NORWEST FUNDS /ME/
497, 1997-10-06
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<PAGE>

                                MONEY MARKET FUNDS
- --------------------------------------------------------------------------------


                                   PROSPECTUS


                                 OCTOBER 1, 1997





                               CASH INVESTMENT FUND
                                 ---------------
                              U.S. GOVERNMENT FUND
                                 ---------------
                                  TREASURY FUND
                                 ---------------
                                    MUNICIPAL
                                MONEY MARKET FUND
                                 ---------------
                                   READY CASH
                                 INVESTMENT FUND




                                     [LOGO]



                                NOT FDIC INSURED


<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
<TABLE>
<C>        <S>                                          <C>        <C>
                             TABLE OF CONTENTS
 
       1.  PROSPECTUS SUMMARY.........................          2
                                                                2
           Highlights of the Funds....................
                                                                6
           Expense Information........................
 
       2.  FINANCIAL HIGHLIGHTS.......................          8
 
       3.  INVESTMENT OBJECTIVES AND POLICIES.........         18
                                                               18
           Investment Objectives......................
                                                               18
           Investment Policies........................
                                                               18
           Cash Investment Fund and Ready Cash
           Investment Fund............................
                                                               20
           U.S. Government Fund.......................
                                                               21
           Treasury Fund..............................
                                                               21
           Municipal Money Market Fund................
                                                               25
           Additional Investment Policies and Risk
           Considerations.............................
 
       4.  MANAGEMENT.................................         31
                                                               31
           Investment Advisory Services...............
                                                               32
           Management, Administration and Distribution
           Services...................................
                                                               33
           Shareholder Servicing and Custody..........
                                                               34
           Expenses of the Funds......................
 
       5.  HOW TO BUY SHARES..........................         36
                                                               36
           Minimum Investment.........................
                                                               37
           Purchase Procedures........................
                                                               38
           Account Application........................
                                                               39
           General Information........................
 
       6.  HOW TO SELL SHARES.........................         40
                                                               40
           General Information........................
                                                               41
           Redemption Procedures......................
                                                               41
           Other Redemption Matters...................
 
       7.  OTHER SHAREHOLDER SERVICES.................         43
                                                               43
           Exchanges..................................
                                                               44
           Automatic Investment Plan..................
                                                               44
           Individual Retirement Accounts.............
                                                               44
           Automatic Withdrawal Plan..................
                                                               45
           Checkwriting...............................
                                                               45
           Reopening Accounts.........................
 
       8.  DIVIDENDS AND TAX MATTERS..................         46
                                                               46
           Dividends..................................
                                                               46
           Tax Matters................................
 
       9.  OTHER INFORMATION..........................         49
                                                               49
           Banking Law Matters........................
                                                               49
           Determination of Net Asset Value...........
                                                               49
           Performance Information....................
                                                               50
           The Trust and Its Shares...................
                                                               51
           Core and Gateway Structure.................
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                                OCTOBER 1, 1997
 
This Prospectus offers shares 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 (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.
 
CASH INVESTMENT FUND seeks to achieve its investment objective by investing in
two money market portfolios of another registered, open-end, management
investment company, each of which invests using a similar investment style. (See
"Prospectus Summary" and "Other Information - Core and
Gateway-Registered Trademark- Structure.")
 
READY CASH INVESTMENT FUND seeks to achieve its investment objective by
investing all of its investable assets in a separate portfolio of another
registered, open-end, management investment company with the same investment
objective. (See "Prospectus Summary" and "Other Information - Core and Gateway
Structure.")
 
U.S. GOVERNMENT FUND, TREASURY FUND and MUNICIPAL MONEY MARKET FUND each seeks
to achieve its investment objective by investing directly in portfolio
securities.
 
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, 1997, as may be amended from
time to time, which is available for reference on the SEC's Web Site (http://
www.sec.gov) and 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) 879-0001. Investors should read this Prospectus
and retain it for future reference.
 
NORWEST ADVANTAGE FUNDS IS A FAMILY OF MUTUAL FUNDS. THE SHARES OF MUTUAL FUNDS
ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL
RESERVE SYSTEM OR ANY OTHER GOVERNMENT AGENCY. THE SHARES ALSO ARE NOT
OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED OR GUARANTEED BY NORWEST BANK
MINNESOTA, N.A. OR ANY OTHER BANK OR BANK AFFILIATE.
 
AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. 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
<PAGE>

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

CASH INVESTMENT FUND seeks to provide high current income to the extent 
consistent with the preservation of capital and the maintenance of liquidity. 
This objective is pursued by investing in a broad spectrum of high quality 
money market instruments of United States and foreign issuers.

READY CASH INVESTMENT FUND seeks to provide high current income to the extent 
consistent with the preservation of capital and the maintenance of liquidity. 
This objective is pursued by investing in a broad spectrum of high quality 
money market instruments of United States and foreign issuers.

U.S. GOVERNMENT FUND seeks to provide high current income to the extent 
consistent with the preservation of capital and the maintenance of liquidity. 
 This objective is pursued by investing primarily in securities that are 
issued or guaranteed by the U.S. Government, its instrumentalities or 
agencies.

TREASURY FUND seeks to provide high current income to the extent consistent 
with the preservation of capital and the maintenance of liquidity.  This 
objective is pursued by investing solely in obligations that are issued or 
guaranteed by the United States Treasury. 

MUNICIPAL MONEY MARKET FUND seeks to provide high current income which is 
exempt from federal income tax to the extent consistent with the preservation 
of capital and the maintenance of liquidity. This objective is pursued by 
investing primarily in tax-exempt municipal securities.

FUND STRUCTURE 

CASH INVESTMENT FUND seeks to achieve its investment objective 
by investing all of its investable assets evenly in two portfolios (each a 
"Core Portfolio") of Core Trust (Delaware) ("Core Trust"), a registered, 
open-end, management investment company.  These Portfolios, Money Market 
Portfolio and Prime Money Market Portfolio, have identical investment 
objectives and investment policies except that Prime Money Market Portfolio 
seeks to maintain a rating from a nationally recognized statistical rating 
organization ("NRSRO").  Accordingly, the Fund's investment experience will 
correspond directly with the investment experience of the two Core 
Portfolios.  (See "Other Information - Core and Gateway Structure.")

READY CASH INVESTMENT FUND seeks to achieve its investment objective by 
investing all of its investable assets in Money Market Portfolio (a "Core 
Portfolio"), a separate portfolio of Core Trust (Delaware) ("Core Trust"), a 
registered, open-end, management investment company, that has the same 

2 

<PAGE>

investment objective and substantially similar investment policies.  
Accordingly, the Fund's investment experience will correspond directly with 
the investment experience of Money Market Portfolio.  (See "Other Information 
- - Core and Gateway Structure.")

U.S. GOVERNMENT FUND, TREASURY FUND and MUNICIPAL MONEY MARKET FUND each seek 
to achieve its investment objective by investing directly in portfolio 
securities.

INVESTMENT ADVISER 

NORWEST INVESTMENT MANAGEMENT, Inc. ("Norwest"), a subsidiary of Norwest Bank 
Minnesota, N.A. ("Norwest Bank"), is the Funds' investment adviser.  Norwest 
also is the investment adviser of each Core Portfolio. Norwest provides 
investment advice to various institutions, pension plans and other accounts 
and, as of August 31, 1997, with its affiliates, managed over $22 billion in 
assets.  (See "Management - Investment Advisory Services.")

Norwest Bank serves as transfer agent, dividend disbursing agent and 
custodian of the Trust and serves as the custodian of each Core Portfolio. 
(See "Management - Shareholder Servicing and Custody" and "- Management, 
Administration and Distribution Services.")

Cash Investment Fund and Ready Cash Investment Fund each incur investment 
advisory fees indirectly through the investment advisory fees paid by their 
respective Core Portfolios; Norwest is paid an advisory fee directly by U.S. 
Government Fund, Treasury Fund and Municipal Money Market Fund.

FUND MANAGEMENT AND ADMINISTRATION 

The manager of the Trust and distributor of its shares is Forum Financial 
Services, Inc. ("Forum"), a registered broker-dealer and member of the 
National Association of Securities Dealers, Inc. Forum Administrative 
Services, LLC ("FAS") provides administrative services to the Funds and also 
serves as administrator of each Core Portfolio. (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 two classes of 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.")

                                                                              3

<PAGE>

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.")

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 AND DISTRIBUTIONS 

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.")

4

<PAGE>

CERTAIN INVESTMENT CONSIDERATIONS AND RISK FACTORS 

There can be no assurance that any Fund or Core Portfolio will achieve its 
investment objective or maintain a stable net asset value of $1.00 per share. 
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."

By pooling their assets in a Core Portfolio with other institutional 
investors, CASH INVESTMENT FUND and READY CASH INVESTMENT FUND each may be 
able to achieve certain efficiencies and economies of scale 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 and Gateway Structure.")

                                                                              5

<PAGE>

EXPENSE INFORMATION

The purpose of the Annual Fund Operating Expenses table in this section is to 
assist investors in understanding the expenses that an investor in Shares of 
a Fund will bear directly or indirectly.

          ANNUAL FUND OPERATING EXPENSES(1)
    (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)

<TABLE>
<CAPTION>
                                                                                                                      READY CASH
                                                                                                   MUNICIPAL          INVESTMENT
                                                                                              MONEY MARKET FUND(3)     FUND(3)
                                                              CASH        U.S.               -----------------------  ----------
                                                           INVESTMENT  GOVERNMENT  TREASURY  INVESTOR  INSTITUTIONAL   INVESTOR
                                                            FUND (3)      FUND       FUND     SHARES      SHARES        SHARES
                                                           ---------------------------------------------------------------------
<S>                                                        <C>         <C>         <C>       <C>       <C>            <C>
Investment Advisory Fees (after fee waviers)(2). . . . . .     N/A        0.14%      0.16%     0.34%       0.34%          N/A
Rule 12b-1 Fees  . . . . . . . . . . . . . . . . . . . . .     N/A         N/A        N/A       N/A         N/A           N/A
Other Expenses (after fee waivers and reimbursements). . .    0.22%       0.36%      0.30%     0.31%       0.11%         0.41%
Investment Advisory Fees - Core Portfolio(s)(2). . . . . .    0.22%        N/A        N/A       N/A         N/A          0.34%
Other Expenses - Core Portfolio(s)(after reimbursements) .    0.04%        N/A        N/A       N/A         N/A          0.07%
                                                            --------------------------------------------------------------------
Total Operating Expenses(4). . . . . . . . . . . . . . . .    0.48%       0.50%      0.46%     0.65%       0.45%         0.82%

</TABLE>

(1)  For a further description of the various expenses associated with 
     investing in the Funds, see "Management." The table is based  on expenses 
     incurred during the Funds' most recent fiscal year ended May 31, 1997, 
     restated to reflect current fees. Cash Investment  Fund and Ready Cash 
     Investment Fund indirectly bear their pro rata portion of the expenses of 
     the Core Portfolios in which they  invest.

(2)  For Cash Investment Fund and Ready Cash Investment Fund, "Investment 
     Advisory Fees - Core Portfolio(s)" reflects the  investment advisory fees 
     incurred by the Core Portfolio(s) in which the Fund invests. Absent 
     waivers, "Investment Advisory Fees" for  Municipal Money Market Fund 
     Investor Shares and Institutional Shares would be 0.34%. Absent waivers, 
     "Investment Advisory Fees - Core Portfolio(s)" for Cash Investment Fund 
     would be 0.24%.

(3)  Norwest and Forum have agreed to waive their respective fees or 
     reimburse expenses in order to maintain Cash Investment Fund's  total 
     operating expenses through May 31, 1999 at 0.48%. In addition, Norwest has
     agreed to waive its investment advisory fee for  Money Market Portfolio 
     through May 31, 1999 to the extent that fee exceeds an annual rate of 0.10%
     of the Portfolio's average daily  net assets. Norwest and Forum have agreed
     to waive their respective fees or reimburse expenses in order to maintain 
     Ready Cash  Investment Fund Investor Shares' total operating expenses 
     through May 31, 1998 at or below 0.82%.

(4)  Absent expense reimbursements and fee waivers, the expenses of Cash 
     Investment Fund, U.S. Government Fund, Treasury Fund,  Municipal Money 
     Market Fund Investor Shares and Institutional Shares and Ready Cash 
     Investment Fund Investor Shares, would be:  "Other Expenses," 0.26%, 
     0.38%, 0.39%, 0.53%, 0.25% and 0.42%, respectively; "Other Expenses - Core 
     Portfolio(s)," 0.07%, N/A, N/A,  N/A, N/A and 0.07%, respectively; and 
     "Total Operating Expenses," 0.57%, 0.52%, 0.55%, 0.87%, 0.59% and 0.83%, 
     respectively. Except  as otherwise noted, expense reimbursements and fee 
     waivers are voluntary and may be reduced or eliminated at any time.


EXAMPLE 

The following Hypothetical Expense Example indicates the dollar amount of 
expenses that an investor would pay, assuming a $1,000 investment in a Fund's 
Shares, the expenses listed in the "Annual Fund Operating Expenses" table, 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. 
The 5% annual return is not predictive of and does not represent the Funds' 
projected returns; rather, it is required by government regulation.

                HYPOTHETICAL EXPENSE EXAMPLE

<TABLE>
<CAPTION>
                                 1 YEAR   3 YEARS   5 YEARS    10 YEARS
                                 --------------------------------------
<S>                              <C>      <C>       <C>        <C>
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
  Investor Shares . . . . . . .    7         21        36         81
  Institutional Shares. . . . .    5         14        25         57
READY CASH INVESTMENT FUND
  Investor Shares . . . . . . .    8         26        46        101

</TABLE>


6                                                                             7
<PAGE>

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 periods ended 
May 31, 1994, and thereafter was audited by KPMG Peat Marwick LLP, 
independent auditors. Information for prior periods was audited by other 
independent auditors. Each Fund's financial statements for the fiscal year 
ended May 31, 1997, and independent auditors' report thereon are contained in 
the Fund's Annual Report. These financial statements are incorporated by 
reference into the SAI. The Annual Reports may be obtained by shareholders 
upon request without charge.

                        CASH INVESTMENT FUND
<TABLE>
<CAPTION>
                                                                                DIVIDENDS        ENDING
                                                 BEGINNING NET       NET         FROM NET       NET ASSET
                                                  ASSET VALUE     INVESTMENT    INVESTMENT      VALUE PER
                                                   PER SHARE        INCOME        INCOME          SHARE
- ---------------------------------------------------------------------------------------------------------
<S>                                              <C>              <C>           <C>             <C>
June 1, 1996 to May 31, 1997                         $1.00          $0.051        ($0.051)        $1.00
June 1, 1995 to May 31, 1996                         $1.00          $0.054        ($0.054)        $1.00
June 1, 1994 to May 31, 1995                         $1.00          $0.049        ($0.049)        $1.00
June 1, 1993 to May 31, 1994                         $1.00          $0.031        ($0.031)        $1.00
June 1, 1992 to May 31, 1993                         $1.00          $0.033        ($0.033)        $1.00
December 1, 1991 to May 31, 1992                     $1.00          $0.021        ($0.021)        $1.00
December 1, 1990 to November 30, 1991                $1.00          $0.061        ($0.061)        $1.00
December 1, 1989 to November 30, 1990                $1.00          $0.079        ($0.079)        $1.00
December 1, 1988 to November 30, 1989                $1.00          $0.088        ($0.088)        $1.00
December 1, 1987 to November 30, 1988                $1.00          $0.071        ($0.071)        $1.00
October 14, 1987 to November 30, 1987                $1.00          $0.009        ($0.009)        $1.00
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
                                                           RATIO TO AVERAGE NET ASSETS
                                                   ------------------------------------------
                                                      NET                                                   NET ASSETS AT
                                                   INVESTMENT        NET            GROSS         TOTAL     END OF PERIOD
                                                     INCOME        EXPENSES       EXPENSES(a)     RETURN    (000'S OMITTED)
- ---------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>             <C>            <C>             <C>       <C>
June 1, 1996 to May 31, 1997                          5.07%          0.48%          0.49%          5.21%       $2,147,894
June 1, 1995 to May 31, 1996                          5.36%          0.48%          0.49%          5.50%       $1,739,549
June 1, 1994 to May 31, 1995                          4.87%          0.48%          0.50%          4.96%       $1,464,304
June 1, 1993 to May 31, 1994                          3.11%          0.49%          0.49%          3.16%       $1,381,402
June 1, 1992 to May 31, 1993                          3.29%          0.50%          0.51%          3.36%       $1,944,948
December 1, 1991 to May 31, 1992                      4.23%(b)       0.50%(b)       0.56%(b)       4.29%(b)    $1,292,196
December 1, 1990 to November 30, 1991                 6.11%          0.51%          0.54%          6.31%       $1,004,979
December 1, 1989 to November 30, 1990                 7.92%          0.45%          0.57%          8.22%         $747,744
December 1, 1988 to November 30, 1989                 8.81%          0.45%          0.64%          9.22%         $662,698
December 1, 1987 to November 30, 1988                 7.00%          0.43%          0.74%          7.32%         $316,349
October 14, 1987 to November 30, 1987                 7.16%(b)       0.45%(b)       1.09%(b)       7.40%(b)       $53,951
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  The ratio of Gross Expenses to Average Net Assets does not reflect fee 
     waivers or expense reimbursements.  

(b)  Annualized.

8                                                                             9

<PAGE>

                              U.S. GOVERNMENT FUND

<TABLE>
<CAPTION>
                                                                                DIVIDENDS        ENDING
                                                 BEGINNING NET       NET         FROM NET       NET ASSET
                                                  ASSET VALUE     INVESTMENT    INVESTMENT      VALUE PER
                                                   PER SHARE        INCOME        INCOME          SHARE
- ---------------------------------------------------------------------------------------------------------
<S>                                              <C>              <C>           <C>             <C>
June 1, 1996 to May 31, 1997                         $1.00          $0.049        ($0.049)        $1.00
June 1, 1995 to May 31, 1996                         $1.00          $0.052        ($0.052)        $1.00
June 1, 1994 to May 31, 1995                         $1.00          $0.047        ($0.047)        $1.00
June 1, 1993 to May 31, 1994                         $1.00          $0.030        ($0.030)        $1.00
June 1, 1992 to May 31, 1993                         $1.00          $0.030        ($0.030)        $1.00
December 1, 1991 to May 31, 1992                     $1.00          $0.020        ($0.020)        $1.00
December 1, 1990 to November 30, 1991                $1.00          $0.058        ($0.058)        $1.00
December 1, 1989 to November 30, 1990                $1.00          $0.077        ($0.077)        $1.00
December 1, 1988 to November 30, 1989                $1.00          $0.085        ($0.085)        $1.00
December 1, 1987 to November 30, 1988                $1.00          $0.069        ($0.069)        $1.00
November 16, 1987 to November 30, 1987               $1.00          $0.003        ($0.003)        $1.00
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
                                                           RATIO TO AVERAGE NET ASSETS
                                                   ------------------------------------------
                                                      NET                                                   NET ASSETS AT
                                                   INVESTMENT        NET            GROSS         TOTAL     END OF PERIOD
                                                     INCOME        EXPENSES       EXPENSES(a)     RETURN    (000'S OMITTED)
- ---------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>             <C>            <C>             <C>       <C>
June 1, 1996 to May 31, 1997                          4.91%          0.49%          0.49%          5.04%       $1,912,574
June 1, 1995 to May 31, 1996                          5.13%          0.50%          0.51%          5.27%       $1,649,721
June 1, 1994 to May 31, 1995                          4.68%          0.50%          0.52%          4.81%       $1,159,421
June 1, 1993 to May 31, 1994                          3.02%          0.47%          0.53%          3.07%       $1,091,141
June 1, 1992 to May 31, 1993                          3.00%          0.45%          0.57%          3.06%         $903,274
December 1, 1991 to May 31, 1992                      3.99%(b)       0.45%(b)       0.61%(b)       4.07%(b)      $623,685
December 1, 1990 to November 30, 1991                 5.84%          0.45%          0.60%          6.00%         $469,487
December 1, 1989 to November 30, 1990                 7.66%          0.45%          0.61%          7.94%         $500,794
December 1, 1988 to November 30, 1989                 8.51%          0.45%          0.65%          8.87%         $394,137
December 1, 1987 to November 30, 1988                 6.87%(b)       0.42%(b)       0.73%          7.13%(b)      $254,104
November 16, 1987 to November 30, 1987                6.89%(b)       0.00%(b)       2.94%(b)       7.35%(b)        $4,343
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  The ratio of Gross Expenses to Average Net Assets does not reflect fee 
     waivers or expense reimbursements.  

(b)  Annualized.


10                                                                           11
<PAGE>

                            TREASURY FUND
<TABLE>
<CAPTION>
                                                                                DIVIDENDS        ENDING
                                                 BEGINNING NET       NET         FROM NET       NET ASSET
                                                  ASSET VALUE     INVESTMENT    INVESTMENT      VALUE PER
                                                   PER SHARE        INCOME        INCOME          SHARE
- ---------------------------------------------------------------------------------------------------------
<S>                                              <C>              <C>           <C>             <C>
June 1, 1996 to May 31, 1997                         $1.00          $0.047        ($0.047)        $1.00
June 1, 1995 to May 31, 1996                         $1.00          $0.050        ($0.050)        $1.00
June 1, 1994 to May 31, 1995                         $1.00          $0.046        ($0.046)        $1.00
June 1, 1993 to May 31, 1994                         $1.00          $0.028        ($0.028)        $1.00
June 1, 1992 to May 31, 1993                         $1.00          $0.029        ($0.029)        $1.00
December 1, 1991 to May 31, 1992                     $1.00          $0.020        ($0.020)        $1.00
December 3, 1990 to November 30, 1991                $1.00          $0.058        ($0.058)        $1.00
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
                                                           RATIO TO AVERAGE NET ASSETS
                                                   ------------------------------------------
                                                      NET                                                   NET ASSETS AT
                                                   INVESTMENT        NET            GROSS         TOTAL     END OF PERIOD
                                                     INCOME        EXPENSES       EXPENSES(a)     RETURN    (000'S OMITTED)
- ---------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>             <C>            <C>             <C>       <C>
June 1, 1996 to May 31, 1997                          4.74%          0.46%          0.53%          4.87%       $1,003,697
June 1, 1995 to May 31, 1996                          4.91%          0.46%          0.56%          5.04%         $802,270
June 1, 1994 to May 31, 1995                          4.62%          0.46%          0.57%          4.65%         $661,098
June 1, 1993 to May 31, 1994                          2.81%          0.46%          0.58%          2.83%         $526,483
June 1, 1992 to May 31, 1993                          2.93%          0.47%          0.58%          2.98%         $384,751
December 1, 1991 to May 31, 1992                      4.01%(b)       0.47%(b)       0.59%(b)       4.07%(b)      $374,492
December 3, 1990 to November 30, 1991                 5.62%(b)       0.31%(b)       0.66%(b)       6.02%(b)      $354,200
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  The ratio of Gross Expenses to Average Net Assets does not reflect fee
     waivers or expense reimbursements. 

(b)  Annualized.


12                                                                           13

<PAGE>

                         MUNICIPAL MONEY MARKET FUND
<TABLE>
<CAPTION>
                                                        NET REALIZED
                                                       AND UNREALIZED                  DIVIDENDS                        ENDING
                                        BEGINNING NET        NET         GAIN           FROM NET       CAPITAL        NET ASSET
                                         ASSET VALUE     INVESTMENT    (LOSS) ON       INVESTMENT    CONTRIBUTION      VALUE PER
                                          PER SHARE        INCOME     INVESTMENTS        INCOME      FROM ADVISER        SHARE
- --------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>            <C>              <C>           <C>              <C>
INSTITUTIONAL SHARES
June 1, 1996 to May 31, 1997                 $1.00         $0.032             --        ($0.032)              --          $1.00
June 1, 1995 to May 31, 1996                 $1.00         $0.035             --        ($0.035)              --          $1.00
June 1, 1994 to May 31, 1995                 $1.00         $0.033        ($0.004)       ($0.033)          $0.004          $1.00
August 3, 1993 to May 31, 1994(a)            $1.00         $0.019             --        ($0.019)              --          $1.00
INVESTOR SHARES
June 1, 1996 to May 31, 1997                 $1.00         $0.030             --        ($0.030)              --          $1.00
June 1, 1995 to May 31, 1996                 $1.00         $0.033             --        ($0.033)              --          $1.00
June 1, 1994 to May 31, 1995                 $1.00         $0.031        ($0.004)       ($0.031)          $0.004          $1.00
June 1, 1993 to May 31, 1994                 $1.00         $0.021             --        ($0.021)              --          $1.00
June 1, 1992 to May 31, 1993                 $1.00         $0.021             --        ($0.021)              --          $1.00
December 1, 1991 to May 31, 1992             $1.00         $0.014             --        ($0.014)              --          $1.00
December 1, 1990 to November 30, 1991        $1.00         $0.042             --        ($0.042)              --          $1.00
December 1, 1989 to November 30, 1990        $1.00         $0.053             --        ($0.053)              --          $1.00
December 1, 1988 to November 30, 1989        $1.00         $0.058             --        ($0.058)              --          $1.00
January 7, 1988 to November 30, 1988(a)      $1.00         $0.042             --        ($0.042)              --          $1.00
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                 RATIO TO AVERAGE NET ASSETS
                                         ------------------------------------------
                                            NET                                                       NET ASSETS AT
                                         INVESTMENT          NET           GROSS          TOTAL        END OF PERIOD
                                           INCOME         EXPENSES      EXPENSES(b)      RETURN       (000'S OMITTED)
- ---------------------------------------------------------------------------------------------------------------------
<S>                                       <C>            <C>            <C>            <C>            <C>            
INSTITUTIONAL SHARES
June 1, 1996 to May 31, 1997                 3.21%          0.45%          0.70%          3.28%            $635,655
June 1, 1995 to May 31, 1996                 3.41%          0.45%          0.72%          3.52%            $592,436
June 1, 1994 to May 31, 1995                 3.37%          0.45%          0.74%          3.33%(d)         $278,953
August 3, 1993 to May 31, 1994(a)            2.33%(c)       0.45%(c)       0.77%(c)       2.34%(c)         $190,356
INVESTOR SHARES
June 1, 1996 to May 31, 1997                 3.01%          0.65%          0.87%          3.08%             $54,616
June 1, 1995 to May 31, 1996                 3.25%          0.65%          0.88%          3.31%             $57,021
June 1, 1994 to May 31, 1995                 3.10%          0.65%          0.93%          3.13%(d)          $47,424
June 1, 1993 to May 31, 1994                 2.03%          0.65%          0.99%          2.09%             $33,554
June 1, 1992 to May 31, 1993                 2.13%          0.65%          0.97%          2.18%             $75,521
December 1, 1991 to May 31, 1992             2.81%(c)       0.63%(c)       0.96%(c)       2.89%(c)          $82,678
December 1, 1990 to November 30, 1991        4.10%          0.64%          1.08%          4.26%             $66,327
December 1, 1989 to November 30, 1990        5.34%          0.64%          1.16%          5.48%             $29,801
December 1, 1988 to November 30, 1989        5.78%          0.62%          1.15%          5.94%             $18,639
January 7, 1988 to November 30, 1988(a)      4.64%(c)       0.60%(c)       1.20%(c)       4.76%(c)           $8,963
- ---------------------------------------------------------------------------------------------------------------------
</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 Institituional Shares on August 3, 1993.

(b)  The ratio of Gross Expenses to Average Net Assets does not reflect fee 
     waivers or expense reimbursements.

(c)  Annualized.

(d)  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.


14                                                                           15

<PAGE>

                           READY CASH INVESTMENT FUND
<TABLE>
<CAPTION>
                                                                       DIVIDENDS          ENDING
                                         BEGINNING NET      NET         FROM NET        NET ASSET
                                          ASSET VALUE    INVESTMENT    INVESTMENT       VALUE PER
                                           PER SHARE       INCOME        INCOME           SHARE
- -------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>          <C>                <C>
INVESTOR SHARES
June 1, 1996 to May 31, 1997                 $1.00         $0.047        ($0.047)         $1.00
June 1, 1995 to May 31, 1996                 $1.00         $0.051        ($0.051)         $1.00
June 1, 1994 to May 31, 1995                 $1.00         $0.045        ($0.045)         $1.00
June 1, 1993 to May 31, 1994                 $1.00         $0.027        ($0.027)         $1.00
June 1, 1992 to May 31, 1993                 $1.00         $0.030        ($0.030)         $1.00
December 1, 1991 to May 31, 1992             $1.00         $0.020        ($0.020)         $1.00
December 1, 1990 to November 30, 1991        $1.00         $0.058        ($0.058)         $1.00
December 1, 1989 to November 30, 1990        $1.00         $0.076        ($0.076)         $1.00
December 1, 1988 to November 30, 1989        $1.00         $0.085        ($0.085)         $1.00
January 20, 1988 to November 30, 1988(a)     $1.00         $0.059        ($0.059)         $1.00
- -------------------------------------------------------------------------------------------------
<CAPTION>
                                                 RATIO TO AVERAGE NET ASSETS
                                          -----------------------------------------
                                             NET                                                       NET ASSETS AT
                                          INVESTMENT        NET           GROSS          TOTAL         END OF PERIOD
                                            INCOME        EXPENSES      EXPENSES(b)      RETURN       (000'S OMITTED)
- ---------------------------------------------------------------------------------------------------------------------
<S>                                       <C>             <C>           <C>              <C>
INVESTOR SHARES
June 1, 1996 to May 31, 1997                 4.75%          0.82%          0.83%          4.87%          $576,011
June 1, 1995 to May 31, 1996                 5.02%          0.82%          0.87%          5.17%          $473,879
June 1, 1994 to May 31, 1995                 4.64%          0.82%          0.91%          4.62%          $268,603
June 1, 1993 to May 31, 1994                 2.70%          0.82%          0.92%          2.74%          $164,138
June 1, 1992 to May 31, 1993                 3.04%          0.82%          0.94%          3.08%          $162,585
December 1, 1991 to May 31, 1992             4.01%(c)       0.82%(c)       0.93%(c)       4.05%(c)       $176,378
December 1, 1990 to November 30, 1991        5.81%          0.82%          0.96%          5.98%          $183,775
December 1, 1989 to November 30, 1990        7.56%          0.82%          0.97%          7.83%          $166,911
December 1, 1988 to November 30, 1989        8.51%          0.81%          0.99%          8.86%          $144,117
January 20, 1988 to November 30, 1988(a)     7.11%(c)       0.77%(c)       1.13%(c)       6.97%(c)        $46,736
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

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

(b)  The ratio of Gross Expenses to Average Net Assets does not reflect fee
     waivers or expense reimbursements.  

(c)  Annualized.


16                                                                           17
<PAGE>
- ----
- ----
 
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 condition, 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 and Tax Matters.")
 
There can be no assurance that any Fund or any Core Portfolio will achieve its
investment objective or maintain a stable net asset value of $1.00 per share.
 
INVESTMENT POLICIES
 
CASH INVESTMENT FUND AND
READY CASH INVESTMENT FUND
 
CASH INVESTMENT FUND currently pursues its investment objective by investing
equally in two Core Portfolios - Money Market Portfolio and Prime Money Market
Portfolio. READY CASH INVESTMENT FUND currently pursues its investment objective
by investing all of its investable assets in Prime Money Market Portfolio. Cash
Investment Fund, Ready Cash Investment Fund, Money Market Portfolio and Prime
Money Market Portfolio each have the same investment objective and investment
policies, except that Ready Cash Investment Fund and Prime Money Market
Portfolio seek to maintain a rating from at least one NRSRO. Accordingly, Ready
Cash Investment Fund and Prime Money Market Portfolio are limited in the type
and amount of permissible securities (as described below) which they may
purchase. Each Core Portfolio invests in a broad spectrum of high quality money
market instruments of United States and foreign issuers.
 
Although the following discusses the investment policies of Money Market
Portfolio and Prime Money Market Portfolio, it applies equally to the Funds. It
is anticipated that the percentage of Cash Investment Fund's assets invested in
each Core Portfolio will not change.
 
OBLIGATIONS OF FINANCIAL INSTITUTIONS. The Portfolios 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,
 
                                       18
<PAGE>
- ----
- ----
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. The Portfolios 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.
Investments in foreign bank obligations are limited to banks, branches and
subsidiaries located in countries which Norwest 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. 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 Portfolios but may be subject to early withdrawal
penalties which could reduce a Portfolio'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.
 
Each Portfolio 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 Portfolio 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
Portfolios 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. Norwest may invest in U.S. dollar denominated
obligations issued or guaranteed by the governments of countries which Norwest
believes do not present undue risk or of those countries' political
subdivisions, agencies or instrumentalities. The Portfolios 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 Portfolios 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.")
 
                                                                  19
<PAGE>
- ----
- ----
 
CORPORATE DEBT SECURITIES. The Portfolios 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 Portfolios
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, Norwest will determine whether each such
investment is liquid.
 
PARTICIPATION INTERESTS. The Portfolios may purchase from financial institutions
participations in loans or securities. A participation interest gives a
Portfolio an undivided interest in the loan or security in the proportion that
the Portfolio's interest bears to the total principal amount of the security.
For certain participation interests a Portfolio will have the right to demand
payment, on not more than seven days' notice, for all or a part of the
Portfolio's participation interest. The Portfolios 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 Portfolios'
investment portfolio. Neither Portfolio will invest more than 10% of its total
assets in participation interests in which the Portfolio does not have demand
rights.
 
FOREIGN INSTRUMENTS. The Portfolios' 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.
Norwest considers these factors when making investments in foreign instruments.
The Portfolios 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 Portfolio 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
 
                                       20
<PAGE>
- ----
- ----
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.
 
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
 
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
 
                                                                  21
<PAGE>
- ----
- ----
the right, however, to invest up to 20% of its assets in securities the interest
income on which is subject to federal income. 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 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)).
 
                                       22
<PAGE>
- ----
- ----
 
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 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
 
                                                                  23
<PAGE>
- ----
- ----
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.") 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 Norwest 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 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
 
                                       24
<PAGE>
- ----
- ----
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
income taxation, which include: (1) short-term U.S. Government Securities; (2)
certificates of deposit, Bankers' acceptances and interest-bearing savings
deposits; (3) commercial paper; (4) repurchase agreements covering any of the
preceding securities; and (5) to the extent permitted by the Investment Company
Act of 1940, money market mutual funds. For a description of the securities
listed in items (1) through (3), (see "Investment Objectives and Policies -
Investment Policies - Cash Investment Fund and Ready Cash Investment Fund.")
 
ADDITIONAL INVESTMENT POLICIES
AND RISK CONSIDERATIONS
 
Each Fund's (and each Core Portfolio's) investment objective and all investment
policies of the Funds (and 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 that Fund (or Core Portfolio). A majority of
the 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
 
                                                                  25
<PAGE>
- ----
- ----
more than 50% of the outstanding shares. Except as otherwise indicated,
investment policies of the Funds (and Core Portfolios) are not deemed to be
fundamental and may be changed by the Board of Trustees of the Trust (the
"Board") or the board of trustees of Core Trust (the "Core Board"), as
applicable, without shareholder approval.
 
Unless otherwise indicated, the discussion below of the investment policies of
the Funds refers, in the case of Cash Investment Fund and Ready Cash Investment
Fund, to the investment policies of their respective Core Portfolios. 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. Each Fund has reserved the right to invest
all or a portion of its assets in one or more other investment companies.
 
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. Norwest
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.
 
As part of its regular banking operations, Norwest Bank 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.
 
GENERAL MONEY MARKET FUND GUIDELINES. Each Fund invests only in high quality,
short-term money market instruments that are determined by Norwest, pursuant to
procedures adopted by the Board or Core Board, as applicable, 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
 
                                       26
<PAGE>
- ----
- ----
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 or Core Board, the
Norwest determines and monitors the liquidity of portfolio securities.
 
As used herein, high quality instruments include those that: (1) 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 NRSROs or, if
only one NRSRO has issued a rating, by that NRSRO; or (2) are otherwise unrated
and determined by Norwest, pursuant to guidelines adopted by the Board and Core
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.
 
                                                                  27
<PAGE>
- ----
- ----
 
Although each Fund only invests in high quality money market instruments, an
investment in a 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.
 
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
 
                                       28
<PAGE>
- ----
- ----
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.
 
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. Norwest 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
 
                                                                  29
<PAGE>
- ----
- ----
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. 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 Norwest 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.
 
                                       30
<PAGE>
- ----
- ----
 
                                                                  4.  MANAGEMENT
 
The business of the Trust is managed under the direction of the Board of
Trustees, and the business of each Core Portfolio is managed under the direction
of the Core 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 eight persons.
 
INVESTMENT ADVISORY SERVICES
 
NORWEST INVESTMENT MANAGEMENT. Subject to the general supervision of the Board,
Norwest Investment Management, Inc. makes investment decisions for the Funds and
Core Portfolios and continuously reviews, supervises and administers each Fund's
and Core Portfolio's investment program. Norwest provides its investment
advisory services indirectly to Cash Investment Fund and Ready Cash Investment
Fund through its investment advisory services to the Core Portfolios. Norwest,
which is located at Norwest Center, Sixth Street and Marquette, Minneapolis,
Minnesota 55479, is an indirect subsidiary of Norwest Corporation, a multi-bank
holding company that was incorporated under the laws of Delaware in 1929. As of
June 30, 1997, Norwest Corporation had assets of $83.6 billion which made it the
11th largest bank holding company in the United States. As of June 30, 1997,
Norwest Corporation and its affiliates managed assets with a value of
approximately $52.9 billion.
 
PORTFOLIO MANAGERS. Many persons on the advisory staff of Norwest contribute to
the investment services provided to the Funds and the Core Portfolios. The
following persons, however, are primarily responsible for day-to-day management
and, unless otherwise noted, have been since the inception of the Fund or
Portfolio. For periods prior to June 1, 1997, all persons associated with
Norwest served in their current positions with Norwest Bank. Prior to that date
Norwest Bank was each Fund's investment adviser. In addition to their
responsibilities as listed below, each of the portfolio managers may perform
portfolio management and other duties for Norwest Bank.
 
David D. Sylvester (all Funds) and Laurie R. White (all Funds except Municipal
Money Market Fund). Mr. Sylvester has been associated with Norwest since 1979,
and as a Vice President and Senior Portfolio Manager since 1985. 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. Ms. White began serving
as a portfolio manager in 1991.
 
                                                                  31
<PAGE>
- ----
- ----
 
ADVISORY FEES. For its services, Norwest receives investment advisory fees from
the Funds (or to the extent a Fund invests in a Core Portfolio, from that Core
Portfolio) at the following annual rates of the Fund's or Portfolio's average
daily net assets.
 
<TABLE>
<CAPTION>
 
FUND                                              INVESTMENT ADVISORY FEE
- -----------------------------------------------------------------------------
<S>                                       <C>
Cash Investment Fund
  (Money Market Portfolio)..............  0.20% (first $300 million of assets)
                                          0.16% (next $400 million of assets)
                                          0.12% (remaining assets)
  (Prime Money Market Portfolio)........  0.40% (first $300 million of assets)
                                          0.36% (next $400 million of assets)
                                          0.32% (remaining assets)
Ready Cash Investment Fund
  (Prime Money Market Portfolio)........  0.40% (first $300 million of assets)
                                          0.36% (next $400 million of assets)
                                          0.32% (remaining assets)
U.S. Government Fund and Treasury
  Fund..................................  0.20% (first $300 million of assets)
                                          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)
</TABLE>
 
Each of Cash Investment Fund and Ready Cash Investment Fund may withdraw its
assets from its corresponding Core Portfolio(s) at any time if the Board
determines that it is in the best interests of the Fund to do so. (See "Other
Information - Core and Gateway Structure.") Accordingly, each of these Funds has
retained Norwest as its investment adviser. Under these "dormant" investment
advisory agreements, Norwest does not receive any investment advisory fees with
respect to a Fund as long as the Fund remains completely invested in its
respective Core Portfolio(s). In the event that Cash Investment Fund were to
withdraw its assets from its respective Core Portfolios, Norwest would receive
an investment advisory fee at the same rate as it does for Money Market
Portfolio. In the event that Ready Cash Investment Fund were to withdraw its
assets from Prime Money Market Portfolio, Norwest would receive an investment
advisory fee at the same rate as it does for Prime Money Market Portfolio.
 
MANAGEMENT, ADMINISTRATION AND
DISTRIBUTION SERVICES
 
As manager, Forum supervises the overall management of the Trust (including the
Trust's receipt of services for which the Trust is obligated to pay) other than
investment advisory services. In this capacity Forum provides the Trust with
general office facilities, provides persons satisfactory to the Board to
 
                                       32
<PAGE>
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serve as officers of the Trust and oversees the performance of administrative
and professional services rendered to the Funds by others. FAS is responsible
for performing certain administrative services necessary for the Trust's
operations with respect to each Fund: (1) preparing and printing updates of the
Trust's registration statement and prospectuses to its shareholders, the SEC and
state securities administrators; (2) preparing proxy and information statements
and any other communications to shareholders; (3) monitoring the sale of shares
and ensuring that such shares are properly and duly registered with the SEC and
applicable state securities administrators; and (4) supervising the declaration
of dividends and distributions to shareholders.
 
As of October 1, 1997, Forum and FAS provided management and administrative
services to registered investment companies and collective investment funds with
assets of approximately $25.5 billion. Forum is a member of the National
Association of Securities Dealers, Inc. For their services Forum and FAS each
receives a fee with respect to 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 at an annual rate
of 0.025%, 0.05%, 0.05%, 0.05%, 0.10% and 0.075%, respectively, of the Funds'
average daily net assets. FAS also serves as an administrator of each Core
Portfolio and provides services to the Core Portfolios that are similar to those
provided to the Funds by Forum and FAS. For its services FAS receives a fee with
respect to each Core Portfolio at an annual rate of 0.05% of the Portfolio's
average daily net assets.
 
Pursuant to a separate agreement, Forum Accounting Services, LLC ("Forum
Accounting") provides portfolio accounting services to each Fund and to each
Core Portfolio. Forum, FAS, and Forum Accounting 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, 1997,
Forum, FAS and Forum Accounting were controlled by John Y. Keffer, President and
Chairman of the Trust.
 
Pursuant to a separate Distribution Services Agreement, Forum is the exclusive
representative of the Trust to act as principal underwriter and distributor of
the Funds, except under circumstances specified in that agreement. Forum
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, Forum may pay a fee to broker-dealers or
other persons for distribution or other services related to the Funds.
 
SHAREHOLDER SERVICING AND
CUSTODY
 
Norwest Bank serves as transfer agent and dividend disbursing agent for the
Trust (in this capacity, the "Transfer Agent"). The Transfer Agent maintains an
account for each shareholder of the Trust (unless such accounts are
 
                                                                  33
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- ----
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. 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 services, the Transfer Agent receives a
fee with respect to each Fund at an annual rate of 0.25% of each Fund's (0.20%
in the case of Cash Investment Fund) average daily net assets attributable to
each class of the Fund (other than Institutional Shares of Municipal Money
Market Fund). For its 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 Bank also serves as each Fund's and each Core Portfolio's custodian. For
its custodial services, Norwest Bank receives a fee with respect to each Fund
and each Core Portfolio at an annual rate of 0.02% of the first $100 million of
the Fund's or Core Portfolio's average daily net assets, 0.015% of the next $100
million of the Fund's or Core Portfolio's average daily net assets and 0.01% of
the Fund's or Core Portfolio's remaining average daily net assets. No fee is
directly payable by a Fund to the extent the Fund is invested in a Core
Portfolio.
 
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. Each service provider to a Fund may
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. Fee waivers are voluntary and may be reduced or eliminated at any time.
 
Norwest has agreed to waive its investment advisory fee for Money Market
Portfolio through May 31, 1999 to the extent that the fee exceeds the annual
rate of 0.10% of the Portfolio's average daily net assets. In addition, Norwest
and Forum have agreed to waive their respective fees or reimburse expenses in
order to maintain Cash Investment Fund's total combined operating expenses
through May 31, 1999 at the same level as the Fund's total operating expenses
prior to May 31, 1997 (0.48%). Any increase in expenses would require Board
approval (and notice to shareholders), which would be given
 
                                       34
<PAGE>
- ----
- ----
only if the Board determined that the amount of the fees to be paid to Norwest
or Forum after the reduction or elimination would be fair and reasonable.
 
Norwest and Forum have agreed to waive their respective fees or reimburse
expenses in order to maintain Ready Cash Investment Fund's total combined
operating expenses through May 31, 1998, at the same level as the Fund's total
operating expenses prior to May 31, 1997 (0.82%). After May 31, 1998, any
proposed reduction in the amount of those waivers and reimbursements would be
reviewed by the Board.
 
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.
 
The expenses of each of Cash Investment Fund and Ready Cash Investment Fund
include the Fund's pro rata share of the expenses of the Core Portfolios in
which the Fund invests, which are borne indirectly by the Fund's shareholders.
 
                                                                  35
<PAGE>
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- ----
 
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 minimums. (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.
 
<TABLE>
<CAPTION>
 
                                    ORDER MUST
                                        BE      PAYMENT MUST
                                     RECEIVED        BE
FUND                                    BY      RECEIVED BY
- ------------------------------------------------------------
<S>                                 <C>         <C>
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.
</TABLE>
 
All times referenced in the above table are Eastern Time. The Trust reserves the
right to close early and advance the time by which the Funds must receive
purchase orders and payments on days that the New York Stock Exchange or
Minneapolis Federal Reserve Bank closes early, the Public Securities Association
recommends that the government securities markets close early or due to other
circumstances which may effect a Fund's trading hours.
 
Fund shares become entitled to receive dividends and distributions 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.
 
                                       36
<PAGE>
- ----
- ----
 
PURCHASE PROCEDURES
 
INITIAL PURCHASES
THERE ARE THREE WAYS TO PURCHASE SHARES INITIALLY.
 
1.  BY MAIL. Investors may send a check or money order along with a completed
account application form to the Trust at the address listed under "Account
Application." Checks or money orders 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.
 
For individual or Uniform Gift to Minors Act accounts, the check or money order
used to purchase shares of a Fund must be made payable to "Norwest Advantage
Funds" or to one or more owners of that account and endorsed to Norwest
Advantage Funds. No other method of payment by check will be accepted. For
corporation, partnership, trust, 401(k) plan or other non-individual type
accounts, the check used to purchase shares of a Fund must be made payable on
its face to "Norwest Advantage Funds." No other method of payment by check will
be accepted.
 
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 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 charges by the investor's bank for transmitting the money by
bank wire. The Trust does not charge investors for the receipt of wire
transfers. Payment by bank wire is treated as a federal funds payment when
received.
 
3.  THROUGH FINANCIAL INSTITUTIONS. Shares may be purchased and redeemed through
certain broker-dealers, banks and other financial institutions ("Processing
Organizations"). The Transfer Agent, Forum and their affiliates may be
Processing Organizations. Processing Organizations may receive payments as a
processing agent from the Transfer Agent. In addition,
 
                                                                  37
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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.
 
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.
 
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.
 
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GENERAL INFORMATION
 
Fund shares are continuously sold on every weekday except customary national
business holidays (New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving
and Christmas) and Good Friday ("Fund Business Day"). The purchase price for
Fund shares equals their net asset value next-determined after acceptance of an
order.
 
All payments for Shares must be in U.S. dollars. 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.
 
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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 receipt 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.
 
<TABLE>
<CAPTION>
 
                                                  ORDER MUST
                                                      BE
                                                   RECEIVED
FUND                                                  BY
- ------------------------------------------------------------
<S>                                               <C>
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.
</TABLE>
 
All times referenced in the above table are Eastern Time. The Trust reserves the
right to close early and advance the time by which the Funds must receive
redemption orders on days that the New York Stock Exchange or Minneapolis
Federal Reserve Bank closes early, the Public Securities Association recommends
that the government securities markets close early or due to other circumstances
which may affect a Fund's trading hours.
 
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 receipt 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.
 
                                       40
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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. 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
 
To protect shareholders and the Funds against fraud, signatures on certain
requests must have a signature guarantee. Requests must be made in writing and
include a signature guarantee for any of the following transactions: (1) any
endorsement on a share certificate; (2) instruction to change a shareholder's
record name; (3) modification of a designated bank account for wire redemptions;
(4) instruction regarding an Automatic Investment Plan or Automatic Withdrawal
Plan; (5) dividend and distribution election; (6) telephone redemption; (7)
exchange option election or any other option election in connection with the
shareholder's account; (8) written instruction to redeem Shares whose value
exceeds $50,000; (9) redemption in an account in
 
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which the account address has changed within the last 30 days; (10) redemption
when the proceeds are deposited in a Norwest Advantage Funds account under a
different account registration; and (11) the remitting of redemption proceeds to
any address, person or account for which there are not established standing
instructions on the account.
 
Shareholders who want telephone redemption or exchange privileges 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 and Transfer Agent did not employ such procedures,
they 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: (1) 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 immediately following any redemption; or (2) Investor Shares
in any Municipal Money Market Fund or Ready Cash Investment Fund account whose
aggregate net asset value is less than $1,000 immediately following any
redemption.
 
                                       42
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                                                  7.  OTHER SHAREHOLDER SERVICES
 
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 by opening
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.")
 
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.")
 
                                                                  43
<PAGE>
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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
 
The Funds (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. Generally, all contributions and
investment earnings in an IRA will be tax-deferred until withdrawn. 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.
 
An employer may also contribute to an individual's IRA as part of a Savings
Incentive Match Plan for Employees, or "SIMPLE plan," established after December
31, 1996. Under a SIMPLE plan, an employee may contribute up to $6,000 annually
to the employee's IRA, and the employer must generally match such contributions
up to 3% of the employee's annual salary. Alternatively, the employer may elect
to contribute to the employee's IRA 2% of the lesser of the employee's earned
income or $150,000.
 
The foregoing discussion regarding IRAs is based on regulations in effect as of
October 1, 1997 and summarizes only some of the important federal tax
considerations generally affecting IRA contributions made by individuals or
their employers. It is not intended as a substitute for tax planning. Investors
should consult their tax advisors with respect to their specific tax situations
as well as with respect to state and local taxes.
 
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
 
                                       44
<PAGE>
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- ----
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 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.
 
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8. DIVIDENDS AND TAX MATTERS
 
DIVIDENDS
 
Dividends of each 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 and distributions paid by a Fund with respect to
each class of shares are calculated in the same manner and at the same time. The
per share dividends on a class of shares will vary inversely with the class of
shares' operating expenses.
 
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 certain 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 A Shares or B 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, each Fund will not be liable for federal income and excise taxes on the
net investment income and capital gain distributed to its 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 net
short-term capital gain) are taxable to shareholders of the Fund as ordinary
income. Pursuant to the Taxpayer Relief Act of 1997, two different tax rates
apply to net capital gains--that is, the excess of net gains from capital assets
held for more than one year over net losses from capital assets held for not
more than one year. One rate (generally 28%) applies to net gains on capital
assets held for more than one year but not more than 18 months ("mid-term
 
                                       46
<PAGE>
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gains"), and a second rate (generally 20%) applies to the balance of such net
capital gains ("adjusted net capital gains"). Distributions of mid-term gains
and adjusted net capital gains will be taxable to shareholders as such,
regardless of how long a shareholder has held shares in the Fund.
 
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.
 
CORE PORTFOLIOS. Each Core 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
a Core Portfolio are deemed to have been "passed through" to the Funds investing
in the Core Portfolio in proportion to the Funds' interests in the Core
Portfolio, regardless of whether such amounts have been distributed by the Core
Portfolio to the Funds.
 
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. Persons who are "substantial users" or "related persons" thereof
of facilities financed by private activity securities held by the Fund, however,
may be subject to federal income tax on their pro rata share of the interest
income from those securities and should consult their tax advisers before
purchasing Shares. Interest on certain private activity securities is treated as
an item of tax preference for purposes of the AMT imposed on individuals and
corporations. In addition, exempt-interest dividends are 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 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 advising the shareholder of the portion of
the Fund's dividends that is derived from obligations of issuers in the various
states and the portion of the Fund's dividends that is exempt from
 
                                                                  47
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federal income taxes. These portions are determined for the Fund's entire year
and, thus, are annual averages, rather than day-by-day determinations for each
shareholder.
 
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
a 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 a Fund which may differ from the federal income tax
consequences described above.
 
                                       48
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                                                           9.  OTHER INFORMATION
 
BANKING LAW MATTERS
 
Federal banking rules 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. Forum believes that Norwest and any bank or other bank affiliate also
may perform Processing Organization or similar services for the Trust and its
shareholders without violating applicable federal banking rules. If a bank or
bank affiliate were prohibited in the future from so acting, changes in the
operation of the Trust could occur and a shareholder serviced by the 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 net asset value per share of each class of Cash Investment Fund, Ready Cash
Investment Fund, U.S. Government Fund, Treasury Fund and Municipal Money Market
Fund is determined 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 the
determination is made. The Funds only determine net asset value on Fund Business
Days.
 
In order to maintain a stable net asset value per share of $1.00, the portfolio
securities of each Fund and Core Portfolio 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 or Core Portfolio's portfolio deviates
more than 1/2 of 1% from the value determined on the basis of amortized cost,
the Board or Core Board will consider whether any action should be initiated to
prevent any material effect on shareholders.
 
PERFORMANCE INFORMATION
 
A Fund's performance may be quoted in terms of yield. 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 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 yields,
which show the taxable yields a shareholder would have to earn to
 
                                                                  49
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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.
 
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 Financial Data, Inc. In addition, the
performance of a Fund may be compared to securities indices. 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 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 Institutional or
Investor Shares); the costs of doing so will be borne by the Trust. Currently
the authorized shares of the Trust are divided into thirty-nine separate series.
 
OTHER CLASSES OF SHARES. Cash Investment Fund, U.S. Government Fund and Treasury
Fund currently issue one class of shares. Municipal Money Market Fund currently
issues two classes of shares - Institutional Shares and Investor Shares. Ready
Cash Investment Fund currently issues two classes of 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 or
the Funds' distributor. Investors may also contact their Norwest sales
representative 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 Institutional, Investor and Exchange
Shares of the Funds.
 
SHAREHOLDER VOTING AND OTHER RIGHTS. Each share of each series 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 pertains 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 series
or class, except if the matter affects only one series or class or voting by
series or class is required by law, in which case shares will be voted
separately by series or class, as appropriate. Delaware law does not require the
Trust to hold annual meetings of shareholders, and it is anticipated that
 
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- ----
- ----
shareholder meetings will be held only when specifically required by federal or
state law. Shareholders (and Trustees) 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 series is entitled to
the shareholder's pro rata share of all dividends and distributions arising from
that series' assets and, upon redeeming shares, will receive the portion of the
series' net assets represented by the redeemed shares.
 
Each Core Portfolio normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in a Core Portfolio will be entitled to
vote in proportion to its relative beneficial interest in the Core Portfolio.
When required by the 1940 Act and other applicable law, a Fund will solicit
proxies from its shareholders and will vote its interest in a Core Portfolio in
proportion to the votes cast by its shareholders.
 
From time to time, certain 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.
 
CORE AND GATEWAY STRUCTURE
 
Cash Investment Fund and Ready Cash Investment Fund each seek to achieve its
investment objective by investing all of its investable assets in its
corresponding Core Portfolio(s), that have the same investment objective and
substantially identical investment policies as the Funds. Accordingly, each Core
Portfolio directly acquires portfolio securities and a Fund acquires an indirect
interest in those securities. Each Core Portfolio is a separate series of Core
Trust, a business trust organized under the laws of the State of Delaware in
1994. Core Trust is registered under the 1940 Act as an open-end, management,
investment company. The assets of each Core Portfolio belong only to, and the
liabilities of each Core Portfolio are borne solely by, that Core Portfolio and
no other portfolio of Core Trust.
 
THE CORE PORTFOLIOS. A Fund's investment in a Core Portfolio is in the form of a
non-transferable beneficial interest. All investors in a Core Portfolio will
invest on the same terms and conditions and will pay a proportionate share of
the Core Portfolio's expenses. As of October 1, 1997, one other fund of the
Trust invested a portion of its assets in each Core Portfolio.
 
A Core Portfolio will not sell its shares directly to members of the general
public. Another investor in a Core 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 any Fund, and
could have different advisory and other fees and expenses than a Fund.
Therefore, Fund shareholders may have different returns than shareholders
 
                                                                  51
<PAGE>
- ----
- ----
in another investment company that invests in a Core Portfolio. Information
regarding any such funds is available from Core Trust by calling Forum at (207)
879-1900.
 
CERTAIN RISKS OF INVESTING IN CORE PORTFOLIOS. A Fund's investment in a Core
Portfolio may be affected by the actions of other large investors in that Core
Portfolio. For example, if Money Market Portfolio had a large investor other
than Cash Investment Fund that redeemed its interest, Money Market Portfolio's
remaining investors (including the Fund) might, as a result, experience higher
pro rata operating expenses, thereby producing lower returns. As there may be
other investors in a Core Portfolio, there can be no assurance that any issue
that receives a majority of the votes cast by a Fund's shareholders will receive
a majority of votes cast by all investors in a Core Portfolio; indeed, other
investors holding a majority interest in a Core Portfolio could have voting
control of the Core Portfolio.
 
Each Fund may withdraw its entire investment from a Core Portfolio 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 a Core Portfolio with power to, and who did by a vote of all
investors (including the Fund), change the investment objective or policies of
the Core 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 Core 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 would incur brokerage fees or other transaction costs. If
the Fund withdrew its investment from a Core Portfolio, the Board would consider
what action might be taken, including the management of the Fund's assets
directly by Norwest or the investment of the Fund's assets in another pooled
investment entity. The inability of the Fund to find a suitable replacement
investment, in the event the Board decided not to permit Norwest to manage the
Fund's assets directly, could have a significant impact on shareholders of the
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.
 
                                       52
<PAGE>



         ------------------------------------------------------------
                                                   ---------------
           [LOGO]                                     BULK RATE
                                                     U.S. POSTAGE
                                                        PAID
                                                   PERMIT NO. 3489
                                                   MINNEAPOLIS, MN
                                                   ---------------




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






          [LOGO]

          SHAREHOLDER INFORMATION:

               Norwest Bank Minnesota, N.A.
               733 Marquette Avenue
               Minneapolis, Minnesota 55479-0040
               612-667-8833 (MINNEAPOLIS/ST. PAUL)
               800-338-1348 (ELSEWHERE)

          -COPYRIGHT- 1997 NORWEST ADVANTAGE FUNDS
          MFBPM001 10/97

<PAGE>

                                  INCOME FUNDS
- --------------------------------------------------------------------------------


                                   PROSPECTUS


                                 OCTOBER 1, 1997



                               STABLE INCOME FUND
                                 ---------------
                              INTERMEDIATE GOVERNMENT
                                   INCOME FUND
                                 ---------------
                                   INCOME FUND
                                 ---------------
                              TOTAL RETURN BOND FUND




                                     [LOGO]



                                NOT FDIC INSURED


<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
<TABLE>
<C>        <S>                                          <C>        <C>
                             TABLE OF CONTENTS
 
       1.  PROSPECTUS SUMMARY.........................          2
                                                                2
           Highlights of the Funds....................
                                                                6
           Expense Information........................
 
       2.  FINANCIAL HIGHLIGHTS.......................         10
 
       3.  INVESTMENT OBJECTIVES AND POLICIES.........         18
                                                               18
           Stable Income Fund.........................
                                                               19
           Intermediate Government Income Fund........
                                                               21
           Income Fund................................
                                                               22
           Total Return Bond Fund.....................
                                                               23
           Additional Investment Policies and Risk
           Considerations.............................
 
       4.  MANAGEMENT.................................         42
                                                               42
           Investment Advisory Services...............
                                                               44
           Management, Administration and Distribution
           Services...................................
                                                               45
           Shareholder Servicing and Custody..........
                                                               46
           Expenses of the Funds......................
 
       5.  CHOOSING A SHARE CLASS.....................         48
                                                               49
           A Shares...................................
                                                               53
           B Shares...................................
 
       6.  HOW TO BUY SHARES..........................         57
                                                               57
           Minimum Investment.........................
                                                               57
           Purchase Procedures........................
                                                               59
           Account Application........................
                                                               59
           General Information........................
 
       7.  HOW TO SELL SHARES.........................         60
                                                               60
           General Information........................
                                                               60
           Redemption Procedures......................
                                                               61
           Other Redemption Matters...................
 
       8.  OTHER SHAREHOLDER SERVICES.................         63
                                                               63
           Exchanges..................................
                                                               64
           Automatic Investment Plan..................
                                                               65
           Individual Retirement Accounts.............
                                                               65
           Automatic Withdrawal Plan..................
                                                               66
           Reopening Accounts.........................
 
       9.  DIVIDENDS AND TAX MATTERS..................         67
                                                               67
           Dividends..................................
                                                               67
           Tax Matters................................
 
      10.  OTHER INFORMATION..........................         69
                                                               69
           Banking Law Matters........................
                                                               69
           Determination of Net Asset Value...........
                                                               69
           Performance Information....................
                                                               70
           The Trust and Its Shares...................
                                                               71
           Core and Gateway Structure.................
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                                OCTOBER 1, 1997
 
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.
 
STABLE INCOME FUND and TOTAL RETURN BOND FUND each seeks to achieve its
investment objective by investing all of its investable assets in a separate
portfolio of another registered, open-end, management investment company with
the same investment objective. See "Prospectus Summary" and "Other Information -
Core and Gateway-Registered Trademark- Structure."
 
INTERMEDIATE GOVERNMENT INCOME FUND and INCOME FUND each seeks to achieve its
investment objective by investing directly in portfolio securities.
 
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, 1997, as may be amended from
time to time, which is available for reference on the SEC's Web Site
(http.//www.sec.gov) and 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) 879-0001. Investors should read this
Prospectus and retain it for future reference.
 
NORWEST ADVANTAGE FUNDS IS A FAMILY OF MUTUAL FUNDS. THE SHARES OF MUTUAL FUNDS
ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL
RESERVE SYSTEM OR ANY OTHER GOVERNMENT AGENCY. THE SHARES ALSO ARE NOT
OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED OR GUARANTEED BY, NORWEST BANK
MINNESOTA, N.A. OR ANY OTHER BANK OR BANK AFFILIATE.
 
AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
 
                                                                  1
<PAGE>

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 to provide total return consistent with current
income. 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.

