation in the period after the 1981-82 recession ended in late 1982. Employment
data through December, 1993 indicate the recession which began in July, 1990 was
less severe in Minnesota than in the national economy, and that Minnesota's
recovery has been more rapid than the nation's. Between 1990 and 1993,
Minnesota's non-farm employment grew 5.1 percent compared to only 0.7 percent
nationwide.

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PERFORMANCE OF THE STATE'S ECONOMY

Since 1980, State per capita personal income has been within three percentage
points of national per capita personal income. The State's per capita income,
which is computed by dividing personal income by total resident population, has
generally remained above the national average in spite of the early 1980's
recessions and some difficult years in agriculture. In 1992, Minnesota per
capita personal income was 101.6 percent of its U.S. counterpart.

In the level of personal income per capita, Minnesota ranked second among twelve
north central states in both 1990 and 1992. During the period 1983 to 1992,
Minnesota ranked first among such states in growth of personal income and third
during the period 1991 to 1992. Minnesota ranked seventeenth nationally and
second among the twelve north central states with a per capita disposable income
of $17,448 in 1992. During 1990-1992, wage and salary disbursements which
constitute some 60% of total personal income grew 12.3 percent in Minnesota as
compared to 8.3 percent for the United States. Personal income in Minnesota
grew more rapidly than eleven other north central states' averages during 1991-
1992, and faster than the United States average. Over the period 1983 to 1992,
Minnesota non-agricultural employment grew 27.4 percent while such employment in
the United States grew 19.7 percent. During the 1990-1993 period, Minnesota
non-agricultural employment increased 5.1 percent, while regional employment
increased 1.3 percent.

Retail sales in Minnesota increased an average of 5.9 percent per year,
compounded, between 1983 and 1992. This growth, however, was not uniform from
year to year. Retail sales grew only 3.4 percent in 1982, a recession year, and
3.0 percent in 1985, while growing 12.1 percent in 1984, and 2.0 percent in
1986.

During 1992 and 1993, the State's monthly unemployment rate was generally less
than the national unemployment rate, averaging 5.1 percent in 1993, as compared
to the national average of 7.4 percent.

POPULATION TRENDS IN THE STATE

Minnesota resident population grew from 4,085,000 in 1980 to 4,390,000 in 1990,
or at an average annual compound rate of 0.7 percent. In comparison, U.S.
population grew at an annual compound rate of 0.9 percent during this period.
Minnesota resident population increased 4,625,000 in 1995. Minnesota population
is currently forecast to grow at an annual compound rate of 0.6 percent between
1990 and 2000. Minnesota population growth accelerated during the late 1980's.

3. INVESTMENT LIMITATIONS

Except as required by the 1940 Act, if any percentage restriction on investment
or utilization of assets is adhered to at the time an investment is made, a
later change in percentage resulting from a change in the market values of a
Fund's assets or purchases and redemptions of shares will not be considered a
violation of the limitation.

Whenever reference is made to the limitations of the 1940 Act, to "the extent
permitted by the 1940 Act" or to similar language, the reference shall be deemed
to include reference to any exemptive order obtained by the Trust or which may
be relied upon by the Trust.

For purposes of the fundamental and nonfundamental limitations which relate to
Diversification, the District of Columbia, each state, each political
subdivision, agency, instrumentality and authority thereof, and each multi-state
agency of which a state is a member is deemed to be a separate "issuer." When
the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from the government creating the subdivision
and the security is backed only by the assets and revenues of the subdivision,
such subdivision would be deemed to be the sole issuer. Similarly, in the case
of private activity bonds, if the bond is backed only by the assets and revenues
of the nongovernmental user, then such

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<PAGE>

nongovernmental user would be deemed to be the sole issuer. However, if in
either case, the creating government or some other agency guarantees a security,
that guarantee would be considered a separate security and would be treated as
an issue of such government or other agency.

A Fund's fundamental limitations cannot be changed without the affirmative vote
of the lesser of (i) more than 50% of the outstanding shares of the Fund or (ii)
67% of the shares of the Fund present or represented at a shareholders meeting
at which the holders of more than 50% of the outstanding shares of the Fund are
present or represented.

FUNDAMENTAL LIMITATIONS

Each Fund and International Portfolio has adopted the following investment
limitations which are fundamental policies of the Fund or Portfolio.

(1) DIVERSIFICATION

(a) With respect to 75% of its assets, each MONEY MARKET FUND, INCOME
FUND, TAX-FREE INCOME FUND and VALUGROWTH STOCK may not purchase a
security other than a U.S. Government Security if, as a result, more
than 5% of the Fund's total assets would be invested in the securities
of a single issuer or the Fund would own more than 10% of the
outstanding voting securities of any single issuer

(b) With respect to 75% of its assets, STABLE INCOME FUND, INTERMEDIATE
GOVERNMENT INCOME FUND, DIVERSIFIED BOND FUND, TOTAL RETURN BOND FUND,
LIMITED TERM TAX-FREE FUND and each EQUITY FUND (other than VALUGROWTH
STOCK FUND) may not purchase a security other than a U.S. Government
Security if, as a result, more than 5% of the Fund's total assets
would be invested in the securities of a single issuer or the Fund
would own more than 10% of the outstanding voting securities of any
single issuer; provided, however, that each Fund may invest all or a
portion of its assets in another diversified, open-end management
investment company with substantially the same investment objective,
policies and restrictions as the Fund.

(2) CONCENTRATION

(a) CASH INVESTMENT FUND and READY CASH INVESTMENT 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; provided, (i) there is no limit on investments in U.S.
Government Securities, in repurchase agreements covering U.S.
Government Securities or in foreign government securities, (ii)
municipal securities are not treated as involving a single industry,
(iii) there is no limit on investment in issuers domiciled in a single
country, (iv) financial service companies are classified according to
the end users of their services (for example, automobile finance, bank
finance and diversified finance) and (v) utility companies are
classified according to their services (for example, gas, gas
transmission, electric and gas, electric and telephone); and provided
the Fund will invest more than 25% of the value of the Fund's total
assets in obligations of domestic and foreign financial institutions
and their holding companies.

(b) TREASURY FUND, U.S. GOVERNMENT FUND and MUNICIPAL MONEY MARKET 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; provided,(i) there is no limit on
investments in U.S. Government Securities, in repurchase agreements
covering U.S. Government Securities, in foreign government securities,
or in obligations of domestic commercial banks (including U.S.
branches of foreign banks subject to regulations under U.S. laws
applicable to domestic banks and, to the extent that

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<PAGE>

its parent is unconditionally liable for the obligation, foreign
branches of U.S. banks), (ii) municipal securities are not treated as
involving a single industry, (iii) there is no limit on investment in
issuers domiciled in a single country, (iv) financial service
companies are classified according to the end users of their services
(for example, automobile finance, bank finance and diversified
finance) and (v) utility companies are classified according to their
services (for example, gas, gas transmission, electric and gas,
electric and telephone).

(c) INCOME FUND, TAX-FREE INCOME FUND, COLORADO TAX-FREE FUND, MINNESOTA
TAX-FREE FUND and VALUGROWTH STOCK 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;
provided, however, that there is no limit on investments in U.S.
Government Securities, repurchase agreements covering U.S. Government
Securities or municipal securities and that financial service
companies are classified according to the end users of their services
(for example, automobile finance, bank finance and diversified
finance) and utility companies are classified according to their
services (for example, gas, gas transmission, electric and gas,
electric and telephone).

(d) TOTAL RETURN BOND 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; provided, however,
that there is no limit on investments in U.S. Government Securities,
repurchase agreements covering U.S. Government Securities, mortgage-
related or housing-related securities (including mortgage-related or
housing-related U.S. Government Securities) or municipal securities
and that financial service companies are classified according to the
end users of their services (for example, automobile finance, bank
finance and diversified finance) and utility companies are classified
according to their services (for example, gas, gas transmission,
electric and gas, electric and telephone); and that the Fund may
invest, to the extent permitted by the 1940 Act, all or a portion of
its assets in another diversified, open-end management investment
company with substantially the same investment objective, policies and
restrictions as the Fund.

(e) SMALL COMPANY STOCK FUND and CONTRARIAN STOCK 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; provided, however, that there is no limit on investments in
U.S. Government Securities, repurchase agreements covering U.S.
Government Securities or municipal securities and that financial
service companies are classified according to the end users of their
services (for example, automobile finance, bank finance and
diversified finance) and utility companies are classified according to
their services (for example, gas, gas transmission, electric and gas,
electric and telephone); and that the Funds may invest, to the extent
permitted by the 1940 Act, all or a portion of their assets in another
diversified, open-end management investment company with substantially
the same investment objective, policies and restrictions as the Fund.

(f) INTERNATIONAL FUND may not purchase securities if, immediately after
the purchase, more than 25 percent of the value of International
Portfolio's total assets would be invested in the securities of
issuers conducting their principal business activities in the same
industry; provided, however that there is no limit on investments in
U.S. Government Securities, repurchase agreements covering U.S.
Government Securities, and issuers domiciled in a single country; that
financial service companies are classified according to the end users
of their services (for example, automobile finance, bank finance and
diversified finance); and that utility companies are classified
according to their services (for example, gas, gas transmission,
electric and gas, electric and telephone).

(g) STABLE INCOME FUND, INTERMEDIATE GOVERNMENT INCOME FUND, DIVERSIFIED
BOND FUND, CONSERVATIVE BALANCED FUND, MODERATE BALANCED FUND, GROWTH
BALANCED FUND, INCOME

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<PAGE>

EQUITY FUND, INDEX FUND, DIVERSIFIED EQUITY FUND, GROWTH EQUITY FUND,
LARGE COMPANY GROWTH FUND and SMALL COMPANY GROWTH 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; provided, however, that there is no limit on
investments in U.S. Government Securities, repurchase agreements
covering U.S. Government Securities, foreign government securities,
mortgage-related or housing-related securities, municipal securities
and issuers domiciled in a single country; that financial service
companies are classified according to the end users of their services
(for example, automobile finance, bank finance and diversified
finance); that utility companies are classified according to their
services (for example, gas, gas transmission, electric and gas,
electric and telephone); and that each Fund may invest, to the extent
permitted by the 1940 Act, all or a portion of their assets in another
diversified, open-end management investment company with substantially
the same investment objective, policies and restrictions as the Fund.

(3) BORROWING

(a) CASH INVESTMENT FUND, READY CASH INVESTMENT FUND, U.S. GOVERNMENT
FUND, TREASURY FUND, MUNICIPAL MONEY MARKET FUND, INCOME FUND, TOTAL
RETURN BOND FUND, TAX-FREE INCOME FUND, COLORADO TAX-FREE FUND,
MINNESOTA TAX-FREE FUND, VALUGROWTH STOCK FUND, SMALL COMPANY STOCK
FUND AND CONTRARIAN STOCK FUND may borrow money from banks or by
entering into reverse repurchase agreements, but the Fund will limit
borrowings to amounts not in excess of 33 1/3% of the value of the
Fund's total assets (computed immediately after the borrowing).

(b) STABLE INCOME FUND, INTERMEDIATE U.S. GOVERNMENT FUND, DIVERSIFIED
BOND FUND, CONSERVATIVE BALANCED FUND, MODERATE BALANCED FUND, GROWTH
BALANCED FUND, INCOME EQUITY FUND, INDEX FUND, DIVERSIFIED EQUITY
FUND, GROWTH EQUITY FUND, LARGE COMPANY GROWTH FUND, SMALL COMPANY
GROWTH FUND and INTERNATIONAL FUND may borrow money for temporary or
emergency purposes, including the meeting of redemption requests, but
not in excess of 33 1/3% of the value of the Fund's total assets
(computed immediately after the borrowing).

(4) ISSUANCE OF SENIOR SECURITIES

EACH FUND may not issue senior securities except to the extent permitted by
the 1940 Act.

(5) UNDERWRITING ACTIVITIES

EACH FUND may not underwrite securities of other issuers, except to the
extent that the Fund may be considered to be acting as an underwriter in
connection with the disposition of portfolio securities.

(6) MAKING LOANS

EACH FUND may not make loans, except the Fund may enter into repurchase
agreements, purchase debt securities that are otherwise permitted
investments and lend portfolio securities.

(7) PURCHASES AND SALES OF REAL ESTATE

EACH FUND may not purchase or sell real estate or any interest therein or
real estate limited partnership interests, except that the Fund may invest
in debt obligations secured by real estate or interests therein or
securities issued by companies that invest in real estate or interests
therein.

(8) PURCHASES AND SALES OF COMMODITIES

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EACH FIXED INCOME FUND and EQUITY FUND may not purchase or sell physical
commodities or contracts, options or options on contracts to purchase or
sell physical commodities, provided that currencies and currency-related
contracts and contracts on indices are not be deemed to be physical
commodities.

NONFUNDAMENTAL LIMITATIONS

Each Fund and International Portfolio has adopted the following investment
limitations which are not fundamental policies of the Fund or Portfolio and may
be changed by the Board, or in the case of International Portfolio, the Core
Trust Board.

(1) DIVERSIFICATION

With respect to each of COLORADO TAX-FREE FUND and MINNESOTA TAX-FREE FUND,
to the extent required to qualify as a regulated investment company and as
of the last day of each fiscal quarter (1) with respect to 50% of its
assets, the Fund may not invest in securities other than U.S. Government
Securities and the securities of investment companies if, as a result, more
than 5% of the Fund's total assets would be invested in the securities of a
single issuer or the Fund would own more than 10% of the outstanding voting
securities of any single issuer and (2) with respect to 50% of its assets,
the Fund may invest no more than 25% of its total assets in the securities
of a single issuer (other than U.S. government Securities or securities of
investment companies).

(2) BORROWING

EACH FUND'S (other than INTERMEDIATE GOVERNMENT INCOME FUND'S and
DIVERSIFIED BOND FUND'S) borrowings for other than temporary or emergency
purposes or meeting redemption requests may not exceed an amount equal to
5% of the value of the Fund's net assets. When STABLE INCOME FUND,
INTERMEDIATE U.S. GOVERNMENT FUND, DIVERSIFIED BOND FUND, CONSERVATIVE
BALANCED FUND, MODERATE BALANCED FUND, GROWTH BALANCED FUND, INCOME EQUITY
FUND, INDEX FUND, DIVERSIFIED EQUITY FUND, GROWTH EQUITY FUND, LARGE
COMPANY GROWTH FUND, SMALL COMPANY GROWTH FUND and INTERNATIONAL FUND
establish a segregated account to limit the amount of leveraging with
respect to certain investment techniques, they do not treat those
techniques as involving borrowings for purposes of this or other borrowing
limitations.

(3) ILLIQUID SECURITIES

(a) EACH MONEY MARKET FUND may not acquire securities or invest in
repurchase agreements with respect to any securities if, as a result,
more than (i) 10% of the Fund's net assets (taken at current value)
would be invested in repurchase agreements not entitling the holder to
payment of principal within seven days and in securities which are not
readily marketable, including securities that are not readily
marketable by virtue of restrictions on the sale of such securities to
the public without registration under the 1933 Act ("Restricted
Securities") or (ii) 10% of the Fund's total assets would be invested
in Restricted Securities (not including Section 4(2) commercial
paper).

(b) EACH FIXED INCOME FUND and EQUITY FUND may not acquire securities or
invest in repurchase agreements with respect to any securities if, as
result, more than (i) 15% of the Fund's net assets (taken at current
value) would be invested in repurchase agreements not entitling the
holder to payment of principal within seven days and in securities
which are not readily marketable, including securities that are not
readily marketable by virtue of restrictions on the sale of such
securities to the public without registration under the 1933 Act
("Restricted Securities") or (ii) 10% of the Fund's total assets would
be invested in Restricted Securities (not including Section 4(2)
commercial paper).

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(4) OTHER INVESTMENT COMPANIES

EACH FUND may not invest in securities of another investment company,
except to the extent permitted by the 1940 Act.

(5) MARGIN AND SHORT SALES

EACH FUND (other than INTERMEDIATE U.S. GOVERNMENT FUND) may not purchase
securities on margin, or make short sales of securities (except short sales
against the box), except for the use of short-term credit necessary for the
clearance of purchases and sales of portfolio securities. Each Fund may
make margin deposits in connection with permitted transactions in options,
futures contracts and options on futures contracts. NO FUND may not enter
short sales if, as a result, more that 25% of the value of the Fund's total
assets would be so invested, or such a position would represent more than
2% of the outstanding voting securities of any single issuer or class of an
issuer.

(6) UNSEASONED ISSUERS

NO FUND may not invest in securities (other than fully-collateralized debt
obligations) issued by companies that have conducted continuous operations
for less than three years, including the operations of predecessors, unless
guaranteed as to principal and interest by an issuer in whose securities
the Fund could invest, if, as a result, more than 5% of the value of the
Fund's total assets would be so invested; provided, that each Fund may
invest all of a portion of its assets in another diversified, open-end
management investment company with substantially the same investment
objective, policies and restrictions as the Fund.

(7) PLEDGING

NO FUND may pledge, mortgage, hypothecate or encumber any of its assets
except to secure permitted borrowings or to secure other permitted
transactions.

(8) INVESTMENTS BY OFFICERS AND TRUSTEES

NO FUND may invest in or hold securities of any issuer if, to the Trust's
or, in the case of International Portfolio, Core Trust's knowledge,
officers and trustees of the Trust or Core Trust, as applicable, or an
Adviser to a Fund, individually owning beneficially more than 1/2 of 1% of
the securities of the issuer, in the aggregate own more than five percent
of the issuer's securities.

(9) OIL, GAS AND MINERAL INVESTMENTS

NO FUND may invest in interests in oil and gas or interests in other
mineral exploration or development programs, including oil, gas and other
mineral leases.

(10) Securities With Voting Rights

NO MONEY MARKET FUND or FIXED INCOME FUND may purchase securities having
voting rights except securities of other investment companies; provided
that the Funds may hold securities with voting rights obtained through a
conversion or other corporate transaction of the issuer of the securities,
whether or not the Fund was permitted to exercise any rights with respect
to the conversion or other transaction.

(11) LENDING OF PORTFOLIO SECURITIES

NO FUND may lend portfolio securities if the total value of all loaned
securities would exceed 33 1/3% of the Fund's total assets.

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(12) REAL ESTATE LIMITED PARTNERSHIPS

NO FUND may invest in real estate limited partnerships.

(13) OPTIONS AND FUTURES CONTRACTS

(a) NO MONEY MARKET FUND may invest in options, futures contracts or and
options on futures contracts.

(b) NO FIXED INCOME FUND or EQUITY FUND may purchase an option if, as a
result, more that 5% of the value of the Fund's total assets would be
so invested.

(14) WARRANTS

NO FUND may invest in warrants if (i) more than 5% of the value of the
Fund's net assets would will be invested in warrants (valued at the lower
of cost or market) or (ii) more than 2% of the value of the Fund's net
assets would be invested in warrants which are not listed on the New York
Stock Exchange or the American Stock Exchange; provided, that warrants
acquired by a Fund attached to securities are deemed to have no value.

(15) TREASURY FUND INVESTMENT LIMITATIONS

TREASURY FUND may not enter into repurchase agreements or purchase any
security other than those that are issued or guaranteed by the U.S.
Treasury, including separately traded principal and interest components of
securities issued or guaranteed by the U.S. Treasury.

(16) PURCHASES AND SALES OF COMMODITIES

NO MONEY MARKET FUND may purchase or sell physical commodities or
contracts, options or options on contracts to purchase or sell physical
commodities, provided that currencies and currency-related contracts and
contracts on indices are not be deemed to be physical commodities.

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4. PERFORMANCE AND ADVERTISING DATA

Quotations of performance may from time to time be used in advertisements, sales
literature, shareholder reports or other communications to shareholders or
prospective investors. All performance information supplied by the Funds is
historical and is not intended to indicate future returns. Each Fund's yield
and total return fluctuate in response to market conditions and other factors.
The value of a Fund's shares when redeemed may be more or less than their
original cost. There can be no assurance that the Money Market Funds will be
able maintain a stable net asset value of $1.00.

For a listing of certain performance data as of May 31, 1996, see Appendix C.

In performance advertising the Funds may compare any of their performance
information with data published by independent evaluators such as Morningstar,
Inc., Lipper Analytical Services, Inc., or other companies which track the
investment performance of investment companies ("Fund Tracking Companies"). The
Funds may also compare any of their performance information with the performance
of recognized stock, bond and other indexes, including but not limited to the
Municipal Bond Buyers Indices, the Salomon Brothers Bond Index, Shearson Lehman
Bond Index, the Standard & Poor's 500 Composite Stock Price Index, Russell 2000
Index, Morgan Stanley - Europe, Australian and Far East Index, Lehman Brothers
Intermediate Government Index, Lehman Brothers Intermediate Government/Corporate
Index, the Dow Jones Industrial Average, U.S. Treasury bonds, bills or notes and
changes in the Consumer Price Index as published by the U.S. Department of
Commerce. The Funds may refer to general market performances over past time
periods such as those published by Ibbotson Associates (for instance, its
"Stocks, Bonds, Bills and Inflation Yearbook"). The Funds may also refer in
such materials to mutual fund performance rankings and other data published by
Fund Tracking Companies. Performance advertising may also refer to discussions
of the Funds and comparative mutual fund data and ratings reported in
independent periodicals, such as newspapers and financial magazines.

SEC YIELD CALCULATIONS

Although published yield information is useful to investors in reviewing a
Fund's performance, investors should be aware that each Fund's yield fluctuates
from day to day and that the Fund's yield for any given period is not an
indication or representation by the Fund of future yields or rates of return on
the Fund's shares. Norwest Bank, Processing Organizations and others may charge
their customers, various retirement plans or other shareholders that invest in a
Fund fees in connection with an investment in a Fund, which will have the effect
of reducing the Fund's net yield to those shareholders. The yields of a Fund
are not fixed or guaranteed, and an investment in a Fund is not insured or
guaranteed. Accordingly, yield information may not necessarily be used to
compare shares of a Fund with investment alternatives which, like money market
instruments or bank accounts, may provide a fixed rate of interest. Also, it
may not be appropriate to compare a Fund's yield information directly to similar
information regarding investment alternatives which are insured or guaranteed.

MONEY MARKET FUNDS

Yield quotations for the Money Market Funds will include an annualized
historical yield, carried at least to the nearest hundredth of one percent,
based on a specific seven-calendar-day period and are calculated by dividing the
net change during the seven-day period in the value of an account having a
balance of one share at the beginning of the period by the value of the account
at the beginning of the period, and multiplying the quotient by 365/7. For this
purpose, the net change in account value reflects the value of additional shares
purchased with dividends declared on the original share and dividends declared
on both the original share and any such additional shares, but would not reflect
any realized gains or losses from the sale of securities or any unrealized
appreciation or depreciation on portfolio securities. In addition, any
effective annualized yield quotation used by a Money Market Fund is calculated
by compounding the current yield quotation for such period by adding 1 to the
product, raising the sum to a power equal to 365/7, and subtracting 1 from the
result. The standardized tax equivalent yield is the rate an investor would have
to earn from a fully taxable investment in order to equal a Fund's yield after
taxes. Tax

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equivalent yields are calculated by dividing the Fund's yield by one minus the
stated Federal or combined Federal and state tax rate. If a portion of a Fund's
yield is tax-exempt, only that portion is adjusted in the calculation.

FIXED INCOME AND EQUITY FUNDS

Standardized yields for the Funds used in advertising are computed by dividing a
Fund's interest income (in accordance with specific standardized rules) for a
given 30 days or one month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing this figure
by the Fund's net asset value per share at the end of the period and annualizing
the result (assuming compounding of income in accordance with specific
standardized rules) in order to arrive at an annual percentage rate. In
general, interest income is reduced with respect to municipal securities
purchased at a premium over their par value by subtracting a portion of the
premium from income on a daily basis. In general, interest income is increased
with respect to municipal securities purchased at original issue at a discount
by adding a portion of the discount to daily income. Capital gains and losses
generally are excluded from these calculations.

The standardized tax equivalent yield is the rate an investor would have to earn
from a fully taxable investment in order to equal a Fund's yield after taxes.
Tax equivalent yields are calculated by dividing the Fund's yield by one minus
the stated Federal or combined Federal and state tax rate. If a portion of a
Fund's yield is tax-exempt, only that portion is adjusted in the calculation.

Income calculated for the purpose of determining each Fund's standardized yield
differs from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding assumed in
yield calculations, the yield quoted for a Fund may differ from the rate of
distribution the Fund paid over the same period or the rate of income reported
in the Fund's financial statements.

TOTAL RETURN CALCULATIONS

Standardized total returns quoted in advertising and sales literature reflect
all aspects of a Fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the Fund's net asset value per
share over the period. Average annual returns are calculated by determining the
growth or decline in value of a hypothetical historical investment in a Fund
over a stated period, and then calculating the annually compounded percentage
rate that would have produced the same result if the rate of growth or decline
in value had been constant over the period. For example, a cumulative return of
100% over ten years would produce an average annual return of 7.18%, which is
the steady annual rate that would equal 100% growth on a compounded basis in ten
years. While average annual returns are a convenient means of comparing
investment alternatives, investors should realize that the performance is not
constant over time but changes from year to year, and that average annual
returns represent averaged figures as opposed to the actual year-to-year
performance of the Funds.

Average annual total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment, over such periods
according to the following formula:

n
P(1+T) = ERV

Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 payment made at the
beginning of the applicable period.

In addition to average annual returns, each Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Total returns may be broken down into their

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components of income and capital (including capital gains and changes in share
price) in order to illustrate the relationship of these factors and their
contributions to total return. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration. Period total return is calculated according to the following
formula:

PT = (ERV/P-1)

Where:
PT = period total return.
The other definitions are the same as in average annual total return
above.

OTHER ADVERTISEMENT MATTERS

The Funds may advertise other forms of performance. For example, the Funds may
quote unaveraged or cumulative total returns reflecting the change in the value
of an investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, and/or a series of
redemptions over any time period. Total returns may be broken down into their
components of income and capital (including capital gains and changes in share
price) in order to illustrate the relationship of se factors and their
contributions to total return. Total returns may be quoted with or without
taking into consideration a Fund's front-end sales charge or contingent deferred
sales charge; excluding sales charges from a total return calculation produces a
higher return figure. Any performance information may be presented numerically
or in a table, graph or similar illustration.

The Funds may also include various information in their advertisements.
Information included in a Fund's advertisements may include, but is not limited
to (i) portfolio holdings and portfolio allocation as of certain dates, such as
portfolio diversification by instrument type, by instrument, by location of
issuer or by maturity, (ii)statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
by an investor to meet specific financial goals, such as funding retirement,
paying for children's education and financially supporting aging parents, (iv)
information (including charts and illustrations) showing the effects of
compounding interest (compounding is the process of earning interest on
principal plus interest that was earned earlier; interest can be compounded at
different intervals, such as annually, quartile or daily), (v) information
relating to inflation and its effects on the dollar; for example, after ten
years the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465
and $12,100, respectively, if the annual rates of inflation were 4%, 5%, 6% and
7%, respectively, (vi) information regarding the effects of automatic investment
and systematic withdrawal plans, including the principal of dollar cost
averaging, (vii) descriptions of the Funds' portfolio managers and the portfolio
management staff of the Adviser, Schroder or Crestone or summaries of the views
of the portfolio managers with respect to the financial markets, (viii) the
results of a hypothetical investment in a Fund over a given number of years,
including the amount that the investment would be at the end of the period, (ix)
the effects of earning Federally and, if applicable, state tax-exempt income
from a Fund or investing in a tax-deferred account, such as an individual
retirement account or Section 401(k) pension plan and (x) the net asset value,
net assets or number of shareholders of a Fund as of one or more dates.

As an example of compounding, $1,000 compounded annually at 9.00% will grow to
$1,090 at the end of the first year (an increase in $90) and $1,118 at the end
of the second year (an increase in $98). The extra $8 that was earned on the
$90 interest from the first year is the compound interest. One thousand dollars
compounded annually at 9.00% will grow to $2,367 at the end of ten years and
$5,604 at the end of 20 years. Other examples of compounding are as follows: at
7% and 12% annually, $1,000 will grow to $1,967 and $3,106, respectively, at the
end of ten years and $3,870 and $9,646, respectively, at the end of twenty
years. These examples are foe illustrative purposes only and are not indicative
of any Fund's performance.

The Funds may advertise information regarding the effects of automatic
investment and systematic withdrawal plans, including the principal of dollar
cost averaging. In a dollar cost averaging program, an investor invests a fixed
dollar amount in a Fund at period intervals, thereby purchasing fewer shares
when prices are high and more shares when prices are low. While such a strategy
does not insure a profit or guard against a loss in a declining

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market, the investor's average cost per share can be lower than if fixed numbers
of shares had been purchased at those intervals. In evaluating such a plan,
investors should consider their ability to continue purchasing shares through
periods of low price levels. For example, if an investor invests $100 a month
for a period of six months in a Fund the following will be the relationship
between average cost per share ($14.35 in the example given) and average price
per share:

Systematic Share Shares
Period Investment Price Purchased
------ ---------- ----- ---------

1 $100 $10 10.00
2 $100 $12 8.33
3 $100 $15 6.67
4 $100 $20 5.00
5 $100 $18 5.56
6 $100 $16 6.25
---- --- ----
Total Invested $600 Average Price $15.17 Total Shares 41.81

With respect to the Funds that invest in municipal securities and distribute
Federally tax-exempt (and in certain cases state tax exempt) dividends), the
Funds may advertise the benefits of investing in municipal securities and the
various effects of investing in municipal securities. For instance, the Funds'
advertisements may note that municipal bonds have historically offered higher
after tax yields than comparable taxable alternatives for those persons in the
higher tax brackets, that municipal bond yields may tend to outpace inflation
and that changes in tax law have eliminated many of the tax advantages of other
investments. The combined Federal and state income tax rates for a particular
state may also be described and advertisements may indicate equivalent taxable
and tax-free yields at various approximate combined marginal Federal an state
tax bracket rates. All yields so advertised are for illustration only are not
necessarily representative of a Fund's yield.