FUND STRUCTURES

STABLE INCOME FUND and TOTAL RETURN BOND FUND each seeks to achieve its
investment objective by investing all of its investable assets in a
separate portfolio (each a "Core Portfolio") of Core Trust (Delaware)
("Core Trust"), a registered, open-end, management investment company,
that has the same investment objective and substantially similar
investment policies as the Fund. Accordingly, the investment experience
of each of these Funds will correspond directly with the investment
experience of its corresponding Core Portfolio. (See "Other Information
- - Core and Gateway Structure.")  The Funds and the Core Portfolio in
which they invest are:

    FUND                        CORE PORTFOLIO
    ----                        --------------
    Stable Income Fund          Stable Income Portfolio
    Total Return Bond Fund      Total Return Bond Portfolio

INTERMEDIATE GOVERNMENT INCOME FUND and INCOME FUND each seek to achieve
its investment objective by investing directly in portfolio securities.

INVESTMENT ADVISERS

NORWEST INVESTMENT MANAGEMENT, INC. ("Norwest"), a subsidiary of Norwest
Bank Minnesota, N.A. ("Norwest Bank"), is each Fund's and each Core
Portfolio's investment adviser.  Norwest also is the investment adviser
of each Core Portfolio.  Norwest provides investment advice to various
institutions, pension plans and other accounts and as of August 31,
1997, managed over $22 billion in assets.  (See "Management - Investment
Advisory Services.")


2

<PAGE>

Norwest Bank serves as transfer agent, dividend disbursing agent and
custodian of the Trust and serves as the custodian of each Core
Portfolio.  (See "Management - Shareholder Servicing and Custody" and 
"-Management, Administration and Distribution Services.")

Stable Income Fund and Total Return Bond Fund each incur investment
advisory fees indirectly through the investment advisory fees paid by
their respective Core Portfolios; Norwest is paid an investment advisory
fee directly by each of Intermediate Government Income Fund and Income
Fund.

GALLIARD CAPITAL MANAGEMENT, INC. ("Galliard"), an investment advisory
subsidiary of Norwest Bank, is the investment subadviser of Stable
Income Portfolio.  Galliard provides investment advice regarding
advisory services to bank and thrift institutions, pension and profit
sharing plans, trusts and charitable organizations and corporate and
other business entities.  (See "Management - Investment Advisory
Services.")

UNITED CAPITAL MANAGEMENT, INC. ("UCM"), a part of Norwest Bank
Colorado, N.A. is the investment subadviser of Total Return Bond
Portfolio.  UCM provides specialized investment advisory services to
various institutional clients.  (See "Management - Investment Advisory
Services.")

Norwest, Galliard and UCM (or Norwest and a particular investment
subadvisor) 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. ("Forum"), a registered broker-dealer and
member of the National Association of Securities Dealers, Inc.  Forum
Administrative Services, LLC ("FAS") provides administrative services to
the Funds and also serves as administrator of each Core Portfolio. (See
"Management - Management, Administration and Distribution Services.")

SHARES OF THE FUNDS

EACH FUND CURRENTLY OFFERS THREE SEPARATE CLASSES OF SHARES: A class 
("A Shares"), B class ("B Shares") and I class ("I Shares"). A Shares
and B Shares are sold through this Prospectus and are collectively
referred to as the "Shares."

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

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


                                                                            3

<PAGE>

     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. (See "Choosing a Share Class.")

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

HOW TO BUY AND SELL SHARES

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

EXCHANGES

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

SHAREHOLDER FEATURES

Each Fund offers an Automatic Investment Plan, Automatic Withdrawal Plan
and Directed Dividend Option. Purchases of A Shares may be subject to
Rights of Accumulation, Cumulative Quantity Discounts or a Reinstatement
Privilege. (See "Other Shareholder Services" and "Choosing a Share
Class.")

DIVIDENDS AND DISTRIBUTIONS

Dividends of Stable Income Fund and Intermediate Government Income
Fund's net investment income are declared and paid monthly. Dividends of
Income Fund's 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.")


4

<PAGE>

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. 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).

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, swap transactions and other investment techniques.
(See "Investment Objectives and Policies - Additional Investment
Policies and Risk Considerations.") Similarly, a Fund's use of mortgage-
and asset-backed securities entails certain risks. (See "Investment
Objectives and Policies - Additional Investment Policies and Risk
Considerations - Mortgage-Backed Securities" and "- Asset-Backed
Securities.") The portfolio turnover rate for certain Funds may from
time to time be high, resulting in increased short-term capital gains or
losses. (See "Investment Objectives and Policies - Additional Investment
Policies and Risk Considerations - Portfolio Transactions.")

By pooling their assets in a Core Portfolio with other institutional
investors, STABLE INCOME FUND and TOTAL RETURN BOND FUND each may be
able to achieve certain efficiencies, economies of scale and enhanced
portfolio diversification.  Nonetheless, these investments could have
adverse effects on the Funds which investors should consider. 
Investment decisions are made by the portfolio managers of each Core
Portfolio independently.  Therefore the portfolio manager of one Core
Portfolio in which a Fund invests may purchase shares of the same issuer
whose shares are being sold by the portfolio manager of another Core
Portfolio in which the Fund invests.  This could result in an indirect
expense to the Fund without accomplishing any investment purpose.  (See
"Other Information - Core and Gateway Structure.")


                                                                             5

<PAGE>

EXPENSE INFORMATION

The purpose of the Shareholder Transaction Expenses and Annual Fund
Operating Expenses tables in this section 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)
<TABLE>
<CAPTION>
                                                                                         INTERMEDIATE       
                                                                                    GOVERNMENT INCOME FUND, 
                                                                 STABLE                 INCOME FUND AND     
                                                               INCOME FUND          TOTAL RETURN BOND FUND  
                                                          -----------------------   ----------------------- 
                                                              A            B            A            B      
                                                            SHARES       SHARES       SHARES       SHARES   
                                                          -----------------------   ----------------------- 
<S>                                                       <C>           <C>         <C>           <C>
Maximum sales charge imposed on purchases 
  (as a percentage of public offering price). . . . . . .   1.5%(1)     Zero          4.0%(1)     Zero      
Maximum deferred sales charge                                                                               
  (as a percentage of the lesser of original purchase                                                       
  price or redemption proceeds) . . . . . . . . . . . . .   Zero(2)     1.5%(1)(3)    Zero(2)     4.0%(1)(3)
Exchange Fee. . . . . . . . . . . . . . . . . . . . . . .   Zero        Zero          Zero        Zero      

</TABLE>

                      ANNUAL FUND OPERATING EXPENSES (4)
        (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS AFTER APPLICABLE 
                   FEE WAIVERS AND EXPENSE REIMBURSEMENTS)

<TABLE>
<CAPTION>
                                                                            INTERMEDIATE
                                                            STABLE           GOVERNMENT                           TOTAL RETURN
                                                          INCOME FUND        INCOME FUND        INCOME FUND       BOND FUND (7)
                                                        ----------------   ----------------   ----------------   ----------------
                                                          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(5) . . . . . . . . . . . . . .   N/A       N/A     0.33%     0.33%    0.50%     0.50%     N/A       N/A 
Rule 12b-1 Fees (after fee waivers)(6). . . . . . . . .   N/A      0.75%     N/A      0.75%     N/A      0.75%     N/A      0.75%
Other Expenses (after fee waivers and reimbursements) .  0.28%     0.28%    0.35%     0.35%    0.25%     0.25%    0.36%     0.36%
Investment Advisory Fees -- Core Portfolio(5) . . . . .  0.30%     0.30%     N/A       N/A      N/A       N/A     0.35%     0.35%
Other Expenses -- Core Portfolio
  (after fee waivers and reimbursements). . . . . . . .  0.07%     0.07%     N/A       N/A      N/A       N/A     0.04%     0.04%
                                                        ----------------   ----------------   ----------------   ----------------
Total Operating Expenses(8) . . . . . . . . . . . . . .  0.65%     1.40%    0.68%     1.43%    0.75%     1.50%    0.75%     1.50%
</TABLE>

(1) Sales charge waivers and reduced sales charge plans are available for A 
    and B Shares. See "Choosing a Share Class".

(2) If A Shares of a Fund (other than Stable Income Fund) purchased without 
    an initial sales charge (purchases of $1,000,000 or more) are redeemed 
    within two years after purchase, a deferred sales charge of up to 0.75% 
    will be applied to the redemption.  If A  Shares of Stable Income Fund 
    purchased without an initial sales charge (purchases of $1,000,000 or 
    more) are redeemed within two years after purchase, a deferred sales 
    charge of up to 0.50% will be applied to the redemption.

(3) The maximum 4.0% deferred sales charge on B Shares of a Fund (other than
    Stable Income Fund) applies to redemptions during the first year after 
    purchase; the charge declines thereafter, and is 3.0% during the second 
    and third years, 2.0% during the fourth and fifth years, 1.0% during the 
    sixth year, and zero the following year. The maximum 1.5% deferred sales 
    charge on B Shares of Stable Income Fund applies to redemptions during 
    the first year after purchase; the charge declines thereafter, and is 
    0.75% during the second year and zero the following year.

(4) For a further description of the various expenses associated with 
    investing in the Funds, see "Management."  Expenses associated with 
    I Shares of a Fund differ from those listed in the table.  The table is 
    based on amounts incurred during the Funds' most recent fiscal year ended
    May 31, 1997 restated to reflect current fees. Stable Income Fund and 
    Total Return Bond Fund indirectly bear their pro rata portion of the 
    expenses of the Core Portfolios in which they invest.

(5) For Stable Income Fund and Total Return Bond Fund, "Investment Advisory 
    Fees - Core Portfolio" reflects the investment advisory fees incurred by
    the Core Portfolio in which the Fund invests. 

(6) Absent waivers, "Rule 12b-1 Fees" would be 1.00% for B Shares of each 
    Fund.  Long-term shareholders of B Shares may pay Rule 12b-1 Fees and 
    contingent deferred sales charges totaling in the aggregate more than 
    the economic equivalent of the maximum front-end sales charges permitted by
    the rules of the National Association of Securities Dealers, Inc.


6                                                                             7

<PAGE>

(7) Norwest and Forum have agreed to waive their respective fees or
    reimburse expenses in order to maintain Total Return Bond Fund's
    total operating expenses through May 31, 1998 at or below 0.75% for
    A Shares and 1.50% for B Shares.

(8) Absent expense reimbursements and fee waivers, the expenses of A
    Shares of Stable Income Fund, Intermediate Government Income Fund,
    Income Fund and Total Return Bond Fund would be: "Other Expenses,"
    0.46%, 0.48%, 0.58% and 0.55%, respectively; "Other Expenses - Core
    Portfolio," 0.12%, N/A, N/A and 0.09%, respectively; and "Total
    Operating Expenses," 0.88%, 0.81%,1.08% and 0.99%, respectively. 
    Absent expense reimbursements and fee waivers, the expenses of B
    Shares of Stable Income Fund, Intermediate Government Income Fund,
    Income Fund and Total Return Bond Fund would be: "Other Expenses,"
    1.17%, 0.53%, 0.65% and 0.66%, respectively; "Other Expenses -- Core
    Portfolio," 0.12%, N/A, N/A and 0.09%, respectively; and "Total
    Operating Expenses," 2.59%, 1.86%, 2.15% and 2.10%, respectively. 
    Except as otherwise noted, expense reimbursements and fee waivers
    are voluntary and may be reduced or eliminated at any time.

EXAMPLE

The following Hypothetical Expense Example indicates the dollar 
amount of expenses that an investor would pay, assuming a $1,000 
investment in a Fund's Shares, the expenses listed in the "Annual 
Fund Operating Expenses" table, a 5% annual return, reinvestment of 
all dividends and distributions, the deduction of the maximum 
initial sales charge for A Shares, the deduction of the applicable 
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. The 5% 
annual return is not predictive of and does not represent the 
Funds' projected returns; rather, it is required by government 
regulation.                                        


8

<PAGE>

                       HYPOTHETICAL EXPENSE EXAMPLE


                                        1 YEAR   3 YEARS   5 YEARS   10 YEARS
                                       --------------------------------------
STABLE INCOME FUND
   A Shares. . . . . . . . . . . . . .    22        35        51        95
   B Shares
        Assuming redemption 
          at the end of the period . .    29        44        --        --
        Assuming no redemption . . . .    14        44        --        --
                                       --------------------------------------

INTERMEDIATE GOVERNMENT INCOME FUND
   A Shares. . . . . . . . . . . . . .    47        61        76       121
   B Shares
        Assuming redemption 
          at the end of the period . .    55        75        98        --
        Assuming no redemption . . . .    15        45        78        --
                                       --------------------------------------

INCOME FUND
   A Shares. . . . . . . . . . . . . .    47        63        80       129
   B Shares                            
        Assuming redemption            
          at the end of the period . .    55        77       102        --
        Assuming no redemption . . . .    15        47        82        --
                                       --------------------------------------

TOTAL RETURN BOND FUND
   A Shares. . . . . . . . . . . . . .    47        63        80       129
   B Shares                            
        Assuming redemption            
          at the end of the period . .    55        77       102        --
        Assuming no redemption . . . .    15        47        82        --


                                                                            9

<PAGE>

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 periods ended May 31, 
1994, and thereafter was audited by KPMG Peat Marwick LLP, independent 
auditors. Information for prior periods was audited by other independent 
auditors. Each Fund's financial statements for the fiscal year ended May 31, 
1997, and independent auditors' report thereon, are contained in the Fund's 
Annual Report. These financial statements are incorporated by reference into 
the SAI. Further information about each Fund's performance is contained in 
the Fund's Annual Report, which may be obtained from the Trust without charge.


                     STABLE INCOME FUND
<TABLE>
<CAPTION>
                                                                NET
                                                            REALIZED AND 
                                  BEGINNING                  UNREALIZED      DIVIDENDS    DISTRIBUTIONS
                                  NET ASSET       NET           GAIN         FROM NET       FROM NET
                                    VALUE      INVESTMENT    (LOSS) ON      INVESTMENT      REALIZED   
                                  PER SHARE      INCOME     INVESTMENTS       INCOME          GAIN  
- -------------------------------------------------------------------------------------------------------
<S>                               <C>          <C>           <C>            <C>            <C>
A SHARES
June 1, 1996 to May 31, 1997       $10.20        $0.58         $0.04          ($0.58)            --
May 2, 1996 to May 31, 1996(a)     $10.22        $0.02            --          ($0.04)            --
B SHARES
June 1, 1996 to May 31, 1997       $10.20        $0.52         $0.02          ($0.50)            --
May 17, 1996 to May 31, 1996(a)    $10.23        $0.02        ($0.01)         ($0.04)            --
- -------------------------------------------------------------------------------------------------------
<CAPTION>
                                                       RATIO TO AVERAGE NET ASSETS
                                               ------------------------------------------
                                   ENDING                                                                             NET ASSETS 
                                  NET ASSET       NET                                                    PORTFOLIO    AT  END OF 
                                    VALUE      INVESTMENT        NET             GROSS         TOTAL      TURNOVER      PERIOD 
                                  PER SHARE      INCOME        EXPENSES       EXPENSES(b)    RETURN(c)      RATE    (000'S OMITTED)
- -----------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>            <C>            <C>            <C>            <C>         <C>        <C>
A SHARES
June 1, 1996 to May 31, 1997       $10.24         5.69%         0.65%           0.87%          6.24%       41.30%       $12,451
May 2, 1996 to May 31, 1996(a)     $10.20         5.77%(d)      0.70%(d)        2.22%(d)       0.23%      109.95%       $16,256
B SHARES
June 1, 1996 to May 31, 1997       $10.24         4.96%         1.39%           2.89%          5.43%       41.30%        $1,056
May 17, 1996 to May 31, 1996(a)    $10.20         5.02%(d)      1.42%(d)        3.07%(d)       0.12%      109.95%          $867
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

(b) The ratio of Gross Expenses to Average Net Assets does not reflect fee
    waivers or expense reimbursements.

(c) Total Return does not include the effects of sales charges.

(d)  Annualized


10                                                                           11

<PAGE>

               INTERMEDIATE GOVERNMENT INCOME FUND

<TABLE>
<CAPTION>
                                                              NET
                                                          REALIZED AND
                                   BEGINNING               UNREALIZED    DIVIDENDS  DISTRIBUTIONS   ENDING
                                   NET ASSET     NET          GAIN       FROM NET     FROM NET     NET ASSET
                                     VALUE    INVESTMENT   (LOSS) ON    INVESTMENT    REALIZED       VALUE
                                   PER SHARE    INCOME    INVESTMENTS     INCOME        GAIN       PER SHARE
- --------------------------------------------------------------------------------------------------------------
<S>                                <C>        <C>         <C>           <C>         <C>            <C>
A SHARES
June 1, 1996 to May 31, 1997         $10.89     $0.73       ($0.05)       ($0.73)        --          $10.84   
May 2, 1996 to May 31, 1996(a)       $10.89     $0.03          --         ($0.03)        --          $10.89   
B SHARES
June 1, 1996 to May 31, 1997         $10.89     $0.64       ($0.05)       ($0.65)        --          $10.83   
May 17, 1996 to May 31, 1996(a)      $10.97     $0.03       ($0.08)       ($0.03)        --          $10.89   
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
                                      RATIO TO AVERAGE NET ASSETS
                                   ----------------------------------                             NET ASSETS
                                      NET                                            PORTFOLIO    AT END OF
                                   INVESTMENT    NET        GROSS        TOTAL       TURNOVER       PERIOD
                                     INCOME    EXPENSES   EXPENSES(b)   RETURN(c)      RATE    (OOO'S OMITTED)
- --------------------------------------------------------------------------------------------------------------
<S>                                <C>         <C>        <C>            <C>        <C>        <C>
A SHARES            
June 1, 1996 to May 31, 1997        6.58%      0.68%        0.80%         6.36%       183.05%      $13,038 
May 2, 1996 to May 31, 1996(a)      7.32%(d)   0.75%(d)     1.74%(d)      0.26%        74.64%      $16,562 
B SHARES                                                                    
June 1, 1996 to May 31, 1997        5.80%      1.42%        1.85%         5.51%       183.05%       $8,970
May 17, 1996 to May 31, 1996(a)     5.56%(d)   1.35%(d)     2.65%(d)     (0.49%)       74.64%      $10,682
- --------------------------------------------------------------------------------------------------------------
</TABLE>

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

(b)  The ratio of Gross Expenses to Average Net Assets does not reflect fee 
     waivers or expense reimbursements.

(c)  Total Return does not include the effects of sales charges.

(d)  Annualized


12                                                                           13
<PAGE>

                INCOME FUND

<TABLE>
<CAPTION>
                                                                      NET
                                                                  REALIZED AND
                                                                   UNREALIZED       DIVIDENDS   DISTRIBUTIONS      ENDING   
                                     BEGINNING NET       NET          GAIN          FROM NET       FROM NET      NET ASSET  
                                      ASSET VALUE     INVESTMENT   (LOSS) ON       INVESTMENT      REALIZED      VALUE PER  
                                       PER SHARE        INCOME    INVESTMENTS        INCOME          GAIN          SHARE    
- ----------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>              <C>            <C>             <C>
A SHARES
June 1, 1996 to May 31, 1997             $9.27           $0.62          --           ($0.62)          --           $9.27
June 1, 1995 to May 31, 1996             $9.63           $0.61       ($0.36)         ($0.61)          --           $9.27
June 1, 1994 to May 31, 1995             $9.52           $0.65        $0.11          ($0.65)          --           $9.63
June 1, 1993 to May 31, 1994            $10.61           $0.70       ($0.83)         ($0.70)       ($0.26)         $9.52
June 1, 1992 to May 31, 1993            $10.52           $0.77        $0.39          ($0.77)       ($0.30)        $10.61
June 1, 1991 to May 31, 1992            $10.23           $0.82        $0.53          ($0.82)       ($0.24)        $10.52
June 1, 1990 to May 31, 1991             $9.94           $0.89        $0.29          ($0.89)          --          $10.23
June 1, 1989 to May 31, 1990            $10.00           $0.90       ($0.06)         ($0.90)          --           $9.94
June 1, 1988 to May 31, 1989             $9.95           $0.79        $0.05          ($0.79)          --          $10.00
June 9, 1987 to May 31, 1988(a)         $10.00           $0.66        $0.05          ($0.66)          --           $9.95
B SHARES                                                                                                       
June 1, 1996 to May 31, 1997             $9.26           $0.55          --           ($0.55)          --           $9.26
June 1, 1995 to May 31, 1996             $9.61           $0.54       ($0.35)         ($0.54)          --           $9.26
June 1, 1994 to May 31, 1995             $9.51           $0.58        $0.10          ($0.58)          --           $9.61
August 5, 1993 to May 31, 1994(a)       $10.67           $0.50       ($0.90)         ($0.50)       ($0.26)         $9.51
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                            RATIO TO AVERAGE NET ASSETS
                                      ----------------------------------------                                 NET ASSETS
                                         NET                                                      PORTFOLIO     AT END OF
                                      INVESTMENT         NET         GROSS           TOTAL        TURNOVER        PERIOD
                                        INCOME         EXPENSES    EXPENSES(b)      RETURN(c)       RATE     (OOO'S OMITTED)
- ----------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>              <C>         <C>              <C>           <C>        <C>            
A SHARES
June 1, 1996 to May 31, 1997             6.59%           0.75%        1.17%            6.79%       231.00%        $5,142
June 1, 1995 to May 31, 1996             6.33%           0.75%        1.16%            2.58%       270.17%        $5,521
June 1, 1994 to May 31, 1995             7.02%           0.75%        1.24%            8.49%        98.83%        $6,231
June 1, 1993 to May 31, 1994             6.72%           0.60%        1.16%           (1.58%)       26.67%        $6,177
June 1, 1992 to May 31, 1993             7.18%           0.60%        1.10%           11.46%        87.98%       $85,252
June 1, 1991 to May 31, 1992             7.80%           0.31%        1.08%           13.58%        84.24%       $63,973
June 1, 1990 to May 31, 1991             8.82%           0.16%        1.11%           12.38%        61.33%       $50,138
June 1, 1989 to May 31, 1990             8.98%           0.19%        1.13%            8.71%        43.81%       $37,932
June 1, 1988 to May 31, 1989             8.62%           0.07%        1.10%            8.78%        48.08%       $27,939
June 9, 1987 to May 31, 1988(a)          6.92%(d)        0.70%(d)     2.28%(d)         6.45%(d)      0.00%        $2,279
B SHARES                                               
June 1, 1996 to May 31, 1997             5.87%           1.50%        2.25%            6.03%       231.00%        $3,349
June 1, 1995 to May 31, 1996             5.57%           1.50%        2.27%            1.92%       270.17%        $3,292
June 1, 1994 to May 31, 1995             6.24%           1.50%        2.21%            7.57%        98.83%        $3,296
August 5, 1993 to May 31, 1994(a)        5.82%(d)        1.33%(d)     2.08%(d)        (4.82%)(d)    26.67%        $2,605
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) The Fund commenced operations on June 9, 1987.  The Fund's original class 
    of shares subsequently became A Shares.  The Fund commenced the offering 
    of B Shares on August 5, 1993.

(b) The ratio of Gross Expenses to Average Net Assets does not reflect fee 
    waivers or expense reimbursements.

(c) Total Return does not include the effects of sales charges.

(d) Annualized.


14                                                                           15

<PAGE>

               TOTAL RETURN BOND FUND

<TABLE>
<CAPTION>
                                                                      NET
                                                                  REALIZED AND
                                                                   UNREALIZED       DIVIDENDS   DISTRIBUTIONS      ENDING   
                                     BEGINNING NET       NET          GAIN          FROM NET       FROM NET      NET ASSET  
                                      ASSET VALUE     INVESTMENT   (LOSS) ON       INVESTMENT      REALIZED      VALUE PER  
                                       PER SHARE        INCOME    INVESTMENTS        INCOME          GAIN          SHARE    
- ----------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>              <C>         <C>              <C>          <C>              <C>
A SHARES
June 1, 1996 to May 31, 1997             $9.40           $0.60       $0.03          ($0.60)        ($0.03)         $9.40    
June 1, 1995 to May 31, 1996             $9.73           $0.64      ($0.31)         ($0.64)        ($0.02)         $9.40    
June 1, 1994 to May 31, 1995             $9.54           $0.67       $0.19          ($0.67)           --           $9.73    
December 31, 1993 to May 31, 1994(a)    $10.00           $0.27      ($0.46)         ($0.27)           --           $9.54    
B SHARES
June 1, 1996 to May 31, 1997             $9.40           $0.53       $0.05          ($0.53)        ($0.03)         $9.42    
June 1, 1995 to May 31, 1996             $9.73           $0.57      ($0.31)         ($0.57)        ($0.02)         $9.40    
June 1, 1994 to May 31, 1995             $9.54           $0.59       $0.19          ($0.59)           --           $9.73    
December 31, 1993 to May 31, 1994(a)    $10.00           $0.24      ($0.46)         ($0.24)           --           $9.54    
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                            RATIO TO AVERAGE NET ASSETS
                                      ----------------------------------------                                 NET ASSETS
                                         NET                                                      PORTFOLIO     AT END OF
                                      INVESTMENT         NET         GROSS           TOTAL        TURNOVER        PERIOD
                                        INCOME         EXPENSES    EXPENSES(b)      RETURN(c)       RATE     (OOO'S OMITTED)
- ----------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>              <C>         <C>              <C>           <C>        <C>            
A SHARES
June 1, 1996 to May 31, 1997            6.37%           0.75%        1.31%            6.84%        55.07%         $3,086
June 1, 1995 to May 31, 1996            6.48%           0.76%        1.57%            3.41%        77.49%         $2,010
June 1, 1994 to May 31, 1995            6.94%           0.64%        2.38%            9.42%        35.19%           $599
December 31, 1993 to May 31, 1994(a)    6.04%(d)        0.37%(d)    13.29%(d)        (4.64%)(d)    37.50%           $150
B SHARES
June 1, 1996 to May 31, 1997            5.61%           1.49%        2.37%            6.27%        55.07%         $2,254
June 1, 1995 to May 31, 1996            5.75%           1.51%        2.48%            2.63%        77.49%         $2,098
June 1, 1994 to May 31, 1995            6.17%           1.41%        3.09%            8.59%        35.19%           $919
December 31, 1993 to May 31, 1994(a)    5.40%(d)        1.11%(d)     8.29%(d)        (5.23%)(d)    37.50%           $186
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

(b) The ratio of Gross Expenses to Average Net Assets does not reflect fee 
    waivers or expense reimbursements.

(c) Total Return does not include the effects of sales charges.

(d) Annualized.


16                                                                           17
<PAGE>
- ----
- ----
 
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. The Fund currently
pursues its investment objective by investing all of its investable assets in
Stable Income Portfolio, which has the same investment objective and
substantially similar investment policies as the Fund. Therefore, although the
following discusses the investment policies of that Portfolio, it applies
equally to the Fund. There can be no assurance that the Fund or Stable Income
Portfolio will achieve its investment objective.
 
INVESTMENT POLICIES. The Portfolio seeks to maintain safety of principal while
providing low volatility total return by investing primarily in investment grade
short-term obligations. The Portfolio 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 Portfolio invests include mortgage-backed and other
asset-backed securities, although the Portfolio limits these investments to not
more than 60 percent and 25 percent, respectively, of its total assets. In
addition, the Portfolio limits its holdings of mortgage-backed securities that
are not U.S. Government Securities to 25 percent of its total assets. The
Portfolio may invest any amount of its assets in U.S. Government Securities, but
under normal circumstances less than 50 percent of the Portfolio's total assets
are so invested. The Portfolio 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 Portfolio 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 Portfolio 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
Norwest to be of comparable quality. (See "Additional Investment Policies and
Risk Considerations - Rating Matters.")
 
                                       18
<PAGE>
- ----
- ----
 
The Portfolio 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 Portfolio
may enter into interest rate and mortgage swap agreements and may purchase and
sell interest rate caps, floors and collars. The Portfolio may also engage in
certain strategies involving options (both exchange-traded and over-the-counter)
to attempt to enhance the Portfolio'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 Portfolio's ability to use these
strategies may be limited by market considerations, regulatory limits and tax
considerations. The Portfolio 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 Portfolio is obligated under the option,
it owns an offsetting position in the underlying security or futures contract or
maintains a segregated account of liquid debt instruments with a value at all
times sufficient to cover the Portfolio's obligations under the option.
 
INTERMEDIATE GOVERNMENT
INCOME FUND
 
INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide income
and safety of principal by investing primarily in U.S. Government Securities.
There can be no assurance that the Fund will achieve its investment objective.
 
INVESTMENT POLICIES. The Fund seeks to attain its investment objective by
investing primarily in fixed and variable rate U.S. Government Securities. Under
normal circumstances, the Fund intends to invest at least 65 percent of its
assets in U.S. Government Securities and may invest up to 35 percent of its
assets in fixed income securities that are not U.S. Government Securities. The
Fund emphasizes the use of intermediate maturity securities to lessen interest
rate risk, while employing low risk yield enhancement techniques, such as
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
 
                                                                  19
<PAGE>
- ----
- ----
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.
 
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 Norwest to be of comparable quality. (See
"Additional Investment Policies and Risk Considerations - Rating Matters.")
 
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 percent and 130 percent of the duration of a
5-year Treasury Note, which is used as the Fund's benchmark index as described
under "Other Information - Performance Information." Duration is a measure of a
debt security's average life that reflects the present value of the security's
cash flow and, accordingly, is a measure of price sensitivity to interest rate
changes ("duration risk"). Because earlier payments on a debt security have a
higher present value, duration of a security, except a zero-coupon security,
will be less than the security's stated maturity.
 
In order to manage its exposure to different types of investments, the Fund may
enter into interest rate and mortgage swap agreements and may purchase and sell
interest rate caps, floors and collars. The Fund 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
 
                                       20
<PAGE>
- ----
- ----
futures contract or maintains a segregated account of liquid 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 provide total
return consistent with current income. 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. Norwest 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
30% 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
50% 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 zero coupon
securities and enter into "dollar roll" transactions. 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, generally 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
Norwest 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.
 
                                                                  21
<PAGE>
- ----
- ----
 
The Fund may from time to time invest in securities rated below investment
grade. Such securities (commonly referred to as "junk bonds") have speculative
or predominantly speculative characteristics. The Fund will not purchase a
security rated below the sixth highest rating category by an NRSRO ("B" by
Moody's, Standard & Poor's or Fitch). (See the SAI for additional information
about junk bonds.)
 
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 40 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
securities, see "Investment Objectives and Policies - Additional Investment
Policies and Risk Consideration - Foreign Securities."
 
TOTAL RETURN BOND FUND
 
INVESTMENT OBJECTIVE. The investment objective of the Fund is to seek total
return. The Fund currently pursues its investment objective by investing all of
its investable assets in Total Return Bond Portfolio, which has the same
investment objective and substantially identical investment policies as the
Fund. Therefore, although the following discusses the investment policies of
that Portfolio, it applies equally to the Fund. There can be no assurance that
the Fund will achieve its investment objective.
 
INVESTMENT POLICIES. The Portfolio invests primarily in U.S. Government
Securities, including mortgage-backed securities and investment grade corporate
fixed income securities. Norwest's investment decisions are based on its
analysis of major changes in the direction of interest rates rather than an
attempt by Norwest to predict short-term interest rate fluctuations. Norwest
also applies a contrarian perspective by looking for undervalued segments of the
fixed income market which Norwest believes offer opportunities for increased
returns.
 
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In making its investment decisions for the Portfolio, Norwest focuses on the
maturity structure and quality structure of the Portfolio's portfolio. When
Norwest's outlook is for rising interest rates and falling bond values, the
majority of the Portfolio'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 Norwest anticipates
interest rates to fall and bond prices increase, the Portfolio 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 Portfolio's portfolio will vary from 1 to 30 years.
 
The Portfolio may invest an unlimited amount of its assets in either corporate
securities, including corporate bonds, debentures and notes, or U.S. Government
Securities. The Portfolio 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 Portfolio limits its investments
in variable or floating rate securities to 5 percent of its net assets. The
Portfolio does not currently invest in mortgage-backed securities or enter
"dollar roll" transactions, but reserves the right to do so in the future.
 
The Portfolio 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 Portfolio 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 Service, L.P., or
which are unrated and determined by Norwest 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 Portfolio.
 
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 (and each Core Portfolio's) investment objective and all investment
policies of the Funds (and 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 Core Portfolio).
 
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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 fundamental and may be changed by the Board of
Trustees of the Trust (the "Board") without shareholder approval. Likewise,
nonfundamental investment policies of a Core Portfolio may be changed by that
investment company's board of trustees ("Core Board") without shareholder
approval.
 
Unless otherwise indicated, the discussion below of the investment policies of
the Funds refers, in the case of Stable Income Fund and Total Return Bond 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 and Gateway Structure.") A further description of the Funds' investment
policies, including additional fundamental policies, is contained in the SAI.
 
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.
 
As part of its regular banking operations, Norwest Bank 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
Bank. A lending relationship will not be a factor in the selection of portfolio
securities for a Fund.
 
BORROWING. As a fundamental policy, each of 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 33 1/3% 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 33 1/3% 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, 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).
 
DIVERSIFICATION AND CONCENTRATION. Each Fund is diversified as that term is
defined in the Investment Company Act of 1940 (the "1940 Act"). As a
 
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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: (1) more than 5% of the Fund's total assets would be
invested in the securities of a single issuer; or (2) 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.
 
Each Fund reserves the right upon notification to shareholders to invest up to
100% of its investable assets in one or more other investment companies such as
the Core Portfolios.
 
FIXED INCOME SECURITIES AND THEIR CHARACTERISTICS. Although each Fund only
invests in investment grade fixed income securities, including money market
instruments, an investment in a Fund is subject to risk even if all fixed income
securities in the Fund's portfolio are paid in full at maturity. All fixed
income securities, including U.S. Government Securities, can change in value
when there is a change in interest rates or the issuer's actual or perceived
creditworthiness or ability to meet its obligations.
 
The market value of the interest-bearing debt securities held by the Funds will
be affected by changes in interest rates. There is normally an inverse
relationship between the market value of securities sensitive to prevailing
interest rates and actual changes in interest rates. In other words, an increase
in interest rates produces a decrease in market value. Moreover, the longer the
remaining maturity (and duration) of a security, the greater will be the effect
of interest rate changes on the market value of that security. Changes in the
ability of an issuer to make payments of interest and principal and in the
market's perception of an issuer's creditworthiness will also affect the market
value of the debt securities of that issuer. The possibility exists that, the
ability of any issuer to pay, when due, the principal of and interest on its
debt securities may become impaired.
 
RATING MATTERS. The Funds' investments are subject to "credit risk" relating to
the financial condition of the issuers of the securities that each Fund holds.
To limit credit risk, each Fund will generally buy securities that are rated in
the top four long-term rating categories by an NRSRO or in the top two
short-term rating categories by an NRSRO, although certain Funds have greater
restrictions. Accordingly, the lowest permissible long-term investment grades
for corporate bonds, including convertible bonds, are "Baa" in the case of
Moody's Investors Service ("Moody's") and "BBB" in the case of
 
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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 Norwest 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
Norwest to be of comparable quality to securities whose rating has been lowered
below the Fund's lowest permissible rating category) if Norwest determines that
retaining the security is in the best interests of the Fund. Because a downgrade
often results in a reduction in the market price of the security, sale of a
downgraded security may result in a loss.
 
VARIABLE AND FLOATING RATE SECURITIES. The securities in which the Funds invest
(including mortgage-backed securities) may have variable or floating rates of
interest. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate
index or market interest rate (the "underlying index"). The interest paid on
these securities is a function primarily of the underlying index upon which the
interest rate adjustments are based. Such adjustments minimize changes in the
market value of the obligation and, accordingly, enhance the ability of the Fund
to maintain a stable net asset value. Similar to fixed rate debt instruments,
variable and floating rate instruments are subject to changes in value based on
changes in market interest rates or changes in the issuer's creditworthiness.
The rate of interest on securities purchased by a Fund may be tied to various
rates of interest or indices. Certain variable rate securities (including
mortgage-related securities) pay interest at a rate that varies inversely to
prevailing short-term interest rates (sometimes referred to as inverse
floaters). For instance, upon reset the interest rate payable on a security may
go down when the underlying index has risen. During times when short-term
interest rates are relatively low as compared to long-term interest rates a Fund
may attempt to enhance its yield by purchasing inverse floaters. Certain inverse
floaters may have an interest rate reset mechanism that multiplies the effects
of changes in the underlying index. This form of leverage may have the effect of
increasing the volatility of the security's market value while increasing the
security's, and thus the Fund's, yield. Total Return Bond Fund limits its
investment in variable and floating rate securities to 5% of its assets.
 
There may not be an active secondary market for certain floating or variable
rate instruments (particularly inverse floaters and similar instruments) which
 
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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.
Norwest 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 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
 
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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 Norwest 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 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.
Norwest continuously monitors the financial condition of the issuer to determine
the issuer's likely ability to make payment on demand.
 
CONVERTIBLE SECURITIES AND PREFERRED STOCK. Convertible securities, which
include convertible debt, convertible preferred stock and other securities
exchangeable under certain circumstances for shares of common stock, are fixed
income securities or preferred stock which generally may be converted at a
stated price within a specific amount of time into a specified number of shares
of common stock. A convertible security entitles the holder to receive interest
paid or accrued on debt or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities have characteristics similar to
nonconvertible debt securities in that they normally provide a stream of income
with generally higher yields than those of common stocks of the same or similar
issuers. These securities are usually senior to common stock in a company's
capital structure, but usually are subordinated to non-convertible debt
securities. In general, the value of a convertible security is the higher of its
investment value (its value as a fixed income security) and its conversion value
(the value of the underlying shares of common stock if the security is
converted). As a fixed income security, the value of a convertible security
generally increases when interest rates decline and generally decreases when
interest rates rise. The value of a convertible security is, however, also
influenced by the value of the underlying common stock.
 
Preferred stock is a class of stock having priority over common stock as to
dividends or the recovery of investment or both. The owner of preferred
 
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stock is a shareholder in a business and not, like a bondholder, a creditor.
Dividends paid to preferred stockholders are distributions of earnings of a
business in contrast to interest payments to bondholders which are expenses of a
business.
 
REPURCHASE AGREEMENTS AND LENDING OF PORTFOLIO SECURITIES. Each Fund may seek
additional income by entering into repurchase agreements or by lending
securities from its portfolio to brokers, dealers and other financial
institutions. These investments may entail certain risks not associated with
direct investments in securities. For instance, in the event that bankruptcy or
similar proceedings were commenced against a counterparty in these transactions
or a counterparty defaulted on its obligations, a Fund might suffer a loss.
 
Repurchase agreements are transactions in which a Fund purchases a security and
simultaneously commits to resell that security to the seller at an agreed-upon
price on an agreed-upon future date, normally one to seven days later. The
resale price reflects a market rate of interest that is not related to the
coupon rate or maturity of the purchased security. When a Fund lends a security
it receives interest from the borrower or from investing cash collateral. The
Trust maintains possession of the purchased securities and any underlying
collateral in these transactions, the total market value of which on a
continuous basis is at least equal to the repurchase price or value of
securities loaned, plus accrued interest. The Funds may pay fees to arrange
securities loans and each Fund will, as a fundamental policy, limit securities
lending to not more than 33 1/3% of the value of its total assets.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. Each Fund may purchase
securities offered on a "when-issued" basis and may purchase securities on a
"forward commitment" basis. When such transactions are negotiated, the price is
fixed at the time the commitment is made, but delivery and payment for the
securities take place at a later date. Normally, the settlement date occurs
within three months after the transaction, but delayed settlements beyond three
months may be negotiated.
 
During the period between a commitment and settlement, no payment is made for
the securities purchased and, thus, no interest accrues to the Fund. At the time
a Fund makes a commitment to purchase securities in this manner, however, the
Fund immediately assumes the risk of ownership, including price fluctuation.
Failure by the other party to deliver or pay for a security purchased or sold by
the Fund may result in a loss or a missed opportunity to make an alternative
investment. Any significant commitment of a Fund's assets committed to the
purchase of securities on a when-issued or forward commitment basis may increase
the volatility of its net asset value. Except for dollar roll transactions,
which are described below, each of Stable
 
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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 Norwest were
to forecast incorrectly the direction of interest rate movements, however, a
Fund might be required to complete when-issued or forward transactions at prices
inferior to the current market values. The Funds enter into when-issued and
forward commitments only with the intention of actually receiving the
securities, but a Fund may sell the securities before the settlement date if
deemed advisable. If a Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition or to dispose of its right to
deliver or receive against a forward commitment, it can incur a gain or loss.
 
DOLLAR ROLL TRANSACTIONS. A Fund may enter into dollar roll transactions wherein
the Fund sells fixed income securities, typically mortgage-backed securities,
and makes a commitment to purchase similar, but not identical, securities at a
later date from the same party. Like a forward commitment, during the roll
period no payment is made for the securities purchased and no interest or
principal payments on the security accrue to the purchaser, but the Fund assumes
the risk of ownership. A Fund is compensated for entering into dollar roll
transactions by the difference between the current sales price and the forward
price for the future purchase, as well as by the interest earned on the cash
proceeds of the initial sale. Like other when-issued securities or firm
commitment agreements, dollar roll transactions involve the risk that the market
value of the securities sold by the Fund may decline below the price at which a
Fund is committed to purchase similar securities. In the event the buyer of
securities under a dollar roll transaction becomes insolvent, the Fund's use of
the proceeds of the transaction may be restricted 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")
 
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in return for payments equal to a fixed interest rate on the same amount for a
specified period. Mortgage swap agreements are similar to interest rate swap
agreements, except that the notional principal amount is tied to a reference
pool of mortgages. In a cap or floor, one party agrees, usually in return for a
fee, to make payments under particular circumstances. For example, the purchaser
of an interest rate cap has the right to receive payments to the extent a
specified interest rate exceeds an agreed upon level; the purchaser of an
interest rate floor has the right to receive payments to the extent a specified
interest rate falls below an agreed upon level. A collar entitles the purchaser
to receive payments to the extent a specified interest rate falls outside an
agreed upon range.
 
Swap agreements may involve leverage and may be highly volatile; depending on
how they are used, they may have a considerable impact on the Fund's
performance. Swap agreements involve risks depending upon the counterparty's
creditworthiness and ability to perform as well as the Fund's ability to
terminate its swap agreements or reduce its exposure through offsetting
transactions.
 
SHORT SALES. Intermediate Government Income Fund may make short sales of
securities which it does not own or have the right to acquire 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 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.
 
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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". In addition, if
the value of the securities purchased on margin decreases such that the Fund's
borrowing with respect to the security exceeds the maximum permissible borrowing
amount, the Fund will be required to make margin payments (additional payments
to the broker to maintain the level of borrowing at permissible levels). A
Fund's obligation to satisfy margin calls may require the Fund to sell
securities at an inappropriate time.
 
TECHNIQUES INVOLVING LEVERAGE. Utilization of leveraging involves special risks
and may involve speculative investment techniques. The Funds may borrow for
other than temporary or emergency purposes, lend their securities, enter reverse
repurchase agreements, and purchase securities on a when issued or forward
commitment basis. In addition, certain funds may engage in dollar roll
transactions and Intermediate 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
 
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obligations in which the proceeds of the leveraging have been invested. To the
extent that the interest expense involved in leveraging approaches the net
return on the Fund's investment portfolio, the benefit of leveraging will be
reduced, and, if the interest expense on borrowings were to exceed the net
return to shareholders, the Fund's use of leverage would result in a lower rate
of return than if the Fund were not leveraged. Similarly, the effect of leverage
in a declining market could be a greater decrease in net asset value per share
than if the Fund were not leveraged. In an extreme case, if the Fund's current
investment income were not sufficient to meet the interest expense of
leveraging, it could be necessary for the Fund to liquidate certain of its
investments at an inappropriate time. The use of leverage may be considered
speculative.
 
SEGREGATED ACCOUNT. In order to limit the risks involved in various transactions
involving leverage, the Trust's custodian will set aside and maintain in a
segregated account cash and other liquid securities in accordance with SEC
guidelines. 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.
 
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 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
 
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mortgages, graduated payment mortgages and other types. Mortgage servicers
impose qualification standards for local lending institutions which originate
mortgages for the pools as well as credit standards and underwriting criteria
for individual mortgages included in the pools. In addition, many mortgages
included in pools are insured through private mortgage insurance companies.
 
    LIQUIDITY AND MARKETABILITY. Generally, government and government-related
pass-through pools are highly liquid. While private conventional pools of
mortgages (pooled by non-government-related entities) have also achieved broad
market acceptance and an active secondary market has emerged, the market for
conventional pools is smaller and less liquid than the market for government and
government-related mortgage pools.
 
    AVERAGE LIFE AND PREPAYMENTS. The average life of a pass-through pool varies
with the maturities of the underlying mortgage instruments. In addition, a
pool's terms may be shortened by unscheduled or early payments of principal and
interest on the underlying mortgages. Prepayments with respect to securities
during times of declining interest rates will tend to lower the return of the
Fund and may even result in losses to the Fund if the securities were acquired
at a premium. The occurrence of mortgage prepayments is affected by various
factors including the level of interest rates, general economic conditions, the
location and age of the mortgage and other social and demographic conditions. As
prepayment rates of individual pools vary widely, it is not possible to
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
 
                                       34
<PAGE>
- ----
- ----
of Housing and Urban Development, and Freddie Mac, a corporate instrumentality
of the United States Government. While Fannie Mae and Freddie Mac each guarantee
the payment of principal and interest on the securities they issue, unlike
Ginnie Mae securities, their securities are not backed by the full faith and
credit of the United States Government.
 
    PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. Mortgage-backed securities
offered by private issuers include pass-through securities comprised of pools of
conventional mortgage loans; mortgage-backed bonds (which are considered to be
debt obligations of the institution issuing the bonds and which are
collateralized by mortgage loans); and collateralized mortgage obligations
("CMOs"), which are described below. Mortgage-backed securities issued by
non-governmental issuers may offer a higher rate of interest than securities
issued by government issuers because of the absence of direct or indirect
government guarantees of payment. Many non-governmental issuers or servicers of
mortgage-backed securities, however, guarantee timely payment of interest and
principal on these securities. Timely payment of interest and principal also may
be supported by various forms of insurance, including individual loan, title,
pool and hazard policies.
 
    ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES. Adjustable rate mortgage-backed
securities ("ARMs") are securities that have interest rates that are reset at
periodic intervals, usually by reference to some interest rate index or market
interest rate. Although the rate adjustment feature may act as a buffer to
reduce sharp changes in the value of adjustable rate securities, these
securities are still subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness. Because of the
resetting of interest rates, adjustable rate securities are less likely than
non-adjustable rate securities of comparable quality and maturity to increase
significantly in value when market interest rates fall. Also, most adjustable
rate securities (or the underlying mortgages) are subject to caps or floors.
"Caps" limit the maximum amount by which the 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
 
                                                                  35
<PAGE>
- ----
- ----
rates of the mortgages underlying the Fund's ARMs may lag behind changes in
market interest rates. This may result in a lower value until the interest rate
resets to market rates.
 
    COLLATERALIZED MORTGAGE OBLIGATIONS. CMOs are debt obligations
collateralized by mortgages or mortgage pass-through securities issued by Ginnie
Mae, Freddie Mac or Fannie Mae or by pools of conventional mortgages ("Mortgage
Assets"). CMOs may be privately issued or U.S. Government Securities. Payments
of principal and interest on the Mortgage Assets are passed through to the
holders of the CMOs on the same schedule as they are received, although, certain
classes (often referred to as tranches) of CMOs have priority over other classes
with respect to the receipt of payments. Multi-class mortgage pass-through
securities are interests in trusts that hold Mortgage Assets and that have
multiple classes similar to those of CMOs. Unless the context indicates
otherwise, references to CMOs include multi-class mortgage pass-through
securities. Payments of principal of and interest on the underlying Mortgage
Assets (and in the case of CMOs, any reinvestment income thereon) provide funds
to pay debt service on the CMOs or to make scheduled distributions on the
multi-class mortgage pass-through securities. Parallel pay CMOs are structured
to provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. Planned amortization class mortgage-based
securities ("PAC Bonds") are a form of parallel pay CMO. PAC Bonds are designed
to provide relatively predictable payments of principal provided that, among
other things, the actual prepayment experience on the underlying mortgage loans
falls within a contemplated range. If the actual prepayment experience on the
underlying mortgage loans is at a rate faster or slower than the contemplated
range, or if deviations from other assumptions occur, principal payments on a
PAC Bond may be greater or smaller than predicted. The magnitude of the
contemplated range varies from one PAC Bond to another; a narrower range
increases the risk that prepayments will be greater or smaller than
contemplated. CMOs may have complicated structures and generally involve more
risks than simpler forms of mortgage-related securities.
 
ASSET-BACKED SECURITIES. Asset-backed securities represent direct or indirect
participations in, or are secured by and payable from, assets other than
mortgage-related assets such as motor vehicle installment sales contracts,
installment loan contracts, leases 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-
 
                                       36
<PAGE>
- ----
- ----
backed securities, including adjustable rate asset-backed securities, have yield
characteristics similar to those of mortgage-related securities and,
accordingly, are subject to many of the same risks.
 
Assets are securitized through the use of trusts and special purpose
corporations that issue securities that are often backed by a pool of assets
representing the obligations of a number of different parties. Payments of
principal and interest may be guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution.
Asset-backed securities do not always have the benefit of a security interest in
collateral comparable to the security interests associated with mortgage-related
securities. As a result, the risk that recovery on repossessed collateral might
be unavailable or inadequate to support payments on asset-backed securities is
greater for asset-backed securities than for mortgage-related securities. In
addition, because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of an interest rate or economic cycle has not been
tested.
 
FOREIGN SECURITIES. Stable Income Fund and Income Fund may invest in debt
securities registered and sold in the United States by foreign issuers (Yankee
Bonds) and debt securities sold outside the United States by foreign or U.S.
issuers (Euro-bonds). Each Fund intends to restrict its purchases of debt
securities to issues denominated and payable in United States dollars.
Investments in foreign companies involve certain risks, such as exchange rate
fluctuations, political or economic instability of the issuer or the country of
issue and the possible imposition of exchange controls, withholding taxes on
interest payments, confiscatory taxes or expropriation. Foreign securities also
may be subject to greater fluctuations in price than securities of domestic
corporations denominated in U.S. dollars. Foreign securities and their markets
may not be as liquid as domestic securities and their markets, and foreign
brokerage commissions and custody fees are generally higher than those in the
United States. In addition, less information may be publicly available about a
foreign company than about a domestic company, and foreign companies may not be
subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies.
 
FUTURES CONTRACTS AND OPTIONS. Stable Income Fund and Intermediate 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
 
                                                                  37
<PAGE>
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- ----
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 or liquid 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 Norwest's ability
to predict movements in the prices of individual securities and fluctuations in
the general securities markets; (2) imperfect correlations between movements in
the prices of options or futures contracts and movements in the price of the
securities hedged or used for cover which may cause a given hedge not to achieve
its objective; (3) the fact that the skills and techniques needed to trade these
instruments are different from those needed to select the other securities in
which the Fund invests; (4) lack of assurance that a liquid secondary market
will exist for any particular instrument at any particular time, which, among
other things, may limit a Fund's ability to limit exposures by closing its
positions; (5) the possible need to defer closing out of certain options,
futures contracts and related options to avoid adverse tax consequences; and (6)
the potential for unlimited loss when investing in futures contracts or writing
options for which an offsetting position is not held.
 
Other risks include the inability of a Fund, as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise price and the possible loss of the entire premium paid for options
purchased by the Fund. In addition, the futures exchanges may limit the amount
of fluctuation permitted in certain futures contract prices during a single
trading day. A Fund may be forced, therefore, to liquidate or close out a
futures contract position at a disadvantageous price.
 
There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out a futures position or that a counterparty in an over-
the-counter option transaction will be able to perform its obligations. There
are a limited number of options on interest rate futures contracts and exchange
traded options contracts on fixed income securities. Accordingly, hedging
transactions involving these instruments may entail "cross-hedging." As an
example, a Fund may wish to hedge existing holdings of mortgage-backed
securities, but no listed options may exist on those securities. In that event,
Norwest may attempt to hedge the Fund's securities by the use of options with
respect to similar fixed income securities. The Fund may use
 
                                       38
<PAGE>
- ----
- ----
various futures contracts that are relatively new instruments without a
significant trading history. As a result, there can be no assurance that an
active secondary market in those contracts will develop or continue to exist.
 
LIMITATIONS. The Funds have no current intention of investing in futures
contracts and options thereon for purposes other than hedging. 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.
 
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
 
                                                                  39
<PAGE>
- ----
- ----
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.
 
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: (1) short-term U.S. Government
Securities; (2) certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of commercial banks doing business in the
United States; (3) commercial paper; (4) repurchase agreements; and (5) 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 Norwest to be of comparable quality.
During periods when and to the extent that a Fund has assumed a temporary
defensive position, it may not be pursuing its investment objective. Apart from
temporary defensive purposes, a Fund may at any time invest a portion of its
assets in cash and cash equivalents as described above.
 
PORTFOLIO TRANSACTIONS. The Advisers place orders for the purchase and sale of
assets they manage with brokers and dealers selected by and in the discretion of
the respective Adviser. The Advisers seek "best execution" for all portfolio
transactions, but a Fund or Core Portfolio may pay higher than the lowest
available commission rates when an Adviser believes it is reasonable to do so in
light of the value of the brokerage 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 or
Core Portfolio that invests in foreign securities than would be the case for
comparable transactions effected on United States securities exchanges.
 
Subject to the policy of obtaining "best execution" each Adviser may employ
broker-dealer affiliates (collectively "Affiliated Brokers") to effect brokerage
transactions. Payment of commissions to Affiliated Brokers is subject to
procedures adopted by the Board and, with respect to a Core Portfolio, that
investment company'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 brokerage transactions will be directed to
Affiliated Brokers and in no event will a broker affiliated with the Adviser
directing the transaction receive brokerage transactions in recognition of
research services provided to the Adviser.
 
                                       40
<PAGE>
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- ----
 
The frequency of portfolio transactions of a Fund or Core Portfolio (the
portfolio turnover rate) will vary from year to year depending on many factors.
From time to time a Fund or Core Portfolio may engage in active short-term
trading to take advantage of price movements affecting individual issues, groups
of issues or markets. 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.
 
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<PAGE>
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4.MANAGEMENT
 
The business of the Trust is managed under the direction of the Board of
Trustees, and the business of each Core Portfolio is managed under the direction
of the Core 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 eight persons.
 
INVESTMENT ADVISORY SERVICES
 
NORWEST INVESTMENT MANAGEMENT. Subject to the general supervision of the Board,
Norwest makes investment decisions for the Funds and Core Portfolios and
continuously reviews, supervises and administers each Fund's and Core
Portfolio's investment program or oversees the investment decisions of the
investment subadvisers, as applicable. Norwest provides its investment advisory
services indirectly to Stable Income Fund and Total Return Bond Fund through its
investment advisory services to the Core Portfolios. Norwest, which is located
at Norwest Center, Sixth Street and Marquette, Minneapolis, Minnesota 55479, is
an indirect subsidiary of Norwest Corporation, a multi-bank holding company that
was incorporated under the laws of Delaware in 1929. As of June 30, 1997,
Norwest Corporation had assets of $83.6 billion, which made it the 11th largest
bank holding company in the United States. As of June 30, 1997, Norwest
Corporation and its affiliates managed assets with a value of approximately
$52.9 billion.
 
INVESTMENT SUBADVISERS. To assist Norwest in carrying out its obligations, the
Core Portfolios and Norwest have retained the services of various investment
subadvisers as follows:
 
<TABLE>
<CAPTION>
                                                      INVESTMENT SUBADVISER OF
FUND                           CORE PORTFOLIO(S)           CORE PORTFOLIO
- -----------------------------------------------------------------------------
<S>                        <C>                        <C>
Stable Income Fund         Stable Income Portfolio    Galliard
Total Return Bond Fund     Total Return Bond          UCM
                           Portfolio
</TABLE>
 
Galliard and UCM make investment decisions for the Core Portfolios to which they
act as investment subadviser and continuously review, supervise
and administer the Core Portfolio's investment programs with respect to that
portion, if any, of the Portfolios' assets that Norwest believes should be
managed by Galliard or UCM. Currently, Galliard and UCM manage all of the assets
of the Core Portfolios for which they subadvise. Norwest supervises the
performance of Galliard and UCM, including their adherence to the Portfolios'
investment objectives and policies.
 
                                       42
<PAGE>
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- ----
 
GALLIARD CAPITAL MANAGEMENT, INC. Galliard, which is located at 800 LaSalle
Avenue, Suite 2060, Minneapolis, Minnesota 55479, is an investment advisory
subsidiary of Norwest Bank. Galliard provides investment advisory services to
bank and thrift institutions, pension and profit sharing plans, trusts and
charitable organizations and corporate and other business entities. As of March
31, 1997 Galliard managed approximately $3.0 billion in assets.
 
UNITED CAPITAL MANAGEMENT. UCM, which is located at 1700 Lincoln Street, Suite
3301, Denver, Colorado 80274, is a division of Norwest Bank Colorado, N.A., a
subsidiary of Norwest Corporation. UCM provides specialized investment advisory
services to various institutional pension accounts. As of March 31, 1997 UCM
managed over $2.0 billion in assets.
 
PORTFOLIO MANAGERS. Many persons on the advisory staff of Norwest, Galliard and
UCM contribute to the investment services provided to the Funds and the Core
Portfolios. The following persons, however, are primarily responsible for
day-to-day management and, unless otherwise noted, have been since the inception
of the Fund or Portfolio. For periods prior to June 1, 1997, all persons
associated with Norwest served in their current positions with Norwest Bank.
Prior to that date Norwest Bank was each Fund's investment adviser. In addition
to their responsibilities as listed below, each of the portfolio managers may
perform portfolio management and other duties for Norwest Bank.
 
     STABLE INCOME FUND/STABLE INCOME PORTFOLIO - Karl P. Tourville. Mr.
     Tourville has been a principal of Galliard since 1995. He has been
     associated with Norwest and its affiliates since 1986, most recently as
     Vice President and Senior Portfolio Manager.
 
     INTERMEDIATE GOVERNMENT INCOME FUND AND INCOME FUND - Marjorie H. Grace,
     CFA. Ms. Grace has been a 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.
 
     TOTAL RETURN BOND FUND/TOTAL RETURN BOND PORTFOLIO - David B. Kinney. Mr.
     Kinney is a Vice President of UCM. He has been associated with Norwest and
     its affiliates since 1981.
 
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<PAGE>
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ADVISORY FEES. For its services, Norwest receives investment advisory fees from
the Funds (or to the extent a Fund invests in a Core Portfolio, from that Core
Portfolio) at the following annual rates of the Fund's or Portfolio's average
daily net assets.
 
<TABLE>
<CAPTION>
 
                                              INVESTMENT ADVISORY
FUND                                                  FEE
- -----------------------------------------------------------------
<S>                                           <C>
Stable Income Fund (Stable Income
  Portfolio)................................           0.30%
Intermediate Government Income Fund.........           0.33%
Income Fund.................................           0.50%
Total Return Bond Fund (Total Return Bond
  Portfolio)................................           0.35%
</TABLE>
 
Norwest (and not the Core Portfolios) pays Galliard and UCM a fee for their
investment subadvisory services. This compensation does not increase the amount
paid by the Core Portfolio to Norwest for investment advisory services.
 
Stable Income Fund and Total Return Bond Fund may withdraw their investments
from their respective Core Portfolio at any time if the Board determines that it
is in the best interests of the Fund to do so. (See "Other Information - Core
and Gateway Structure.") Accordingly, Stable Income Fund and Total Return Bond
Fund have retained Norwest as their investment adviser. Similarly, Stable Income
Fund has retained Galliard as its investment subadviser; and Total Return Bond
Fund has retained UCM as its investment subadviser. Under these "dormant"
investment advisory arrangements, none of Norwest, Galliard or UCM receives any
advisory fees with respect to a Fund as long as the Fund remains completely
invested in its respective Core Portfolio or any other investment companies. In
the event that Stable Income Fund or Total Return Bond Fund were to withdraw
there assets from their respective Core Portfolios, Norwest would receive an
investment advisory fee at the same rate as it does for the Core Portfolio and
would pay Galliard and UCM, as applicable, a fee for their investment
sub-advisory services.
 
MANAGEMENT, ADMINISTRATION AND
DISTRIBUTION SERVICES
 
As manager, Forum supervises the overall management of the Trust (including the
Trust's receipt of services for which the Trust is obligated to pay) other than
investment advisory services. In this capacity Forum 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 Funds by others. FAS is responsible for
performing certain administrative services necessary for the Trust's operations
with respect to each Fund including: (1) preparing and printing updates
 
                                       44
<PAGE>
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of the Trust's registration statement and prospectuses to its shareholders, the
SEC and state securities administrators; (2) preparing proxy and information
statements and any other communications to shareholders; (3) monitoring the
sales of shares and ensuring that such shares are properly and duly registered
with the SEC and applicable state securities administrators; and (4) supervising
the declaration of dividends and distributions to shareholders.
 
As of June 30, 1997, Forum and FAS provided management and administrative
services to registered investment companies and collective investment funds with
assets of approximately $25.5 billion. Forum is a member of the National
Association of Securities Dealers, Inc. For their services, Forum and FAS each
receives a fee with respect to Stable Income Fund and Total Return Bond Fund at
an annual rate of 0.025% of the Fund's average daily net assets and with respect
to Intermediate Government Income Fund and Income Fund at an annual rate of
0.05% of the Fund's average daily net assets.
 
FAS also serves as an administrator of each Core Portfolio and provides services
to the Core Portfolios that are similar to those provided to the Funds by Forum
and FAS. For its services FAS receives a fee with respect to each Core Portfolio
at an annual rate of 0.05% of the Portfolio's average daily net assets.
 
Pursuant to a separate agreement, Forum Accounting Services, LLC ("Forum
Accounting") provides portfolio accounting services to each Fund and to each
Core Portfolio. Forum, FAS, and Forum Accounting 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, 1997,
Forum, FAS and Forum Accounting were controlled by John Y. Keffer, President and
Chairman of the Trust.
 
Forum also acts as the distributor of the Shares. As the Funds' distributor,
Forum 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, Forum will make
payments to broker-dealers (see, "Characteristics of The Shares.") From its own
resources, Forum may pay additional fees to broker-dealers or other persons for
distribution or other services related to the Funds. For further information
about the Funds' distribution plan, including the fees payable thereunder, see
"Characteristics of The Shares."
 
SHAREHOLDER SERVICING AND
CUSTODY
 
Norwest Bank serves as transfer agent and dividend disbursing agent for the
Trust (in this capacity, the "Transfer Agent"). The Transfer Agent maintains an
account for each shareholder of the Trust (unless such accounts are maintained
by sub-transfer agents or processing agents), performs other
 
                                                                  45
<PAGE>
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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. 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 services, the Transfer Agent receives a
fee with respect to each Fund at an annual rate of 0.25% of each Fund's average
daily net assets attributable to each class of the Fund.
 
Norwest Bank also serves as each Fund's and each Core Portfolio's custodian and
may appoint subcustodians for the foreign securities and other assets held in
foreign countries. For its custodial services, Norwest Bank receives a fee with
respect to each Fund and each Core Portfolio at an annual rate of 0.02% of the
first $100 million of the Fund's or Core Portfolio's average daily net assets,
0.015% of the next $100 million of the Fund's or Core Portfolio's average daily
net assets and 0.01% of the Fund's or Core Portfolio's remaining average daily
net assets. No fee is directly payable by the Fund to the extent the Fund is
invested in a Core Portfolio.
 
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. Each service provider to a Fund may
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. Except as otherwise noted fee waivers are voluntary and may be reduced
or eliminated at any time.
 
Norwest and Forum have agreed to waive their respective fees or reimburse
expenses in order to maintain Total Return Bond Fund's total combined operating
expenses through May 31, 1998 at the same levels as the Fund's total operating
expenses prior to May 31, 1997 (0.75% for A Shares and 1.50% for B Shares).
After May 31, 1988, any proposed reduction in the amount of those waivers and
reimbursements would be reviewed by the Board.
 
                                       46
<PAGE>
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- ----
 
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.
 
The expenses of Stable Income Fund and Total Return Bond Fund include the Fund's
pro rata share of the operating expenses of the Core Portfolios in which the
Fund invests, which are borne indirectly by the Fund's shareholders.
 
                                                                  47
<PAGE>
- ----
- ----
 
5.CHOOSING A SHARE CLASS
 
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
broker-dealers and other financial institutions selling 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 4.0% 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 does not take into account the
time value of money, fluctuations in net asset value or the effects of different
performance assumptions.
 
                                       48
<PAGE>
- ----
- ----
 
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
 
<TABLE>
<CAPTION>
 
                                                              BROKER-
                                                              DEALERS'
                                   SALES CHARGE            REALLOWANCE AS
                                AS A PERCENTAGE OF          A PERCENTAGE
                         ................................   OF OFFERING
AMOUNT OF PURCHASE       OFFERING PRICE  NET ASSET VALUE*      PRICE
 
- -------------------------------------------------------------------------
<S>                      <C>             <C>               <C>
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
</TABLE>
 
INTERMEDIATE GOVERNMENT INCOME FUND,
INCOME FUND AND TOTAL RETURN BOND FUND
 
<TABLE>
<CAPTION>
 
                                                              BROKER-
                                                              DEALERS'
                                   SALES CHARGE            REALLOWANCE AS
                                AS A PERCENTAGE OF          A PERCENTAGE
                         ................................   OF OFFERING
AMOUNT OF PURCHASE       OFFERING PRICE  NET ASSET VALUE*      PRICE
 
- -------------------------------------------------------------------------
<S>                      <C>             <C>               <C>
Less than $50,000......         4.00%            4.17%            3.50%
$50,000 to $99,999.....         3.50%            3.63%            3.00%
$100,000 to $249,000...         3.00%            3.09%            2.50%
$250,000 to $499,999...         2.50%            2.56%            2.25%
$500,000 to $999,000...         2.00%            2.04%            1.75%
$1,000,000 to
 $2,499,999............         0.00%            0.00%            0.75%
$2,500,000 to
 $4,999,999............         0.00%            0.00%            0.50%
Over $5,000,000........         0.00%            0.00%            0.25%
 
* Rounded to the nearest one-hundredth percent
</TABLE>
 
Forum may pay a broker-dealers' reallowance to selected broker-dealers
purchasing shares as principal or agent, which may include banks, bank
affiliates and Processing Organizations. Normally, Forum will reallow discounts
to selected broker-dealers in the amounts indicated in the table above. In
addition, Forum may elect to reallow the entire sales charge to selected
 
                                                                  49
<PAGE>
- ----
- ----
broker-dealers for all sales with respect to which orders are placed with Forum.
The broker-dealers' reallowance may be changed from time to time. Forum may make
additional payments (out of its own resources) to selected broker-dealers of up
to 0.75% (0.50% in the case of Stable Income Fund) of the value of Fund shares
purchased at net asset value.
 
In addition, from time to time and at its own expense, Forum may provide
compensation, including financial assistance, to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns or other dealer-sponsored special events.
Compensation may include: (1) the provision of travel arrangements and lodging;
(2) tickets for entertainment events; and (3) merchandise.
 
In some instances, this compensation may be made available only to certain
dealers or other financial intermediaries who have sold or are expected to sell
significant amounts of shares of the Funds or who charge an asset based fee
(whether or not they have a fiduciary relationship with their clients).
 
No sales charge is assessed on purchases: (1) 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); (2) by any
bank, trust company or other financial intermediary acting on behalf of its
asset based fee account customers; (3) by trustees and officers of the Trust;
directors, officers and full-time employees of Forum, of Norwest Corporation or
of any of their affiliates; the spouse, direct ancestor or direct descendant
(collectively, "relatives") of any such person; any trust or individual
retirement account or self-employed retirement plan for the benefit of any such
person or relative; or the estate of any such person or relative; (4) by any
registered investment adviser with whom Forum has entered into a Share purchase
agreement and which is acting on behalf of its fiduciary customer accounts; or
(5) 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"). Shares sold without a sales charge may not be resold except to the
Fund, 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
 
                                       50
<PAGE>
- ----
- ----
redeemed shares at the time of their purchase a sales charge equal to or greater
than that applicable to the A Shares of that Fund. Investors should contact the
Trust for further information and to obtain the necessary forms.
 
REDUCED INITIAL SALES CHARGES.  To qualify for a reduced sales charge, an
investor or the investor's Processing Organization must notify the Transfer
Agent at the time of purchase of the investor's intention to qualify and must
provide the Transfer Agent with sufficient information to verify that the
purchase qualifies for the reduced sales charge. Reduced sales charges may be
modified or terminated at any time and are subject to confirmation of an
investor's holdings. Further information about reduced sales charges is
contained in the SAI.
 
SELF-DIRECTED 401(K) PROGRAMS.  Purchases of A Shares of a Fund through
self-directed 401(k) programs and other qualified retirement plans offered by
Norwest, Forum or their affiliates in accumulated amounts of less than $100,000
are subject to a reduced sales charge applicable to a single purchase of
$100,000.
 
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION).  An investor's purchase of
additional A Shares of a Fund may qualify for rights of accumulation ("ROA")
under which the applicable sales charge will be based on the total of the
investor's current purchase and the net asset value (at the end of the previous
Fund Business Day) of all A Shares of that Fund held by the investor. For
example, if an investor in Intermediate 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 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.  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.
 
                                                                  51
<PAGE>
- ----
- ----
 
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
 
<TABLE>
<CAPTION>
 
                                            CONTINGENT DEFERRED
                                          SALES CHARGE AS A % OF
                         PERIOD SHARES     DOLLAR AMOUNT SUBJECT
AMOUNT OF PURCHASE           HELD                TO CHARGE
- -----------------------------------------------------------------
<S>                    <C>                <C>
$1,000,000 to          Less than one
  $4,999,999.........  year                          0.50%
                       One to two years              0.25%
                       Less than one
Over $5,000,000......  year                          0.25%
</TABLE>
 
INTERMEDIATE GOVERNMENT INCOME FUND,
INCOME FUND AND TOTAL RETURN BOND FUND
 
<TABLE>
<CAPTION>
 
                                            CONTINGENT DEFERRED
                                          SALES CHARGE AS A % OF
                         PERIOD SHARES     DOLLAR AMOUNT SUBJECT
AMOUNT OF PURCHASE           HELD                TO CHARGE
- -----------------------------------------------------------------
<S>                    <C>                <C>
$1,000,000 to          Less than one
  $2,499,999.........  year                          0.75%
                       One to two years              0.50%
$2,500,000 to          Less than one
  $4,999,999.........  year                          0.50%
                       Less than one
Over $5,000,000......  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 a Fund's A Shares pursuant
 
                                       52
<PAGE>
- ----
- ----
to their Statement, no contingent deferred sales charge is imposed. The
Statement of Intention provides for a contingent deferred sales charge in
certain other cases. Further information about the contingent deferred sales
charge is contained in the SAI.
 
B SHARES
 
DISTRIBUTION PLAN.  B Shares are sold at their net asset value per share without
the imposition of a sales charge at the time of purchase. With respect to B
Shares, each Fund has adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act (the "Plan") providing for distribution payments, at an annual rate
of up to 0.75% of the average daily net assets of the Fund attributable to B
Shares (the "distribution services fee"), by each Fund to Forum, to compensate
Forum for its distribution activities. The distribution payments due to Forum
from each Fund comprise: (1) sales commissions at levels set from time to time
by the Board ("sales commissions"); and (2) 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% (1.5% in the case of Stable Income Fund) and Forum
currently expects to pay sales commissions to each broker-dealer at the time of
sale of up to 4% (1.5% in the case of Stable Income Fund) of the purchase price
of B Shares of each Fund sold by the broker-dealer.
 
Under the distribution services agreement between Forum and the Trust, Forum
will receive, in addition to the distribution services fee, all contingent
deferred sales charges due upon redemptions of B Shares. The combined contingent
deferred sales charge and distribution services fee on B Shares are intended to
finance the distribution of those shares by permitting an investor to purchase
shares through broker-dealers without the assessment of an initial sales charge
and, at the same time, permitting Forum to compensate broker-dealers in
connection with the sales of the shares. Proceeds from the contingent deferred
sales charge with respect to a Fund are paid to Forum to defray the expenses
related to providing distribution-related services in connection with the sales
of B Shares, such as the payment of compensation to broker-dealers selling B
Shares. Forum may spend the distribution services fees it receives as it deems
appropriate on any activities primarily intended to result in the sale of B
Shares.
 
Under the Plan, a Fund will make distribution services fee payments to Forum
only for periods during which there are outstanding uncovered distribution
charges attributable to that Fund. Uncovered distribution charges are equivalent
to all sales commissions previously due (plus interest), less amounts received
pursuant to the Plan and all contingent deferred sales charges previously paid
to Forum. At May 31, 1997, Stable Income Fund, Intermediate Government Income
Fund, Income Fund and Total Return
 
                                                                  53
<PAGE>
- ----
- ----
Bond Fund had uncovered distribution expenses of $15,281; $153,833; $75,004; and
$45,379, respectively, or approximately 1.45%, 1.71%, 2.24% and 2.01%, of each
respective Fund's net assets attributable to B Shares as of the same date.
 
The amount of distribution services fees and contingent deferred sales charge
payments received by Forum with respect to a Fund is not related directly to the
amount of expenses incurred by Forum in connection with providing distribution
services to the B Shares and may be higher or lower than those expenses. Forum
may be considered to have realized a profit under the Plan if, at any time, the
aggregate amounts of all distribution services fees and contingent deferred
sales charge payments previously made to Forum exceed the total expenses
incurred by Forum in distributing B Shares.
 
Pursuant to the Plan, each Fund has agreed also to pay Forum a maintenance fee
in an amount equal to 0.25% of the average daily net assets of the Fund
attributable to the B Shares for providing personal services to shareholder
accounts. The maintenance fee may be paid by Forum to broker-dealers in an
amount not to exceed 0.25% of the value of B Shares held by the customers of the
broker-dealers. The distribution services fee and the maintenance fee are each
accrued daily and paid monthly and will cause a Fund's B Shares to have a higher
expense ratio and to pay lower dividends than A Shares of that Fund.
Notwithstanding the discontinuation of distribution services fees with respect
to a Fund, the Fund may continue to pay maintenance fees.
 
A Fund does not accrue future distribution services fees as a liability of the
Fund with respect to the B Shares or reduce the Fund's current net assets in
respect of distribution services fees which may become payable under the Plan in
the future.
 
In the event that the Plan is terminated or not continued with respect to a
Fund, the Fund may, under certain circumstances, continue to pay distribution
services fees to Forum (but only with respect to sales that occurred prior to
the termination or discontinuance of the Plan). Those circumstances are
described in detail in the SAI. In deciding whether to purchase B Shares of a
Fund, investors should consider that payments of distribution services fees
could continue until such time as there are no uncovered distribution charges
under the Plan attributable to that Fund. In approving the Plan, the Board
determined that there was a reasonable likelihood that the Plan would benefit
each Fund and its B shareholders.
 
Periods with a high level of sales of B Shares of a Fund accompanied by a low
level of redemptions of those shares that are subject to contingent deferred
sales charges will tend to increase uncovered distribution charges. Conversely,
periods with a low level of sales of B Shares of a Fund accompanied by a high
level of redemptions of those shares that are subject to contingent deferred
sales charges will tend to reduce uncovered distribution charges. A
 
                                       54
<PAGE>
- ----
- ----
high level of sales of B Shares during the first few years of operations,
coupled with the limitation on the amount of distribution services fees payable
by a Fund with respect to B Shares during any fiscal year, would cause a large
portion of the distribution services fees attributable to a sale of the B Shares
to be accrued and paid by the Fund to Forum with respect to those shares in
fiscal years subsequent to the years in 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.
 
<TABLE>
<CAPTION>
 
                            CONTINGENT DEFERRED SALES CHARGE AS A % OF
                                 DOLLAR AMOUNT SUBJECT TO CHARGE
                            ..........................................
                                                     INTERMEDIATE
                                                      GOVERNMENT
                                                 INCOME FUND, INCOME
                                                FUND AND TOTAL RETURN
YEAR SINCE PURCHASE         STABLE INCOME FUND        BOND FUND
 
- ----------------------------------------------------------------------
<S>                         <C>                 <C>
First.....................            1.5%                  4.0%
Second....................           0.75%                  3.0%
Third.....................         None                     3.0%
Fourth....................         None                    2.0        %
Fifth.....................         None                    2.0        %
Sixth.....................         None                    1.0        %
Seventh...................         None                  None
</TABLE>
 
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
 
                                                                  55
<PAGE>
- ----
- ----
held for over four years (two years in the case of the Stable Income Fund), and
fourth from the longest outstanding B Shares of the Fund held for less than four
years (two years in the case of the Stable Income Fund).
 
No contingent deferred sales charge is imposed on: (1) redemptions of Shares
acquired through the reinvestment of dividends and distributions; (2)
involuntary redemptions by a Fund of shareholder accounts with low account
balances; (3) 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; (4) 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 (5) redemptions by any registered
investment adviser with whom Forum has entered into a share purchase agreement
and which is acting on behalf of its fiduciary customer accounts. See the SAI
for further information.
 
CONVERSION FEATURE.  After six years (four years in the case of Stable Income
Fund) from the end of the calendar month in which the shareholder's purchase
order for B shares was accepted, the Shares will automatically convert to A
Shares of that Fund. The conversion will be on the basis of the relative net
asset values of the Shares, without the imposition of any sales load, fee or
other charge. For purposes of conversion, B Shares of a Fund purchased by a
shareholder through the reinvestment of dividends and distributions will be
considered to be held in a separate sub-account. Each time any B Shares in the
shareholder's account (other than those in the sub-account) convert, a
corresponding pro rata portion of those shares in the sub-account will also
convert. The conversion of B Shares to A Shares is subject to the continuing
availability of certain opinions of counsel and the conversion of a Fund's B
Shares to A Shares may be suspended if such an opinion is no longer available at
the time the conversion is to occur. In that event, no further conversions of
the Fund's B Shares would occur, and shares might continue to be subject to a
distribution services and maintenance fee for an indefinite period.
 
                                       56
<PAGE>
- ----
- ----
 
                                                           6.  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."
 
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 or money order (cash cannot be accepted)
along with a completed account application form to the Trust at the address
listed under "Account Application." Checks or money orders are accepted at full
value subject to collection. If a check or money order 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 Forum.
 
For individual or Uniform Gift to Minors Act accounts, the check or money order
used to purchase shares of a Fund must be made payable to "Norwest Advantage
Funds" or to one or more owners of that account and endorsed to Norwest
Advantage Funds. No other method of payment by check will be accepted. For
corporation, partnership, trust, 401(k) plan or other non-individual type
accounts, the check used to purchase shares of a Fund must be made payable on
its face to "Norwest Advantage Funds." No other method of payment by check will
be accepted.
 
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:
 
                                                                  57
<PAGE>
- ----
- ----
 
The investor should then promptly complete and mail the account application
form. There may be charges by the investor's bank for transmitting the money by
bank wire. The Trust does not charge investors for the receipt of wire
transfers. Payment by bank wire is treated as a federal funds payment when
received.
 
3.  THROUGH FINANCIAL INSTITUTIONS. Shares may be purchased and redeemed through
certain broker-dealers, banks and other financial institutions ("Processing
Organizations"). The Transfer Agent, Forum and their affiliates may be
Processing Organizations. Processing Organizations may receive as a
broker-dealer's reallowance a portion of the sales charge paid by their
customers who purchase A Shares of a Fund, may receive payments from Forum with
respect to sales of B Shares and may receive payments as a processing agent from
the Transfer Agent. In addition, financial institutions, including Processing
Organizations, may charge their customers a fee for their services and are
responsible for promptly transmitting purchase, redemption and other requests to
the Funds.
 
Investors who purchase shares through a Processing Organization will be subject
to the procedures of their Processing Organization, which may include charges,
limitations, investment minimums, cutoff times and restrictions in addition to,
or different from, those applicable to shareholders who invest in a Fund
directly. These investors should acquaint themselves with their institution's
procedures and should read this Prospectus in conjunction with any materials and
information provided by their institution. Customers who purchase a Fund's
shares through a Processing Organization may or may not be the shareholder of
record and, subject to their institution's and the Funds' procedures, may have
Fund shares transferred into their name. There is typically a three-day
settlement period for purchases and redemptions through broker-dealers. Certain
Processing Organizations also may enter purchase orders with payment to follow.
 
Certain shareholder services may not be available to shareholders who have
purchased shares through a Processing Organization. These shareholders should
contact their Processing Organization for further information. The Trust may
confirm purchases and redemptions of a Processing Organization's customers
directly to the Processing Organization, which in turn will provide its
customers with confirmations and periodic statements. The Trust is not
responsible for the failure of any Processing Organization to carry out its
obligations to its customer.
 
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.
 
                                       58
<PAGE>
- ----
- ----
 
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 (New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving
and Christmas) 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.
 
Fund shares become entitled to receive dividends and distributions on the next
Fund Business Day after a purchase order is accepted.
 
All payments for Shares must be in U.S. dollars. 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.
 
                                                                  59
<PAGE>
- ----
- ----
 
7.HOW TO SELL SHARES
 
GENERAL INFORMATION
 
Fund Shares may be sold (redeemed) at their net asset value on any Fund Business
Day subject to a contingent deferred sales charge imposed, in the case of A
Shares, on some redemptions made within two years of purchase and, in the case
of B Shares, on most redemptions made within four years of purchase (two in the
case of Stable Income Fund). There is no minimum period of investment and no
restriction on the frequency of redemptions.
 
Fund shares are redeemed as of the next determination of the Fund's net asset
value following receipt by the Transfer Agent of the redemption order in proper
form (and any supporting documentation that the Transfer Agent may require).
Redeemed shares are not entitled to receive dividends declared after the day the
redemption becomes effective.
 
Normally, redemption proceeds are paid immediately, but in no event later than
seven days, following receipt 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 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 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
 
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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
 
To protect shareholders and the Funds against fraud, signatures on certain
requests must have a signature guarantee. Requests must be made in writing and
include a signature guarantee for any of the following transactions: (1) any
endorsement on a share certificate; (2) instruction to change a shareholder's
record name; (3) modification of a designated bank account for wire redemptions;
(4) instruction regarding an Automatic Investment Plan or Automatic Withdrawal
Plan; (5) dividend and distribution election; (6) telephone redemption; (7)
exchange option election or any other option election in connection with the
shareholder's account; (8) written instruction to redeem Shares whose value
exceeds $50,000; (9) redemption in an account in which the account address has
changed within the last 30 days; (10) redemption when the proceeds are deposited
in a Norwest Advantage Funds account under a different account registration; and
(xi) the remitting of redemption proceeds to any address, person or account for
which there are not established standing instructions on the account.
 
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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 want to telephone redemption or exchange privileges must elect
those privileges. The Trust and Transfer Agent 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 and Transfer Agent did not
employ such procedures, they could be liable for losses due to unauthorized or
fraudulent telephone instructions. Shareholders should verify the accuracy of
telephone instructions immediately upon receipt of confirmation statements.
During times of drastic economic or market changes, telephone redemption and
exchange privileges may be difficult to implement. In the event that a
shareholder is unable to reach the Transfer Agent by telephone, requests may be
mailed or hand-delivered to the Transfer Agent.
 
Due to the cost to the Trust of maintaining smaller accounts, the Trust reserves
the right to redeem, upon not less than 60 days' written notice, all shares in
any Fund account whose aggregate net asset value is less than $1,000 ($5,000 in
the case of Stable Income Fund) immediately following any redemption.
 
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                                                  8.  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, ValuGrowth-SM- 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 Funds' Shares. In addition,
A Shares may be exchanged for Investor Shares of Ready Cash Investment Fund and
Municipal Money Market Fund of the Trust. B Shares may be exchanged for Exchange
Shares of Ready Cash Investment Fund. Prospectuses for the shares of the funds
listed above, as well as a current list of the funds of the Trust that offer
shares exchangeable with the Shares of the Funds, can be obtained through Forum
by contacting the Transfer Agent.
 
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 by opening
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 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
 
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acquired in the exchange over any initial sales charge paid by the shareholder
for the shares being exchanged. For example, if a shareholder paid a 2% initial
sales charge in connection with a purchase of shares and then exchanged those
shares into A Shares of another fund with a 3% initial sales charge, the
shareholder would pay an additional 1% sales charge on the exchange. A Shares
acquired through the reinvestment of dividends or distributions are deemed to
have been acquired with a sales charge rate equal to that applicable to the
shares on which the dividends or distributions were paid.
 
Shares of a Fund ("Original Shares") may be exchanged without the payment of any
contingent deferred sales charge. A and B Shares acquired as a result of such
exchange ("New Shares") and subsequently redeemed will nonetheless be subject to
the contingent deferred sales charge applicable to the Original Shares as if
those shares were being redeemed at that time. For purposes of computing both
the contingent deferred sales charge payable upon redemption of the New Shares
and, in the case of B Shares, the time remaining before the New B Shares convert
to A Shares of that Fund, the deferred sales charge and the time remaining
applicable to the Original Shares will apply to the New Shares rather than the
deferred sales charge and time remaining that would otherwise apply. The
deferred sales charge and time remaining applicable to Shares first purchased by
a shareholder will apply to New Shares resulting from both an initial and any
subsequent exchanges.
 
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
 
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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.
Generally, all contributions and investment earnings in an IRA will be
tax-deferred until withdrawn. 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.
 
An employer may also contribute to an individual's IRA as part of a Savings
Incentive Match Plan for Employees, or "SIMPLE plan," established after December
31, 1996. Under a SIMPLE plan, an employee may contribute up to $6,000 annually
to the employee's IRA, and the employer must generally match such contributions
up to 3% of the employee's annual salary. Alternatively, the employer may elect
to contribute to the employee's IRA 2% of the lesser of the employee's earned
income or $150,000.
 
The foregoing discussion regarding IRAs is based on regulations in effect as of
June 1, 1997 and summarizes only some of the important federal tax
considerations generally affecting IRA contributions made by individuals or
their employers. It is not intended as a substitute for tax planning. Investors
should consult their tax advisors with respect to their specific tax situations
as well as with respect to state and local taxes.
 
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
 
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writing or calling the Transfer Agent. The Trust may suspend a shareholder's
withdrawal plan without notice if the account contains insufficient funds to
effect a withdrawal or if the account balance is less than $1,000 at any time.
 
REOPENING ACCOUNTS
 
A shareholder may reopen an account, without filing a new account application
form, at any time within one year after the shareholder's account is closed,
provided that the information on the account application form on file with the
Trust is still applicable.
 
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                                                   9.  DIVIDENDS AND TAX MATTERS
 
DIVIDENDS
 
Dividends of Stable Income Fund's and Intermediate Government Income Fund's net
investment income are declared and paid monthly. Dividends of Income Fund's 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 and distributions paid by a Fund with respect to
each class of shares are calculated in the same manner and at the same time. 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.
 
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, each Fund will not be liable for federal income and excise taxes on the
net investment income and capital gain distributed to its 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 net
short-term capital gain) are taxable to shareholders of the Fund as ordinary
 
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income. Pursuant to the Taxpayer Relief Act of 1997, two different tax rates
apply to net capital gains -- that is, the excess of net gains from capital
assets held for more than one year over net losses from capital assets held for
not more than one year. One rate (generally 28%) applies to net gains on capital
assets held for more than one year but not more than 18 months ("mid-term
gains"), and a second rate (generally 20%) applies to the balance of such net
capital gains ("adjusted net capital gains"). Distributions of mid-term gains
and adjusted net capital gains will be taxable to shareholders as such,
regardless of how long a shareholder has held shares in the Fund. If a
shareholder holds Shares for six months or less and during that period receives
a distribution of net capital gain, any loss realized on the sale of the Shares
during that six-month period will be a long-term capital loss to the extent of
the distribution. Dividends from Stable Income Fund and Intermediate Government
Income Fund and distributions reduce the net asset value of the Fund paying the
dividend or distribution by the amount of the dividend or distribution.
Furthermore, these dividends or a distribution made shortly after the purchase
of Shares by a shareholder, although in affect a return of capital to that
particular shareholder, will be taxable to the shareholder as described above.
 
Each Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gain distributions and redemptions) paid
to a shareholder who fails to provide the Fund with a correct taxpayer
identification number or to make required certifications, or who is subject to
backup withholding.
 
Reports containing appropriate information with respect to the federal income
tax status of dividends and distributions paid during the year by each Fund will
be mailed to shareholders shortly after the close of each calendar year.
 
CORE PORTFOLIOS. Each Core 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
a Core Portfolio are deemed to have been "passed through" to the Funds investing
in the Core Portfolio in proportion to the Funds' interests in the Core
Portfolio, regardless of whether such amounts have been distributed by the Core
Portfolio to the Funds.
 
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                                                          10.  OTHER INFORMATION
 
BANKING LAW MATTERS
 
Federal banking rules 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. Forum believes that Norwest and any bank or other bank affiliate also
may perform Processing Organization or similar services for the Trust and its
shareholders without violating applicable federal banking rules. If a bank or
bank affiliate were prohibited in the future from so acting, changes in the
operation of the Trust could occur and a shareholder serviced by the 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 net asset value per share of each class of each Fund is determined 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 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 Board or pursuant to
procedures approved by the Board or the Core Board, as applicable. The Funds
only determine net asset value on Fund Business Days.
 
PERFORMANCE INFORMATION
 
A Fund's performance may be quoted 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 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
 
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variations in the Funds' returns, shareholders should recognize that they are
not the same as actual year-by-year results. Published yield quotations are, and
total return figures may be, based on amounts invested in a Fund net of sales
charges that may be paid by an investor. A computation of yield or total return
that does not take into account sales charges paid by an investor will be higher
than a similar computation that takes into account payment of sales charges.
 
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 Financial Data, Inc. In addition, the
performance of a Fund may be compared to securities indices. These indices may
be comprised of a composite of various recognized securities indices to reflect
the investment policies of a Fund that invests its assets using different
investment styles. Indices are not used in the management of a Fund but rather
are standards by which an 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. 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 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); the costs
of doing so will be borne by the Trust. Currently the authorized shares of the
Trust are divided into thirty-nine separate series.
 
OTHER CLASSES OF SHARES. The Funds currently issue three classes of shares, A
Shares, B Shares and I Shares. I Shares are offered to fiduciary, agency and
custodial clients of bank trust departments, trust companies and their
affiliates without any sales charges. 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 or the Funds'
distributor. Investors may also contact their Norwest sales representative to
obtain information about the other classes.
 
SHAREHOLDER VOTING AND OTHER RIGHTS. Each share of each series 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)
 
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are borne solely by those shares and each class votes separately with respect to
the provisions of any Rule 12b-1 plan which pertains 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 series or class, except if the matter affects only one series or
class or voting by series or class is required by law, in which case shares will
be voted separately by series 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 (and Trustees) 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 series is entitled to the shareholder's pro rata share of all dividends and
distributions arising from that series' assets and, upon redeeming shares, will
receive the portion of the series' net assets represented by the redeemed
shares.
 
Each Core Portfolio normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in a Core Portfolio will be entitled to
vote in proportion to its relative beneficial interest in the Core Portfolio.
When required by the 1940 Act and other applicable law, a Fund will solicit
proxies from its shareholders and will vote its interest in a Core Portfolio in
proportion to the votes cast by its shareholders.
 
As of September 2, 1997, Norwest Bank may be deemed to have controlled Stable
Income Fund and Norwest Bank Colorado, N.A., may be deemed to have controlled
Total Return Bond Fund through investment in the Funds by their customers. 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.
 
CORE AND GATEWAY STRUCTURE
 
Stable Income Fund and Total Return Bond Fund each seek to achieve its
investment objective by investing all of its investable assets in its
corresponding Core Portfolio, that has the same investment objective and
substantially identical investment policies as the Fund. Accordingly, each Core
Portfolio directly acquires portfolio securities and a Fund investing in the
Core Portfolio acquires an indirect interest in those securities. Each Core
Portfolio is a separate series of Core Trust, a business trust organized under
the laws of the State of Delaware in 1994. Core Trust is registered under the
,1940 Act as an open-end, management, investment company. The assets of each
Core Portfolio belong only to, and the liabilities of each Core Portfolio are
borne solely by, that Core Portfolio and no other portfolio of Core Trust.
 
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THE CORE PORTFOLIO. A Fund's investment in a Core Portfolio is in the form of a
non-transferable beneficial interest. All investors in a Core Portfolio will
invest on the same terms and conditions and will pay a proportionate share of
the Core Portfolio's expenses. As of October 1, 1997, several other funds of the
Trust invested a portion of their assets in Stable Income Portfolio and Total
Return Bond Portfolio.
 
A Core Portfolio will not sell its shares directly to members of the general
public. Another investor in a Core 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 any Fund, and
could have different advisory and other fees and expenses than a Fund.
Therefore, Fund shareholders may have different returns than shareholders in
another investment company that invests in a Core Portfolio. Information
regarding any such funds is available from Core Trust by calling Forum at (207)
879-0001.
 
CERTAIN RISKS OF INVESTING IN CORE PORTFOLIOS. A Fund's investment in a Core
Portfolio may be affected by the actions of other large investors in that Core
Portfolio. For example, if Total Return Bond Portfolio had a large investor
other than Total Return Bond Fund that redeemed its interest, Total Return Bond
Portfolio's remaining investors (including the Fund) might, as a result,
experience higher pro rata operating expenses, thereby producing lower returns.
As there may be other investors in a Core Portfolio, there can be no assurance
that any issue that receives a majority of the votes cast by a Fund's
shareholders will receive a majority of votes cast by all investors in a Core
Portfolio; indeed, other investors holding a majority interest in a Core
Portfolio could have voting control of the Core Portfolio.
 
Each Fund may withdraw its entire investment from a Core Portfolio 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 a Core Portfolio with power to, and who did by a vote of all
investors (including the Fund), change the investment objective or policies of
the Core 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 Core 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 would incur brokerage fees or other transaction costs. If
the Fund withdrew its investment from a Core Portfolio, the Board would consider
what action might be taken, including the management of the Fund's assets
directly by the Adviser or the investment of the Fund's assets in another pooled
investment entity. The inability of the Fund to find a suitable
 
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replacement investment, in the event the Board decided not to permit the
Advisers to manage the Fund's assets directly, could have a significant impact
on shareholders of the Fund.
 
Investment decisions are made by the portfolio managers of each Core Portfolio
independently. Therefore the portfolio manager of one Core Portfolio in which a
Fund invests may purchase shares of the same issuer whose shares are being sold
by the portfolio manager of another Core Portfolio in which the Fund invests.
This could result in an indirect expense to the Fund without accomplishing any
investment purpose.
 
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.
 
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                                                     U.S. POSTAGE
                                                        PAID
                                                   PERMIT NO. 3489
                                                   MINNEAPOLIS, MN
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          [LOGO]

          SHAREHOLDER INFORMATION:

               Norwest Bank Minnesota, N.A.
               733 Marquette Avenue
               Minneapolis, Minnesota 55479-0040
               612-667-8833 (MINNEAPOLIS/ST. PAUL)
               800-338-1348 (ELSEWHERE)

          -COPYRIGHT- 1997 NORWEST ADVANTAGE FUNDS
          MFBPB002 10/97



<PAGE>

                               TAX-FREE INCOME FUNDS
- --------------------------------------------------------------------------------


                                   PROSPECTUS


                                 OCTOBER 1, 1997





                              TAX-FREE INCOME FUND
                                 ---------------
                             COLORADO TAX-FREE FUND
                                 ---------------
                             MINNESOTA TAX-FREE FUND




                                     [LOGO]



                                NOT FDIC INSURED


<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                               TABLE OF CONTENTS
 
 1.  PROSPECTUS SUMMARY..............................................     2
     Highlights of the Funds.........................................     2
     Expense Information.............................................     5
 
 2.  FINANCIAL HIGHLIGHTS............................................     8
 
 3.  INVESTMENT OBJECTIVES AND POLICIES..............................    14
     Tax-Free Income Fund............................................    14
     Colorado Tax-Free Fund..........................................    15
     Minnesota Tax-Free Fund.........................................    16
     Investment Considerations and Risk Factors......................    18
     Additional Investment Policies and Risk Considerations..........    20
 
 4.  MANAGEMENT......................................................    27
     Investment Advisory Services....................................    27
     Management, Administration and Distribution Services............    28
     Shareholder Servicing and Custody...............................    29
     Expenses of the Funds...........................................    29
 
 5.  CHOOSING A SHARE CLASS..........................................    31
     A Shares........................................................    32
     B Shares........................................................    35
 
 6.  HOW TO BUY SHARES...............................................    40
     Minimum Investment..............................................    40
     Purchase Procedures.............................................    40
     Account Application.............................................    42
     General Information.............................................    42
 
 7.  HOW TO SELL SHARES..............................................    43
     General Information.............................................    43
     Redemption Procedures...........................................    43
     Other Redemption Matters........................................    44
 
 8.  OTHER SHAREHOLDER SERVICES......................................    46
     Exchanges.......................................................    46
     Automatic Investment Plan.......................................    47
     Automatic Withdrawal Plan.......................................    48
     Reopening Accounts..............................................    48
 
 9.  DIVIDENDS AND TAX MATTERS.......................................    49
     Dividends.......................................................    49
     Tax Matters.....................................................    49
 
10.  OTHER INFORMATION...............................................    53
     Banking Law Matters.............................................    53
     Determination of Net Asset Value................................    53
     Performance Information.........................................    53
     The Trust and Its Shares........................................    54
<PAGE>
                                                                   PROSPECTUS
 
                                OCTOBER 1, 1997
 
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 portfolios of Norwest
Advantage Funds (the "Trust"), which is a registered, open-end, management
investment company. Tax-Free Income Fund is a diversified portfolio; the other
Funds are non-diversified portfolios.
 
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, 1997,
as may be further amended from time to time, which is available for reference on
the SEC's Web Site (http://www.sec.gov) and 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) 879-0001. 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 MUTUAL FUNDS. THE SHARES OF MUTUAL FUNDS
ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL
RESERVE SYSTEM OR ANY OTHER GOVERNMENT AGENCY. THE SHARES ALSO ARE NOT
OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED OR GUARANTEED BY NORWEST BANK
MINNESOTA, N.A. OR ANY OTHER BANK OR BANK AFFILIATE.
 
AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
 
                                                                  1
<PAGE>

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 provide 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 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 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

NORWEST INVESTMENT MANAGEMENT, INC. ("Norwest"), a subsidiary of Norwest
Bank Minnesota, N.A. ("Norwest Bank"), is the Funds' investment adviser. 
Norwest provides investment advice to various institutions, pension
plans and other accounts and, as of August 31, 1997, managed over
$22 billion in assets.  (See "Management - Investment Advisory
Services.")  Norwest Bank serves as transfer agent, dividend disbursing
agent and custodian of the Trust.  (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. ("Forum"), a registered broker-dealer and
member of the National Association of Securities Dealers, Inc.  Forum
Administrative Services, LLC ("FAS") provides administrative services to
the Funds. (See "Management - Management, Administration and
Distribution Services.")

SHARES OF THE FUNDS

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


2
<PAGE>

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

    B SHARES.  B Shares are offered at a price equal to their net asset value 
    plus a contingent deferred sales charge imposed on most redemptions made 
    within four years 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 "Choosing a Share Class.")

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

HOW TO BUY AND SELL SHARES

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

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 "Choosing a Share Class.")


                                                                              3

<PAGE>

DIVIDENDS AND DISTRIBUTIONS

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.") 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.")

COLORADO TAX-FREE FUND AND MINNESOTA TAX-FREE FUND each 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.")


4

<PAGE>

EXPENSE INFORMATION

The purpose of the Shareholder Transaction Expenses and Annual Fund Operating 
Expenses tables in this section 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      SHARES
                                                       ----------------------
Maximum sales charge imposed on purchases 
  (as a percentage of offering price). . . . . . . . .   4.0%(1)      Zero

Maximum deferred sales charge 
  (as a percentage of the lesser of original purchase
  price or redemption proceeds). . . . . . . . . . . .   Zero(2)      4.0%(1)(3)

Exchange Fee . . . . . . . . . . . . . . . . . . . . .   Zero         Zero

(1)  Sales charge waivers and reduced sales charge plans are available
     for A and B Shares.  (See "Choosing a Share Class.")

(2)  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 deferred sales charge of up to 0.75% will be applied to the
     redemption.  

(3)  The maximum 4.0% deferred sales charge on B Shares of a Fund
     applies to redemptions during the first year after purchase; the charge
     declines thereafter, and is 3.0% for redemptions during the second and
     third years, 2.0% for redemptions during the fourth and fifth years,
     1.0% for redemption during the sixth year, and zero the following year.


                                                                              5

<PAGE>

               ANNUAL FUND OPERATING EXPENSES(4)
          (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)

<TABLE>
<CAPTION>
                                                            TAX-FREE INCOME    COLORADO TAX-FREE   MINNESOTA TAX-FREE 
                                                                 FUND(7)            FUND                 FUND(6)
                                                           -----------------   -----------------   ------------------
                                                              A          B       A          B        A          B 
                                                           SHARES     SHARES   SHARES     SHARES   SHARES     SHARES
                                                           -----------------   -----------------   ------------------
<S>                                                        <C>        <C>      <C>      <C>        <C>        <C>
Investment Advisory Fees(5) (after fee waivers). . . . . .  0.44%      0.44%    0.36%      0.36%    0.33%      0.33%
Rule 12b-1 Fees(6) (after fee waivers) . . . . . . . . . .  None       0.75%    None       0.75%    None       0.75%
Other Expenses (after fee waivers and reimbursements). . .  0.16%      0.16%    0.24%      0.24%    0.27%      0.27%
                                                           -----------------   -----------------   ------------------
Total Operating Expenses(7). . . . . . . . . . . . . . . .  0.60%      1.35%    0.60%      1.35%    0.60%      1.35%
</TABLE>

(4)    For a further description of the various expenses associated with
       investing in the Funds, see "Management." Expenses associated with I
       Shares of a Fund differ from those listed in the table. The table is
       based on amounts incurred during the Funds' most recent fiscal year
       ended May 31, 1997, restated to reflect current fees.

(5)    Absent waivers, "Investment Advisory Fees" for A Shares and B
       Shares of each Fund would be 0.50%.

(6)    Absent waivers, "Rule 12b-1 Fees" would be 1.00% for B Shares of
       each Fund.  Long-term shareholders of B Shares may pay Rule 12b-1 Fees
       and contingent deferred sales charges totaling in the aggregate more
       than the economic equivalent of the maximum front-end sales charges
       permitted by the rules of the National Association of Securities
       Dealers, Inc.

(7)    Absent expense reimbursements and fee waivers, the expenses of A
       Shares of Tax-Free Income Fund, Colorado Tax-Free Fund and Minnesota
       Tax-Free Fund would be: "Other Expenses," 0.46%, 0.53% and 0.57%,
       respectively; and "Total Operating Expenses," 0.96%, 1.02% and 1.07%,
       respectively. Absent expense reimbursements and fee waivers, the
       expenses of B Shares of Tax-Free Income Fund, Colorado Tax-Free Fund and
       Minnesota Tax-Free Fund would be: "Other Expenses," 0.53%, 0.53% and
       0.57%, respectively; and "Total Operating Expenses," 2.03%, 2.03% and 
       2.07%, respectively. Expense reimbursements and fee waivers are
       voluntary and may be reduced or eliminated at any time.


EXAMPLE

The following Hypothetical Expense Example indicates the dollar amount of 
expenses that an investor would pay assuming a $1,000 investment in a Fund's 
Shares, the expenses listed in the "Annual Fund Operating Expense" table,  a 
5% annual return, reinvestment of all dividends and distributions, the 
deduction of the maximum initial sales charge for A Shares, the deduction of 
the applicable contingent deferred sales charge for B Shares 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. The 
5% annual return is not predictive of and does not represent the Funds' 
projected returns; rather, it is required by government regulation. 

                   HYPOTHETICAL EXPENSE EXAMPLE

                                      1 YEAR    3 YEARS   5 YEARS   10 YEARS
                                     ----------------------------------------
TAX-FREE INCOME FUND

   A Shares . . . . . . . . . . . .     46         58       72        112
   B Shares
     Assuming redemption 
      at the end of the period. . .     54         73       94        --
     Assuming no redemption . . . .     14         43       74        --
                                     ----------------------------------------

COLORADO TAX-FREE FUND
   A Shares . . . . . . . . . . . .     46         58       72        112
   B Shares

     Assuming redemption 
      at the end of the period. . .     54         73       94        --
     Assuming no redemption . . . .     14         43       74        --
                                     ----------------------------------------
MINNESOTA TAX-FREE FUND
   A Shares . . . . . . . . . . . .     46         58       72        112
   B Shares
     Assuming redemption 
      at the end of the period. . .     54         73       94        --
     Assuming no redemption . . . .     14         43       74        --


6                                                                             7

<PAGE>

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 periods ended May 31, 
1994 and thereafter was audited by KPMG Peat Marwick LLP, independent 
auditors. Information for prior periods was audited by other independent 
auditors. Each Fund's financial statements for the year ended May 31, 1997, 
and independent auditors' report thereon, are contained in the Fund's Annual 
Report. These financial statements are incorporated by reference into the 
SAI. Further information about each Fund's performance is contained in the 
Fund's Annual Report, which may be obtained from the Trust without charge.


                  TAX-FREE INCOME FUND

<TABLE>
<CAPTION>
                                                                NET                                               
                                                           REALIZED AND                                        
                                    BEGINNING               UNREALIZED   DIVIDENDS   DISTRIBUTIONS    ENDING
                                    NET ASSET      NET         GAIN       FROM NET      FROM NET     NET ASSET 
                                      VALUE    INVESTMENT   (LOSS) ON    INVESTMENT     REALIZED       VALUE   
                                    PER SHARE    INCOME    INVESTMENTS     INCOME         GAIN       PER SHARE 
- -----------------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>         <C>           <C>         <C>             <C>
A SHARES 
June 1, 1996 to May 31, 1997          $9.78       $0.54        $0.27       ($0.54)          --         $10.05     
June 1, 1995 to May 31, 1996          $9.82       $0.55       ($0.04)      ($0.55)          --          $9.78     
June 1, 1994 to May 31, 1995          $9.60       $0.55        $0.22       ($0.55)          --          $9.82     
June 1, 1993 to May 31, 1994         $10.06       $0.58       ($0.39)      ($0.58)      ($0.07)         $9.60     
June 1, 1992 to May 31, 1993          $9.98       $0.66        $0.11       ($0.66)      ($0.03)        $10.06     
June 1, 1991 to May 31, 1992          $9.95       $0.70        $0.04       ($0.70)      ($0.01)         $9.98     
June 1, 1990 to May 31, 1991          $9.78       $0.70        $0.17       ($0.70)          --          $9.95     
August 1, 1989 to May 31, 1990(a)    $10.00       $0.57       ($0.22)      ($0.57)          --          $9.78     
B SHARES                                                                                              
June 1, 1996 to May 31, 1997          $9.78       $0.46        $0.27       ($0.46)          --         $10.05     
June 1, 1995 to May 31, 1996          $9.82       $0.48       ($0.04)      ($0.48)          --          $9.78     
June 1, 1994 to May 31, 1995          $9.60       $0.48        $0.22       ($0.48)          --          $9.82     
August 6, 1993 to May 31, 1994(a)    $10.17       $0.39       ($0.50)      ($0.39)      ($0.07)         $9.60     
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
                                     RATIO TO AVERAGE NET ASSETS    
                                  --------------------------------- 
                                                                                                     NET ASSETS 
                                     NET                                               PORTFOLIO      AT END OF 
                                  INVESTMENT    NET       GROSS            TOTAL       TURNOVER        PERIOD 
                                    INCOME    EXPENSES  EXPENSES(b)      RETURN(c)     RATE       (000'S OMITTED)
- -----------------------------------------------------------------------------------------------------------------
<S>                               <C>         <C>       <C>              <C>           <C>        <C>
A SHARES 
June 1, 1996 to May 31, 1997         5.41%      0.50%      1.06%           8.43%        152.33%        $29,217 
June 1, 1995 to May 31, 1996         5.54%      0.40%      1.06%           5.29%        126.20%        $33,914 
June 1, 1994 to May 31, 1995         5.87%      0.60%      1.12%           8.42%        130.90%        $30,786 
June 1, 1993 to May 31, 1994         5.77%      0.60%      1.14%           1.74%        116.54%        $34,426 
June 1, 1992 to May 31, 1993         6.47%      0.60%      1.12%           7.86%         42.81%        $109,983 
June 1, 1991 to May 31, 1992         7.03%      0.34%      1.14%           7.65%         73.66%         $56,250 
June 1, 1990 to May 31, 1991         7.09%      0.14%      1.08%           9.16%        101.11%         $35,215 
August 1, 1989 to May 31, 1990(a)    6.96%(d)   0.03%(d)   0.97%(d)        4.34%(c)      41.16%         $17,439 
B SHARES                                                                                             
June 1, 1996 to May 31, 1997         4.64%      1.26%      2.15%           7.63%        152.33%          $7,329 
June 1, 1995 to May 31, 1996         4.77%      1.14%      2.21%           4.50%        126.20%          $5,897 
June 1, 1994 to May 31, 1995         5.05%      1.35%      2.21%           7.61%        130.90%          $3,729 
August 6, 1993 to May 31, 1994(a)    4.76%(d)   1.31%(d)   2.24%(d)       (0.98%)(c)    116.54%          $2,674 
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  The Fund commenced operations on August 1, 1989.  The Fund's original 
     class of shares subsequently became A Shares.  The Fund commenced the 
     offering of B Shares on August 6, 1993.

(b)  The ratio of Gross Expenses to Average Net Assets does not reflect fee 
     waivers or expense reimbursements.

(c)  Total Return does not reflect the effects of sales charges.

(d)  Annualized.


8                                                                             9

<PAGE>

              COLORADO TAX-FREE FUND

<TABLE>
<CAPTION>
                                                            NET
                                                        REALIZED AND
                                  BEGINNING              UNREALIZED    DIVIDENDS  DISTRIBUTIONS   ENDING
                                  NET ASSET     NET         GAIN       FROM NET     FROM NET     NET ASSET
                                    VALUE    INVESTMENT   (LOSS) ON   INVESTMENT    REALIZED       VALUE
                                  PER SHARE    INCOME    INVESTMENTS    INCOME        GAIN       PER SHARE
- -------------------------------------------------------------------------------------------------------------
<S>                               <C>        <C>        <C>           <C>         <C>            <C>
A SHARES
June 1, 1996 to May 31, 1997        $9.89      $0.54        $0.33       ($0.54)        --         $10.22
June 1, 1995 to May 31, 1996        $9.90      $0.53       ($0.01)      ($0.53)        --          $9.89
June 1, 1994 to May 31, 1995        $9.69      $0.48        $0.21       ($0.48)        --          $9.90
June 1, 1993 to May 31, 1994(a)    $10.00      $0.51       ($0.30)      ($0.51)      ($0.01)       $9.69
B SHARES                                    
June 1, 1996 to May 31, 1997        $9.90      $0.47        $0.33       ($0.47)        --         $10.23
June 1, 1995 to May 31, 1996        $9.91      $0.46       ($0.01)      ($0.46)        --          $9.90
June 1, 1994 to May 31, 1995        $9.70      $0.41        $0.21       ($0.41)        --          $9.91
August 2, 1993 to May 31, 1994(a)  $10.04      $0.35       ($0.33)      ($0.35)      ($0.01)       $9.70
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
                                  RATIO TO AVERAGE NET ASSETS
                                -------------------------------                                  NET ASSETS
                                    NET                                             PORTFOLIO    AT END OF
                                INVESTMENT     NET         GROSS        TOTAL       TURNOVER      PERIOD
                                  INCOME     EXPENSES    EXPENSES(b)   RETURN(c)      RATE    (000'S OMITTED)
- -------------------------------------------------------------------------------------------------------------
<S>                             <C>        <C>      <C>         <C>      <C>        <C>
A SHARES
June 1, 1996 to May 31, 1997       5.36%       0.45%        1.14%        9.00%       129.26%      $27,806
June 1, 1995 to May 31, 1996       5.30%       0.30%        1.13%        5.35%       171.41%      $26,991
June 1, 1994 to May 31, 1995       5.10%       0.30%        1.15%        7.47%        47.88%      $25,997
June 1, 1993 to May 31, 1994(a)    4.94%       0.07%        1.23%        2.02%        40.92%      $31,724
B SHARES                          
June 1, 1996 to May 31, 1997       4.60%       1.20%        2.15%        8.19%       129.26%       $7,218
June 1, 1995 to May 31, 1996       4.64%       1.05%        2.16%        4.56%       171.41%       $6,400
June 1, 1994 to May 31, 1995       4.32%       1.05%        2.16%        6.67%        47.88%       $5,198
August 2, 1993 to May 31, 1994(a)  4.08%(d)    0.85%(d)     2.24%(d)     0.27%(d)     40.92%       $4,494
- -------------------------------------------------------------------------------------------------------------
</TABLE>


(a)  The Fund commenced operations on June 1, 1993. The Fund's original class of
     shares subsequently became A Shares.  The Fund commenced the offering of B
     Shares on August 2, 1993.

(b)  The ratio of Gross Expenses to Average Net Assets does not reflect fee
     waivers or expense reimbursements.

(c)  Total Return does not reflect the effects of sales charges.

(d)  Annualized.


10                                                                            11

<PAGE>

             MINNESOTA TAX-FREE FUND

<TABLE>
<CAPTION>
                                                                       NET
                                                                  REALIZED AND
                                          BEGINNING                UNREALIZED    DIVIDENDS    DISTRIBUTIONS    ENDING
                                          NET ASSET      NET          GAIN        FROM NET      FROM NET      NET ASSET 
                                            VALUE     INVESTMENT   (LOSS) ON     INVESTMENT     REALIZED        VALUE   
                                          PER SHARE     INCOME     INVESTMENTS     INCOME         GAIN        PER SHARE
- --------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>         <C>         <C>            <C>          <C>             <C>
A SHARES 
June 1, 1996 to May 31, 1997               $10.30       $0.54         $0.27       ($0.54)          --          $10.57   
June 1, 1995 to May 31, 1996               $10.45       $0.56        ($0.15)      ($0.56)          --          $10.30   
June 1, 1994 to May 31, 1995               $10.15       $0.53         $0.30       ($0.53)          --          $10.45   
June 1, 1993 to May 31, 1994               $10.65       $0.53        ($0.31)      ($0.53)       ($0.19)        $10.15   
June 1, 1992 to May 31, 1993               $10.27       $0.55         $0.39       ($0.55)       ($0.01)        $10.65   
December 1, 1991 to May 31, 1992           $10.20       $0.30         $0.11       ($0.30)       ($0.04)        $10.27   
December 1, 1990 to November 30, 1991      $10.15       $0.61         $0.12       ($0.61)       ($0.07)        $10.20   
December 1, 1989 to November 30, 1990      $10.14       $0.62         $0.02       ($0.62)       ($0.01)        $10.15   
December 1, 1988 to November 30, 1989       $9.78       $0.62         $0.36       ($0.62)          --          $10.14   
January 12, 1988 to November 30, 1988(a)   $10.00       $0.55        ($0.22)      ($0.55)          --           $9.78   
B SHARES 
June 1, 1996 to May 31, 1997               $10.30       $0.46         $0.27       ($0.46)          --          $10.57   
June 1, 1995 to May 31, 1996               $10.44       $0.48        ($0.14)      ($0.48)          --          $10.30   
June 1, 1994 to May 31, 1995               $10.15       $0.45         $0.29       ($0.45)          --          $10.44   
August 6, 1993 to May 31, 1994(a)          $10.77       $0.35        ($0.43)      ($0.35)       ($0.19)        $10.15   
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                 RATIO TO AVERAGE NET ASSETS
                                           -------------------------------------                             NET ASSETS
                                              NET                                              PORTFOLIO      AT END OF
                                           INVESTMENT      NET         GROSS         TOTAL     TURNOVER        PERIOD
                                             INCOME      EXPENSES    EXPENSES(b)   RETURN(c)     RATE      (000'S OMITTED)
- --------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>           <C>         <C>           <C>         <C>         <C>
A SHARES
June 1, 1996 to May 31, 1997                 5.11%        0.60%        1.21%         7.98%       96.68%        $25,739
June 1, 1995 to May 31, 1996                 5.26%        0.48%        1.26%         3.97%       77.10%        $26,610
June 1, 1994 to May 31, 1995                 5.25%        0.49%        1.61%         8.55%      139.33%        $15,559
June 1, 1993 to May 31, 1994                 4.92%        0.61%        1.52%         1.94%       84.23%        $10,008
June 1, 1992 to May 31, 1993                 5.13%        0.75%        1.79%         9.35%       44.29%        $10,852
December 1, 1991 to May 31, 1992             5.86%(d)     0.90%(d)     2.38%(d)      8.10%(d)     6.70%         $4,896
December 1, 1990 to November 30, 1991        6.01%        0.90%        2.63%         7.40%       37.32%         $4,575
December 1, 1989 to November 30, 1990        6.21%        0.90%        2.37%         6.50%       30.86%         $4,243
December 1, 1988 to November 30, 1989        6.21%        0.90%        1.70%        10.30%       26.31%         $5,309
January 12, 1988 to November 30, 1988(a)     6.51%(d)     0.76%(d)     1.47%(d)      4.03%(d)    32.34%         $5,904
B SHARES
June 1, 1996 to May 31, 1997                 4.35%        1.34%        2.21%         7.18%       96.68%        $11,128
June 1, 1995 to May 31, 1996                 4.51%        1.23%        2.29%         3.28%       77.10%         $8,825
June 1, 1994 to May 31, 1995                 4.52%        1.21%        2.62%         7.63%      139.33%         $5,090
August 6, 1993 to May 31, 1994(a)            3.99%(d)     1.31%(d)     2.45%(d)     (0.58%)(d)   84.23%         $2,485
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  The Fund commenced operations on January 12, 1988.  The Fund's original
     class of shares subsequently became A Shares.  The Fund commenced the 
     offering of B Shares on August 6, 1993.

(b)  The ratio of Gross Expenses to Average Net Assets does not reflect fee
     waivers or expense reimbursements.

(c)  Total Return does not include the effects of sales charges.

(d)  Annualized.


12                                                                           13
<PAGE>
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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"). 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). 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.")
 
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. As the Fund's objective is to
provide high current income, the Fund invests 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
 
                                       14
<PAGE>
- ----
- ----
Investors Service, 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 Norwest 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.
 
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. 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). 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.")
 
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. As the
Fund's
 
                                                                  15
<PAGE>
- ----
- ----
objective is to provide high current income, the Fund invests 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 and Fitch Investors Service, 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 Norwest
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
 
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).
 
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
 
                                       16
<PAGE>
- ----
- ----
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. As the Fund's objective is to provide high
current income, the Fund invests 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
Service, 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 Norwest 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 Norwest 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.
 
                                                                  17
<PAGE>
- ----
- ----
 
During the fiscal year ended May 31, 1997, the Fund had 88.8% of its average
annual assets in municipal securities rated by Moody's or S&P and 11.2% 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" - 36.3%, "Aa"/"AA" - 38.4%, "A"/"A" - 9.8%, "Baa"/"BBB"
- - 4.3% 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.
 
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.
Tax-Free Income Fund will be subject to similar risks to the extent it
concentrates its investments in a particular jurisdiction. These risks are
linked to 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
 
                                       18
<PAGE>
- ----
- ----
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. Norwest 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
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: (1) own the
securities of a single issuer with a value of more than 5% of the Fund's total
assets; or (2) 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 if, as a result, more than 5% of the Fund's total assets would be
invested in the securities of a single issuer. These limits do not apply to U.S.
Government securities and the securities of investment companies. Each Fund
reserves the right to invest up to 100% of its investable assets in one or more
other investment companies.
 
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
 
                                                                  19
<PAGE>
- ----
- ----
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 is 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.
 
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
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 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.
 
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.
 
As part of its regular banking operations, Norwest Bank 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
Bank. A lending relationship will not be a factor in the selection of portfolio
securities for a Fund.
 
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.
 
                                       20
<PAGE>
- ----
- ----
 
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 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 Norwest to be of comparable quality, if Norwest 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.
 
                                                                  21
<PAGE>
- ----
- ----
 
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 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.
 
                                       22
<PAGE>
- ----
- ----
The Funds' policy is to enter into stand-by commitment transactions only with
municipal securities dealers which, in the view of Norwest, 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 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
 
                                                                  23
<PAGE>
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- ----
to an instrument. Norwest 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 Norwest
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.
 
Repurchase agreements are transactions in which a Fund purchases a security and
simultaneously commits to resell that security to the seller at an agreed-upon
price on an agreed-upon future date, normally one to seven days later. The
resale price reflects a market rate of interest that is not related to the
coupon rate or maturity of the purchased security. When a Fund lends a security
it receives interest from the borrower or from investing cash collateral. The
Trust maintains possession of the purchased securities and any underlying
collateral in these transactions, the total market value of which on a
continuous basis is at least equal to the repurchase price or value of
securities loaned, plus accrued interest. The Funds may pay fees to arrange
securities loans and each Fund will, as a fundamental policy, limit securities
lending to not more than 33 1/3% of the value of its total assets.
 
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. Each Fund may purchase
securities offered on a "when-issued" basis and may purchase securities on a
"forward commitment" basis. When such transactions are negotiated, the price is
fixed at the time the commitment is made, but delivery and payment for the
securities take place at a later date. Normally, the settlement date occurs
within three months after the transaction, but delayed settlements beyond three
months may be negotiated.
 
During the period between a commitment and settlement, no payment is made for
the securities purchased and, thus, no interest accrues to the Fund. At the time
a Fund makes a commitment to purchase securities in this
 
                                       24
<PAGE>
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- ----
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.
 
The use of when-issued transactions and forward commitments enables a Fund to
hedge against anticipated changes in interest rates and prices. If Norwest 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: (1) short-term U.S.
Government Securities; (2) certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of commercial banks doing business in the
United States; (3) commercial paper; (4) repurchase agreements; and (5) 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 Norwest 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
 
                                                                  25
<PAGE>
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- ----
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. Norwest 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.
 
                                       26
<PAGE>
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- ----
 
                                                                  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 eight persons.
 
INVESTMENT ADVISORY SERVICES
 
NORWEST INVESTMENT MANAGEMENT. Subject to the general supervision of the Board,
Norwest makes investment decisions for the Funds and continuously reviews,
supervises and administers each Fund's investment program. Norwest, which is
located at Norwest Center, Sixth Street and Marquette, Minneapolis, Minnesota
55479, is an indirect subsidiary of Norwest Corporation, a multi-bank holding
company that was incorporated under the laws of Delaware in 1929. As of June 30,
1997, Norwest Corporation had assets of $83.6 billion, which made it the 11th
largest bank holding company in the United States. As of June 30, 1997, Norwest
and its affiliates managed assets with a value of approximately $52.9 billion.
 
For its 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 first $300 million of the Fund's average daily net assets, 0.46% of
the next $400 million of the Fund's average daily net assets and 0.42% of the
Fund's remaining average daily net assets.
 
PORTFOLIO MANAGERS. Many persons on the advisory staff of Norwest contribute to
the investment services provided to the Funds. The following persons, however,
are primarily responsible for day-to-day management and, unless otherwise noted,
have been since the inception of the Fund. For periods prior to June 1, 1997,
all persons served in their current positions with Norwest Bank. Prior to that
date Norwest Bank was each Fund's investment adviser. In addition to their
responsibilities as listed below, each of the portfolio managers may perform
portfolio management and other duties for Norwest Bank.
 
     TAX-FREE INCOME FUND and COLORADO TAX-FREE FUND Mr. William T. Jackson,
     CFA. Mr. Jackson 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 to 1993; a Vice
     President and Municipal Bond Trading Manager from 1991 to 1992; and a Vice
     President and Municipal Bond Trader with Kemper Securities, Inc., from 1984
     to 1991.
 
                                                                  27
<PAGE>
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- ----
 
     MINNESOTA TAX-FREE FUND Ms. Patricia D. Hovanetz, CFA. Ms. Hovanetz, a Vice
     President of Norwest, has been associated with Norwest for more than 25
     years in various capacities related to municipal bond investments. She has
     been a municipal bond fund portfolio manager since 1988 and has served as
     portfolio manager of the Fund since 1991.
 