In connection with its advertisements each Fund may provide "shareholders
letters" which serve to provide shareholders or investors an introduction into
the Fund's, the Trust's or any of the Trust's service provider's policies or
business practices. For instance, advertisements may provide for a message from
Norwest Bank or its parent corporation that Norwest Bank has more than 60 years
been committed to quality products and outstanding service in order to assist
its customers in meeting their financial goals and the reasons Norwest Bank
believes that it has been successful as a national financial service firm.

MULTICLASS, COLLECTIVE TRUST FUND AND CORE & GATEWAY PERFORMANCE

MULTICLASS PERFORMANCE

When more than one class of shares exists for a Fund performance calculations
for the classes of shares that are created after the initial class may be stated
so as to include the performance of the initial class or classes of the Fund.
Generally, performance of the initial class is not restated to reflect the
expenses or expense ratio of the subsequent class. For instance, if A Shares of
a Fund are created after I Shares have been in existence, the inception of
performance for the A Shares will be deemed to be the inception date of the I
Shares and the performance of the I Shares (based on the I Shares actual
expenses) from the inception of I Shares to the inception of A Shares will be
deemed to be the performance of A Shares for that period. For standardized
total return calculations, the current maximum sales commissions on A Shares
will be used in determining the total return of A Shares as if assessed at the
inception of I Shares. Generally, the performance of B Shares will be
calculated only from the inception date of B Shares, regardless of the existence
of prior share classes in the same Fund.

COLLECTIVE TRUST FUND PERFORMANCE

CORE & GATEWAY PERFORMANCE

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5. MANAGEMENT

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 Bank.

TRUSTEES AND OFFICERS

TRUSTEES AND OFFICERS OF THE TRUST

The Trustees and officers of the Trust and their principal occupations during
the past five years and age as of October 31, 1996 are set forth below. Each
Trustee who is an "interested person" (as defined by the 1940 Act) of the Trust
is indicated by an asterisk. John Y. Keffer and David R. Keffer are brothers.

John Y. Keffer, Chairman and President,* Age 54.

President and Director, Forum Financial Services, Inc. (a registered
broker-dealer), Forum Financial Corp. (a registered transfer agent), Forum
Advisors, Inc. (a registered investment adviser). Mr. Keffer is a
Director, Trustee and officer of various registered investment companies
for which Forum Financial Services, Inc. serves as manager, administrator
and/or distributor. His address is Two Portland Square, Portland, Maine
04101.

Robert C. Brown, Trustee,* Age 65.

Director, Federal Farm Credit Banks Funding Corporation and Farm Credit
System Financial Assistance Corp. Prior thereto, he was Manager of the
Capital Markets Group, Norwest Corporation (a multi-bank holding company
and parent of Norwest Bank) until 1991. His address is 1431 Landings
Place, Sarasota, Florida 34231.

Donald H. Burkhardt, Trustee, Age 70.

Principal, The Burkhardt Law Firm. His address is 777 South Steele Street,
Denver, Colorado 80209.

James C. Harris, Trustee, Age 76.

President and sole Director of James C. Harris & Co., Inc. (a financial
consulting firm). Mr. Harris is also a liquidating Trustee and former
Director of First Midwest Corporation, a small business investment company.
His address is 6950 France Avenue South, Minneapolis, Minnesota 55435.

Richard M. Leach, Trustee, Age 63_.

Chief Executive Officer, Tee Box Company (a golf equipment manufacturer),
since January 1994 and President of Richard M. Leach Associates (a
financial consulting firm) since 1992. Prior thereto, Mr. Leach was Senior
Adviser of Taylor Investments (a registered investment adviser), a Director
of Mountainview Broadcasting (a radio station) and Managing Director,
Digital Techniques, Inc. (an interactive video design and manufacturing
company). His address is P.O. Box 1888, New London, New Hampshire 03257.

Timothy J. Penny, Trustee, Age 44.

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Senior Counselor to the public relations firm Himle-Horner since 1994.
Prior thereto Mr. Penny was the Representative to the United States
Congress from Minnesota's First Congressional District. His address is 500
North State Street, Waseca, Minnesota 56095.

Donald C. Willeke, Trustee, Age 56.

Principal of the law firm of Willeke & Daniels. His address is 201
Ridgewood Avenue, Minneapolis, Minnesota 55403.

Richard C. Butt, Vice President, Assistant Secretary and Assistant
Treasure age 41

Managing Director, Forum Financial Services, Inc., with which he has
been associated since May 1996. Prior thereto, from December 1994 -
April 1996 Mr. Butt was a Director of the Financial Services Consulting
Practice, KPMG Peat Marwick LLP. Prior therto, from November 1993 -
August 1994 Mr. Bult was President, 440 Financial Distributors, Inc., and
prior thereto was Senior vice President 440 Financial Group, Inc. His
address is Two Portland Square, Portland, Maine 04101.

Michael D. Martins, Vice President and Treasurer, Age 30.

Fund Accounting Manager, Forum Financial Corp., with which he has been
associated since 1995. Prior thereto, Mr. Martins was at the audit firm of
Deloitte & Touche LLP. Mr. Martins is also an officer of various
registered investment companies for which Forum Financial Services, Inc.
serves as manager, administrator and/or distributor. His address is Two
Portland Square, Portland, Maine 04101.

David I. Goldstein, Vice President and Secretary, Age 35.

Counsel, Forum Financial Services, Inc., with which he has been associated
since 1991. Prior thereto, Mr. Goldstein was associated with the law firm
of Kirkpatrick & Lockhart. Mr. Goldstein is also an officer of various
registered investment companies for which Forum Financial Services, Inc.
serves as manager, administrator and/or distributor. His address is Two
Portland Square, Portland, Maine 04101.

Sara M. Clark, Vice President and Assistant Treasurer, Age 33.

Managing Director, Forum Financial Services, Inc., with which she has been
associated since 1994. Prior thereto, from 1991 to 1994 Ms. Clark was
Controller of Wright Express Corporation (a national credit card company)
and for six years prior thereto was employed at Deloitte & Touche LLP as an
accountant. Ms. Clark is also an officer of various registered investment
companies for which Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. Her address is Two Portland Square,
Portland, Maine 04101.

Thomas G. Sheehan, Vice President and Assistant Secretary, Age 42.

Counsel, Forum Financial Services, Inc., with which he has been associated
since 1993. Prior thereto, Mr. Sheehan was Special Counsel to the Division
of Investment Management of the SEC. Mr. Sheehan is also an officer of
various registered investment companies for which Forum Financial Services,
Inc. serves as manager, administrator and/or distributor. His address is
Two Portland Square, Portland, Maine 04101.

Renee A. Walker, Assistant Secretary, Age 26.

Fund Administrator, Forum Financial Services, Inc., with which she has been
associated since 1994. Prior thereto, Ms. Walker was an administrator at
Longwood Partners (the manager of a hedge fund partnership) for a year.
After graduating for college, from 1991 to 1993 Ms. Walker was a sales
representative assistant at PaineWebber Incorporated (a broker-dealer).
Her address is Two Portland Square, Portland, Maine 04101.

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COMPENSATION OF TRUSTEES AND OFFICERS OF THE TRUST

Effective as of June 1, 1995 each Trustee of the Trust is paid a quarterly
retainer fee for the Trustee's service to the Trust and to Norwest Select Funds,
a separate registered open-end management investment company for which each
Trustee serves as trustee, of $4,000. In addition, each Trustee is paid $3,000
for each Board meeting attended (whether in person or by electronic
communication) and is paid $1,000 for each Committee meeting attended on a date
when a Board meeting is not held. Trustees are also reimbursed for travel and
related expenses incurred in attending meetings of the Board. Mr. Keffer
received no compensation for his services as Trustee for the past year and no
officer of the Trust is compensated by the Trust. In addition, Mr. Keffer
currently is not compensated or reimbursed for his expenses in serving as
Trustee. Prior to June 1, 1995 each Trustee of the Trust was paid $1,000 for
each Board meeting attended (whether in person or by electronic communication)
plus $100 per active portfolio of the Trust and was paid $1,000 for each
Committee meeting attended on a date when a Board meeting is not held.

Mr. Burkhardt Chairman of the Trust's and Norwest Select Funds' audit
committees, receives additional compensation of $5,000 from the Trust and $1,000
form Norwest Select Funds for his services as Chairman. Mr. Willeke was
appointed a Trustee in July 1995 and Mr. Penny was appointed a Trustee in
January 1996.

The following table provides the aggregate compensation paid to the Trustees of
the Trust by the Trust and Norwest Select Funds, combined. Norwest Select Funds
have a December 31 fiscal year end. Information is presented for the twelve
month period ended May 31, 1996, which was the fiscal year end of all of the
Trust's portfolios.

Total Compensation From
Total Compensation the Trust and Norwest
from the Trust Select Funds
-------------- ------------

Mr. Brown $28,974 $29,000
Mr. Burkhart $36,223 $36,250
Mr. Harris $28,975 $28,000
Mr. Leach $33,970 $33,000
Mr. Penny $16,985 $16,000
Mr. Willeke $29,973 $30,000

Neither the Trust nor Norwest Select Funds has adopted any form of retirement
plan covering Trustees or officers. For the twelve month period ended May 31,
1996 total expenses of the Trustees (other than Mr. Keffer) was $30,408 and
total expenses of the trustees of Norwest Select Funds was $27.

As of October 1, 1996, the Trustees and officers of the Trust in the aggregate
owned less than 1% of the outstanding shares of the Funds.

TRUSTEES AND OFFICERS OF CORE TRUST

The Trustees and officers of Core Trust and their principal occupations
during the past five years and ages are set forth below. Each Trustee who is
an "interested person" (as defined by the 1940 Act) of Core Trust is
indicated by an asterisk. Mr. John Y. Keffer and Messrs. Goldstein, Butt and
Sheehan Ms. Clark and Ms. Walker, officers of Core Trust, all currently serve
as officers of the Trust. Accordingly, for background information pertaining
to these officers, see "Management - Trustees and Officers - Trustees and
Officers of the Trust."

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John Y. Keffer*, Chairman and President.

Costas Azariadis, Trustee, Age 53.

Professor of Economics, University of California, Los Angeles, since July
1992. Prior thereto, Dr. Azariadis was Professor of Economics at the
University of Pennsylvania. His address is Department of Economics,
University of California, Los Angeles, 405 Hilgard Avenue, Los Angeles,
California 90024.

James C. Cheng, Trustee, Age 54.

Managing Director, Forum Financial Services, Inc. since September 1991.
President of Technology Marketing Associates (a marketing consulting
company) since September 1991. Prior thereto, Mr. Cheng was President and
Chief Executive Officer of Network Dynamics, Incorporated (a software
development company). His address is Two Portland Square, Portland, Maine
04101.

J. Michael Parish, Trustee, Age 53.

Partner at the law firm of Winthrop Stimson Putnam & Roberts since 1989.
Prior thereto, he was a partner at LeBoeuf, Lamb, Leiby & MacRae, a law
firm of which he was a member from 1974 to 1989. His address is 40 Wall
Street, New York, New York 10005.

Richard C. Butt, Treasurer

Sara M. Clark, Vice President, Assistant Secretary and Assistant Treasurer.

David I. Goldstein, Secretary.

Thomas G. Sheehan, Assistant Secretary.

Renee A. Walker, Assistant Secretary.

INVESTMENT ADVISORY SERVICES

NORWEST INVESTMENT MANAGEMENT

The Adviser furnishes at its expense all services, facilities and personnel
necessary in connection with managing each Fund's investments and effecting
portfolio transactions for each Fund. For further information about the
investment subadvisory services for certain Funds and the advisory services for
International Portfolio of Core Trust, see "Management - Investment Advisory
Services - Schroder Capital Management International Inc." and "- Crestone
Capital Management, Inc." below. Under its various Investment Advisory
Agreements, the Adviser may delegate its responsibilities to any investment
subadviser approved by the Board and, as applicable shareholders, with respect
to all or a portion of the assets of the Fund. The Investment Advisory
Agreement between each Fund and the Adviser will continue in effect only if such
continuance is specifically approved at least annually by the Board or by vote
of the shareholders, and in either case,

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<PAGE>

by a majority of the Trustees who are not interested persons of any party to the
Investment Advisory Agreement, at a meeting called for the purpose of voting on
the Investment Advisory Agreement.

Each Investment Advisory Agreement is terminable without penalty with respect to
the Fund on 60 days' written notice when authorized either by vote of the Fund's
shareholders or by a vote of a majority of the Board of Trustees, or by the
Adviser on not more than 60 days' nor less than 30 days' written notice, and
will automatically terminate in the event of its assignment. The Investment
Advisory Agreements also provide that, with respect to the Funds, neither the
Adviser nor its personnel shall be liable for any error of judgment or mistake
of law or for any act or omission in the performance of their duties to the
Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of the Adviser's duties or by reason of reckless disregard of its
obligations and duties under the Investment Advisory Agreements. The Investment
Advisory Agreements provide that the Adviser may render services to others.

The Adviser acts as investment adviser to Index Portfolio and Small Company
Portfolio, two Portfolios of Core Trust in which Conservative Balanced Fund,
Moderate Balanced Fund, Growth Balanced Fund, Diversified Equity Fund and Growth
Equity Fund invest a portion of their assets. The investment advisory
agreements between Core Trust on behalf of Index Portfolio and Small Company
Portfolio are identical to the Investment Advisory Agreements between the Trust
and the Adviser, except for the fees payable thereunder and certain immaterial
matters. The Adviser is required to waive all of its investment advisory fees
payable by Index Portfolio and Small Company Portfolio.

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC.

With respect to each of Conservative Balanced Fund, Moderate Balanced Fund,
Growth Balanced Fund, Diversified Equity Fund, Growth Equity Fund and
International Fund (the Funds that invest a stated portion or all of their
assets in international securities), the Adviser and the Trust have entered into
an Investment Subadvisory Agreement with Schroder. Currently, Schroder does not
directly manage any of the assets of these Funds directly. Rather, the funds
invest a portion of their assets in International Portfolio II or, in the case
of International Fund, invests all of its investable assets in International
Portfolio.

Under its Investment Subadvisory Agreements Schroder makes investment decisions
for the Funds and continuously reviews, supervises and administers the Fund's
investment program with respect to that portion, if any, of the respective
Fund's portfolio that the Adviser has so delegated. Schroder is required to
furnish at its own expense all services, facilities and personnel necessary in
connection with managing of the Fund's investments and effecting portfolio
transactions for the Funds (to the extent of the Adviser's delegation).

The Investment Subadvisory Agreements will continue in effect only if such
continuance is specifically approved at least annually by the Board or by vote
of the shareholders of the respective Fund, and in either case by a majority of
the Trustees who are not interested persons of any party to the Investment
Subadvisory Agreement, at a meeting called for the purpose of voting on the
Investment Subadvisory Agreement.

The Investment Subadvisory Agreements are terminable without penalty by the
Trust with respect to a Fund on 60 days' written notice when authorized either
by vote of the Fund's shareholders or by a vote of a majority of the Board, or
by Schroder on not more than 60 days' nor less than 30 days' written notice, and
will automatically terminate in the event of their assignment. The Investment
Subadvisory Agreement also provides that, with respect to the Funds, neither
Schroder nor its personnel shall be liable for any error of judgment or mistake
of law or for any act or omission in the performance of its or their duties to
the Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its or their duties or by reason of reckless disregard of its or
their obligations and duties under the Investment Subadvisory Agreement. The
Investment Subadvisory Agreement provides that Schroder may render services to
others.

No payments are made under the Fund's Investment Subadvisory Agreement with
Schroder because no assets are allocated to Schroder to manage directly.

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<PAGE>

INTERNATIONAL PORTFOLIO/INTERNATIONAL PORTFOLIO II.

Schroder acts as investment adviser to International Portfolio and International
Portfolio II and is required to furnish at its expense all services, facilities
and personnel necessary in connection with managing International Portfolio's
investments and effecting portfolio transactions for International Portfolio.
The Advisory Agreement between International Portfolio and Schroder and
International Portfolio II and Schroder each will continue in effect only if
such continuance is specifically approved at least annually by the Core Trust or
by vote of the holders of beneficial interest of the respective Portfolio, and
in either case by a majority of the Trustees of Core Trust who are not parties
to the Advisory Agreement or interested persons of any such party, at a meeting
called for the purpose of voting on the Advisory Agreement.

The Advisory Agreements are each terminable without penalty by the respective
Portfolio on 60 days' written notice when authorized either by vote of the
Portfolio's unitholders or by a vote of a majority of the Core Trust Board, or
by Schroder on not more than 60 days' nor less than 30 days' written notice, and
will automatically terminate in the event of their assignment. The Advisory
Agreements also provide that, with respect to each Portfolio, neither Schroder
nor its personnel shall be liable for any error of judgment or mistake of law or
for any act or omission in the performance of its or their duties to the
Portfolio, except for willful misfeasance, bad faith or gross negligence in the
performance of Schroder's or their duties or by reason of reckless disregard of
its or their obligations and duties under the Advisory Agreement. The Advisory
Agreements provide that Schroder may render service to others.

The investment advisory agreements between Core Trust on behalf of International
Portfolio and International Portfolio II are identical to the Investment
Advisory Agreements between the Trust and the Adviser, except for the fees
payable thereunder and certain immaterial matters. The Adviser is required to
reimburse each Portfolio in an amount equal to the investment advisory fees
payable by the Portfolios to Schroder.

CRESTONE CAPITAL MANAGEMENT, INC.

To assist the Adviser in carrying out its obligations under the Investment
Advisory Agreement with the Small Company Stock Fund (the "Fund"), the Adviser
has entered into a Sub-Investment Advisory Agreement with Crestone, located at
7720 East Belleview Avenue, Suite 220, Englewood, Colorado 80111. Crestone is
registered with the SEC as an investment adviser and is a non-wholly owned
subsidiary of Norwest. Pursuant to the Sub-Investment Advisory Agreement,
Crestone makes investment decisions for the 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 the Adviser believes should be
invested using Crestone as a 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 its adherence to the
Portfolio's investment objectives and policies and pays Crestone a fee for its
investment management services. For its services under the Sub-Investment
Advisory Agreement, the Adviser pays Crestone a fee based on the Fund's average
daily net assets at an annual rate of 0.40% on the first $30 million; 0.30% on
the next $30 million; 0.20% on the next $40 million and 0.15% on all sums in
excess of $100 million. For the Fund's fiscal years ended May 31, 1996, 1995
and 1994, the Adviser paid Crestone subadvisory fees of $_____, $137,862 and
$8,792, respectively.

Under its Sub-Investment Subadvisory Agreement Crestone makes investment
decisions for the 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 the Adviser has so delegated. Crestone is required to furnish at
its own expense all services, facilities and personnel necessary in connection
with managing of the Fund's investments and effecting portfolio transactions for
the Fund (to the extent of the Adviser's delegation).

The Sub-Investment Advisory Agreement will continue in effect only if such
continuance is specifically approved at least annually by the Board or by vote
of the shareholders of the Fund, and in either case by a

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<PAGE>

majority of the Trustees who are not interested persons of any party to the Sub-
Investment Advisory Agreement, at a meeting called for the purpose of voting on
the Sub-Investment Advisory Agreement.

The Sub-Investment Agreement is terminable without penalty by the Fund on 60
days' written notice when authorized either by vote of the Fund's shareholders
or by a vote of a majority of the Board, or by Crestone on not more than 60
days' nor less than 30 days' written notice, and will automatically terminate in
the event of its assignment. The Sub-Investment Advisory Agreement also
provides that neither Crestone nor its personnel shall be liable for any error
of judgment or mistake of law or for any act or omission in the performance of
its or their duties to the Fund, except for willful misfeasance, bad faith or
gross negligence in the performance of its or their duties or by reason of
reckless disregard of its or their obligations and duties under the Sub-
Investment Advisory Agreement. The Sub-Investment Advisory Agreement provides
that Crestone may render services to others.

GENERAL

Table 1 in Appendix B shows the dollar amount of fees payable under the
Investment Advisory Agreements between Norwest and the Trust with respect to
each Fund, the amount of fee that was waived by Norwest, if any, and the actual
fee received by Norwest. That table also shows similar information with respect
to Schroder for its services to International Portfolio. The data is for the
past three fiscal years or shorter period if the Fund has been in operation for
a shorter period.

All investment advisory fees are accrued daily and paid monthly. The Advisers,
in their its sole discretion, may waive or continue to waive all or any portion
of their investment advisory fees.

In addition to receiving its advisory fee from the Funds, the Adviser or its
affiliates may act and be compensated as investment manager for their clients
with respect to assets which are invested in a Fund. In some instances the
Adviser or its affiliates may elect to credit against any investment management,
custodial or other fee received from, or rebate to, a client who is also a
shareholder in a Fund an amount equal to all or a portion of the fees received
by the Adviser or any of its affiliates from a Fund with respect to the client's
assets invested in the Fund.

MANAGEMENT AND ADMINISTRATIVE SERVICES

MANAGER AND ADMINISTRATOR

Forum manages all aspects of the Trust's operations with respect to each Fund
except those which are the responsibility of the Adviser, or any other
investment adviser or investment subadviser to a Fund, or Norwest in its
capacity as administrator pursuant to an investment administration or similar
agreement. With respect to each Fund, Forum has entered into a Management
Agreement that will continue in effect only if such continuance is specifically
approved at least annually by the Board or by the shareholders and, in either
case, by a majority of the Trustees who are not interested persons of any party
to the Management Agreement.

On behalf of the Trust and with respect to each Fund, Forum (i) oversees (A) the
preparation and maintenance by the Advisers and the Trust's administrator,
custodian, transfer agent, dividend disbursing agent and fund accountant (or if
appropriate, prepare and maintain) in such form, for such periods and in such
locations as may be required by applicable law, of all documents and records
relating to the operation of the Trust required to be prepared or maintained by
the Trust or its agents pursuant to applicable law; (B) the reconciliation of
account information and balances among the Advisers and the Trust's custodian,
transfer agent, dividend disbursing agent and fund accountant; (C) the
transmission of purchase and redemption orders for Shares; (D) the notification
of the Advisers of available funds for investment; and (E) the performance of
fund accounting, including the calculation of the net asset value per Share;
(ii) oversees the Trust's receipt of the services of persons competent to
perform such supervisory, administrative and clerical functions as are necessary
to provide effective operation of the Trust; (iii) oversees the performance of
administrative and professional services rendered to the Trust by others,
including its administrator,

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<PAGE>

custodian, transfer agent, dividend disbursing agent and fund accountant, as
well as accounting, auditing, legal and other services performed for the Trust;
(iv) provides the Trust with adequate general office space and facilities and
provide, at the Trust's request and expense, persons suitable to the Board to
serve as officers of the Trust; (v) oversees the preparation and the printing of
the periodic updating of the Trust's registration statement, Prospectuses and
SAIs, the Trust's tax returns, and reports to its shareholders, the SEC and
state and other securities administrators; (vi) oversees the preparation of
proxy and information statements and any other communications to shareholders;
(vii) with the cooperation of the Trust's counsel, Investment Advisers and other
relevant parties, oversees the preparation and dissemination of materials for
meetings of the Board; (viii) oversees the preparation, filing and maintenance
of the Trust's governing documents, including the Trust Instrument, Bylaws and
minutes of meetings of Trustees, Board committees and shareholders; (ix)
oversees registration and sale of Fund shares, to ensure that such shares are
properly and duly registered with the SEC and applicable state and other
securities commissions;(x) oversees the calculation of performance data for
dissemination to information services covering the investment company industry,
for sales literature of the Trust and other appropriate purposes; (xi) oversees
the determination of the amount of and supervise the declaration of dividends
and other distributions to shareholders as necessary to, among other things,
maintain the qualification of each Fund as a regulated investment company under
the Internal Revenue Code of 1986, as amended, and oversee the preparation and
distribution to appropriate parties of notices announcing the declaration of
dividends and other distributions to shareholders; (xii) reviews and negotiates
on behalf of the Trust normal course of business contracts and agreements;
(xiii) maintains and reviews periodically the Trust's fidelity bond and errors
and omission insurance coverage; and (xiv) advises the Trust and the Board on
matters concerning the Trust and its affairs.

The Management Agreement terminates automatically if assigned and may be
terminated without penalty with respect to any Fund by vote of that Fund's
shareholders or by either party on not more than 60 days' nor less than 30 days'
written notice. The Management Agreement also provides that neither Forum nor
its personnel shall be liable for any error of judgment or mistake of law or for
any act or omission in the administration or management of the Trust, except for
willful misfeasance, bad faith or gross negligence in the performance of Forum's
or their duties or by reason of reckless disregard of their obligations and
duties under the Management Agreement.

Forum manages all aspects of the Trust's operations with respect to each Fund
except those which are the responsibility of Forum, the Adviser, or any other
investment adviser or investment subadviser to a Fund, or Norwest in its
capacity as administrator pursuant to an investment administration or similar
agreement. With respect to each Fund, Forum has entered into a Administrative
Agreement that will continue in effect only if such continuance is specifically
approved at least annually by the Board or by the shareholders and, in either
case, by a majority of the Trustees who are not interested persons of any party
to the Management Agreement.

On behalf of the Trust and with respect to each Fund, Forum Administrative (i)
provides the Trust with, or arrange for the provision of, the services of
persons competent to perform such supervisory, administrative and clerical
functions as are necessary to provide effective operation of the Trust; (ii)
assists in the preparation and the printing and the periodic updating of the
Trust's registration statement, Prospectuses and SAIs, the Trust's tax returns,
and reports to its shareholders, the SEC and state and other securities
administrators; (iii) assists in the preparation of proxy and information
statements and any other communications to shareholders; (iv) assists the
Advisers in monitoring Fund holdings for compliance with Prospectus and SAI
investment restrictions and assist in preparation of periodic compliance
reports;(v) with the cooperation of the Trust's counsel, Investment Advisers,
the officers of the Trust and other relevant parties, is responsible for
preparation and dissemination of materials for meetings of the Board; (vi) is
responsible for preparing, filing and maintaining the Trust's governing
documents, including the Trust Instrument, Bylaws and minutes of meetings of
Trustees, Board committees and shareholders; (vii) is responsible for
maintaining the Trust's existence and good standing under state law;(viii)
monitors sales of shares and ensure that such shares are properly and duly
registered with the SEC and applicable state and other securities
commissions;(ix) is responsible for the calculation of performance data for
dissemination to information services covering the investment company industry,
for sales literature of the Trust and other appropriate purposes; and (x) is
responsible for the determination of the amount of and supervise the

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<PAGE>

declaration of dividends and other distributions to shareholders as necessary
to, among other things, maintain the qualification of each Fund as a regulated
investment company under the Internal Revenue Code of 1986, as amended, and
prepare and distribute to appropriate parties notices announcing the declaration
of dividends and other distributions to shareholders.

The Administrative Agreement terminates automatically if assigned and may be
terminated without penalty with respect to any Fund by vote of that Fund's
shareholders or by either party on not more than 60 days' nor less than 30 days'
written notice. The Administrative Agreement also provides that neither Forum
nor its personnel shall be liable for any error of judgment or mistake of law or
for any act or omission in the administration or management of the Trust, except
for willful misfeasance, bad faith or gross negligence in the performance of
Forum's or their duties or by reason of reckless disregard of their obligations
and duties under the Administrative Agreement.

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

Table 2 in Appendix B shows the dollar amount of fees payable to Forum for its
management services with respect to each Fund (or class thereof for those
periods when multiple classes were outstanding), the amount of fee that was
waived by Forum, if any, and the actual fee received by Forum. The data is for
the past three fiscal years or shorter period if the Fund has been in operation
for a shorter period. The Administration Agreement became effective on October
1, 1996 and, accordingly, no fees have been paid pursuant to that agreement
during the past three years.

PORTFOLIOS OF CORE TRUST

Forum manages all aspects of Core Trust's operations with respect to each Fund
except those which are the responsibility of the Adviser or Schroder. With
respect to each Fund, Forum has entered into a Management Agreement that will
continue in effect only if such continuance is specifically approved at least
annually by the Board or by the shareholders and, in either case, by a majority
of the Trustees who are not interested persons of any party to the Management
Agreement. Under the Management Agreement Forum performs similar services for
each Portfolio as it and Forum Administrative perform fro the Funds, as
applicable to the Portfolios and their structure. Forum or Forum Administrative
waive their fees payable by each of Conservative Balanced Fund, Moderate
Balanced Fund, Growth Balanced Fund, Diversified Equity Fund and Equity Fund to
the extent those Funds would incur indirectly management fees charged by Forum
to a Portfolio.

NORWEST ADMINISTRATIVE SERVICES

Under a servicing agreement between the Trust and Norwest with respect to
International Fund, Norwest performs ministerial, administrative and oversight
functions for the Fund and undertakes to reimburse certain excess expenses of
the Fund. Among other things, Norwest gathers performance and other data from
the adviser of International Portfolio and from other sources, formats the data
and prepares reports to the Fund's shareholders and the Trustees. Norwest also
insures that the adviser to International Portfolio is aware of pending net
purchases or redemptions of Fund shares and other matters that may affect the
adviser's performance of its duties. Lastly, Norwest has agreed to reimburse
the Fund for any amounts by which its operating expenses (exclusive of interest,
taxes and brokerage fees, organization expenses and, if applicable, distribution
expenses, all to the extent permitted by applicable state law or regulation)
exceed the limits prescribed by any state in which the Fund's shares are
qualified for sale. No fees will be paid to Norwest under the Servicing
Agreement unless the Fund's assets are invested solely in International
Portfolio or in a portfolio of another registered investment company. This
agreement will continue in effect only if

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<PAGE>

such continuance is specifically approved at least annually by the Board or by
the shareholders and, in either case, by a majority of the Trustees who are not
parties to the Management Agreement or interested persons of any such party.

The agreement provides that neither Norwest nor its personnel shall be liable
for any error of judgment or mistake of law or for any act or omission in the
performance of its or their duties to the Fund, except for willful misfeasance,
bad faith or gross negligence in the performance of Forum's or their duties or
by reason of reckless disregard of its or their obligations and duties under the
agreement.

DISTRIBUTION

Forum also acts as distributor of the shares of the Fund. Forum acts as the
agent of the Trust in connection with the offering of shares of the Funds on a
"best efforts" basis pursuant to a Distribution Services Agreement.

Under the Distribution Services Agreement, the Trust has agreed to indemnify,
defend and hold Forum, and any person who controls Forum within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which Forum or any such controlling person may incur,
under the 1933 Act, or under common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained in the Trust's
Registration Statement or a Fund's Prospectus or Statement of Additional
Information in effect from time to time under the 1933 Act or arising out of or
based upon any alleged omission to state a material fact required to be stated
in any one thereof or necessary to make the statements in any one thereof not
misleading. Forum is not, however, protected against any liability to the Trust
or its shareholders to which Forum would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of Forum's reckless disregard of its obligations and duties
under the Distribution Services Agreement.

With respect to each Fund, the Distribution Services Agreement will continue in
effect only if such continuance is specifically approved at least annually by
the Board or by the shareholders and, in either case, by a majority of the
Trustees who are not parties to the Distribution Services Agreement or
interested persons of any such party and, with respect to each class of a Fund
for which there is an effective plan of distribution adopted pursuant to Rule
12b-1, who do not have any direct or indirect financial interest in any
distribution plan of the Fund or in any agreement related to the distribution
plan cast in person at a meeting called for the purpose of voting on such
approval.

The Distribution Services Agreement terminates automatically if assigned. With
respect to each Fund, the Distribution Services Agreement may be terminated at
any time without the payment of any penalty (i) by the Board or by a vote of the
Fund's shareholders or, with respect to each class of a Fund for which there is
an effective plan of distribution adopted pursuant to Rule 12b-1, a majority of
Trustees who do not have any direct or indirect financial interest in any such
plan or in any agreements related to the plan, on 60 days' written notice to
Forum or (ii) by Forum on 60 days' written notice to the Trust.

Under the Distribution Services Agreement related to the Fixed Income and Equity
Funds, Forum receives, and may reallow to certain financial institutions, the
initial sales charges assessed on purchases of A Shares of the Funds. With
respect to B Shares of each Fixed Income and Equity Fund, and with respect to
Exchange Shares of Ready Cash Investment Fund, the Funds have adopted a
distribution plan pursuant to Rule 12b-1 under the 1940 Act (the "Plan") which
authorizes the payment to Forum under the Distribution Services Agreement of a
distribution services fee, which may not exceed an annual rate of 0.75%, and a
maintenance fee in an amount equal to 0.25%, of the average daily net assets of
the Fund attributable to the B Shares and Exchange Shares.

The Plan provides that all written agreements relating to the Plan must be in a
form satisfactory to the Board. In addition, the Plan requires the Trust and
Forum to prepare, at least quarterly, written reports setting forth all amounts
expended for distribution purposes by the Funds and Forum pursuant to the Plan
and identifying the distribution activities for which those expenditures were
made.

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The Plan provides that, with respect to each class of each Fund to which it
applies, it will remain in effect for one year from the date of its adoption and
thereafter may continue in effect for successive annual periods provided it is
approved by the shareholders of the respective class or by the Board, including
a majority of trustees who are not interested persons of the Trust and who have
no direct or indirect interest in the operation of the Plan, the Distribution
Services Agreement or any agreement related to the Plan. The Plan further
provides that it may not be amended to increase materially the costs which may
be borne by the Trust for distribution pursuant to the Plan without shareholder
approval and that other material amendments to the Plan must be approved by the
trustees in the manner described in the preceding sentence. The Plan may be
terminated at any time by a vote of the Board or by the shareholders of the
respective classes.

The Plan is "semi-enchanced" in that under the circumstances described below,
payments to Forum under the Plan continue while there are uncovered distribution
charges even though the Plan has been terminated. Uncovered distribution
charges include all sales commissions previously due, plus interest, less
amounts previously received by Forum (or other distributor) pursuant to the Plan
and contingent deferred sales charges previously paid to Forum. The Plan
provides that in the event of a complete Termination (as defined below) of the
Plan with respect to a Fund, payments by a Fund in consideration of sales of B.
Shares that occurred prior to termination of the Plan will cease. A Complete
Termination in respect of any Fund means: (i) the 12b-1 Trustees acting in good
faith have determined that termination is in the best interest of the trust and
the shareholders of the fund; (ii) the Trust does not alter the terms of the
CDSC applicable to the B Shares of the Fund outstanding at the time of the
termination; (iii) the Trust does not pay any portion of the asset based sales
charge or service fees to an entity other than the distributor or its
termination was in material breach under the Distribution Agreement in respect
of the fund) and (iv) the Fund does not adopt a distribution plan relating to a
class of shares of similar (as defined in the Plan) to that of the B. shares.
Complete Termination, payments by the fund to the distributor would continue.

In the event of a termination of the Plan that does not satisfy clauses (ii),
(iii) and (iv) of the definition of a Complete Termination above, Ready Cash
Investment fund, ValuGrowth Stock Fund, Small Company Stock Fund, Contrarian
Bond Fund, Minnesota Tax-Free Income Fund, Total Return Fund would continue to
pay distribution services fees for no more than four years. In contrast,
payments by Stable Income Fund, Income Equity Fund and Diversified Equity Fund
would continue until such time as there exist no outstanding uncovered
distribution charges attributable to the Fund and, therefore could continue for
periods of time beyond four years after the date of termination.

In addition, pursuant to the Plan each of Stable Income fund, Income Equity
Fund, diversified Equity Fund, Intermediate Government Income Fund and Growth
Equity Fund may, subject to approval by the Trustees, assume and pay (i) any
uncovered distribution charges of the distributor of a fund whose assets are
being acquired on behalf of such fund that are not reimbursed or paid by the
fund upon the merger or combinations with or acquisition of substantially all of
the assets of that fund.

Under previous distribution plans, which were terminated effective August 1,
1993, Forum was expressly permitted to use its own resources, including fees
payable to Forum pursuant to the Management Agreements, to defray the cost of
and to compensate others for assisting in the distribution of the Funds' shares.
For all periods previous to, and including the fiscal year ended, May 31, 1995
each Fund incurred no expenses pursuant to that distribution plan.

Table 3 in Appendix B shows the dollar amount of fees payable to Forum for its
distribution services with respect to each Fund (or class thereof), the amount
of fee that was waived by Forum, if any, and the actual fee received by Forum.
All maintenance fees were waived by Forum during the fiscal years ended May 31,
1995 and 1996. With respect to each Fund, Forum has paid brokers that sold B
Shares in amounts greater than the distribution fees received by Forum with
respect to that Fund. The data is for the past three fiscal years or shorter
period if the Fund has been in operation for a shorter period.

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Table 4 in Appendix B shows the dollar amount of sales charges payable to Forum
with respect to sales of A Shares (or of the respective Funds prior to the
offering of multiple classes of shares) and the amount of sales charge retained
by Forum and not reallowed to other persons. The data is for the past three
fiscal years or shorter period if the Fund has been in operation for a shorter
period.

TRANSFER AGENT

Norwest acts as Transfer Agent of the Trust pursuant to a Transfer Agency
Agreement. The Transfer Agency Agreement will continue in effect only if such
continuance is specifically approved at least annually by the Board or by a vote
of the shareholders of the Trust and in either case by a majority of the
Trustees who are not parties to the Transfer Agency Agreement or interested
persons of any such party, at a meeting called for the purpose of voting on the
Transfer Agency Agreement.

Among the responsibilities of the Transfer Agent as agent for the Trust are:
(1) answering customer inquiries regarding account status and history, the
manner in which purchases and redemptions of shares of the Fund may be effected
and certain other matters pertaining to the Fund; (2) assisting shareholders in
initiating and changing account designations and addresses; (3) providing
necessary personnel and facilities to establish and maintain shareholder
accounts and records, (4) assisting in processing purchase and redemption
transactions and receiving wired funds; (5) transmitting and receiving funds in
connection with customer orders to purchase or redeem shares; (6) verifying
shareholder signatures in connection with changes in the registration of
shareholder accounts; (7) furnishing periodic statements and confirmations of
purchases and redemptions; (8) transmitting proxy statements, annual reports,
prospectuses and other communications from the Trust to its shareholders; (9)
receiving, tabulating and transmitting to the Trust proxies executed by
shareholders with respect to meetings of shareholders of the Trust; and (10)
providing such other related services as the Trust or a shareholder may request.

For its services, the Transfer Agent receives from the Trust, with respect to
Cash Investment Fund, U.S. Government Fund, Treasury Fund, Investor Shares and
Exchange Shares of Ready Cash Investment Fund, Investor Shares of Municipal
Money Market Fund and each class of each Fixed Income and Equity Fund, a fee
computed and paid monthly at the annual rate of 0.25% of the Fund's average
daily net assets (or, in those Funds with more than one class, the Fund's
average daily net assets attributable to the class). For its services, the
Transfer Agent receives from the Trust, with respect to Institutional Shares of
Ready Cash Investment Fund and Municipal Money Market Fund, a fee computed and
paid monthly at the annual rate of 0.10% of the Fund's average daily net assets
attributable to the class plus reimbursement of Norwest's out-of-pocket expenses
relating to the Institutional Shares.

CUSTODIAN

Pursuant to a Custodian Agreement, Norwest acts as the custodian of the Trust's
assets. The custodian's responsibilities include safeguarding and controlling
the Trust's cash and securities, determining income and collecting interest on
Fund investments. For these services, the custodian receives a fee, with
respect to each Fund (other than International Fund), computed and paid monthly,
based on the average daily net assets of the Fund, the number of portfolio
transactions of the Fund and the number of securities in the Fund's portfolio.

With respect to Cash Investment Fund, U.S. Government Fund and Treasury Fund,
the custodian's fee for any fiscal year of the Trust will not exceed 0.03% of
the Fund's average daily net assets. With respect to each other Fund (other
than International Fund), the custodian's fee for any fiscal year of the Trust
will not exceed 0.05% of the Fund's average daily net assets. In addition, for
those Funds permitted to lend their portfolio securities, the custodian receives
a separate fee for performing certain functions in connection with loans of
portfolio securities.

Pursuant to rules adopted under the 1940 Act, International Fund may maintain
its foreign securities and cash in the custody of certain eligible foreign banks
and securities depositories. Selection of these foreign custodial institutions
is made by the Board following a consideration of a number of factors, including
(but not limited to) the reliability and financial stability of the institution;
the ability of the institution to perform capably custodial services for the
Fund; the reputation of the institution in its national market; the political
and economic stability of the country in which the institution is located; and
further risks of potential

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nationalization or expropriation of Fund assets. The custodian employs
qualified foreign subcustodians to provide custody of the Fund's foreign assets
in accordance with applicable regulations. The Chase Manhattan Bank, N.A.,
through its Global Custody Division located in London, England, acts as
custodian of International Fund's assets and of International Portfolio and
International Portfolio II, but plays no role in making decisions as to the
purchase or sale of portfolio securities for the Fund.

International Fund will not pay custodian fees to the extent the Fund invests in
shares of another registered investment company. Where the Fund's investments
consists solely of such shares, such as International Fund's investment in
shares of International Portfolio, the Fund will pay no custodian fees.

PORTFOLIO ACCOUNTING

FFC, an affiliate of Forum, performs portfolio accounting services for each Fund
pursuant to a Fund Accounting Agreement with the Trust. The Fund Accounting
Agreement will continue in effect only if such continuance is specifically
approved at least annually by the Board or by a vote of the shareholders of the
Trust and in either case by a majority of the Trustees who are not parties to
the Fund Accounting Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on the Fund Accounting Agreement.

Under its agreement, FFC prepares and maintains books and records of each Fund
on behalf of the Trust that are required to be maintained under the 1940 Act,
calculates the net asset value per share of each Fund (and class thereof) and
dividends and capital gain distributions and prepares periodic reports to
shareholders and the SEC. For its services, FFC receives from the Trust with
respect to each Fund a fee of $36,000 per year plus, for each class of the Fund
above one, $12,000 per year. In addition, FFC is paid an additional $12,000 per
year with respect to tax-free money market funds, global and international funds
(such as International Fund) and funds with more than 25% of their total assets
invested in asset backed securities, that have more than 100 security positions
or that have a monthly portfolio turnover rate of 10% or greater. Under
International Fund's Fund Accounting Agreement so long as all of the Fund's
investments consist solely of securities of International Portfolio or any other
registered investment company, the Fund pays $12,000 per year plus $12,000 for
each class of shares above one.

FFC is required to use its best judgment and efforts in rendering fund
accounting services and is not be liable to the Trust for any action or inaction
in the absence of bad faith, willful misconduct or gross negligence. FFC is not
responsible or liable for any failure or delay in performance of its fund
accounting obligations arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control and the Trust has agreed to
indemnify and hold harmless FFC, its employees, agents, officers and directors
against and from any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or in any way related to FFC's actions
taken or failures to act with respect to a Fund or based, if applicable, upon
information, instructions or requests with respect to a Fund given or made to
FFC by an officer of the Trust duly authorized. This indemnification does not
apply to FFC's actions taken or failures to act in cases of FFC's own bad faith,
willful misconduct or gross negligence.

Table 5 in Appendix B shows the dollar amount of fees payable to FFC for its
accounting services with respect to each Fund, the amount of fee that was waived
by FFC, if any, and the actual fee received by FFC. The data is for the past
three fiscal years or shorter period if the Fund has been in operation for a
shorter period.

EXPENSES

The Trust may elect not to qualify the shares of all of its portfolios and
classes thereof for sale in every state. The Adviser has agreed to reimburse
the Trust for certain of the operating expenses of the Funds (exclusive of
interest, taxes, brokerage, fees and organization expenses, all to the extent
permitted by applicable state law or regulation) which in any year exceed the
limits prescribed by any state in which the Fund's shares are qualified for
sale. Forum believes that currently the most restrictive expense ratio
limitation imposed by any state is 2-1/2% of the first $30 million of each
Fund's average net assets, 2% of the next $70 million of its average net assets
and 1-1/2% of its average net assets in excess of $100 million. For the purpose
of this obligation to reimburse expenses, a

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Fund's annual expenses are estimated and accrued daily, and any appropriate
estimated payments will be made by The Adviser or Forum monthly.

Subject to the obligations of the Adviser to reimburse the Trust for its excess
expenses as described above, the Trust has, under its Investment Advisory
Agreements, confirmed its obligation to pay all its other expenses, including:
(i) interest charges, taxes, brokerage fees and commissions; (ii) certain
insurance premiums; (iii) fees, interest charges and expenses of the Trust's
custodian, transfer agent and dividend disbursing agent; (iv) telecommunications
expenses; (v) auditing, legal and compliance expenses; (vi) costs of the Trust's
formation and maintaining its existence; (vii) costs of preparing and printing
the Trust's prospectuses, statements of additional information, account
application forms and shareholder reports and delivering them to existing and
prospective shareholders; (viii) costs of maintaining books of original entry
for portfolio and fund accounting and other required books and accounts and of
calculating the net asset value of shares of the Trust; (ix) costs of
reproduction, stationery and supplies; (x) compensation of the Trust's trustees,
officers and employees and costs of other personnel performing services for the
Trust who are not officers of the Adviser, Forum or affiliated persons of the
Adviser or Forum; (xi) costs of corporate meetings; (xii) registration fees and
related expenses for registration with the SEC and the securities regulatory
authorities of other countries in which the Trust's shares are sold; (xiii)
state securities law registration fees and related expenses; (xiv) fees and out-
of-pocket expenses payable to Forum Financial Services, Inc. under any
distribution, management or similar agreement; (xv) and all other fees and
expenses paid by the Trust pursuant to any distribution or shareholder service
plan adopted pursuant to Rule 12b-1 under the Act.

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6. PORTFOLIO TRANSACTIONS

Purchases and sales of portfolio securities for the Money Market and Fixed
Income Funds usually are principal transactions. Portfolio securities are
normally purchased directly from the issuer or from an underwriter or market
maker for the securities. There usually are no brokerage commissions paid for
such purchases. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market makers include the spread between the bid and
asked price. In the case of securities traded in the foreign and domestic over-
the-counter markets, there is generally no stated commission, but the price
usually includes an undisclosed commission or markup. In underwritten
offerings, the price includes a disclosed fixed commission or discount The
Equity Funds generally will effect purchases and sales through brokers who
charge commissions except in the over-the-counter markets. Allocations of
transactions to brokers and dealers and the frequency of transactions are
determined by the Investment Advisers in their best judgment and in a manner
deemed to be in the best interest of shareholders of each Fund (holders of
beneficial interest in the case of International Portfolio) rather than by any
formula. The primary consideration is prompt execution of orders in an
effective manner and at the most favorable price available to the Fund. In
transactions on stock exchanges in the United States, these commissions are
negotiated, whereas on foreign stock exchanges these commissions are generally
fixed. Where transactions are executed in the over-the-counter market, each
Fund and International Portfolio will seek to deal with the primary market
makers; but when necessary in order to obtain best execution, they will utilize
the services of others. In all cases the Funds and International Portfolio will
attempt to negotiate best execution.

The Money Market Funds and Fixed Income Funds may effect purchases and sales
through brokers who charge commissions, although the Trust does not anticipate
that the Money Market Funds will pay brokerage commissions. No Money Market
Fund or Fixed Income Fund paid has any brokerage commissions during the last
three fiscal years of each Fund unless noted in Table 6 in Appendix B. Table 6
in Appendix B shows the aggregate brokerage commissions with respect to each
Equity Fund. The data is for the past three fiscal years or shorter period if
the Fund has been in operation for a shorter period.

Subject to the general policies regarding allocation of portfolio brokerage as
set forth above, the Board has authorized the Investment Advisers to employ
their respective affiliates to effect securities transactions of the Funds and
International Portfolio, provided certain other conditions are satisfied.
Payment of brokerage commissions to an affiliate of an Investment Adviser for
effecting such transactions is subject to Section 17(e) of the 1940 Act, which
requires, among other things, that commissions for transactions on securities
exchanges paid by a registered investment company to a broker which is an
affiliated person of such investment company, or an affiliated person of another
person so affiliated, not exceed the usual and customary brokers' commissions
for such transactions. It is the Funds policy that commissions paid to Schroder
Securities Limited, Norwest Investment Management, Inc. ("NISI") and other
affiliates of an Investment Adviser will, in the judgment of the Investment
Adviser responsible for making portfolio decisions and selecting brokers, be (i)
at least as favorable as commissions contemporaneously charged by the affiliate
on comparable transactions for its most favored unaffiliated customers and (ii)
at least as favorable as those which would be charged on comparable transactions
by other qualified brokers having comparable execution capability. The Board,
including a majority of the non-interested Trustees, has adopted procedures to
ensure that commissions paid to affiliates of an Adviser by the Funds satisfy
the foregoing standards. The Core Trust Board has adopted similar policies with
respect to the Portfolios.

No Fund has no understanding or arrangement to direct any specific portion of
its brokerage to an affiliate of an Investment Adviser, and will not direct
brokerage to an affiliate of an Investment Adviser in recognition of research
services.

During the last three fiscal years certain Funds paid brokerage commissions to
NISI, a wholly-owned broker-dealer subsidiary of the parent of Norwest, Norwest
Corporation. The following table indicates the Funds that paid commissions to
NISI, the aggregate amounts of commissions paid, the percentage of aggregate

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brokerage commissions paid to NISI and the percentage of the aggregate dollar
amount of transactions involving payment of commissions that were effected
through NISI.

Percentage of
Commission
Aggregate Percentage Transactions
Commissions of Commissions Executed
Paid to NISI Paid to NISI Through NISI
------------ ------------ ------------

VALUGROWTH STOCK FUND
Year Ended May 31, 1996 $10.494 2.41% 1.73%
Year Ended May 31, 1995 $12,213 1.78% 2.28%
Year Ended May 31, 1994 $25,713 4.65% 6.00%

The placement of orders with NISI are consistent with each Fund's objective of
obtaining best execution and are not dependent on the fact that NISI is an
affiliate of the Adviser.

A Fund, and in the case of International Fund, International Portfolio, may not
always pay the lowest commission or spread available. Rather, in determining
the amount of commission, including certain dealer spreads, paid in connection
with securities transactions, the Investment Advisers take into account such
factors as size of the order, difficulty of execution, efficiency of the
executing broker's facilities (including the services described below) and any
risk assumed by the executing broker. The Investment Advisers may also take
into account payments made by brokers effecting transactions for a Fund or
International Portfolio (i) to the Fund and International Portfolio or (ii) to
other persons on behalf of the Fund and International Portfolio for services
provided to them for which they would be obligated to pay.

In addition, the Investment Advisers may give consideration to research services
furnished by brokers to the Advisers for their use and may cause the Funds and
International Portfolio to pay these brokers a higher amount of commission than
may be charged by other brokers. Such research and analysis is of the types
described in Section 28(e)(3) of the Securities Exchange Act of 1934, as
amended, and is designed to augment the Adviser's own internal research and
investment strategy capabilities. Such research and analysis may be used by the
Advisers in connection with services to clients other than the Funds and
International Portfolio, and the Adviser's fees are not reduced by reason of the
Adviser's receipt of the research services.

Investment decisions for the Funds (and for International Portfolio) will be
made independently from those for any other account or investment company that
is or may in the future become managed by the Advisers or their affiliates.
Investment decisions are the product of many factors including basic suitability
for the particular client involved. Thus, a particular security may be bought
or sold for certain clients even though it could have been bought or sold for
other clients at the same time. Likewise, a particular security may be bought
for one or more clients when one or more clients are selling the security. In
some instances, one client may sell a particular security to another client. It
also sometimes happens that two or more clients simultaneously purchase or sell
the same security, in which event each day's transactions in such security are,
insofar as is possible, averaged as to price and allocated between such clients
in a manner which, in the respective Adviser's opinion, is equitable to each and
in accordance with the amount being purchased or sold by each. There may be
circumstances when purchases or sales of portfolio securities for one or more
clients will have an adverse effect on other clients. In addition, when
purchases or sales of the same security for a Fund and other client accounts
managed by the Advisers occur contemporaneously, the purchase or sale orders may
be aggregated in order to obtain any price advantages available to large
denomination purchases or sales.

During their last fiscal year certain Funds acquired the securities of their
"regular brokers and dealers" or the parents of those brokers and dealers.
Regular brokers and dealers means the 10 brokers or dealers that (i) received
the greatest amount of brokerage commissions during the Fund's last fiscal year,
(ii) engaged in the largest amount of principal transactions for portfolio
transactions of the Fund during the Fund's last fiscal year or (iii) sold the
largest amount of the Fund's shares during the Fund's last fiscal year.
Following is

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a list of the regular brokers and dealers of the Funds whose securities (or the
securities of the parent company) were acquired during the past fiscal year and
the aggregate value of the Funds' holdings of those securities as of May 31,
1996.

Regular Broker Value of
or Dealer Securities Held
--------- ---------------

CASH INVESTMENT FUND Bear, Stearns & Company $75,000,000
CS First Boston $15,000,000
Merrill Lynch & Co. $47,497,784
Morgan Stanley $345,781,386

READY CASH INVESTMENT FUND Bear, Stearns & Company $50,000,000
CS First Boston $10,000,000
Merrill Lynch & Co. $37,499,817
Morgan Stanley $55,000,000

U.S. GOVERNMENT FUND Bank of America Securities 345,781,386

TREASURY FUND None 0

MUNICIPAL MONEY MARKET FUND None 0

STABLE INCOME FUND Lehman Brothers Holdings 1,043,889

INTERMEDIATE GOVERNMENT FUND None 0

DIVERSIFIED BOND FUND Lehman Brothers Holdings 1,092,216
Paine Webber Group, Inc. 991,450
Dean Whitter 977,500
Charles Schwab Corporation 562,630

INCOME FUND None 0

TOTAL RETURN BOND FUND Salomon Brothers Inc. 1,205,617

LIMITED TERM TAX-FREE FUND None 0

TAX-FREE INCOME FUND None 0

COLORADO TAX FREE FUND None 0

MINNESOTA TAX FREE FUND None 0

CONSERVATIVE BALANCED FUND Charles Schwab Corporation 187,544
Dean Witter 293,598
Paine Webber Group, Inc. 495,725
Salomon Brothers Inc. 497,433
Bear Stearns Company 500,232
Charles Schwab Corp. 487,425
Donaldson, Lufkin & Jenrette, Inc. 111,562

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MODERATE BALANCED FUND Charles Schwab Corporation 562,630
Dean Witter 636,131
Lehman Brothers Inc. 819,162
Paine Webber Group, Inc. 1,090,595
Salomon Brothers Inc. 895,522
Charles Schwabb Corp. 1,940,000
Donaldson, Lufkin & Jenrette, Inc. 427,126

GROWTH BALANCED FUND Charles Schwab Corporation 562,629
Dean Witter 636,130
Lehman Brothers, Inc. 819,162
Paine Webber Group, Inc. 991,450
Salomon Brothers Inc. 497,432
Charles Schwab Corp. 3,533,225
Donaldson, Lufkin & Jenrette, Inc. 784,125

INCOME EQUITY FUND None 0

INDEX FUND Merrill Lynch & Co., Inc. 498,575
Morgan Stanley Group, Inc. 336,600
Salomon, Inc. 192,626

VALUGROWTH STOCK FUND None 0

DIVERSIFIED EQUITY FUND Charles Schwab Corporation 9,971,600
Donaldson, Lufkin & Jenrette, Inc. 2,218,502

GROWTH EQUITY FUND Charles Schwab Corporation 11,300,500
Donaldson, Lufkin & Jenrette, Inc. 2,524,500

LARGE COMPANY GROWTH FUND Charles Schwab Corporation 11,300,500
Donaldson, Lufkin & Jenrette, Inc. 2,524,500

SMALL COMPANY STOCK FUND None 0

SMALL COMPANY GROWTH FUND None 0

CONTRARIAN STOCK FUND None 0

INTERNATIONAL FUND None 0

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7. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares of all Funds are sold on a continuous basis by the distributor.

Set forth below is an example of the method of computing the offering price of
the Fixed Income and Equity Funds' A Shares. All other shares of the Trust are
offered at their next determined net asset value. The example assumes a
purchase of A Shares of the Fixed Income and Equity Funds' in an amount such
that the purchase would be subject to each Fund's maximum sales charges set
forth in the Prospectus at a price based on the net asset value per share of A
Shares of each Fund at May 31, 1996. The maximum sales charges as of May 31,
1995 was 4.5% for each Equity Fund and 3.75% for each Fixed Income Fund, except
Stable Income Fund, wherein it was 1.50%. Offering price is determined as
follows: Net asset value per share times the sum of one (1) plus the sales
charge expressed as a percentage (for example 4.5% would equal 0.045).

Net Asset Offering
Value Per Share Price
--------------- -----

Stable Income Fund $ 10.20 10.35
Intermediate Government Income Fund 10.89 11.30
Diversified Bond Fund (No Shares Outstanding)
Income Fund 9.27 9.62
Total Return Bond Fund 9.40 9.75
Tax-Free Income Fund 9.78 10.06
Colorado Tax-Free Fund 9.89 10.26
Minnesota Tax-Free Fund 10.30 10.69
Conservative Balanced Fund (No Shares Outstanding)
Moderate Balanced Fund (No Shares Outstanding)
Growth Balanced Fund (No Shares Outstanding)
Income Equity Fund 27.56 28.80
Index Fund (No Shares Outstanding)
ValuGrowth Stock Fund 22.63 23.48
Diversified Equity Fund 30.56 31.93
Growth Equity Fund 29.08 30.39
Large Company Growth Fund (No Shares Outstanding)
Small Company Stock Fund 14.02 14.55
Small Company Growth Fund (No Shares Outstanding)
Contrarian Stock Fund 10.82 11.23
International Fund 19.82 20.56

STATEMENT OF INTENTION

As more fully described in the Prospectus, investors may obtain reduced sales
charges with respect to the purchase of A Shares of the Fixed Income and Equity
Funds by means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a period of 13
months in A Shares of a Fund. The Statement of Intention is not a binding
obligation upon the investor to purchase the full amount indicated. A Shares
purchased with the first 5% of such amount will be held subject to a registered
pledge (while remaining registered in the name of the investor) to secure
payment of the higher sales charge applicable to the shares actually purchased
if the full amount indicated is not purchased, and such pledged shares will be
involuntarily redeemed to pay the additional sales charge, if necessary. When
the full amount indicated has been purchased, the shares will be released from
pledge.

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EXCHANGES

By making an exchange, the investor authorizes the Trust's transfer agent to act
on telephonic instructions from any person representing himself or herself to be
the investor and believed by the Trust's transfer agent to be genuine. The
records of the Trust's transfer agent of such instructions are binding. The
exchange procedures may be modified or terminated at any time upon appropriate
notice to shareholders. For Federal income tax purposes, exchanges are treated
as sales on which a purchaser will realize a capital gain or loss depending on
whether the value of the shares redeemed is more or less than his basis in such
shares at the time of such transaction.