MANAGEMENT, ADMINISTRATION AND
DISTRIBUTION SERVICES
 
As manager, Forum supervises the overall management of the Trust (including the
Trust's receipt of services for which the Trust is obligated to pay) other than
investment advisory services. In this capacity Forum 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 Funds by others. FAS is responsible for
performing certain administrative services necessary for the Trust's operations
with respect to each Fund including: (1) preparing and printing updates of the
Trust's registration statement and prospectuses to its shareholders, the SEC and
state securities administrators; (2) preparing proxy and information statements
and any other communications to shareholders; (3) monitoring the sales of shares
and ensuring that such shares are properly and duly registered with the SEC and
applicable state securities administrators; and (4) supervising the declaration
of dividends and distributions to shareholders.
 
As of June 30, 1997, Forum and FAS provided management and administrative
services to registered investment companies and collective investment funds with
assets of approximately $25.5 billion. Forum is a member of the National
Association of Securities Dealers, Inc. For their services with respect to each
Fund, Forum and FAS each receives a fee, at an annual rate of 0.05% of the
Fund's average daily net assets.
 
Pursuant to a separate agreement, Forum Accounting Services, LLC ("Forum
Accounting") provides portfolio accounting services to each Fund and to each
Core Portfolio. Forum, FAS, and Forum Accounting 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 June 1, 1997,
Forum, FAS and Forum Accounting were controlled by John Y. Keffer, President and
Chairman of the Trust.
 
Forum also acts as the distributor of the Shares. As the Funds' distributor,
Forum 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,
 
                                       28
<PAGE>
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- ----
Forum will make payments to broker-dealers as discussed under "Characteristics
of The Shares." From its own resources, Forum may pay additional fees to
broker-dealers or other persons for distribution or other services related to
the Funds. For further information about the Funds' distribution plan, including
the fees payable thereunder, see "Characteristics of The Shares."
 
SHAREHOLDER SERVICING AND
CUSTODY
 
Norwest Bank serves as transfer agent and dividend disbursing agent for the
Trust (in this capacity, the "Transfer Agent"). The Transfer Agent maintains an
account for each shareholder of the Trust (unless such accounts are maintained
by sub-transfer agents or processing agents), performs other transfer agency
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. 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 services, the Transfer Agent receives a
fee a fee with respect to each Fund at an annual rate of 0.25% of each Fund's
average daily net assets attributable to each class of the Fund.
Norwest Bank also serves as each Fund's custodian. For its custodial services,
Norwest Bank receives a fee with respect to each Fund at an annual rate of:
0.02% of the first $100 million of the Fund's average daily net assets, 0.015%
of the next $100 million of the Fund's average daily net assets and 0.01% of the
Fund's remaining average daily net assets.
 
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 of its 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. Each service provider to a Fund may
elect to waive (or continue 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 is in effect. Fee waivers are voluntary and may be
reduced or eliminated at any time.
 
                                                                  29
<PAGE>
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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.
 
                                       30
<PAGE>
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                                                      5.  CHOOSING A SHARE CLASS
 
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
broker-dealers and other financial institutions selling 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 4.0% 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.
 
                                                                  31
<PAGE>
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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):
 
<TABLE>
<CAPTION>
 
                                                              Broker-
                                                              Dealers'
                                   Sales Charge            Reallowance As
                                As a Percentage of          a Percentage
                         ................................   of Offering
Amount of Purchase       Offering Price  Net Asset Value*      Price
 
- -------------------------------------------------------------------------
<S>                      <C>             <C>               <C>
Less than $50,000......         4.00%            4.17%            3.50%
$50,000 to $99,999.....         3.50%            3.63%            3.00%
$100,000 to $249,000...         3.00%            3.09%            2.50%
$250,000 to $499,999...         2.50%            2.56%            2.25%
$500,000 to $999,000...         2.00%            2.04%            1.75%
$1,000,000 to
 $2,499,999............         0.00%            0.00%            0.75%
$2,500,000 to
 $4,999,999............         0.00%            0.00%            0.50%
Over $5,000,000........         0.00%            0.00%            0.25%
 
* Rounded to the nearest one-hundredth percent
</TABLE>
 
Forum may pay a broker-dealers' reallowance to selected broker-dealers
purchasing shares as principal or agent, which may include banks, bank
affiliates and Processing Organizations. Normally, Forum will reallow discounts
to selected broker-dealers in the amounts indicated in the table above. In
addition, Forum may elect to reallow the entire sales charge to selected
broker-dealers for all sales with respect to which orders are placed with Forum.
The broker-dealers' reallowance may be changed from time to time. Forum may make
additional payments (out of its own resources) to selected broker-dealers of up
to 0.75% of the value of Fund shares purchased at net asset value.
 
In addition, from time to time and at its own expense, Forum may provide
compensation, including financial assistance, to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns or other dealer-sponsored special events.
Compensation may include: (1) the provision of travel arrangements and lodging;
(2) tickets for entertainment events; and (3) merchandise.
 
In some instances, this compensation may be made available only to certain
dealers or other financial intermediaries who have sold or are expected to sell
significant amounts of shares of the Funds or who charge an asset based fee
(whether or not they have a fiduciary relationship with their clients).
 
                                       32
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No sales charge is assessed on purchases: (1) 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); (2) by
trustees and officers of the Trust; directors, officers and full-time employees
of Forum, of Norwest Corporation or of any of their affiliates; the spouse,
direct ancestor or direct descendant (collectively, "relatives") of any such
person; any trust or individual retirement account or self-employed retirement
plan for the benefit of any such person or relative; or the estate of any such
person or relative; (3) by any registered investment adviser with whom Forum has
entered into a share purchase agreement and which is acting on behalf of its
fiduciary customer accounts; and (4) 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".) 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.
 
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.
 
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
 
                                                                  33
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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") 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 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.
 
                                       34
<PAGE>
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- ----
 
<TABLE>
<CAPTION>
 
                                                                    Contingent Deferred
                                                                  Sales Charge as a % of
                                                                   Dollar Amount Subject
Amount of Purchase                        Period Shares Held             to Charge
- -----------------------------------------------------------------------------
<S>                                   <C>                         <C>
$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%
</TABLE>
 
No contingent deferred sales charge is charged on redemptions to the same extent
as described under "B Shares - Contingent Deferred Sales Charge." 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 Forum, to compensate
Forum for its distribution activities. The distribution payments due to Forum
from each Fund comprise: (1) sales commissions at levels set from time to time
by the Board ("sales commissions"); and (2) 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% and Forum currently expects to pay sales commissions to
each broker-dealer at the time of sale of up to 4% of the purchase price of B
Shares of each Fund sold by the broker-dealer.
 
Under the distribution services agreement between Forum and the Trust, Forum
will receive, in addition to the distribution services fee, all contingent
deferred sales charges due upon redemptions of B Shares. The combined contingent
deferred sales charge and distribution services fee on B Shares are intended to
finance the distribution of those shares by permitting an investor to purchase
shares through broker-dealers without the assessment of an initial sales charge
and, at the same time, permitting Forum to compensate broker-dealers in
connection with the sales of the shares. Proceeds from the contingent deferred
sales charge with respect to a Fund are paid to Forum to
 
                                                                  35
<PAGE>
- ----
- ----
defray the expenses related to providing distribution-related services in
connection with the sales of B Shares, such as the payment of compensation to
broker-dealers selling B Shares. Forum may spend the distribution services fees
it receives as it deems appropriate on any activities primarily intended to
result in the sale of those shares.
 
Under the Plan, a Fund will make distribution services fee payments to Forum
only for periods during which there are outstanding uncovered distribution
charges attributable to that Fund. Uncovered distribution charges are equivalent
to all sales commissions previously due (plus interest), less amounts received
pursuant to the Plan and all contingent deferred sales charges previously paid
to Forum. At May 31, 1997, uncovered distribution expenses for Tax-Free Income
Fund, Colorado Tax-Free Fund and Minnesota Tax-Free Fund were $105,116, $84,082
and $201,650, respectively, or approximately 1.43%, 1.16%, and 1.81% of each
respective Fund's net assets attributable to B Shares as of the same date.
 
The amount of distribution services fees and contingent deferred sales charge
payments received by Forum with respect to a Fund is not related directly to the
amount of expenses incurred by Forum in connection with providing distribution
services to the B Shares and may be higher or lower than those expenses. Forum
may be considered to have realized a profit under the Plan if, at any time, the
aggregate amounts of all distribution services fees and contingent deferred
sales charge payments previously made to Forum exceed the total expenses
incurred by Forum in distributing B Shares.
 
Pursuant to the Plan, each Fund has agreed also to pay Forum a maintenance fee
in an amount equal to 0.25% of the average daily net assets of the Fund
attributable to B Shares for providing personal services to shareholder
accounts. The maintenance fee may be paid by Forum to broker-dealers in an
amount not to exceed 0.25% of the value of B Shares held by the customers of the
broker-dealers. The distribution services fee and the maintenance fee are each
accrued daily and paid monthly and will cause a Fund's B Shares to have a higher
expense ratio and to pay lower dividends than A Shares of that Fund.
Notwithstanding the discontinuation of distribution services fees with respect
to a Fund, the Fund may continue to pay maintenance fees.
 
A Fund does not accrue future distribution services fees as a liability of the
Fund with respect to the B Shares or reduce the Fund's current net assets in
respect 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 Forum (but only with respect to sales that occurred prior to
the termination or discontinuance of the Plan). Those circumstances are
described in detail in the SAI. In deciding whether to purchase B Shares of a
 
                                       36
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Fund, investors should consider that payments of distribution services fees
could continue until such time as there are no uncovered distribution charges
under the Plan attributable to that Fund. In approving the Plan, the Board
determined that there was a reasonable likelihood that the Plan would benefit
each Fund and its B shareholders.
 
Periods with a high level of sales of B Shares of a Fund accompanied by a low
level of redemptions of those shares that are subject to contingent deferred
sales charges will tend to increase uncovered distribution charges. Conversely,
periods with a low level of sales of B Shares of a Fund accompanied by a high
level of redemptions of those shares that are subject to contingent deferred
sales charges will tend to reduce uncovered distribution charges. A high level
of sales of B Shares during the first few years of operations, coupled with the
limitation on the amount of distribution services fees payable by a Fund with
respect to B Shares during any fiscal year, would cause a large portion of the
distribution services fees attributable to a sale of the B Shares to be accrued
and paid by the Fund to Forum with respect to those shares in fiscal years
subsequent to the years in 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 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.
 
                                                                  37
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<TABLE>
<CAPTION>
 
                                           Contingent Deferred
                                           Sales Charge as a %
                                            of Dollar Amount
Year Since Purchase                         Subject to Charge
- ---------------------------------------------------------------
<S>                                       <C>
First...................................             4.0%
Second..................................             3.0%
Third...................................             3.0%
Fourth..................................             2.0%
Fifth...................................             2.0%
Sixth...................................             1.0%
Seventh.................................             None
</TABLE>
 
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 and fourth from the longest outstanding B Shares of the
Fund held for less than four years.
 
No contingent deferred sales charge is imposed on: (1) redemptions of shares
acquired through the reinvestment of dividends and distributions; (2)
involuntary redemptions by a Fund of shareholder accounts with low account
balances; (3) 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; (4) 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 (5) redemptions by any registered
investment adviser with whom Forum has entered into a share purchase agreement
and which is acting on behalf of its fiduciary customer accounts. (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 available at the time the
 
                                       38
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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.
 
                                                                  39
<PAGE>
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6. 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.")
 
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 or money order (cash cannot be accepted)
along with a completed account application form to the Trust at the address
listed under "Account Application." Checks or money orders are accepted at full
value subject to collection. If a check or money order 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 Forum.
 
For individual or Uniform Gift to Minors Act accounts, the check or money order
used to purchase shares of a Fund must be made payable to "Norwest Advantage
Funds" or to one or more owners of that account and endorsed to Norwest
Advantage Funds. No other method of payment by check will be accepted. For
corporation, partnership, trust, 401(k) plan or other non-individual type
accounts, the check used to purchase shares of a Fund must be made payable on
its face to "Norwest Advantage Funds." No other method of payment by check will
be accepted.
 
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:
 
                                       40
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The investor should then promptly complete and mail the account application
form. There may be charges by the investor's bank for transmitting the money by
bank wire. The Trust does not charge investors for the receipt of wire
transfers. Payment by bank wire is treated as a federal funds payment when
received.
 
3.  THROUGH FINANCIAL INSTITUTIONS. Shares may be purchased and redeemed through
certain broker-dealers, banks and other financial institutions ("Processing
Organizations"). The Transfer Agent, Forum and their affiliates may be
Processing Organizations. Processing Organizations, may receive as a
broker-dealer's reallowance a portion of the sales charge paid by their
customers who purchase A Shares of a Fund, may receive payments from Forum with
respect to sales of B Shares and may receive payments as a processing agent from
the Transfer Agent. In addition, financial institutions, including Processing
Organizations, may charge their customers a fee for their services and are
responsible for promptly transmitting purchase, redemption and other requests to
the Funds.
 
Investors who purchase shares through a Processing Organization will be subject
to the procedures of their Processing Organization, which may include charges,
limitations, investment minimums, cutoff times and restrictions in addition to,
or different from, those applicable to shareholders who invest in a Fund
directly. These investors should acquaint themselves with their institution's
procedures and should read this Prospectus in conjunction with any materials and
information provided by their institution. Customers who purchase a Fund's
shares through a Processing Organization may or may not be the shareholder of
record and, subject to their institution's and the Funds' procedures, may have
Fund shares transferred into their name. There is typically a three-day
settlement period for purchases and redemptions through broker-dealers. Certain
Processing Organizations 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.
 
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.
 
                                                                  41
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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 (New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving
and Christmas) 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.
 
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.
 
All payments for Shares must be in U.S. dollars. 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.
 
                                       42
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                                                          7.  HOW TO SELL SHARES
 
GENERAL INFORMATION
 
Fund Shares may be sold (redeemed) at their net asset value on any Fund Business
Day subject to a contingent deferred sales charge imposed, in the case of A
Shares, on some redemptions made within two years of purchase and, in the case
of B Shares, on most redemptions made within six years of purchase. There is no
minimum period of investment and no restriction on the frequency of redemptions.
 
Fund shares are redeemed as of the next determination of the Fund's net asset
value following receipt 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 after the day the
redemption becomes effective.
 
Normally, redemption proceeds are paid immediately, but in no event later than
seven days, following receipt 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.
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.
 
                                                                  43
<PAGE>
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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
 
To protect shareholders and the Funds against fraud, signatures on certain
requests must have a signature guarantee. Requests must be made in writing and
include a signature guarantee for any of the following transactions: (1) any
endorsement on a share certificate; (2) instruction to change a shareholder's
record name; (3) modification of a designated bank account for wire redemptions;
(4) instruction regarding an Automatic Investment Plan or Automatic Withdrawal
Plan; (5) dividend and distribution election; (6) telephone redemption; (7)
exchange option election or any other option election in connection with the
shareholder's account; (8) written instruction to redeem Shares whose value
exceeds $50,000; (9) redemption in an account in which the account address has
changed within the last 30 days; (10) redemption when the proceeds are deposited
in a Norwest Advantage Funds account under a different account registration; and
(11) the remitting of redemption proceeds to any address, person or account for
which there are not established standing instructions on the account.
 
                                       44
<PAGE>
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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 want telephone redemption or exchange privileges must elect
those privileges. The Trust and Transfer Agent 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 and Transfer Agent did not
employ such procedures, they could be liable for losses due to 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.
 
                                                                  45
<PAGE>
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8. 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, ValuGrowth-SM- 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 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 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 (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 by opening
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 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
 
                                       46
<PAGE>
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- ----
acquired in the exchange over any initial sales charge paid by the shareholder
for the shares being exchanged. For example, if a shareholder paid a 2% initial
sales charge in connection with a purchase of shares and then exchanged those
shares into A Shares of another fund with a 3% initial sales charge, the
shareholder would pay an additional 1% sales charge on the exchange. A Shares
acquired through the reinvestment of dividends or distributions are deemed to
have been acquired with a sales charge rate equal to that applicable to the
shares on which the dividends or distributions were paid.
 
Shares of a Fund ("Original Shares") may be exchanged without the payment of any
contingent deferred sales charge. A and B Shares acquired as a result of such
exchange ("New Shares") and subsequently redeemed will nonetheless be subject to
the contingent deferred sales charge applicable to the Original Shares as if
those shares were being redeemed at that time. For purposes of computing both
the contingent deferred sales charge payable upon redemption of the New Shares
and, in the case of B Shares, the time remaining before the New B Shares convert
to A Shares of that Fund, the deferred sales charge and the time remaining
applicable to the Original Shares will apply to the New Shares rather than the
deferred sales charge and time remaining that would otherwise apply. The
deferred sales charge and time remaining applicable to Shares first purchased by
a shareholder will apply to New Shares resulting from both an initial and any
subsequent exchanges.
 
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
 
                                                                  47
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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
notice if the account contains insufficient funds to effect a withdrawal or if
the account balance is less than $1,000 at any time.
 
REOPENING ACCOUNTS
 
A shareholder may reopen an account, without filing a new account application
form, at any time within one year after the shareholder's account is closed,
provided that the information on the account application form on file with the
Trust is still applicable.
 
                                       48
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                                                   9.  DIVIDENDS AND TAX MATTERS
 
DIVIDENDS
 
Dividends of each 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 and distributions paid by a Fund with respect to
each class of shares are calculated in the same manner and at the same time. 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.
 
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, each Fund will not be liable for federal income and excise taxes on the
net investment income and capital gain distributed to its 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 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. Persons who are "substantial users"
or "related persons" thereof of facilities financed by private
 
                                                                  49
<PAGE>
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activity securities held by a Fund, however, may be subject to federal income
tax on their pro rata share of the interest income from those securities and
should consult their tax advisers before purchasing Shares. 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, exempt-interest dividends are 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
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 advising the shareholder of the portion
of the Fund's dividends that is derived from obligations of issues on the
various states and the portion of the Fund's dividends that is exempt from
federal income taxes. These portions are determined for a Fund's entire year
and, thus, are annual averages, rather than day-by-day determinations for each
shareholder. Dividends paid by a Fund out of its net investment income
(including net short-term capital gain) are taxable to shareholders of the Fund
as ordinary income.
 
Dividends paid by a Fund out of its net investment income (including net
short-term capital gain) are taxable to shareholders of the Fund as ordinary
income. Two different tax rates apply to net capital gain - that is, the excess
of gains from capital assets held for more than one year over net losses from
capital assets held for not more than one year. One rate (generally 28%) applies
to net gain on capital assets held for more than one year but not more than 18
months ("mid-term gain"), and a second rate (generally 20%) applies to the
balance of net capital gain ("adjusted net capital gain"). Distributions of
mid-term gain and adjusted net capital gain will be taxable to shareholders as
such, regardless of how long a shareholder has held shares in the Fund. If a
shareholder holds Shares for six months or less and during that period receives
a distribution of net 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. Distributions reduce the net asset value of the Fund paying
the distribution by the amount of the distribution. Furthermore, these
distributions made shortly after the purchase of Shares by a shareholder,
although in effect a return of capital to that particular shareholder, will be
taxable to the shareholder.
 
                                       50
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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.
 
TAX-FREE INCOME FUND. 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.
 
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 AMT, because interest on
Colorado private activity bonds is not a preference item for Colorado income tax
purposes. Furthermore, 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 securities 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
 
                                                                  51
<PAGE>
- ----
- ----
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 securities issued after August
7, 1986, even though these dividends are exempt from the regular Minnesota
personal income tax.
 
                                       52
<PAGE>
- ----
- ----
 
                                                          10.  OTHER INFORMATION
 
BANKING LAW MATTERS
 
Federal banking rules 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. Forum believes that Norwest and any bank or other bank affiliate also
may perform Processing Organization or similar services for the Trust and its
shareholders without violating applicable federal banking rules. If a bank or
bank affiliate were prohibited in the future from so acting, changes in the
operation of the Trust could occur and a shareholder serviced by the 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 net asset value per share of each class of each Fund is determined 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 Funds only determine net asset value on Fund
Business Days.
 
PERFORMANCE INFORMATION
 
A Fund's performance may be quoted in terms of yield or total return. All
performance information is 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 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 shows 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.
 
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
 
                                                                  53
<PAGE>
- ----
- ----
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. Published yield quotations are, and total return figures
may be, based on amounts invested in a Fund net of sales charges that may be
paid by an investor. A computation of yield or total return that does not take
into account sales charges paid by an investor will be higher than a similar
computation that takes into account payment of sales charges.
 
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 Financial Data, Inc. In addition, the
performance of a Fund may be compared to securities indices. 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 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); the costs
of doing so will be borne by the Trust. Currently the authorized shares of the
Trust are divided into thirty-nine separate series.
 
OTHER CLASSES OF SHARES. The Funds currently issue three classes of shares, A
Shares, B Shares and I Shares. I Shares are offered to fiduciary, agency and
custodial clients of bank trust departments, trust companies and their
affiliates without any sales charges. 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 or the Funds'
distributor. Investors may also contact their Norwest sales representative to
obtain information about the other classes.
 
SHAREHOLDER VOTING AND OTHER RIGHTS. Each share of each series 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 pertains to the class and other
 
                                       54
<PAGE>
- ----
- ----
matters for which separate class voting is appropriate under applicable law.
Generally, shares will be voted in the aggregate without reference to a
particular series or class, except if the matter affects only one series or
class or voting by series or class is required by law, in which case shares will
be voted separately by series 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 (and Trustees) 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 series is entitled to the shareholder's pro rata share of all dividends and
distributions arising from that series' assets and, upon redeeming shares, will
receive the portion of the series' net assets represented by the redeemed
shares.
 
As of October 1, 1997, Norwest Bank Colorado, N.A. may be deemed to have
controlled Colorado Tax-Free Fund and Norwest Bank may be deemed to have
controlled Limited Term Tax-Free Fund and Tax-Free Income Fund due to
investments by their customers. From time to time, this shareholder 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.
 
                                                                  55
<PAGE>



         ------------------------------------------------------------
                                                   ---------------
           [LOGO]                                     BULK RATE
                                                     U.S. POSTAGE
           733 MARQUETTE AVENUE                         PAID
           MINNEAPOLIS, MN 55479-0040              PERMIT NO. 3489
                                                   MINNEAPOLIS, MN
                                                   ---------------




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






          [LOGO]

          SHAREHOLDER INFORMATION:

               Norwest Bank Minnesota, N.A.
               733 Marquette Avenue
               Minneapolis, Minnesota 55479-0040
               612-667-8833 (MINNEAPOLIS/ST. PAUL)
               800-338-1348 (ELSEWHERE)

          -COPYRIGHT- 1997 NORWEST ADVANTAGE FUNDS
          MFBPT004 10/97


<PAGE>

                                  STOCK FUNDS
- --------------------------------------------------------------------------------


                                   PROSPECTUS


                                 OCTOBER 1, 1997





                                INCOME EQUITY FUND
                                 ---------------
                             VALUGROWTH-SM- STOCK FUND
                                 ---------------
                              DIVERSIFIED EQUITY FUND
                                 ---------------
                               GROWTH EQUITY FUND
                                 ---------------
                             SMALL COMPANY STOCK FUND
                                 ---------------
                           SMALL CAP OPPORTUNITIES FUND
                                 ---------------
                                INTERNATIONAL FUND




                                     [LOGO]



                                NOT FDIC INSURED


<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
<TABLE>
<C>        <S>                                          <C>        <C>
                             TABLE OF CONTENTS
 
       1.  PROSPECTUS SUMMARY.........................          2
           Highlights of the Funds....................          2
           Expense Information........................          8
 
       2.  FINANCIAL HIGHLIGHTS.......................         12
 
       3.  INVESTMENT OBJECTIVES AND POLICIES.........         26
           Income Equity Fund.........................         26
           ValuGrowth Stock Fund......................         26
           Diversified Equity Fund....................         27
           Growth Equity Fund.........................         28
           Small Company Stock Fund...................         30
           Small Cap Opportunities Fund...............         30
           International Fund.........................         32
           Core Portfolio Descriptions................         33
           Additional Investment Policies and Risk
           Considerations.............................         40
 
       4.  MANAGEMENT.................................         47
           Investment Advisory Services...............         47
           Management, Administration and Distribution
           Services...................................         53
           Shareholder Servicing and Custody..........         54
           Expenses of the Funds......................         55
 
       5.  CHOOSING A SHARE CLASS.....................         56
           A Shares...................................         57
           B Shares...................................         60
 
       6.  HOW TO BUY SHARES..........................         64
           Minimum Investment.........................         64
           Purchase Procedures........................         64
           Account Application........................         66
           General Information........................         66
 
       7.  HOW TO SELL SHARES.........................         67
           General Information........................         67
           Redemption Procedures......................         67
           Other Redemption Matters...................         68
 
       8.  OTHER SHAREHOLDER SERVICES.................         70
           Exchanges..................................         70
           Automatic Investment Plan..................         71
           Individual Retirement Accounts.............         72
           Automatic Withdrawal Plan..................         72
           Reopening Accounts.........................         72
 
       9.  DIVIDENDS AND TAX MATTERS..................         73
           Dividends..................................         73
           Tax Matters................................         73
 
      10.  OTHER INFORMATION..........................         75
           Banking Law Matters........................         75
           Determination of Net Asset Value...........         75
           Performance Information....................         76
           The Trust and Its Shares...................         76
           Core and Gateway Structure.................         78
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                                OCTOBER 1, 1997
 
This Prospectus offers A Shares and B Shares of Income Equity Fund,
ValuGrowth-SM- Stock Fund, Diversified Equity Fund, Growth Equity Fund, Small
Company Stock Fund, Small Cap Opportunities 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.
 
INCOME EQUITY FUND, SMALL COMPANY STOCK FUND and SMALL CAP OPPORTUNITIES FUND
each seeks to achieve its investment objective by investing all of its
investable assets in a separate portfolio of another registered, open-end,
management investment company with the same investment objective. (See
"Prospectus Summary" and "Other Information - Core and
Gateway-Registered Trademark- Structure.")
 
DIVERSIFIED EQUITY FUND, GROWTH EQUITY FUND and INTERNATIONAL FUND each seeks to
achieve its investment objective by investing in various equity portfolios of
another registered, open-end, management investment company, each of which
invests using a different investment style. (See "Prospectus Summary" and "Other
Information - Core and Gateway Structure.")
 
VALUGROWTH STOCK FUND seeks to achieve its investment objective by investing
directly in portfolio securities.
 
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, 1997,
as may be further amended from time to time, which is available for reference on
the SEC's Web Site (http://www.sec.gov) and 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) 879-0001. Investors
should read this Prospectus and retain it for future reference.
 
NORWEST ADVANTAGE FUNDS IS A FAMILY OF MUTUAL FUNDS. THE SHARES OF MUTUAL FUNDS
ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL
RESERVE SYSTEM OR ANY OTHER GOVERNMENT AGENCY. THE SHARES ALSO ARE NOT
OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED OR GUARANTEED BY, NORWEST BANK
MINNESOTA, N.A. OR ANY OTHER BANK OR BANK AFFILIATE.
 
AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
 
                                                                              --
                                                                               1
<PAGE>

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 long-term capital appreciation consistent 
with 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 to provide long-term capital appreciation. This 
objective is pursued by investing in a diversified portfolio of common stock 
and securities convertible into common stock 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 
domestic companies.

SMALL CAP OPPORTUNITIES FUND seeks capital appreciation. Current income will be 
incidental to the objective of capital appreciation. This objective is pursued 
by investing in equity securities of companies.

INTERNATIONAL FUND seeks long-term capital appreciation. This objective is 
pursued by investing in high quality companies based outside the United States.

FUND STRUCTURES

INCOME EQUITY FUND, SMALL COMPANY STOCK FUND and SMALL CAP OPPORTUNITIES FUND 
each seeks to achieve its investment objective by investing all of its 
investable assets in a separate portfolio (each a "Core Portfolio") of a 
registered, open-end, management investment company (each a "Core Trust") that 
has the same investment objective and substantially similar investment policies 
as the Fund. Accordingly, the investment experience of each of these Funds will 
correspond directly with the investment experience of its corresponding Core 
Portfolio. (See "Other Information - Core and 


2

<PAGE>

Gateway Structure.") The Funds and the Core Portfolios in which they invest are:

FUND                             CORE PORTFOLIO
- ----                             --------------
Income Equity Fund               Income Equity Portfolio
Small Company Stock Fund         Small Company Stock Portfolio
Small Cap Opportunities Fund     Schroder U.S. Smaller
                                   Companies Portfolio

DIVERSIFIED EQUITY FUND, GROWTH EQUITY FUND and INTERNATIONAL FUND each seeks 
to achieve its investment objective by investing all of its investable assets 
in various portfolios (each a "Core Portfolio") of registered, open-end, 
management investment companies (each a "Core Trust"). Each Core Portfolio 
invests using a different investment style. (See "Other Information - Core and 
Gateway Structure.") The Funds and the Core Portfolios in which they currently 
invest are:

FUND                             CORE PORTFOLIOS
- ----                             ---------------
Diversified Equity Fund          Index Portfolio
                                 Income Equity Portfolio
                                 Large Company Growth Portfolio
                                 Disciplined Growth Portfolio
                                 Small Company Stock Portfolio
                                 Small Company Growth Portfolio
                                 Small Company Value Portfolio
                                 Small Cap Value Portfolio
                                 International Portfolio
                                 Schroder EM Core Portfolio
Growth Equity Fund               Large Company Growth Portfolio
                                 Small Company Stock Portfolio
                                 Small Company Growth Portfolio
                                 Small Company Value Portfolio
                                 Small Cap Value Portfolio
                                 International Portfolio
                                 Schroder EM Core Portfolio
International Fund               International Portfolio
                                 Schroder EM Core Portfolio

VALUGROWTH STOCK FUND seeks to achieve its investment objective by investing 
directly in portfolio securities.

INVESTMENT ADVISERS

NORWEST INVESTMENT MANAGEMENT, INC. ("Norwest"), a subsidiary of Norwest Bank 
Minnesota, N.A. ("Norwest Bank"), is each Funds' and each Core Portfolio's 
(other than Schroder U.S. Smaller Companies Portfolio, Schroder EM Core 
Portfolio and International Portfolio) investment adviser. Norwest provides 
investment advice to various institutions, pension plans and other accounts 
and, as of August 31, 1997, managed over $22 billion in assets. (See 
"Management - Investment Advisory Services.")


                                                                               3
<PAGE>

Norwest Bank serves as transfer agent, dividend disbursing agent and custodian
of the Trust, serves as the custodian of each Core Portfolio other than Schroder
U.S. Smaller Companies Portfolio and Schroder EMCore Portfolio and provides
administrative services to Small Cap Opportunities Fund and International Fund.
(See "Management - Shareholder Servicing and Custody" and "- Management,
Administration and Distribution Services.")

Each Fund (other than ValuGrowth Stock Fund) incurs investment advisory fees
indirectly through the investment advisory fees paid by the Core Portfolios;
Norwest is paid an investment advisory fee directly by ValuGrowth Stock Fund. In
addition, Diversified Equity Fund, Growth Equity Fund and International Fund
each pay Norwest a fee for Norwest's services with respect to the allocation of
the Fund's assets to and among the Fund's respective Core Portfolios ("Asset
Allocation Services").

CRESTONE CAPITAL MANAGEMENT, INC. ("Crestone"), an investment advisory
subsidiary of Norwest Bank, is the investment subadviser of Small Company Stock
Portfolio. Crestone provides investment advice regarding companies with small
capitalization to various clients, including institutional investors. 

PEREGRINE CAPITAL MANAGEMENT, INC. ("Peregrine"), an investment advisory
subsidiary of Norwest, is the investment subadviser of Large Company Growth
Portfolio, Small Company Growth Portfolio and Small Company Value Portfolio.
Peregrine provides investment advisory services to corporate and public pension
plans, profit sharing plans, savings-investment plans and 401(k) plans. 

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. ("Schroder") is the investment
adviser of Schroder U.S. Smaller Companies Portfolio, International Portfolio
and Schroder EMCore Portfolio. Schroder specializes in providing international
investment advice to various clients and, as of December 31, 1996, Schroder and
its affiliates managed more than $150 billion in assets worldwide.

SMITH ASSET MANAGEMENT GROUP, L.P. ("Smith Group") is the investment subadvisor
of Disciplined Growth Portfolio and Small Cap Value Portfolio. Smith Group
provides investment management services to company retirement plans,
foundations, endowments, trust companies, and high net worth individuals using a
disciplined equity style.

Norwest, Crestone, Peregrine, Schroder and Smith (or Norwest and a particular
investment subadviser) are sometimes referred to collectively as the "Advisers."
The various investment subadivisers are sometimes referred to as the
"Subadvisers."

FUND MANAGEMENT AND ADMINISTRATION

The manager of the Trust and distributor of its shares is Forum Financial
Services, Inc. ("Forum"), a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. Forum Administrative Services, LLC
("FAS") provides administrative services to the Funds and also serves as
administrator of each Core Portfolio, except Schroder U.S. Smaller Companies
Portfolio and Schroder EMCore Portfolio, for which FAS serves 


4
<PAGE>

as subadministrator. Schroder Fund Advisors Inc. serves as administrator of
Schroder U.S. Smaller Companies Portfolio and Schroder EMCore Portfolio. (See
"Management - Management, Administration and Distribution Services.")

SHARES OF THE FUNDS

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

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

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

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 an investor who
qualifies for reduced initial sales charges. (See "Choosing a Share Class.")

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

HOW TO BUY AND SELL SHARES

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 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.") 

                                                                               5

<PAGE>

SHAREHOLDER FEATURES

Each Fund offers an Automatic Investment Plan, Automatic Withdrawal Plan and
Directed Dividend Option. Purchases of A Shares may be eligible for Rights of
Accumulation, Cumulative Quantity Discounts or a Reinstatement Privilege. (See
"Other Shareholder Services" and "Choosing a Share Class.")

DIVIDENDS AND DISTRIBUTIONS

Dividends of the net investment income of Income Equity Fund, ValuGrowth Stock
Fund and Small Company Stock Fund are declared and paid quarterly. Dividends of
the net investment income of Diversified Equity Fund, Growth Equity Fund, Small
Cap Opportunities Fund and International Fund are declared and paid annually.
Each Fund's net capital gain, if any, is distributed annually. All dividends and
distributions are reinvested in additional Fund shares unless the shareholder
elects to have them paid in cash. (See "Dividends and Tax Matters.")

CERTAIN INVESTMENT CONSIDERATIONS AND RISK FACTORS

There can be no assurance that any Fund will achieve its investment objective,
and each Fund's net asset value and total return will fluctuate based upon
changes in the value of its portfolio securities. Upon redemption, an investment
in a Fund may be worth more or less than its original value.  All of the Funds
invest primarily in equity securities and are subject to the general risks of
investing in the stock market.  The fundamental risk of investing in common
stock is the risk that the value of the stock might decrease. 

All investments made by the Funds entail some risk. Certain investments and
investment techniques, however, entail additional risks, such as the potential
use of leverage by certain Funds through borrowings, securities lending and
other investment techniques. (See "Investment Objectives and Policies -
Additional Investment Policies and Risk Considerations.") The 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 that is employed by
SMALL COMPANY STOCK FUND and SMALL CAP OPPORTUNITIES 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. These risks include the fact that the
issuer may have limited product lines, access to financial markets and
management depth. (See "Investment Objectives and Policies - Small Company Stock
Fund (or Small Cap Opportunities Fund) - Additional Investment Considerations
and Risk Factors.") SMALL COMPANY STOCK FUND and SMALL CAP OPPORTUNITIES FUND
are designed for the investment of that portion of an investor's funds that can
appropriately bear the special risks associated with an investment in smaller
market capitalization companies.


6
<PAGE>

The policy of investing in foreign issuers employed by INTERNATIONAL 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. These risks include the 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. (See "Investment Objectives and Policies - International Fund - Foreign
Investments.") INTERNATIONAL FUND is designed for the investment of that portion
of an investor's funds that can appropriately bear the special risks associated
with an investment in foreign companies.

By pooling their assets in one or more Core Portfolios with other institutional
investors, INCOME EQUITY FUND, DIVERSIFIED EQUITY FUND, GROWTH EQUITY FUND,
SMALL COMPANY STOCK FUND, SMALL CAP OPPORTUNITIES FUND and INTERNATIONAL FUND
each may be able to achieve certain efficiencies, economies of scale and
enhanced portfolio diversification. Nonetheless, these investments could have
adverse effects on the Funds which investors should consider. Investment
decisions are made by the portfolio managers of each Core Portfolio
independently. Therefore the portfolio manager of one Core Portfolio in which a
Fund invests may purchase shares of the same issuer whose shares are being sold
by the portfolio manager of another Core Portfolio in which the Fund invests.
This could result in an indirect expense to the Fund without accomplishing any
investment purpose. (See "Other Information - Core and Gateway Structure.") 


                                                                               7


<PAGE>

EXPENSE INFORMATION

The purpose of the Shareholder Transaction Expenses and Annual Fund Operating 
Expenses tables in this section 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)

<TABLE>
<CAPTION>
                                                            A         B
                                                          SHARES    SHARES
                                                        -----------------------
<S>                                                     <C>         <C>
Maximum sales charge imposed on purchases 
   (as a percentage of public offering price) . . . . .   5.5%(1)    Zero
Maximum deferred sales charge 
   (as a percentage of the lesser of original 
   purchase price or redemption proceeds) . . . . . . .   Zero(2)    4.0%(1)(3)
Exchange Fee  . . . . . . . . . . . . . . . . . . . . .   Zero       Zero

</TABLE>

                    ANNUAL FUND OPERATING EXPENSES(4)
                (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)

<TABLE>
<CAPTION>
                                                   INCOME EQUITY       VALUGROWTH STOCK       DIVERSIFIED EQUITY
                                                        FUND                 FUND                    FUND(7)
                                                   --------------------  --------------------  --------------------
                                                       A         B           A         B            A        B
                                                     SHARES    SHARES      SHARES    SHARES      SHARES    SHARES
                                                   --------------------  --------------------  --------------------
<S>                                                <C>         <C>       <C>         <C>       <C>         <C>
Investment Advisory Fees (after fee waivers)(5). .    N/A       N/A        0.80%     0.80%       0.17%     0.17%
Rule 12b-1 Fees (after fee waivers)(6) . . . . . .    N/A      0.75%        N/A      0.75%        N/A      0.75%

Other Expenses (after reimbursements). . . . . . .   0.31%     0.31%       0.20%     0.20%       0.27%     0.27%
Investment Advisory Fees - Core Portfolio(s)(5). .   0.50%     0.50%        N/A       N/A        0.50%     0.50%
Other Expenses - Core Portfolio(s)
(after reimbursements) . . . . . . . . . . . . . .   0.04%     0.04%        N/A       N/A        0.06%     0.06%
                                                   --------------------  --------------------  --------------------
Total Operating Expenses(8). . . . . . . . . . . .   0.85%     1.60%       1.00%     1.75%       1.00%     1.75%

</TABLE>

<TABLE>
<CAPTION>
                                                GROWTH EQUITY          SMALL COMPANY          SMALL CAP            INTERNATIONAL
                                                   FUND(7)             STOCK FUND(7)      OPPORTUNITIES FUND           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 
(after fee waivers) (5). . . . . . . . . . .   0.22%     0.22%        N/A       N/A        0.25%     0.25%       0.38%     0.38%
Rule 12b-1 Fees (after fee waivers)(6) . . .    N/A      0.75%        N/A      0.75%        N/A      0.75%        N/A      0.75%
Other Expenses (after fee waivers 
  and reimbursements). . . . . . . . . . . .   0.24%     0.24%       0.25%     0.25%       0.21%     0.21%       0.39%     0.39%
Investment Advisory Fees - 
Core Portfolio(s). . . . . . . . . . . . . .   0.69%     0.69%       0.90%     0.90%       0.60%     0.60%       0.48%     0.48%

Other Expenses - Core Portfolio(s)
(after fee waivers and reimbursements) . . .   0.10%     0.10%       0.05%     0.05%       0.19%     0.19%       0.25%     0.25%
                                             --------------------  --------------------  --------------------  --------------------
Total Operating Expenses(8). . . . . . . . .   1.25%     2.00%       1.20%     1.95%       1.25%     2.00%       1.50%     2.25%
</TABLE>


(1) Sales charge waivers and reduced sales charge plans are available for
    A and B Shares. (See "Choosing a Share Class.")

(2) If A Shares purchased without an initial sales charge (purchases of
    $1,000,000 or more) are redeemed within two years after purchase, a 
    deferred sales charge of up to 1.0% will be applied to the redemption.

(3) The maximum 4.0% deferred sales charge on B Shares applies to redemptions
    during the first year after purchase; the charge declines thereafter, and 
    is 3.0% during the second and third years, 2.0% during the fourth and fifth
    years, 1.0% during the sixth year and zero the following year.

(4) For a further description of the various expenses associated with investing
    in the Funds, see "Management." Expenses associated with I Shares of a Fund
    differ from those listed in the table. The table is based on expenses 
    incurred during the Funds' most recent fiscal year ended May 31, 1997, 
    restated to reflect current fees. To the extent a Fund invests its assets 
    in various Core Portfolios (each of which bears expenses as noted under 
    "Investment Advisory Fees - Core Portfolio(s)" and "Other Expenses - Core 
    Portfolio(s)"), the Fund indirectly bears its pro rata portion of the 
    expenses of each Core Portfolio in which it invests.

(5) For Diversified Equity Fund, Growth Equity Fund and International Fund,
    "Investment Advisory Fees" reflects the fee for Asset Allocation Services.
    In addition, for Small Cap Opportunities Fund and International Fund, 
    "Investment Advisory Fees" reflects the administrative services fee payable
    to Norwest. "Investment Advisory Fees - Core Portfolio(s)" reflects the 
    investment advisory fees incurred by the Core Portfolio(s) in which the 
    Funds invest. Absent waivers, "Investment Advisory Fees" for ValuGrowth 
    Stock Fund, Diversified Equity Fund, Growth Equity Fund and International
    Fund  would be 0.80%, 0.25%, 0.25% and 0.50%, respectively. The "Investment
    Advisory Fees - Core Portfolios" incurred by each of Diversified Equity 
    Fund, Growth Equity Fund, and International Fund will vary based on the 
    percentage of the Fund's assets invested in each Core Portfolio.


8                                                                             9

<PAGE>

(6) Absent waivers, "Rule 12b-1 Fees" would be 1.00% for B Shares of each Fund.
    Long-term shareholders of B Shares may pay Rule 12b-1 Fees and contingent
    deferred sales charges totaling in the aggregate more than the economic
    equivalent of the maximum front-end sales charges permitted by the rules of 
    the National Association of Securities Dealers, Inc.

(7) Norwest and Forum have agreed to waive their respective fees or reimburse
    expenses in order to maintain Small Company Stock Fund's total operating
    expenses through May 31, 1998 at or below 1.20% for A Shares and 1.95% for B
    Shares. In addition, Norwest and Forum have agreed to waive their 
    respective fees through May 31, 1999 in order to ensure that the fees borne 
    by each of Diversified Equity Fund and Growth Equity Fund for investment 
    advisory, administrative and management services would not exceed, in the 
    aggregate, 0.75% and 1.00%, respectively.

(8) Absent estimated expense reimbursements and fee waivers, the expenses of A
    Shares of Income Equity Fund, ValuGrowth Stock Fund, Diversified Equity 
    Fund, Growth Equity Fund, Small Company Stock Fund, Small Cap Opportunities
    Fund and International Fund would be: "Other Expenses," 0.35%, 0.47%, 
    0.35%, 0.38%, 0.43%, 2.46% and 0.57%, respectively; "Other Expenses - Core 
    Portfolio(s)," 0.07%, N/A, 0.11%, 0.14%, 0.14%, 0.10%, 0.19% and 0.26%, 
    respectively; and "Total Operating Expenses," 0.93%, 1.27%, 1.22%, 1.46%, 
    1.43%, 3.50% and 1.81%, respectively." Absent expense reimbursements and 
    fee waivers, the expenses of B Shares of Income Equity Fund, ValuGrowth 
    Stock Fund, Diversified Equity Fund, Growth Equity Fund, Small Company 
    Stock Fund, Small Cap Opportunities Fund and International Fund would be:
    "Other Expenses," 0.36%, 0.54%, 0.35%, 0.41%, 0.48%, 6.69% and 0.63%, 
    respectively; "Other Expenses - Core Portfolio(s)," 0.07%, N/A, 0.11%, 
    0.14%, 0.10% and 0.19% and 0.26%, respectively; and "Total Operating 
    Expenses," 1.93%, 2.34%, 2.21%, 2.98%, 2.48%, 8.73% and 2.88%, 
    respectively."  Except as otherwise noted, expense reimbursements and fee
    waivers are voluntary and may be reduced or eliminated at any time.

EXAMPLE

The following Hypothetical Expense Example indicates the dollar amount of 
expenses that an investor would pay, assuming a $1,000 investment in a Fund's 
Shares, the expenses listed in the "Annual Fund Operating Expenses" table, a 
5% annual return, reinvestment of all dividends and distributions, the 
deduction of the maximum initial sales charge for A Shares, the deduction of 
the applicable 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. The 5% annual return is not 
predictive of and does not represent the Funds' projected returns; rather, it 
is required by government regulation.

10

<PAGE>

                            HYPOTHETICAL EXPENSE EXAMPLE

<TABLE>
<CAPTION>

                                                  1 YEAR       3 YEARS     5 YEARS      10 YEARS
                                                -------------------------------------------------
<S>                                             <C>          <C>          <C>          <C>
INCOME EQUITY FUND
     A Shares . . . . . . . . . . . . . . . .       63            81          100          154
     B Shares
        Assuming redemption
        at the end of the period  . . . . . .       56            80          107           --
     Assuming no redemption . . . . . . . . .       16            50           87           --
                                                -------------------------------------------------
VALUGROWTH STOCK FUND                                      
     A Shares . . . . . . . . . . . . . . . .       65            85          107          171
     B Shares                                              
        Assuming redemption                                
        at the end of the period  . . . . . .       58            85          115           --
     Assuming no redemption . . . . . . . . .       18            55           95           --
                                                -------------------------------------------------
DIVERSIFIED EQUITY FUND                                    
     A Shares . . . . . . . . . . . . . . . .       65            85          107          171
     B Shares                                              
        Assuming redemption                                
        at the end of the period  . . . . . .       58            85          115           --
     Assuming no redemption . . . . . . . . .       18            55           95           --
                                                -------------------------------------------------
GROWTH EQUITY FUND                                         
     A Shares . . . . . . . . . . . . . . . .       67            92          120          198
     B Shares                                              
        Assuming redemption                                
        at the end of the period  . . . . . .       60            93          128           --
     Assuming no redemption . . . . . . . . .       20            63          108           --
                                                -------------------------------------------------
SMALL COMPANY STOCK FUND                                   
     A Shares . . . . . . . . . . . . . . . .       67            91          117          192
     B Shares                                              
        Assuming redemption                                
        at the end of the period  . . . . . .       60            91          125           --
     Assuming no redemption . . . . . . . . .       20            61          105           --
                                                -------------------------------------------------
SMALL CAP OPPORTUNITIES FUND                               
     A Shares . . . . . . . . . . . . . . . .       57            83          111          189
     B Shares                                              
        Assuming redemption                                
        at the end of the period  . . . . . .       67            92          120           --
     Assuming no redemption . . . . . . . . .       27            62          100           --
                                                -------------------------------------------------
INTERNATIONAL FUND                                         
     A Shares . . . . . . . . . . . . . . . .       69           100          132          224
     B Shares                                              
        Assuming redemption                                
        at the end of the period. . . . . . .       63           100          140           --
     Assuming no redemption . . . . . . . . .       23            70          120           --

</TABLE>

                                                                             11

<PAGE>

2.  FINANCIAL HIGHLIGHTS

The following tables provide financial highlights for the Funds. This 
information represents selected data for a single outstanding A and B Share 
of each Fund for the periods shown. Information for the periods ended May 31,
1994 and thereafter were audited by KPMG Peat Marwick LLP, independent 
auditors. Information for prior periods was audited by other independent 
auditors. Each Fund's financial statements for the fiscal year ended May 31, 
1997, and independent auditors' report thereon, are contained in the Fund's 
Annual Report. These financial statements are incorporated by reference into 
the SAI. Further information about each Fund's performance is contained in 
the Fund's Annual Report, which may be obtained from the Trust without charge.


INCOME EQUITY FUND

<TABLE>
<CAPTION>
                                                            NET
                                                       REALIZED AND
                                 BEGINNING               UNREALIZED    DIVIDENDS   DISTRIBUTIONS   ENDING 
                                 NET ASSET     NET         GAIN        FROM NET      FROM NET     NET ASSET    
                                   VALUE    INVESTMENT   (LOSS) ON    INVESTMENT     REALIZED       VALUE      
                                 PER SHARE    INCOME    INVESTMENTS     INCOME         GAIN       PER SHARE    
- ------------------------------------------------------------------------------------------------------------
<S>                              <C>        <C>        <C>            <C>          <C>            <C>          
A SHARES
June 1, 1996 to May 31, 1997       $27.56      $0.57        $5.54       ($0.51)         --          $33.16      
June 1, 1995 to May 31, 1996(a)    $26.94      $0.07        $0.55          --           --          $27.56     
B SHARES
June 1, 1996 to May 31, 1997       $27.54      $0.36        $5.52       ($0.33)         --          $33.09     
June 1, 1995 to May 31, 1996(a)    $26.94      $0.02        $0.58          --           --          $27.54     
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
                                     RATIO TO AVERAGE NET ASSETS
                                 ------------------------------------
                                                                                                               NET ASSETS
                                    NET                                PORTFOLIO     AVERAGE                   AT END OF
                                 INVESTMENT     NET         GROSS        TOTAL       TURNOVER    COMMISSION      PERIOD
                                   INCOME     EXPENSES    EXPENSES(b)   RETURN(c)      RATE        RATE(d)   (000'S OMITTED)
- ----------------------------------------------------------------------------------------------------------------------------
<S>                              <C>          <C>         <C>          <C>          <C>          <C>            
A SHARES        
June 1, 1996 to May 31, 1997        1.95%      0.85%        0.93%        22.40%        4.76%       $0.0792       $43,708
June 1, 1995 to May 31, 1996(a)     3.69%(e)   0.91%(e)     1.91%(e)      2.30%        0.69%       $0.0942       $31,448
B SHARES
June 1, 1996 to May 31, 1997        1.24%      1.59%        1.96%        21.48%        4.76%       $0.0792       $33,626
June 1, 1995 to  May 31, 1996(a)    1.72%(e)   2.92%(e)     2.63%(e)      2.23%        0.69%       $0.0942       $17,318
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

(b) The ratio of Gross Expenses to Average Net Assets does not
    reflect fee waivers or expense reimbursements.

(c) Total Return does not include the effects of sales charges.

(d) Represents the average commission per share paid to brokers on the purchase
    or sale of portfolio securities. Prior to 1996, this data was not reported 
    in mutual fund financial statements.

(e) Annualized.


12                                                                           13
<PAGE>

VALUEGROWTH STOCK FUND

<TABLE>
<CAPTION>
                                                                  NET                                            
                                                              REALIZED AND                                        
                                       BEGINNING               UNREALIZED   DIVIDENDS   DISTRIBUTIONS    ENDING
                                       NET ASSET      NET         GAIN       FROM NET      FROM NET     NET ASSET 
                                         VALUE    INVESTMENT   (LOSS) ON    INVESTMENT     REALIZED       VALUE   
                                       PER SHARE    INCOME    INVESTMENTS     INCOME         GAIN       PER SHARE 
- -----------------------------------------------------------------------------------------------------------------
<S>                                    <C>        <C>         <C>           <C>         <C>             <C>
A SHARES
June 1, 1996 to May 31, 1997              $22.63     $0.17       $4.80       ($0.13)       ($2.41)        $25.06    
June 1, 1995 to May 31, 1996              $18.82     $0.13       $3.93       ($0.13)       ($0.12)        $22.63    
June 1, 1994 to May 31, 1995              $17.17     $0.17       $1.66       ($0.18)            --        $18.82    
June 1, 1993 to May 31, 1994              $17.27     $0.10       $0.19       ($0.17)       ($0.22)        $17.17    
June 1, 1992 to May 31, 1993              $16.30     $0.17       $1.34       ($0.17)       ($0.37)        $17.27    
December 1, 1991 to May 31, 1992          $14.48     $0.09       $1.83       ($0.10)            --        $16.30    
December 1, 1990 to November 30, 1991     $11.67     $0.18       $2.82       ($0.19)            --        $14.48    
December 1, 1989 to November 30, 1990     $12.67     $0.21     ($0.55)       ($0.21)       ($0.45)        $11.67    
December 1, 1988 to November 30, 1989     $10.03     $0.18       $2.61       ($0.15)            --        $12.67    
January 8, 1988 to November 30, 1988(a)   $10.00     $0.15       $0.03       ($0.15)            --        $10.03    
B SHARES
June 1, 1996 to May 31, 1997              $22.28     $0.01       $4.68       ($0.01)       ($2.41)        $24.55    
June 1, 1995 to May 31, 1996             ($18.65    ($0.02)      $3.87       ($0.10)       ($0.12)        $22.28    
June 1, 1994 to May 31, 1995              $17.10     $0.07       $1.61       ($0.13)            --        $18.65    
August 5, 1993 to May 31, 1994(a)         $17.12     $0.07       $0.23       ($0.10)       ($0.22)        $17.10    
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
                                          RATIO TO AVERAGE NET ASSETS    
                                       --------------------------------- 
                                                                                                                 NET ASSETS 
                                           NET                                        PORTFOLIO   AVERAGE         AT END OF 
                                       INVESTMENT    NET       GROSS       TOTAL      TURNOVER   COMMISSION        PERIOD 
                                         INCOME    EXPENSES  EXPENSES(b)  RETURN(c)     RATE       RATE(d)     (000'S OMITTED)
- ------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>         <C>       <C>          <C>         <C>        <C>            <C>
A SHARES                                                                                                                   
June 1, 1996 to May 31, 1997              0.70%     1.01%      1.39%       23.32%       75.50%    $0.0781          $18,830
June 1, 1995 to May 31, 1996              0.63%     1.20%      1.42%       21.69%      105.43%    $0.0603          $15,232
June 1, 1994 to May 31, 1995              1.01%     1.20%      1.43%       10.72%       63.82%       --            $12,138
June 1, 1993 to May 31, 1994              1.06%     1.20%      1.43%        1.68%       86.07%       --            $12,922
June 1, 1992 to May 31, 1993              1.02%     1.20%      1.42%        9.32%       57.34%       --           $109,669
December 1, 1991 to May 31, 1992          1.34%(e)  1.19%(e)   1.64%(e)    26.46%(e)    29.50%       --            $68,659
December 1, 1990 to November 30, 1991     1.57%     1.19%      4.33%       25.84%       31.17%       --             $4,853
December 1, 1989 to November 30, 1990     1.88%     1.20%     11.73%       (2.91%)      38.67%       --               $750
December 1, 1988 to November 30, 1989     1.58%     1.20%      8.38%       28.00%       65.89%       --               $411
January 8, 1988 to November 30, 1988(a)   1.84%(e)  1.19%(e)   2.50%(e)     2.04%(e)    30.90%       --               $281
B SHARES                                                                                                    
June 1, 1996 to May 31, 1997             (0.07%)    1.76%      2.48%       22.33%       75.50%     $0.0781          $6,591
June 1, 1995 to May 31, 1996             (0.12%)    1.96%      2.54%       20.79%      105.43%     $0.0603          $5,130
June 1, 1994 to May 31, 1995              0.28%     1.95%      2.51%        9.88%       63.82%       --             $3,569
August 5, 1993 to May 31, 1994(a)         0.25%(e)  1.95%(e)   2.55%(e)     2.36%(e)    86.07%       --             $2,218
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  The Fund commenced operations on January 8, 1988.  The Fund's original
     class of shares subsequently became A Shares.  The Fund commenced the 
     offering of B Shares on August 5, 1993.

(b)  The ratio of Gross Expenses to Average Net Assets does not reflect fee
     waivers or expense reimbursements.

(c)  Total Return does not include the effects of sales charges.

(d)  Represents the average commission per share paid to brokers on the purchase
     or sale of portfolio securities.  Prior to 1996, this data was not 
     reported in mutual fund financial statements.

(e)  Annualized.


14                                                                           15

<PAGE>

DIVERSIFIED EQUITY FUND

<TABLE>
<CAPTION>
                                                              NET                                             
                                                          REALIZED AND                                        
                                  BEGINNING                UNREALIZED   DIVIDENDS   DISTRIBUTIONS     ENDING
                                  NET ASSET      NET          GAIN       FROM NET     FROM NET       NET ASSET 
                                    VALUE     INVESTMENT   (LOSS) ON    INVESTMENT    REALIZED         VALUE   
                                  PER SHARE     INCOME    INVESTMENTS     INCOME        GAIN         PER SHARE 
- ---------------------------------------------------------------------------------------------------------------
<S>                               <C>         <C>         <C>           <C>         <C>            <C>         
A Shares
June 1, 1996 to May 31, 1997        $30.56       $0.20       $6.10       ($0.16)       ($0.19)         $36.51    
May 2, 1996 to May 31, 1996(a)      $29.89       $0.02       $0.65          --            --         $30.56      
B Shares
June 1, 1996 to May 31, 1997        $30.54       $0.03       $6.00        ($0.07)      ($0.19)         $36.31    
May 6, 1996 to May 31, 1996(a)      $29.41       $0.02       $1.11          --            --         $30.54      
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
                                      RATIO TO AVERAGE NET ASSETS
                                 --------------------------------------
                                                                                                                NET ASSETS
                                    NET                                                PORTFOLIO    AVERAGE      AT END OF
                                 INVESTMENT       NET         GROSS         TOTAL      TURNOVER   COMMISSION      PERIOD
                                  INCOME        EXPENSES    EXPENSES(b)    RETURN(c)     RATE       RATE(d)   (000'S OMITTED)
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                <C>          <C>         <C>            <C>         <C>        <C>         <C>            
A Shares
June 1, 1996 to May 31, 1997       0.81%(f)     1.02%(f)      1.40%(f)      20.75%      48.08%      $0.0626        $25,271
May 2, 1996 to May 31, 1996(a)     1.88%(e)(f)  1.52%(e)(f)   4.06%(e)(f)    2.24%       5.76%      $0.0671         $2,699
B Shares                                        
June 1, 1996 to May 31, 1997       0.09%(f)     1.76%(f)      2.41%(f)      19.86%      48.08%      $0.0626        $33,870
May 6, 1996 to May 31, 1996(a)     1.24%(e)(f)  2.37%(e)(f)   4.95%(e)(f)    3.84%       5.76%      $0.0671         $2,447
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

(b)  The ratio of Gross Expenses to Average Net Assets does not reflect fee
     waivers or expense reimbursements.

(c)  Total Return does not include the effects of sales charges.

(d)  Represents the average commission per share paid to brokers on the purchase
     or sale of portfolio securities.  Prior to 1996, this data was not reported
     in mutual fund financial statements.

(e)  Annualized.

(f)  Includes expenses allocated from the Core Portfolios in which the Fund was
     invested:  Index Portfolio, Small Company Portfolio and International
     Portfolio II of Core Trust (Delaware).


16                                                                           17

<PAGE>

GROWTH EQUITY FUND

<TABLE>
<CAPTION>
                                                              NET                                             
                                                          REALIZED AND                                        
                                  BEGINNING                UNREALIZED   DIVIDENDS   DISTRIBUTIONS     ENDING
                                  NET ASSET      NET          GAIN       FROM NET     FROM NET       NET ASSET 
                                    VALUE     INVESTMENT   (LOSS) ON    INVESTMENT    REALIZED         VALUE   
                                  PER SHARE     INCOME    INVESTMENTS     INCOME        GAIN         PER SHARE 
- ---------------------------------------------------------------------------------------------------------------
<S>                               <C>         <C>         <C>           <C>         <C>            <C>         
A SHARES
June 1, 1996 to May 31, 1997        $29.08     ($0.02)       $4.06       ($0.04)      ($0.59)         $32.49    
May 2, 1996 to May 31, 1996(a)      $28.50        --         $0.58          --           --           $29.08    
B SHARES
June 1, 1996 to May 31, 1997        $29.07     ($0.13)       $3.93          --        ($0.59)         $32.28    
May 6, 1996 to   May 31, 1996(a)    $28.18        --         $0.89          --           --           $29.07    
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
                                       RATIO TO AVERAGE NET ASSETS
                                 --------------------------------------
                                                                                                                NET ASSETS
                                    NET                                                PORTFOLIO    AVERAGE      AT END OF
                                 INVESTMENT       NET         GROSS         TOTAL      TURNOVER   COMMISSION      PERIOD
                                  INCOME        EXPENSES    EXPENSES(b)    RETURN(c)     RATE       RATE(d)   (000'S OMITTED)
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                <C>          <C>         <C>            <C>         <C>        <C>         <C>            
A SHARES
June 1, 1996 to May 31, 1997      (0.12%)(f)     1.30%(f)     1.95%(f)      14.11%       9.06%      $0.0565       $14,146
May 2, 1996 to May 31, 1996(a)     0.34% (e)(f)  2.08%(e)(f)  6.40%(e)(f)    2.04%       7.39%      $0.0617        $3,338
B SHARES                                                                           
June 1, 1996 to May 31, 1997      (0.82%)(f)     2.04%(f)     3.02%(f)      13.28%       9.06%      $0.0565        $8,713
May 6, 1996 to May 31, 1996(a)    (0.40%)(e)(f)  2.92%(e)(f)  7.44%(e)(f)    3.16%       7.39%      $0.0617          $703
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

(b) The ratio of Gross Expenses to Average Net Assets does not reflect fee
    waivers or expense reimbursements.

(c)  Total Return does not include the effects of sales charges.

(d) Represents the average commission per share paid to brokers on the 
    purchase or sale of portfolio securities.  Prior to 1996, this data was 
    not required to be reported in mutual fund financial statements.

(e) Annualized.

(f) Includes expenses allocated from the Core Portfolios in which the Fund 
    was invested: Index Portfolio, Small Company Portfolio and International 
    Portfolio II of Core Trust (Delaware).