Shareholders of A Shares may purchase, with the proceeds from a redemption of
all or part of their shares, A Shares of the other Fixed Income and Equity Funds
or Investor Shares of Ready Cash Investment Fund or Municipal Money Market Fund.
Shareholders of B Shares may purchase, with the proceeds from a redemption of
all or part of their shares, B Shares of the other Fixed Income and Equity Funds
or Exchange Shares of Ready Cash Investment Fund. Shareholders of I Shares may
purchase, with the proceeds from a redemption of all or part of their shares, I
Shares of the other Fixed Income and Equity Funds or Institutional Shares of
Ready Cash Investment Fund or Municipal Money Market Fund or shares of U.S.
Government Fund and Treasury Fund.

Shareholders of Investor Shares of Ready Cash Investment Fund and Municipal
Money Market Fund may purchase, with the proceeds from a redemption of all or
part of their shares, Investor Shares of the other Fund or A Shares of the Fixed
Income and Equity Funds. Shareholders of Exchange Shares of Ready Cash
Investment Fund may purchase, with the proceeds from a redemption of all or part
of their shares, B Shares of the Fixed Income and Equity Funds.

Shareholders of Institutional Shares of Ready Cash Investment Fund and Municipal
Money Market Fund who are eligible to purchase I Shares may purchase, with the
proceeds from a redemption of all or part of their shares, Institutional Shares
of the other Fund, shares of U.S. Government Fund and Treasury Fund or I Shares
of the Fixed Income and Equity Funds. Similarly, shareholders of U.S.
Government Fund and Treasury Fund who are eligible to purchase I Shares may
purchase, with the proceeds from a redemption of all or part of their shares,
shares of the other Fund, Institutional Shares of Ready Cash Investment Fund and
Municipal Money Market Fund or I Shares of the Fixed Income and Equity Funds.

Shareholders of Institutional Shares of Municipal Money Market Fund who are not
eligible to purchase I Shares may purchase, with the proceeds from a redemption
of all or part of their shares, shares of Cash Investment Fund, U.S. Government
Fund and Treasury Fund. Similarly, shareholders of Cash Investment Fund, U.S.
Government Fund and Treasury Fund who are not eligible to purchase I Shares may
purchase, with the proceeds from a redemption of all or part of their shares,
shares of the other two Funds or Institutional Shares of Municipal Money Market
Fund.

Shareholders of A Shares or Investor Shares making an exchange will be subject
to the applicable sales charge of any A Shares acquired in the exchange;
provided, that the sales charge charged with respect to the acquired shares will
be assessed at a rate that is equal to the excess (if any) of the rate of the
sales charge that would be applicable to the acquired shares in the absence of
an exchange over the rate of the sales charge previously paid on the exchanged
shares. For purposes of the preceding sentence, A Shares acquired through the
reinvestment of dividends or distributions are deemed to have been acquired with
a sales charge rate equal to that paid on the shares on which the dividend or
distribution was paid.

In addition, A Shares and Investor Shares acquired by a previous exchange
transaction involving shares on which a sales charge has directly or indirectly
been paid (e.g., shares purchased with a sales charge or issued in connection
with an exchange transaction involving shares that had been purchased with a
sales charge), as well as additional shares acquired through reinvestment of
dividends or distributions on such shares will be treated as if they had been
acquired subject to that sales charge.

B Shares ("original Investor Shares") may be exchanged without the payment of
any contingent deferred sales charge; however, B Shares or Exchange Shares
acquired as a result of such exchange and subsequently redeemed

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will nonetheless be subject to the contingent deferred sales charge applicable
to the original B Shares as if those shares were being redeemed at that time.
Exchange Shares may be exchanged without the payment of any contingent deferred
sales charge; however, B Shares acquired as a result of such exchange and
subsequently redeemed will nonetheless be subject to the contingent deferred
sales charge applicable to the Exchange Shares as if those shares were being
redeemed at that time.

REDEMPTIONS

In addition to the situations described in the Prospectus with respect to the
redemptions of shares, the Trust may redeem shares involuntarily to reimburse a
Fund for any loss sustained by reason of the failure of a shareholder to make
full payment for shares purchased by the shareholder or to collect any charge
relating to transactions effected for the benefit of a shareholder which is
applicable to a Fund's shares as provided in the Prospectus from time to time.

Proceeds of redemptions normally are paid in cash. However, payments may be
made wholly or partially in portfolio securities if the Board determines that
payment in cash would be detrimental to the best interests of the Fund. If
payment for shares redeemed is made wholly or partially in portfolio securities,
brokerage costs may be incurred by the shareholder in converting the securities
to cash. The Trust has filed a formal election with the SEC pursuant to which a
Fund will only effect a redemption in portfolio securities if the particular
shareholder is redeeming more than $250,000 or 1% of the Fund's total net
assets, whichever is less, during any 90-day period.

CONTINGENT DEFERRED SALES CHARGE (A SHARES)

Certain A Shares of the Fixed Income and Equity Funds on which no initial sales
charge was assessed, that are redeemed within specified periods after the
purchase date will be subject to a contingent deferred sales charge upon
redemption.

RIGHT OF ACCUMULATION

Contingent deferred sales charges may be charged on redemptions of A Shares
purchased pursuant to the Cumulative Quantity Discount (Right of Accumulation).
The contingent deferred sales charge will apply to A Shares purchased if the
value of those shares on the date of purchase plus the net asset value of any
Investor Shares held by the shareholder (as of the close of business on the
previous Fund Business Day) of all A Shares held by the shareholder exceed
$1,000,000. For example, if a shareholder has made prior purchases of A Shares
which now have a value of $900,000, the purchase of $150,000 of A Shares will
not be subject to an initial sales charge but will be subject to the contingent
deferred sales charge. The $900,000 of A Shares is not subject to the
contingent deferred sales charge.

STATEMENT OF INTENTION

Contingent deferred sales charges may be charged on redemptions of A Shares
purchased pursuant to a Statement of Intention ("SOI"). The contingent deferred
sales charge will not apply to SOIs of under $1,000,000 and will not be applied
to SOIs for a greater amount if the shareholder never purchases $1,000,000 or
more of A Shares under the SOI. If a shareholder purchases $1,000,000 or more
under an SOI, the contingent deferred sales charge will apply with respect to
the entire amount purchased. The holding period for each A Share, however,
shall be determined from the date the share was purchased. If the shareholder
redeems A Shares during the period that the SOI is in effect, a contingent
deferred sales charge will be charged at the time the shareholder has purchased
$1,000,000 or more worth of A Shares pursuant to the SOI and will be assessed at
the rate applicable in the case of a single purchase of the minimum amount
specified in the SOI. If the shareholder purchases less than the amount
specified under the SOI, an additional contingent deferred sales charge may be
assessed in respect of A Shares previously redeemed based on the amount actually
purchased pursuant to the SOI.

A Shares purchased by a shareholder within 60 days following the redemption by
the shareholder of A Shares in the same Fund with a value at least equal to the
A Shares being purchased will not be subject to a contingent deferred

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<PAGE>

sales charge; provided, however, that this exemption is not applicable to more
than two purchases within a 12-month period.

CONTINGENT DEFERRED SALES CHARGE (A SHARES AND B SHARES)

With respect to A Shares and B Shares of the Fixed Income Funds and Equity
Funds, certain redemptions are not subject to any contingent deferred sales
charge. No contingent deferred sales charge is imposed on (i) redemptions of
shares acquired through the reinvestment of dividends and distributions, (ii)
involuntary redemptions by 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, (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. For these purposes, the term disability shall
have the meaning ascribed thereto in Section 72(m)(7) of the Code. Under that
provision, a person is considered disabled if the person is unable to engage in
any substantial activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or to be of long-
continued and indefinite duration. Appropriate documentation satisfactory to
the Fund is required to substantiate any shareholder death or disability.

CONVERSION OF B SHARES

The conversion of Exchange Shares to Investor Shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the distribution services fee with respect to the Exchange Shares
does not result in the Fund's dividends or distributions constituting
"preferential dividends" under the Code, and (ii) the conversion of Exchange
Shares to Investor Shares does not constitute a taxable event under Federal
income tax law. The conversion of Exchange Shares to Investor Shares may be
suspended if such an opinion is no longer available at the time the conversion
is to occur. In that event, no further conversions of Exchange Shares would
occur, and shares might continue to be subject to a distribution services fee
for an indefinite period, which may extend beyond the specified number of years
for conversion of the original B Shares.

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8. TAXATION

Each Fund intends for each taxable year to qualify for tax treatment as a
"regulated investment company" under the Code. Such qualification does not, of
course, involve governmental supervision of management or investment practices
or policies. Investors should consult their own counsel for a complete
understanding of the requirements each Fund must meet to qualify for such
treatment, and of the application of state and local tax laws to his or her
particular situation.

Since each Money Market Fund and Fixed Income Fund expects to derive
substantially all of its gross income (exclusive of capital gains) from sources
other than dividends, it is expected that none of a Fund's dividends or
distributions will qualify for the dividends-received deduction for
corporations.

Certain listed options and regulated futures contracts are considered "section
1256 contracts" for Federal income tax purposes. Section 1256 contracts held by
a Fund at the end of each taxable year will be "marked to market" and treated
for Federal income tax purposes as though sold for fair market value on the last
business day of such taxable year. Gain or loss realized by a Fund on section
1256 contracts generally will be considered 60% long-term and 40% short-term
capital gain or loss. Each Fund can elect to exempt its section 1256 contracts
which are part of a "mixed straddle" (as described below) from the application
of section 1256.

With respect to over-the-counter put and call options, gain or loss realized by
a Fund upon the lapse or sale of such options held by such Fund will be either
long-term or short-term capital gain or loss depending upon the Fund's holding
period with respect to such option. However, gain or loss realized upon the
lapse or closing out of such options that are written by a Fund will be treated
as short-term capital gain or loss. In general, if a Fund exercises an option,
or an option that a Fund has written is exercised, gain or loss on the option
will not be separately recognized but the premium received or paid will be
included in the calculation of gain or loss upon disposition of the property
underlying the option.

Any option, futures contract, or other position entered into or held by a Fund
in conjunction with any other position held by such Fund may constitute a
"straddle" for Federal income tax purposes. A straddle of which at least one,
but not all, the positions are section 1256 contracts may constitute a "mixed
straddle". In general, straddles are subject to certain rules that may affect
the character and timing of a Fund's gains and losses with respect to straddle
positions by requiring, among other things, that (i) loss realized on
disposition of one position of a straddle not be recognized to the extent that a
Fund has unrealized gains with respect to the other position in such straddle;
(ii) a Fund's holding period in straddle positions be suspended while the
straddle exists (possibly resulting in gain being treated as short-term capital
gain rather than long-term capital gain); (iii) losses recognized with respect
to certain straddle positions which are part of a mixed straddle and which are
non-section 1256 positions be treated as 60% long-term and 40% short-term
capital loss; (iv) losses recognized with respect to certain straddle positions
which would otherwise constitute short-term capital losses be treated as long-
term capital losses; and (v) the deduction of interest and carrying charges
attributable to certain straddle positions may be deferred. Various elections
are available to a Fund which may mitigate the effects of the straddle rules,
particularly with respect to mixed straddles. In general, the straddle rules
described above do not apply to any straddles held by a Fund all of the
offsetting positions of which consist of section 1256 contracts.

A Fund's investments in zero coupon securities will be subject to special
provisions of the Code which may cause the Fund to recognize income without
receiving cash necessary to pay dividends or make distributions in amounts
necessary to satisfy the distribution requirements for avoiding federal income
and excise taxes. In order to satisfy those distribution requirements the Fund
may be forced to sell other portfolio securities.

Each International Fund shareholder should include in the shareholder's report
of gross income in his Federal income tax return both cash dividends received by
the shareholder from the Fund and also the amount which the Fund advises the
shareholder is the shareholder's pro rata portion of foreign income taxes paid
with respect to, or withheld from, dividends and interest paid to International
Portfolio from its foreign investments. Each shareholder then would be
entitled, subject to certain limitations, to take a foreign tax

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credit against the shareholders' Federal income tax liability for the amount of
such foreign taxes or else to deduct such foreign taxes as an itemized deduction
from gross income.

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<PAGE>

9. ADDITIONAL INFORMATION ABOUT THE TRUST AND THE SHAREHOLDERS OF THE FUNDS

DETERMINATION OF NET ASSET VALUE

Pursuant to the rules of the SEC, the Board has established procedures to
stabilize each Money Market Funds' net asset value at $1.00 per share. These
procedures include a review of the extent of any deviation of net asset value
per share as a result of fluctuating interest rates, based on available market
rates, from the Fund's $1.00 amortized cost price per share. Should that
deviation exceed 1/2 of 1%, the Board will consider whether any action should be
initiated to eliminate or reduce material dilution or other unfair results to
shareholders. Such action may include redemption of shares in kind, selling
portfolio securities prior to maturity, reducing or withholding dividends and
utilizing a net asset value per share as determined by using available market
quotations. Each Fund will maintain a dollar-weighted average portfolio
maturity of 90 days or less, will not purchase any instrument with a remaining
maturity greater than 397 days or subject to a repurchase agreement having a
duration of greater than 397 days, will limit portfolio investments, including
repurchase agreements, to those U.S. dollar-denominated instruments that the
Board has determined present minimal credit risks and will comply with certain
reporting and recordkeeping procedures. The Trust has also established
procedures to ensure that portfolio securities meet the Funds' high quality
criteria.

COUNSEL AND AUDITORS

Legal matters in connection with the issuance of shares of beneficial interest
of the Trust are passed upon by the law firm of Seward & Kissel, One Battery
Park Plaza, New York, NY 10004.

KPMG Peat Marwick LLP, 99 High Street, Boston, MA 02110, independent auditors,
served as the independent auditors for the Trust for the fiscal years ended
May 31, 1996, 1995 and 1994, as well as for the fiscal year ended October 31,
1995 for those Funds that had that fiscal year end. KPMG Peat Marwick LLP have
been selected as independent auditors for the Trust for the fiscal year ending
May 31, 1997. For the prior fiscal periods Deloitte & Touche LLP acted as
independent auditors of the Trust's predecessor corporation.

GENERAL INFORMATION

The Trust is divided into twenty eight separate series representing shares of
the Funds and Small Cap opportunities Fund. The Trust received an order from
the SEC permitting the issuance and sale of separate classes of shares
representing interests in each of the Trust's existing funds; however, the Trust
currently issues and operates the various Funds separate classes of shares under
the provisions of 1940 Act .

The Board has determined that currently no conflict of interest exists between
or among each Fund's A Shares, B Shares and I Shares, among Ready Cash
Investment Fund's Institutional, Investor and Exchange Shares and between
Municipal Money Market Fund's Institutional and Investor Shares. On an ongoing
basis, the Board, pursuant to its fiduciary duties under the 1940 Act and state
law, will seek to ensure that no such conflict arises.

Generally, the Trust's shareholders are not personally liable for the
obligations of the Trust under Delaware law. The Delaware Business Trust Act
(the "Delaware Act") provides that a shareholder of a Delaware business trust
shall be entitled to the same limitation of liability extended to shareholders
of private corporations for profit. However, no similar statutory or other
authority limiting business trust shareholder liability exists in many other
states, including Texas. As a result, to the extent that the Trust or a
shareholder is subject to the jurisdiction of courts in those states, the courts
may not apply Delaware law, and may thereby subject the Trust shareholders to
liability. To guard against this risk, the Trust Instrument of the Trust
disclaims shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
and instrument entered into by the Trust or its Trustees, and provides for
indemnification out of Trust property of any shareholder held personally liable
for the obligations of the Trust. Thus, the risk of a shareholder incurring
financial loss beyond his investment because of shareholder liability is limited
to circumstances in which (i) a court refuses to

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apply Delaware law, (ii) no contractual limitation of liability is in effect,
and (iii) the Trust itself is unable to meet its obligations. In light of
Delaware law, the nature of the Trust's business, and the nature of its assets,
the Board believes that the risk of personal liability to a Trust shareholder is
extremely remote.

In order to change its adopt the name Norwest Funds, the Trust has agreed in
each Investment Advisory Agreement with the Adviser that if the Adviser ceases
to act as investment adviser to the Trust or any Fund whose name includes the
word "Norwest," or if the Adviser requests in writing, the Trust shall take
prompt action to change the name of the Trust any such Fund to a name that does
not include the word "Norwest." The Adviser may from time to time make
available without charge to the Trust for the Trust's use any marks or symbols
owned by the adviser, including marks or symbols containing the word "Norwest"
or any variation thereof, as the Adviser deems appropriate. Upon the Adviser's
request in writing, the Trust shall cease to use any such mark or symbol at any
time. The Trust acknowledges that any rights in or to the word "Norwest" and
any such marks or symbols which may exist on the date of this Agreement or arise
hereafter are, and under any and all circumstances shall continue to be, the
sole property of the Adviser. The Adviser may permit other parties, including
other investment companies, to use the word "Norwest" in their names without the
consent of the Trust. The Trust shall not use the word "Norwest" in conducting
any business other than that of an investment company registered under the Act
without the permission of the Adviser.

RECENT MERGERS

As of May 17, 1996, three portfolios of the Funds, Adjustable U.S. Government
Reserve Fund, Government Income Fund and Income Stock Fund (the "Acquired
Funds") were reorganized into Stable Income Fund, Intermediate Government Income
Fund and Income Equity Fund (the "Acquiring Funds"), respectively. Each
Acquiring Fund commenced operations prior to that date and was the entity that
continued its existence after the transactions. Performance for the Acquiring
Funds reflects those Funds performance prior to the transaction and all fees
listed in this Statement of Additional Information reflect the fees paid by the
Acquiring Funds.

SHAREHOLDINGS

Table 7 to Appendix A lists the persons who owned of record 5% or more of the
outstanding shares of a class of shares of a Fund as of August 31, 1995.

FINANCIAL STATEMENTS

The financial statements of each Fund for the year ended May 31, 1996 (which
include statements of assets and liabilities, statements of operations,
statements of changes in net assets, notes to financial statements, financial
highlights, portfolios of investments and the independent auditors' report
thereon) are included in the Annual Report to Shareholders of the Trust
delivered along with this SAI and are incorporated herein by reference. The
fiscal year end of Stable Income Fund, Intermediate Government Income Fund,
Diversified Bond Fund, Conservative Balanced Fund, Moderate Balanced Fund,
Growth Balanced Fund, Income Equity Fund, Index Fund, Diversified Equity
Fund, Growth Equity Fund, Large Company Growth Fund, Small Company Growth
Fund and International Fund was October 31 prior to the year ended May 31,
1996.

REGISTRATION STATEMENT

This SAI and the Prospectus do not contain all the information included in the
Trust's registration statement filed with the SEC under the Securities Act of
1933 with respect to the securities offered hereby, certain portions of which
have been omitted pursuant to the rules and regulations of the SEC. The
registration statement, including the exhibits filed therewith, may be examined
at the office of the SEC in Washington, D.C.

Statements contained herein and in the Prospectus as to the contents of any
contract of other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract

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or other documents filed as an exhibit to the registration statement, each such
statement being qualified in all respects by such reference.

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APPENDIX A - DESCRIPTION OF SECURITIES RATINGS

MUNICIPAL AND CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)

MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")

Moody's rates corporate bond issues, including convertible debt issues, as
follows:

Bonds which are rated Aaa are judged by Moody's to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.

Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.

Bonds which are rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payment and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Bonds which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.

Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.

Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
<PAGE>

Note: Those bonds in the Aa, A, Baa, Ba or B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa1,
A1, Baa1, Ba1, and B1.

STANDARD AND POOR'S CORPORATION ("S&P")

S&P rates corporate bond issues, including convertible debt issues, as follows:

Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

Bonds rated AA have a very strong capacity to pay interest and repay principal
and differ from the highest rated issues only in small degree.

Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt rated in higher rated
categories.

Bonds rated BBB are regarded as having an adequate capacity to pay interest and
repay principal. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.

Bonds rated BB, B, CCC, CC and C are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. Bonds rated BB have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.

Bonds rated B have a greater vulnerability to default but currently have the
capacity to meet interest payments and principal payments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.

Bonds rated CCC have currently identifiable vulnerability to default, and are
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, they are not likely to have the
capacity to pay interest and repay principal.

Bonds rated C typically are subordinated to senior debt which as assigned an
actual or implied CCC debt rating. This rating may also be used to indicate
imminent default.

The C rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued. The rating Cl is reserved
for income bonds on which no interest is being paid.

Bonds are rated D when the issue is in payment default, or the obligor has filed
for bankruptcy. Bonds rated D are in payment default or the obligor has filed
for bankruptcy. The D rating category is used when interest payments or
principal payments are not made on the date due, even if the applicable grace
period has not expired, unless S&P believes that such payments will made during
such grace period.

Note: The ratings from AA to CCC may be modified by the addition of a plus (+)
or minus (-) sign to show the relative standing within the rating category.

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<PAGE>

FITCH INVESTORS SERVICE, INC. ("FITCH")

Fitch rates corporate bond issues, including convertible debt issues, as
follows:

AAA Bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.

AA Bonds are considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the AAA
and AA categories are not significantly vulnerable to foreseeable future
developments, shorter-term debt of these issuers is generally rate F-1+.

A Bonds are considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB Bonds are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.

BB Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C Bonds are in imminent default in payment of interest or principal.

DDD, DD, and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.

Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA, DDD, DD, or D categories.

-A3-
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PREFERRED STOCK

MOODY'S INVESTORS SERVICE, INC.

Moody's rates preferred stock as follows:

An issue rated aaa is considered to be a top-quality preferred stock. This
rating indicates good asset protection and the least risk of dividend impairment
among preferred stock issues.

An issue rated aa is considered a high-grade preferred stock. This rating
indicates that there is a reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.

An issue rated a is considered to be an upper-medium grade preferred stock.
While risks are judged to be somewhat greater than in the aaa and aa
classification, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.

An issue rated baa is considered to be a medium-grade, neither highly protected
nor poorly secured. Earnings and asset protection appear adequate at present
but may be questionable over any great length of time.

An issue rated ba is considered to have speculative elements and its future
cannot be considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.

An issue which is rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of
the issue over any long period of time may be small.

An issue which is rated caa is likely to be in arrears on dividend payments.
This rating designation does not purport to indicate the future status of
payments.

An issue which is rated ca is speculative in a high degree and is likely to be
in arrears on dividends with little likelihood of eventual payment.

An issue which is rated c can be regarded as having extremely poor prospects of
ever attaining any real investment standing. This is the lowest rated class of
preferred or preference stock.

Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification from aa through b in its preferred stock rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issuer ranks in the lower end of its generic rating
category.

STANDARD & POOR'S CORPORATION

S&P rates preferred stock as follows:

AAA is the highest rating that is assigned by S&P to a preferred stock issue and
indicates an extremely strong capacity to pay the preferred stock obligations.

A preferred stock issue rated AA also qualifies as a high-quality fixed income
security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated AAA.

An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.

-A4-
<PAGE>

An issue rated BBB is regarded as backed by an adequate capacity to pay the
preferred stock obligations. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the A category.

Preferred stock rated BB, B, and CCC are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay preferred stock
obligations. BB indicates the lowest degree of speculation and CCC the highest
degree of speculation. While such issues will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.

The rating CC is reserved for a preferred stock issue in arrears on dividends or
sinking fund payments but that is currently paying.

A preferred stock rated C is a non-paying issue.

A preferred stock rated D is a non-paying issue with the issuer in default on
debt instruments.

To provide more detailed indications of preferred stock quality, the ratings
from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign
to show relative standing within the major rating categories.

SHORT TERM MUNICIPAL LOANS

MOODY'S INVESTORS SERVICE, INC. Moody's highest rating for short-term municipal
loans is MIG-1/VMIG-1. A rating of MIG-1/VMIG-1 denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broadbased access to the market for refinancing. Loans bearing
the MIG-2/VMIG-2 designation are of high quality. Margins of protection are
ample although not so large as in the MIG-1/VMIG-1 group. A rating of MIG
3/VMIG 3 denotes favorable quality. All security elements are accounted for but
there is lacking the undeniable strength of the preceding grades. Liquidity and
cash flow protection may be narrow and market access for refinancing is likely
to be less well established. A rating of MIG 4/VMIG 4 denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.

STANDARD & POOR'S RATING GROUP. S&P's highest rating for short-term municipal
loans is SP-1. S&P states that short-term municipal securities bearing the SP-1
designation have very strong or strong capacity to pay principal and interest.
Those issues rated SP-1 which are determined to possess overwhelming safety
characteristics will be given a plus (+) designation. Issues rated SP-2 have
satisfactory capacity to pay principal and interest. Issues rated SP-3 have
speculative capacity to pay principal and interest.

FITCH INVESTORS SERVICE, INC. Fitch's short-term ratings apply to debt
obligations that are payable on demand or have original maturities of generally
up to three years, including commercial paper, certificates of deposit, medium-
term notes, and municipal and investment notes.

Short-term issues rated F-1+ are regarded as having the strongest degree of
assurance for timely payment. Issues assigned a rating of F-1 reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
Issues assigned a rating of F-2 have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for issues assigned
F-1+ or F-1.

OTHER MUNICIPAL SECURITIES AND COMMERCIAL PAPER

MOODY'S INVESTORS SERVICE, INC.

-A5-
<PAGE>

Moody's two highest ratings for short-term debt, including commercial paper, are
Prime-1 and Prime-2. Both are judged investment grade, to indicate the relative
repayment ability of rated issuers.

Issuers rated Prime-1 have a superior ability for repayment of senior short-term
debt obligations. Prime-1 repayment ability will often be evidenced by many of
the following characteristics: Leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structure with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; well-established access to a range of financial markets and assured
sources of alternate liquidity.

Issuers rated Prime-2 by Moody's have a strong ability for repayment of senior
short-term debt obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1 but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

STANDARD AND POOR'S CORPORATION

S&P's two highest commercial paper ratings are A-1 and A-2. Issues assigned an
A rating are regarded as having the greatest capacity for timely payment.
Issues in this category are delineated with the numbers 1, 2 and 3 to indicate
the relative degree of safety. An A-1 designation indicates that the degree of
safety regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics are denoted
with a plus (+) sign designation. The capacity for timely payment on issues
with an A-2 designation is strong. However, the relative degree of safety is
not as high as for issues designated A-1. A-3 issues have a satisfactory
capacity for timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying the higher
designations. Issues rated A-2 are regarded as having only an adequate capacity
for timely payment. However, such capacity may be damaged by changing
conditions or short-term adversities.

FITCH INVESTORS SERVICE, INC.

Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.

F-1+. Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.

F-1. Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.

F-2. Issues assigned this rating have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for issues assigned
F-1+ or F-1 rating.

F-3. Issues assigned this rating have characteristics suggesting that the
degree of assurance for timely payment is adequate, however, near-term adverse
changes could cause these securities to be rated below investment grade.

F-S. Issues assigned this rating have characteristics suggesting a minimal
degree of assurance for timely payment and are vulnerable to near-term adverse
changes in financial and economic conditions.

D. Issues assigned this rating are in actual or imminent payment default.

-A6-
<PAGE>

APPENDIX B - MISCELLANEOUS TABLES

TABLE 1 - INVESTMENT ADVISORY FEES

The following Table shows the dollar amount of fees payable under the Investment
Advisory Agreements between Norwest and the Trust with respect to each Fund, the
amount of fee that was waived by Norwest, if any, and the actual fee received by
Norwest. That table also shows the dollar amount of fees payable under the
investment advisory agreement between Schroder and Core trust with respect to
International Portfolio, the amount of fee that was waived by Schroder, if any,
and the actual fee received by Schroder.

Advisory Fee Advisory Fee Advisory Fee
Payable Waived Retained
------- ------ --------
CASH INVESTMENT FUND
Year Ended May 31, 1996 2,383,128 0 2,383,128
Year Ended May 31, 1995 2,067,323 0 2,067,323
Year Ended May 31, 1994 2,631,318 0 2,631,318

READY CASH INVESTMENT FUND
Year Ended May 31, 1996 4,128,532 44,547 4,083,985
Year Ended May 31, 1995 2,153,906 71,093 2,082,813
Year Ended May 31, 1994 1,187,810 250,039 937,771

U.S. GOVERNMENT FUND

Year Ended May 31, 1996 2,205,102 0 2,205,102
Year Ended May 31, 1995 1,687,958 0 1,687,958
Year Ended May 31, 1994 1,618,648 18,841 1,599,807

TREASURY FUND
Year Ended May 31, 1996 1,308,984 0 1,308,984
Year Ended May 31, 1995 1,152,801 0 1,152,801
Year Ended May 31, 1994 786,588 31,704 754,884

MUNICIPAL MONEY MARKET FUND
Year Ended May 31, 1996 1,907,103 303,321 1,603,782
Year Ended May 31, 1995 987,273 175,377 811,896
Year Ended May 31, 1994 480,381 296,671 183,710

STABLE INCOME FUND
Year Ended May 31, 1996 106,127 0 106,127
Year End October 31, 1995 114,429 0 114,429

INTERMEDIATE U.S. GOVERNMENT FUND
Year Ended May 31, 1996 142,125 0 142,125
Year End October 31, 1995 160,764 0 160,764

DIVERSIFIED BOND FUND
Year Ended May 31, 1996 344,777 0 344,777
Year End October 31, 1995 607,061 0 607,061

<PAGE>

INCOME FUND
Year Ended May 31, 1996 981,244 196,249 784,995
Year Ended May 31, 1995 560,463 149,529 410,934
Year Ended May 31, 1994 501,265 399,431 101,834

TOTAL RETURN BOND FUND
Year Ended May 31, 1996 584,872 352,590 232,282
Year Ended May 31, 1995 305,162 244,711 60,451
Year Ended May 31, 1994 18,515 18,515 0

LIMITED TERM TAX-FREE FUND
Year Ended May 31, 1996 N/A N/A N/A

TAX-FREE INCOME FUND
Year Ended May 31, 1996 1,187,026 1,032,179 154,847
Year Ended May 31, 1995 671,570 306,789 364,781
Year Ended May 31, 1994 600,178 516,714 143,464

COLORADO TAX-FREE FUND
Year Ended May 31, 1996 286,768 286,768 0
Year Ended May 31, 1995 257,147 257,147 0
Year Ended May 31, 1994 200,552 200,552 0

MINNESOTA TAX-FREE FUND
Year Ended May 31, 1996 154,733 154,733 0
Year Ended May 31, 1995 67,504 67,504 0
Year Ended May 31, 1994 64,534 60,030 4,504

CONSERVATIVE BALANCED FUND
Year Ended May 31, 1996 376,529 0 376,529
Year Ended October 31, 1995 547,353 0 547,353

MODERATE BALANCED FUND
Year Ended May 31, 1996 1,208,825 0 1,208,825
Year End October 31, 1995 1,722,174 0 1,722,174

GROWTH BALANCED FUND
Year Ended May 31, 1996 1,424,260 0 1,424,260
Year End October 31, 1995 1,849,672 0 1,849,672

INCOME EQUITY FUND
Year Ended May 31, 1996 227,790 0 227,790
Year End October 31, 1995 187,584 0 187,584

INDEX FUND
Year Ended May 31, 1996 193,373 143,795 49,578
Year End October 31, 1995 212,875 0 212,875

VALUGROWTH STOCK FUND
Year Ended May 31, 1996 1,335,281 16,691 1,318,590
Year Ended May 31, 1995 1,132,507 4,813 1,127,694
Year Ended May 31, 1994 992,202 168,379 823,823

B-2
<PAGE>

DIVERSIFIED EQUITY FUND
Year Ended May 31, 1996 3,038,858 0 3,038,858
Year End October 31, 1995 3,737,147 0 3,737,147

GROWTH EQUITY FUND
Year Ended May 31, 1996 3,342,391 0 3,342,390
Year End October 31, 1995 3,961,897 0 3,961,897

LARGE COMPANY GROWTH FUND
Year Ended May 31, 1996 274,152 0 274,152
Year End October 31, 1995 362,480 0 362,480

SMALL COMPANY STOCK FUND
Year Ended May 31, 1996 909,200 327,218 581,982
Year Ended May 31, 1995 322,908 322,908 0
Year Ended May 31, 1994 21,501 21,501 0

SMALL COMPANY GROWTH FUND
Year Ended May 31, 1996 1,653,578 0 1,653,578
Year End October 31, 1995 1,984,348 0 1,984,348

CONTRARIAN STOCK FUND
Year Ended May 31, 1996 349,877 70,170 279,707
Year Ended May 31, 1995 258,669 128,979 129,690
Year Ended May 31, 1994 9,927 9,927 0

INTERNATIONAL FUND*
Year Ended May 31, 1996 316,701 0 316,701
Year End October 31, 1995 367,007 0 367,007

* Represents investment advisory fees paid to Schroder Capital Management
Inc. by International Portfolio of Core Trust (Delaware)

B-3
<PAGE>

TABLE 2 - MANAGEMENT FEES

The following Table shows the dollar amount of fees payable to (i) Forum for its
management services with respect to each Fund (or class thereof for those
periods when multiple classes were outstanding), (ii) Norwest for its
administrative services with respect to International Fund and (iii) Forum with
respect to its administrative securities with respect to International
Portfolio. Also shown are the amount of fees that were waived by Forum and
Norwest, if any, and the actual fees received by Forum and Norwest. The data is
for the past three fiscal years or shorter period if the Fund has been in
operation for a shorter period.

(1) MANAGEMENT FEES TO FORUM
Management Management Management
Fee Fee Fee
Payable Waived Retained
-------- ------- --------
CASH INVESTMENT FUND
Year Ended May 31, 1996 1,076,303 160,959 915,344
Year Ended May 31, 1995 944,718 263,073 681,645
Year Ended May 31, 1994 1,179,716 0 1,179,716

U.S. GOVERNMENT FUND
Year Ended May 31, 1996 1,002,126 40,949 9,611,177
Year Ended May 31, 1995 786,649 135,127 651,522
Year Ended May 31, 1994 757,658 36,670 720,988

TREASURY FUND
Year Ended May 31, 1996 627,992 448,841 179,151
Year Ended May 31, 1995 558,734 467,978 90,756
Year Ended May 31, 1994 387,463 88,351 299,112

READY CASH INVESTMENT FUND
Investor Shares
Year Ended May 31, 1996 760,979 60,072 700,907
Year Ended May 31, 1995 391,466 147,704 243,762
Year Ended May 31, 1994 305,534 5,338 300,146
Institutional Shares
Year Ended May 31, 1996 1,569,081 1,569,081 0
Year Ended May 31, 1995 739,794 589,996 149,797
Year Ended May 31, 1994 260,556 205,978 54,578
Exchange Shares
Year Ended May 31, 1996 273 273 0
Year Ended May 31, 1995 417 331 86

MUNICIPAL MONEY MARKET FUND
Investor Shares
Year Ended May 31, 1996 115,294 65,869 49,425
Year Ended May 31, 1995 82,763 75,983 6,780
Year Ended May 31, 1994 89,824 26,370 63,554
Institutional Shares
Year Ended May 31, 1996 990,763 814,669 176,094
Year Ended May 31, 1995 481,393 393,600 87,793
Year Ended May 31, 1994 184,579 8,730 175,849

B-4
<PAGE>

STABLE INCOME FUND
A Shares
Year Ended May 31, 1996 623 623 0
B Shares
Year Ended May 31, 1996 33 33 0
I Shares
Year Ended May 31, 1996 34,720 34,720 0
Year End October 31, 1995 38,143 38,143 0

INTERMEDIATE U.S. GOVERNMENT FUND
A Shares
Year Ended May 31, 1996 666 666 0
B Shares
Year Ended May 31, 1996 412 412 0
I Shares
Year Ended May 31, 1996 41,991 41,991 0
Year End October 31, 1995 48,716 48,716 0

DIVERSIFIED BOND FUND
I Shares
Year Ended May 31, 1996 98,508 69,269 29,239
Year Ended October 31, 1995 173,446 147,461 25,985

INCOME FUND
A Shares
Year Ended May 31, 1996 11,894 11,894 0
Year Ended May 31, 1995 12,210 11,607 603
Year Ended May 31, 1994 50,378 6,025 44,353
B Shares
Year Ended May 31, 1996 6,732 6,732 0
Year Ended May 31, 1995 5,559 3,553 2,006
Year Ended May 31, 1994 2,799 0 2,799
I Shares
Year Ended May 31, 1996 373,872 353,908 19,964
Year Ended May 31, 1995 206,416 124,725 81,691
Year Ended May 31, 1994 147,328 13,243 134,085

TOTAL RETURN BOND FUND
A Shares
Year Ended May 31, 1996 2,416 2,416 0
Year Ended May 31, 1995 674 674 0
Year Ended May 31, 1994 27 9 18
B Shares
Year Ended May 31, 1996 3,264 3,264 0
Year Ended May 31, 1995 923 923 0
Year Ended May 31, 1994 60 52 8
I Shares
Year Ended May 31, 1996 228,269 12,744 215,525
Year Ended May 31, 1995 120,468 17,639 102,829
Year Ended May 31, 1994 7,320 923 6,397

B-5
<PAGE>

LIMITED TERM TAX-FREE FUND
A Shares
Year Ended May 31, 1996 N/A N/A N/A
B Shares
Year Ended May 31, 1996 N/A N/A N/A
I Shares
Year Ended May 31, 1996 N/A N/A N/A

TAX-FREE INCOME FUND
A Shares
Year Ended May 31, 1996 67,046 27,085 39,961
Year Ended May 31, 1995 64,084 64,084 0
Year Ended May 31, 1994 114,072 28,475 85,597
B Shares
Year Ended May 31, 1996 9,866 9,866 0
Year Ended May 31, 1995 6,348 5,591 757
Year Ended May 31, 1994 2,493 333 2,160
I Shares
Year Ended May 31, 1996 397,898 304,725 93,173
Year Ended May 31, 1995 198,196 139,199 58,997
Year Ended May 31, 1994 147,507 17,206 130,301

COLORADO TAX-FREE FUND
A Shares
Year Ended May 31, 1996 53,988 48,022 5,966
Year Ended May 31, 1995 56,039 40,684 15,355
Year Ended May 31, 1994 63,445 63,445 0
B Shares
Year Ended May 31, 1996 11,566 11,566 0
Year Ended May 31, 1995 9,429 7,791 1,638
Year Ended May 31, 1994 4,341 3,571 770
I Shares
Year Ended May 31, 1996 49,153 41,507 7,646
Year Ended May 31, 1995 37,392 31,974 5,418
Year Ended May 31, 1994 14,112 10,883 3,229

MINNESOTA TAX-FREE FUND
A Shares
Year Ended May 31, 1996 43,885 26,289 17,596
Year Ended May 31, 1995 19,236 19,236 0
Year Ended May 31, 1994 21,698 21,698 0
B Shares
Year Ended May 31, 1996 13,910 10,499 3,411
Year Ended May 31, 1995 5,974 5,974 0
Year Ended May 31, 1994 2,446 1,527 919
I Shares
Year Ended May 31, 1996 4,098 2,630 1,468
Year Ended May 31, 1995 1,781 1,622 159
Year Ended May 31, 1994 1,507 1,279 228

CONSERVATIVE BALANCED FUND
Year Ended May 31, 1996 83,673 69,584 14,089
Year Ended October 31, 1995 121,634 121,634 0

B-6
<PAGE>

MODERATE BALANCED FUND
Year Ended May 31, 1996 228,080 126,077 102,003
Year Ended October 31, 1995 324,938 212,921 112,017

GROWTH BALANCED FUND
Year Ended May 31, 1996 245,562 136,905 108,657
Year Ended October 31, 1995 318,909 209,411 109,498

INCOME EQUITY FUND
A Shares
Year Ended May 31, 1996 1,196 1,196 0
B Shares
Year Ended May 31, 1996 670 670 0
I Shares
Year Ended May 31, 1996 43,691 43,691 0
Year Ended October 31, 1995 37,517 37,517 0

INDEX FUND
Year Ended May 31, 1996 128,916 93,961 34,955
Year Ended October 31, 1995 141,917 141,917 0

VALUGROWTH STOCK FUND
A Shares
Year Ended May 31, 1996 27,427 27,427 0
Year Ended May 31, 1995 24,465 24,465 0
Year Ended May 31, 1994 87,585 8,799 78,786
B Shares
Year Ended May 31, 1996 8,763 8,763 0
Year Ended May 31, 1995 5,593 4,617 976
Year Ended May 31, 1994 1,686 0 1,686
I Shares
Year Ended May 31, 1996 297,630 147,086 150,544
Year Ended May 31, 1995 253,243 148,800 104,443
Year Ended May 31, 1994 158,779 26,640 132,139

DIVERSIFIED EQUITY FUND
A Shares
Year Ended May 31, 1996 99 99 0
B Shares
Year Ended May 31, 1996 96 96 0
I Shares
Year Ended May 31, 1996 467,322 238,224 229,098
Year Ended October 31, 1995 574,946 287,473 287,473

B-7
<PAGE>

GROWTH EQUITY FUND
A Shares
Year Ended May 31, 1996 100 100 0
B Shares
Year Ended May 31, 1996 25 25 0
I Shares
Year Ended May 31, 1996 371,252 187,661 183,591
Year Ended October 31, 1995 440,211 286,1371 154,107

LARGE COMPANY GROWTH FUND
Year Ended May 31, 1996 42,177 40,150 2,027
Year Ended October 31, 1995 55,766 55,766 0

SMALL COMPANY STOCK FUND
A Shares
Year Ended May 31, 1996 5,800 5,800 0
Year Ended May 31, 1995 1,655 1,515 140
Year Ended May 31, 1994 88 22 66
B Shares
Year Ended May 31, 1996 4,426 4,426 0
Year Ended May 31, 1995 1,051 1,051 0
Year Ended May 31, 1994 67 19 48
I Shares
Year Ended May 31, 1996 171,614 15,664 155,950
Year Ended May 31, 1995 61,876 14,997 46,878
Year Ended May 31, 1994 4,146 1,395 2,751

SMALL COMPANY GROWTH FUND
Year Ended May 31, 1996 183,731 76,278 107,453
Year Ended October 31, 1995 220,483 177,287 43,196

CONTRARIAN STOCK FUND
A Shares
Year Ended May 31, 1996 1,439 1,439 0
Year Ended May 31, 1995 646 646 0
Year Ended May 31, 1994 45 0 45
B Shares
Year Ended May 31, 1996 1,194 1,194 0
Year Ended May 31, 1995 328 328 0
Year Ended May 31, 1994 19 3 16
I Shares
Year Ended May 31, 1996 84,836 37,213 47,623
Year Ended May 31, 1995 63,693 543 63,150
Year Ended May 31, 1994 2,418 0 2,418

B-8
<PAGE>

INTERNATIONAL FUND
A Shares
Year Ended May 31, 1996 345 345 0
B Shares
Year Ended May 31, 1996 395 395 0
I Shares
Year Ended May 31, 1996 69,616 0 69,616
Year Ended October 31, 1995 205,140 41,566 163,574

(ii) ADMINISTRATIVE FEES TO NORWEST

INTERNATIONAL FUND
Year Ended May 31, 1996 175,887 0 175,887
Year Ended October 31, 1995 205,150 0 205,150

(iii) ADMINISTRATIVE FEES TO FORUM

INTERNATIONAL PORTFOLIO
Year Ended May 31, 1996 105,567 11,873 93,694
Year Ended October 31, 1995 122,669 70,043 52,626

B-9
<PAGE>

TABLE 3 - DISTRIBUTION FEES

The following table shows the dollar amount of fees payable to Forum for its
distribution services with respect to each Fund (or class thereof), the amount
of fee that was waived by Forum, if any, and the actual fee received by Forum.
All maintenance fees were waived by Forum during the fiscal years ended May 31,
1995 and 1996. The data is for the past three fiscal years or shorter period if
the Fund has been in operation for a shorter period. Only Exchange Shares and B
Shares incur distribution fees.

Distribution Distribution Distribution
Fee Fee Fee
Payable Waived Retained
------- ------ --------
READY CASH INVESTMENT FUND
Exchange Shares
Year Ended May 31, 1996 1,023 1,023 0
Year Ended May 31, 1995 2,050 2,050 0
Year Ended May 31, 1994 62 62 0

STABLE INCOME FUND
B Shares
Year Ended May 31, 1996 245 245 0

INTERMEDIATE GOVERNMENT INCOME FUND
B Shares
Year Ended May 31, 1996 2,646 2,646 0

INCOME FUND
B Shares
Year Ended May 31, 1996 25,247 6,666 18,581
Year Ended May 31, 1995 27,796 6,949 20,847
Year Ended May 31, 1994 13,997

TOTAL RETURN BOND FUND
B Shares
Year Ended May 31, 1996 12,239 3,619 8,620
Year Ended May 31, 1995 4,612 1,153 3,459
Year Ended May 31, 1994 297

TAX-FREE INCOME FUND
B Shares
Year Ended May 31, 1996 36,997 2,390 34,607
Year Ended May 31, 1995 31,738 7,934 23,803
Year Ended May 31, 1994 12,467

COLORADO TAX-FREE FUND
B Shares
Year Ended May 31, 1996 43,374 207 43,167
Year Ended May 31, 1995 47,144 11,786 35,358
Year Ended May 31, 1994 21,705

B-10
<PAGE>

MINNESOTA TAX-FREE FUND
B Shares
Year Ended May 31, 1996 52,163 0 52,163
Year Ended May 31, 1995 30,386 8,880 21,506
Year Ended May 31, 1994 12,467

INCOME EQUITY FUND
B Shares
Year Ended May 31, 1996 5,031 0 5,031

VALUGROWTH STOCK FUND
B Shares
Year Ended May 31, 1996 32,860 5,269 27,591
Year Ended May 31, 1995 27,965 6,991 20,974
Year Ended May 31, 1994 8,429

DIVERSIFIED EQUITY FUND
B Shares
Year Ended May 31, 1996 719 719 0

GROWTH EQUITY FUND
B Shares
Year Ended May 31, 1996 187 187 0

SMALL COMPANY STOCK FUND
B Shares
Year Ended May 31, 1996 16,598 4,077 12,521
Year Ended May 31, 1995 5,256 2,038 3,218
Year Ended May 31, 1994 332 0 332

CONTRARIAN STOCK FUND
B Shares
Year Ended May 31, 1996 4,479 4,479 0
Year Ended May 31, 1995 1,642 411 1,232
Year Ended May 31, 1994 95 0 95

INTERNATIONAL FUND
B Shares
Year Ended May 31, 1996 2,959 2,930 29

B-11
<PAGE>

TABLE 4 - SALES CHARGES

The following table shows (i) the dollar amount of sales charges payable to
Forum with respect to sales of A Shares (or of the respective Funds prior to the
offering of multiple classes of shares), (ii) the amount of sales charge
retained by Forum and not reallowed to other persons, and (iii) the amount of
contingent deferred sales charge ("CDSL") paid to Forum. The data is for the
past three fiscal years or shorter period if the Fund has been in operation for
a shorter period.

Sales Retained CDSL
Charges Amount Paid
------- ------ ----
STABLE INCOME FUND
A Shares --
Year Ended May 31, 1996
B Shares -- --
Year Ended May 31, 1996

INTERMEDIATE GOVERNMENT INCOME FUND
A Shares --
Year Ended May 31, 1996
B Shares
Year Ended May 31, 1996 -- --

INCOME FUND
A Shares
Year Ended May 31, 1996 --
Year Ended May 31, 1995 --
Year Ended May 31, 1994 189,340 2,827 --
B Shares
Year Ended May 31, 1996 -- --
Year Ended May 31, 1995 -- --
Year Ended May 31, 1994 -- --

C-12
<PAGE>

TOTAL RETURN BOND FUND
A Shares
Year Ended May 31, 1996 --
Year Ended May 31, 1995 --
Year Ended May 31, 1994 2,027 0 --
B Shares
Year Ended May 31, 1996 -- --
Year Ended May 31, 1995 -- --
Year Ended May 31, 1994 -- --

LIMITED TERM TAX-FREE FUND
A Shares
Year Ended May 31, 1996 N/A N/A --
B Shares
Year Ended May 31, 1996 -- -- N/A

TAX-FREE INCOME FUND
A Shares
Year Ended May 31, 1996
Year Ended May 31, 1995
Year Ended May 31, 1994 253,262 5,531 --
B Shares
Year Ended May 31, 1996 -- --
Year Ended May 31, 1995 -- --
Year Ended May 31, 1994 -- --

COLORADO TAX-FREE FUND
A Shares
Year Ended May 31, 1996
Year Ended May 31, 1995
Year Ended May 31, 1994 257,549 0 --
B Shares
Year Ended May 31, 1996 -- --
Year Ended May 31, 1995 -- --
Year Ended May 31, 1994 -- --

MINNESOTA TAX-FREE FUND
A Shares
Year Ended May 31, 1996 --
Year Ended May 31, 1995 --
Year Ended May 31, 1994 56,586 3,807 --
B Shares
Year Ended May 31, 1996 -- --
Year Ended May 31, 1995 -- --
Year Ended May 31, 1994 -- --

INCOME EQUITY FUND
A Shares
Year Ended May 31, 1996 --
B Shares
Year Ended May 31, 1996 -- --

C-13
<PAGE>

VALUGROWTH STOCK FUND
A Shares
Year Ended May 31, 1996 --
Year Ended May 31, 1995 --
Year Ended May 31, 1994 155,806 6,157 --
B Shares
Year Ended May 31, 1996 -- --
Year Ended May 31, 1995 -- --
Year Ended May 31, 1994 -- --

DIVERSIFIED EQUITY FUND
A Shares
Year Ended May 31, 1996
B Shares
Year Ended May 31, 1996 -- --

GROWTH EQUITY FUND
A Shares
Year Ended May 31, 1996
B Shares
Year Ended May 31, 1996 -- --

SMALL COMPANY STOCK FUND
A Shares
Year Ended May 31, 1996 --
Year Ended May 31, 1995 --
Year Ended May 31, 1994 2,701 0 --
B Shares
Year Ended May 31, 1996 -- --
Year Ended May 31, 1995 -- --
Year Ended May 31, 1994 -- --

CONTRARIAN STOCK FUND
A Shares
Year Ended May 31, 1996 --
Year Ended May 31, 1995 --
Year Ended May 31, 1994 2,243 0 --
B Shares
Year Ended May 31, 1996 -- --
Year Ended May 31, 1995 -- --
Year Ended May 31, 1994 -- --

INTERNATIONAL FUND
Year Ended May 31, 1996 --
B Shares
Year Ended May 31, 1996 -- --

B-14
<PAGE>

TABLE 5 - ACCOUNTING FEES

The following table shows the dollar amount of fees payable to FFC for its
accounting services with respect to each Fund, the amount of fee that was waived
by FFC, if any, and the actual fee received by FFC. The data is for the past
three fiscal years or shorter period if the Fund has been in operation for a
shorter period.

Fee Fee Fee
Payable Waived Retained
------- ------ --------
CASH INVESTMENT FUND
Year Ended May 31, 1996 49,000 0 49,000
Year Ended May 31, 1995 36,000 0 36,000
Year Ended May 31, 1994 47,000 0 47,000

U.S. GOVERNMENT FUND
Year Ended May 31, 1996 46,000 0 46,000
Year Ended May 31, 1995 36,000 0 36,000
Year Ended May 31, 1994 36,000 0 36,000

TREASURY FUND
Year Ended May 31, 1996 43,500 0 43,500
Year Ended May 31, 1995 36,000 0 36,000
Year Ended May 31, 1994 36,000 0 36,000

READY CASH INVESTMENT FUND
Year Ended May 31, 1996 63,000 0 63,000
Year Ended May 31, 1995 48,000 0 48,000
Year Ended May 31, 1994 41,000 0 41,000

MUNICIPAL MONEY MARKET FUND
Year Ended May 31, 1996 72,500 0 72,500
Year Ended May 31, 1995 60,000 0 60,000
Year Ended May 31, 1994 60,000 0 60,000

STABLE INCOME FUND
Year Ended May 31, 1996 37,452 7,136 30,316
Year Ended October 31, 1995 51,700 0 51,700

INTERMEDIATE U.S. GOVERNMENT FUND
Year Ended May 31, 1996 29,452 5,322 24,130
Year Ended October 31, 1995 52,700 0 52,700

DIVERSIFIED BOND FUND
Year Ended May 31, 1996 29,500 5,561 23,939
Year Ended October 31, 1995 46,700 0 36,700

INCOME FUND
Year Ended May 31, 1996 79,500 0 79,500
Year Ended May 31, 1995 64,000 0 64,000
Year Ended May 31, 1994 63,000 0 63,000

B-15
<PAGE>

TOTAL RETURN BOND FUND
Year Ended May 31, 1996 57,500 0 57,500
Year Ended May 31, 1995 50,000 0 50,000
Year Ended May 31, 1994 23,500 23,500 0

LIMITED TERM TAX-FREE FUND
Year Ended May 31, 1996 N/A N/A N/A

TAX-FREE INCOME FUND
Year Ended May 31, 1996 66,000 0 66,000
Year Ended May 31, 1995 62,000 0 62,000
Year Ended May 31, 1994 65,100 0 65,100

COLORADO TAX-FREE FUND
Year Ended May 31, 1996 60,000 0 60,000
Year Ended May 31, 1995 55,000 0 55,000
Year Ended May 31, 1994 50,000 50,000 0

MINNESOTA TAX-FREE FUND
Year Ended May 31, 1996 56,000 0 56,000
Year Ended May 31, 1995 55,300 0 55,300
Year Ended May 31, 1994 54,000 0 54,000

CONSERVATIVE BALANCED FUND
Year Ended May 31, 1996 32,500 6,054 26,446
Year Ended October 31, 1995 54,266 0 54,266

MODERATE BALANCED FUND
Year Ended May 31, 1996 36,000 7,104 28,896
Year Ended October 31, 1995 52,266 0 52,266

GROWTH BALANCED FUND
Year Ended May 31, 1996 34,000 6,591 27,409
Year Ended October 31, 1995 50,833 0 50,833

INCOME EQUITY FUND
Year Ended May 31, 1996 22,935 4,293 18,642
Year Ended October 31, 1995 34,700 0 34,700

VALUGROWTH STOCK FUND
Year Ended May 31, 1996 57,500 0 57,500
Year Ended May 31, 1995 48,500 0 48,500
Year Ended October 31, 1995 53,000 0 53,000

INDEX FUND
Year Ended May 31, 1996 30,500 5,659 24,391
Year Ended October 31, 1995 46,266 0 46,266

DIVERSIFIED EQUITY FUND
Year Ended May 31, 1996 30,306 6,216 24,090
Year Ended October 31, 1995 34,700 0 34,700

B-16
<PAGE>

GROWTH EQUITY FUND
Year Ended May 31, 1996 30,306 6,216 24,090
Year Ended October 31, 1995 34,700 0 34,700

LARGE COMPANY GROWTH FUND
Year Ended May 31, 1996 21,000 3,755 17,245
Year Ended October 31, 1995 34,700 0 34,700

SMALL COMPANY STOCK FUND
Year Ended May 31, 1996 60,500 0 60,500
Year Ended May 31, 1995 51,000 0 51,000
Year Ended May 31, 1994 22,500 22,500 0

SMALL COMPANY GROWTH FUND
Year Ended May 31, 1996 30,000 5,759 24,241
Year Ended October 31, 1995 36,700 0 36,700

CONTRARIAN STOCK FUND
Year Ended May 31, 1996 52,000 0 52,000
Year Ended May 31, 1995 50,000 0 50,000
Year Ended May 31, 1994 22,500 22,500 0

INTERNATIONAL FUND
Year Ended May 31, 1996 23,000 3,952 19,048
Year Ended October 31, 1995 51,766 39,766 12,000

B-17
<PAGE>

TABLE 6 - COMMISSIONS

The following table shows the aggregate brokerage commissions with respect to
each Fund that incurred brokerage costs. The data is for the past three fiscal
years or shorter period if the Fund has been in operation for a shorter period.

AGGREGATE
COMMISSIONS PAID

DIVERSIFIED BOND FUND
Year Ended May 31, 1996 5,261
Year Ended October 31, 1995 1,750

CONSERVATIVE BALANCED FUND
Year Ended May 31, 1996 8,406
Year Ended October 31, 1995 9,298

MODERATE BALANCED FUND
Year Ended May 31, 1996 54,332
Year Ended October 31, 1995 57,931

GROWTH BALANCED FUND
Year Ended May 31, 1996 69,732
Year Ended October 31, 1995 66,361

INCOME EQUITY FUND
Year Ended May 31, 1996 52,904
Year Ended October 31, 1995 25,321

INDEX FUND
Year Ended May 31, 1996 121,170
Year Ended October 31, 1995 107,321

VALUGROWTH STOCK FUND
Year Ended May 31, 1996 436,274
Year Ended May 31, 1995 485,176
Year Ended May 31, 1994 553,049

DIVERSIFIED EQUITY FUND
Year Ended May 31, 1996 175,648
Year Ended October 31, 1995 180,093

GROWTH EQUITY FUND
Year Ended May 31, 1996 127,666
Year Ended October 31, 1995 115,993

LARGE COMPANY GROWTH FUND
Year Ended May 31, 1996 42,229
Year Ended October 31, 1995 60,264

B-18
<PAGE>

SMALL COMPANY STOCK FUND
Year Ended May 31, 1996 208,021
Year Ended May 31, 1995 67,471
Year Ended May 31, 1994 10,127

SMALL COMPANY GROWTH FUND
Year Ended May 31, 1996 785,875
Year Ended October 31, 1995 600,341

CONTRARIAN STOCK FUND
Year Ended May 31, 1996 52,162
Year Ended May 31, 1995 43,397
Year Ended May 31, 1994 9,311

INTERNATIONAL FUND*
Year Ended May 31, 1996 0
Year Ended October 31, 1995 -

* Reflects commission paid by International Portfolio; International Fund
paid no commissions directly during either year.

B-19
<PAGE>

TABLE 7 - 5% SHAREHOLDERS

The following table lists the persons who owned of record 5% or more of the
outstanding shares of a class of shares of a Fund as of August 31, 1996, as well
as their percentage holding of all shares of the Fund. All percentages are
rounded off to the nearest one percent. Certain persons own shares of the Funds
of record only, including Alpine & Co., BHC Securities, Inc., EMSEG & Co., First
Stock Co., Norwest Bank Minnesota, N.A. and Stout & Co.