18                                                                           19

<PAGE>

SMALL COMPANY STOCK FUND

<TABLE>
<CAPTION>
                                                               NET                                             
                                                           REALIZED AND                                        
                                     BEGINNING              UNREALIZED   DIVIDENDS  DISTRIBUTIONS   ENDING
                                     NET ASSET     NET        GAIN        FROM NET    FROM NET     NET ASSET 
                                       VALUE    INVESTMENT  (LOSS) ON    INVESTMENT   REALIZED       VALUE   
                                     PER SHARE    INCOME   INVESTMENTS     INCOME       GAIN       PER SHARE 
- -------------------------------------------------------------------------------------------------------------
<S>                                  <C>        <C>        <C>           <C>         <C>            <C>         
A SHARES
June 1, 1996 to May 31, 1997           $14.02    ($0.04)      $0.88          --        ($0.91)      $13.95 
June 1, 1995 to May 31, 1996           $10.64     $0.01       $3.93       ($0.03)      ($0.53)      $14.02 
June 1, 1994 to May 31, 1995            $9.84     $0.12       $0.87       ($0.11)      ($0.08)      $10.64 
December 31, 1993 to May 31, 1994(a)   $10.00     $0.07      ($0.15)      ($0.08)         --         $9.84 
B SHARES 
June 1, 1996 to May 31, 1997           $13.83    ($0.11)      $0.82          --        ($0.91)      $13.63 
June 1, 1995 to May 31, 1996           $10.56    ($0.08)      $3.90       ($0.02)      ($0.53)      $13.83 
June 1, 1994 to May 31, 1995            $9.82     $0.07       $0.84       ($0.09)      ($0.08)      $10.56 
December 31, 1993 to May 31, 1994(a)   $10.00     $0.06      ($0.17)      ($0.07)         --         $9.82 
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
                                        RATIO TO AVERAGE NET ASSETS
                                     -----------------------------------
                                                                                                                NET ASSETS
                                        NET                                             PORTFOLIO    AVERAGE      AT END OF
                                     INVESTMENT    NET         GROSS         TOTAL      TURNOVER   COMMISSION      PERIOD
                                       INCOME    EXPENSES    EXPENSES(b)    RETURN(c)     RATE       RATE(d)   (000'S OMITTED)
- ------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>        <C>         <C>            <C>         <C>        <C>         <C>            
A SHARES
June 1, 1996 to May 31, 1997          (0.38%)     1.19%         1.67%         6.34%      210.19%     $0.0774       $7,355
June 1, 1995 to May 31, 1996           0.03%      1.21%         1.87%        38.22%      134.53%     $0.0555       $5,426
June 1, 1994 to May 31, 1995           1.14%      0.53%         2.32%        10.19%       68.09%       --          $1,540
December 31, 1993 to May 31, 1994(a)   1.95%(e)   0.22%(e)     10.66%(e)     (1.98%)(e)   14.98%       --            $265
B SHARES                                                                               
June 1, 1996 to May 31, 1997          (1.13%)     1.94%         2.73%         5.46%      210.19%     $0.0774       $5,125
June 1, 1995 to May 31, 1996          (0.74%)     1.96%         2.96%        37.32%      134.53%     $0.0555       $4,125
June 1, 1994 to May 31, 1995           0.38%      1.27%         3.56%         9.31%       68.09%       --            $963
December 31, 1993 to May 31, 1994(a)   1.27%(e)   0.98%(e)     20.87%(e)     (2.77%)(e)   14.98%       --            $195
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

(b)  The ratio of Gross Expenses to Average Net Assets does not reflect fee
     waivers or expense reimbursements.

(c)  Total Return does not include the effects of sales charges.

(d)  Represents the average commission per share paid to brokers on the
     purchase or sale of portfolio securities.
     Prior to 1996, this data was not reported in mutual fund financial
     statements.

(e)  Annualized.


20                                                                           21

<PAGE>

SMALL CAP OPPORTUNITIES FUND

<TABLE>
<CAPTION>
                                                             NET
                                                         REALIZED AND
                                    BEGINNING              UNREALIZED   DIVIDENDS  DISTRIBUTIONS   ENDING
                                    NET ASSET      NET       GAIN        FROM NET    FROM NET     NET ASSET          NET
                                      VALUE    INVESTMENT  (LOSS) ON    INVESTMENT   REALIZED       VALUE        INVESTMENT
                                    PER SHARE    INCOME   INVESTMENTS    INCOME        GAIN        PER SHARE       INCOME
- ------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>        <C>           <C>        <C>            <C>           <C>
A SHARES
October 9, 1996 to May 31, 1997(a)    $17.39    ($0.01)      $2.46          --        ($0.01)       $19.83       (0.18%)(f)(g)
B SHARES
November 8, 1996 to May 31, 1997(a)   $17.41    ($0.05)      $2.40          --        ($0.01)       $19.75       (0.99%)(f)(g)
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                          RATIO TO AVERAGE NET ASSETS
                                    --------------------------------------
                                                                                                      NET ASSETS
                                                                            PORTFOLIO    AVERAGE       AT END OF
                                       NET           GROSS         TOTAL     TURNOVER   COMMISSION       PERIOD
                                     EXPENSES     EXPENSES(b)    RETURN(c)     RATE     RATE(d)(e)   (000'S OMITTED)
- --------------------------------------------------------------------------------------------------------------------
<S>                                 <C>           <C>            <C>        <C>         <C>          <C>
A SHARES
October 9, 1996 to May 31, 1997(a)   1.25%(f)(g)  10.51%(f)(g)    11.37%      34.45%     $0.0584           $522
B SHARES
November 8, 1996 to May 31, 1997(a)  2.06%(f)(g)  27.27%(f)(g)    13.53%      34.45%     $0.0584           $158
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) The Fund commenced  the offering of A Shares on October 9, 1996 and B
    Shares on November 8, 1996.

(b) The ratio of Gross Expenses to Average Net Assets does not reflect fee
    waivers or expense reimbursements.

(c) Total Return does not include the effects of sales charges.

(d) Represents the Portfolio Turnover Rate and Average Commission Rate, of
    Schroder U.S. Smaller Companies Portfolio of Schroder Capital Funds.

(e) Represents the average commission per share paid to brokers on the purchase
    or sale of portfolio securities. Prior to 1996, this data was not reported 
    in mutual fund financial statements.

(f) Annualized.

(g) Includes expenses allocated for Schroder U.S. Smaller Companies Portfolio
    of Schroder Capital Funds.


22                                                                            23

<PAGE>

INTERNATIONAL FUND

<TABLE>
<CAPTION>
                                                                     NET
                                                                 REALIZED AND
                                        BEGINNING                 UNREALIZED    DIVIDENDS    DISTRIBUTIONS    ENDING
                                        NET ASSET      NET           GAIN        FROM NET      FROM NET      NET ASSET
                                          VALUE     INVESTMENT     (LOSS) ON    INVESTMENT     REALIZED        VALUE
                                        PER SHARE     INCOME      INVESTMENTS     INCOME         GAIN        PER SHARE
- ----------------------------------------------------------------------------------------------------------------------
<S>                                     <C>         <C>           <C>           <C>          <C>             <C>
A SHARES
June 1, 1996 to May 31, 1997             $19.82       $0.10          $1.94        ($0.20)         --           $21.66
November 1, 1995 to May 31, 1996         $17.97       $0.35          $1.83        ($0.33)         --           $19.82
April 1, 1995 to October 31, 1995(a)     $16.50       $0.01          $1.46           --           --           $17.97
B SHARES
June 1, 1996 to May 31, 1997             $19.71      ($0.06)         $1.93        ($0.03)         --           $21.55
November 1, 1995 to May 31, 1996         $17.91       $0.25          $1.83        ($0.28)         --           $19.71
May 12, 1995 to October 31, 1995(a)      $17.20       $0.01          $0.70           --           --           $17.91
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                               RATIO TO AVERAGE NET ASSETS
                                       -----------------------------------------
                                                                                                                       NET ASSETS
                                          NET                                                PORTFOLIO    AVERAGE       AT END OF
                                       INVESTMENT        NET           GROSS       TOTAL     TURNOVER   COMMISSION       PERIOD
                                         INCOME        EXPENSES      EXPENSES(b)  RETURN(c)   RATE(d)   RATE(d)(e)   (000'S OMITTED)
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>             <C>          <C>           <C>        <C>        <C>          <C>
A SHARES
June 1, 1996 to May 31, 1997             0.42%(g)      1.43%(g)      1.72%(g)      10.33%     48.23%      0.0202          $2,240
November 1, 1995 to May 31, 1996         0.92%(f)(g)   1.50%(f)(g)   2.51%(f)(g)   12.31%     14.12%      0.0325          $1,080
April 1, 1995 to October 31, 1995(a)     0.26%(f)(g)   1.32%(f)(g)  20.95%(f)(g)    8.91%     29.41%        --              $216
B SHARES
June 1, 1996 to May 31, 1997            (0.34%)(g)     2.18%(g)      2.76%(g)       9.44%     48.23%      0.0202          $1,667
November 1, 1995 to May 31, 1996        (0.02%)(f)(g)  2.25%(f)(g)   3.11%(f)(g)   11.79%     14.12%      0.0325            $995
May 12, 1995 to October 31, 1995(a)      0.17%(f)(g)   1.27%(f)(g)  14.57%(f)(g)    4.30%     29.41%        --              $395
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  The Fund commenced the offering of A Shares on April 1, 1995 and the
     offering of B Shares on May 12, 1995.   

(b)  The ratio of Gross Expenses to Average Net Assets does not reflect fee
     waivers or expense reimbursements.

(c)  Total Return does not include the effects of sales charges.

(d)  Represents the Portfolio Turnover Rate and Average Commission Rate of
     International Portfolio of Core Trust (Delaware).

(e)  Represents the average commission per share paid to brokers on the
     purchase or sale of portfolio securities. Prior to 1996, this data was 
     not reported in mutual fund financial statements.

(f)  Annualized.

(g)  Includes expenses allocated from International Portfolio of Core Trust
     (Delaware).


24                                                                           25
<PAGE>
- ----
- ----
 
3. INVESTMENT OBJECTIVES AND POLICIES
 
There can be no assurance that any Fund or any Core Portfolio will achieve its
investment objective.
 
INCOME EQUITY FUND
 
INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide
long-term capital appreciation consistent with above-average dividend income.
The Fund currently pursues its investment objective by investing all of its
investable assets in Income Equity Portfolio, which has the same investment
objective and substantially similar investment policies as the Fund. Therefore,
although the following discusses the investment policies of that Portfolio, it
applies equally to the Fund.
 
INVESTMENT POLICIES. Income Equity Portfolio 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 Portfolio, Norwest uses various valuation measures,
including above-average dividend yields and below industry average price to
earnings, price to book and price to sales ratios. The Portfolio considers large
companies to be those whose market capitalization is greater than the median of
the Russell 1000 Index. The Portfolio 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 - Core Portfolio Descriptions
- - International Portfolio Investment Considerations and Risk Factors.") Under
normal circumstances, Income Equity Portfolio 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 provide
long-term capital appreciation.
 
INVESTMENT POLICIES. The Fund invests primarily in the common stock and
convertible securities of medium- and large-capitalization companies (companies
with a market capitalization of greater than $500 million) that, in the view of
Norwest, possess above average growth characteristics and appear to be
undervalued.
 
The Fund seeks to identify and invest in companies whose earnings and dividends
Norwest believes will grow both faster than inflation and faster than the
economy in general and whose growth Norwest believes has not yet been fully
reflected in the market price of the companies' shares. In seeking
 
- -
26
<PAGE>
- ----
- ----
these investments, Norwest 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, Norwest 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 Norwest 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. These investments are the
exception, not the rule, and must satisfy Norwest's valuation parameters. In
addition, the Fund may invest up to 20% of its assets in securities of foreign
issuers, American Depository Receipts, European Depository Receipts and other
similar securities of foreign issuers. (See "Investment Objectives and Policies
- - Core Portfolio Descriptions - International Portfolio Investment
Considerations and Risk Factors.") The Fund may invest in convertible debt and
convertible preferred stock.
 
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. The Fund invests in various Core Portfolios, each of which invests using
a different investment style.
 
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: (1) index style; (2)
an income equity style; (3) a large company style; (4) a small company style;
and (5) an international style. The Fund allocates the assets dedicated to large
company investments to two Core Portfolios, the assets allocated to small
company investments to four Core Portfolios and the assets dedicated to
international investments to two Core Portfolios. 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.
 
                                                                              --
                                                                              27
<PAGE>
- ----
- ----
 
DIVERSIFIED EQUITY FUND ALLOCATION
Set forth below are the ranges of investments by the Fund in each Core Portfolio
and current allocation among the Core Portfolios.
 
<TABLE>
<CAPTION>
 
                                 CURRENT            RANGE OF
                                ALLOCATION         INVESTMENT
- ---------------------------------------------------------------
<S>                           <C>                <C>
Index Portfolio.............             25%     23.5% - 26.5%
Income Equity Portfolio.....             25%     23.5% - 26.5%
Large Company style.........             25%     23.5% - 26.5%
  Large Company Growth
   Portfolio................               20%
  Disciplined Growth
   Portfolio................               5%
Small Company style.........             10%      8.5% - 11.5%
  Small Company Growth
   Portfolio................               3%
  Small Company Value
   Portfolio................               3%
  Small Company Stock
   Portfolio................               2.5%
  Small Cap Value
   Portfolio................               1.5%
International style.........             15%     13.5% - 16.5%
  International Portfolio...               14.25%
  Schroder EM Core
   Portfolio................               0.75%
                                        ---
TOTAL FUND ASSETS...........            100%
</TABLE>
 
As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest daily effects transactions for the
Fund to reestablish its allocations.
 
Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities. When Norwest
believes that a change in the allocation percentages is desirable, it will sell
and purchase securities to effect the change.
 
Investors should refer to the descriptions below under "Investment Objectives
and Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each style.
 
GROWTH EQUITY FUND
 
INVESTMENT OBJECTIVE. The investment objective of Growth Equity Fund is to
provide a high level of long-term capital appreciation while moderating annual
return volatility by diversifying its investment in accordance with different
equity styles. The Fund currently invests in various Core Portfolios each of
which invests using a different investment style.
 
- -
28
<PAGE>
- ----
- ----
 
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: (1) a large company
growth style; (2) a small company style; and (3) an international style. The
Fund allocates the assets dedicated to small company investments to four Core
Portfolios and the assets dedicated to international investments to two Core
Portfolios. The Fund utilizes different equity styles in order to reduce the
risk of price and return volatility associated with reliance on a single 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 styles.
 
GROWTH EQUITY FUND ALLOCATION
Set forth below are the ranges of investments by the Fund in each Core Portfolio
and current allocation among the Core Portfolios.
 
<TABLE>
<CAPTION>
 
                                   CURRENT            RANGE OF
                                  ALLOCATION         INVESTMENT
- -----------------------------------------------------------------
<S>                             <C>                <C>
Large Company Growth
 Portfolio....................             35%         33% - 37%
Small Company style...........             35%         33% - 37%
  Small Company Growth
   Portfolio..................               10.5%
  Small Company Value
   Portfolio..................               10.5%
  Small Company Stock
   Portfolio..................               8.75%
  Small Cap Value Portfolio...               5.25%
International style...........             30%         28% - 32%
  International Portfolio.....               28.5%
  Schroder EM Core
   Portfolio..................               1.5%
                                          ---
TOTAL FUND ASSETS.............            100%
</TABLE>
 
As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest daily effects transactions for the
Fund to reestablish its allocations.
 
Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities. When Norwest
believes that a change in the allocation percentages is desirable, it will sell
and purchase securities to effect the change.
 
Investors should refer to the descriptions below under "Investment Objectives
and Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each style.
 
                                                                              --
                                                                              29
<PAGE>
- ----
- ----
 
SMALL COMPANY STOCK FUND
 
INVESTMENT OBJECTIVE. The Fund's investment objective is long-term capital
appreciation. The Fund currently pursues its investment objective by investing
all of its investable assets in Small Company Stock Portfolio, which has the
same investment objective and substantially similar investment policies as the
Fund. Therefore, although the following discusses the investment policies of
that Portfolio, it applies equally to the Fund.
 
INVESTMENT POLICIES. Small Company Stock Portfolio 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 companies are companies whose market
capitalization is less than the largest stock included in the Russell 2000
Index. Medium-size companies have a market capitalization in the range from $500
million to $8 billion.
 
In selecting securities for the Portfolio, the Advisers seek 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 Portfolio 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
companies have a small management group and single product or product line
expertise, which, in the view of an Adviser, may result in an enhanced
entrepreneurial spirit and greater focus, thereby allowing such companies to be
successful. The Advisers 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.
 
The securities in which the Portfolio 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.
 
The Portfolio also may invest up to 20% of its assets in American Depository
Receipts, European Depository Receipts and other similar securities of foreign
issuers. (See "Additional Investment Policies and Considerations - American
Depository Receipts and European Depository Receipts.")
 
For a description of investment considerations and risk involved in investing in
small company securities, see "Investment Objectives and Policies - Core
Portfolio Descriptions - Risk of Investing in Small Company Securities."
 
SMALL CAP OPPORTUNITIES FUND
 
INVESTMENT OBJECTIVE. The investment objective of the Fund is capital
appreciation. Current income will be incidental to the objective of capital
appreciation. The Fund currently pursues its investment objective by investing
all of its investable assets in Schroder U.S. Smaller Companies Portfolio, which
has
 
- -
30
<PAGE>
- ----
- ----
the same investment objective and substantially similar investment policies as
the Fund. Therefore, although the following discusses the investment policies of
that Portfolio, it applies equally to the Fund.
 
INVESTMENT POLICIES. The 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.
 
In its investment approach, Schroder attempts to identify securities of
companies which it believes can generate above average earnings growth, and
which can be bought at favorable prices in relation to book values and earnings.
As part of the investment decision, Schroder's assessment of the competency of
an issuer's management will be an important consideration. These criteria are
not rigid, and other investments may be included in the Portfolio if Schroder
believes they can 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
consistent with the Portfolio's investment objective.
 
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 the fourth highest rating category. These securities are commonly
known as "high yield/high risk" securities or "junk bonds." The Portfolio will
not invest in debt securities that are in default. High yield/high risk
securities are predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal and generally involve a greater volatility
of price than securities in higher rated categories. The Portfolio is not
obligated to dispose of securities due to changes by the rating agencies. (See
"Investment Objectives and Policies - Additional Investment Policies and Risk
Considerations - Debt Securities.")
 
For a description of investment considerations and risk involved in investing in
small company securities, see "Investment Objectives and Policies - Core
Portfolio Descriptions - Risks of Investing in Small Company Securities."
 
OPTIONS AND FUTURES TRANSACTIONS. While the Portfolio does not presently intend
to do so, it may write covered call options and purchase certain put and call
options, stock index futures, and options on stock index futures and
 
                                                                              --
                                                                              31
<PAGE>
- ----
- ----
broadly-based stock indices, all of which are referred to as "Hedging
Instruments." In general, the Portfolio may use Hedging Instruments: (1) to
attempt to protect against declines in the market value of the Portfolio's
securities and thus protect the Fund's net asset value per share against
downward market trends; or (2) to establish a position in the equities markets
as a temporary substitute for purchasing particular equity securities. The
Portfolio will not use Hedging Instruments for speculation. The Hedging
Instruments which the Portfolio is authorized to use have certain risks
associated with them. The Hedging Instruments the Portfolio may use and the
risks associated with them are described in greater detail in the SAI. (See
"Additional Investment Policies and Risk Considerations - Options and Futures
Contracts.")
 
INTERNATIONAL FUND
 
The Fund is designed for investors who desire to achieve international
diversification of their investments by participating in foreign securities
markets. Because international investments generally involve risks in addition
to those risks associated with investments in the United States, the Fund should
be considered only as a vehicle for international diversification and not as a
complete investment program.
 
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 in two Core Portfolios, International
Portfolio and Schroder EM Core Portfolio, each of which invests using a
different investment style.
 
INVESTMENT POLICIES. The Fund follows a "multi style" approach designed to
minimize the volatility and risk of investing in international equity
securities. The Fund's investment portfolio combines two different investment
styles: (1) an international equity investment style and (2) an international
emerging markets equity style.
 
INTERNATIONAL FUND ALLOCATION
Set forth below are the ranges of investments by the Fund in each Core Portfolio
and current allocation among the Core Portfolios.
 
<TABLE>
<CAPTION>
 
                                                 CURRENT      RANGE OF
                                                ALLOCATION   INVESTMENT
          -------------------------------------------------------------
          <S>                                   <C>          <C>
          International Portfolio.............      95%      80% - 100%
          Schroder EM Core Portfolio..........       5%      0% - 20%
                                                    --
          TOTAL FUND ASSETS...................     100%
</TABLE>
 
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As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest daily effects transactions for the
Fund to reestablish its allocations.
 
Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities. When Norwest
believes that a change in the allocation percentages is desirable, it will sell
and purchase securities to effect the change.
 
Investors should refer to the descriptions below under "Investment Objectives
and Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each style.
 
CORE PORTFOLIO DESCRIPTIONS
 
INDEX PORTFOLIO. The investment objective of Index Portfolio is to duplicate the
return of the Standard & Poor's 500 Composite Stock Index (the "Index") with
minimum tracking error, while also minimizing transaction costs. The Portfolio
invests 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.
 
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 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 transaction costs. The Portfolio does not invest in
futures contracts for speculative purposes or to leverage the Portfolio.
 
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
 
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                                                                              33
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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 47% 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.
 
Index Portfolio 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
interest in Index Portfolio 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
any Fund investing in Index Portfolio, by 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.
 
    INDEX FUTURES CONTRACTS. Index Portfolio 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.
 
The use of index futures contracts entails certain investment risks and costs,
including (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 Portfolio 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 the Portfolio'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.
 
INCOME EQUITY PORTFOLIO. (See "Investment Objectives and Policies - Income
Equity Fund.")
 
LARGE COMPANY GROWTH PORTFOLIO. The investment objective of the Large Company
Growth Portfolio is to provide long-term capital appreciation by investing
primarily in large, high-quality domestic companies that Norwest
 
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believes have superior growth potential. Large companies are those companies
whose market capitalization is greater than the median of the Russell 1000
Index. In selecting securities for the Portfolio, Norwest seeks issuers whose
stock is attractively valued and whose fundamental characteristics both are
significantly better than the market average and support internal earnings
growth capability. The Portfolio may invest in the securities of companies whose
growth potential is, in Norwest's opinion, generally unrecognized or
misperceived by the market. In addition, up to 20% of the total assets invested
in by the Portfolio may be invested in American Depository Receipts, European
Depository Receipts and other, similar securities of foreign issuers and Norwest
may attempt to reduce the overall risk of foreign investments by using foreign
currency forward contracts. (See "Investment Objectives and Policies - Core
Portfolio Descriptions - International Portfolio Investment Considerations and
Risk Factors.") Under normal circumstances, no more than 10% of the assets of
the Portfolio will be invested in the securities of a single issuer. The
Portfolio does not currently invest in preferred stock or securities convertible
into common stock but reserves the right to do so in the future.
 
DISCIPLINED GROWTH PORTFOLIO. Disciplined Growth Portfolio seeks capital
appreciation by investing in common stocks of larger companies. Disciplined
Growth Portfolio seeks greater long-term returns by investing primarily in the
common stock of companies that, in the view of the investment adviser, possess
above average potential for growth. The average market capitalization of the
companies in which the Portfolio invests will be greater than $5 billion.
 
The Portfolio seeks to identify growth companies that will report a level of
corporate earnings that exceed the level expected by investors. In seeking these
companies, the investment adviser uses both quantitative and fundamental
analysis. Among the factors that the investment adviser considers are changes of
earnings estimates by investment analysts, the recent trend of company earnings
reports, and an analysis of the fundamental business outlook for the company.
The investment adviser uses a variety of valuation measures to determine whether
the share price already reflects any positive fundamentals identified by the
investment adviser. In addition to approximately equal weighting of portfolio
securities, the investment adviser attempts to constrain the variability of the
investment returns by employing risk control screens for price volatility,
financial quality and valuation.
 
RISKS OF INVESTING IN SMALL COMPANY SECURITIES. While all investments have
risks, investments in smaller capitalization companies carry greater risk than
investments in larger capitalization companies. Smaller capitalization companies
generally experience higher growth rates and higher failure rates than do larger
capitalization companies; and the trading volume of smaller capitalization
companies' securities is normally lower than that of larger capitalization
companies and, consequently, generally has a disproportionate effect on market
price (tending to make prices rise more in response to buying demand and fall
more in response to selling pressure).
 
                                                                              --
                                                                              35
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Investments in small, unseasoned issuers generally carry greater risk than is
customarily associated with larger, more seasoned companies. Such issuers often
have products and management personnel that have not been tested by time or the
marketplace and their financial resources may not be as substantial as those of
more established companies. Their securities (which a Portfolio may purchase
when they are offered to the public for the first time) may have a limited
trading market which can adversely affect their sale by the Portfolio and can
result in such securities being priced lower than otherwise might be the case.
If other institutional investors engage in trading this type of security, the
Portfolio may be forced to dispose of its holdings at prices lower than might
otherwise be obtained.
 
SMALL COMPANY STOCK PORTFOLIO. (See "Investment Objectives and Policies - Small
Company Stock Fund.")
 
SMALL COMPANY GROWTH PORTFOLIO. Small Company Growth Portfolio seeks to provide
long-term capital appreciation by investing in smaller sized domestic companies.
Small companies are those companies whose market capitalization is less than the
largest stock in the Russell 2,000 Index.
 
In selecting securities for the Portfolio, Norwest 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. The Advisers may look to changes in a company that involve a sharp
increase in earnings, the hiring of new management or measures taken to close
the gap between the company's share price and takeover/asset value. The
Portfolio may invest up to 10% of its assets in foreign securities and in
American Depository Receipts, European Depository Receipts and other similar
securities of foreign issuers. The Portfolio may not invest more than 10% of its
total assets in the securities of a single issuer. The Portfolio currently does
not invest in preferred stock and securities convertible into common stock, but
reserves the right to do so in the future. (See "Investment Objectives and
Policies - Core Portfolio Descriptions - Risks of Investing in Small Company
Securities.")
 
SMALL COMPANY VALUE PORTFOLIO. Small Company Value Portfolio seeks to provide
long-term capital appreciation by investing primarily in smaller companies. The
Portfolio invests primarily in the common stock of companies that have a market
capitalization well below that of the average company in the Standard & Poor's
500 Composite Stock Price Index. Smaller companies are those companies whose
market capitalization is less than the largest stock in the Russell 2000 Index.
 
The Advisers focus 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. The Advisers 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
 
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36
<PAGE>
- ----
- ----
gains favor among other investors and its stock price rises. (See "Investment
Objectives and Policies - Core Portfolio Descriptions - Risks of Investing in
Small Company Securities.")
 
SMALL CAP VALUE PORTFOLIO. Small Cap Value Portfolio seeks higher growth rates
and greater long-term returns by investing primarily in the common stock of
smaller companies that, in the view of the investment adviser, are undervalued.
Under normal circumstances, the Portfolio will invest substantially all of its
assets, but not less than 65% of its net assets, in securities of companies with
a market capitalization which reflects the market capitalization of companies
included in the Russell 2000 Index.
 
The Portfolio invests in those smaller companies that the investment adviser
believes to be undervalued and which will report a level of corporate earnings
exceeding the level expected by investors. The determination of value is based
upon both the price to earnings ratio of the company and a comparison of the
public market value of the company to a proprietary model that values the
company in the private market. In seeking companies that will report a level of
earnings exceeding that expected by investors, the investment adviser uses both
quantitative and fundamental analysis. Among the factors that the investment
adviser considers are changes of earnings estimates by investment analysts, the
recent trend of company earnings reports, and the fundamental business outlook
for the company. (See "Investment Objectives and Policies - Core Portfolio
Descriptions - Risks of Investing in Small Company Securities.")
 
INTERNATIONAL PORTFOLIO. The investment objective of International Portfolio is
to provide long-term capital appreciation by investing directly or indirectly in
high quality companies based outside the United States. The 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
 
                                                                              --
                                                                              37
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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.
 
INTERNATIONAL PORTFOLIO INVESTMENT CONSIDERATIONS AND RISK FACTORS
 
    FOREIGN CURRENCY CONTRACTS. Changes in foreign currency exchange rates will
affect the U.S. dollar values of securities denominated in currencies other than
the U.S. dollar. The rate of exchange between the U.S. dollar and other
currencies fluctuates in response to forces of supply and demand in the foreign
exchange markets. These forces are affected by the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors. When investing in foreign securities,
International Portfolio usually effects currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign exchange market.
International Portfolio incurs foreign exchange expenses in converting assets
from one currency to another.
 
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 enter into these contracts for speculative purposes or 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. 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
 
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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 to shareholders;
commission rates payable on foreign transactions are generally higher than in
the U.S.; foreign accounting, auditing and financial reporting standards differ
from those in the U.S. 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. 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 fund redemptions. 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.
 
SCHRODER EM CORE PORTFOLIO. The investment objective of Schroder EM Core
Portfolio is to seek to achieve long-term capital appreciation through direct or
indirect investment in equity and debt securities of issuers domiciled or doing
business in emerging market countries in regions such as Southeast Asia, Latin
America, and Eastern and Southern Europe. Current income is incidental to the
Portfolio's objective.
 
The Portfolio may invest, under normal market conditions, up to 65% of its total
assets in emerging market equity and debt securities, including common stocks;
convertible preferred stocks; stock rights and warrants; convertible debt
securities; and non-convertible debt securities. (Investments in stock rights
and warrants will not be considered for purposes of determining compliance with
this policy.) The Portfolio may invest up to 35% of its total assets in
high-risk debt securities that are unrated or rated below investment grade. The
Portfolio may be able to invest in certain emerging markets solely or primarily
through governmentally authorized investment companies or vehicles. When
investing through investment companies, the Portfolio may
 
                                                                              --
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pay substantial premiums above such investment companies' net asset value per
share. The Portfolio does not intend to invest in other investment companies
unless, in the judgment of Schroder, the potential benefits of such investment
justify the payments of any applicable premiums or sales charges.
 
In recent years, many emerging market countries have begun programs of economic
reform: removing import tariffs, dismantling trade barriers, deregulating
foreign investment, privatizing state-owned industries, permitting the value of
their currencies to float against the dollar and other major currencies, and
generally reducing the level of state intervention in industry and commerce.
Important intra-regional economic integration also holds the promise of greater
trade and growth. At the same time, significant progress has been made in
restructuring the heavy external debt burden that certain emerging market
countries accumulated during the 1970s and 1980s. While there is no assurance
that these trends will continue, Schroder, will seek out attractive investment
opportunities in these countries.
 
"Emerging market" countries are all those not included in the Morgan Stanley
Capital International World Index ("MSCI World") of major world economies. If,
however, the investment adviser determines that the economy of a MSCI
World-listed country is an emerging market economy, Schroder may include such
country in the emerging market category. The Portfolio will not necessarily seek
to diversify investments on a geographic basis and may invest more than 25% of
its total assets in issuers located in any one country.
 
Investment in sovereign debt carries high risk. Schroder EM Core Portfolio may
invest a portion of its assets in Brady Bonds, which are securities created
through the exchange of existing commercial bank loans to sovereign entities for
new obligations in connection with debt restructuring. In general, the risks
incurred by the Portfolio are of the type described under "Investment Objectives
and Policies - Core Portfolio Descriptions - International Portfolio Investment
Considerations and Risk Factors." These risks are, however, greatly enhanced in
the Portfolio.
 
ADDITIONAL INVESTMENT POLICIES
AND RISK CONSIDERATIONS
 
Each Fund's (and each Core Portfolio's) investment objective and all investment
policies of the Funds (and 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 Core 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 fundamental and may be changed by the Board of Trustees of the
Trust (the "Board") without shareholder
 
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approval. Likewise, nonfundamental investment policies of a Core Portfolio may
be changed by that investment company's board of trustees ("Core Board") without
shareholder approval.
 
Unless otherwise indicated, the discussion below of the investment policies of
the Funds refers, in the case of Income Equity Fund, Small Company Stock Fund,
Small Cap Opportunities Fund and International Fund, to the investment policies
of those Funds' corresponding Core Portfolios. A further description of the
Funds' investment policies, including additional fundamental policies, is
contained in the SAI.
 
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.
 
As part of its regular banking operations, Norwest Bank 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
Bank. A lending relationship will not be a factor in the selection of portfolio
securities for a Fund.
 
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
33 1/3% of the value of the Fund's total assets. As a fundamental policy, each
other 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
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 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); reverse purchase agreements are considered to be borrowings
by each Fund other than International Portfolio.
 
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 a security of an investment company)
if, as a result: (1) more than 5% of the Fund's total assets would be invested
in the securities of a single issuer; or (2) 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 one industry.
As a fundamental policy, each Fund may not purchase a security if, as a result,
more than 25% of the value of the Fund's total assets would be invested in the
securities of issuers conducting their
 
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principal business activities in the same industry. This limit does not apply to
investments in U.S. Government Securities or repurchase agreements covering U.S.
Government Securities.
 
Each Fund reserves the right upon notification to shareholders to invest up to
100% of its investable assets in one or more other investment companies such as
the Core Portfolios.
 
COMMON AND PREFERRED STOCK. The Funds may invest in common and preferred stock.
Common stockholders are the owners of the company issuing the stock and,
accordingly, vote on various corporate governance matters such as mergers. They
are not creditors of the company, but rather, upon liquidation of the company,
are entitled to their pro rata share of the company's assets after creditors
(including fixed income security holders) and, if applicable, preferred
stockholders, are paid. Preferred stock is a class of stock having a preference
over common stock as to dividends and, 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
 
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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 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.
 
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 Fund 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. Except for Small Cap
Opportunities Fund, 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
Advisers to be of comparable quality. Small Cap Opportunities Fund may not
invest more than 5% of its net assets in debt securities rated below the fourth
highest rating category by an NRSRO (for example "Baa" by Moody's, or "BBB" by
S&P). Bonds rated in the fourth highest category are described by those rating
agencies as having speculative characteristics
 
                                                                              --
                                                                              43
<PAGE>
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and that changes in economic conditions or other circumstances are more likely
to lead to a weakened capacity of issuers of such bonds to make principal and
interest payments than is the case with higher grade bonds.
 
In purchasing high yield/high risk securities, the Funds will rely on the
investment adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer of such securities. Nonetheless, investors should
review the investment objective and policies of the Fund and consider their
willingness to assume risk before making an investment.
 
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 may have difficulty in exercising its rights to the
underlying securities, may incur costs and experience time delays in disposing
of them and may 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 payment from the borrower or interest from investing cash
collateral. The Trust or the Core Trust, as applicable, maintains possession of
the purchased securities and the collateral in lending 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 limit securities lending to
not more than 33 1/3% (25% in the case of Small Cap Opportunities Fund) of the
value of its total assets.
 
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. Each of the Funds (except Small
Cap Opportunities Fund) may purchase securities offered on a "when-issued" basis
and may purchase securities on a "forward commitment" basis. When such
transactions are negotiated, the price is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date.
Normally, the settlement date occurs within three months after the transaction,
but delayed settlements beyond three months may be negotiated. During the period
between a commitment and settlement, no payment is made for the securities
purchased and the Fund receives no income. 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
 
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<PAGE>
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- ----
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 Core Board). 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
Advisers may determine that such securities are not illiquid securities under
guidelines adopted by the Board (or, in the case of Core Portfolio, the board of
trustees (the "Core Board") of the investment company of which the Core
Portfolio is a series.) 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.
 
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: (1) short-term U.S.
Government Securities; (2) certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of commercial banks doing business in the
United States (United States banks in the case of Small Cap Opportunities Fund);
(3) commercial paper; (4) repurchase agreements; and (5) 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 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 (in United States banks in the case of Small Cap Opportunities Fund).
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 and
International Fund will
 
                                                                              --
                                                                              45
<PAGE>
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- ----
have at least 65% of its net assets invested in securities of companies
domiciled outside the United States. International Portfolio and Schroder EM
Core Portfolio may hold cash and bank instruments denominated in any major
foreign currency.
 
PORTFOLIO TRANSACTIONS. The Advisers place orders for the purchase and sale of
assets they manage with brokers and dealers selected by and in the discretion of
the respective Adviser. The Advisers seek "best execution" for all portfolio
transactions, but a Fund may pay higher than the lowest available commission
rates when an Adviser believes it is reasonable to do so in light of the value
of the brokerage 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 be paid by 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 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 or, with respect to a Core Portfolio, the Core Board, 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
Norwest directing the transaction receive brokerage transactions in recognition
of research services provided to the Advisers.
 
The frequency of portfolio transactions of a Fund or Core Portfolio (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 or Core Portfolio were replaced once in a period of one year. Higher
portfolio turnover rates may result in increased brokerage costs to the Fund or
Core Portfolio and a possible increase in short-term capital gains or losses.
 
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<PAGE>
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                                                                  4.  MANAGEMENT
 
The business of the Trust is managed under the direction of the Board, and the
business of each Core Portfolio is managed under the direction of the Core
Portfolio's Core 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 eight persons.
 
INVESTMENT ADVISORY SERVICES
 
NORWEST INVESTMENT MANAGEMENT. Subject to the general supervision of the Board,
Norwest Investment Management, Inc. makes investment decisions for the Funds
(except Small Cap Opportunities Fund and International Fund) and continuously
reviews, supervises and administers each Fund's investment program or oversees
the investment decisions of the investment subadvisers, as applicable. Norwest
provides its investment advisory services directly to ValuGrowth Stock Fund and
indirectly to each Fund that operates in a Core and Gateway Structure through
its investment advisory services to the Core Portfolios. In addition, subject to
the general supervision of the Board, Norwest continuously reviews and
determines the allocation of the assets of Diversified Equity Fund and Growth
Equity Fund among the various investment styles and Core Portfolios in which
those Funds invest ("Asset Allocation Services"). Norwest, which is located at
Norwest Center, Sixth Street and Marquette, Minneapolis, Minnesota 55479, is an
indirect subsidiary of Norwest Corporation, a multi-bank holding company that
was incorporated under the laws of Delaware in 1929. As of June 30, 1997,
Norwest Corporation had assets of $83.6 billion, which made it the 11th largest
bank holding company in the United States. As of June 30, 1997, Norwest
Corporation and its affiliates managed assets with a value of approximately
$52.9 billion.
 
SMALL CAP OPPORTUNITIES FUND AND INTERNATIONAL FUND. Subject to the general
supervision of the Core Boards, Schroder Capital Management International Inc.
makes investment decisions for Schroder U.S. Smaller Companies Portfolio (in
which Small Cap Opportunities Fund invests), International Portfolio and
Schroder EM Core Portfolio and continuously reviews, supervises and administers
those Portfolios' investment programs.
 
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<PAGE>
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INVESTMENT SUBADVISERS. To assist Norwest in carrying out its obligations,
certain of the Core Portfolios and Norwest have retained the services of the
various Subadvisers as follows:
 
<TABLE>
<CAPTION>
 
                                                                 INVESTMENT
                                                                 SUBADVISER
FUND                              CORE PORTFOLIO(S)          OF CORE PORTFOLIO
- -----------------------------------------------------------------------------
<S>                        <C>                               <C>
Diversified Equity Fund    Large Company Growth Portfolio    Peregrine
                           Disciplined Growth Portfolio      Smith
                           Small Company Stock Portfolio     Crestone
                           Small Company Growth Portfolio    Peregrine
                           Small Company Value Portfolio     Peregrine
                           Small Cap Value Portfolio         Smith
 
Growth Equity Fund         Large Company Growth Portfolio    Peregrine
                           Small Company Stock Portfolio     Crestone
                           Small Company Growth Portfolio    Peregrine
                           Small Company Value Portfolio     Peregrine
                           Small Cap Value Portfolio         Smith
 
Small Company Stock Fund   Small Company Stock Portfolio     Crestone
</TABLE>
 
Crestone, Peregrine and Smith make investment decisions for the Core Portfolios
to which they act as investment subadviser and continuously review, supervise
and administer those Core Portfolios' investment programs with respect to that
portion, if any, of the Portfolios' assets that Norwest believes should be
managed by the Subadvisers. Currently, each Subadviser manage all of the assets
of the Core Portfolios that they subadvise. Norwest supervises the performance
of each Subadviser, including their adherence to the Portfolios' investment
objectives and policies.
 
CRESTONE CAPITAL MANAGEMENT, INC. Crestone, which is located at 7720 East
Belleview Avenue, Suite 220, Englewood, Colorado 80111, is an investment
advisory subsidiary of Norwest Bank. Crestone provides investment advice
regarding companies with small market capitalization to various clients,
including institutional investors. As of June 30, 1997, Crestone managed assets
with a value of approximately $534 million.
 
PEREGRINE CAPITAL MANAGEMENT, INC. Peregrine, which is located at LaSalle Plaza,
800 LaSalle Avenue, Suite 1850, Minneapolis, Minnesota 55402, is an investment
adviser subsidiary of Norwest Bank. Peregrine provides investment advisory
services to corporate and public pension plans, profit sharing plans,
savings-investment and 401(k) plans. As of June 30, 1997, Peregrine managed
approximately $5.0 billion in assets.
 
SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. Schroder, whose principal
business address is 787 Seventh Avenue, New York, New York 10019, is a wholly
owned U.S. subsidiary of Schroders Incorporated (doing business in
 
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<PAGE>
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New York State as Schroders Holdings), the wholly owned U.S. holding company
subsidiary of Schroders plc. Schroders plc is the holding company parent of a
large worldwide group of banks and financial services companies (referred to as
the "Schroder Group"), with associated companies and branch and representative
offices located in eighteen countries worldwide. The Schroder Group specializes
in providing investment management services and had assets under management in
excess of $175 billion as of June 30, 1997.
 
SMITH ASSET MANAGEMENT GROUP, L.P. Smith Group, whose principal business address
is 500 Crescent Court, Suite 250, Dallas, Texas 75201 is a registered investment
advisor. Smith Group provides investment management services to company
retirement plans, foundations, endowments, trust companies, and high net worth
individuals using a disciplined equity style. As of June 13, 1997, the Smith
Group managed over $200 million in assets.
 
PORTFOLIO MANAGERS. Many persons on the advisory staff of Norwest, Crestone,
Peregrine and Schroder contribute to the investment services provided to the
Funds and the Core Portfolios. The following persons, however, are primarily
responsible for day-to-day management and, unless otherwise noted, have been
primarily responsible since the inception of the Fund or Portfolio. In addition
to their primary responsibility for day-to-day management of the Fund/Portfolio,
certain of the portfolio managers may have other duties with respect to Norwest
Bank.
 
     INCOME EQUITY FUND/INCOME EQUITY PORTFOLIO - David L. Roberts. Mr. Roberts
     is a Senior Vice President of Norwest and has been a Senior Vice President
     of Norwest Bank since 1991. Mr. Roberts has been associated with Norwest
     for 20 years in various investment related capacities.
 
     VALUGROWTH STOCK FUND - David S. Lunt, CFA. Mr. Lunt is a Vice President of
     Norwest and has been associated with Norwest and its affiliates since 1992.
     Prior thereto, he was a portfolio manager for FirsTier Bank and a
     securities analyst for Woodman Accident and Life Company.
 
     DIVERSIFIED EQUITY FUND, GROWTH EQUITY FUND AND INTERNATIONAL FUND - The
     day-to-day management of each Fund, with respect to the portion of a Fund's
     portfolio that is invested in a particular Core Portfolio, is performed by
     the portfolio managers listed for the Core Portfolios.
 
     SMALL COMPANY STOCK FUND/SMALL COMPANY STOCK PORTFOLIO - Kirk McCown, CFA.
     Mr. McCown is the founder, President and a Director of Crestone, which was
     incorporated in 1990.
 
     SMALL CAP OPPORTUNITIES FUND/SCHRODER U.S. SMALLER COMPANIES
     PORTFOLIO - Fariba Talebi. Ms. Talebi is a Group Vice President of
 
                                                                              --
                                                                              49
<PAGE>
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- ----
     Schroder, with the assistance of a small cap investment team, is primarily
     responsible for the day-to-day management of the Portfolio's investments.
     Ms. Talebi has been employed by SCMI in the investment research and
     portfolio management areas since 1987.
 
     INDEX PORTFOLIO - David D. Sylvester and Laurie R. White. Mr. Sylvester has
     been associated with Norwest Bank since 1979, and as a Vice President and
     Senior Portfolio Manager since 1985. 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 Index Portfolio on January 1,
     1996.
 
     LARGE COMPANY GROWTH PORTFOLIO - John S. Dale, CFA. Mr. Dale is a Senior
     Vice President of Peregrine. Mr Dale has held various investment management
     positions with Norwest, Peregrine and their affiliates since 1968.
 
     DISCIPLINED GROWTH PORTFOLIO AND SMALL CAP VALUE PORTFOLIO - Stephen S.
     Smith, CFA. Mr. Smith is the Chief Investment Officer for Smith Group and
     is a principal in the firm. He has held this position since November, 1995.
     Prior thereto, Mr. Smith served as senior portfolio manager with
     NationsBank where he managed approximately $1 billion of client assets. At
     NationsBank, Mr. Smith held a variety of management positions including
     manager of the institutional asset management group, manager of the
     disciplined equity style and member of the Investment Policy Committee. At
     NationsBank he also served as sub-adviser for a portfolio of AIM Management
     Company's Summit Fund.
 
     SMALL COMPANY VALUE PORTFOLIO - Tasso H. Coin, Jr. Mr. Coin is a Senior
     Vice President of Peregrine Capital Management, Inc. Mr. Coin joined
     Peregrine in 1995. From 1992 to 1995 he was a research officer at Lord
     Asset Management, an investment adviser, and prior thereto was associated
     with Morgan Stanley Asset Management.
 
     SMALL COMPANY GROWTH PORTFOLIO - Robert B. Mersky, CFA and Paul E. von
     Koster, CFA. Mr. Mersky is the President of Peregrine Capital Management,
     Inc. Mr. Mersky has held various investment management positions with
     Norwest, Peregrine and their affiliates since 1977. From 1980 to 1984 he
     was head of investments for Norwest Bank. Mr. von Koster is a Senior Vice
     President of Peregrine. Mr. von Koster has held various investment
     management positions with Peregrine, Norwest and their affiliates since
     1972.
 
     INTERNATIONAL PORTFOLIO - Michael Perelstein, a Senior Vice President of
     Schroder, with the assistance of an SCMI investment committee, are
     primarily responsible for the day-to-day management of the Portfolio's
     investment portfolio. Mr. Perelstein has been a Senior Vice President of
     Schroder since January 2, 1997. Prior thereto, Mr. Perelstein was a
 
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<PAGE>
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- ----
     Managing Director at MacKay Shields. Mr. Perelstein has more than twelve
     years of international and global investment experience. Since January
     1997, Mr. Perelstein has served as portfolio manager of International
     Portfolio.
 
     SCHRODER EM CORE PORTFOLIO - John A. Troiano. Mr. Troiano, a Vice President
     of Schroder Capital Funds, assisted by the management team of Heather
     Crighton and Mark Bridgeman, are responsible for the day-to-day management
     of the investment portfolio. Mr. Troiano, Chief Executive Officer of
     Schroder since April 1, 1997, has been a Managing Director of Schroder
     since October 1995 and has been employed by various Schroder Group
     companies in the investment research and portfolio management areas since
     1981. Ms. Crighton is a Vice President of Schroder and has been employed by
     Schroder/various Schroder Group companies in the investment research and
     portfolio management areas since 1992. Mr. Bridgeman, also a Vice President
     of Schroder, has been employed by various Schroder Group companies in the
     investment research and portfolio management areas since 1990.
 
ADVISORY FEES. For their services, Norwest or Schroder receive investment
advisory fees from the Funds (or to the extent a Fund invests in a single Core
Portfolio, from that Core Portfolio) at the following annual rates of the Fund's
or Portfolio's average daily net assets.
 
<TABLE>
<CAPTION>
 
    FUND                                      INVESTMENT ADVISORY FEE
    ------------------------------------------------------------------------
    <S>                                 <C>
    Income Equity Fund (Income Equity
      Portfolio)......................                 0.50%
    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 (Small
      Company Stock Portfolio)........                 0.90%
    Small Cap Opportunities Fund
      (Schroder U.S. Smaller Companies
      Portfolio)......................                 0.60%
</TABLE>
 
With respect to Diversified Equity Fund, Growth Equity Fund and International
Fund, Norwest is entitled to receive investment advisory fees from the Funds for
its Asset Allocation Services at a maximum annual rate of 0.25% of each Fund's
average daily net assets. No advisory fee for Asset Allocation Services is
payable by International Fund until December 1, 1997. In addition, each of
Diversified Equity Fund, Growth Equity Fund, and International Fund bears an
investment advisory fee at a blended rate based on the investment advisory fee
of the Core Portfolio in which the Fund invests.
 
                                                                              --
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<PAGE>
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Norwest and Schroder receive investment advisory fees from the Core Portfolios
at the following annual rates of the Portfolio's average daily net assets. The
total fee payable by a Fund through its investments in Core Portfolios will vary
based on the percentage of its assets invested in each Core Portfolio.
 
<TABLE>
<CAPTION>
 
CORE PORTFOLIO                       INVESTMENT ADVISORY FEE
- --------------------------------------------------------------
<S>                                 <C>
Index Portfolio...................            0.15%
Income Equity Portfolio...........            0.50%
Large Company Growth Portfolio....            0.65%
Disciplined Growth Portfolio......            0.90%
Small Company Stock Portfolio.....            0.90%
Small Company Growth Portfolio....            0.90%
Small Company Value Portfolio.....            0.90%
Small Cap Value Portfolio.........            0.95%
International Portfolio...........            0.45%
Schroder EM Core Portfolio........            1.00%
</TABLE>
 
Norwest (and not the Core Portfolios) pays Crestone and Peregrine a fee for
their investment subadvisory services. This compensation does not increase the
amount paid by the Core Portfolios to Norwest for investment advisory services.
 
Each Fund investing its assets in one or more Core Portfolios may withdraw its
investments from its corresponding Core Portfolio(s) at any time if the Board
determines that it is in the best interests of the Fund to do so. (See "Other
Information - Core and Gateway Structure.") Accordingly, each of these Funds has
retained Norwest as its investment adviser. Similarly, in the event that a Fund
withdraws its investment from a Core Portfolio, to the extent the Fund invested
in a Core Portfolio advised by Schroder or a Subadviser, the Fund has retained
Schroder and that Subadviser as an investment subadviser. Under these "dormant"
investment advisory arrangements, none of Norwest, Schroder, Crestone or
Peregrine receives any advisory fees with respect to a Fund as long as the Fund
remains completely invested in its respective Core Portfolio(s) or any other
investment companies. In the event that Income Equity Fund or Small Company
Stock Fund were to withdraw their assets from their corresponding Core
Portfolios, Norwest would receive an investment advisory fee at the same rate as
it does for the Core Portfolio. Similarly, to the extent Diversified Equity
Fund, Growth Equity Fund, Small Cap Opportunities Fund or International Fund
were to withdraw any or all of their assets from their corresponding Core
Portfolios, Norwest would receive an investment advisory fee on the withdrawn
assets at an annual rate of 0.65%, 0.90%, 0.925% and 0.85% of the Funds' average
daily net assets, respectively and would pay Schroder, Crestone and Peregrine,
as applicable, a fee for their investment subadvisory services.
 
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MANAGEMENT, ADMINISTRATION AND
DISTRIBUTION SERVICES
 
As manager, Forum supervises the overall management of the Trust (including the
Trust's receipt of services for which the Trust is obligated to pay) other than
investment advisory services. In this capacity, Forum 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 Funds by others. FAS is responsible for
performing certain administrative services necessary for the Trust's operations
with respect to each Fund including: (1) preparing and printing updates of the
Trust's registration statement and prospectuses to its shareholders, the SEC and
state securities administrators; (2) preparing proxy and information statements
and any other communications to shareholders; (3) monitoring the sale of shares
and ensuring that such shares are properly and duly registered with the SEC and
applicable state securities administrators; and (4) supervising the declaration
of dividends and distributions to shareholders.
 
As of June 30, 1997, Forum and FAS provided management and administrative
services to registered investment companies and collective investment funds with
assets of approximately $25.5 billion. Forum is a member of the National
Association of Securities Dealers, Inc. For their services, Forum and FAS each
receives a fee with respect to ValuGrowth Stock Fund and International Fund at
an annual rate of 0.05% of the Fund's average daily net assets and with respect
to each other Fund at an annual rate of 0.025% of the Fund's average daily net
assets.
 
FAS also serves as an administrator of each Core Portfolio (except Schroder U.S.
Smaller Companies Portfolio and Schroder EM Core Portfolio) and provides
services to the Core Portfolios that are similar to those provided to the Funds
by Forum and FAS. For its services FAS receives a fee with respect to each Core
Portfolio (other than Schroder U.S. Smaller Companies Portfolio and Schroder EM
Core Portfolio) at an annual rate of 0.05% of the Portfolio's average daily net
assets (0.15% in the case of International Portfolio). Schroder Advisors Inc.
("Schroder Advisors") serves as the administrator of Schroder U.S. Smaller
Companies Portfolio and Schroder EM Core Portfolio and FAS serves as the
subadministrator of those Portfolios. Schroder Advisors and FAS provide certain
management and administrative services necessary for the Portfolios' operations,
other than the administrative services provided to the Portfolios by Schroder.
For their services, Schroder Advisors receives no fee from Schroder U.S. Smaller
Companies Portfolio and -0.075% from Schroder EM Core Portfolio. FAS receives a
fee at an annual rate of 0.10% of each Portfolio's average daily net assets.
 
In addition, pursuant to a separate agreement, Norwest receives a fee with
respect to Small Cap Opportunities Fund and International Fund at an annual rate
of 0.25% of the Funds' average daily net assets. 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, monitoring and reporting to
 
                                                                              --
                                                                              53
<PAGE>
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- ----
the Board on the performance of the applicable Core Portfolio and reimbursing
the Fund for certain excess expenses. No fees are payable under this agreement
if the Fund is not completely invested in a Core Portfolio. Small Cap
Opportunities Fund and International Fund incur total management and
administrative fees at a higher rate than many other mutual funds, including
other funds of the Trust.
 
Pursuant to a separate agreement, Forum Accounting Services, LLC ("Forum
Accounting") provides portfolio accounting services to each Fund and to each
Core Portfolio. Forum, FAS, and Forum Accounting 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, 1997,
Forum, FAS and Forum Accounting were controlled by John Y. Keffer, President and
Chairman of the Trust.
 
Forum also acts as the distributor of the Shares. As the Funds' distributor,
Forum 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, Forum will make
payments to broker-dealers as discussed under "Characteristics of The Shares."
From its own resources, Forum may pay additional fees to broker-dealers or other
persons for distribution or other services related to the Funds. For further
information about the Funds' distribution plan, including the fees payable
thereunder, (see "Characteristics of The Shares.")
 
SHAREHOLDER SERVICING AND CUSTODY
 
Norwest Bank serves as transfer agent and dividend disbursing agent for the
Trust (in this capacity, the "Transfer Agent"). The Transfer Agent maintains an
account for each shareholder of the Trust (unless such accounts are maintained
by sub-transfer agents or processing agents), performs other transfer agency
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. 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 services, the Transfer Agent receives a
fee with respect to each Fund at an annual rate of 0.25% of each Fund's average
daily net assets attributable to each class of the Fund.
 
Norwest Bank also serves as each Fund's and each Core Portfolio's (other than
Schroder U.S. Smaller Companies Portfolio and Schroder EM Core Portfolio)
custodian and may appoint subcustodians for the foreign securities and other
assets held in foreign countries. For its custodial service, Norwest Bank
receives a fee with respect to each Fund and each Core Portfolio at an annual
rate of: 0.02% of the first $100 million of the Fund's or Core Portfolio's
average daily net assets, 0.015% of the next $100 million of the Fund's
 
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or Core Portfolio's average daily net assets and 0.01% of the Fund's or Core
Portfolio's remaining average daily net assets. No fee is directly payable by a
Fund to the extent the Fund is invested in a Core Portfolio. With respect to
International Portfolio, Norwest receives a fee at an annual rate of 0.07% of
the Portfolio's average daily net assets plus monthly out of pocket expenses.
The Chase Manhattan Bank, N.A. serves as custodian of Schroder U.S. Smaller
Companies Portfolio and Schroder EM Core Portfolio and is paid a fee for its
services.
 
EXPENSES OF THE FUNDS
 
Subject to the obligation of Norwest to reimburse the Trust for certain expenses
of the Funds, the Trust (as well as each Core Trust) is obligated to pay all of
its 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. Each service
provider to a Fund may elect to waive (or continue 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 is in effect. Fee waivers are
voluntary and may be reduced or eliminated at any time.
 
Norwest and Forum have agreed to waive their respective fees or reimburse
expenses in order to maintain Small Company Stock Fund's total combined
operating expenses through May 31, 1998 at the same levels as the Fund's total
operating expenses prior to May 31, 1997 (1.20% for A Shares and 1.95% for B
Shares). After May 31, 1998, any proposed reduction in the amounts of those
waivers and reimbursements would be reviewed by the Board.
Norwest and Forum have agreed to waive their respective fees through May 31,
1999 in order to ensure that the fees borne by each of Diversified Equity Fund
and Growth Equity Fund for investment advisory, administrative and management
services would not exceed, in the aggregate, 0.75% and 1.00%, respectively (the
"Waiver"). After May 31, 1999, each Fund's aggregate payment for those services
could increase if the Waiver was reduced or eliminated. Any reduction or
elimination of the Waiver, however, would require Board approval (and notice to
shareholders), which would be given only if the Board determined that the amount
of the fees to be paid to Norwest or Forum after the reduction or elimination
would be fair and reasonable.
 
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.
 
The expenses of each Fund (other than ValuGrowth Stock Fund) include the Fund's
pro rata share of the expenses of the Core Portfolios in which the Fund invests,
which are borne indirectly by the Fund's shareholders.
 
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                                                                              55
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5. CHOOSING A SHARE CLASS
 
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
broker-dealers and other financial institutions selling 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 purchasing A Shares, which are subject to a 5.5%
initial sales charge, who elects to reinvest all dividends and distributions
would have to hold the A Shares approximately six years for the B Shares'
distribution services fee and maintenance fee to exceed the initial sales charge
imposed when purchasing A Shares. The foregoing example does not take into
account the time value of money, fluctuations in net asset value or the effects
of different performance assumptions.
 
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A SHARES
 
The public offering price of 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):
 
<TABLE>
<CAPTION>
 
                                                                BROKER-
                                          SALES CHARGE          DEALERS'
                                       AS A PERCENTAGE OF    REALLOWANCE AS
                                      ....................    A PERCENTAGE
                                      OFFERING   NET ASSET    OF OFFERING
 AMOUNT OF PURCHASE                    PRICE      VALUE*         PRICE
 
 --------------------------------------------------------------------------
 <S>                                  <C>        <C>         <C>
 Less than $50,000..................    5.50%      5.76%          5.00%
 $50,000 to $99,999.................    4.50%      4.71%          4.00%
 $100,000 to $249,000...............    3.50%      3.63%          3.00%
 $250,000 to $499,000...............    2.50%      2.56%          2.25%
 $500,000 to $999,000...............    2.00%      2.04%          1.80%
 $1,000,000 to $2,499,999...........    0.00%      0.00%          1.00%
 $2,500,000 to $4,999,999...........    0.00%      0.00%          0.50%
 Over $5,000,000....................    0.00%      0.00%          0.25%
 
 * Rounded to the nearest one-hundredth percent
</TABLE>
 
Forum may pay a broker-dealers' reallowance to selected broker-dealers
purchasing shares as principal or agent, which may include banks, bank
affiliates and Processing Organizations. Normally, Forum will reallow discounts
to selected broker-dealers in the amounts indicated in the table above. In
addition, Forum may elect to reallow the entire sales charge to selected
broker-dealers for all sales with respect to which orders are placed with Forum.
The broker-dealers' reallowance may be changed from time to time. Forum may make
additional payments (out of its own resources) to selected broker-dealers of up
to 1.00% of the value of Fund shares purchased at net asset value.
 
In addition, from time to time and at its own expense, Forum may provide
compensation, including financial assistance, to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns or other dealer-sponsored special events.
Compensation may include: (1) the provision of travel arrangements and lodging,
(2) tickets for entertainment events and (3) merchandise.
 
In some instances, this compensation may be made available only to certain
dealers or other financial intermediaries who have sold or are expected to sell
significant amounts of shares of the Funds or who charge an asset based fee
(whether or not they have a fiduciary relationship with their clients).
 
No sales charge is assessed on purchases: (1) 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), (2) by
 
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trustees and officers of the Trust; directors, officers and full-time employees
of Forum, of Norwest Corporation or of any of their affiliates; the spouse,
direct ancestor or direct descendant (collectively, "relatives") of any such
person; any trust or individual retirement account or self-employed retirement
plan for the benefit of any such person or relative; or the estate of any such
person or relative, (3) by any registered investment adviser with whom Forum has
entered into a share purchase agreement and which is acting on behalf of its
fiduciary customer accounts; (4) 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 (5) 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 clause (v), Forum 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.
 
REDUCED INITIAL SALES CHARGES. To qualify for a reduced sales charge, an
investor or the investor's Processing Organization must notify the Transfer
Agent at the time of purchase of the investor's intention to qualify and must
provide the Transfer Agent with sufficient information to verify that the
purchase qualifies for the reduced sales charge. Reduced sales charges may be
modified or terminated at any time and are subject to confirmation of an
investor's holdings. Further information about reduced sales charges is
contained in the SAI.
 
SELF-DIRECTED 401(k) PROGRAMS. Purchases of A Shares of a Fund through
self-directed 401(k) programs and other qualified retirement plans offered by
Norwest, Forum or their affiliates in accumulated amounts of less than $100,000
are subject to a reduced sales charge applicable to a single purchase of
$100,000.
 
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<PAGE>
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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 4.5% 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.
 
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
 
                                                                              --
                                                                              59
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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.
 
<TABLE>
<CAPTION>
 
                                                 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". The contingent
deferred sales charge on shares purchased through an exchange from another fund
of the Trust is based upon the original purchase date and price of the other
Fund's shares. For A shareholders with a Statement of Intention that do not
purchase $1,000,000 of a Fund's A Shares pursuant to their Statement, no
contingent deferred sales charge is imposed. The Statement of Intention provides
for a contingent deferred sales charge in certain other cases. Further
information about the contingent deferred sales charge is contained in the SAI.
 
B SHARES
 
DISTRIBUTION PLAN. B Shares of a Fund are sold at their net asset value per
share without the imposition of a sales charge at the time of purchase. With
respect to B Shares, each Fund has adopted a distribution plan pursuant to Rule
12b-1 under the 1940 Act (the "Plan") providing for distribution payments, at an
annual rate of up to 0.75% of the average daily net assets of the Fund
attributable to the B Shares (the "distribution services fee"), by each Fund to
Forum, to compensate Forum for its distribution activities. The distribution
payments due to Forum from each Fund comprise: (1) sales commissions at levels
set from time to time by the Board ("sales commissions"); and (2) an interest
fee calculated by applying the rate of 1% over the prime rate to the outstanding
balance of uncovered distribution charges. The current sales commission rate is
4.0% and Forum currently expects to pay sales commissions to each broker-dealer
at the time of sale of up to 4.0% of the purchase price of B Shares of each Fund
sold by the broker-dealer.
 
Under the distribution services agreement between Forum and the Trust, Forum
will receive, in addition to the distribution services fee, all contingent
deferred sales charges due upon redemptions of B Shares. The combined contingent
deferred sales charge and distribution services fee on B Shares are intended to
finance the distribution of those shares by permitting an investor to purchase
shares through broker-dealers without the assessment of an initial sales charge
and, at the same time, permitting Forum to compensate broker-dealers in
connection with the sales of the shares. Proceeds from the
 
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60
<PAGE>
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contingent deferred sales charge with respect to a Fund are paid to Forum to
defray the expenses related to providing distribution-related services in
connection with the sales of B Shares, such as the payment of compensation to
broker-dealers selling B Shares. Forum may spend the distribution services fees
it receives as it deems appropriate on any activities primarily intended to
result in the sale of B Shares.
 
Under the Plan, a Fund will make distribution services fee payments to Forum
only for periods during which there are outstanding uncovered distribution
charges attributable to that Fund. Uncovered distribution charges are equivalent
to all sales commissions previously due (plus interest), less amounts received
pursuant to the Plan and all contingent deferred sales charges previously paid
to Forum. At May 31, 1997, Income Equity Fund, ValuGrowth Stock Fund,
Diversified Equity Fund, Growth Equity Fund, Small Company Stock Fund, Small Cap
Opportunities Fund and International Fund had uncovered distribution expenses of
$90,315, $119,169, $1,132,878, $301,051, $122,207,5,656 and $51,784,
respectively, or approximately 2.70%, 1.80%, 3.34%, 3.46%, 2.38%, 3.58% and
3.10% of each respective Fund's net assets attributable to B Shares as of the
same date.
 
The amount of distribution services fees and contingent deferred sales charge
payments received by Forum with respect to a Fund is not related directly to the
amount of expenses incurred by Forum in connection with providing distribution
services to the B Shares and may be higher or lower than those expenses. Forum
may be considered to have realized a profit under the Plan if, at any time, the
aggregate amounts of all distribution services fees and contingent deferred
sales charge payments previously made to Forum exceed the total expenses
incurred by Forum in distributing B Shares.
Pursuant to the Plan, each Fund has agreed also to pay Forum a maintenance fee
in an amount equal to 0.25% of the average daily net assets of the Fund
attributable to B Shares for providing personal services to shareholder
accounts. The maintenance fee may be paid by Forum to broker-dealers in an
amount not to exceed 0.25% of the value of the B Shares held by the customers of
the broker-dealers. The distribution services fee and the maintenance fee are
each accrued daily and paid monthly and will cause a Fund's B Shares to have a
higher expense ratio and to pay lower dividends than A Shares of that Fund.
Notwithstanding the discontinuation of distribution services fees with respect
to a Fund, the Fund may continue to pay maintenance fees.
 
A Fund does not accrue future distribution services fees as a liability of the
Fund with respect to the B Shares or reduce the Fund's current net assets in
respect of distribution services fees which may become payable under the Plan in
the future.
 
In the event that the Plan is terminated or not continued with respect to a
Fund, the Fund may, under certain circumstances, continue to pay distribution
services fees to Forum (but only with respect to sales that occurred prior to
the termination or discontinuance of the Plan). Those circumstances are
described in detail in the SAI. In deciding whether to purchase B Shares of a
 
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Fund, investors should consider that payments of distribution services fees
could continue until such time as there are no uncovered distribution charges
under the Plan attributable to that Fund. In approving the Plan, the Board
determined that there was a reasonable likelihood that the Plan would benefit
each Fund and its B shareholders.
 
Periods with a high level of sales of B Shares of a Fund accompanied by a low
level of redemptions of those shares that are subject to contingent deferred
sales charges will tend to increase uncovered distribution charges. Conversely,
periods with a low level of sales of B Shares of a Fund accompanied by a high
level of redemptions of those shares that are subject to contingent deferred
sales charges will tend to reduce uncovered distribution charges. A high level
of sales of B Shares during the first few years of operations, coupled with the
limitation on the amount of distribution services fees payable by a Fund with
respect to B Shares during any fiscal year, would cause a large portion of the
distribution services fees attributable to a sale of the B Shares to be accrued
and paid by the Fund to Forum with respect to those shares in fiscal years
subsequent to the years in 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.
 
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.
 
<TABLE>
<CAPTION>
 
                                           CONTINGENT DEFERRED
                                           SALES CHARGE AS A %
                                            OF DOLLAR AMOUNT
YEAR SINCE PURCHASE                         SUBJECT TO CHARGE
- ---------------------------------------------------------------
<S>                                       <C>
First...................................             4.0%
Second..................................             3.0%
Third...................................             3.0%
Fourth..................................             2.0%
Fifth...................................             2.0%
Sixth...................................             1.0%
Seventh.................................             None
</TABLE>
 
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
 
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<PAGE>
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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: (1) redemptions of Shares
acquired through the reinvestment of dividends and distributions; (2)
involuntary redemptions by a Fund of shareholder accounts with low account
balances; (3) 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; (4) 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 (5) redemptions by any registered
investment adviser with whom Forum has entered into a share purchase agreement
and which is acting on behalf of its fiduciary customer accounts. See the SAI
for further information.
 
CONVERSION FEATURE. After seven years from the end of the calendar month in
which the shareholder's purchase order for B shares was accepted, the B Shares
will automatically convert to A Shares of that Fund. The conversion will be on
the basis of the relative net asset values of the Shares, without the imposition
of any sales load, fee or other charge. For purposes of conversion, B Shares of
a Fund purchased by a shareholder through the reinvestment of dividends and
distributions will be considered to be held in a separate sub-account. Each time
any B Shares in the shareholder's account (other than those in the sub-account)
convert, a corresponding pro rata portion of those shares in the sub-account
will also convert. The conversion of B Shares to A Shares is subject to the
continuing availability of certain opinions of counsel, and the conversion of a
Fund's B Shares to A Shares may be suspended if such an opinion is no longer
available at the time the conversion is to occur. In that event, no further
conversions of the Fund's B Shares would occur and shares might continue to be
subject to a distribution services and maintenance fee for an indefinite period.
 
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<PAGE>
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6. 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.")
 
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 or money order (cash cannot be accepted)
along with a completed account application form to the Trust at the address
listed under "Account Application." Checks or money orders are accepted at full
value subject to collection. If a check or money order 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 Forum.
 
For individual or Uniform Gift to Minors Act accounts, the check or money order
used to purchase shares of a Fund must be made payable to "Norwest Advantage
Funds" or to one or more owners of that account and endorsed to Norwest
Advantage Funds. No other method of payment by check will be accepted. For
corporation, partnership, trust, 401(k) plan or other non-individual type
accounts, the check used to purchase shares of a Fund must be made payable on
its face to "Norwest Advantage Funds." No other method of payment by check will
be accepted.
 
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:
 
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The investor should then promptly complete and mail the account application
form. There may be charges by the investor's bank for transmitting the money by
bank wire. The Trust does not charge investors for the receipt of wire
transfers. Payment by bank wire is treated as a federal funds payment when
received.
 
3.  THROUGH FINANCIAL INSTITUTIONS. Shares may be purchased and redeemed through
certain broker-dealers, banks and other financial institutions ("Processing
Organizations"). The Transfer Agent, Forum and their affiliates may be
Processing Organizations. Processing Organizations may receive as a
broker-dealer's reallowance a portion of the sales charge paid by their
customers who purchase A Shares of a Fund, may receive payments from Forum with
respect to sales of B Shares and may receive payments as a processing agent from
the Transfer Agent. In addition, financial institutions, including Processing
Organizations, may charge their customers a fee for their services and are
responsible for promptly transmitting purchase, redemption and other requests to
the Funds.
 
Investors who purchase shares through a Processing Organization will be subject
to the procedures of their Processing Organization, which may include charges,
limitations, investment minimums, cutoff times and restrictions in addition to,
or different from, those applicable to shareholders who invest in a Fund
directly. These investors should acquaint themselves with their institution's
procedures and should read this Prospectus in conjunction with any materials and
information provided by their institution. Customers who purchase a Fund's
shares through a Processing Organization may or may not be the shareholder of
record and, subject to their institution's and the Funds' procedures, may have
Fund shares transferred into their name. There is typically a three-day
settlement period for purchases and redemptions through broker-dealers. Certain
Processing Organizations also may enter purchase orders with payment to follow.
 
Certain shareholder services may not be available to shareholders who have
purchased shares through a Processing Organization. These shareholders should
contact their Processing Organization for further information. The Trust may
confirm purchases and redemptions of a Processing Organization's customers
directly to the Processing Organization, which in turn will provide its
customers with confirmations and periodic statements. The Trust is not
responsible for the failure of any Processing Organization to carry out its
obligations to its customer.
 
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.
 
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                                                                              65
<PAGE>
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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
holidays (New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas) 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.
 
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.
 
All payments for Shares must be in U.S. dollars. 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.
 
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                                                          7.  HOW TO SELL SHARES
 
GENERAL INFORMATION
 
Fund Shares may be sold (redeemed) at their net asset value on any Fund Business
Day subject to a contingent deferred sales charge imposed, in the case of A
Shares, on some redemptions made within two years of purchase and, in the case
of B Shares, on most redemptions made within six years of purchase. There is no
minimum period of investment and no restriction on the frequency of redemptions.
 
Fund shares are redeemed as of the next determination of the Fund's net asset
value following receipt by the Transfer Agent of the redemption order in proper
form (and any supporting documentation that the Transfer Agent may require).
Redeemed shares are not entitled to receive dividends declared after the day the
redemption becomes effective.
 
Normally, redemption proceeds are paid immediately, but in no event later than
seven days following receipt 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.
 
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.
 
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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
 
To protect shareholders and the Funds against fraud, signatures on certain
requests must have a signature guarantee. Requests must be made in writing and
include a signature guarantee for any of the following transactions: (1)
endorsement on a share certificate, (2) instruction to change a shareholder's
record name; (3) modification of a designated bank account for wire redemptions,
(4) instruction regarding an Automatic Investment Plan or Automatic Withdrawal
Plan, (5) dividend and distribution election, (6) telephone redemption, (7)
exchange option election or any other option election in connection with the
shareholder's account, (8) written instruction to redeem Shares whose value
exceeds $50,000, (9) redemption in an account in which the account address has
changed within the last 30 days, (10) redemption when the proceeds are deposited
in a Norwest Advantage Funds account under a different account registration and
(11) the remitting of redemption proceeds to any address, person or account for
which there are not established standing instructions on the account.
 
Signature guarantees may be provided by any bank, broker-dealer, national
securities exchange, credit union, savings association or other eligible
institution that is authorized to guarantee signatures and is acceptable to the
Transfer Agent. Whenever a signature guarantee is required, the signature of
each person required to sign for the account must be guaranteed.
 
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Shareholders who want telephone redemption or exchange privileges must elect
those privileges. The Trust and Transfer Agent 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 and Transfer Agent did not
employ such procedures, they could be liable for losses due to unauthorized or
fraudulent telephone instructions. Shareholders should verify the accuracy of
telephone instructions immediately upon receipt of confirmation statements.
During times of drastic economic or market changes, telephone redemption and
exchange privileges may be difficult to implement. In the event that a
shareholder is unable to reach the Transfer Agent by telephone, requests may be
mailed or hand-delivered to the Transfer Agent.
 
Due to the cost to the Trust of maintaining smaller accounts, the Trust reserves
the right to redeem, upon not less than 60 days' written notice, all shares in
any Fund account whose aggregate net asset value is less than $1,000 immediately
following any redemption.
 
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8. 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 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 (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
 
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charge, the shareholder would pay an additional 1% sales charge on the exchange.
A Shares acquired through the reinvestment of dividends or distributions are
deemed to have been acquired with a sales charge rate equal to that applicable
to the shares on which the dividends or distributions were paid.
 
Shares of a Fund ("Original Shares") may be exchanged without the payment of any
contingent deferred sales charge. A and B Shares acquired as a result of such
exchange ("New Shares") and subsequently redeemed will nonetheless be subject to
the contingent deferred sales charge applicable to the Original Shares as if
those shares were being redeemed at that time. For purposes of computing both
the contingent deferred sales charge payable upon redemption of the New Shares
and, in the case of B Shares, the time remaining before the New B Shares convert
to A Shares of that Fund, the deferred sales charge and the time remaining
applicable to the Original Shares will apply to the New Shares rather than the
deferred sales charge and time remaining that would otherwise apply. The
deferred sales charge and time remaining applicable to Shares first purchased by
a shareholder will apply to New Shares resulting from both an initial and any
subsequent exchanges.
 
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."
 
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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.
Generally, all contributions and investment earnings in an IRA will be
tax-deferred until withdrawn. 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.
 
An employer may also contribute to an individual's IRA as part of a Savings
Incentive Match Plan for Employees, or "SIMPLE plan," established after December
31, 1996. Under a SIMPLE plan, an employee may contribute up to $6,000 annually
to the employee's IRA, and the employer must generally match such contributions
up to 3% of the employee's annual salary. Alternatively, the employer may elect
to contribute to the employee's IRA 2% of the lesser of the employee's earned
income or $150,000.
 
The foregoing discussion regarding IRAs is based on regulations in effect as of
October 1, 1997 and summarizes only some of the important federal tax
considerations generally affecting IRA contributions made by individuals or
their employers. It is not intended as a substitute for tax planning. Investors
should consult their tax advisors with respect to their specific tax situations
as well as with respect to state and local taxes.
 
AUTOMATIC WITHDRAWAL PLAN
 
A shareholder whose Shares in a single account total $1,000 or more may
establish a withdrawal plan to provide for the preauthorized payment from the
shareholder's account of $250 or more on a monthly, quarterly, semi-annual or
annual basis. Under the withdrawal plan, sufficient shares in the shareholder's
account are redeemed to provide the amount of the periodic payment and any
taxable gain or loss is recognized by the shareholder upon redemption of the
shares. Shareholders wishing to utilize the withdrawal plan may do so by
completing an application which may be obtained by writing or calling the
Transfer Agent. The Trust may suspend a shareholder's withdrawal plan without
notice if the account contains insufficient funds to effect a withdrawal or if
the account balance is less than $1,000 at any time.
 
REOPENING ACCOUNTS
 
A shareholder may reopen an account, without filing a new account application
form, at any time within one year after the shareholder's account is closed,
provided that the information on the account application form on file with the
Trust is still applicable.
 
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                                                   9.  DIVIDENDS AND TAX MATTERS
 
DIVIDENDS
 
Dividends of Income Equity Fund's, ValuGrowth Stock Fund's and Small Company
Stock Fund's net investment income are declared and paid quarterly. Dividends of
each other 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 paid by a Fund with respect to each class of shares are
calculated in the same manner and at the same time. 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.
 
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, each Fund will not be liable for federal income and excise taxes on the
net investment income and capital gain distributed to its 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 net
short-term capital gain) are taxable to shareholders of the Fund as ordinary
income. Pursuant to the Taxpayer Relief Act of 1997, two different tax rates
apply to net capital gains -- that is, the excess of net gains from capital
assets held for more than one year over net losses from capital assets held for
not more than one year. One rate (generally 28%) applies to net gains on capital
 
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assets held for more than one year but not more than 18 months ("mid-term
gains"), and a second rate (generally 20%) applies to the balance of such net
capital gains ("adjusted net capital gains"). Distributions of mid-term gains
and adjusted net capital gains will be taxable to shareholders as such,
regardless of how long a shareholder has held shares in the Fund. If a
shareholder holds Shares for six months or less and during that period receives
distribution of net capital gain, any loss realized on the sale of the Shares
during that six-month period will be a long-term capital loss to the extent of
the distribution. Dividends and distributions reduce the net asset value of the
Fund paying the dividend or distribution 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, will 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 a portion of the dividends
received by corporate 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.
 
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.
 
CORE PORTFOLIOS. Each Core 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
a Core Portfolio are deemed to have been "passed through" to the Funds investing
in the Core Portfolio in proportion to the Funds' interests in the Core
Portfolio, regardless of whether such amounts have been distributed by the Core
Portfolio to the Funds.
 
FUNDS INVESTING IN FOREIGN SECURITIES. Investment income received by a 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 and Schroder EM Core Portfolio.
Shareholders of that Fund will be notified of their share of those foreign taxes
and will be required to treat the amount of such foreign taxes as additional
income. In that event, the shareholder may be entitled to claim a credit or
deduction for those taxes.
 
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                                                          10.  OTHER INFORMATION
 
BANKING LAW MATTERS
 
Federal banking rules 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. Forum believes that Norwest and any bank or other bank affiliate also
may perform Processing Organization or similar services for the Trust and its
shareholders without violating applicable federal banking rules. If a bank or
bank affiliate were prohibited in the future from so acting, changes in the
operation of the Trust could occur and a shareholder serviced by the 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 net asset value per share of each class of each Fund is determined 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 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 Board or pursuant to
procedures approved by the Board or the Core Board, as applicable. The Funds
only determine net asset value on Fund Business Days.
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 on 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 Norwest 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.
 
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PERFORMANCE INFORMATION
 
A Fund's performance may be quoted 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 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. Published yield quotations are, and
total return figures may be, based on amounts invested in a Fund net of sales
charges that may be paid by an investor. A computation of yield or total return
that does not take into account sales charges paid by an investor will be higher
than a similar computation that takes into account payment of sales charges.
 
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 Financial Data, Inc. In addition, the
performance of a Fund may be compared to securities indices. These indices may
be comprised of a composite of various recognized securities indices to reflect
the investment policies of a Fund that invests its assets using different
investment styles. Indices are not used in the management of a Fund but rather
are standards by which an 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. 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 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); the costs
of doing so will be borne by the Trust. Currently the authorized shares of the
Trust are divided into thirty-nine separate series.
 
OTHER CLASSES OF SHARES. The Funds currently issue three classes of shares, A
Shares, B Shares and I Shares. I Shares are offered to fiduciary, agency and
 
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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 or the Funds'
distributor. Investors may also contact their Norwest sales representative to
obtain information about the other classes.
 
SHAREHOLDER VOTING AND OTHER RIGHTS. Each share of each series 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 pertains 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 series
or class, except if the matter affects only one series or class or voting by
series or class is required by law, in which case shares will be voted
separately by series 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 (and Trustees) 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 series is entitled to
the shareholder's pro rata share of all dividends and distributions arising from
that series' assets and, upon redeeming shares, will receive the portion of the
series' net assets represented by the redeemed shares.
 
Each Core Portfolio normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in a Core Portfolio will be entitled to
vote in proportion to its relative beneficial interest in the Core Portfolio.
When required by the 1940 Act and other applicable law, a Fund will solicit
proxies from its shareholders and will vote its interest in a Core Portfolio in
proportion to the votes cast by its shareholders.
 
As of September 2, 1997, Norwest Bank may be deemed to have controlled Income
Equity Fund. Norwest Bank Colorado, N.A. may be deemed to have controlled
ValueGrowth Stock Fund through investment in the Funds by their customers. From
time to time certain 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.
 
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CORE AND GATEWAY STRUCTURE
 
Income Equity Fund, Small Company Stock Fund and Small Cap Opportunities Fund
each seek to achieve its investment objective by investing all of its investable
assets in its corresponding Core Portfolio that has the same investment
objective and substantially identical investment policies as the Fund.
Diversified Equity Fund, Growth Equity Fund and International Fund each seek to
achieve its investment objective by investing all or part of its assets in two
or more Core Portfolios. Accordingly, each Core Portfolio directly acquires
portfolio securities and a Fund investing in the Core Portfolio acquires an
indirect interest in those securities. Schroder U.S. Smaller Companies Portfolio
and Schroder EM Core Portfolio are separate series of Schroder Capital Funds, a
business trust organized under the laws of the State of Delaware in 1995. Each
other Core Portfolio is a separate series of Core Trust (Delaware), a business
trust organized under the laws of the State of Delaware in 1994. Each Core Trust
is registered under the 1940 Act as an open-end, management, investment company.
The assets of each Core Portfolio belong only to, and the liabilities of each
Core Portfolio are borne solely by, that Core Portfolio and no other portfolio
of a Core Trust.
 
THE CORE PORTFOLIOS. A Fund's investment in a Core Portfolio is in the form of a
non-transferable beneficial interest. All investors in a Core Portfolio will
invest on the same terms and conditions and will pay a proportionate share of
the Core Portfolio's expenses. As of October 1, 1997, one other mutual fund
invested in Schroder U.S. Smaller Companies Portfolio and Schroder EM Core
Portfolio and several other funds of the Trust invested a portion of their
assets in each other Core Portfolio.
 
A Core Portfolio will not sell its shares directly to members of the general
public. Another investor in a Core 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 any Fund, and
could have different advisory and other fees and expenses than a Fund.
Therefore, Fund shareholders may have different returns than shareholders in
another investment company that invests in a Core Portfolio. Information
regarding any such funds is available from the Core Trusts by calling Forum at
(207) 879-0001.
 
CERTAIN RISKS OF INVESTING IN CORE PORTFOLIOS. A Fund's investment in a Core
Portfolio may be affected by the actions of other large investors in that Core
Portfolio. For example, if International Portfolio had a large investor other
than International Fund that redeemed its interest, International Portfolio's
remaining investors (including the Fund) might, as a result, experience higher
pro rata operating expenses, thereby producing lower returns. As there may be
other investors in a Core Portfolio, there can be no assurance that any issue
that receives a majority of the votes cast by a Fund's shareholders will receive
a majority of votes cast by all investors in a Core Portfolio; indeed, other
investors holding a majority interest in a Core Portfolio could have voting
control of the Core Portfolio.
 
- -
78
<PAGE>
- ----
- ----
 
Each Fund may withdraw its entire investment from a Core Portfolio 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 a Core Portfolio with power to, and who did by a vote of all
investors (including the Fund), change the investment objective or policies of
the Core 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 Core 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 would incur brokerage fees or other transaction costs. If
the Fund withdrew its investment from a Core Portfolio, the Board would consider
what action might be taken, including the management of the Fund's assets
directly by the Advisers or the investment of the Fund's assets in another
pooled investment entity. The inability of the Fund to find a suitable
replacement investment, in the event the Board decided not to permit the
Advisers to manage the Fund's assets directly, could have a significant impact
on shareholders of the Fund.
 
Investment decisions are made by the portfolio managers of each Core Portfolio
independently. Therefore the portfolio manager of one Core Portfolio in which a
Fund invests may purchase shares of the same issuer whose shares are being sold
by the portfolio manager of another Core Portfolio in which the Fund invests.
This could result in an indirect expense to the Fund without accomplishing any
investment purpose.
 
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.
 
                                                                              --
                                                                              79
<PAGE>



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                                                   ---------------
           [LOGO]                                     BULK RATE
                                                     U.S. POSTAGE
                                                        PAID
                                                   PERMIT NO. 3489
                                                   MINNEAPOLIS, MN
                                                   ---------------




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          [LOGO]

          SHAREHOLDER INFORMATION:

               Norwest Bank Minnesota, N.A.
               733 Marquette Avenue
               Minneapolis, Minnesota 55479-0040
               612-667-8833 (MINNEAPOLIS/ST. PAUL)
               800-338-1348 (ELSEWHERE)

          -COPYRIGHT- 1997 NORWEST ADVANTAGE FUNDS
          MFBPS003 10/97


<PAGE>
                 [LOGO]
 
- --------------------------------------------------------------------------------
 
PROSPECTUS
 
OCTOBER 1, 1997
 
This Prospectus offers shares of thirty-two separate portfolios (each a "Fund"
and collectively the "Funds") of Norwest Advantage Funds (the "Trust"), which is
a registered, open-end, management investment company, as follows: (1) five
MONEY MARKET FUNDS - Shares of Cash Investment Fund 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"); (2) I Shares of six FIXED INCOME FUNDS - Stable Income Fund,
Limited Term Government Income Fund, Intermediate Government Income Fund,
Diversified Bond Fund, Income Fund and Total Return Bond Fund (the "Fixed Income
Funds"); (3) I Shares of five TAX-FREE FIXED INCOME FUNDS - Limited Term
Tax-Free Fund, Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota
Intermediate Tax-Free Fund and Minnesota Tax-Free Fund (the "Tax-Free Fixed
Income Funds"); (4) I Shares of four BALANCED FUNDS - Strategic Income Fund
(FORMERLY CONSERVATIVE BALANCED FUND), Moderate Balanced Fund, Growth Balanced
Fund and Aggressive Balanced-Equity Fund (the "Balanced Funds"); and (5) I
Shares of twelve EQUITY FUNDS - Index Fund, Income Equity Fund, ValuGrowth Stock
Fund, Diversified Equity Fund, Growth Equity Fund, Large Company Growth Fund,
Diversified Small Cap 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 Cash
Investment Fund, 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."
 
READY CASH INVESTMENT FUND, STABLE INCOME FUND, TOTAL RETURN BOND FUND, INDEX
FUND, INCOME EQUITY FUND,
LARGE COMPANY GROWTH FUND, SMALL COMPANY STOCK FUND, SMALL COMPANY GROWTH FUND
and SMALL CAP OPPORTUNITIES FUND each seeks to achieve its investment objective
by investing all of its investable assets in a separate portfolio of another
registered, open-end, management investment company with the same investment
objective. (See "Summary" and "Other Information - Core and
Gateway-Registered Trademark- - Structure.")
 
CASH INVESTMENT FUND, DIVERSIFIED BOND FUND, STRATEGIC INCOME FUND, MODERATE
BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE BALANCED-EQUITY FUND,
DIVERSIFIED EQUITY FUND, GROWTH EQUITY FUND, DIVERSIFIED SMALL CAP FUND AND
INTERNATIONAL FUND each seeks to achieve its investment objective by investing
in various portfolios of other registered open-end, management investment
companies, each of which invests using a different investment style. (See
"Summary" and "Other Information - Core and Gateway Structure.")
 
Each other Fund seeks to achieve its investment objective by investing directly
in portfolio securities.
 
Shares of Colorado Tax-Free Fund, Minnesota Intermediate Tax-Free Fund and
Minnesota Tax-Free Fund are offered solely to residents of Colorado and
Minnesota, respectively.
 
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, 1997,
as may be further amended from time to time. The SAI is available for reference
on the SEC's Web Site (http://www.sec.gov) and contains more detailed
information about the Trust and each of the Funds. The SAI 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) 879-0001.
Investors should read this Prospectus and retain it for future reference.
 
NORWEST ADVANTAGE FUNDS IS A FAMILY OF MUTUAL FUNDS. THE SHARES OF MUTUAL FUNDS
ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL
RESERVE SYSTEM OR ANY OTHER GOVERNMENT AGENCY. THE SHARES ALSO ARE NOT
OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED OR GUARANTEED BY, NORWEST BANK
MINNESOTA, N.A. OR ANY OTHER BANK OR BANK AFFILIATE.
 
AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO ASSURANCE THAT ANY OF
THE MONEY MARKET 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.
<PAGE>
TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                                             PAGE
<S>        <C>                                                                          <C>
1.         SUMMARY....................................................................          3
 
2.         FINANCIAL HIGHLIGHTS.......................................................         16
 
3.         INVESTMENT OBJECTIVES AND POLICIES.........................................         24
           Money Market Funds.........................................................         24
           Fixed Income Funds.........................................................         28
           Tax-Free Fixed Income Funds................................................         33
           Balanced Funds.............................................................         38
           Equity Funds...............................................................         43
           Core Portfolio Descriptions................................................         53
 
4.         ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS.....................         60
           General Information........................................................         60
           Common Policies of the Funds...............................................         61
 
5.         MANAGEMENT OF THE FUNDS....................................................         65
           Investment Advisory Services...............................................         66
           Management, Administration and Distribution Services.......................         74
           Shareholder Servicing and Custody..........................................         75
           Expenses of the Funds......................................................         75
 
6.         PURCHASES AND REDEMPTIONS OF SHARES........................................         77
           General Purchase Information...............................................         77
           Purchase Procedures........................................................         78
           General Redemption Information.............................................         79
           Redemption Procedures......................................................         80
           Exchanges..................................................................         81
           Shareholder Services.......................................................         82
 
7.         DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS...................................         83
           Dividends..................................................................         83
           Tax Matters................................................................         84
 
8.         OTHER INFORMATION..........................................................         86
           Banking Law Matters........................................................         86
           Determination of Net Asset Value...........................................         86
           Performance Information....................................................         87
           The Trust and Its Shares...................................................         88
           Core and Gateway Structure.................................................         89
           APPENDIX A.................................................................        A-1
           Investments, Investment Strategies and Risk Considerations
</TABLE>
 
2
<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 Cash Investment Fund, U.S. Government
Fund and Treasury Fund and are designed primarily for institutional clients.
Investor Shares are designed for retail investors and incur more expenses than
Institutional 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 thirty-two Funds are offered by this Prospectus: (1) five MONEY MARKET
FUNDS - shares of Cash Investment Fund, 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; (2) I Shares of six FIXED INCOME
FUNDS - Stable Income Fund, Limited Term Government Income Fund, Intermediate
Government Income Fund, Diversified Bond Fund, Income Fund and Total Return Bond
Fund; (3) I Shares of five TAX-FREE FIXED INCOME FUNDS - Limited Term Tax-Free
Fund, Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota Intermediate
Tax-Free Fund and Minnesota Tax-Free Fund; (4) I Shares of four BALANCED FUNDS -
Strategic Income Fund, Moderate Balanced Fund, Growth Balanced Fund and
Aggressive Balanced-Equity Fund; and (5) I Shares of twelve EQUITY FUNDS - Index
Fund, Income Equity Fund, ValuGrowth Stock Fund, Diversified Equity Fund, Growth
Equity Fund, Large Company Growth Fund, Small Company Stock Fund, Small Company
Growth Fund, Diversified Small Cap Fund, Small Cap Opportunities Fund,
Contrarian Stock Fund and International Fund. Only the Shares indicated are
offered by this Prospectus. Other classes of shares of a Fund that currently
offers other 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 (except Municipal Money Market Fund) seeks to
provide high current income to the extent consistent with the preservation of
capital and the maintenance of liquidity. MUNICIPAL MONEY MARKET FUND seeks to
provide high current income which is exempt from federal income tax to the
extent consistent with the preservation of capital and the maintenance of
liquidity. CASH INVESTMENT FUND and READY CASH INVESTMENT FUND each pursue their
investment objectives by investing in a broad spectrum of high quality money
market instruments of United States and foreign issuers. U.S. GOVERNMENT FUND
pursues 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 investment grade short-term
obligations. LIMITED TERM GOVERNMENT INCOME FUND seeks to provide income and
safety of principal by investing primarily in U.S. Government Securities.
INTERMEDIATE GOVERNMENT INCOME FUND seeks to provide 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
 
                                                                               3
<PAGE>
structuring the maturities of its investment portfolio. DIVERSIFIED BOND FUND
seeks to provide total return by diversifying its investments among different
fixed-income investment styles. INCOME FUND seeks to provide total return
consistent with current income. 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 provide 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 provide 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. COLORADO TAX-FREE FUND
seeks to provide 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 INTERMEDIATE TAX-FREE FUND seeks to provide 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 intermediate investment grade municipal
securities of Minnesota issuers. MINNESOTA TAX-FREE FUND seeks to provide 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
 
STRATEGIC INCOME 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. Of the Balanced Funds, Strategic Income 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. 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. AGGRESSIVE BALANCED-EQUITY
FUND seeks 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 component of the Balanced Funds and may be
considered a non-traditional balanced fund because it may at times invest less
than 25% of its assets in debt securities.
 
EQUITY FUNDS
 
INDEX FUND seeks to duplicate the return of the Standard & Poor's 500 Composite
Stock Price Index. INCOME EQUITY FUND seeks to provide long-term capital
appreciation consistent with above-average dividend income. VALUGROWTH STOCK
FUND seeks to provide long-term capital appreciation. 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. 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.
Growth Equity Fund assumes a higher level of risk than Diversified Equity Fund
in order
 
4
<PAGE>
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. DIVERSIFIED SMALL
CAP FUND seeks to provide long-term capital appreciation while moderating annual
return volatility by diversifying its investments across different small
capitalization equity investment styles. 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 to
provide long-term capital appreciation by investing in smaller domestic
companies. This objective is pursued 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. CONTRARIAN
STOCK FUND seeks capital appreciation. This objective is pursued by investing
primarily in common stocks for which the Fund's investment adviser believes
there is significant potential for price appreciation. INTERNATIONAL FUND seeks
long-term capital appreciation. This objective is pursued by investing, directly
or indirectly, in high quality companies based outside the United States.
 
FUND STRUCTURES
 
READY CASH INVESTMENT FUND, STABLE INCOME FUND, TOTAL RETURN BOND FUND, INDEX
FUND, INCOME EQUITY FUND, LARGE COMPANY GROWTH FUND, SMALL COMPANY STOCK FUND,
SMALL COMPANY GROWTH FUND and SMALL CAP OPPORTUNITIES FUND each seek to achieve
its investment objective by investing all of its investable assets in a separate
portfolio (each a "Core Portfolio") of a registered, open-end, management
investment company (each a "Core Trust") that has the same investment objective
and substantially similar investment policies. Accordingly, the investment
experience of each of these Funds will correspond directly with the investment
experience of its corresponding Core Portfolio. (See "Other Information - Core
and Gateway Structure.") The Funds and the Core Portfolios in which they invest
are:
 
<TABLE>
<CAPTION>
FUND                                CORE PORTFOLIO
- ----------------------------------  ------------------------------------------------
<S>                                 <C>
Ready Cash Investment Fund          Prime Money Market Portfolio
Stable Income Fund                  Stable Income Portfolio
Total Return Bond Fund              Total Return Bond Portfolio
Index Fund                          Index Portfolio
Income Equity Fund                  Income Equity Portfolio
Large Company Growth Fund           Large Company Growth Portfolio
Small Company Stock Fund            Small Company Stock Portfolio
Small Company Growth Fund           Small Company Growth Portfolio
Small Cap Opportunities Fund        Schroder U.S. Smaller Companies Portfolio
</TABLE>
 
CASH INVESTMENT FUND, DIVERSIFIED BOND FUND, STRATEGIC INCOME FUND, MODERATE
BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE BALANCED-EQUITY FUND,
DIVERSIFIED EQUITY FUND, DIVERSIFIED SMALL CAP FUND, GROWTH EQUITY FUND and
INTERNATIONAL FUND each seeks to achieve its investment objective by investing
all of its investable assets in various portfolios (each a "Core Portfolio") of
other, open-end, management investment companies (each a "Core Trust"). Each
Core Portfolio invests using a different investment style. (See "Other
Information - Core and Gateway Structure.") The Funds and the Core Portfolios in
which they currently invest are:
 
<TABLE>
<CAPTION>
FUND                                       CORE PORTFOLIOS
- -----------------------------------------  ------------------------------------------------
<S>                                        <C>
Cash Investment Fund                       Money Market Portfolio
                                           Prime Money Market Portfolio
</TABLE>
 
                                                                               5
<PAGE>
<TABLE>
<CAPTION>
FUND                                       CORE PORTFOLIOS
- -----------------------------------------  ------------------------------------------------
Diversified Bond Fund                      Positive Return Bond Portfolio
                                           Strategic Value Bond Portfolio
                                           Managed Fixed Income Portfolio
<S>                                        <C>
Strategic Income Fund                      Money Market Portfolio
                                           Stable Income Portfolio
                                           Positive Return Bond Portfolio
                                           Strategic Value Bond Portfolio
                                           Managed Fixed Income Portfolio
                                           Each of the ten Core Portfolios in which
                                           Diversified Equity Fund invests
Moderate Balanced Fund                     Stable Income Portfolio
                                           Positive Return Bond Portfolio
                                           Strategic Value Bond Portfolio
                                           Managed Fixed Income Portfolio
                                           Each of the ten Core Portfolios in which
                                           Diversified Equity Fund invests
Growth Balanced Fund                       Positive Return Bond Portfolio
                                           Strategic Value Bond Portfolio
                                           Managed Fixed Income Portfolio
                                           Each of the ten Core Portfolios in which
                                           Diversified Equity Fund Invests
Aggressive Balanced-Equity Fund            Positive Return Bond Portfolio
                                           Strategic Value Bond Portfolio
                                           Managed Fixed Income Portfolio
                                           Each of the ten Core Portfolios in which
                                           Diversified Equity Fund Invests
Diversified Equity Fund                    Index Portfolio
                                           Income Equity Portfolio
                                           Large Company Growth Portfolio
                                           Disciplined Growth Portfolio
                                           Small Company Stock Portfolio
                                           Small Company Growth Portfolio
                                           Small Company Value Portfolio
                                           Small Cap Value Portfolio
                                           International Portfolio
                                           Schroder EM Core Portfolio
Growth Equity Fund                         Large Company Growth Portfolio
                                           Small Company Stock Portfolio
                                           Small Company Growth Portfolio
                                           Small Company Value Portfolio
                                           Small Cap Value Portfolio
                                           International Portfolio
                                           Schroder EM Core Portfolio
International Fund                         International Portfolio
                                           Schroder EM Core Portfolio
</TABLE>
 
6
<PAGE>
The percentage of each of these Fund's (except Cash Investment Fund's) assets
invested in each Core Portfolio may be changed at any time in response to market
or other conditions. Allocations are made within specified ranges as described
under "Investment Objectives and Policies" for each Fund. Upon approval by the
Board of Trustees of the Trust and notification of shareholders, each Fund may
invest in additional or fewer Core Portfolios or invest directly in portfolio
securities.
 
U.S. GOVERNMENT FUND, TREASURY FUND, MUNICIPAL MONEY MARKET FUND, LIMITED TERM
GOVERNMENT INCOME FUND, INTERMEDIATE GOVERNMENT INCOME FUND, INCOME FUND,
LIMITED TERM TAX-FREE FUND, TAX-FREE INCOME FUND, COLORADO TAX-FREE FUND,
MINNESOTA INTERMEDIATE TAX-FREE FUND, MINNESOTA TAX-FREE FUND, VALUGROWTH STOCK
FUND and CONTRARIAN STOCK FUND each seeks to achieve its investment objective by
investing directly in portfolio securities.
 
MANAGEMENT OF THE FUNDS
 
ADVISORY SERVICES
 
NORWEST INVESTMENT MANAGEMENT, INC. ("Norwest"), a subsidiary of Norwest Bank
Minnesota, N.A. ("Norwest Bank"), is each Fund's and each Core Portfolio's
(other than Schroder U.S. Smaller Companies Portfolio, International Portfolio
and Schroder EM Core Portfolio) investment adviser. Norwest provides investment
advice to various institutions, pension plans and other accounts and, as of June
30, 1997 managed over $22 billion in assets. (See "Management of the Funds -
Investment Advisory Services.") Norwest Bank serves as transfer agent, dividend
disbursing agent and custodian of the Trust, serves as the custodian of each
Core Portfolio (other than Schroder U.S. Smaller Companies Portfolio and
Schroder EM Core Portfolio) and provides administrative services to Small Cap
Opportunities Fund and International Fund. (See "Management of the Funds -
Shareholder Servicing and Custody" and "- Management, Administration and
Distribution Services.")
 
Each Fund that invests in one or more Core Portfolios incurs investment advisory
fees indirectly through the investment advisory fees paid by the Core
Portfolios; Norwest is paid an investment advisory fee directly by the other
Funds. In addition, Diversified Bond Fund, Strategic Income Fund, Moderate
Balanced Fund, Growth Balanced Fund, Aggressive Balanced-Equity Fund,
Diversified Equity Fund, Growth Equity Fund, Diversified Small Cap Fund and
International Fund each pay Norwest an asset allocation fee for Norwest's
services with respect to the allocation of the Fund's assets to and among the
various Core Portfolios ("Asset Allocation Services"). Cash Investment Fund does
not vary the percentages of its assets invested in the Core Portfolios in which
it invests and, accordingly, pays no asset allocation Fee.
 
CRESTONE CAPITAL MANAGEMENT, INC. ("Crestone"), an investment advisory
subsidiary of Norwest Bank, is the investment subadviser of Small Company Stock
Portfolio. Crestone provides investment advice regarding companies with small
capitalization to various clients, including institutional investors.
 
GALLIARD CAPITAL MANAGEMENT, INC. ("Galliard"), an investment advisory
subsidiary of Norwest Bank, is the investment subadviser of Stable Income
Portfolio, Strategic Value Bond Portfolio and Managed Fixed Income Portfolio.
Galliard provides investment advisory services to bank and thrift institutions,
pension and profit sharing plans, trusts and charitable organizations and
corporate and other business entities.
 
PEREGRINE CAPITAL MANAGEMENT, INC. ("Peregrine"), an investment advisory
subsidiary of Norwest Bank, is the investment subadviser of Positive Return Bond
Portfolio, Large Company Growth Portfolio, Small Company Growth Portfolio and
Small Company Value Portfolio. Peregrine provides investment advisory services
to corporate and public pension plans, profit sharing plans, savings-investment
plans and 401(k) plans.
 
SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. ("Schroder") is the investment
adviser of Schroder U.S. Smaller Companies Portfolio, International Portfolio
and Schroder EM Core Portfolio. Schroder specializes in providing international
investment advice to various clients.
 
                                                                               7
<PAGE>
SMITH ASSET MANAGEMENT GROUP, L.P. ("Smith Group") is the investment subadviser
of Disciplined Growth Portfolio and Small Cap Value Portfolio. Smith Group
provides investment management services to company retirement plans,
foundations, endowments, trust companies, and high net worth individuals using a
discplined equity style.
 
UNITED CAPITAL MANAGEMENT ("UCM"), a part of Norwest Bank Colorado, N.A., is the
investment subadviser of Total Return Bond Portfolio and Contrarian Stock Fund.
UCM provides specialized investment advisory services to various institutional
pension accounts.
 
Norwest, UCM, Galliard, Crestone, Peregrine, Schroder and Smith (or Norwest and
a particular investment subadviser) are sometimes referred to collectively as
the "Advisers." The various investment subadvisers are sometimes referred to as
the "Subadvisers."
 
FUND MANAGEMENT AND ADMINISTRATION
 
The business of the Trust is managed under the direction of the Board of
Trustees (the "Board"). The manager of the Trust and distributor of its shares
is Forum Financial Services, Inc. ("Forum"), a registered broker-dealer and
member of the National Association of Securities Dealers, Inc. Forum
Administrative Services, LLC ("FAS") provides administrative services for the
Funds and also serves as administrator of each Core Portfolio, except Schroder
U.S. Smaller Companies Portfolio and Schroder EM Core Portfolio, for which Forum
serves as subadministrator. Schroder Fund Advisors Inc. serves as the
administrator of Schroder U.S. Smaller Companies Portfolio and Schroder EM Core
Portfolio. (See "Management - Management, Administration and Distribution
Services.")
 
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 Cash Investment
Fund, 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 Cash Investment Fund,
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.")
 
DIVIDENDS AND DISTRIBUTIONS
 
Dividends of net investment income are declared and paid as follows:
 
<TABLE>
<S>                             <C>
Declared daily and paid         Each Money Market Fund, Limited Term Government In-
monthly:                        come Fund, Income Fund, Total Return Bond Fund and
                                each Tax-Exempt Fixed Income Fund.
 
Declared and paid monthly:      Stable Income Fund, Intermediate Government Income
                                Fund and Diversified Bond Fund.
 
Declared and paid quarterly:    Income Equity Fund, ValuGrowth Stock Fund, Small
                                Company Stock Fund and Contrarian Stock Fund.
</TABLE>
 
8
<PAGE>
<TABLE>
<S>                             <C>
Declared and paid annually:     Strategic Income Fund, Moderate Balanced Fund,
                                Growth Balanced Fund, Aggressive Balanced-Equity
                                Fund, Index Fund, Diversified Equity Fund, Growth
                                Equity Fund, Large Company Growth Fund, Small
                                Company Growth Fund, Diversified Small Cap Fund,
                                Small Cap Opportunities Fund and International Fund.
</TABLE>
 
Each Fund's net capital gain, if any, is distributed at least annually. (See
"Dividends and Tax Matters.")
 
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 of the equity
funds invest primarily in equity securities and are subject to the general risks
of investing in the stock market.
 
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. There can be no assurance that
any MONEY MARKET FUND or Core Portfolio in which they invest will maintain a
stable net asset value of $1.00 per share and the amount of income earned by
each Money Market Fund will tend to vary with changes in prevailing interest
rates. Certain investments and investment techniques, however, entail additional
risks, such as the potential use of leverage by certain Funds through
borrowings, securities lending, investments in foreign issuers and other
investment techniques. (See "Appendix A - Investments, Investment Strategies and
Risk Considerations.") 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.")
 
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 Intermediate Tax-Free Fund,
Minnesota Tax-Free Fund, Income Fund, Diversified Bond Fund and Strategic Value
Bond Portfolio), 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 INTERMEDIATE
TAX-FREE FUND and 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, MINNESOTA INTERMEDIATE TAX-FREE FUND and
MINNESOTA TAX-FREE FUND invests principally in securities issued by the
government of and municipalities in the State of Colorado or Minnesota,
respectively, and is therefore more susceptible to factors adversely affecting
issuers of those states than would be a 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.")
 
                                                                               9
<PAGE>
The policy of investing in securities of smaller companies employed by SMALL
COMPANY STOCK FUND, SMALL COMPANY GROWTH FUND, DIVERSIFIED SMALL CAP FUND and
SMALL CAP OPPORTUNITIES FUND and by STRATEGIC INCOME FUND, MODERATE BALANCED
FUND, GROWTH BALANCED FUND, AGGRESSIVE BALANCED-EQUITY FUND, 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. These risks include lower trading volumes and,
therefore, the potential for greater stock price volatility. For a description
of investment considerations and risks involved in investing in small company
securities, see "Investment Objectives and Policies - Equity Funds - Small
Company Investment Considerations and Risk Factors.") SMALL COMPANY STOCK FUND,
SMALL COMPANY GROWTH FUND, DIVERSIFIED SMALL CAP FUND and SMALL CAP
OPPORTUNITIES FUND are designed for the investment of that portion of an
investor's funds that can appropriately bear the special risks associated with
an investment in smaller market capitalization companies.
 
The policy of investing in foreign issuers employed by INTERNATIONAL FUND and by
STRATEGIC INCOME FUND, MODERATE BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE
BALANCED-EQUITY FUND, 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.
These risks include the 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. (See "Investment Objectives and Policies - Equity Funds -
International Fund - Foreign Investment Considerations and Risk Factors.")
INTERNATIONAL FUND is designed for the investment of that portion of an
investor's funds that can appropriately bear the special risks associated with
an investment in foreign companies.
 
By pooling their assets in one or more Core Portfolios with other institutional
investors, CASH INVESTMENT FUND, READY CASH INVESTMENT FUND, STABLE INCOME FUND,
DIVERSIFIED BOND FUND, TOTAL RETURN BOND FUND, STRATEGIC INCOME FUND, MODERATE
BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE BALANCED-EQUITY FUND, INDEX
FUND, INCOME EQUITY FUND, DIVERSIFIED EQUITY FUND, GROWTH EQUITY FUND, LARGE
COMPANY GROWTH FUND, SMALL COMPANY STOCK FUND, SMALL COMPANY STOCK FUND,
DIVERSIFIED SMALL CAP FUND, SMALL CAP OPPORTUNITIES FUND and INTERNATIONAL FUND
each may be able to achieve certain efficiencies and economies of scale 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 and Gateway Structure - Certain Risks
of Investing in Core Portfolios.") Investment decisions are made by the
portfolio managers of each Core Portfolio independently. Therefore the portfolio
manager of one Core Portfolio in which a Fund invests may purchase shares of the
same issuer whose shares are being sold by the portfolio manager of another Core
Portfolio in which the Fund invests. This could result in an indirect expense to
the Fund without accomplishing any investment purpose. (See "Other Information -
Core and Gateway Structure.")
 
10
<PAGE>
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 FUND OPERATING EXPENSES(1)
 
(as a percentage of average daily net assets after applicable fee waivers and
expense reimbursements)
 
<TABLE>
<CAPTION>
                                                  The Fund                 Core Portfolio(s)
                                         ---------------------------  ---------------------------
                                          Investment                   Investment                      Total
                                           Advisory        Other        Advisory        Other        Operating
                                            Fees(2)       Expenses       Fees(2)       Expenses      Expenses
                                         -------------  ------------  -------------  ------------  -------------
<S>                                      <C>            <C>           <C>            <C>           <C>
MONEY MARKET FUNDS
   Cash Investment Fund                         N/A           0.22%         0.22%          0.04%         0.48%(3)
   Ready Cash Investment Fund
     (Investor Shares)                          N/A           0.41%         0.34%          0.07%         0.82%(3)
   U.S. Government Fund                        0.14%          0.36%          N/A            N/A          0.50%
   Treasury Fund                               0.16%          0.30%          N/A            N/A          0.46%
   Municipal Money Market Fund
     Institutional Shares                      0.34%          0.11%          N/A            N/A          0.45%
     Investor Shares                           0.34%          0.31%          N/A            N/A          0.65%
 
FIXED INCOME FUNDS (I SHARES)
   Stable Income Fund                           N/A           0.28%         0.30%          0.07%         0.65%
   Limited Term Government Income Fund         0.33%          0.35%          N/A            N/A          0.68%
   Intermediate Government Income Fund         0.33%          0.35%          N/A            N/A          0.68%
   Diversified Bond Fund                       0.00%          0.27%         0.38%          0.05%         0.70%(3)
   Income Fund                                 0.50%          0.25%          N/A            N/A          0.75%
   Total Return Bond Fund                       N/A           0.35%         0.35%          0.05%         0.75%(3)
 
TAX-FREE FIXED INCOME FUNDS (I SHARES)
   Limited Term Tax-Free Fund                  0.36%          0.29%          N/A            N/A          0.65%
   Tax-Free Income Fund                        0.44%          0.16%          N/A            N/A          0.60%
   Colorado Tax-Free Fund                      0.36%          0.24%          N/A            N/A          0.60%
   Minnesota Intermediate Tax-Free Fund        0.30%          0.30%          N/A            N/A          0.60%
   Minnesota Tax-Free Fund                     0.33%          0.27%          N/A            N/A          0.60%
 
BALANCED FUNDS (I SHARES)
   Strategic Income Fund                       0.10%          0.28%         0.36%          0.06%         0.80%(3)
   Moderate Balanced Fund                      0.14%          0.27%         0.41%          0.06%         0.88%(3)
   Growth Balanced Fund                        0.14%          0.27%         0.46%          0.06%         0.93%(3)
   Aggressive Balanced-Equity Fund             0.18%          0.28%         0.48%          0.06%         1.00%
</TABLE>
 
                                                                              11
<PAGE>
<TABLE>
<CAPTION>
                                                  The Fund                 Core Portfolio(s)
                                         ---------------------------  ---------------------------
                                          Investment                   Investment                      Total
                                           Advisory        Other        Advisory        Other        Operating
EQUITY FUNDS (I SHARES)                     Fees(2)       Expenses       Fees(2)       Expenses      Expenses
                                         -------------  ------------  -------------  ------------  -------------
   Index Fund                                   N/A           0.07%         0.15%          0.03%         0.25%
<S>                                      <C>            <C>           <C>            <C>           <C>
   Income Equity Fund                           N/A           0.31%         0.50%          0.04%         0.85%
   ValuGrowth Stock Fund                       0.80%          0.20%          N/A            N/A          1.00%
   Diversified Equity Fund                     0.17%          0.27%         0.50%          0.06%         1.00%(3)
   Growth Equity Fund                          0.22%          0.24%         0.69%          0.10%         1.25%(3)
   Large Company Growth Fund                    N/A           0.33%         0.65%          0.02%         1.00%
   Small Company Stock Fund                     N/A           0.26%         0.90%          0.04%         1.20%(3)
   Small Company Growth Fund                    N/A           0.31%         0.90%          0.04%         1.25%
   Diversified Small Cap Fund                  0.25%          0.25%         0.65%          0.05%         1.20%
   Small Cap Opportunities Fund                0.25%          0.21%         0.60%          0.19%         1.25%
   Contrarian Stock Fund                       0.39%          0.81%          N/A            N/A          1.20%
   International Fund                          0.38%          0.39%         0.48%          0.25%         1.50%
</TABLE>
 
(1) For a further description of the various expenses associated with investing
    in the Funds, see "Management." Expenses associated with other classes of a
    Fund differ from those listed in the table. The table is based on expenses
    incurred during the Funds' most recent fiscal year ended May 31, 1997,
    restated to reflect current fees; the expenses and any waivers and
    reimbursements for Limited Term Government Income Fund, Minnesota
    Intermediate Tax-Free Fund, Aggressive Balanced-Equity Fund and Diversified
    Small Cap Fund are based on estimated expenses for those Funds' first fiscal
    year of operations ending May 31, 1998. To the extent a Fund invests all or
    a portion of its assets in various Core Portfolio(s) (each of which bears
    expenses as noted under "Core Portfolios - Investment Advisory Fees" and
    "Core Portfolio(s) - Other Expenses"), the Fund indirectly bears its pro
    rata portion of the expenses of each Core Portfolio in which it invests.
 
(2) For Diversified Bond Fund, each of the four Balanced Funds, Diversified
    Equity Fund, Growth Equity Fund, Diversified Small Cap Fund and
    International Fund, "Investment Advisory Fees" reflects the Asset Allocation
    Fee. In addition, for Small Cap Opportunities Fund and International Fund,
    "Investment Advisory Fees" reflects the administrative services fee payable
    to Norwest. For all Funds that invest in a Core Portfolio, "Core
    Portfolio(s) - Investment Advisory Fees" reflects the investment advisory
    fees incurred by the Core Portfolio(s) in which the Fund invests. Absent
    waivers, "Investment Advisory Fees" for Municipal Money Market Fund -
    Institutional Shares, Municipal Money Market Fund - Investor Shares, Limited
    Term Tax-Free Fund, Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota
    Intermediate Tax-Free Fund, Minnesota Tax-Free Fund and Contrarian Stock
    Fund would be 0.35%, 0.35%, 0.50%, 0.50%, 0.50%, 0.50%, 0.50% and 0.80%, and
    for Diversified Bond Fund, each of the four Balanced Funds, Diversified
    Equity Fund, Growth Equity Fund and Diversified Small Cap Fund would be
    0.25%. The investment advisory fees set forth under "Core Portfolio(s) -
    Investment Advisory Fees" paid by Diversified Bond Fund, each of the four
    Balanced Funds, Diversified Equity Fund, Growth Equity Fund and Diversified
    Small Cap Fund will vary based on the percentage of the Fund's assets
    invested in each Core Portfolio.
 
(3) Norwest and Forum have agreed to waive their respective fees or reimburse
    expenses in order to maintain Cash Investment Fund's total combined
    operating expenses through May 31, 1999 at 0.48%. Norwest and Forum have
    agreed to waive their respective fees or reimburse expenses in order to
    maintain Ready Cash Investment Fund's, Total Return Bond Fund's and Small
    Company Stock Fund's total operating expenses through May 31, 1998 at or
    below the following amounts: Ready Cash Investment Fund, 0.82%; Total Return
    Bond Fund, 0.75% and Small Company Stock Fund, 1.20%.
 
12
<PAGE>
    Norwest and Forum have agreed to waive their respective fees through May 31,
    1999 in order to ensure that the fees borne by each of Diversified Bond
    Fund, Strategic Income Fund, Moderate Balanced Fund, Growth Balanced Fund,
    Diversified Equity Fund and Growth Equity Fund for investment advisory,
    administrative and management services would not exceed, in the aggregate,
    0.45%, 0.55%, 0.63%, 0.68%, 0.75% and 1.00%, respectively.
 
(4) Absent expense reimbursements and fee waivers the expenses of Cash
    Investment Fund, Ready Cash Investment Fund, U.S. Government Fund, Treasury
    Fund, Municipal Money Market Fund - Institutional Shares, Municipal Money
    Market Fund - Investor Shares, Stable Income Fund, Limited Term Government
    Income Fund, Intermediate Government Income Fund, Diversified Bond Fund,
    Income Fund, Total Return Bond Fund, Limited Term Tax-Free Fund, Tax-Free
    Income Fund, Colorado Tax-Free Fund, Minnesota Intermediate Tax-Free Fund,
    Minnesota Tax-Free Fund, Strategic Income Fund, Moderate Balanced Fund,
    Growth Balanced Fund, Aggressive Balanced-Equity Fund, Index Fund, Income
    Equity Fund, ValuGrowth Stock Fund, Diversified Equity Fund, Growth Equity
    Fund, Large Company Growth Fund, Small Company Stock Fund, Small Company
    Growth Fund, Diversified Small Cap Fund, Small Cap Opportunities Fund,
    Contrarian Stock Fund and International Fund would be: "Other Expenses,"
    0.26%, 0.42%, 0.38%, 0.39%, 0.25%, 0.53%, 0.36%, 0.52%, 0.39%, 0.34%, 0.43%,
    0.35%, 0.55%, 0.43%, 0.52%, 0.42%, 0.55%, 0.34%, 0.32%, 0.32%, 0.80%, 0.32%,
    0.32%, 0.42%, 0.27%, 0.24%, 0.34%, 0.35%, 0.32%, 0.80%, 0.64%, 1.07% and
    0.64%, respectively; and "Total Operating Expenses," 0.57%, 0.83%, 0.52%,
    0.55%, 0.59%, 0.87%, 0.78%, 0.85%, 0.72%, 1.08%, 0.93%, 0.80%, 1.05%, 0.93%,
    1.02%, 0.92%, 1.05%, 1.07%, 1.10%, 1.14%, 1.64%, 0.55%, 0.90%, 1.22%, 1.18%,
    1.40%, 1.06%, 1.35%, 1.30%, 2.79%, 1.44%, 1.87% and 1.63%, respectively.
    Absent expense reimbursements and fee waivers, "Core Portfolio(s) - Other
    Expenses" of Cash Investment Fund, Ready Cash Investment Fund, Stable Income
    Fund, Diversified Bond Fund, Total Return Bond Fund, Strategic Income Fund,
    Moderate Balanced Fund, Growth Balanced Fund, Aggressive Balanced-Equity
    Fund, Index Fund, Income Equity Fund, Diversified Equity Fund, Growth Equity
    Fund, Large Company Growth Fund, Small Company Stock Fund, Small Company
    Growth Fund, Diversified Small Cap Fund, Small Cap Opportunities Fund and
    International Fund would be 0.07%, 0.07%, 0.12%, 0.10%, 0.09%, 0.10%, 0.10%,
    0.10%, 0.38%, 0.08%, 0.07%, 0.07%, 0.10%, 0.07%, 0.10%, 0.08%, 1.10%, 0.19%,
    and 0.26%, respectively. Except as otherwise noted, expense reimbursements
    and fee waivers are voluntary and may be reduced or eliminated at any time.
 
EXAMPLE
 
The following is a hypothetical example that indicates the dollar amount of
expenses that an investor would pay, assuming a $1,000 investment in a Fund's
Shares, the expenses listed in the "Annual Fund Operating Expenses" table, 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. The 5% annual
return is not predictive of and does not represent the Funds' projected returns;
rather, it is required by government regulation.
 
<TABLE>
<CAPTION>
                                                            1 Year        3 Years        5 Years       10 Years
                                                          -----------  -------------  -------------  -------------
<S>                                                       <C>          <C>            <C>            <C>
MONEY MARKET FUNDS
  Cash Investment Fund                                             5            15             27             60
  Ready Cash Investment Fund (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            14             25             57
    Investor Shares                                                7            21             36             81
</TABLE>
 
                                                                              13
<PAGE>
<TABLE>
<CAPTION>
                                                            1 Year        3 Years        5 Years       10 Years
                                                          -----------  -------------  -------------  -------------
<S>                                                       <C>          <C>            <C>            <C>
FIXED INCOME FUNDS (I SHARES)
  Stable Income Fund                                               7            21             36             81
  Limited Term Government Income Fund                              7            22             38             85
  Intermediate Government Income Fund                              7            22             38             85
  Diversified Bond Fund                                            7            22             39             87
  Income Fund                                                      8            24             42             93
  Total Return Bond Fund                                           8            24             42             93
TAX-FREE FIXED INCOME FUNDS (I SHARES)
  Limited Term Tax-Free Fund                                       7            21             36             81
  Tax-Free Income Fund                                             6            19             33             75
  Colorado Tax-Free Fund                                           6            19             33             75
  Minnesota Intermediate Tax-Free Fund                             6            19             33             75
  Minnesota Tax-Free Fund                                          6            19             33             75
BALANCED FUNDS (I SHARES)
  Strategic Income Fund                                            8            26             44             99
  Moderate Balanced Fund                                           9            28             49            108
  Growth Balanced Fund                                             9            30             51            114
  Aggressive Balanced-Equity Fund                                 10            32             55            122
EQUITY FUNDS (I SHARES)
  Index Fund                                                       3             8             14             32
  Income Equity Fund                                               9            27             47            105
  ValuGrowth Stock Fund                                           10            32             55            122
  Diversified Equity Fund                                         10            32             55            122
  Growth Equity Fund                                              13            40             69            151
  Large Company Growth Fund                                       10            32             55            122
  Small Company Stock Fund                                        12            38             66            145
  Small Company Growth Fund                                       13            40             69            151
  Diversified Small Cap Fund                                      12            38             66            145
  Small Cap Opportunities Fund                                    13            40             69            151
  Contrarian Stock Fund                                           12            38             66            145
  International Fund                                              15            47             82            179
</TABLE>
 
14
<PAGE>
                 [This page has been intentionally left blank.]
 