SHARE % OF % OF
NAME AND ADDRESS BALANCE CLASS FUND
<S> <C> <C> <C> <C>

CASH INVESTMENT FUND Norwest Bank Minnesota NA 200,607,071 11% 11%
Collective Trust Funds
Clearing Account
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

READY CASH INVESTMENT FUND
Investor Shares BHC Securities, Inc. 201,599,526 40% 12%
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

Institutional Shares Stout & Co. 82,921,160 7% 5%
Discretionary Cash
1740 Broadway MS 8751
Denver, CO 80274

Norwest Bank Minnesota NA AMS 458,179,987 39% 27%
VP4600301
Attn: Cash Sweep Processing
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

Norwest Bank Minnesota NA AMS 327,285,687 28% 19%
VP460500022
Attn: Cash Sweep Processing
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

Norwest Bank Minnesota NA AMS 124,271,901 10% 7%
VP4500030
Attn: Cash Sweep Processing
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

Alpine & Co 78,689,001 7% 5%
Non Discretionary
1740 Broadway MS 8751
Denver, CO 80274

B-20
<PAGE>

Exchange Shares BHC Securities, Inc. 8,732 7% 0%
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

Stephen P. Arkulary 107,467 80% 0%
and Helen M. Doane
595 W. Wabasha Street
Duluth, MN 55803

U.S. GOVERNMENT FUND Alpine & Co 148,485,489 9% 9%
Non-Discretionary
1740 Broadway MS 8751
Denver, CO 80274

Norwest Bank Minnesota NA AMS 1,032,827,619 64% 64%
Collective Trust Funds
Clearing Account
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

TREASURY FUND Alpine & Co. 61,812,363 7% 7%
Discretionary
1740 Broadway MS 8751
Denver, CO 80274

Norwest Bank Minnesota NA AMS 455,951,871 48% 48%
Collective Trust Funds
Clearing Account
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

Norwest Bank Colorado 54,923,699 7% 6%
P.O. Box 400
Colorado Springs, CO 80901

MUNICIPAL MONEY MARKET FUND
Investor Shares Advance Homes, Inc. 5,047,919 8% 0%
4215 E 60th St. Suite 6
Davenport, IA 52807

West Texas Industries Inc. 4,063,277 6% 0%
P.O. Box 1680
Lubbock, TX 79408

BHC Securities, Inc. 20,938,370 32% 0%
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

B-21
<PAGE>

Institutional Shares Norwest Bank Minnesota NA AMS 107,270,676 17% 16%
Collective Trust Funds
Clearing Account
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

Norwest Bank Minnesota NA 296,020,622 48% 43%
VP4620002
Attn: Cash Sweep Processing
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

STABLE INCOME FUND
A Shares BHC Securities, Inc. 83,469 52%
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

Ramsey Foundation 136,738 9%
8100 34th Avenue South
POBox 1309
Minneapolis, MN 55440-1309

St. Paul Ramsey Medical Center 274,204 17%
6th Floor
8100 34th Ave South
POB 1309
Minneapolis, MN 55440-1309

Von Maur Investment Co 112,663 71%
6565 Brady St
Davenport, IA 52806

Aspen Medical Group, PA 90,811 6%
1021 Bandana Blvd E, Suite 200
St Paul, MN 55108

Analysts International Corporation 216,969 14%
7615 Metro Blvd
Minneapolis, MN 55439

B-22
<PAGE>

B Shares Marjorie A. Thien 2,874 3%
5400 Vernon Avenue S
Ednia, MN 55436

Benedict M. Lonsky 4,018 5%
and Bernice T. Lonsky
2524 W. Armour Trce
Minneapolis, MN 55418

Fred P. Mattson 7,980 1%
and Berry J. Matton
P..O. Box 248
Elmwood, WI 54740-0248

Lucy Wu 2,833 3%
702 14th Avenue S
Minneapolis, MN 55414

BHC Securities, Inc. 4,566 5%
FBO FAO 52490122
One Commerce Square
2005 Market St STE 1200
Philadelphia, PA 19103

BHC Securities, Inc. 4,973 6%
FBO 52509602
One Commerce Square
2005 Market St STE 1200
Philadelphia, PA 19103

BHC Securities, Inc. 3,680 4%
FBO FAO 52510525
One Commerce Square
2005 Market St STE 1200
Philadelphia, PA 19103

BHC Securities, Inc. 3,330 4%
FBO 51631241
One Commerce Square
2005 Market St STE 1200
Philadelphia, PA 19103

I Shares EMSEG & Co. 8,185,835 89%
c/o Norwest Bank Minnesota, N.A.
733 Marquette Avenue
Minneapolis, MN 55479

Norwest Bank Texas NA 639,848 7%
1500 Broadway
Lubbock, TX 79408

B-23
<PAGE>

DIVERSIFIED BOND FUND
I Shares EMSEG & Co. 5,863,877 88% 88%
c/o Norwest Bank Minnesota, N.A.
733 Marquette Avenue MS0036
Minneapolis, MN 55479 0036

INCOME FUND
A Shares BHC Securities, Inc. 191,855 34% 1%
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

B Shares None

I Shares Norwest Income Bond CTF 15,345,916 53% 51%
P.O. Box 1450 NW 8477
Minneapolis, MN 55480-8477

EMSEG & Co Ira 2,377, 358 8% 1%
Norwest Bank Minnesota, NA
733 Marquette Avenue
Minneapolis, MN 55479-0036

Stout & Co. 1,591,766 6% 1%
Discretionary Cash
1740 Broadway MS 8751
Denver, CO 80274

Dentru & Co 5,118,550 18% 17%
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver CO 80274

FINABA 2,386,537 8% 8%
Discretionary Cash Acct
1314 Avenue K
Lubbock, TX 79401

INTERMEDIATE GOVERNMENT INCOME FUND
A Shares BHC Securities, Inc. 300,189 20%
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-3212

Ibraham Madani 100,694 6%
and Salwa Abdulghaffar
C/O Bernie Markel
10010 Regency Circle
Omaha, NE 68114

B Shares None

B-24
<PAGE>

I Shares EMSEG & Co. 29,431,579 82%
c/o Norwest Bank Minnesota, N.A.
733 Marquette Avenue MS0036
Minneapolis, MN 55479 0036

Dentru & Co. 4,113,123 11%
C/O Norwest Bank Colorado NA
Denver, CO 80274-8676

TOTAL RETURN BOND FUND
A Shares BHC Securities, Inc. 91,040
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

Norwest Wealthbuilder 96,675
Reinvest Account
733 Marquette Avenue
Minneapolis, MN 55479-0050

B Shares None

I Shares Stout & Co. 1,214,706
Discretionary Cash
1740 Broadway MS 8751
Denver, CO 80274

Dentru & Co 1,665,133
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver CO 80274

EMSEG & Co. 667,221
Norwest Bank Minnesota, NA
733 Marquette Avenue
Minneapolis, MN 55479-0050

Kiwilis & Co 679,483
Discretionary Reinvest
1700 Broadway MS 0076
Denver, CO 80274

Seret & Co. 7,711,279
Discretionary Reinvest
1700 Broadway MS 0076
Denver, CO 80274

LIMITED TERM TAX FREE FUND
A Shares None

B Shares None

I Shares None

B-25
<PAGE>

TAX-FREE INCOME FUND
A Shares BHC Securities, Inc. 404,831
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

B Shares

I Shares Stout & Co. 1,966,104
Discretionary Cash
1740 Broadway MS 8751
Denver, CO 80274

Dentru & Co 5,482,571
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver CO 80274

FINABA 1,668,836
Discretionary Cash Acct
1314 Avenue K
Lubbock, TX 79401

Norwest Tax Exempt Bond Fund 17,173,002
P.O. Box 1450 NW 8477
Minneapolis, MN 55480-8477

COLORADO TAX-FREE FUND
A Shares BHC Securities, Inc. 298,280
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

Walter Stonehocker and Roswitha 520,622
Stonehocker
15600 Holly
Brighton, CO 80601

B Shares

I Shares Stout & Co. 1,024,973
Discretionary Cash
1740 Broadway MS 8751
Denver, CO 80274

Dentru & Co 1,410,397
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver CO 80274

B-26
<PAGE>

MINNESOTA TAX-FREE FUND
A Shares BHC Securities, Inc. 360,855 14% 9%
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

B Shares

I Shares EMSEG & Co Ira 203,386 43% 5%
Norwest Bank Minnesota, NA
733 Marquette Avenue
Minneapolis, MN 55479-0036

CONSERVATIVE BALANCED FUND
I Shares EMSEG & Co. 7,246,804 92% 92%
c/o Norwest Bank Minnesota, N.A.
733 Marquette Avenue
Minneapolis, MN 55479

MODERATE BALANCED FUND
I Shares EMSEG & Co. 17,938,553 91% 91%
c/o Norwest Bank Minnesota, N.A.
733 Marquette Avenue MS0036
Minneapolis, MN 55479 0036

GROWTH BALANCED FUND
I Shares EMSEG & Co. 18,302,059 92% 92%
c/o Norwest Bank Minnesota, N.A.
733 Marquette Avenue MS0036
Minneapolis, MN 55479 0036

INCOME EQUITY FUND
A Shares BHC Securities, Inc. 453,389 8%
Trade House Acct
One Commerce Square
2005 Market St
Philadelphia, PA 19103-3212

Abbot Limited Company 74,360 13%
P.O. Box 247
305 Main Street
Walthill, NE 68067

B Shares

I Shares EMSEG & Co. 5,788,026 61%
c/o Norwest Bank Minnesota, N.A.
733 Marquette Avenue MS0036
Minneapolis, MN 55479 0036

Dentru & Co. 1,249,858 13%
C/O Norwest Bank Colorado NA
Denver, CO 80274-8676

B-27
<PAGE>

Norwest Bank Texas NA 881,299 9%
1500 Broadway
Lubbock, TX 79408

Stout & Co. 788,757 8%
c/o Norwest Bank Colorado NA
1740 Broadway
Denver, CO 80274-8676

VALUGROWTH STOCK FUND
A Shares BHC Securities, Inc. 270,857 40%
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

B Shares

I Shares EMSEG & Co. 1,386,894 20%
Norwest Bank Minnesota, NA
733 Marquette Avenue
Minneapolis, MN 55479-0036

Stout & Co.
Discretionary Cash 1,558,788 23%
1740 Broadway MS 8751
Denver, CO 80274

Dentru & Co
Non-Discretionary Cash 1,800,377 26%
1740 Broadway Mail 8676
Denver CO 80274

FINABA
Discretionary Cash Acct 1,069,163 15%
1314 Avenue K
Lubbock, TX 79401

INDEX FUND
I Shares EMSEG & Co. 8,590,738 96% 96%
c/o Norwest Bank Minnesota, N.A.
733 Marquette Avenue MS0036
Minneapolis, MN 55479 0036

DIVERSIFIED EQUITY FUND
A Shares BHC Securities, Inc. 249,054
One Commerce Square
2005 Market St
Philadelphia, PA 19103-3212

B Shares None

B-28
<PAGE>

I Shares EMSEG & Co. 27,143,748 96%
c/o Norwest Bank Minnesota, N.A.
733 Marquette Avenue MS0036
Minneapolis, MN 55479 0036

Kiwils & Co. 2,533,749 8%
c/o Norwest Bank Colorado NA
1740 Broadway MS 8676
Denver, CO 80274-8676

GROWTH EQUITY FUND
A Shares BHC Securities, Inc. 80,539
Trade House Acct
One Commerce Square
2005 Market St
Philadelphia, PA 19103-3212

Norwest Wealthbuilder 120,384
Reinvest Account
733 Marquette Avenue
Minneapolis, MN 55479-0040

Abbot Limited Company 73,959
P.O. Box 247
305 Main Street
Walthill, NE 68067

B Shares None

I Shares EMSEG & Co. 23,807,193 93%
c/o Norwest Bank Minnesota, N.A.
733 Marquette Avenue MS0036
Minneapolis, MN 55479 0036

LARGE COMPANY GROWTH FUND
I Shares EMSEG & Co. 3,096,084 95% 95%
c/o Norwest Bank Minnesota, N.A.
733 Marquette Avenue MS0036
Minneapolis, MN 55479 0036

SMALL COMPANY STOCK FUND
A Shares Norwest Wealthbuilder 77,299 18% 1%
Reinvest Account
733 Marquette Avenue
Minneapolis, MN 55479-0040

BHC Securities, Inc. 159,413 38% 1%
One Commerce Square
2005 Market Street Suite 1200
Philadelphia PA 19103

B-29
<PAGE>

B Shares BHC Securities, Inc. 30,101 10% 0%
FAO 52711393
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

I Shares EMSEG & Co Ira 4,918,473 48% 45%
Norwest Bank Minnesota, NA
733 Marquette Avenue 50
Minneapolis, MN 55479-0050

Stout & Co. 1,010,087 10% 9%
Discretionary Cash
1740 Broadway MS 8751
Denver, CO 80274

Dentru & Co 1,166,630 11% 11%
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver CO 80274

SMALL COMPANY GROWTH FUND
I Shares EMSEG & Co. 11,436,485 99% 99%
c/o Norwest Bank Minnesota, N.A.
733 Marquette Avenue MS0036
Minneapolis, MN 55479 0036

CONTRARIAN STOCK FUND
A Shares BHC Securities, Inc. 24,055 24% 1%
One Commerce Square
2005 Market Street Suite 1200
Philadelphia PA 19103

Marathon Press, Inc. 5,127 5% 0%
P.O. Box 407
1500 Square Turn Blvd
Norfolk, NE 68702-0407

Norwest Wealthbuilder 44,673 45% 1%
Reinvest Account
733 Marquette Avenue
Minneapolis, MN 55479-0040

B Shares BHC Securities, Inc. 3,473 7% 0%
FAO 51610366
One Commerce Square
2005 Market Street Suite 1200
Philadelphia PA 19103

BHC Securities, Inc. 8,248 17% 0%
FAO 51611219
One Commerce Square
2005 Market Street Suite 1200
Philadelphia PA 19103

B-30-
<PAGE>

Bonnie Forsman 4,749 10% 0%
4703 Lakeview Ave N
Brooklyn Center, MN 55429

I Shares Stout & Co. 741,467 25% 24%
Discretionary Cash
1740 Broadway MS 8751
Denver, CO 80274

Dentru & Co 643,947 22% 21%
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver CO 80274

FINABA 271,534 9% 9%
Discretionary Cash Acct
1314 Avenue K
Lubbock, TX 79401

Kiwils & Co 189,347 6.3% .06%
Discretionary Reinvest
1740 Broadway MS 8751
Denver, CO 80274

Seret & Co. 760,004 25% 24%
Discretionary Reinvest
1740 Broadway MS 8751
Denver, CO 80274

INTERNATIONAL FUND
A Shares Norwest Wealthbuilder 24,633 38%
Reinvest Account
733 Marquette Avenue
Minneapolis, MN 55479-0040

BHC Securities, Inc. 19,295 30%
One Commerce Square
2005 Market Street Suite 1200
Philadelphia PA 19103

B Shares BHC Securities, Inc. 5,144 9%
FAO 43268824
One Commerce Square
2005 Market Street Suite 1200
Philadelphia PA 19103

I Shares EMSEG & Co. 6,856,816 86%
c/o Norwest Bank Minnesota, N.A.
733 Marquette Avenue MS0036
Minneapolis, MN 55479 0036

</TABLE>

B-31
<PAGE>

APPENDIX C - PERFORMANCE DATA

TABLE 1 - MONEY MARKET FUND YIELDS

As of May 31, 1996, the yield, effective yield and, for Municipal Money Market
Fund, the tax equivalent yield, of each class of the Money Market Funds was as
follows. For the tax-equivalent yield quotations, the assumed Federal income
tax rate is 39.6%.

Effective Tax-Equivalent Tax-Equivalent
Yield Yield Yield Effective Yield
----- ----- ----- ---------------

CASH INVESTMENT FUND 4.97% 5.10% N/A N/A

READY CASH INVESTMENT FUND
Investor Shares 4.67% 4.78% N/A N/A
Institutional Shares 5.01% 5.14% N/A N/A
Exchange Shares 3.92% 3.99% N/A N/A

U.S. GOVERNMENT FUND 4.84% 4.95% N/A N/A

TREASURY FUND 4.64% 4.75% N/A N/A

MUNICIPAL MONEY MARKET FUND
Investor Shares 3.15% 3.20% 5.21% 5.30%
Institutional Shares 3.35% 3.40% 5.55% 5.63%

TABLE 2 - FIXED INCOME FUND YIELDS

For the 30-day period ended May 31, 1996 the annualized yield and, where
applicable, the tax equivalent yield of each class of the Fixed Income Funds was
as follows. For the tax-equivalent yield quotations, the assumed Federal income
tax rate is 39.6%. In addition, for the tax-equivalent yields of the Colorado
and Minnesota Tax-Free Income Funds, the assumed Colorado and Minnesota income
tax rates are 5% and 8.5%, respectively. As of that date Limited Term Tax-Free
Fund had not commenced operations.

Tax Equivalent
Yield Yield
----- -----

STABLE INCOME FUND
A Shares 6.95% N/A
B Shares 6.44% N/A
I Shares 7.24% N/A

INTERMEDIATE GOVERNMENT INCOME FUND
A Shares 5.71% N/A
B Shares 5.61% N/A
I Shares 5.89% N/A

DIVERSIFIED BOND FUND
A Shares N/A% N/A
B Shares N/A% N/A
I Shares 5.72% N/A

INCOME FUND
A Shares 6.09% N/A
B Shares 5.54% N/A
I Shares 6.30% N/A

<PAGE>

TOTAL RETURN BOND FUND
A Shares 5.52% N/A
B Shares 4.96% N/A
I Shares 5.72% N/A

LIMITED TERM TAX-FREE FUND
A Shares N/A N/A
B Shares N/A N/A
I Shares N/A N/A

TAX-FREE INCOME FUND
A Shares 6.25% 10.35%
B Shares 5.70% 9.44%
I Shares 6.46% 10.70%

COLORADO TAX-FREE FUND
A Shares 5.78% 10.08%
B Shares 5.24% 9.13%
I Shares 6.01% 10.47%

MINNESOTA TAX-FREE FUND
A Shares 4.99% 9.05%
B Shares 4.40% 7.96%
I Shares 5.16% 9.33%

CONSERVATIVE BALANCED FUND
I Shares 3.48% N/A

MODERATE BALANCED FUND
I Shares 3.04% N/A

GROWTH BALANCED FUND
I Shares 1.85% N/A

DIVERSIFIED EQUITY FUND
A Shares 1.48% N/A
B Shares 1.48% N/A
I Shares 1.48% N/A

GROWTH EQUITY FUND
A Shares 0.87% N/A
B Shares 0.87% N/A
I Shares 0.87% N/A

INDEX FUND
I Shares 2.76% N/A

VALUGROWTH STOCK FUND
A Shares 1.95% N/A
B Shares 1.95% N/A
I Shares 1.95% N/A

C-2
<PAGE>

INCOME EQUITY FUND
A Shares 3.03% N/A
B Shares 3.03% N/A
I Shares 3.03% N/A

LARGE COMPANY GROWTH FUND
I Shares 0.68% N/A

SMALL COMPANY STOCK FUND
A Shares 0.78% N/A
B Shares 0.78% N/A
I Shares 0.78% N/A

SMALL COMPANY GROWTH FUND
I Shares 0.52% N/A

CONTRARIAN STOCK FUND
A Shares 2.26% N/A
B Shares 2.26% N/A
I Shares 2.26% N/A

INTERNATIONAL FUND
A Shares 1.60% N/A
B Shares 1.60% N/A
I Shares 1.60% N/A

TABLE 3 - TOTAL RETURNS

The average annual total return of each class of each Fixed Income and Equity
Fund for the periods ended May 31, 1996 was as follows. The actual dates of the
commencement of each Fund's operations, or the commencement of the offering of
each class' shares, is listed in the Fund's financial statements.

Since
One Year Five Years Ten Years Inception
-------- ---------- --------- ---------

STABLE INCOME FUND
A Shares 1.64% N/A N/A 3.96%
B Shares N/A% N/A N/A -52.49%
I Shares 5.63% N/A N/A 6.54%

INTERMEDIATE GOVERNMENT INCOME FUND
A Shares 0.46% 5.14% 6.41% 7.42%
B Shares N/A N/A N/A -60.28%
I Shares 3.42% 5.94% 6.82% 7.72%

DIVERSIFIED BOND FUND
A Shares N/A N/A N/A N/A
B Shares N/A N/A N/A N/A
I Shares 4.06% 5.92% 7.20% N/A

INCOME FUND
A Shares -1.31% 5.94% N/A 7.32%
B Shares -0.08% N/A N/A 1.14%
I Shares 2.58% 6.73% N/A 7.76%

C-3
<PAGE>

TOTAL RETURN BOND FUND
A Shares 0.48% N/A N/A 2.75%
B Shares 0.63% N/A N/A 2.84%
I Shares 3.42% N/A N/A 4.41%

LIMITED TERM TAX-FREE FUND
A Shares N/A N/A% N/A N/A
B Shares N/A N/A N/A N/A
I Shares N/A% N/A N/A N/A

TAX-FREE INCOME FUND
A Shares 1.37% 5.35% N/A 5.78%
B Shares 2.50% N/A N/A 3.27%
I Shares 5.29% 6.16% N/A 6.37%

COLORADO TAX-FREE FUND
A Shares 1.36% N/A N/A 3.60%
B Shares 2.56% N/A N/A 3.35%
I Shares 5.35% N/A N/A 4.92%

MINNESOTA TAX-FREE FUND
A Shares 0.05% 5.41% N/A 6.12%
B Shares 1.28% N/A N/A 2.97%
I Shares 3.97% 6.22% N/A 6.61%

INCOME EQUITY FUND
A Shares 22.64% 13.22% N/A 14.34%
B Shares N/A N/A N/A -9.01%
I Shares 28.41% 14.27% N/A 15.09%

INDEX FUND
A Shares N/A N/A N/A N/A
B Shares N/A N/A N/A N/A
I Shares 27.41% 13.82% N/A 12.86%

VALUGROWTH STOCK FUND
A Shares 16.20% 10.12% N/A 11.94%
B Shares 17.79% N/A N/A 10.40%
I Shares 21.72% 11.10% N/A 12.53%

DIVERSIFIED EQUITY FUND
A Shares 22.56% 13.31% N/A 15.49%
B Shares N/A N/A N/A N/A
I Shares 28.31% 14.34% N/A 16.20%

GROWTH EQUITY FUND
A Shares 23.23% 14.62% N/A 15.79%
B Shares N/A N/A N/A 2.13%
I Shares 29.03% 15.69% N/A 16.55%

C-4
<PAGE>

LARGE COMPANY GROWTH FUND
A Shares N/A N/A N/A N/A
B Shares N/A N/A N/A N/A
I Shares 32.35% 13.59% 12.84% N/A

SMALL COMPANY STOCK FUND
A Shares 32.01% N/A N/A 16.39%
B Shares 34.32% N/A N/A 16.75%
I Shares 38.30% N/A N/A 18.43%

SMALL COMPANY GROWTH FUND
A Shares 32.35% 13.59% 12.84% N/A
B Shares 27.41% 13.82% N/A 12.86%
I Shares 47.43% 23.02% 18.77% N/A

CONTRARIAN STOCK FUND
A Shares 5.95% N/A N/A 6.91%
B Shares 7.02% N/A N/A 7.06%
I Shares 10.90% N/A N/A 8.97%

INTERNATIONAL FUND
A Shares 10.34% N/A N/A 14.24%
B Shares 11.67% N/A N/A 15.52%
I Shares 15.57% N/A N/A 10.56%

C-5
<PAGE>

PART C
OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) FINANCIAL STATEMENTS.

Included in the Prospectus:

Financial Highlights for all Funds (A Shares, B Shares and I Shares) for
which a Prospectus is contained in this amendment to the Registration
Statement.

Included in the Statement of Additional Information:

For all Funds (A Shares, B Shares and I Shares) for which a Prospectus is
contained in this amendment to the Registration Statement:

Audited financial statements for the fiscal year ended May 31, 1996
including Statements of Assets and Liabilities, Statements of Operations,
Statements of Changes in Net Assets, Notes to Financial Statements,
Financial Highlights, Portfolio of Investments and Report of Independent
Auditors.

(b) EXHIBITS.

NOTE: * INDICATES THAT THE EXHIBIT IS INCORPORATED HEREIN BY REFERENCE. ALL
REFERENCES TO A POST-EFFECTIVE AMENDMENT ("PEA") OR PRE-EFFECTIVE AMENDMENT
("PREEA") ARE TO PEAS AND PREEAS TO REGISTRANT'S REGISTRATION STATEMENT ON FORM
N-1A, FILE NO. 33-9645.

(1)* Trust Instrument of Registrant as now in effect (filed as Exhibit 1
to PEA No. 35).

(2)* By-Laws of Registrant as now in effect (filed as Exhibit 2 to
PEA No. 35).

(3) Not Applicable.

(4)* Specimen Certificate for shares of beneficial interest of each class of
each portfolio of Registrant. Except for the names of the classes of
and CUSIP numbers. the certificate of each class of each portfolio of
Registrant is substantially the same as the specimen certificate, and
therefore, is omitted pursuant to Rule 483(d)(2) under the 1933 Act
(filed as Exhibit 4 to PEA No. 35).

(5) (a)* Investment Advisory Agreement between Registrant and Norwest Bank
Minnesota, N.A. relating to the Diversified Equity Fund, Growth Equity
Fund, Large Company Growth Fund, Small Company Growth Fund,
International Fund, Income Equity Fund, Index Fund, Conservative
Balanced Fund, Moderate

<PAGE>

Balanced Fund, Growth Balanced Fund, Intermediate U.S. Government Fund,
Managed Fixed Income Fund and Stable Income Fund. Except for the names
of each series of the Registrant, the Investment Advisory Agreement of
each series of Registrant is substantially the same as the Investment
Advisory Agreement, and therefore, is omitted pursuant to
Rule 483(d)(2) under the 1933 Act (filed as Exhibit 5(a) to
PEA No. 35).

(b)* Investment Sub-Advisory Agreement between Registrant and Crestone
Capital Management, Inc. relating to Small Company Stock Fund (filed
as Exhibit 5(b) to PEA No. 35).

(c)* Investment Sub-Advisory Agreement between Registrant and Schroder
Capital Management International Inc. relating to the Diversified
Equity Fund, Growth Equity Fund, International Fund, Conservative
Balanced Fund, Moderate Balanced Fund and Growth Balanced Fund (filed
as Exhibit 5(c) to PEA No. 35).

(d)* Advisory Agreement between Registrant and Norwest Bank Minnesota,
N.A., relating to Cash Investment Fund, Treasury Fund, U.S. Government
Fund, Ready Cash Investment Fund, Municipal Money Market Fund,
Minnesota Tax-Free Fund, Colorado Tax-Free Fund, Government Income
Fund, Income Fund, Tax-Free Income Fund, Adjustable U.S. Government
Reserve Fund, ValuGrowth Stock Fund, and Income Stock Fund (filed as
Exhibit 5(d) to PEA No. 35).

(6)* Distribution Agreement between Registrant and Forum Financial
Services, Inc. relating to each portfolio of Registrant (filed as
Exhibit 6 to PEA No. 35).

(7) Not Applicable.

(8) (a)* Custodian Agreement between Registrant and Norwest Bank Minnesota,
N.A. dated August 1, 1993 as amended November 11, 1994 (filed as
Exhibit 8(a) to PEA No. 35).

(b)* Transfer Agency Agreement to be between Registrant and Norwest Bank
Minnesota, N.A. (filed as Exhibit 8(b) to PEA No. 35).

(9) (a)* Management Agreement between Registrant and Forum Financial Services,
Inc. relating to each portfolio of Registrant (filed as Exhibit 9(a)
to PEA No. 35).

(b)* Fund Accounting Agreement between Registrant and Forum Financial Corp.
(filed as Exhibit 9(b) to PEA No. 35).

(c)* Administration Services Agreement between Registrant and Norwest Bank
Minnesota, N.A. relating to International Fund (filed as Exhibit 9(c)
to PEA No. 35).
<PAGE>

(10) (a)* Opinion of Seward & Kissel (filed on December 31, 1986 as Exhibit
10(a) of PreEA 2).

(b)* Opinion of Seward & Kissel (filed as Exhibit 10(b) to PEA No. 35).

(11) (a) Consent of KPMG Peat Marwick LLP, independent auditors (filed
herewith).

(11) (b) Consent of Coopers & Lybrand L.L.P., independent auditors (filed
herewith).

(12) Not Applicable.

(13)* Investment representation letter of John Y. Keffer as initial
purchaser of shares of stock of Registrant (filed on December 31, 1986
as Exhibit 13 of PreEA 2).

(14)* Individual Retirement Account materials (filed on April 22, 1994 as
Exhibit 14 to PEA 24).

(15)* Rule 12b-1 Plan adopted by Registrant with respect to the Income Fund,
Tax-Free Income Fund, Minnesota Tax-Free Fund, ValuGrowth Stock Fund,
Adjustable U.S. Government Reserve Fund, Colorado Tax-Free Fund, Income
Stock Fund, Arizona Tax-Free Fund, Contrarian Stock Fund, Small Company
Stock Fund, Government Income Fund, Total Return Bond Fund, Stable
Income Fund, Income Equity Fund, Diversified Equity Fund, Intermediate
U.S. Government Fund, Growth Equity Fund and Exchange Shares of Ready
Cash Investment Fund (filed as Exhibit 15 to PEA No. 35).

(16)* Schedule for Computation of each Performance Quotation provided in the
Registration Statement in response to Item 22 for the Colorado Tax-Free
Fund and Income Stock Fund (filed on February 18, 1994 as Exhibit 16 to
PEA 23).

(17) Not Applicable.

(18)* Multiclass (Rule 18f-3) Plan adopted by Registrant (filed as Exhibit
18 to PEA No. 35).

Other Exhibits

(A)* Power of Attorney of James C. Harris, Trustee of Registrant (filed
as Other Exhibit A to PEA No. 35).

(B)* Power of Attorney of Richard M. Leach, Trustee of Registrant (filed as
Other Exhibit B to PEA No. 35).

(C)* Power of Attorney of Robert C. Brown, Trustee of Registrant (filed as
Other Exhibit C to PEA No. 35).