                                                                              15
<PAGE>
2.  FINANCIAL HIGHLIGHTS
 
The following tables provide financial highlights for the Funds. This
information represents selected data for a single outstanding Share of each Fund
for the period shown. As of October 1, 1997, Limited Term Government Income
Fund, Minnesota Intermediate Tax-Free Fund, Aggressive Balanced-Equity Fund and
Diversified Small Cap Fund had not commenced operations. Information for the
periods ended May 31, 1994, and thereafter, was audited by KPMG Peat Marwick
LLP, independent auditors. Information for prior periods was audited by other
independent auditors. Each
 
<TABLE>
<CAPTION>
                                     Beginning                 Net Realized    Dividends    Distributions
                                     Net Asset      Net       and Unrealized    from Net      from Net
                                     Value Per   Investment   Gain (Loss) on   Investment    Investment       Capital
 MONEY MARKET FUNDS                    Share       Income      Investments       Income        Income       Contribution
                                     ---------   ----------   --------------   ----------   -------------   ------------
<S>                                  <C>         <C>          <C>              <C>          <C>             <C>
 CASH INVESTMENT FUND
- ------------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          $1.00       $0.051             --        $(0.051)           --             --
 June 1, 1995 to May 31, 1996           1.00        0.054             --         (0.054)           --             --
 June 1, 1994 to May 31, 1995           1.00        0.049             --         (0.049)           --             --
 June 1, 1993 to May 31, 1994           1.00        0.031             --         (0.031)           --             --
 June 1, 1992 to May 31, 1993           1.00        0.033             --         (0.033)           --             --
 December 1, 1991 to May 31, 1992       1.00        0.021             --         (0.021)           --             --
 December 1, 1990 to November 30,
   1991                                 1.00        0.061             --         (0.061)           --             --
 December 1, 1989 to November 30,
   1990                                 1.00        0.079             --         (0.079)           --             --
 December 1, 1988 to November 30,
   1989                                 1.00        0.088             --         (0.088)           --             --
 December 1, 1987 to November 30,
   1988                                 1.00        0.071             --         (0.071)           --             --
 October 14, 1987 to November 30,
   1987                                 1.00        0.009             --         (0.009)           --             --
 READY CASH INVESTMENT FUND -
   INVESTOR SHARES
- ------------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997           1.00        0.047             --         (0.047)           --             --
 June 1, 1995 to May 31, 1996           1.00        0.051             --         (0.051)           --             --
 June 1, 1994 to May 31, 1995           1.00        0.045             --         (0.045)           --             --
 June 1, 1993 to May 31, 1994           1.00        0.027             --         (0.027)           --             --
 June 1, 1992 to May 31, 1993           1.00        0.030             --         (0.030)           --             --
 December 1, 1991 to May 31, 1992       1.00        0.020             --         (0.020)           --             --
 December 1, 1990 to November 30,
   1991                                 1.00        0.058             --         (0.058)           --             --
 December 1, 1989 to November 30,
   1990                                 1.00        0.076             --         (0.076)           --             --
 December 1, 1988 to November 30,
   1989                                 1.00        0.085             --         (0.085)           --             --
 January 20, 1988 to November 30,
   1988                                 1.00        0.059             --         (0.059)           --             --
 U.S. GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997           1.00        0.049             --         (0.049)           --             --
 June 1, 1995 to May 31, 1996           1.00        0.052             --         (0.052)           --             --
 June 1, 1994 to May 31, 1995           1.00        0.047             --         (0.047)           --             --
 June 1, 1993 to May 31, 1994           1.00        0.030             --         (0.030)           --             --
 June 1, 1992 to May 31, 1993           1.00        0.030             --         (0.030)           --             --
 December 1, 1991 to May 31, 1992       1.00        0.020             --         (0.020)           --             --
 December 1, 1990 to November 30,
   1991                                 1.00        0.058             --         (0.058)           --             --
 December 1, 1989 to November 30,
   1990                                 1.00        0.077             --         (0.077)           --             --
 December 1, 1988 to November 30,
   1989                                 1.00        0.085             --         (0.085)           --             --
 December 1, 1987 to November 30,
   1988                                 1.00        0.069             --         (0.069)           --             --
 November 16, 1987 to November 30,
   1987                                 1.00        0.003             --         (0.003)           --             --
 TREASURY FUND
- ------------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997           1.00        0.047             --         (0.047)           --             --
 June 1, 1995 to May 31, 1996           1.00        0.050             --         (0.050)           --             --
 June 1, 1994 to May 31, 1995           1.00        0.046             --         (0.046)           --             --
 June 1, 1993 to May 31, 1994           1.00        0.028             --         (0.028)           --             --
 June 1, 1992 to May 31, 1993           1.00        0.029             --         (0.029)           --             --
 December 1, 1991 to May 31, 1992       1.00        0.020             --         (0.020)           --             --
 December 3, 1990 to November 30,
   1991                                 1.00        0.058             --         (0.058)           --             --
 MUNICIPAL MONEY MARKET FUND(A)
- ------------------------------------------------------------------------------------------------------------------------
 INVESTOR SHARES
 June 1, 1996 to May 31, 1997           1.00        0.030             --         (0.030)           --             --
 June 1, 1995 to May 31, 1996           1.00        0.033             --         (0.033)           --             --
 June 1, 1994 to May 31, 1995           1.00        0.031        $(0.004)        (0.031)           --          $0.004
 June 1, 1993 to May 31, 1994           1.00        0.021             --         (0.021)           --             --
 June 1, 1992 to May 31, 1993           1.00        0.021             --         (0.021)           --             --
 December 1, 1991 to May 31, 1992       1.00        0.014             --         (0.014)           --             --
 December 1, 1990 to November 30,
   1991                                 1.00        0.042             --         (0.042)           --             --
 December 1, 1989 to November 30,
   1990                                 1.00        0.053             --         (0.053)           --             --
 December 1, 1988 to November 30,
   1989                                 1.00        0.058             --         (0.058)           --             --
 January 7, 1988 to November 30,
   1988(a)                              1.00        0.042             --         (0.042)           --             --
 INSTITUTIONAL SHARES
 June 1, 1996 to May 31, 1997           1.00        0.032             --         (0.032)           --             --
 June 1, 1995 to May 31, 1996           1.00        0.035             --         (0.035)           --             --
 June 1, 1994 to May 31, 1995           1.00        0.033         (0.004)        (0.033)           --          0.004
 August 3, 1993 to May 31, 1994(a)      1.00        0.019             --         (0.019)           --             --
</TABLE>
 
(a) Municipal Money Market Fund commenced operations on January 7, 1988. The
    Fund's original class of shares subsequently became Investor Shares. The
    Fund commenced the offer of Institutional Shares on August 3, 1993.
(b) The ratio of Gross Expenses to Average Net Assets does not reflect fee
waivers or expense reimbursements.
(c) Annualized.
(d) Total return for 1995 includes the effect of a capital contribution from
    Norwest Bank. Without the capital contribution, total return would have been
    7.51% for Investor Shares and 7.79% for Institutional Shares.
 
16
<PAGE>
 
Fund's financial statements for the fiscal year ended May 31, 1997, and
independent auditors' report thereon, are contained in the Fund's Annual Report.
These financial statements are incorporated by reference into the SAI. Further
information about each Fund's performance is contained in the Fund's Annual
Report, which may be obtained from the Trust without charge.
 
<TABLE>
<CAPTION>
                                                      Ratio to Average Net Assets                  Net Assets
                                      Ending     -------------------------------------             at End of
                                     Net Asset       Net                                             Period
                                     Value Per   Investment       Net         Gross      Total       (000's
                                       Share       Income      Expenses    Expenses(b)   Return     Omitted)
                                     ---------   -----------   ---------   -----------   ------   ------------
<S>                                  <C>         <C>           <C>         <C>           <C>      <C>
CASH INVESTMENT FUND
- --------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997           $1.00        5.07%        0.48%        0.49%       5.21%   $ 2,147,894
June 1, 1995 to May 31, 1996            1.00        5.36%        0.48%        0.49%       5.50%     1,739,549
June 1, 1994 to May 31, 1995            1.00        4.87%        0.48%        0.50%       4.96%     1,464,304
June 1, 1993 to May 31, 1994            1.00        3.11%        0.49%        0.49%       3.16%     1,381,402
June 1, 1992 to May 31, 1993            1.00        3.29%        0.50%        0.51%       3.36%     1,944,948
December 1, 1991 to May 31, 1992        1.00        4.23%(c)     0.50%(c)     0.56%(c)    4.29%(c)   1,292,196
December 1, 1990 to November 30,
  1991                                  1.00        6.11%        0.51%        0.54%       6.31%     1,004,979
December 1, 1989 to November 30,
  1990                                  1.00        7.92%        0.45%        0.57%       8.22%       747,744
December 1, 1988 to November 30,
  1989                                  1.00        8.81%        0.45%        0.64%       9.22%       662,698
December 1, 1987 to November 30,
  1988                                  1.00        7.00%        0.43%        0.74%       7.32%       316,349
October 14, 1987 to November 30,
  1987                                  1.00        7.16%(c)     0.45%(c)     1.09%(c)    7.40%(c)      53,951
READY CASH INVESTMENT FUND -
  INVESTOR SHARES
- --------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            1.00        4.75%        0.82%        0.83%       4.87%       576,011
June 1, 1995 to May 31, 1996            1.00        5.02%        0.82%        0.87%       5.17%       473,879
June 1, 1994 to May 31, 1995            1.00        4.64%        0.82%        0.91%       4.62%       268,603
June 1, 1993 to May 31, 1994            1.00        2.70%        0.82%        0.92%       2.74%       164,138
June 1, 1992 to May 31, 1993            1.00        3.04%        0.82%        0.94%       3.08%       162,585
December 1, 1991 to May 31, 1992        1.00        4.01%(c)     0.82%(c)     0.93%(c)    4.05%(c)     176,378
December 1, 1990 to November 30,
  1991                                  1.00        5.81%        0.82%        0.96%       5.98%       183,775
December 1, 1989 to November 30,
  1990                                  1.00        7.56%        0.82%        0.97%       7.83%       166,911
December 1, 1988 to November 30,
  1989                                  1.00        8.51%        0.81%        0.99%       8.86%       144,117
January 20, 1988 to November 30,
  1988                                  1.00        7.11%(c)     0.77%(c)     1.13%(c)    6.97%(c)      46,736
U.S. GOVERNMENT FUND
- --------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            1.00        4.91%        0.49%        0.49%       5.04%     1,912,574
June 1, 1995 to May 31, 1996            1.00        5.13%        0.50%        0.51%       5.27%     1,649,721
June 1, 1994 to May 31, 1995            1.00        4.68%        0.50%        0.52%       4.81%     1,159,421
June 1, 1993 to May 31, 1994            1.00        3.02%        0.47%        0.53%       3.07%     1,091,141
June 1, 1992 to May 31, 1993            1.00        3.00%        0.45%        0.57%       3.06%       903,274
December 1, 1991 to May 31, 1992        1.00        3.99%(c)     0.45%(c)     0.61%(c)    4.07%(c)     623,685
December 1, 1990 to November 30,
  1991                                  1.00        5.84%        0.45%        0.60%       6.00%       469,487
December 1, 1989 to November 30,
  1990                                  1.00        7.66%        0.45%        0.61%       7.94%       500,794
December 1, 1988 to November 30,
  1989                                  1.00        8.51%        0.45%        0.65%       8.87%       394,137
December 1, 1987 to November 30,
  1988                                  1.00        6.87%        0.42%        0.73%       7.13%       254,104
November 16, 1987 to November 30,
  1987                                  1.00        6.89%(c)     0.00%(c)     2.94%(c)    7.35%(c)       4,343
TREASURY FUND
- --------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            1.00        4.74%        0.46%        0.53%       4.87%     1,003,697
June 1, 1995 to May 31, 1996            1.00        4.91%        0.46%        0.56%       5.04%       802,270
June 1, 1994 to May 31, 1995            1.00        4.62%        0.46%        0.57%       4.65%       661,098
June 1, 1993 to May 31, 1994            1.00        2.81%        0.46%        0.58%       2.83%       526,483
June 1, 1992 to May 31, 1993            1.00        2.93%        0.47%        0.58%       2.98%       384,751
December 1, 1991 to May 31, 1992        1.00        4.01%(c)     0.47%(c)     0.59%(c)    4.07%(c)     374,492
December 3, 1990 to November 30,
  1991                                  1.00        5.62%(c)     0.31%(c)     0.66%(c)    6.02%(c)     354,200
MUNICIPAL MONEY MARKET FUND(A)
- --------------------------------------------------------------------------------------------------------------
INVESTOR SHARES
June 1, 1996 to May 31, 1997            1.00        3.01%        0.65%        0.87%       3.08%        54,616
June 1, 1995 to May 31, 1996            1.00        3.25%        0.65%        0.88%       3.31%        57,021
June 1, 1994 to May 31, 1995            1.00        3.10%        0.65%        0.93%       3.13%(d)      47,424
June 1, 1993 to May 31, 1994            1.00        2.03%        0.65%        0.99%       2.09%        33,554
June 1, 1992 to May 31, 1993            1.00        2.13%        0.65%        0.97%       2.18%        75,521
December 1, 1991 to May 31, 1992        1.00        2.81%(c)     0.63%(c)     0.96%(c)    2.89%(c)      82,678
December 1, 1990 to November 30,
  1991                                  1.00        4.10%        0.64%        1.08%       4.26%        66,327
December 1, 1989 to November 30,
  1990                                  1.00        5.34%        0.64%        1.16%       5.48%        29,801
December 1, 1988 to November 30,
  1989                                  1.00        5.78%        0.62%        1.15%       5.94%        18,639
January 7, 1988 to November 30,
  1988(a)                               1.00        4.64%(c)     0.60%(c)     1.20%(c)    4.76%(c)       8,963
INSTITUTIONAL SHARES
June 1, 1996 to May 31, 1997            1.00        3.21%        0.45%        0.70%       3.28%       635,655
June 1, 1995 to May 31, 1996            1.00        3.41%        0.45%        0.72%       3.52%       592,436
June 1, 1994 to May 31, 1995            1.00        3.37%        0.45%        0.74%       3.33%(d)     278,953
August 3, 1993 to May 31, 1994(a)       1.00        2.33%(c)     0.45%(c)     0.77%(c)    2.34%(c)     190,356
</TABLE>
 
                                                                              17
<PAGE>
 
<TABLE>
<CAPTION>
                                     Beginning                 Net Realized    Dividends                     Ending
                                     Net Asset      Net       and Unrealized    from Net    Distributions   Net Asset
 FIXED INCOME                        Value Per   Investment   Gain (Loss) on   Investment     from Net      ValuePer
 FUNDS -- I SHARES                     Share       Income      Investments       Income     Realized Gain     Share
                                     ---------   ----------   --------------   ----------   -------------   ---------
<S>                                  <C>         <C>          <C>              <C>          <C>             <C>
 STABLE INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997         $10.20       $0.58          $ 0.04         $(0.58)           --        $10.24
 November 1, 1995 to May 31, 1996      10.72        0.28            0.03          (0.77)       $(0.06)        10.20
 November 11, 1994 to October 31,
  1995                                 10.00        0.50            0.22             --            --         10.72
 INTERMEDIATE GOVERNMENT INCOME
  FUND
- ---------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          10.89        0.72           (0.04)         (0.73)           --         10.84
 November 1, 1995 to May 31, 1996      12.40        0.40            0.53          (1.32)        (1.12)        10.89
 November 11, 1994 to October 31,
  1995(c)                              11.11        0.93            0.36             --            --         12.40
 DIVERSIFIED BOND FUND
- ---------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          26.03        1.59            0.01          (1.69)        (0.34)        25.60
 November 1, 1995 to May 31, 1996      27.92        1.07           (0.99)         (1.67)        (0.30)        26.03
 November 11, 1994 to October 31,
  1995                                 25.08        1.65            1.19             --            --         27.92
 INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997           9.26        0.62            0.01          (0.62)           --          9.27
 June 1, 1995 to May 31, 1996           9.62        0.61           (0.36)         (0.61)           --          9.26
 June 1, 1994 to May 31, 1995           9.51        0.65            0.11          (0.65)           --          9.62
 August 2, 1993 to May 31, 1994        10.68        0.58           (0.91)         (0.58)        (0.26)         9.51
 TOTAL RETURN BOND FUND
- ---------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997           9.40        0.60            0.04          (0.60)        (0.03)         9.41
 June 1, 1995 to May 31, 1996           9.73        0.64           (0.31)         (0.64)        (0.02)         9.40
 June 1, 1994 to May 31, 1995           9.54        0.67            0.19          (0.67)           --          9.73
 December 31, 1993 to May 31, 1994     10.00        0.27           (0.46)         (0.27)           --          9.54
 
 TAX-FREE FIXED
 INCOME FUNDS -- I SHARES
 
 LIMITED TAX-FREE FUND
- ---------------------------------------------------------------------------------------------------------------------
 October 1, 1996 to May 31, 1997      $10.00       $0.31          $ 0.39         $(0.31)           --        $10.39
 TAX-FREE INCOME FUND - I SHARES
- ---------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997           9.78        0.54            0.28          (0.54)           --         10.06
 June 1, 1995 to May 31, 1996           9.82        0.55           (0.04)         (0.55)           --          9.78
 June 1, 1994 to May 31, 1995           9.60        0.55            0.22          (0.55)           --          9.82
 August 2, 1993 to May 31, 1994        10.14        0.47           (0.47)         (0.47)       $(0.07)         9.60
 COLORADO TAX-FREE FUND
- ---------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997           9.89        0.54            0.33          (0.54)           --         10.22
 June 1, 1995 to May 31, 1996           9.90        0.53           (0.01)         (0.53)           --          9.89
 June 1, 1994 to May 31, 1995           9.69        0.48            0.21          (0.48)           --          9.90
 August 23, 1993 to May 31, 1994       10.22        0.39           (0.52)         (0.39)        (0.01)         9.69
 MINNESOTA FAX-FREE FUND
- ---------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          10.30        0.54            0.27          (0.54)           --         10.57
 June 1, 1995 to May 31, 1996          10.45        0.56           (0.15)         (0.56)           --         10.30
 June 1, 1994 to May 31, 1995          10.16        0.53            0.29          (0.53)           --         10.45
 August 2, 1993 to May 31, 1994        10.74        0.43           (0.39)         (0.43)        (0.19)        10.16
</TABLE>
 
(a) The ratio of Gross Expenses to Average Net Assets does not reflect fee
waivers or expense reimbursements.
(b) Annualized.
(c) Adjusted for a five to one stock split.
 
18
<PAGE>
 
<TABLE>
<CAPTION>
                                          Ratio to Average Net Assets
                                     -------------------------------------
                                         Net                                          Portfolio   Net Assets at
                                     Investment       Net         Gross      Total    Turnover    End of Period
                                       Income      Expenses    Expenses(a)   Return     Rate     (000's Omitted)
                                     -----------   ---------   -----------   ------   --------   ---------------
<S>                                  <C>           <C>         <C>           <C>      <C>        <C>
STABLE INCOME FUND
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            5.73%        0.65%        0.79%       6.24%     41.30%      $111,030
November 1, 1995 to May 31, 1996        5.74%(b)     0.65%(b)     0.92%(b)    2.97%    109.95%        83,404
November 11, 1994 to October 31,
  1995                                  5.91%(b)     0.65%(b)     0.98%(b)    7.20%    115.85%        48,087
INTERMEDIATE GOVERNMENT INCOME FUND
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            6.57%        0.68%        0.72%       6.36%    183.05%       371,278
November 1, 1995 to May 31, 1996        6.71%(b)     0.71%(b)     1.17%(b)    0.60%     74.64%       399,324
November 11, 1994 to October 31,
  1995(c)                               7.79%(b)     0.68%(b)     0.93%(b)   11.58%    240.90%        50,213
DIVERSIFIED BOND FUND
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            6.19%        0.70%        0.77%       6.23%     57.19%       162,310
November 1, 1995 to May 31, 1996        6.78%(b)     0.70%(b)     0.77%(b)    0.22%    118.92%       167,159
November 11, 1994 to October 31,
  1995                                  5.87%(b)     0.67%(b)     0.82%(b)   11.32%     58.90%       171,453
INCOME FUND
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            6.59%        0.75%        1.02%       6.90%    231.00%       258,207
June 1, 1995 to May 31, 1996            6.30%        0.75%        1.06%       2.58%    270.17%       271,157
June 1, 1994 to May 31, 1995            7.02%        0.75%        1.06%       8.49%     98.83%       109,994
August 2, 1993 to May 31, 1994          6.75%(b)     0.61%(b)     1.09%(b)   (4.04%)(b)   26.67%      93,665
TOTAL RETURN BOND FUND
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            6.36%        0.75%        1.05%       6.95%     55.07%       125,437
June 1, 1995 to May 31, 1996            6.57%        0.75%        1.07%       3.41%     77.49%       120,767
June 1, 1994 to May 31, 1995            7.04%        0.71%        1.17%       9.43%     35.19%        96,199
December 31, 1993 to May 31, 1994       6.81%(b)     0.46%(b)     2.10%(b)   (4.62%)(b)   37.50%      11,694
 
TAX-FREE FIXED
 INCOME FUNDS -- I SHARES
 
LIMITED TAX-FREE FUND
- ----------------------------------------------------------------------------------------------------------------
October 1, 1996 to May 31, 1997         4.45%(b)     0.65%(b)     1.27%(b)    6.99%     16.39%      $ 40,990
TAX-FREE INCOME FUND - I SHARES
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            5.40%        0.50%        1.03%       8.54%    152.33%       259,861
June 1, 1995 to May 31, 1996            5.57%        0.32%        1.06%       5.29%    126.20%       276,159
June 1, 1994 to May 31, 1995            5.84%        0.60%        1.05%       8.42%    130.90%        94,454
August 2, 1993 to May 31, 1994          5.71%(b)     0.60%(b)     1.10%(b)   (0.21%)(b)  116.54%     102,084
COLORADO TAX-FREE FUND
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            5.35%        0.45%        1.13%       9.00%    129.26%        25,917
June 1, 1995 to May 31, 1996            5.30%        0.30%        1.13%       5.35%    171.41%        24,074
June 1, 1994 to May 31, 1995            5.08%        0.30%        1.16%       7.47%     47.88%        24,539
August 23, 1993 to May 31, 1994         5.03%(b)     0.11%(b)     1.21%(b)    0.90%(b)   40.92%       15,153
MINNESOTA FAX-FREE FUND
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            5.12%        0.60%        1.23%       7.98%     96.68%        11,135
June 1, 1995 to May 31, 1996            5.24%        0.51%        1.30%       3.97%     77.10%         3,988
June 1, 1994 to May 31, 1995            5.29%        0.48%        1.58%       8.44%    139.33%         1,799
August 2, 1993 to May 31, 1994          4.90%(b)     0.61%(b)     1.54%(b)    0.29%(b)   84.23%          872
</TABLE>
 
                                                                              19
<PAGE>
 
<TABLE>
<CAPTION>
                                     Beginning                 Net Realized    Dividends                     Ending
                                     Net Asset      Net       and Unrealized    from Net    Distributions   Net Asset
 BALANCED FUNDS --                   Value Per   Investment   Gain (Loss) on   Investment     from Net      Value Per
  I SHARES                             Share       Income      Investments       Income     Realized Gain     Share
                                     ---------   ----------   --------------   ----------   -------------   ---------
<S>                                  <C>         <C>          <C>              <C>          <C>             <C>
 STRATEGIC INCOME FUND(E)
- ------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997         $18.12       $0.97          $0.71          $(.095)       $(0.38)       $18.47
 November 1, 1995 to May 31, 1996      18.21        0.48           0.42           (0.76)        (0.23)        18.12
 November 11, 1994 to October 31,
   1995                                16.19        0.75           1.27              --            --         18.21
 MODERATE BALANCED FUND
- ------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          20.27        0.77           1.60           (0.76)        (0.29)        21.59
 November 1, 1995 to May 31, 1996      19.84        0.46           0.89           (0.66)        (0.26)        20.27
 November 11, 1994 to October 31,
   1995                                17.25        0.65           1.94              --            --         19.84
 GROWTH BALANCED FUND
- ------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          22.83        0.62           2.86           (0.63)        (0.91)        24.77
 November 1, 1995 to May 31, 1996      21.25        0.31           1.95           (0.51)        (0.17)        22.83
 November 11, 1994 to October 31,
   1995                                17.95        0.47           2.83              --            --         21.25
</TABLE>
 
(a) The ratio of Gross Expenses to Average Net Assets does not reflect fee
waivers or expense reimbursements.
(b) Represents the average commission per share paid to brokers on the purchase
    or sale of portfolio securities. Prior to 1996, this data was not reported
    in mutual fund financial statements.
(c) Annualized.
(d) Includes expenses allocated from the Core Portfolios in which the Fund was
    invested: Index Portfolio, Small Company Portfolio and International
    Portfolio II of Core Trust (Delaware).
(e) Prior to October 1, 1997, Strategic Income Fund was named Conservative
    Balanced Fund.
 
20
<PAGE>
<TABLE>
<CAPTION>
                                            Ratio to Average Net Assets
                                     ------------------------------------------
                                         Net                                                  Portfolio   Average
                                     Investment        Net            Gross         Total     Turnover   Commission
                                      Income(d)    Expenses(d)    Expenses(a)(d)   Return       Rate      Rate(b)
                                     -----------   ------------   -------------   ---------   --------   ----------
<S>                                  <C>           <C>            <C>             <C>         <C>        <C>
STRATEGIC INCOME FUND(E)
- -------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            4.38%        0.81%           0.98%         9.58%       72.03%     $0.0720
November 1, 1995 to May 31, 1996        4.65%(c)     0.82%(c)        0.97%(c)      5.14%       56.47%      0.0648
November 11, 1994 to October 31,
  1995                                  4.67%(c)     0.82%(c)        1.03%(c)     12.48%       65.53%         N/A
MODERATE BALANCED FUND
- -------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            3.70%        0.88%           1.04%        12.04%       45.33%      0.0684
November 1, 1995 to May 31, 1996        3.95%(c)     0.90%(c)        1.04%(c)      7.03%       52.71%      0.0658
November 11, 1994 to October 31,
  1995                                  3.76%(c)     0.92%(c)        1.11%(c)     15.01%       62.08%         N/A
GROWTH BALANCED FUND
- -------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            2.47%        0.94%           1.16%        15.81%       24.33%      0.0676
November 1, 1995 to May 31, 1996        2.66%(c)     0.98%(c)        1.16%(c)     10.87%       38.78%      0.0696
November 11, 1994 to October 31,
  1995                                  2.63%(c)     0.99%(c)        1.23%(c)     18.38%       41.04%         N/A
 
<CAPTION>
 
                                      Net Assets at
                                      End of Period
                                     (000's Omitted)
                                     ---------------
<S>                                  <C>
STRATEGIC INCOME FUND(E)
- --------------------------------------------------------------------
June 1, 1996 to May 31, 1997            $128,777
November 1, 1995 to May 31, 1996         146,950
November 11, 1994 to October 31,
  1995                                   136,710
MODERATE BALANCED FUND
- ------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997             418,680
November 1, 1995 to May 31, 1996         398,005
November 11, 1994 to October 31,
  1995                                   373,998
GROWTH BALANCED FUND
- ----------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997             503,382
November 1, 1995 to May 31, 1996         484,641
November 11, 1994 to October 31,
  1995                                   374,892
</TABLE>
 
                                                                              21
<PAGE>
 
<TABLE>
<CAPTION>
                                     Beginning      Net        Net Realized    Dividends                    Ending Net
                                     Net Asset   Investment   and Unrealized    from Net    Distributions     Asset
 EQUITY FUNDS --                     Value Per     Income     Gain (Loss) on   Investment     from Net       ValuePer
 I SHARES                              Share       (Loss)      Investments       Income     Realized Gain     Share
                                     ---------   ----------   --------------   ----------   -------------   ----------
<S>                                  <C>         <C>          <C>              <C>          <C>             <C>
 INDEX FUND
- ----------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997         $31.49       $ 0.49         $ 8.50         $(0.48)       $(0.51)       $39.49
 November 1, 1995 to May 31, 1996      27.67         0.36           4.08          (0.43)        (0.19)        31.49
 November 11, 1994 to October 31,
  1995                                 21.80         0.45           5.42             --            --         27.67
 INCOME EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          27.56         0.56           5.55          (0.51)           --         33.16
 November 1, 1995 to May 31, 1996      24.02         0.29           4.02          (0.69)        (0.08)        27.56
 November 11, 1994 to October 31,
  1995                                 18.90         0.46           4.66             --            --         24.02
 VALUGROWTH STOCK FUND
- ----------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          22.61         0.16           4.80          (0.13)        (2.41)        25.03
 June 1, 1995 to May 31, 1996          18.80         0.14           3.91          (0.12)        (0.12)        22.61
 June 1, 1994 to May 31, 1995          17.16         0.18           1.64          (0.18)           --         18.80
 August 2, 1993 to May 31, 1994        16.91         0.13           0.46          (0.12)        (0.22)        17.16
 DIVERSIFIED EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          30.55         0.25           6.05          (0.16)        (0.19)        36.50
 November 1, 1995 to May 31, 1996      27.53         0.16           4.25          (0.42)        (0.97)        30.55
 November 11, 1994 to October 31,
  1995                                 22.21         0.22           5.10             --            --         27.53
 GROWTH EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          29.08        (0.02)          4.05          (0.04)        (0.59)        32.48
 November 1, 1995 to May 31, 1996      26.97           --           4.09          (0.12)        (1.86)        29.08
 November 11, 1994 to October 31,
  1995                                 22.28        (0.02)          4.71             --            --         26.97
 LARGE COMPANY GROWTH FUND
- ----------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          26.97        (0.03)          5.91             --         (0.22)        32.63
 November 1, 1995 to May 31, 1996      23.59        (0.04)          3.64             --         (0.22)        26.97
 November 11, 1994 to October 31,
  1995                                 18.50        (0.05)          5.14             --            --         23.59
 SMALL COMPANY STOCK FUND
- ----------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          13.96        (0.04)          0.87             --         (0.91)        13.88
 June 1, 1995 to May 31, 1996          10.59         0.01           3.93          (0.03)        (0.54)        13.96
 June 1, 1994 to May 31, 1995           9.80         0.12           0.87          (0.12)        (0.08)        10.59
 December 31, 1993 to May 31, 1994     10.00         0.08          (0.20)         (0.08)           --          9.80
 SMALL COMPANY GROWTH FUND
- ----------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          33.00        (0.18)          1.83             --         (3.57)        31.08
 November 1, 1995 to May 31, 1996      29.99        (0.07)          5.94             --         (2.86)        33.00
 November 11, 1994 to October 31,
  1995                                 21.88        (0.11)          8.22             --            --         29.99
 SMALL CAP OPPORTUNITIES FUND
- ----------------------------------------------------------------------------------------------------------------------
 August 15, 1996 to May 31, 1997       16.26        (0.01)          3.60             --         (0.01)        19.84
 CONTRARIAN STOCK FUND
- ----------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          10.82         0.09           1.03          (0.08)        (1.16)        10.25
 June 1, 1995 to May 31, 1996          10.90         0.10           1.01          (0.10)        (1.09)        10.82
 June 31, 1994 to May 31, 1995          9.71         0.11           1.19          (0.11)        (0.03)        10.90
 December 31, 1993 to May 31, 1994     10.00         0.07          (0.29)         (0.07)           --          9.71
 INTERNATIONAL FUND
- ----------------------------------------------------------------------------------------------------------------------
 June 1, 1996 to May 31, 1997          19.84         0.09           1.94          (0.20)           --         21.67
 November 1, 1995 to May 31, 1996      17.99         0.14           2.04          (0.33)           --         19.84
 November 11, 1994 to October 31,
  1995                                 17.28         0.09           0.62             --            --         17.99
</TABLE>
 
(a) The ratio of Gross Expense to Average Net Assets does not reflect fee
waivers and expense reimbursements.
(b) Represents the average commission per share paid to brokers on the purchase
    or sale of portfolio securities. Prior to 1996, this data was not reported
    in mutual fund financial statements.
(c) Annualized.
(d) Includes expenses allocated from the Core Portfolios in which the Fund was
    invested: Index Portfolio, Small Company Portfolio, International Portfolio
    and International Portfolio II of Core Trust (Delaware), and Schroder U.S.
    Smaller Companies Portfolio of Schroder Capital Funds.
(e) Represents the Portfolio Turnover Rate and Average Commission Rate of the
    Fund's corresponding Core Portfolio.
 
22
<PAGE>
<TABLE>
<CAPTION>
                                             Ratio to Average Net Assets
                                     -------------------------------------------
                                         Net                                                   Portfolio    Average
                                      Investment                       Gross         Total     Turnover    Commission
                                        Income      Net Expenses    Expenses(a)     Return       Rate       Rate (b)
                                     ------------   ------------   -------------   ---------   ---------   ----------
<S>                                  <C>            <C>            <C>             <C>         <C>         <C>
INDEX FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997             2.10%        0.25%           0.56%        29.02%        24.17%     $0.0417
November 1, 1995 to May 31, 1996         2.25%(c)     0.31%(c)        0.57%(c)     16.27%         9.12%      0.0517
November 11, 1994 to October 31,
  1995                                   2.12%(c)     0.50%(c)        0.64%(c)     26.93%        14.48%         N/A
INCOME EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997             1.97%        0.85%           0.90%        22.40%         4.76%      0.0792
November 1, 1995 to May 31, 1996         2.72%(c)     0.86%(c)        1.13%(c)     18.14%         0.69%      0.0942
November 11, 1994 to October 31,
  1995                                   2.51%(c)     0.85%(c)        1.12%(c)     27.09%         7.03%         N/A
VALUGROWTH STOCK FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997             0.67%        1.01%           1.33%        23.30%        75.50%      0.0781
June 1, 1995 to May 31, 1996             0.62%        1.20%           1.32%        21.72%       105.43%      0.0603
June 1, 1994 to May 31, 1995             1.02%        1.20%           1.33%        10.67%        63.82%         N/A
August 2, 1993 to May 31, 1994           0.92%(c)     1.20%(c)        1.39%(c)      2.99%(c)     86.07%         N/A
DIVERSIFIED EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997             0.79%(d)     1.02%(d)        1.31%(d)     20.76%        48.08%      0.0626
November 1, 1995 to May 31, 1996         1.00%(c)(d)   1.06%(c)(d)    1.30%(c)(d)  16.38%         5.76%      0.0671
November 11, 1994 to October 31,
  1995                                   1.01%(c)(d)   1.09%(c)(d)    1.37%(c)(d)  23.95%        10.33%         N/A
GROWTH EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            (0.09%)(d)    1.30%(d)        1.84%(d)     14.11%         9.06%      0.0565
November 1, 1995 to May 31, 1996         0.01%(c)(d)   1.35%(c)(d)    1.85%(c)(d)  15.83%         7.39%      0.0617
November 11, 1994 to October 31,
  1995                                  (0.11%)(c)(d)   1.38%(c)(d)    1.92%(c)(d) 21.10%         8.90%         N/A
LARGE COMPANY GROWTH FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            (0.18%)       0.99%           1.09%        21.93%        24.37%      0.0564
November 1, 1995 to May 31, 1996        (0.30%)(c)    1.00%(c)        1.13%(c)     15.40%        16.93%      0.0616
November 11, 1994 to October 31,
  1995                                  (0.23%)(c)    1.00%(c)        1.20%(c)     27.51%        31.60%         N/A
SMALL COMPANY STOCK FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            (0.38%)       1.19%           1.56%         6.30%       210.19%      0.0774
June 1, 1995 to May 31, 1996             0.05%        1.21%           1.60%        38.30%       134.53%      0.0555
June 1, 1994 to May 31, 1995             1.14%        0.52%           1.82%        10.13%        68.09%         N/A
December 31, 1993 to May 31, 1994        2.03%(c)     0.20%(c)        4.33%(c)     (2.93)%(c)    14.98%         N/A
SMALL COMPANY GROWTH FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            (0.71%)       1.24%           1.29%         5.65%       124.03%      0.0565
November 1, 1995 to May 31, 1996        (0.41%)(c)    1.25%(c)        1.29%(c)     21.43%        62.06%      0.0583
November 11, 1994 to October 31,
  1995                                  (0.47%)(c)    1.25%(c)        1.35%(c)     37.07%       106.55%         N/A
SMALL CAP OPPORTUNITIES FUND
- ---------------------------------------------------------------------------------------------------------------------
August 15, 1996 to May 31, 1997         (0.16%)(c)(d)   1.25%(c)(d)    1.89%(c)(d) 11.42%        34.45%(e)   0.0584(e)
CONTRARIAN STOCK FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997             0.81%        1.19%           1.72%        13.02%        13.36%      0.0472
June 1, 1995 to May 31, 1996             0.87%        1.20%           1.45%        10.90%        28.21%      0.0467
June 31, 1994 to May 31, 1995            0.91%        1.12%           1.57%        13.52%        30.32%         N/A
December 31, 1993 to May 31, 1994        1.82%(c)     0.62%(c)        3.52%(c)     (5.35)%(c)     2.67%         N/A
INTERNATIONAL FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997             0.40%(d)     1.43%(d)        1.44%(d)     10.27%        48.23%(e)   0.0202(e)
November 1, 1995 to May 31, 1996         0.60%(c)(d)   1.50%(c)(d)    1.52%(c)(d)  12.31%        14.12%(e)   0.0325(e)
November 11, 1994 to October 31,
  1995                                   0.54%(c)(d)   1.50%(c)(d)    1.66%(c)(d)   4.11%        29.41%(e)      N/A
 
<CAPTION>
 
                                      Net Assets at
                                      End of Period
                                     (000's Omitted)
                                     ---------------
<S>                                  <C>
INDEX FUND
- --------------------------------------------------------------------
June 1, 1996 to May 31, 1997           $  513,134
November 1, 1995 to May 31, 1996          249,644
November 11, 1994 to October 31,
  1995                                    186,197
INCOME EQUITY FUND
- ------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997              425,197
November 1, 1995 to May 31, 1996          230,831
November 11, 1994 to October 31,
  1995                                     49,000
VALUGROWTH STOCK FUND
- ----------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997              180,204
June 1, 1995 to May 31, 1996              156,553
June 1, 1994 to May 31, 1995              136,589
August 2, 1993 to May 31, 1994            113,061
DIVERSIFIED EQUITY FUND
- --------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997            1,212,565
November 1, 1995 to May 31, 1996          907,223
November 11, 1994 to October 31,
  1995                                    711,111
GROWTH EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------
 
June 1, 1996 to May 31, 1997              895,420
November 1, 1995 to May 31, 1996          735,728
November 11, 1994 to October 31,
  1995                                    564,004
LARGE COMPANY GROWTH FUND
- ---------------------------------------------------------------------------------------------------------------------
 
June 1, 1996 to May 31, 1997              131,768
November 1, 1995 to May 31, 1996           82,114
November 11, 1994 to October 31,
  1995                                     63,567
SMALL COMPANY STOCK FUND
- ---------------------------------------------------------------------------------------------------------------------
 
June 1, 1996 to May 31, 1997              161,995
June 1, 1995 to May 31, 1996              125,986
June 1, 1994 to May 31, 1995               54,240
December 31, 1993 to May 31, 1994           9,251
SMALL COMPANY GROWTH FUND
- ---------------------------------------------------------------------------------------------------------------------
 
June 1, 1996 to May 31, 1997              447,580
November 1, 1995 to May 31, 1996          378,546
November 11, 1994 to October 31,
  1995                                    278,058
SMALL CAP OPPORTUNITIES FUND
- ---------------------------------------------------------------------------------------------------------------------
 
August 15, 1996 to May 31, 1997            77,174
CONTRARIAN STOCK FUND
- ---------------------------------------------------------------------------------------------------------------------
 
June 1, 1996 to May 31, 1997                8,260
June 1, 1995 to May 31, 1996               36,020
June 31, 1994 to May 31, 1995              45,832
December 31, 1993 to May 31, 1994           4,548
INTERNATIONAL FUND
- ---------------------------------------------------------------------------------------------------------------------
 
June 1, 1996 to May 31, 1997              228,552
November 1, 1995 to May 31, 1996          143,643
November 11, 1994 to October 31,
  1995                                     91,401
</TABLE>
 
                                                                              23
<PAGE>
3. INVESTMENT OBJECTIVES AND POLICIES
 
The thirty-two Funds offered through this Prospectus each have distinct
investment objectives and policies. There can be no assurance that any Fund or
Core Portfolio will achieve its investment objective or that any Money Market
Fund will maintain a stable net asset value.
 
The investment objective, policies and risk considerations of each Fund are
described below. For a further description of each Fund's investments and
investment techniques and additional risk considerations associated with those
investments and techniques, see "Additional Investment Policies and Risk
Considerations," "Appendix A - Investments, Investment Strategies and Risk
Considerations" and the SAI.
 
MONEY MARKET FUNDS
 
For a general description of the limits imposed on the investments of the Money
Market Funds, see "Additional Investment Policies and Risk Considerations -
General Information - General Money Market Fund Guidelines."
 
CASH INVESTMENT FUND, READY CASH INVESTMENT FUND
 
INVESTMENT OBJECTIVES. The investment objective of each of Cash Investment Fund
and Ready Cash Investment Fund is to provide high current income to the extent
consistent with the preservation of capital and the maintenance of liquidity.
 
CASH INVESTMENT FUND currently pursues its investment objective by investing
equally in two Core Portfolios - Money Market Portfolio and Prime Money Market
Portfolio.
 
READY CASH INVESTMENT FUND currently pursues its investment objective by
investing all of its investable assets in Prime Money Market Portfolio. Cash
Investment Fund, Ready Cash Investment Fund, Money Market Portfolio and Prime
Money Market Portfolio each have the same investment objective and investment
policies, except that Ready Cash Investment Fund and Prime Money Market
Portfolio seek to maintain a rating from at least one NRSRO. Accordingly, Prime
Money Market Portfolio is limited in the type and amount of permissible
securities which it may purchase. Each Core Portfolio invests in a broad
spectrum of high quality money market instruments of United States and foreign
issuers.
 
Although the following discusses the investment policies of Money Market
Portfolio and Prime Money Market Portfolio, it applies equally to the Funds. It
is anticipated that the percentage of Cash Investment Fund's assets invested in
each Core Portfolio will not change.
 
INVESTMENT POLICIES. The Portfolios 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. The Portfolios 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.
 
Each Portfolio 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 Portfolio may not invest more than 25% of its total assets in
any other single industry.
 
24
<PAGE>
Although the Portfolios invest in dollar-denominated obligations, the foreign
securities in which the Portfolios invest also involve certain risks. (See
"Investment Policies - Equity Funds - International Fund - Foreign Investment
Considerations and Risk Factors.") The Portfolios 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 Portfolios 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.") A Portfolio will not invest more than 10% of its
total assets in participation interests in which the Portfolio 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.
 
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 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.")
 
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.
 
                                                                              25
<PAGE>
INVESTMENT POLICIES. 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 "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 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 and Tax Matters - Tax Matters.")
 
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 federal income 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.
 
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 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
 
26
<PAGE>
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
- - Cash Investment Fund and 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 Norwest 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 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
 
                                                                              27
<PAGE>
defensive position and invest without limit in cash or cash equivalents the
interest income on which is subject to federal income taxation, which include:
(1) short-term U.S. Government Securities; (2) certificates of deposit, Bankers'
acceptances and interest-bearing savings deposits; (3) commercial paper; (4)
repurchase agreements covering any of the preceding securities; and (5) to the
extent permitted by the Investment Company Act of 1940, 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 and Risk
Considerations - Common Policies of the Funds - Fixed Income Investments and
their Characteristics.") 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. The Fund currently
pursues its investment objective by investing all of its investable assets in
Stable Income Portfolio, which has the same investment objective and
substantially identical investment policies as the Fund. Therefore, although the
following discusses the investment policies of that Portfolio, it applies
equally to the Fund.
 
INVESTMENT POLICIES. The Portfolio seeks to maintain safety of principal while
providing low volatility total return by investing primarily in investment grade
short-term obligations. The Portfolio 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 Portfolio invests include mortgage-backed and other
asset-backed securities, although the Portfolio limits these investments to not
more than 60 percent and 25 percent, respectively, of its total assets. In
addition, the Portfolio limits its holdings of mortgage-backed securities that
are not U.S. Government Securities to 25 percent of its total assets. The
Portfolio may invest any amount of its assets in U.S. Government Securities, but
under normal circumstances less than 50 percent of the Portfolio's total assets
are so invested. The Portfolio 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 Portfolio 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 Portfolio 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
Norwest to be of comparable quality. (See "Additional Investment Policies and
Risk Considerations - Common Policies of the Funds - Rating Matters.")
 
The Portfolio 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 Portfolio
may enter into interest rate and mortgage swap agreements and may purchase and
sell interest rate caps, floors and collars. The Portfolio may also engage in
certain strategies involving options (both exchange-traded and over-the-counter)
to attempt to enhance the Portfolio's income and may attempt to reduce the
overall risk of its
 
28
<PAGE>
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 Portfolio's ability to use these strategies may be
limited by market considerations, regulatory limits and tax considerations. The
Portfolio 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 Portfolio is obligated under the option, it owns an offsetting
position in the underlying security or futures contract or maintains a
segregated account of liquid debt instruments with a value at all times
sufficient to cover the Portfolio's obligations under the option.
 
LIMITED TERM 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.
 
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 short 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. The Fund will
limit its investment in zero-coupon 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 - 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 Norwest to be of comparable quality. (See
"Additional Investment Policies and Risk Considerations - Common Policies of the
Funds - Rating Matters.")
 
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 10 years. Under normal circumstances, the
Fund's portfolio of securities will have an average dollar-weighted maturity of
between 1 and 5 years.
 
In order to manage its exposure to different types of investments, the Fund may
enter into interest rate and mortgage swap agreements and may purchase and sell
interest rate caps, floors and collars. The Fund may also engage in certain
strategies involving options (both exchange-traded and over-the-counter) to
attempt to enhance the Fund's 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,
 
                                                                              29
<PAGE>
it owns an offsetting position in the underlying security or futures contract or
maintains a segregated account of liquid 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.
 
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 - 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 Norwest to be of comparable quality. (See
"Additional Investment Policies and Risk Considerations - Common Policies of the
Funds - Rating Matters.")
 
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 percent and 130 percent 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.
 
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,
 
30
<PAGE>
it owns an offsetting position in the underlying security or futures contract or
maintains a segregated account of liquid 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 total return
by diversifying its investments among different fixed-income investment styles.
The Fund invests in various Core Portfolios, each of which invests using a
different investment style.
 
INVESTMENT POLICIES. The Fund follows a "multi-style" approach designed to
reduce the price and return volatility of the Fund and to provide more
consistent returns. The Fund's portfolio combines three different fixed income
investment styles - Managed Fixed Income style, Strategic Value Bond style, and
Positive Return style.
 
    DIVERSIFIED BOND FUND ALLOCATION
 
    Set forth below are the ranges of investments by the Fund in each Core
    Portfolio and current allocation among the Core Portfolios.
 
<TABLE>
<CAPTION>
                                                      CURRENT          RANGE OF
                                                    ALLOCATION        INVESTMENT
                                                   -------------  ------------------
<S>                                                <C>            <C>
Managed Fixed Income Portfolio                           50.0%        45% - 55%
Strategic Value Bond Portfolio                           16.7%      11.7% - 21.7%
Positive Return Portfolio                                33.3%        30% - 37%
                                                          ---
TOTAL FUND ASSETS                                         100%
</TABLE>
 
As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest periodically effects transactions for
the Fund to reestablish its allocations.
 
Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities. When Norwest
believes that a change in the current allocation percentages is desirable, it
will sell and purchase securities to effect the change.
 
Investors should refer to the descriptions below under "Investment Objectives
and Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each investment style.
 
INCOME FUND
 
INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide total
return consistent with current income. The Fund pursues this objective by
investing in a portfolio of fixed income securities issued by domestic and
foreign issuers.
 
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. Norwest 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 Lipper Corporate A-Rated Debt Average.
 
                                                                              31
<PAGE>
The Fund may invest any amount of its assets, and normally will invest at least
30% 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
50% 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 zero coupon
securities and enter into "dollar roll" transactions. 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, generally 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
Norwest 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 may from time to time invest in securities rated below investment
grade. Such securities (commonly referred to as "junk bonds") have speculative
or predominantly speculative characteristics. The Fund will not purchase a
security rated below the sixth highest rating category by an NRSRO ("B" by
Moodys, Standard & Poor's or Fitch. (See the SAI for additional information
about junk bonds.)
 
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 40 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
securities, see "Investment Objectives and Policies - Core Portfolio
Descriptions - International Portfolio."
 
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. The Fund currently pursues its investment
objective by investing all of its investable assets in Total Return Bond
Portfolio, which has the same investment objective and substantially identical
investment policies as the Fund. Therefore, although the following discusses the
investment policies of that Portfolio, it applies equally to the Fund.
 
INVESTMENT POLICIES. The Portfolio invests primarily in U.S. Government
Securities, including mortgage-backed securities and investment grade corporate
fixed income securities. Norwest's investment decisions are based on its
analysis of major changes in the direction of interest rates rather than an
attempt by Norwest to predict short-term interest rate fluctuations. Norwest
also applies a contrarian perspective by looking for undervalued segments of the
fixed income market which Norwest believes offer opportunities for increased
returns.
 
32
<PAGE>
In making its investment decisions for the Portfolio, Norwest focuses on the
maturity structure and quality structure of the Portfolio's portfolio. When
Norwest's outlook is for rising interest rates and falling bond values, the
majority of the Portfolio'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 Norwest anticipates
interest rates to fall and bond prices increase, the Portfolio 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 Portfolio's portfolio will vary from 1 to 30 years.
 
The Portfolio may invest an unlimited amount of its assets in either corporate
securities, including corporate bonds, debentures and notes, or U.S. Government
Securities. The Portfolio 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 Portfolio limits its investments
in variable or floating rate securities to 5 percent of its net assets. The
Portfolio does not currently invest in mortgage-backed securities or enter
"dollar roll" transactions, but reserves the right to do so in the future.
 
The Portfolio 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 Portfolio 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 Service, L.P., or
which are unrated and determined by Norwest 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 Portfolio.
 
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" 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.")
 
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.
 
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"). 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). 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" and "Additional
Investment Policies - Common Policies of the Funds - Temporary Defensive
Position" and "Dividends, Distributions and Tax Matters.")
 
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
 
                                                                              33
<PAGE>
shorter maturity is generally associated with a lower level of volatility in the
market value of a security. As the Fund's objective is to provide current
income, the Fund invests 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 Service, 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 Norwest
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 FUNDS
 
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.
 
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"). 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). 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", "Additional Investment Policies
- - Common Policies of the Funds - Temporary Defensive Position" and "Dividends,
Distributions and Tax Matters.")
 
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. As the Fund's objective is to
provide high current income, the Fund invests 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 Service, 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 Norwest
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.
 
34
<PAGE>
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. 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). 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," "Additional Investment Policies and Risk Considerations - Common
Policies of the Funds - Temporary Defensive Position" and "Dividends,
Distributions and Tax Matters.")
 
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. As the
Fund's objective is to provide high current income, the Fund invests 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 and Fitch Investors Service, 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 Norwest
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 INTERMEDIATE TAX-FREE FUND
MINNESOTA TAX-FREE FUND
 
INVESTMENT OBJECTIVE. The investment objective of each 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 Funds are offered only to residents of the
State of Minnesota.
 
INVESTMENT POLICIES. Substantially all of the Funds' 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. As a fundamental policy,
except during periods when the Funds assume a temporary defensive position, the
Funds will invest at least 80% of their total assets in securities exempt from
both federal and Minnesota state income taxes (including the alternative minimum
tax). In order to respond to business and financial conditions, the Funds may
invest up to 20% of their assets in instruments on which the interest is subject
to taxation. (See "Taxable Investments," "Additional Investment Policies -
Common Policies of the Funds - Temporary Defensive Position" and "Dividends,
Distributions and Tax Matters.")
 
                                                                              35
<PAGE>
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 as
Minnesota issues. (See "Dividends, Distributions and Tax Matters - Tax-Exempt
Distributions - Minnesota Intermediate Tax-Free Funds and Minnesota Tax-Free
Fund" for a description of certain tax matters that may effect the Fund and its
shareholders.)
 
The average dollar-weighted maturity of the MINNESOTA INTERMEDIATE TAX-FREE
FUND'S assets normally will be between 5 and 10 years. The average maturity of
the Fund's portfolio will vary depending on anticipated market conditions. There
are no restrictions on MINNESOTA TAX-FREE 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.
As each Fund's objective is to provide high current income, the Funds 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 Funds' 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
Service, 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 Funds also may
invest in unrated securities that Norwest believes are comparable in quality to
rated securities in which the Funds may invest. A description of the rating
categories of certain NRSROs is contained in the SAI of the Funds.
 
NON-INVESTMENT GRADE SECURITIES. The Funds 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
Norwest to be of comparable quality. Such securities (commonly referred to as
"junk bonds") are not considered to be investment grade and have speculative or
predominantly speculative characteristics. Non-investment grade, high risk
securities provide poor protection for payment of principal and interest but may
have greater potential for capital appreciation than do higher quality
securities. These lower rated securities involve greater risk of default or
price changes due to changes in the issuers' creditworthiness than do higher
quality securities. The market for these securities may be thinner and less
active than that for higher quality securities, which may affect the price at
which the lower rated securities can be sold. In addition, the market prices of
lower rated securities may fluctuate more than the market prices of higher
quality securities and may decline significantly in periods of general economic
difficulty or rising interest rates.
 
During its most recent fiscal year ended May 31, 1997, the Minnesota Tax-Free
Fund had 88.8% of its average annual assets in municipal securities rated by
Moody's or S&P and 11.2% 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"-36.3%, "Aa"/"AA"-38.4%,
"A"/"A"-9.8%, "Baa"/"BBB"-4.3% and "Ba"/"BB" and below-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.
 
36
<PAGE>
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, MINNESOTA INTERMEDIATE
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.
 
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. Norwest 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 invest more than 25% of its total assets
in securities that are so related or
 
                                                                              37
<PAGE>
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 invest more than 25% of
their total assets in issuers located in the same state.
 
DIVERSIFICATION MATTERS. Each of COLORADO TAX-FREE FUND, MINNESOTA INTERMEDIATE
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: (1) with respect to 50%
of its assets, a Fund may not: (a) 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 (b) own more than 10% of the outstanding voting securities of a
single issuer and (2) a Fund may not own the securities of a single issuer,
other than a U.S. Government security, with a value of more than 25% of the
Fund's total assets.
 
Except for investment in U.S. Government Securities, no more than 25% of the
total assets of Colorado Tax-Free Fund, no more than 10% of the total assets of
Minnesota Intermediate 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
 
Each of the four Balanced Funds invests in a balanced portfolio of fixed income
and equity securities. Strategic Income Fund has the smallest equity securities
component of the four Funds and is the most conservative of the Balanced Funds.
Aggressive Balanced-Equity Fund has the largest equity securities component of
the four Funds and is the most aggressive of the Balanced Funds. This Fund may
be considered to be a non-traditional balanced fund because it may at times
invest less than 25% of its assets in debt securities.
 
The equity portion of each Balanced Fund's portfolio uses the ten different
equity investment styles of Diversified Equity Fund. The blending of multiple
equity investment styles is intended to reduce the risk associated with the use
of a single style, which may move in and out of favor during the course of a
market cycle. The fixed income portion of each Balanced Fund's portfolio uses
from three to five different fixed income investment styles. The blending of
multiple fixed income investment styles is intended to reduce the price and
return volatility of, and provide more consistent returns within, the fixed
income portion of the Funds.
 
As the securities markets change, Norwest may attempt to enhance the returns of
a Balanced Fund by changing the percentage of Fund assets invested in fixed
income and equity securities. Absent unstable market conditions, Norwest does
not anticipate making a substantial number of percentage changes. When
 
38
<PAGE>
Norwest believes that a change in the current allocation percentages is
desirable, it will sell and purchase securities to effect the change. When
Norwest 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."
 
STRATEGIC INCOME 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 Balanced
Funds. The Fund invests in various Core Portfolios, each of which invests using
a different investment style.
 
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 three investment styles used by
Diversified Bond Fund - Managed Fixed Income style, Strategic Value Bond style
and Positive Return style - as well as Stable Income style and Money Market
style, in order to reduce the risk of relying on a single fixed income
investment style. The equity portion of the Fund's portfolio uses the investment
style of Diversified Equity Fund, which is based on a multi-style approach
designed to minimize the volatility and risk of investing in equity securities.
 
    STRATEGIC INCOME FUND ALLOCATION
 
    Set forth below are the ranges of investments by the Fund in each Core
    Portfolio and current allocation among the Core Portfolios.
 
<TABLE>
<CAPTION>
INVESTMENT STYLE                                    CURRENT ALLOCATION           RANGE OF INVESTMENT
- --------------------------------------------  -------------------------------  -----------------------
<S>                                           <C>        <C>        <C>        <C>
Diversified Bond Fund style                         55%                               45% - 65%
  Positive Return Bond Portfolio                           18.3%                   16.04% - 20.63%
  Strategic Value Bond Portfolio                           9%                      8.02% - 10.31%
  Managed Fixed Income Portfolio                           27.5%                   24.06% - 30.94%
Stable Income Portfolio                             15%                                  15%
Money Market Portfolio                              10%                                  10%
Diversified Equity Fund style                       20%                               10% - 30%
  Index Portfolio                                          5%                        2.5% - 7.5%
  Income Equity Portfolio                                  5%                        2.5% - 7.5%
  Large Company style                                      5%                        2.5% - 7.5%
    Large Company Growth Portfolio                                    4%               2% - 6%
    Disciplined Growth Portfolio                                      1%             0.5% - 1.5%
  Small Company style                                       2.0%                       1% - 3%
    Small Company Growth Portfolio                                     0.6%          0.3% - 0.9%
    Small Company Value Portfolio                                      0.6%          0.3% - 0.9%
    Small Company Stock Portfolio                                      0.5%         0.25% - 0.75%
    Small Cap Value Portfolio                                          0.3%         0.15% - 4.5%
  International style                                       3.0%                     1.5% - 4.5%
    International Portfolio                                            2.85%         1.2% - 4.5%
    Schroder EM Core Portfolio                                         0.15%          0% - 0.9%
                                              ---------
TOTAL FUND ASSETS                                  100%
</TABLE>
 
As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest periodically effects transactions to
reestablish their base allocations.
 
                                                                              39
<PAGE>
Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities.
 
Investors should refer to "Investment Objectives and Policies - Equity Funds -
Diversified Equity Fund" and the descriptions below under "Investment Objectives
and Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each investment style.
 
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. The Fund invests in
various Core Portfolios, each of which invests using a different investment
style.
 
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 three investment styles used by
Diversified Bond Fund - Managed Fixed Income style, Strategic Value Bond style
and Positive Return style - and Stable Income style, in order to reduce the risk
of relying on a single fixed income investment style. The equity portion of the
Fund's portfolio uses the investment style of Diversified Equity Fund, which is
based on a multi-style approach designed to minimize the volatility and risk of
investing in equity securities.
 
    MODERATE BALANCED FUND ALLOCATION
 
    Set forth below are the ranges of investments by the Fund in each Core
    Portfolio and current allocation among the Core Portfolios.
 
<TABLE>
<CAPTION>
INVESTMENT STYLE                                     CURRENT ALLOCATION           RANGE OF INVESTMENT
- ---------------------------------------------  -------------------------------  -----------------------
<S>                                            <C>        <C>        <C>        <C>
Diversified Bond Fund style                          45%                               30% - 60%
  Positive Return Bond Portfolio                           15%                         10% - 20%
  Strategic Value Bond Portfolio                             7.5%                      5% - 10%
  Managed Fixed Income Portfolio                            22.5%                      15% - 30%
Stable Income Portfolio                              15%                                  15%
Diversified Equity Fund style                        40%                               25% - 55%
  Index Portfolio                                             10%                    6.3% - 13.8%
  Income Equity Portfolio                                     10%                    6.3% - 13.8%
  Large Company style                                         10%                    6.3% - 13.8%
    Large Company Growth Portfolio                                     8%            5.0% - 11.0%
    Disciplined Growth Portfolio                                       2%            1.25% - 2.75%
  Small Company style                                       4%                        2.5% - 5.5%
    Small Company Growth Portfolio                                      1.2%         0.75% - 1.65%
    Small Company Value Portfolio                                       1.2%         0.75% - 1.65%
    Small Company Stock Portfolio                                       1.0%         0.63% - 1.38%
    Small Cap Value Portfolio                                           0.6%         0.38% - 0.83%
  International style                                       6%                       3.75% - 8.25%
    International Portfolio                                             5.7%         3.0% - 8.25%
    Schroder EM Core Portfolio                                          0.3%          0% - 1.65%
                                               ---------
TOTAL FUND ASSETS                                   100%
</TABLE>
 
40
<PAGE>
As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest periodically effects transactions to
reestablish their base allocations.
 
Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities.
 
Investors should refer to "Investment Objectives and Policies - Equity Funds -
Diversified Equity Fund" and the descriptions below under "Investment Objectives
and Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each investment style.
 
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 invests in
various Core Portfolios, each of which invests using a different investment
style.
 
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 three investment styles
used by Diversified Bond Fund - Managed Fixed Income style, Strategic Value Bond
style and Positive Return style - in order to reduce the risk of relying on a
single fixed income investment style. The equity portion of the Fund's portfolio
uses the investment style of Diversified Equity Fund, which is based on a
multi-style approach designed to minimize the volatility and risk of investing
in equity securities.
 
    GROWTH BALANCED FUND ALLOCATION
 
    Set forth below are the ranges of investments by the Fund in each Core
    Portfolio and current allocation among the Core Portfolios.
 