<PAGE>

(D)* Power of Attorney of Donald H. Burkhardt, Trustee of Registrant (filed
as Other Exhibit D to PEA No. 35).

(E)* Power of Attorney of John Y. Keffer, Trustee of Registrant (filed as
Other Exhibit E to PEA No. 35).

(F)* Power of Attorney of Donald C. Willeke, Trustee of Registrant (filed as
Other Exhibit F to PEA No. 35).

(G)* Power of Attorney of Timothy J. Penny, Trustee of Registrant (filed as
Other Exhibit G to PEA No. 35).

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

None.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF AUGUST 31, 1996.

Number of
Title of Class of Unit of Beneficial Interest Record Holders
- --------------------------------------------- -----------------------------

Cash Investment Fund 3,677

U.S. Government Fund 611

Treasury Fund 414

Municipal Money Market Fund
Investor Shares 649
Institutional Shares 293
Ready Cash Investment Fund
Investor Shares 15,333

Institutional Shares 18

Exchange Class 9
Income Fund

A Shares 264
B Shares 238
I Shares 278

Total Return Bond Fund

A Shares 79
B Shares 218
I Shares 128

Colorado Tax-Free Fund
A Shares 436

B Shares 186
I Shares 6

<PAGE>

Minnesota Tax-Free Fund
A Shares 479

B Shares 350
I Shares 32

Tax-Free Income Fund
A Shares 633

B Shares 221
I Shares 134

ValuGrowth Stock Fund
A Shares 1,200

B Shares 615
I Shares 324

Contrarian Stock Fund
A Shares 51

B Shares 88
I Shares 56

Small Company Stock Fund
A Shares 549

B Shares 572
I Shares 569

Diversified Equity Fund
A Shares 284

B Shares 563
I Shares 9

Growth Equity Fund
A Shares 239

B Shares 282
I Shares 11

Large Company Growth Fund
I Shares 10
Small Company Growth Fund
I Shares 7
International Fund
A Shares 155

B Shares 161
I Shares 16

Income Stock Fund
A Shares 1
Income Equity Fund
A Shares 1,594
B Shares 1,969
I Shares 22
Index Fund
I Shares 11

<PAGE>

Conservative Balanced Fund
I Shares 7
Moderate Balanced Fund
I Shares 8
Growth Balanced Fund
I Shares 7
Intermediate Government Income Fund
A Shares 568

B Shares 531
I Shares 20

Diversified Bond Fund
I Shares 10
Stable Income Fund
A Shares 72

B Shares 29
I Shares 14

ITEM 27. INDEMNIFICATION.

The general effect of Section 10.02 of Registrant's Trust Instrument is to
indemnify existing or former trustees and officers of the Trust to the fullest
extent permitted by law against liability and expenses. There is no
indemnification if, among other things, any such person is adjudicated liable to
Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. This description is modified in its entirety by the provisions of
Section 10.02 of Registrant's Trust Instrument contained in this Registration
Statement as Exhibit 1 and incorporated herein by reference.

Registrant's Investment Advisory Agreements, Investment Subadvisory Agreements,
Management and Distribution Agreements and Distribution Services Agreements
provide that Registrant's investment advisers and principal underwriter are
protected against liability to the extent permitted by Section 17(i) of the
Investment Company Act of 1940. Similar provisions are contained in the
Management Agreement and Transfer Agency and Fund Accounting Agreement.
Registrant's principal underwriter is also provided with indemnification against
various liabilities and expenses under the Management and Distribution
Agreements and Distribution Services Agreements between Registrant and the
principal underwriter; provided, however, that in no event shall the
indemnification provision be construed as to protect the principal underwriter
against any liability to Registrant or its security holders to which the
principal underwriter would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and duties under those
agreements. Registrant's transfer agent and fund accountant and certain related
individuals are also provided with indemnification against various liabilities
and expenses under the Transfer Agency and Fund Accounting Agreements between
Registrant and the transfer agent and fund accountant; provided, however, that
in no event shall the transfer agent, fund accountant or such persons be
indemnified against any liability or expense that is the

<PAGE>

direct result of willful misfeasance, bad faith or gross negligence by the
transfer agent or such persons.

The preceding paragraph is modified in its entirety by the provisions of the
Investment Advisory Agreements, Investment SubAdvisory Agreements, Management
and Distribution Agreements, Distribution Services Agreements, Management
Agreements, Transfer Agency Agreement and Fund Accounting Agreement of
Registrant filed as Exhibits 5, 6, and 9 to Registrant's Registration Statement
and incorporated herein by reference.

Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such trustee, officer
or controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

NORWEST BANK MINNESOTA, N.A.

The description of Norwest Bank Minnesota, N.A., under the caption "Management-
Advisor" or Management of the Funds-Norwest Investment Management" in each
Prospectus and under the caption "Management-Adviser" or "Management -Investment
Advisory Services-Norwest Investment Management" in each Statement of Additional
Information constituting Parts A and B, respectively, of this Registration
Statement are incorporated by reference herein.

The following are the directors and principal executive officers of Norwest Bank
Minnesota, N.A., including their business connections which are of a substantial
nature. The address of Norwest Corporation, the parent of Norwest Bank
Minnesota, N.A., is Norwest Center, Sixth Street and Marquette Avenue,
Minneapolis, Minnesota, 55479. Unless otherwise indicated below, the principal
business address of any company with which the directors and principal executive
officers are connected is also Sixth Street and Marquette Avenue, Minneapolis,
Minnesota 55479.

Barbara S. Brett was elected Senior Vice President and Treasurer of Norwest Bank
Minnesota, N.A. on February 1, 1996.

James R. Campbell, previously Director, President and Chief Executive Officer of
Norwest Bank Minnesota, N.A. was elected Chairman of the Board of Norwest Bank
Minnesota, N.A. on

<PAGE>

December 11, 1995. He is also Executive Vice President of Norwest Corporation.
He is a Director of Centennial Investment Corporation, Flore Properties, Inc.,
Minnesota FSL Corporation, The Foothill Group, Inc., located at 11111 Santa
Monica Boulevard, Suite 1500, Los Angeles, California, 90025, and Peregrine
Capital Management, Inc., located at LaSalle Plaza, 800 LaSalle Avenue, Suite
1850, Minneapolis, Minnesota 55402-2056. He is the President and Chief
Executive Officer of BNRN Merger Corporation, and Director and Chairman of
Norwest Investment Advisors, Inc. Mr. Campbell is also Director of a number of
non-profit organizations located in Minneapolis, Minnesota.

Richard P. Ferris, Senior Vice President of Norwest Bank Minnesota, N.A. is also
a Director and Senior Vice President of Norwest Bank International.

Michael A. Graf, Vice President, Controller and Cashier, also serves as Senior
Vice Present and Controller of Norwest Corporation.

P. Jay Kiedrowski, Executive Vice President, has served in various capacities as
an employee of Norwest Bank Minnesota, N.A. and/or its affiliates since August,
1987. Mr. Kiedrowski is also Executive Vice President of BNRN Merger
Corporation. He is Director and President of Galliard Capital Management, Inc.,
Suite 2060, 800 LaSalle Avenue, Minneapolis, Minnesota. 55479-2052 and Director
of Norwest Investment Management Inc., and Crestone Capital Management, Inc.,
7720 E. Belleview Avenue, Suite 220, Engelwood, CO 80111. Mr. Kiedrowski is the
Chairman of Project for Pride in Living, Inc., and a Director of the University
of Minnesota Alumni Association, both non-profit organizations.

Scott A. Kissing, Director of Norwest Bank Minnesota, N.A. was elected President
and Chief Executive Officer on December 11, 1995 and is also Executive Vice
President of Norwest Corporation. He is also Executive Vice President of BNRN
Merger Corporation and Director and Executive Vice President of Norwest Bank
Faribault, N.A., 25 Northwest 4th Street, Faribault, Minnesota 55021. Mr.
Kisting is on the Board of several non-profit organizations in Minneapolis,
Minnesota.

William H. Queenan, Director, is also Executive Vice President of Norwest
Corporation. He is a Director of AMFED Financial, Inc., Alexandria Securities
and Investment Company, Alice Bancshares, Inc., AmeriGroup, Incorporated,
American Community Bank Group Service Corporation, American Republic Bancshares,
Inc., B & G. Investment Company, Babbscha Company, Bancshares Holding Company,
Benson Financial Corporation, Canton Bancshares, Inc., Central Computers., Inc.,
One O'Connor Plaza, Victoria, TX 77902, Comfort Bancshares, Inc., Copper
Bancshares, Inc., D.L. Bancshares, Inc., Dickenson Bancorporation, Inc., First
Tule Bancorp of Delaware, Inc., 1209 Orange Street, Wilmington, Delaware 19807,
First Tule Bancorp, Inc., Ford Bank Group Holdings, Inc., 300 Delaware Avenue,
Suite 1704, Wilmington Delaware 19807, Ford Bank Group, Inc., 1500 Broadway,
Suite 301, Lubbock, TX 79408, GST Co., Goldenbanks of Colorado, Inc., Guardian
Trust Co., Inc., Henrietta Bancshares, Inc., Henrietta Delaware Financial
Corporation, 15 E. N Street, Dover, Delaware 19901, Independent Bancorp of
Arizona, Inc., 3800 N. Central Avenue, Suite 900, Phoenix, AZ 85012, Irene
Bancorporation, Inc., Ken-Caryl Investment Company, La Porte Bancorp. Lindeberg
Financial

<PAGE>

Corporation, New Braunfels Bancshares, Inc., Norwest Bank Wisconsin, N.A., 735
West Wisconsin Avenue, Milwaukee, Wisconsin 53201-2057, Norwest Colorado, Inc.,
1700 Lincoln, Denver, CO 80274, Norwest Holding Company, Parker Bankshares,
Incorporated, Texas National Bankshares, Inc., The Foothill Group, Inc., 1111
Santa Monica Boulevard, Suite 1500, Los Angeles, CA 90025, Transact Financial
Corporation, One O'Connor Plaza, Victoria, TX 77902, Union Texas Bancorporation,
United New Mexico Financial Corporation, 200 Lomas Blvd., Suite 200,
Albuquerque, NM 87103, United Texas Financial Corporation, Valley-Hi Investment
Company, Victoria Bankshares, Inc., Victoria Capital Corporation, One O'Connor
Plaza, Victoria, TX 77902 and Victoria Financial Services, Inc., 1013 Centre
Road, Wilmington, Delaware.

Peggy O. Roush was named Executive Vice President on January 30, 1995. She is a
Director, Executive Vice President, Secretary and CTR Officer of Norwest Bank
Faribault, N.A., 25 Northwest Fourth Street, Faribault, MN 55021-0189, and
Director, Executive Vice President, Cashier and Secretary of Norwest National
Bank, 10001 Wadsworth Parkway, Westminister, CO 80021.

John T. Thornton, Director, is also Executive Vice President and Chief Financial
Officer of Norwest Corporation. Mr. Thornton is also a Director and President
of AMFED Financial, Inc. Alexandria Securities and Investment Company, Alice
Bancshares, Inc., Am-Can Investments, Inc., AmeriGroup, Incorporated, American
Community Bank Group Service Corporation, American Republic Bancshares, Inc., B
& G Investment Company, Babbscha Company, Bancshares Holding Company, Benson
Financial Corporation, Canton Bancshares, Inc. Central Computers, Inc., One
O'Conner Plaza, Victoria, Texas 77902, Comfort Bancshares, Inc., Copper
Bancshares, Inc., D.L. Bancshares, Inc., Dickinson Bancorporation, Inc., First
Tule Bancorp, Inc., Ford Bank Group Holdings, Inc., 300 Delaware Avenue, Suite
1704, Wilmington, DE 19807, Ford Bank Group, Inc., 1500 Broadway Suite 301,
Lubbock, TX 79408, GST Co., Goldenbanks of Colorado, Inc., Guardian Trust Co.,
Henrietta Bancshares, Inc., Henrietta Delaware Financial Corporation, 15 East N
Street, Dover, DE 19901, Independent Bancorp of Arizona, Inc., 3800 N. Central
Avenue, Suite 900, Phoenix, Arizona 85012, Irene Bancorporation, Inc., Ken-Caryl
Investment Company, La Porte Bancorp, Lindeberg Financial Corporation, New
Braunfels Bancshares, Inc., Northern Prairie Indemnity, Grand Cayman, Cayman
Islands, British West Indies, Norwest Colorado, Inc., 1700 Lincoln, Denver,
Colorado 80274, Norwest Holding Company, Parker Bankshares, Incorporation,
Superior Guaranty Insurance Company, Texas National Bankshares, Inc., Transact
Financial Corporation, One O'Connor Plaza, Victoria, TX 77902, Union Texas
Bancorporation, Inc., United New Mexico Financial Corporation, 200 Lomas Blvd.,
Suite 200, Albuquerque, New Mexico 87103, United Texas Financial Corporation,
Valley-Hi Investment Company, Victoria Bankshares, Inc., Victoria Capital
Corporation, One O"Connor Plaza, Victoria, TX 77902, and Victoria Financial
Services, Inc., 1013 Centre Road, Wilmington, Delaware.

He is also a Director of BNRN Merger Corporation, Blue Jay Asset Management,
Inc., Cardinal Asset Management, Inc., 100 W. Commons. Blvd., Suite 303, New
Castle, Delaware 19720, Copper Asset Management, Inc., 100 W. Commons, Blvd.,
Suite 303, New Castle, Delaware 19720, Falcon Asset Management, Inc., 100 W.
Commons Blvd., Suite 303, New Castle,

<PAGE>

Delaware 19720, Great Plains Insurance Company, Green Bay Asset Management,
Inc., 735 W. Wisconsin Avenue, Milwaukee, Wisconsin 53201, IntraWest Asset
Management, Inc., Iowa Asset Management, Inc., 100 West Commons Blvd., Suite
303, New Castle, DE 19720, LaCrosse Asset Management, Inc., 100 West Commons
Blvd., Suite 303, New Castle, DE 19720, Norwest Equity Capital, LLC, 2800 Piper
Jaffray Tower, 222 South Ninth Street, Minneapolis, MN 54402, Norwest Growth
Fund, Inc., 2800 Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, MN
54402, Norwest Venture Capital Management, Inc., 2800 Piper Jaffray Tower, 222
South Ninth Street, Minneapolis, MN 54402, Osprey Asset Management, Inc., South
Dakota Asset Management, Inc., 100 West Commons Blvd., Suite 303, New Castle, DE
19720 and The Foothill Group, Inc., 11111 Santa Monica Blvd., Suite 1500, Los
Angeles, CA 90025.

Mr. Thornton is Director and Vice President of Blue Spirit Insurance Company,
2929 North 44th Street, Suite 120, Phoenix, Arizona 85018 and Treasurer of
Norwest Foundation.

Richard C. Westergaard, Executive Vice President since January of 1990 and
Director since January of 1994, has served in various capacities as an employee
of Norwest Bank Minnesota, N.A. and/or its affiliates. Mr. Westergaard is also
a Director of Centennial Investment Corporation, Flore Properties, Inc.,
Minnesota FSL Corporation, The Foothill Group, 11111 Santa Monica Boulevard,
Suite 1500 Los Angeles, CA 90025, Norwest Business Credit, Inc., Norwest Credit,
Inc., First Interstate Equipment Finance, Inc., R.D. Leasing, Inc., Norwest
Alliance System, Inc., Commonwealth Leasing Corporation, Norwest Equipment
Finance, Inc., Investors Building, 733 Marquette, Suite 300, Minneapolis, MN
55479-2048 and Nat-Lea, Inc., 112 W. Jefferson Blvd., South Bend, Indiana 46601.
He is Executive Vice President of BNRN Merger Corporation and Director and
Executive Vice President of Norwest Bank Faribault, N.A., 25 Northwest Fourth
Street, Faribault, Minnesota 55021-0189.

J. Thomas Wiklund, Executive Vice President and Chief Lending Officer since
July 1, 1996, is a Vice President of Flore Properties, Inc., and Norwest Bank
Wisconsin, N.A. located at 735 West Wisconsin Avenue, Milwaukee, Wisconsin
53201-2057. He is Executive Vice President of Norwest Bank Faribault, N.A.
located at 25 Northwest 4th Street, Faribault, Minnesota 55021.

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC.

The description of Schroder Capital Management International Inc. ("Schroder")
under the caption "Management of the Funds - Investment Advisory Services -
Schroder Capital Management International Inc." in the Prospectus and
"Management-Investment Advisory Services" in the Statement of Additional
Information relating to International Fund, Diversified Equity Fund, Growth
Equity Fund, Conservative Balanced Fund, Moderate Balanced Fund and Growth
Balanced Fund, constituting certain of Parts A and B, respectively, of the
Registration Statement, are incorporated by reference herein.

The following are the directors and principal officers of Schroder, including
their business connections which are of a substantial nature. The address of
each company listed, unless

<PAGE>

otherwise noted, is 33 Gutter Lane, London EC2V 8AS, United Kingdom. Schroder
Capital Management International Limited ("Schroder Ltd.") is a United Kingdom
affiliate of Schroder which provides investment management services
international clients located principally in the United States.

David M. Salisbury, Chief Executive Officer. Mr. Salisbury is also the
Chief Executive Officer and Director of Schroder Ltd. and a Director of
Schroder Wertheim Investment Services Inc. located at 787 Seventh Avenue,
New York, New York 10019, an affiliate of SCMI and also the Joint Chief
Executive of Schroder Investment Management Limited. Mr. Salisbury is a
director or former director of various investment trust companies and
closed end investment companies for which SCMI and/or its affiliates
provide investment services.

John S. Ager, Director. Mr. Ager is also a Director of Schroder Ltd.

Richard R. Foulkes, Director. Mr. Foulkes is also a Director of Schroder
Ltd.

David Gibson, Director. Mr. Gibson is also a Director of Schroder Ltd., a
Director of Schroder Investment Management Limited, and a Director of
Schroder Wertheim Investment Services Inc. An affiliate of SCMI and of an
investment trust for which SCMI or its affiliates provide investment
services.

C. John Govett, Director. Mr. Govett is also a Director of Schroder Ltd.,
Schroder Personal Investment Management (investment adviser), Schroder
Ventures Limited (investment adviser) and Schroder Venture International
Holdings Limited (investment adviser). He is Chairman and Director of
Schroder Investment Management Limited and Schroder Properties Limited. He
is also Director of several investment companies for which SCMI and/or its
affiliates provide investment services.

Sharon L. Haugh, Director. Ms. Haugh is also a Director of Schroder Ltd.,
a Director of Schroder Fund Advisors and Deputy Chairman and Director of
Schroder Wertheim Investment Services Inc., an affiliate of SCMI.

Laura E. Luckyn-Malone, Director. Ms. Luckyn-Malone is also a Director of
Schroder Ltd. and President and Director of various investment trusts and
closed and open end investment companies for which SCMI or its affiliates
provide investment services and a Director of Schroder Wertheim Investment
Services, Inc., an affiliate of SCMI.

Gavin D.L. Ralston, Director. Mr. Ralston is also a Director of
Schroder Ltd.

Mark J. Smith, Director. Mr. Smith is also Director, Schroder Ltd. and
Schroder Investment Management (Guernsey) Limited, an investment management
company, and Director and Vice President of Schroder Advisors. Mr. Smith is
also a director of various investment trusts and open end investment
companies for which Schroder and/or its affiliates provide investment
services.

<PAGE>

John A. Troiano, Managing Director. Mr. Troiano is also a Director of
Schroder Ltd., Schroder Fund Advisors, and Vice President of open end
investment companies for which Schroder and/or its affiliates provide
investment services.

Jane P. Lucas, Director. Ms. Lucas is also a Director of Schroder Wertheim
Investment Services, Inc. an affiliate of SCMI and of an investment trust
for which SCMI or its affiliates provide investment services.

Andrew R. Barker, First Vice President. Mr. Barker is also First Vice
President of Schroder Ltd.

J. Ann Bonathan, First Vice President. Ms. Bonathan is also First Vice
President of Schroder Ltd. During the last two years, Ms. Bonathan has
been Deputy Head of Custody Operations of SG Warburg, 1 Finsbury Avenue,
London, merchant bankers.

John D. Burns, First Vice President. Mr. Burns is also First Vice
President of Schroder Ltd.

Heather F. Crighton, First Vice President. Ms. Crighton is also First Vice
President of Schroder Ltd.

Louise Croset, First Vice President. Mr. Croset is also First Vice
President of Schroder Ltd.

Robert C. Davy, Director. Mr. Davy is also a Director of Schroder Ltd. and
an officer of open end investment companies for which Schroder and/or its
affiliates provide investment services.

Margaret H. Douglas-Hamilton, Secretary. Ms. Douglas-Hamilton is also
First Vice President and General Counsel of Schroders Incorporated
("Schroders Inc."), 787 Seventh Avenue, New York, New York, the holding
company for various United States based Schroder affiliates. Ms. Douglas-
Hamilton is also Secretary to various Schroder affiliates, including
Schroder Distributors.

Phillipa Gould, Director. Ms. Gould is also a Director of Schroder Ltd. And
during the past two years was a Director of Hill Samuel Asset Management,
100 Wood Street, London.

Abdallah Nauphal, Director.

Joshua Shapiro, First Vice President.

Ellen B. Sullivan, First Vice President.

<PAGE>

Fariba Talebi, Group Vice President. Ms. Talebi is also an officer of
various open end investment companies for which SCMI and/or its affiliates
provide investment services.

Jan Kees van Heusde, First Vice President. Mr. van Heusde is also First
Vice President of Schroder Ltd.

Patrick Vermeulen, Vice First President. Mr. Vermeulen is also Vice First
President of Schroder Ltd.

Mark J. Astley, First Vice President.

William H. Barnes, Vice President.

Susan M. Belson, Vice President.

Alan Gilston, Vice President.

Robert Jackowitz, Vice President. Mr. Jackowitz is also Vice President of
Schroder Wertheim Investment Services, Inc., an affiliate of SCMI and
Treasurer of various investment trusts and closed and open end investment
companies for which SCMI or its affiliates provide investment services.

Clare L. Latham, Vice President. During the last two years, Ms. Latham has
been First Vice President of Schroder Ltd. and Analyst at the Bank of
England, Threadneedle Street, London EC2R 8AH.

Catherine A. Mazza, First Vice President. Ms. Mazza is also Vice President
of various investment trusts and closed and open end investment companies
for which SCMI or its affiliates provide investment services.

Donald HM Farquharson, First Vice President. During the past two years Mr.
Farquharson has been a fund manager with Schroder Investment Management
Limited, an affiliate of SCMI.

Robert J. Martorana, Vice President.

Thomas Melendez, Vice President. During the last two years, Mr. Melendez
has been a Vice President of Natwest Securities, 175 Water Street, New
York, NY, an investment adviser.

Ira L. Unschuld, First Vice President. Mr. Unschuld is also an officer of
various open end investment companies for which SCMI and/or its affiliates
provide investment services.

<PAGE>

James L. Gray, Vice President. Mr. Gray is also Vice President of various
open end investment companies for which SCMI or its affiliates provide
investment services. During the past two years Mr. Gray has been a mutual
fund administrator with Furman Selz, 230 Park Avenue, New York, New York
10019, and Concord Holdings Holding Corp., 125 W 55th Street, New York, New
York 10017.

Dawn M. Vroegop, Vice President. During the last two years, Ms. Vroegop
has been an Associate of A.T. Keaney, Inc., 153 East 53rd Street, New York,
NY, management consultants.

Anita L. Whelan, Vice President and Compliance Officer. Ms. Whelan is also
Vice President and Compliance Officer of Schroder Wertheim Investment
Services Inc., an affiliate of SCMI. During the past two years, Ms. Whelan
has been First Vice President, Assistant General Counsel and Compliance
Officer of Prudential Mutual Fund Management Inc., One Seaport Plaza, New
York, New York 10292.

CRESTONE CAPITAL MANAGEMENT, INC.

The description of Crestone Capital Management, Inc. ("Crestone") under the
caption "Management - SubAdviser" in the Prospectus and "Management- Adviser -
SubAdviser - Small Company Stock Fund" in the Statement of Additional
Information relating to the Small Company Stock Fund, constituting certain of
Parts A and B, respectively, of the Registration Statement, are incorporated by
reference herein.

The following are the directors and principal officers of Crestone, including
their business connections which are of a substantial nature.

Kirk McCown, President and Director. His address is 7720 East Belleview
Avenue, Suite 220, Englewood, Colorado 80111.

Mark Steven Sunderhuse, Senior Vice President and Director. His address is
7720 East Belleview Avenue, Suite 220, Englewood, Colorado 80111.

P. Jay Kiedrowski, Director. Mr. Kiedrowski is an Executive Vice President
of Norwest and is also a Director and Chairman of the Board of Norwest
Investment Management, Inc. His address is Sixth and Marquette Avenue,
Minneapolis, Minnesota 55479.

Steven P. Gianoli, Director. Mr. Gianoli is a Vice President of Norwest.
His address is Sixth and Marquette Avenue, Minneapolis, Minnesota 55479.

Susan Koonsman, Director. Ms. Koonsman is President of Norwest Investments
& Trust. Her address is 1740 Broadway, Denver, Colorado 80274.

<PAGE>

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) Forum Financial Services, Inc., Registrant's underwriter, serves as
underwriter to Avalon Capital, Inc., Core Trust (Delaware), The CRM Funds,
The Cutler Trust, Forum Funds, Monarch Funds, Norwest Advantage Funds,
Norwest Select Funds, Sound Shore Fund, Inc., Stone Bridge Funds, Inc. and
Trans Adviser Funds, Inc.

(b) John Y. Keffer, President and Secretary of Forum Financial Services, Inc.,
is the Chairman and President of Registrant. David R. Keffer, Vice
President and Treasurer of Forum Financial Services, Inc., is the Vice
President, Assistant Treasurer and Assistant Secretary of Registrant.
Their business address is Two Portland Square, Portland, Maine

ITEM 30. LOCATION OF BOOKS AND RECORDS.

The majority of accounts, books and other documents required to be maintained by
31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained at the offices of Forum Financial Services, Inc. at Two Portland
Square, Portland, Maine 04101, at Forum Financial Corp., Two Portland Square,
Portland, Maine 04101 and Forum Administrative Services, LLC, Two Portland
Square, Portland, Maine 04101. The records required to be maintained under Rule
31a-1(b)(1) with respect to journals of receipts and deliveries of securities
and receipts and disbursements of cash are maintained at the offices of
Registrant's custodian. The records required to be maintained under Rule
31a-1(b)(5), (6) and (9) are maintained at the offices of Registrant's
investment advisers as indicated in the various prospectuses constituting
Part A of this Registration Statement.

Additional records are maintained at the offices of Norwest Bank Minnesota,
N.A., 733 Marquette Avenue, Minneapolis, MN 55479-0040, Registrant's investment
adviser, custodian and transfer agent.

ITEM 31. MANAGEMENT SERVICES.

Not Applicable.

ITEM 32. UNDERTAKINGS.

(i) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders
relating to the portfolio or class thereof to which the prospectus relates
upon request and without charge.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Portland, and State of Maine on the 18th
day of September, 1996.

NORWEST ADVANTAGE FUNDS

By: /s/ John Y. Keffer
--------------------------
John Y. Keffer
President

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement amendment has been signed below by the following persons on the 18th
day of September, 1996.

Signatures Title
---------- -----

(a) Principal Executive Officer

/s/ John Y. Keffer Chairman and President
-----------------------------
John Y. Keffer

(b) Principal Financial and Accounting Officer

/s/ Michael D. Martins Treasurer, Principal Financial
----------------------------- and Accounting Officer
Michael D. Martins

/s/ John Y. Keffer Chairman
-----------------------------
John Y. Keffer

Robert C. Brown* Trustee
Donald H. Burkhardt* Trustee
James C. Harris* Trustee
Richard M. Leach* Trustee
Donald C. Willeke* Trustee
Timothy J. Penny* Trustee

* By: /s/ John Y. Keffer
-----------------------------
John Y. Keffer
Attorney in Fact

<PAGE>
SIGNATURES

On behalf of Schroder Capital Funds, being duly authorized, I have duly caused
this amendment to the Registration Statement of Norwest Advantage Funds to be
signed in the City of New York, State of New York on the 17th day of September,
1996.

SCHRODER CAPITAL FUNDS

By: /s/ Laura E. Luckyn-Malone
----------------------------
Laura E. Luckyn-Malone
President

This amendment to the Registration Statement of Norwest Advantage Funds has been
signed below by the following persons in the capacities indicated on the 17th
day of September, 1996.

Signatures Title
---------- ------

(a) Principal Executive Officer

/s/ Laura E. Luckyn-Malone President
------------------------------- and Trustee
Laura E. Luckyn-Malone

(b) Principal Financial and
Accounting Officer

ROBERT JACKOWITZ* Treasurer

*By:/s/ Thomas G. Sheehan
--------------------------
Thomas G. Sheehan, Attorney-in-Fact

/s/ Laura E. Luckyn-Malone Trustee
Laura E. Luckyn-Malone

PETER E. GUERNSEY* Trustee
RALPH E. HANSMANN* Trustee
JOHN I. HOWELL* Trustee
HERMANN C. SCHWAB* Trustee
MARK J. SMITH* Trustee

*By: /s/ Thomas G. Sheehan
--------------------------
Thomas G. Sheehan, Attorney-in-Fact

<PAGE>

SIGNATURES

On behalf of Core Trust (Delaware), being duly authorized, I have duly caused
this amendment to the Registration Statement of Norwest Advantage Funds to be
signed in the City of Portland, State of Maine on the 18th day of September,
1996.

CORE TRUST (DELAWARE)

By: /s/ John Y. Keffer
---------------------------
John Y. Keffer
President

This amendment to the Registration Statement of Norwest Advantage Funds has been
signed below by the following persons in the capacities indicated on the 18th
day of September, 1996.

Signatures Title

(a) Principal Executive Officer

/s/ John Y. Keffer Chairman and President
-------------------------------
John Y. Keffer

(b) Principal Financial and Accounting Officer

/s/ Michael D. Martins Treasurer, Principal Financial
------------------------------- and Accounting Officer
Michael D. Martins

/s/ John Y. Keffer Chairman
-------------------------------
John Y. Keffer

J. Michael Parish* Trustee
James C. Cheng* Trustee
Costas Azariadis* Trustee

*By: /s/ John Y. Keffer
----------------------------
John Y. Keffer
Attorney in Fact

<PAGE>

INDEX TO EXHIBITS

Sequential
Exhibit Page Number
- ------- -----------
9(a) Form of Management Agreement between Norwest
Advantage Funds and Forum Financial Services, Inc.

(b) Form of Administration Services Agreement between
NorwestAdvantage Funds and Forum Financial Services,
Inc.

11(a) Consent of KPMG Peat Marwick LLP

11(b) Consent of Coopers & Lybrand L.L.P.

<PAGE>

EXHIBIT 9 (a)

NORWEST ADVANTAGE FUNDS
MANAGEMENT AGREEMENT

October 1, 1995, as amended October 1, 1996

AGREEMENT made October 1, 1995, and amended this 1st day of October, 1996,
between Norwest Advantage Funds (the "Trust"), a business trust organized under
the laws of the State of Delaware with its principal place of business at Two
Portland Square, Portland, Maine 04101, and Forum Financial Services, Inc.
("Forum"), a corporation organized under the laws of State of Delaware with its
principal place of business at Two Portland Square, Portland, Maine 04101.

WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act") as an open-end management investment company and may
issue its shares of beneficial interest, no par value, in separate series and
classes; and

WHEREAS, the Trust desires that Forum perform certain management services
for each of the series of the Trust as listed in Appendix A hereto (each a
"Fund" and collectively the "Funds") and Forum is willing to provide those
services on the terms and conditions set forth in this Agreement;

NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and Forum agree as follows:

SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS

The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in the Trust's Trust Instrument, By-Laws and registration statement
filed with the Securities and Exchange Commission (the "SEC") under the Act and
the Securities Act of 1933 (the "Securities Act"), including any representations
made in a prospectus ("Prospectus") or statement of additional information
("SAI") relating to a Fund contained therein and as may be supplemented from
time to time, all in such manner and to such extent as may from time to time be
authorized by the Trust's Board of Trustees (the "Board"). The Trust is
currently authorized to issue thirty-one series of shares and the Board is
authorized to issue any unissued shares in any number of additional series or
classes. The Trust has delivered copies of the documents listed in this Section
to Forum and will from time to time furnish Forum with any amendments thereof.

SECTION 2. APPOINTMENT

The Trust hereby employs Forum, subject to the direction and control of the
Board, to manage all aspects of the Trust's operations with respect to each Fund
except those which are the responsibility of Norwest Bank Minnesota, N.A., each
Fund's investment adviser, or any other

<PAGE>

investment adviser or investment subadviser to a Fund (each an "Adviser"), or
Norwest Bank Minnesota, N.A. in its capacity as administrator pursuant to an
investment administration or similar agreement.

SECTION 3. MANAGEMENT DUTIES

(a) On behalf of the Trust and with respect to each Fund, Forum will

(i) oversee (A) the preparation and maintenance by the Advisers and the
Trust's administrator, custodian, transfer agent, dividend disbursing agent
and fund accountant (or if appropriate, prepare and maintain) in such form,
for such periods and in such locations as may be required by applicable
law, of all documents and records relating to the operation of the Trust
required to be prepared or maintained by the Trust or its agents pursuant
to applicable law; (B) the reconciliation of account information and
balances among the Advisers and the Trust's custodian, transfer agent,
dividend disbursing agent and fund accountant; (C) the transmission of
purchase and redemption orders for Shares; (D) the notification of the
Advisers of available funds for investment; and (E) the performance of fund
accounting, including the calculation of the net asset value per Share;

(ii) at the Trust's expense, oversee the Trust's receipt of the services of
persons competent to perform such supervisory, administrative and clerical
functions as are necessary to provide effective operation of the Trust;

(iii) oversee the performance of administrative and professional
services rendered to the Trust by others, including its administrator,
custodian, transfer agent, dividend disbursing agent and fund accountant,
as well as accounting, auditing, legal and other services performed for the
Trust;

(iv) provide the Trust with adequate general office space and facilities
and provide, at the Trust's request and expense, persons suitable to the
Board to serve as officers of the Trust;

(v) oversee the preparation and the printing of the periodic updating of
the Trust's registration statement, Prospectuses and SAIs, the Trust's tax
returns, and reports to its shareholders, the SEC and state and other
securities administrators;

(vi) oversee the preparation of proxy and information statements and any
other communications to shareholders;

(vii) with the cooperation of the Trust's counsel, Advisers and other
relevant parties, oversee the preparation and dissemination of materials
for meetings of the Board;

<PAGE>

(viii) oversee the preparation, filing and maintenance of the Trust's
governing documents, including the Trust Instrument, Bylaws and minutes of
meetings of Trustees, Board committees and shareholders;

(ix) oversee registration and sale of Fund shares, to ensure that such
shares are properly and duly registered with the SEC and applicable state
and other securities commissions;

(x) oversee the calculation of performance data for dissemination to
information services covering the investment company industry, for sales
literature of the Trust and other appropriate purposes;

(xi) oversee the determination of the amount of and supervise the
declaration of dividends and other distributions to shareholders as
necessary to, among other things, maintain the qualification of each Fund
as a regulated investment company under the Internal Revenue Code of 1986,
as amended, and oversee the preparation and distribution to appropriate
parties of notices announcing the declaration of dividends and other
distributions to shareholders;

(xii) review and negotiate on behalf of the Trust normal course of
business contracts and agreements;

(xiii) maintain and review periodically the Trust's fidelity bond and
errors and omission insurance coverage; and

(xiv) advise the Trust and the Board on matters concerning the Trust
and its affairs.

(b) Forum shall maintain records relating to its services, such as
journals, ledger accounts and other records, as are required to be maintained by
Forum and the Trust under the Act and Rule 31a-1 under the Act. The books and
records pertaining to the Trust which are in possession of Forum shall be the
property of the Trust. The Trust, or the Trust's authorized representatives,
shall have access to such books and records at all times during Forum's normal
business hours. Upon the reasonable request of the Trust, copies of any such
books and records shall be provided promptly by Forum to the Trust or the
Trust's authorized representatives.

SECTION 4. STANDARD OF CARE

The Trust shall expect of Forum, and Forum will give the Trust the benefit
of, Forum's best judgment and efforts in rendering these services to the Trust,
and the Trust agrees as an inducement to Forum's undertaking these services that
Forum shall not be liable under this Agreement for any mistake of judgment or in
any event whatsoever, except for lack of good faith, provided that nothing
herein shall be deemed to protect, or purport to protect, Forum against any
liability to the Trust or to its security holders to which Forum would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of

<PAGE>

Forum's duties under this Agreement, or by reason of Forum's reckless
disregard of its obligations and duties under this Agreement.

SECTION 5. COMPENSATION; EXPENSES

(a) In consideration of the management services performed by Forum as
described herein, the Trust will pay Forum, with respect to each class of Shares
of each Fund a fee at the annual rate as listed in Appendix A hereto. Forum's
fees shall be accrued by the Trust daily and shall be payable monthly in arrears
on the first day of each calendar month for services performed under the
Agreement during the prior calendar month.

(b) Notwithstanding that other persons may, in investment advisory
agreements or otherwise, agree to assume certain expenses of the Trust or of any
Fund or class of Shares thereof, the Trust shall be responsible and hereby
assumes the obligation for payment of all the Trust's expenses, including (i)
payment of the fee payable to Forum under this Section 5 hereof and the fee
payable to the Advisers of each Fund pursuant to any investment advisory or
similar agreement between the Adviser and the Trust; (ii) interest charges,
taxes, brokerage fees and commissions; (iii) insurance and fidelity bond
premiums; (iv) fees, interest charges and expenses of the Trust's administrator,
custodian, transfer agent, dividend disbursing agent and fund accountant and
providers of pricing, credit analysis and dividend services; (v)
telecommunications expenses; (vi) auditing, legal and compliance expenses; (vii)
costs of forming the Trust and maintaining its existence; (viii) costs of
preparing and printing the Trust's Prospectuses, SAIs, subscription application
forms and stockholder reports and their delivery to existing and prospective
stockholders; (ix) costs of maintaining books of original entry for portfolio
and fund accounting and other required books and accounts and of calculating the
net asset value of the Trust's shares; (x) costs of reproduction, stationery and
supplies; (xi) compensation of the Trust's trustees, officers and employees and
costs of other personnel performing services for the Trust, whether or not any
such persons are affiliated persons of Forum or any Adviser of the Trust; (xii)
costs of Board, Board committee, shareholder and other corporate meetings;
(xiii) SEC registration fees and related expenses; (xiv) state and other
jurisdiction securities laws registration fees and related expenses, including
costs of personnel to perform such securities registration; and (xv) all costs
borne by the Trust pursuant to any distribution plan adopted by the Trust
pursuant to Rule 12b-1 under the Act, shareholder service or similar plan.

SECTION 6. EFFECTIVENESS, DURATION; TERMINATION AND
ASSIGNMENT

(a) This Agreement shall become effective with respect to each Fund on the
date hereof or, with respect to additional series of the Trust to which this
agreement shall apply by amendment of Appendix A, upon the date of such
amendment. Upon effectiveness of this Agreement, it shall supersede all
previous agreements between the parties hereto covering the subject matter
hereof insofar as such Agreement may have been deemed to relate to the Funds.

<PAGE>

(b) This Agreement shall continue in effect with respect to a Fund for a
period of one year from its effectiveness and shall continue in effect for
successive one year periods; provided, however, that continuance is specifically
approved at least annually (i) by the Board or by a vote of a majority of the
outstanding voting securities of the Fund and (ii) by a vote of a majority of
Trustees of the Trust who are not parties to this agreement or interested
persons of any such party (other than as Trustees of the Trust); provided
further, however, that if the continuation of this agreement is not approved as
to a Fund, Forum may continue to render to the Fund the services described
herein in the manner and to the extent permitted by the Act and the rules and
regulations thereunder.

(c) This Agreement may be terminated with respect to a Fund at any time,
without the payment of any penalty, (i) by the Board on 60 days' written notice
to Forum or (ii) by Forum on 60 days' written notice to the Trust.

(d) This Agreement and the rights and duties under this Agreement
otherwise shall not be assignable by either Forum or the Trust except by the
specific written consent of the other party. All terms and provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the respective successors and assigns of the parties hereto.

SECTION 7. ACTIVITIES OF FORUM

(a) Except to the extent necessary to perform Forum's obligations under
this Agreement, nothing herein shall be deemed to limit or restrict Forum's
right, or the right of any of Forum's officers, directors or employees who also
may be a trustee, officer or employee of the Trust, or persons otherwise
affiliated persons of the Trust to engage in any other business or to devote
time and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any kind to
any other corporation, trust, firm, individual or association.

(b) Forum may subcontract any or all of its functions or responsibilities
pursuant to this Agreement to one or more corporations, trusts, firms,
individuals or associations, which may be affiliates of Forum, who agree to
comply with the terms of this Agreement. Forum may pay those persons for their
services, but no such payment will increase Forum's compensation from the Trust.

SECTION 8. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY

The Trustees of the Trust and the shareholders of each Fund shall not be
liable for any obligations of the Trust or of the Funds under this Agreement,
and Forum agrees that, in asserting any rights or claims under this Agreement,
it shall look only to the assets and property of the Trust or the Fund to which
Forum's rights or claims relate in settlement of such rights or claims, and not
to the Trustees of the Trust or the shareholders of the Funds.

<PAGE>

SECTION 9. MISCELLANEOUS

(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto.

(b) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.

(c) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.

(d) Notices, requests, instructions and communications received by the
parties at their respective principal addresses, or at such other address as a
party may have designated in writing, shall be deemed to have been properly
given.

(e) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of New York.

(f) The terms "vote of a majority of the outstanding voting securities,"
"interested person," and "assignment" shall have the meanings ascribed thereto
in the Act.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.

NORWEST ADVANTAGE FUNDS

__________________________
David I. Goldstein
Vice President

FORUM FINANCIAL SERVICES, INC.

________________________
John Y. Keffer
President

<PAGE>

NORWEST ADVANTAGE FUNDS
MANAGEMENT AGREEMENT

October 1, 1995, as amended October 1, 1996

APPENDIX A

FEE AS A % OF
THE ANNUAL AVERAGE DAILY
FUNDS OF THE TRUST NET ASSETS OF EACH CLASS OF THE FUND
- ------------------ ------------------------------------

Cash Investment Fund 0.05% of the first $300 million of assets
0.0375% for the next $400 million of assets
0.025% of remaining assets.

U.S. Government Fund 0.05% of the first $300 million of assets
0.0375% for the next $400 million of assets
0.025% of remaining assets.

Treasury Fund 0.05% of the first $300 million of assets
0.0375% for the next $400 million of assets
0.025% of remaining assets.

Municipal Money Market Fund 0.10%
Ready Cash Investment Fund 0.10%

ValuGrowth Stock Fund 0.10%
Contrarian Stock Fund 0.10%
Small Company Stock Fund 0.10%

Income Fund 0.10%
Total Return Bond Fund 0.10%

Tax-Free Income Fund 0.10%
Colorado Tax-Free Fund 0.10%
Minnesota Tax-Free Fund 0.10%

<PAGE>

FEE AS A % OF
THE ANNUAL AVERAGE DAILY
FUNDS OF THE TRUST NET ASSETS OF EACH CLASS OF THE FUND
- ------------------ ------------------------------------

Diversified Equity Fund 0.05%
Growth Equity Fund 0.05%

Large Company Growth Fund 0.05%
Small Company Growth Fund 0.05%
International Fund 0.05%
Income Equity Fund 0.05%
Index Fund 0.05%

Conservative Balanced Fund 0.05%
Moderate Balanced Fund 0.05%
Growth Balanced Fund 0.05%

Intermediate Government Income Fund 0.05%
Diversified Bond Fund 0.05%
Stable Income Fund 0.05%

<PAGE>

EXHIBIT 9 (b)

NORWEST ADVANTAGE FUNDS
ADMINISTRATION AGREEMENT

October 1, 1996

AGREEMENT made this 1st day of October, 1996, between Norwest Advantage
Funds (the "Trust"), a business trust organized under the laws of the State of
Delaware with its principal place of business at Two Portland Square, Portland,
Maine 04101, and Forum Administrative Services, LLC ("FAS"), a limited liability
corporation organized under the laws of State of Delaware with its principal
place of business at Two Portland Square, Portland, Maine 04101.

WHEREAS, the Fund has entered into a Management Agreement with Forum
Financial Services, Inc. (the "Manager"), pursuant to which Manager provides
certain management services for the Trust; and

WHEREAS, the Trust desires that FAS perform administrative services for
each of the series of the Trust as listed in Appendix A hereto (each a "Fund"
and collectively the "Funds") other than any administrative services performed
by the Manager incidental to the aforesaid Management Agreement, and FAS is
willing to provide those services on the terms and conditions set forth in this
Agreement;

NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and FAS agree as follows:

SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS

The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in the Trust's Trust Instrument, By-Laws and registration statement
filed with the Securities and Exchange Commission (the "SEC") under the Act and
the Securities Act of 1933 (the "Securities Act"), including any representations
made in a prospectus ("Prospectus") or statement of additional information
("SAI") relating to a Fund contained therein and as may be supplemented from
time to time, all in such manner and to such extent as may from time to time be
authorized by the Trust's Board of Trustees (the "Board"). The Trust has
delivered copies of the documents listed in this Section to FAS and will from
time to time furnish FAS with any amendments thereof.

<PAGE>

SECTION 2. APPOINTMENT

The Trust hereby employs FAS, subject to the direction and control of the
Board and the Manager, to provide certain administrative services necessary for
the Trust's operations with respect to each Fund except those that are the
responsibility of the Manager, Norwest Bank Minnesota, N.A. ("Norwest"), each
Fund's investment adviser, or any other investment adviser or investment
subadviser to a Fund (each an "Adviser"), or Norwest in its capacity as
administrator pursuant to an investment administration or similar agreement.

SECTION 3. ADMINISTRATIVE DUTIES

(a) On behalf of the Trust and with respect to each Fund, FAS will

(i) at the Trust's expense provide the Trust with, or arrange for the
provision of, the services of persons competent to perform such
supervisory, administrative and clerical functions as are necessary to
provide effective operation of the Trust;

(ii) assist in the preparation and the printing and the periodic updating
of the Trust's registration statement, Prospectuses and SAIs, the Trust's
tax returns, and reports to its shareholders, the SEC and state and other
securities administrators;

(iii) assist in the preparation of proxy and information statements and
any other communications to shareholders;

(iv) assist the Advisers in monitoring Fund holdings for compliance with
Prospectus and SAI investment restrictions and assist in preparation of
periodic compliance reports;

(v) with the cooperation of the Trust's counsel, Advisers, the officers of
the Trust and other relevant parties, be responsible for preparation and
dissemination of materials for meetings of the Board;

(vi) be responsible for preparing, filing and maintaining the Trust's
governing documents, including the Trust Instrument, Bylaws and minutes of
meetings of Trustees, Board committees and shareholders;

(vii) be responsible for maintaining the Trust's existence and good
standing under state law;

(viii) monitor sales of shares and ensure that such shares are properly
and duly registered with the SEC and applicable state and other securities
commissions;

(ix) be responsible for the calculation of performance data for
dissemination to information services covering the investment company
industry, for sales literature of the Trust and other appropriate purposes;
and

<PAGE>

(x) be responsible for the determination of the amount of and supervise
the declaration of dividends and other distributions to shareholders as
necessary to, among other things, maintain the qualification of each Fund
as a regulated investment company under the Internal Revenue Code of 1986,
as amended, and prepare and distribute to appropriate parties notices
announcing the declaration of dividends and other distributions to
shareholders.

(b) FAS shall provide such other services and assistance relating to the
affairs of the Trust as the Trust, the Manager or the Adviser may, from time to
time, reasonably request.

(c) FAS shall maintain records relating to its services, such as journals,
ledger accounts and other records, as are required to be maintained under the
Act and Rule 31a-1 under the Act. The books and records pertaining to the Trust
which are in possession of FAS shall be the property of the Trust. The Trust,
or the Trust's authorized representatives, shall have access to such books and
records at all times during FAS's normal business hours. Upon the reasonable
request of the Trust, copies of any such books and records shall be provided
promptly by FAS to the Trust or the Trust's authorized representatives.

SECTION 4. STANDARD OF CARE

The Trust shall expect of FAS, and FAS will give the Trust the benefit of,
FAS's best judgment and efforts in rendering these services to the Trust, and
the Trust agrees as an inducement to FAS's undertaking these services that FAS
shall not be liable under this Agreement for any mistake of judgment or in any
event whatsoever, except for lack of good faith, provided that nothing herein
shall be deemed to protect, or purport to protect, FAS against any liability to
the Trust or to its security holders to which FAS would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of FAS's duties under this Agreement, or by reason of FAS's reckless disregard
of its obligations and duties under this Agreement.

SECTION 5. COMPENSATION; EXPENSES

(a) In consideration of the administrative services performed by FAS as
described herein, the Trust will pay FAS, with respect to each class of Shares
of each Fund a fee at the annual rate as listed in Appendix A hereto. FAS's
fees shall be accrued by the Trust daily and shall be payable monthly in arrears
on the first day of each calendar month for services performed under the
Agreement during the prior calendar month.

<PAGE>

insurance and fidelity bond premiums; (iv) fees, interest charges and
expenses of the Trust's manager, custodian, transfer agent, dividend
disbursing agent and fund accountant and providers of pricing, credit
analysis and dividend services; (v) telecommunications expenses; (vi)
auditing, legal and compliance expenses; (vii) costs of forming the Trust and
maintaining its existence; (viii) costs of preparing and printing the Trust's
Prospectuses, SAIs, subscription application forms and stockholder reports
and their delivery to existing and prospective stockholders; (ix) costs of
maintaining books of original entry for portfolio and fund accounting and
other required books and accounts and of calculating the net asset value of
the Trust's shares; (x) costs of reproduction, stationery and supplies; (xi)
compensation of the Trust's trustees, officers and employees and costs of
other personnel performing services for the Trust, whether or not any such
persons are affiliated persons of FAS or any Adviser of the Trust; (xii)
costs of Board, Board committee, shareholder and other corporate meetings;
(xiii) SEC registration fees and related expenses; (xiv) state and other
jurisdiction securities laws registration fees and related expenses,
including costs of personnel to perform such securities registration; and
(xv) all costs borne by the Trust pursuant to any distribution plan adopted
by the Trust pursuant to Rule 12b-1 under the Act, shareholder service or
similar plan.

SECTION 6. EFFECTIVENESS, DURATION; TERMINATION AND
ASSIGNMENT

(b) This Agreement shall continue in effect with respect to a Fund for a
period of one year from its effectiveness and shall continue in effect for
successive one year periods; provided, however, that continuance is specifically
approved at least annually (i) by the Board or by a vote of a majority of the
outstanding voting securities of the Fund and (ii) by a vote of a majority of
Trustees of the Trust who are not parties to this agreement or interested
persons of any such party (other than as Trustees of the Trust); provided
further, however, that if the continuation of this agreement is not approved as
to a Fund, FAS may continue to render to the Fund the services described herein
in the manner and to the extent permitted by the Act and the rules and
regulations thereunder.

(c) This Agreement may be terminated with respect to a Fund at any time,
without the payment of any penalty, (i) by the Board on 60 days' written notice
to FAS or (ii) by FAS on 60 days' written notice to the Trust.

(d) This Agreement and the rights and duties under this Agreement
otherwise shall not be assignable by either FAS or the Trust except by the
specific written consent of the other party. All terms and provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the respective successors and assigns of the parties hereto.

<PAGE>

SECTION 7. ACTIVITIES OF FAS

(a) Except to the extent necessary to perform FAS's obligations under this
Agreement, nothing herein shall be deemed to limit or restrict FAS's right, or
the right of any of FAS's officers, directors or employees who also may be a
trustee, officer or employee of the Trust, or persons otherwise affiliated
persons of the Trust to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
corporation, trust, firm, individual or association.

(b) FAS may subcontract any or all of its functions or responsibilities
pursuant to this Agreement to one or more corporations, trusts, firms,
individuals or associations, which may be affiliates of FAS, who agree to comply
with the terms of this Agreement. FAS may pay those persons for their services,
but no such payment will increase FAS's compensation from the Trust.

SECTION 8. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY

The Trustees of the Trust and the shareholders of each Fund shall not be
liable for any obligations of the Trust or of the Funds under this Agreement,
and FAS agrees that, in asserting any rights or claims under this Agreement, it
shall look only to the assets and property of the Trust or the Fund to which
FAS's rights or claims relate in settlement of such rights or claims, and not to
the Trustees of the Trust or the shareholders of the Funds.

SECTION 9. MISCELLANEOUS

(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto.

(c) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.

(e) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of New York.

<PAGE>

(f) The terms "vote of a majority of the outstanding voting securities,"
"interested person," and "assignment" shall have the meanings ascribed thereto
in the Act.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.

NORWEST ADVANTAGE FUNDS

__________________________
David I. Goldstein
Vice President

FORUM ADMINISTRATIVE SERVICES, LLC

________________________
John Y. Keffer
President

NORWEST ADVANTAGE FUNDS
ADMINISTRATION AGREEMENT

August 1, 1996

APPENDIX A

FEE AS A % OF
THE ANNUAL AVERAGE DAILY
FUNDS OF THE TRUST NET ASSETS OF EACH CLASS OF THE FUND
- ------------------ ------------------------------------

Cash Investment Fund 0.05% of the first $300 million of assets
0.0375% for the next $400 million of assets
0.025% of remaining assets.

U.S. Government Fund 0.05% of the first $300 million of assets
0.0375% for the next $400 million of assets
0.025% of remaining assets.

Treasury Fund 0.05% of the first $300 million of assets
0.0375% for the next $400 million of assets
0.025% of remaining assets.

<PAGE>

Municipal Money Market Fund 0.10%
Ready Cash Investment Fund 0.10%

ValuGrowth Stock Fund 0.10%
Contrarian Stock Fund 0.10%
Small Company Stock Fund 0.10%

Income Fund 0.10%
Total Return Bond Fund 0.10%

Tax-Free Income Fund 0.10%
Colorado Tax-Free Fund 0.10%
Minnesota Tax-Free Fund 0.10%

<PAGE>

FEE AS A % OF
THE ANNUAL AVERAGE DAILY
FUNDS OF THE TRUST NET ASSETS OF EACH CLASS OF THE FUND
- ------------------ ------------------------------------

Diversified Equity Fund 0.05%
Growth Equity Fund 0.05%

Large Company Growth Fund 0.05%
Small Company Growth Fund 0.05%
International Fund 0.05%
Income Equity Fund 0.05%
Index Fund 0.05%

Conservative Balanced Fund 0.05%
Moderate Balanced Fund 0.05%
Growth Balanced Fund 0.05%

Intermediate Government Income Fund 0.05%
Diversified Bond Fund 0.05%
Stable Income Fund 0.05%

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

The Board of Trustees
Norwest Advantage Funds:

We consent to the use of our reports dated July 19, 1996 incorporated by
reference herein and to the references to our Firm under the headings "Financial
Highlights" in the Prospectuses and "Counsel and Auditors" in the Statement of
Additional Information.

/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP

Boston, Massachusetts
September 27, 1996

<PAGE>

[Coopers & Lybrand Logo]

CONSENT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Norwest Advantage Funds:

We hereby consent to the incorporation by reference of our reports dated
July 15, 1996 on our audits of the financial statements and financial
highlights of Core Trust (Delaware), which reports are included in the Funds'
Annual Reports for the year ended May 31, 1996, which are incorporated by
reference in the Statements of Additional Information with respect to Post-
Effective Amendment No. 40 to the Registration Statement on Form N-1A (File No.
33-9645).

/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
September 26, 1996

<PAGE>
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<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
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ENTIRETY TO SUCH REPORT.
</LEGEND>
<CIK> 0000804235
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
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<PAGE>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
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</TABLE>

<S> <C>
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</TABLE>

<S> <C>
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</TABLE>

<S> <C>
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<INVESTMENTS-AT-COST> 288127497
<INVESTMENTS-AT-VALUE> 278150793
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</TABLE>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
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</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
ADVANTAGE FUNDS ANNUAL REPORT DATED MAY 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000804235
<NAME> NORWEST ADVANTAGE FUNDS
<SERIES>
<NUMBER> 112
<NAME> TAX-FREE INCOME FUND

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 312953949
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</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
ADVANTAGE FUNDS ANNUAL REPORT DATED MAY 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000804235
<NAME> NORWEST ADVANTAGE FUNDS
<SERIES>
<NUMBER> 113
<NAME> TAX-FREE INCOME FUND

<S> <C>
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<FISCAL-YEAR-END> MAY-31-1996
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</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Norwest
Advantage Funds Annual Report dated May 31, 1996 and is qualified in its
entirety by reference to such report.
</LEGEND>
<CIK> 0000804235
<NAME> NORWEST ADVANTAGE FUNDS
<SERIES>
<NUMBER> 190
<NAME> SMALL COMPANY GROWTH FUND

<S> <C>
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</TABLE>

<S> <C>
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</TABLE>

<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<S> <C>
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<PAGE>
<ARTICLE> 6
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
ADVANTAGE FUNDS ANNUAL REPORT DATED MAY 31, 1996 AND IS QUALIFIED IN ITS
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<PAGE>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
ADVANTAGE FUNDS ANNUAL REPORT DATED MAY 31, 1996 AND IS QUALIFIED IN ITS
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<PAGE>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTEDC FROM NORWEST
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</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
ADVANTAGE FUNDS ANNUAL REPORT DATED MAY 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY TO SUCH REPORT.
</LEGEND>
<CIK> 0000804235
<NAME> NORWEST ADVANTAGE FUNDS
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<NUMBER> 171
<NAME> SMALL COMPANY STOCK FUND

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</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
ADVANTAGE FUNDS ANNUAL REPORT DATED MAY 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY TO SUCH REPORT.
</LEGEND>
<CIK> 0000804235
<NAME> NORWEST ADVANTAGE FUNDS
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<NUMBER> 172
<NAME> SMALL COMPANY STOCK FUND

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</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
ADVANTAGE FUNDS ANNUAL REPORT DATED MAY 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY TO SUCH REPORT.
</LEGEND>
<CIK> 0000804235
<NAME> NORWEST ADVANTAGE FUNDS
<SERIES>
<NUMBER> 173
<NAME> SMALL COMPANY STOCK FUND

<S> <C>
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</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
ADVANTAGE FUNDS ANNUAL REPORT DATED MAY 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000804235
<NAME> NORWEST ADVANTAGE FUNDS
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<NAME> CONTRARIAN STOCK FUND

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</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
ADVANTAGE FUNDS ANNUAL REPORT DATED MAY 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000804235
<NAME> NORWEST ADVANTAGE FUNDS
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<NUMBER> 182
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</TABLE>

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORWEST
ADVANTAGE FUNDS ANNUAL REPORT DATED MAY 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000804235
<NAME> NORWEST ADVANTAGE FUNDS
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