<TABLE>
<CAPTION>
INVESTMENT STYLE                                      CURRENT ALLOCATION          RANGE OF INVESTMENT
- ----------------------------------------------  -------------------------------  ---------------------
<S>                                             <C>        <C>        <C>        <C>
Diversified Equity Fund style                         65%                              45% - 85%
  Index Portfolio                                            16.25%                 11.25% - 21.25%
  Income Equity Portfolio                                    16.25%                 11.25% - 21.25%
  Large Company style                                        16.25%                 11.25% - 21.25%
    Large Company Growth Portfolio                                      13.0%        9.0% - 17.0%
    Disciplined Growth Portfolio                                         3.25%       2.25% - 4.25%
  Small Company style                                         6.5%                    4.5% - 8.5%
    Small Company Growth Portfolio                                       2.17%       1.5% - 2.83%
    Small Company Value Portfolio                                        2.17%       1.5% - 2.83%
    Small Company Stock Portfolio                                        2.17%       1.5% - 2.83%
    Small Cap Value Portfolio                                            0.6%        0.42% - 0.78%
  International style                                         9.75%                 6.75% - 12.75%
    International Portfolio                                              9.26%       5.4% - 12.75%
    Schroder EM Core Portfolio                                           0.49%        0% - 2.55%
Diversified Bond Fund style                           35%                              15% - 55%
  Managed Fixed Income Portfolio                             17.5%                   7.5% - 27.5%
  Strategic Value Bond Portfolio                              5.83%                  2.5% - 9.17%
  Positive Return Bond Portfolio                             11.67%                   5% - 18.53%
                                                ---------
TOTAL FUND ASSETS                                    100%
</TABLE>
 
                                                                              41
<PAGE>
As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest periodically effects transactions to
reestablish their base allocations.
 
Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities.
 
Investors should refer to "Investment Objectives and Policies - Equity Funds -
Diversified Equity Fund" and the descriptions below under "Investment Objectives
and Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each investment style.
 
AGGRESSIVE BALANCED-EQUITY 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. The Fund invests in
various Core Portfolios, each of which invests using a different investment
style.
 
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 three investment styles
used by Diversified Bond Fund - Managed Fixed Income style, Strategic Value Bond
style and Positive Return style - in order to reduce the risk of relying on a
single fixed income investment style. The equity portion of the Fund's portfolio
uses the investment style of Diversified Equity Fund, which is based on a
multi-style approach designed to minimize the volatility and risk of investing
in equity securities.
 
    AGGRESSIVE BALANCED-EQUITY FUND ALLOCATION
 
    Set forth below are the ranges of investments by the Fund in each Core
    Portfolio and current allocation among the Core Portfolios.
 
<TABLE>
<CAPTION>
INVESTMENT STYLE                                      CURRENT ALLOCATION          RANGE OF INVESTMENT
- ----------------------------------------------  -------------------------------  ---------------------
<S>                                             <C>        <C>        <C>        <C>
Diversified Equity Fund style                         80%                             60% - 100%
  Index Portfolio                                           20%                        15% - 25%
  Income Equity Portfolio                                   20%                        15% - 25%
  Large Company style                                       20%                        15% - 25%
    Large Company Growth Portfolio                                     16%             12% - 20%
    Disciplined Growth Portfolio                                        4%              3% - 5%
  Small Company style                                        8%                        6% - 10%
    Small Company Growth Portfolio                                       2.4%          1.8% - 3%
    Small Company Value Portfolio                                        2.4%          1.8% - 3%
    Small Company Stock Portfolio                                        2.0%         1.5% - 2.5%
    Small Cap Value Portfolio                                            1.2%         0.9% - 1.5%
  International style                                       12%                        9% - 15%
    International Portfolio                                             11.4%         7.2% - 15%
    Schroder EM Core Portfolio                                           0.6%           0% - 3%
</TABLE>
 
42
<PAGE>
 
<TABLE>
<CAPTION>
INVESTMENT STYLE                                      CURRENT ALLOCATION          RANGE OF INVESTMENT
- ----------------------------------------------  -------------------------------  ---------------------
<S>                                             <C>        <C>        <C>        <C>
Diversified Bond Fund style                         20.0%                              0% - 40%
  Managed Fixed Income Portfolio                             10.0%                     0% - 20%
  Strategic Value Bond Portfolio                              3.33%                   0% - 6.67%
  Positive Return Bond Portfolio                              6.67%                   0% - 13.33%
                                                ---------
TOTAL FUND ASSETS                                    100%
</TABLE>
 
As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest periodically effects transactions to
reestablish their base allocations.
 
Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities.
 
Investors should refer to "Investment Objectives and Policies - Equity Funds -
Diversified Equity Fund" and the descriptions below under "Investment Objectives
and Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each investment style.
 
TEMPORARY ALLOCATIONS
 
In its discretion, Norwest may increase or decrease the percentage of assets of
each Balanced Fund that are invested in fixed income and equity securities. When
Norwest believes that a percentage reallocation will be of short duration
(generally, up to 3 years), Norwest 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, a 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 - Futures Contracts and Options.")
 
EQUITY FUNDS
 
To achieve their investment objectives, the Equity Funds invest primarily in
common stocks and other equity securities. The domestic securities in which an
Equity Fund invests are generally listed on a securities exchange or included in
the National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System but may be traded in the over-the-counter securities
market. Under normal circumstances, each of the Equity Funds will invest
substantially all of its assets, but not less than 65 percent of its total
assets, in equity securities.
 
Each Equity Fund, other than Index Fund and Small Cap Opportunities Fund, may
invest in foreign issuers. These investments may involve certain risks. (See
"Investment Objectives and Policies - Equity Funds - International Fund -
Foreign Investment Considerations and Risk Factors.") Each Fund other than Index
Fund may invest in the securities of smaller companies. Small Company Stock
Fund, Small Company Growth Fund and Diversified Small Cap Fund invest primarily
in these securities, which entails special risks. (See "Small Company Investment
Considerations and Risk Factors" below.)
 
                                                                              43
<PAGE>
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. The Fund
currently pursues its investment objective by investing all of its investable
assets in Index Portfolio, which has the same investment objective and
substantially identical investment policies as the Fund. Therefore, although the
following discusses the investment policies of that Portfolio, it applies
equally to the Fund.
 
INVESTMENT POLICIES. The Portfolio 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
Portfolio will hold stocks representing 100 percent or more of the
capitalization-weighted market values of the Index. Portfolio transactions for
the Portfolio generally are executed only to duplicate the composition of the
Index, to invest cash received from portfolio security dividends or investments
in the Portfolio, and to raise cash to fund redemptions. The Portfolio may hold
cash or cash equivalents for the purpose of facilitating payment of the
Portfolio's expenses or redemptions. For these and other reasons, the
Portfolio's performance can be expected to approximate but not be equal to that
of the Index.
 
The Portfolio 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 Portfolio does not invest
in futures contracts for speculative reasons or to leverage the Portfolio.
 
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.
 
Neither the Fund nor the Portfolio 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 Portfolio or 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
Portfolio or the Fund, by the owners of the Portfolio or the Fund, or by any
other 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.
 
INDEX FUTURES CONTRACTS. Index Portfolio 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.
 
44
<PAGE>
The use of index futures contracts entails certain investment risks and
transaction costs, including: (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 Portfolio 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 the
Portfolio'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.
 
INCOME EQUITY FUND
 
INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide
long-term capital appreciation consistent with above-average dividend income.
The Fund currently pursues its investment objective by investing all of its
investable assets in Income Equity Portfolio, which has the same investment
objective and substantially identical investment policies as the Fund.
Therefore, although the following discusses the investment policies of that
Portfolio, it applies equally to the Fund.
 
INVESTMENT POLICIES. Income Equity Portfolio 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 Portfolio, Norwest uses various valuation measures,
including above-average dividend yields and below industry average price to
earnings, price to book and price to sales ratios. The Portfolio considers large
companies are those companies whose market capitalization is greater than the
median of the Russell 1000 Index. The Portfolio 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. Under normal circumstances, Income Equity Portfolio 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 provide
long-term capital appreciation.
 
INVESTMENT POLICIES. The Fund invests primarily in medium- and
large-capitalization companies that, in the view of Norwest, possess above
average growth characteristics and appear to be undervalued. Medium companies
are those companies whose market capitalization is in the range of $500 million
to $8 billion. Large companies are those companies whose market capitalization
is greater than the median of the Russell 1000 Index.
 
The Fund seeks to identify and invest in companies whose earnings and dividends
Norwest believes will grow both faster than inflation and faster than the
economy in general and whose growth Norwest believes has not yet been fully
reflected in the market price of the companies' shares. In seeking these
investments, Norwest 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, Norwest 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 Norwest 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. These investments are the
exception, not the rule, and must
 
                                                                              45
<PAGE>
satisfy Norwest's valuation parameters. In addition, the Fund may invest up to
20% of its assets in securities of foreign issuers, American Depository
Receipts, European Depository Receipts and other similar securities of foreign
issuers.
 
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. The Fund invests in various Core Portfolios, each of which invests using
a different investment style.
 
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 - index style, an
income equity style, a large company style, a small company style and an
international style. The Fund allocates the assets dedicated to large company
investments to two Core Portfolios, the assets allocated to small company
investments to four Core Portfolios and the assets dedicated to international
investments to two Core Portfolios. 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.
 
    DIVERSIFIED EQUITY FUND ALLOCATION
 
    Set forth below are the ranges of investments by the Fund in each Core
    Portfolio and current allocation among the Core Portfolios.
 
<TABLE>
<CAPTION>
                                                 CURRENT ALLOCATION     RANGE OF INVESTMENT
                                              ------------------------  -------------------
<S>                                           <C>          <C>          <C>
Index Portfolio                                      25%                   23.5% - 26.5%
Income Equity Portfolio                              25%                   23.5% - 26.5%
Large Company style                                  25%                   23.5% - 26.5%
  Large Company Growth Portfolio                                  20%      18.5% - 21.5%
  Disciplined Growth Portfolio                                     5%       3.5% - 6.5%
Small Company style                                  10%                   8.5% - 11.5%
  Small Company Growth Portfolio                                   3%       1.5% - 4.5%
  Small Company Value Portfolio                                    3%       1.5% - 4.5%
  Small Company Stock Portfolio                                  2.5%         1% - 4%
  Small Cap Value Portfolio                                      1.5%         0% - 3%
International Style                                  15%                   13.5% - 16.5%
  International Portfolio                                      14.25%      10.8% - 16.5%
  Schroder EM Core Portfolio                                    0.75%        0% - 3.3%
                                              -----------
TOTAL FUND ASSETS                                   100%
</TABLE>
 
As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest daily effects transactions for the
Fund to reestablish its allocations.
 
Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities. When Norwest
believes that a change in the allocation percentages is desirable, it will sell
and purchase securities to effect the change.
 
46
<PAGE>
Investors should refer to the descriptions under "Investment Objectives and
Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each investment style.
 
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. The Fund currently invests in various Core Portfolios, each
of which invests using a different investment style.
 
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 styles - a large company growth style,
a small company style and an international style. The Fund allocates the assets
dedicated to small company investments to four Core Portfolios and the assets
dedicated to international investments to two Core Portfolios. The Fund utilizes
different equity styles in order to reduce the risk of price and return
volatility associated with reliance on a single 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 styles.
 
    GROWTH EQUITY FUND ALLOCATION
 
    Set forth below are the ranges of investments by the Fund in each Core
    Portfolio and current allocation among the Core Portfolios.
 
<TABLE>
<CAPTION>
                                              CURRENT ALLOCATION   RANGE OF INVESTMENT
                                             --------------------  -------------------
<S>                                          <C>                   <C>
Large Company Growth Portfolio.............             35%             33% - 37%
Small Company Style........................             35%             33% - 37%
  Small Company Growth Portfolio...........           10.5%           8.5% - 12.5%
  Small Company Value Portfolio............           10.5%           8.5% - 12.5%
  Small Company Stock Portfolio............           8.75%          6.75% - 10.75%
  Small Cap Value Portfolio................           5.25%           3.25% - 7.25%
International Style........................             30%             28% - 32%
  International Portfolio..................           28.5%           22.4% - 32.0%
  Schroder EM Core Portfolio...............            1.5%             0% - 6.4%
                                               -----------
TOTAL FUND ASSETS..........................            100%
</TABLE>
 
As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest daily effects transactions for the
Fund to reestablish its allocations.
 
Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities. When Norwest
believes that a change in the allocation percentages is desirable, it will sell
and purchase securities to effect the change.
 
Investors should refer to the descriptions below under "Investment Objectives
and Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each investment style.
 
                                                                              47
<PAGE>
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. The Fund currently pursues its investment objective by investing all
of its investable assets in Large Company Growth Portfolio, which has the same
investment objective and substantially identical investment policies as the
Fund. Therefore, although the following discusses the investment policies of
that Portfolio, it applies equally to the Fund.
 
INVESTMENT POLICIES. The Portfolio invests primarily in the common stock of
large, high-quality domestic companies that have superior growth potential.
Large companies are those companies whose market capitalization is greater than
the median of the Russell 1000 Index. Market capitalization refers to the total
market value of a company's outstanding shares of common stock. In selecting
securities for the Portfolio, Norwest 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
Portfolio's assets may be invested in the securities of companies whose growth
potential is, in Norwest's opinion, generally unrecognized or misperceived by
the market. In addition, the Portfolio 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 Portfolios - International Fund -
Foreign Investment Risks and Considerations.") Under normal circumstances, the
Portfolio will not invest more than 10 percent of its total assets in the
securities of a single issuer. The Portfolio 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 INVESTMENT CONSIDERATIONS AND RISK FACTORS.
 
ADDITIONAL INVESTMENT CONSIDERATIONS AND RISK FACTORS. While all investments
have risks, investments in smaller capitalization companies carry greater risk
than investments in larger capitalization companies. Smaller capitalization
companies generally experience higher growth rates and higher failure rates than
do larger capitalization companies; and the trading volume of smaller
capitalization companies' securities is normally lower than that of larger
capitalization companies and, consequently, generally has a disproportionate
effect on market price (tending to make prices rise more in response to buying
demand and fall more in response to selling pressure).
 
Investments in small, unseasoned issuers generally carry greater risk than is
customarily associated with larger, more seasoned companies. Such issuers often
have products and management personnel that have not been tested by time or the
marketplace and their financial resources may not be as substantial as those of
more established companies. Their securities (which a Portfolio may purchase
when they are offered to the public for the first time) may have a limited
trading market which can adversely affect their sale by the Portfolio and can
result in such securities being priced lower than otherwise might be the case.
If other institutional investors engage in trading this type of security, the
Portfolio may be forced to dispose of its holdings at prices lower than might
otherwise be obtained.
 
DIVERSIFIED SMALL CAP 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 across different small capitalization equity
investment styles.
 
INVESTMENT POLICIES. The Fund follows a "multi-style" approach designed to
minimize the volatility and risk of investing in small capitalization equity
securities. The Fund invests in five different small capitalization equity
styles. The Fund uses different equity investment styles in order to reduce the
risk of price and return volatility associated with reliance on a single
investment style.
 
48
<PAGE>
    DIVERSIFIED SMALL CAP FUND ALLOCATION
 
    Set forth below are the ranges of investments by the Fund in each Core
    Portfolio and current allocation among the Core Portfolios.
 
<TABLE>
<CAPTION>
                                                    CURRENT ALLOCATION     RANGE OF INVESTMENT
                                                 ------------------------  -------------------
<S>                                              <C>          <C>          <C>
Small Cap Index Portfolio                               40%                     38% - 42%
Small Company style                                     60%                     58% - 62%
  Small Company Stock Portfolio                                      15%        13% - 17%
  Small Company Growth Portfolio                                     18%        16% - 20%
  Small Company Value Portfolio                                      18%        16% - 20%
  Small Cap Value Portfolio                                           9%        7% - 11%
                                                 -----------
Total Fund Assets                                      100%
</TABLE>
 
As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest daily effects transactions for the
Fund to reestablish its allocations.
 
Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities. When Norwest
believes that a change in the allocation percentages is desirable, it will sell
and purchase securities to effect the change.
 
Investors should refer to the descriptions under "Investment Objectives and
Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each investment style.
 
SMALL COMPANY STOCK FUND
 
INVESTMENT OBJECTIVE. The Fund's investment objective is long-term capital
appreciation. The Fund currently pursues its investment objective by investing
all of its investable assets in Small Company Stock Portfolio, which has the
same investment objective and substantially identical investment policies as the
Fund. Therefore, although the following discusses the investment policies of
that Portfolio, it applies equally to the Fund.
 
INVESTMENT POLICIES. Small Company Stock Portfolio 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 companies are those companies whose
market capitalization is less than the largest stock in the Russell 2000 Index.
Medium companies are those companies whose market capitalization is in the range
of $500 million to $8 billion.
 
In selecting securities for the Portfolio, Norwest seek 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 Portfolio 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
companies have a small management group and single product or product line
expertise, which, in the view of Norwest, may result in an enhanced
entrepreneurial spirit and greater focus, thereby allowing such companies to be
successful. The Advisers 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.
 
Securities owned by the Portfolio 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
 
                                                                              49
<PAGE>
exchange. As a result, disposition by the Portfolio of a portfolio security, to
meet redemption requests by shareholders or otherwise, may require the Portfolio
to sell these securities at a discount from market prices, to sell during
periods when disposition is not desirable, or to make many small sales over a
lengthy period of time.
 
Small Company Stock Portfolio also may invest up to 20% of its assets in
American Depository Receipts, European Depository Receipts and other similar
securities of foreign issuers.
 
For a description of the investment considerations and risks involved in
investing in small company securities, see "Investment Objectives and Policies -
Equity Funds - Small Company Investment Considerations and Risk Factors."
 
SMALL COMPANY GROWTH FUND
 
INVESTMENT OBJECTIVE. The Fund's investment objective is to provide long-term
capital appreciation by investing in smaller domestic companies. This objective
is pursued by investing primarily in small and medium-sized domestic companies
that are either growing rapidly or completing a period of significant change.
The Fund currently pursues its investment objective by investing all of its
investable assets in Small Company Growth Portfolio, which has the same
investment objective and substantially identical investment policies as the
Fund. Therefore, although the following discusses the investment policies of
that Portfolio, it applies equally to the Fund.
 
INVESTMENT POLICIES. Small Company Growth Portfolio invests primarily in the
common stock of smaller domestic companies. Small companies are those companies
whose market capitalization is less than the largest stock in the Russell 2,000
Index. The Portfolio considers smaller companies to be those with market
capitalizations less than $1 billion at the time of the Portfolio's purchase.
 
In selecting securities for the Small Company Growth Fund, Norwest 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. Norwest may invest up to 10
percent of the total assets of the Portfolio in foreign securities and in
American Depository Receipts and other similar securities of foreign issuers.
Norwest may not invest more than 10 percent of the total assets of the Portfolio
in the securities of a single issuer. The Portfolio does not currently invest in
preferred stock and securities convertible into common stock but reserves the
right to do so in the future.
 
For a description of the investment considerations and risks involved in
investing in small company securities, see "Investment Objectives and Policies -
Equity Funds - Small Company Investment Considerations and Risk Factors."
 
SMALL CAP OPPORTUNITIES FUND
 
INVESTMENT OBJECTIVE. The investment objective of the Fund is capital
appreciation. Current income will be incidental to the objective of capital
appreciation. The Fund currently pursues 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 that Portfolio, it applies equally to the Fund.
 
INVESTMENT POLICIES. Schroder U.S. Smaller Companies Portfolio seeks to achieve
its investment objective by investing primarily 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.
 
In its investment approach, Schroder attempts 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.
 
50
<PAGE>
As part of the investment decision, Schroder's assessment of the competency of
an issuer's management will be an important consideration. These criteria are
not rigid, and other investments may be included in the Portfolio 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.
 
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 the fourth highest rating category. These securities are commonly
known as "high yield/high risk" securities or "junk bonds." The Portfolio will
not invest in debt securities that are in default. High yield/high risk
securities are predominantly speculative with respect to the capacity to pay
interest and repay principal and generally involve a greater volatility of price
than securities in higher rated categories. The Portfolio is not obligated to
dispose of securities due to changes by the rating agencies. (See "Additional
Investment Policies and Risk Considerations - Debt Securities.") (See the SAI
for information about the risks associated with investing in junk bonds.)
 
For a description of the investment considerations and risks involved in
investing in small company securities, see "Investment Objectives and Policies
- -- Equity Funds -- Small Company Investment Considerations and Risk Factors."
 
OPTIONS AND FUTURES TRANSACTIONS. While the Portfolio does not presently intend
to do so, it may write covered call options and purchase certain put and call
options, stock index futures, and options on stock index futures and
broadly-based stock indices, all of which are referred to as "Hedging
Instruments." In general, the Portfolio may use Hedging Instruments: (1) to
attempt to protect against declines in the market value of the Portfolio's
securities and thus protect the Fund's net asset value per share against
downward market trends; or (2) to establish a position in the equities markets
as a temporary substitute for purchasing particular equity securities. The
Portfolio will not use Hedging Instruments for speculation. The Hedging
Instruments which the Portfolio is authorized to use have certain risks
associated with them. Principal among such risks are: (1) the possible failure
of such instruments as hedging techniques in cases where the price movements of
the securities underlying the options or futures do not follow the price
movements of the portfolio securities subject to the hedge; (2) potentially
unlimited loss associated with futures transactions and the possible lack of a
liquid secondary market for closing out a futures position; and (3) possible
losses resulting from the inability of the Portfolio's investment adviser to
correctly predict the direction of stock prices, interest rates and other
economic factors. The Hedging Instruments the Portfolio may use and the risks
associated with them are described in greater detail in the SAI.
 
CONTRARIAN STOCK FUND
 
INVESTMENT OBJECTIVE. The investment objective of the Fund is to seek capital
appreciation by investing primarily in common stocks for which Norwest believes
there is significant potential for price appreciation.
 
INVESTMENT POLICIES. The basic premise of Norwest'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. Norwest believes that security prices change more than fundamental
investment
 
                                                                              51
<PAGE>
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 Norwest's contrarian investment approach is the comparison of the
value and the price of a security. Norwest 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 Norwest 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 - Equity Funds -
International Fund - Foreign Investment Considerations and Risk Factors.") 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 Norwest 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. Norwest believes, however, that purchasing
securities depressed by temporary factors may provide investment returns
superior to those obtained when premium prices are paid for issues currently in
favor.
 
INTERNATIONAL FUND
 
The Fund is designed for investors who desire to achieve international
diversification of their investments by participating in foreign securities
markets. Because international investments generally involve risks in addition
to those risks associated with investments in the United States, the Fund should
be considered only as a vehicle for international diversification and not as a
complete investment program.
 
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 in two Core Portfolios, International
Portfolio and Schroder EM Core Portfolio, each of which invests using a
different investment style.
 
INVESTMENT POLICIES. The Fund follows a "multi-style" approach designed to
minimize the volatility and risk of investing in international equity
securities. The Fund's investment portfolio combines two different investment
styles - an international equity investment style and an international emerging
markets equity investment style.
 
52
<PAGE>
    INTERNATIONAL FUND ALLOCATION
 
    Set forth below are the ranges of investments by the Fund in each Core
    Portfolio and current allocation among the Core Portfolios.
 
<TABLE>
<CAPTION>
                                                             CURRENT
                                                           ALLOCATION   RANGE OF INVESTMENT
                                                           -----------  -------------------
<S>                                                        <C>          <C>
International Portfolio                                           95%       80% - 100%
Schroder EM Core Portfolio                                         5%        0% - 20%
                                                           -----------
TOTAL FUND ASSETS                                                100%
</TABLE>
 
As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest daily effects transactions for the
Fund to reestablish its allocations.
 
Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities. When Norwest
believes that a change in the allocation percentages is desirable, it will sell
and purchase securities to effect the change.
 
Investors should refer to the descriptions below under "Investment Objectives
and Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each investment style.
 
CORE PORTFOLIO DESCRIPTIONS
 
MONEY MARKET PORTFOLIO and PRIME MONEY MARKET PORTFOLIO. (See "Investment
Objectives and Policies - Money Market Funds - Cash Investment Fund and Ready
Cash Investment Fund.")
 
POSITIVE RETURN BOND PORTFOLIO. Positive Return Bond Portfolio 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
Portfolio's assets 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 Advisers' 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
will vary. It is anticipated that under normal circumstances the Portfolio will
have an average dollar-weighted maturity of between 1 and 30 years.
 
Under normal circumstances, at least 50 percent of the net assets of the
Portfolio will be invested in U.S. Government Securities, including Treasury
securities. All securities will be, at the time of purchase: (1) rated in one of
the two highest long-term rating categories assigned by a NRSRO such as Moody's
Investors Service, Standard & Poor's and Fitch Investors Service, L.P.; or (2)
unrated and determined by the Advisers 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 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 Portfolio may not invest in convertible
securities, mortgage pass-through securities or private placement securities.
Within these constraints, the Advisers purchase securities that they believe
have above-average yields.
 
STABLE INCOME PORTFOLIO. (See "Investment Objectives and Policies - Fixed Income
Funds - Stable Income Fund.")
 
                                                                              53
<PAGE>
MANAGED FIXED INCOME PORTFOLIO. Managed Fixed Income Portfolio seeks consistent
fixed income returns by investing primarily in investment grade
intermediate-term obligations. The Portfolio 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 Advisers emphasize 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 Portfolio may invest 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 portfolio's total assets. As part of its
asset-backed securities investments, the Portfolio may enter into "dollar roll"
transactions and may purchase stripped mortgage-backed securities. The Advisers
may invest any amount of the portfolio's assets in U.S. Government Securities,
or in the securities of financial institutions, corporations, and others. The
Portfolio 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 Portfolio may not invest more than 30
percent of its total assets in the securities issued or guaranteed by any single
agency or instrumentality of the U.S. Government, except the U.S. Treasury.
 
The Portfolio may invest up to 10 percent of its total assets invested in this
style in participations purchased from financial institutions in loans or
securities in which the Portfolio may invest directly. The Portfolio may also
invest up to 10 percent of its total assets in each of: (1) obligations issued
or guaranteed by the governments of countries which Norwest believes do not
present undue risk or by those countries' political subdivisions, agencies or
instrumentalities; (2) obligations of supranational organizations; and (3)
obligations of the states, territories or possessions of the United States and
their subdivisions, authorities and corporations ("municipal securities").
 
The Portfolio 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 Service, L.P., or which are unrated and determined by Norwest to
be of comparable quality. (See "Additional Investment Policies and Risk
Considerations - Rating Matters.")
 
The Portfolio 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 Portfolio
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 Portfolio's exposure to different types of investments,
the Portfolio may enter into interest rate and mortgage swap agreements and may
purchase and sell interest rate caps, floors and collars. The Portfolio may also
engage in certain strategies involving options (both exchange-traded and
over-the-counter) to attempt to enhance the Portfolio's return and may attempt
to reduce the overall risk of its investments ("hedge") by using options and
futures contracts. The Advisers' ability to use these strategies may be limited
by market considerations, regulatory limits and tax considerations. The Advisers
may on behalf of the Portfolio 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 Portfolio is obligated under the option, it owns an offsetting
position in the underlying security or futures contract or maintains a
segregated account of liquid debt instruments with a value at all times
sufficient to cover the Portfolio's obligations under the option.
 
54
<PAGE>
STRATEGIC VALUE BOND PORTFOLIO. Strategic Value Bond Portfolio invests in a
broad range of fixed income instruments including corporate bonds, asset-backed
securities, mortgage-backed securities, U.S. Government Securities, preferred
stock, convertible bonds and foreign bonds in order to create a strategically
diversified portfolio of high quality fixed income investments.
 
In making investment decisions, the investment adviser focuses on relative value
as opposed to the prediction of the direction of interest rates. In general,
particular emphasis is placed on higher current income instruments such as
corporate bonds and mortgage/asset-backed securities in order to enhance
returns. The Adviser believes that this exposure enhances performance in varying
economic and interest rate cycles while avoiding excessive risk concentrations.
The Advisers' investment process involves rigorous evaluation of each security.
This includes identifying and valuing cash flows, embedded options, credit
quality, structure, liquidity, marketability, current versus historical trading
relationships, supply and demand for the instrument and expected returns in
varying economic/interest rate environments. This process seeks to identify
securities which represent the best relative economic value. The results of the
investment process are then evaluated against the Portfolio's objective and the
Portfolio purchases those securities which will enhance its positioning. The
Portfolio will be repositioned based on market changes and shifts in relative
value of the instruments held by the Portfolio.
 
At least 65% of the Portfolio's assets will be invested in securities that are
rated, at the time of purchase, in one of the three highest rating categories
assigned by a "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. (See "Additional Investment Policies and
Risk Considerations - Common Policies of the Funds - Rating Matters.") In
addition, the Portfolio will limit its investment in securities with a less than
an investment grade rating to 20% of the Portfolio's assets. While the average
quality of the Portfolio will vary over an economic cycle, the average rating of
the Portfolio's investments will be "A" or better. Investment grade instruments
include those that are rated in one of four highest long-term rating categories
by an NRSRO or are unrated and determined by the Adviser to be of comparable
quality.
 
The average maturity (or average life in the case of mortgage-backed and similar
securities) of the Portfolio will vary between 5 and 15 years. The Portfolio's
effective duration normally will vary between 3 and 8 years.
 
The Portfolio may enter into derivative transactions to receive favorable
financing or diversify portfolio risk.
 
NON-INVESTMENT GRADE SECURITIES. The Portfolio may invest up to 20% of its
assets in non-investment grade securities (commonly referred to as "junk
bonds"). These securities have speculative or predominantly speculative
characteristics and provide poor protection for payment of principal and
interest, but may have greater potential for capital appreciation than do higher
quality securities. Non-investment grade securities involve greater risk of
default or price changes due to changes in the issuers' creditworthiness than do
investment grade 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.
 
TOTAL RETURN BOND PORTFOLIO. (See "Investment Objectives and Policies - Fixed
Income Funds - Total Return Bond Fund.")
 
INDEX PORTFOLIO. (See "Investment Objectives and Policies - Equity Funds - Index
Fund.")
 
INCOME EQUITY PORTFOLIO. (See "Investment Objectives and Policies - Equity Funds
- - Income Equity Fund.")
 
LARGE COMPANY GROWTH PORTFOLIO. (See "Investment Objectives and Policies -
Equity Funds - Large Company Growth Fund.")
 
                                                                              55
<PAGE>
DISCIPLINED GROWTH PORTFOLIO. Disciplined Growth Portfolio seeks capital
appreciation by investing in common stocks of larger companies. Disciplined
Growth Portfolio seeks greater long-term returns by investing primarily in the
common stock of companies that, in the view of the investment adviser, possess
above average potential for growth. The average market capitalization of the
companies in which the Portfolio invests will be greater than $5 billion.
 
The Portfolio seeks to identify growth companies that will report a level of
corporate earnings that exceed the level expected by investors. In seeking these
companies, the investment adviser uses both quantitative and fundamental
analysis. Among the factors that the investment adviser considers are changes of
earnings estimates by investment analysts, the recent trend of company earnings
reports, and an analysis of the fundamental business outlook for the company.
The investment adviser uses a variety of valuation measures to determine whether
the share price already reflects any positive fundamentals identified by the
investment adviser. In addition to approximately equal weighting of portfolio
securities, the investment adviser attempts to constrain the variability of the
investment returns by employing risk control screens for price volatility,
financial quality and valuation.
 
SMALL COMPANY STOCK PORTFOLIO. (See "Investment Objectives and Policies - Equity
Funds - Small Company Stock Fund.")
 
SMALL COMPANY GROWTH PORTFOLIO. (See "Investment Objectives and Policies -
Equity Funds - Small Company Growth Fund.")
 
SMALL COMPANY VALUE PORTFOLIO. Small Company Value Portfolio seeks to provide
long-term capital appreciation by investing primarily in smaller companies. The
Portfolio invests primarily in the common stock of companies that have a market
capitalization well below that of the average company in the Standard & Poor's
500 Composite Stock Price Index. Smaller companies are those companies whose
market capitalization is less than the largest stock in the Russell 2000 Index.
 
The Advisers focus 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. The Advisers 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.
 
For a description of the investment considerations and risks involved in
investing in small company securities, see "Investment Objectives and Policies -
Equity Funds - Small Company Investment Considerations and Risk Factors."
 
SMALL CAP VALUE PORTFOLIO. Small Cap Value Portfolio seeks capital appreciation
by investing in common stocks of smaller companies. Small Cap Value Portfolio
seeks higher growth rates and greater long-term returns by investing primarily
in the common stock of smaller companies that, in the view of the investment
adviser, are undervalued. Under normal circumstances, the Portfolio will invest
substantially all of its assets, but not less than 65% of its net assets, in
securities of companies with a market capitalization which reflects the market
capitalization of companies included in the Russell 2000 Growth Index.
 
The Portfolio invests in those smaller companies that the investment adviser
believes to be undervalued and which will report a level of corporate earnings
exceeding the level expected by investors. The determination of value is based
upon both the price to earnings ratio of the company and a comparison of the
public market value of the company to a proprietary model that values the
company in the private market. In seeking companies that will report a level of
earnings exceeding that expected by investors, the investment adviser uses both
quantitative and fundamental analysis. Among the factors that the investment
adviser considers are changes of earnings estimates by investment analysts, the
recent trend of company earnings reports, and the fundamental business outlook
for the company.
 
56
<PAGE>
For a description of the investment considerations and risks involved in
investing in small company securities, see "Investment Objectives and Policies -
Equity Funds - Small Company Investment Considerations and Risk Factors."
 
SMALL CAP INDEX PORTFOLIO. Small Cap Index Portfolio seeks to replicate the
return of the Standard & Poor's Small Cap 600 Composite Stock Price Index (the
"Index"). The Portfolio is designed to replicate the return of the Index with
minimum tracking error, while also minimizing transaction costs. Under normal
circumstances, the Portfolio will hold stocks representing 100% of the
capitalization-weighted market values of the Index. Portfolio transactions for
the Portfolio generally are executed only to duplicate the composition of the
Index, to invest cash received from portfolio security dividends or investments
in the Portfolio, and to raise cash to fund redemptions. The Portfolio may hold
cash or cash equivalents for the purpose of facilitating payment of the
Portfolio's expenses or redemptions. Cash positions may be invested in short-
term money market instruments, hedged with S&P 500 Index futures. For these and
other reasons, the Portfolio's performance can be expected to approximate but
not be equal to that of the Index.
 
Small Cap Index Portfolio 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
portfolio management purposes; to facilitate trading; or to reduce transaction
costs. The Portfolio does not invest in futures contracts for speculative
reasons or to leverage the Portfolio. (See "Investment Objectives and Policies -
Equity Funds - Index Fund - Index Futures Contracts".)
 
The Index tracks the total return performance of 600 common stocks which are
chosen for inclusion in the Index by Standard & Poor's Corporation ("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 600 securities, most
of which trade on the New York Stock Exchange, represent 4% of the total market
value of all U.S. common stocks. The Index is comprised of industrial, utility,
financial and transportation companies and is a market-value weighted index,
with each stock's weight in the Index proportionate to its market value.
 
Small Cap Index Portfolio is not sponsored, endorsed, sold or promoted by S&P,
nor does S&P make any representation or warranty, implied or express, to the
investors in the Portfolio 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
Small Cap Index Portfolio, by the investors in the Portfolio, or by any other
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.
 
INTERNATIONAL PORTFOLIO. The investment objective of International Portfolio is
to provide long-term capital appreciation by investing directly or indirectly in
high quality companies based outside the United States. The 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
 
                                                                              57
<PAGE>
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 CURRENCY CONTRACTS. Changes in foreign currency exchange rates will
affect the U.S. dollar values of securities denominated in currencies other than
the U.S. dollar. The rate of exchange between the U.S. dollar and other
currencies fluctuates in response to forces of supply and demand in the foreign
exchange markets. These forces are affected by the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors. When investing in foreign securities,
International Portfolio usually effects currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign exchange market.
International Portfolio incurs foreign exchange expenses in converting assets
from one currency to another.
 
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 enter into these contracts for speculative purposes or 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 RISKS. 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 to shareholders;
commission rates payable on foreign transactions are
 
58
<PAGE>
generally higher than in the U.S.; foreign accounting, auditing and financial
reporting standards differ from those in the U.S. and, accordingly, less
information may be available about foreign companies than is available about
issuers of comparable securities in the U.S.; 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. 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 fund redemptions. 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.
 
SCHRODER EM CORE PORTFOLIO. The investment objective of Schroder EM Core
Portfolio is to seek to achieve long-term capital appreciation through direct or
indirect investment in equity and debt securities of issuers domiciled or doing
business in emerging market countries in regions such as Southeast Asia, Latin
America, and Eastern and Southern Europe. Current income is incidental to the
Portfolio's objective.
 
The Portfolio may invest, under normal market conditions, up to 65% of its total
assets in emerging market equity and debt securities, including common stocks;
convertible preferred stocks; stock rights and warrants; convertible debt
securities; and non-convertible debt securities. (Investments in stock rights
and warrants will not be considered for purposes of determining compliance with
this policy.) The Portfolio may invest up to 35% of its total assets in
high-risk debt securities that are unrated or rated below investment grade. The
Portfolio may be able to invest in certain emerging markets solely or primarily
through governmentally authorized investment companies or vehicles. When
investing through investment companies, the Portfolio may pay substantial
premiums above such investment companies' net asset value per share. The
Portfolio does not intend to invest in other investment companies unless, in the
judgment of Schroder, the potential benefits of such investment justify the
payments of any applicable premiums or sales charges.
 
In recent years, many emerging market countries have begun programs of economic
reform: removing import tariffs, dismantling trade barriers, deregulating
foreign investment, privatizing state-owned industries, permitting the value of
their currencies to float against the dollar and other major currencies, and
generally reducing the level of state intervention in industry and commerce.
Important intra-regional economic integration also holds the promise of greater
trade and growth. At the same time, significant progress has been made in
restructuring the heavy external debt burden that certain emerging market
countries accumulated during the 1970s and 1980s. While there is no assurance
that these trends will continue, Schroder will seek out attractive investment
opportunities in these countries.
 
"Emerging market" countries are all those not included in the Morgan Stanley
Capital International World Index ("MSCI World") of major world economies. If,
however, the investment adviser determines that the economy of a MSCI
World-listed country is an emerging market economy, Schroder may include such
country in the emerging market category. The Portfolio will not necessarily seek
to diversify investments on a geographic basis and may invest more than 25% of
its total assets in issuers located in any one country.
 
Schroder EM Core Portfolio may invest a portion of its assets in Brady Bonds,
which are securities created through the exchange of existing commercial bank
loans to sovereign entities for new obligations in connection with debt
restructuring.
 
                                                                              59
<PAGE>
4. ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
 
GENERAL INFORMATION
 
Each Fund's (and each 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 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
("Core Board") without shareholder approval.
 
Unless otherwise indicated below, the discussion below of the investment
policies of a Fund investing in a single Core Portfolio also refers to the
investment policies of that Core Portfolio. A further description of the Funds'
investment policies, including additional fundamental policies, is contained in
the SAIs.
 
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.
 
As part of its regular banking operations, Norwest Bank 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
Bank. A lending relationship will not be a factor in the selection of portfolio
securities for a Fund.
 
GENERAL MONEY MARKET FUND GUIDELINES
 
Each Money Market Fund (which for purposes of this section, also includes Money
Market Portfolio and Prime Money Market Portfolio) invests only in high quality,
short-term money market instruments that are determined by Norwest, pursuant to
procedures adopted by 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.
 
As used herein, high quality instruments include those that: (1) 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 (2) are otherwise unrated and determined by
Norwest, pursuant to guidelines
 
60
<PAGE>
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.
 
COMMON POLICIES OF THE FUNDS
 
BORROWING
 
As a fundamental policy, each Money Market Fund, Income Fund, Total Return Bond
Fund, each Tax-Free Fixed Income Fund, ValuGrowth Stock Fund, Small Company
Stock Fund, Small Cap Opportunities Fund 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, Stable Income Fund, Intermediate
Government Income Fund, Limited Term 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,
Diversified Small Cap 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 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 Portfolio,
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 - Borrowing and
Techniques Involving Leverage.")
 
REPURCHASE AGREEMENTS AND LENDING OF PORTFOLIO SECURITIES
 
Each Fund (except for Treasury 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
 
                                                                              61
<PAGE>
proceedings were commenced against a counterparty in these transactions or a
counterparty defaulted on its obligations, a Fund may have difficulties in
exercising its rights to the underlying securities, may incur costs and
experience time delays in disposing of them and may 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 limit securities lending to not more than 33
1/3% (25% in the case of Small Cap Opportunities Fund) of the value of its total
assets.
 
DIVERSIFICATION AND CONCENTRATION
 
Each Fund (other than Colorado Tax-Free Fund, Minnesota Intermediate 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, a diversified fund may not purchase a security
(other than a U.S. Government Security or shares of investment companies) if, as
a result: (1) more than 5% of the Fund's total assets would be invested in the
securities of a single issuer; or (2) the Fund would own more than 10% of the
outstanding voting securities of any single issuer. Except for Cash investment
Fund and Ready Cash Investment Fund, each Fund is prohibited from concentrating
its assets in the securities of issuers in any industry. As a fundamental
policy, no Fund (other than Cash Investment Fund and Ready Cash Investment 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. Each
Fund reserves the right to invest up to 100% of its investable assets in one or
more investment companies such as the Core Portfolios.
 
ILLIQUID SECURITIES
 
Each of the Funds limits its purchase of illiquid securities. No Fund may
knowingly acquire securities or invest in repurchase agreements with respect to
any securities if, as a result, more than 15 percent (10 percent in the case of
the Money Market Funds) of the Fund's net assets taken at current value would be
invested in securities which are not readily marketable. Illiquid securities are
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount at which the Fund has valued the
securities and include, among other things, repurchase agreements not entitling
the holder to payment within seven days and restricted securities (other than
those determined to be liquid pursuant to guidelines established by the Board or
Core Board). Under the supervision of the Board or Core Board, the Advisers
determine and monitor the liquidity of the portfolio securities.
 
FIXED INCOME INVESTMENTS AND THEIR CHARACTERISTICS
 
Although each Fund (other than Minnesota Intermediate Tax-Free Fund, Minnesota
Tax-Free Fund and Small Cap Opportunities 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.
 
62
<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. 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 an investment adviser 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. Norwest 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
 
                                                                              63
<PAGE>
obligations upon a specified number of days' notice. These obligations generally
are not traded, nor generally is there an established secondary market for these
obligations. To the extent a demand note does not have a seven day or shorter
demand feature and there is no readily available market for the obligation, it
is treated as an illiquid security.
 
Certain securities may have an initial principal amount that varies over time
based on an interest rate index, and, accordingly, a Fund might be entitled to
less than the initial principal amount of the security upon the security's
maturity. The Funds intend to purchase these securities only when Norwest
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 Intermediate Tax-Free Fund, Minnesota
Tax-Free Fund, Diversified Bond Fund, Income Fund and Strategic Value Bond Fund)
Small Cap Opportunities Fund) will generally buy debt securities that are rated
in the top four long-term rating categories by an NRSRO or in the top two
short-term rating categories by an NRSRO, although certain Funds have greater
restrictions. Accordingly, the lowest permissible long-term investment grades
for corporate bonds, including convertible bonds, are "Baa" in the case of
Moody's Investor Service ("Moody's") and "BBB" in the case of Standard & Poor's
("S&P") and Fitch Investors Services, L.P. ("Fitch"); the lowest permissible
long-term investment grades for preferred stock are "Baa" in the case of Moody's
and "BBB" in the case of S&P and Fitch; and the lowest permissible short-term
investment grades for short-term debt, including commercial paper, are Prime-2
(P-2) in the case of Moody's, "A-2" in the case of S&P and "F-2" in the case of
Fitch.
 
The Funds also may purchase unrated securities if the Fund's 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 an
Adviser to be of comparable quality to securities whose rating has been lowered
below the Fund's lowest permissible rating category) if an Adviser determines
that retaining the security is in the best interests of the Fund. Because a
downgrade often results in a reduction in the market price of the security, sale
of a downgraded security may result in a loss.
 
TEMPORARY DEFENSIVE POSITION
 
When business or financial conditions warrant, each Fund may assume a temporary
defensive position and invest without limit in cash or prime quality cash
equivalents, including: (1) short-term U.S. Government Securities; (2)
certificates of deposit, bankers acceptances and interest-bearing savings
deposits of commercial banks doing business in the United States (United States
banks in the case of Small Cap Opportunities Fund); (3) commercial paper; (4)
repurchase agreements; and (5) 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 (in United States
banks in the case of Small Cap Opportunities Fund). Except during periods when
the Fund assumes a temporary defensive position, each Equity Fund and Aggressive
Balanced - Equity Fund will have at least 65% of its total assets invested in
common stock and International
 
64
<PAGE>
Fund will have at least 65% of its net assets invested in securities of
companies domiciled outside the United States. International Portfolio and
Schroder EM Core Portfolio and may hold cash and bank instruments denominated in
any major foreign currency.
 
When a Tax-Exempt Fixed Income Fund assumes a temporary defensive position, it
is likely that its shareholders will be subject to federal and applicable state
income taxes on a greater portion of their income dividends received from the
Fund.
 
PORTFOLIO TRANSACTIONS
 
The Advisers monitor 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.
 
The Advisers place orders for the purchase and sale of assets they manage with
brokers and dealers selected by and in the discretion of the respective adviser.
The Advisers seek "best execution" for all portfolio transactions, but a Fund
may pay higher than the lowest available commission rates when an 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 or the Core
Boards, 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." Norwest anticipates that the annual portfolio turnover rate of
Limited Term Government Income Fund, Minnesota Intermediate Tax-Free Fund, and
Diversified Small Cap Fund will be less than 100% in their 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.
 
5. MANAGEMENT OF THE FUNDS
 
The business of the Trust is managed under the direction of the Board of
Trustees, and the business of each Core Portfolio is managed under the direction
of that investment company's Core 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 eight persons.
 
                                                                              65
<PAGE>
INVESTMENT ADVISORY SERVICES
 
NORWEST INVESTMENT MANAGEMENT. Subject to the general supervision of the Board,
Norwest Investment Management, Inc. makes investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program
or oversees the investment decisions of the investment subadvisers, as
applicable. Norwest provides its investment advisory services indirectly to each
Fund that operates in a Core and Gateway Structure (other than Schroder U.S.
Smaller Companies Portfolio, Schroder EM Core Portfolio and International
Portfolio) through its investment advisory services of the Core Portfolios. In
addition, subject to the general supervision of the Board, Norwest continuously
reviews and determines the allocation of the assets of Diversified Bond Fund,
Strategic Income Fund, Moderate Balanced Fund, Growth Balanced Fund, Aggressive
Balanced-Equity Fund, Diversified Equity Fund, Growth Equity Fund, Diversified
Small Cap Fund and International Fund among the various investment styles and
Core Portfolios in which those Funds invest. Norwest, which is located at
Norwest Center, Sixth Street and
 
Marquette, Minneapolis, Minnesota 55479, is an indirect subsidiary of Norwest
Corporation, a multi-bank holding company that was incorporated under the laws
of Delaware in 1929. As of June 30, 1997, Norwest Corporation had assets of
$83.6 billion, which made it the 11th largest bank holding company in the United
States. As of June 30, 1997, Norwest and its affiliates managed assets with a
value of approximately $52.9 billion.
 
SMALL CAP OPPORTUNITIES FUND AND INTERNATIONAL FUND. Subject to the general
supervision of the Core Boards, Schroder Capital Management International Inc.
makes investment decisions for Schroder U.S. Smaller Companies Portfolio,
International Portfolio and Schroder EM Core Portfolio and continuously reviews,
supervises and administers those Portfolio's investment programs.
 
INVESTMENT SUBADVISERS. To assist Norwest in carrying out its obligations,
certain of the Core Portfolios and Norwest, and Contrarian Stock Fund and
Norwest, have retained the services of the Subadvisers as follows:
 
<TABLE>
<CAPTION>
                                                                                                   INVESTMENT
                                                                                                   SUBADVISER
FUND                                           CORE PORTFOLIO(S)                               OF CORE PORTFOLIO
- ---------------------------------------------  ---------------------------------------------  --------------------
<S>                                            <C>                                            <C>
Stable Income Fund                             Stable Income Portfolio                        Galliard
Diversified Bond Fund                          Positive Return Bond Portfolio                 Peregrine
                                               Strategic Value Bond Portfolio                 Galliard
                                               Managed Fixed Income Portfolio                 Galliard
Total Return Bond Fund                         Total Return Bond Portfolio                    UCM
Strategic Income Fund                          Stable Income Portfolio                        Galliard
                                               Positive Return Bond Portfolio                 Peregrine
                                               Strategic Value Bond Portfolio                 Galliard
                                               Managed Fixed Income Portfolio                 Galliard
                                               Large Company Growth Portfolio                 Peregrine
                                               Disciplined Growth Portfolio                   Smith
                                               Small Company Stock Portfolio                  Crestone
                                               Small Company Growth Portfolio                 Peregrine
                                               Small Company Value Portfolio                  Peregrine
                                               Small Cap Value Portfolio                      Smith
Moderate Balanced Fund                         Stable Income Portfolio                        Galliard
                                               Positive Return Bond Portfolio                 Peregrine
                                               Strategic Value Bond Portfolio                 Galliard
                                               Managed Fixed Income Portfolio                 Galliard
                                               Large Company Growth Portfolio                 Peregrine
                                               Disciplined Growth Portfolio                   Smith
                                               Small Company Stock Portfolio                  Crestone
                                               Small Company Growth Portfolio                 Peregrine
</TABLE>
 
66
<PAGE>
<TABLE>
<CAPTION>
                                                                                                   INVESTMENT
                                                                                                   SUBADVISER
FUND                                           CORE PORTFOLIO(S)                               OF CORE PORTFOLIO
- ---------------------------------------------  ---------------------------------------------  --------------------
                                               Small Company Value Portfolio                  Peregrine
<S>                                            <C>                                            <C>
                                               Small Cap Value Portfolio                      Smith
Growth Balanced Fund                           Positive Return Bond Portfolio                 Peregrine
                                               Strategic Value Bond Portfolio                 Galliard
                                               Managed Fixed Income Portfolio                 Galliard
                                               Large Company Growth Portfolio                 Peregrine
                                               Disciplined Growth Portfolio                   Smith
                                               Small Company Stock Portfolio                  Crestone
                                               Small Company Growth Portfolio                 Peregrine
                                               Small Company Value Portfolio                  Peregrine
                                               Small Cap Value Portfolio                      Smith
Aggressive Balanced-Equity Fund                Positive Return Bond Portfolio                 Peregrine
                                               Strategic Value Bond Portfolio                 Galliard
                                               Managed Fixed Income Portfolio                 Galliard
                                               Large Company Growth Portfolio                 Peregrine
                                               Disciplined Growth Portfolio                   Smith
                                               Small Company Stock Portfolio                  Crestone
                                               Small Company Growth Portfolio                 Peregrine
                                               Small Company Value Portfolio                  Peregrine
                                               Small Cap Value Portfolio                      Smith
Diversified Equity Fund                        Large Company Growth Portfolio                 Peregrine
                                               Disciplined Growth Portfolio                   Smith
                                               Small Company Stock Portfolio                  Crestone
                                               Small Company Growth Portfolio                 Peregrine
                                               Small Company Value Portfolio                  Peregrine
                                               Small Cap Value Portfolio                      Smith
Large Company Growth Fund                      Large Company Growth Portfolio                 Peregrine
Small Company Stock Fund                       Small Company Stock Portfolio                  Crestone
Small Company Growth Fund                      Small Company Growth Portfolio                 Peregrine
Diversified Small Cap Fund                     Small Company Stock Portfolio                  Crestone
                                               Small Company Growth Portfolio                 Peregrine
                                               Small Company Value Portfolio                  Peregrine
                                               Small Cap Value Portfolio                      Smith
Contrarian Stock Fund                          N/A                                            UCM
</TABLE>
 
Galliard, UCM, Peregrine, Crestone and Smith make investment decisions for the
Fund or Core Portfolios to which they act as investment subadviser and
continuously review, supervise and administer those Funds' or Core Portfolios'
investment programs with respect to that portion, if any, of the Fund's or
Portfolio's assets that Norwest believes should be managed by the Subadviser.
Currently, each Subadviser manages all of the assets of each Fund and Core
Portfolio that it subadvises. Norwest supervises the performance of each
Subadviser, including their adherence to the Funds' and Portfolios' investment
objectives and policies.
 
CRESTONE CAPITAL MANAGEMENT, INC. Crestone, which is located at 7720 East
Belleview Avenue, Suite 220, Englewood Colorado 80111, is an investment adviser
subsidiary of Norwest Bank. Crestone provides investment advice regarding
companies with small market capitalization to various clients, including
institutional investors. As of June 30, 1997, Crestone managed assets with a
value of approximately $534 million.
 
                                                                              67
<PAGE>
GALLIARD CAPITAL MANAGEMENT, INC. Galliard, which is located at 800 LaSalle
Avenue, Suite 2060, Minneapolis, Minnesota 55479, is an investment advisory
subsidiary of Norwest Bank. Galliard provides investment advisory services to
bank and thrift institutions, pension and profit sharing plans, trusts and
charitable organizations and corporate and other business entities. As of June
30, 1997 Galliard managed approximately $3.1 billion in assets.
 
PEREGRINE CAPITAL MANAGEMENT, INC. Peregrine, which is located at LaSalle Plaza,
800 LaSalle Avenue, Suite 1850, Minneapolis, Minnesota 55402, is an investment
adviser subsidiary of Norwest Bank. Peregrine provides investment advisory
services to corporate and public pension plans, profit sharing plans, savings-
investment plans and 401(k) plans. As of June 30, 1997 Peregrine managed
approximately $5.0 billion in assets.
 
SCHRODER CAPITAL MANAGEMENT INTERNATIONAL, INC. Schroder, whose principal
business address is 787 Seventh Avenue, New York, New York 10019, is a wholly
owned U.S. subsidiary of Schroders Incorporated (doing business in New York
State as Schroders Holdings), the wholly owned U.S. holding company subsidiary
of Schroders plc. Schroders plc is the holding company parent of a large
worldwide group of banks and financial services companies (referred to as the
"Schroder Group"), with associated companies and branch and representative
offices located in eighteen countries worldwide. The Schroder Group specializes
in providing investment management services and as of June 30, 1997 had assets
under management in excess of $175 billion.
 
SMITH ASSET MANAGEMENT GROUP, L.P. Smith Group, whose principal business address
is 500 Crescent Court, Suite 250, Dallas, Texas 75201 is a registered investment
adviser. Smith Group provides investment management services to company
retirement plans, foundations, endowments, trust companies, and high net worth
individuals using a disciplined equity style. As of June 13, 1997, the Smith
Group managed over $200 million in assets.
 
UNITED CAPITAL MANAGEMENT. UCM, which is located at 1700 Lincoln Street, Suite
3301, Denver, Colorado 80274, is a division of Norwest Bank Colorado, N.A., a
subsidiary of Norwest Corporation. UCM provides specialized investment advisory
services to various institutional pension accounts. As of June 30, 1997 UCM
managed over $2 billion in assets.
 
PORTFOLIO MANAGERS. Many persons on the advisory staffs of Norwest, Schroder and
each Subadviser contribute to the investment services provided to the Funds and
the Core Portfolios. The following persons, however, are primarily responsible
for day-to-day management and, unless otherwise noted, have been since the
inception of the Fund or Portfolio. For periods prior to June 1, 1997, all
persons associated with Norwest served in their current positions with Norwest
Bank. Prior to that date, Norwest Bank was each Fund's investment adviser. In
addition to their responsibilities as listed below, each of the portfolio
managers associated with Norwest may perform portfolio management and other
duties for Norwest Bank.
 
    CASH INVESTMENT FUND/READY CASH INVESTMENT FUND/MONEY MARKET PORTFOLIO/PRIME
    MONEY MARKET PORTFOLIO - David D. Sylvester and Laurie R. White. Mr.
    Sylvester has been associated with Norwest since 1979, and as a Vice
    President and Senior Portfolio Manager since 1985. 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. Ms. White
    began serving as a portfolio manager of Cash Investment Fund and Ready Cash
    Investment Fund in 1991.
 
    U.S. GOVERNMENT FUND - David D. Sylvester and Laurie R. White. For a
    description of Mr. Sylvester and Ms. White, see "Cash Investment Fund/Ready
    Cash Investment Fund." Ms. White began serving as a portfolio manager of the
    Fund in 1991.
 
68
<PAGE>
    TREASURY FUND - David D. Sylvester and Laurie R. White. For a description of
    Mr. Sylvester and Ms. White, see "Cash Investment Fund/Ready Cash Investment
    Fund." 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 "Cash Investment Fund/Ready Cash Investment Fund."
 
    STABLE INCOME FUND/STABLE INCOME PORTFOLIO - Karl P. Tourville. Mr.
    Tourville has been a principal of Galliard since 1995. He has been
    associated with Norwest and its affiliates since 1986, most recently as Vice
    President and Senior Portfolio Manager of Norwest Bank.
 
    LIMITED TERM GOVERNMENT INCOME FUND AND INTERMEDIATE GOVERNMENT INCOME FUND
    - Marjorie H. Grace, CFA. Ms. Grace has been a 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 - The day-to-day management of the Fund, with respect
    to the portion of the Fund's assets that is invested in a particular Core
    Portfolio, is performed by the portfolio managers listed for the Core
    Portfolio.
 
    INCOME FUND - Ms. Marjorie H. Grace, CFA. For a description of Ms. Grace,
    see "Intermediate Government Income Fund." Ms. Grace has served as a
    portfolio manager for the Fund since May 1995.
 
    TOTAL RETURN BOND FUND/TOTAL RETURN BOND PORTFOLIO - Mr. David B. Kinney.
    Mr. Kinney is a Vice President of UCM. He has been associated with Norwest
    and its affiliates since 1981.
 
    LIMITED TERM TAX-FREE FUND - Mr. William T. Jackson, CFA. Mr. Jackson 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, CFA. For a description of Mr.
    Jackson, see "Limited Term Tax-Free Fund." Mr. Jackson has served as
    portfolio manager of the Fund since 1993.
 
    COLORADO TAX-FREE FUND - Mr. William T. Jackson, CFA. For a description of
    Mr. Jackson, see "Limited Tax-Free Income Fund." Mr. Jackson has served as
    portfolio manager of the Fund since July 1995.
 
    MINNESOTA INTERMEDIATE TAX-FREE FUND AND MINNESOTA TAX-FREE FUND - Ms.
    Patricia D. Hovanetz, CFA. Ms. Hovanetz, a Vice President of Norwest, has
    been associated with Norwest for more than 25 years in various capacities
    related to municipal bond investments. Ms. Hovanetz has been a municipal
    bond fund portfolio manager since 1988 and has served as portfolio manager
    of the Fund since 1991.
 
    STRATEGIC INCOME FUND, MODERATE BALANCED FUND, GROWTH BALANCED FUND AND
    AGGRESSIVE BALANCED-EQUITY FUND - The day-to-day management of each Fund,
    with respect to the portion of the Fund's assets that is invested in a
    particular Core Portfolio, is performed by the portfolio managers listed for
    the Core Portfolio.
 
    INDEX FUND/INDEX PORTFOLIO - David D. Sylvester and Laurie R. White. Mr.
    Sylvester and Ms. White began serving as portfolio managers of Index
    Portfolio in January, 1996. For a description of Mr. Sylvester and Ms.
    White, see "Cash Investment Fund/Ready Cash Investment Fund."
 
                                                                              69
<PAGE>
    INCOME EQUITY FUND /INCOME EQUITY PORTFOLIO - David L. Roberts. Mr. Roberts
    has been a Senior Vice President of Norwest since 1991. Mr. Roberts has been
    associated with Norwest and its affiliates for over 20 years in various
    investment related capacities.
 
    VALUGROWTH STOCK FUND - Mr. David S. Lunt, CFA. Mr. Lunt is a Vice President
    of Norwest and has been associated with Norwest and its affiliates since
    1992. Prior thereto he was a portfolio manager for FirsTier Bank and a
    securities analyst for Woodmen Accident and Life Company. Mr. Lunt began
    serving as portfolio manager of ValuGrowth Stock Fund in February, 1996.
 
    DIVERSIFIED EQUITY FUND AND GROWTH EQUITY FUND - The day-to-day management
    of each Fund, with respect to the portion of the Fund's assets that is
    invested in a particular Core Portfolio, is performed by the portfolio
    managers listed for the Core Portfolio.
 
    LARGE COMPANY GROWTH FUND /LARGE COMPANY GROWTH PORTFOLIO - John S. Dale,
    CFA. Mr. Dale is a Senior Vice President of Peregrine. Mr. Dale has held
    various investment management positions with Norwest, Peregrine and their
    affiliates since 1968.
 
    DIVERSIFIED SMALL CAP FUND - The day-to-day management of the Fund, with
    respect to the portion of the Fund's assets that is invested in a particular
    Core Portfolio, is performed by the portfolio managers listed for the Core
    Portfolio.
 
    SMALL COMPANY STOCK FUND /SMALL COMPANY STOCK PORTFOLIO - Kirk McCown, CFA.
    Mr. McCown is founder, President and a Director of Crestone, which was
    incorporated in 1990.
 
    SMALL COMPANY GROWTH FUND/SMALL COMPANY GROWTH PORTFOLIO - Robert B. Mersky,
    CFA and Paul E. von Koster, CFA. Mr. Mersky is the President of Peregrine
    Capital Management, Inc. Mr. Mersky has held various investment management
    positions with Norwest, Peregrine and their affiliates since 1977. From 1980
    to 1984 he was head of investments for Norwest Bank. Mr. von Koster is a
    Senior Vice President of Peregrine. Mr. von Koster has held various
    investment management positions with Peregrine, Norwest and their affiliates
    since 1972.
 
    SMALL CAP OPPORTUNITIES FUND/SCHRODER U.S. SMALLER COMPANIES PORTFOLIO - Ms.
    Fariba Talebi. Ms. Talebi is a Group Vice President of Schroder, with the
    assistance of a small cap investment team is primarily responsible for the
    day-to-day management of the Portfolio's investments. Ms. Talebi has been
    employed by Schroder in the investment research and portfolio management
    areas since 1987.
 
    CONTRARIAN STOCK FUND - Mr. W. Lon Schreur, CFA. Mr. Schreur is the
    President of UCM, a position he has held for sixteen years.
 
    INTERNATIONAL FUND - The day-to-day management of the Fund, with respect to
    the portion of the Fund's assets that is invested in a particular Core
    Portfolio, is performed by the portfolio managers listed for the Core
    Portfolio.
 
    POSITIVE RETURN BOND PORTFOLIO - William D. Giese, CFA. Mr. Giese is a
    Senior Vice President of Peregrine. Mr. Giese has been a portfolio manager
    of Peregrine over ten years and has over 20 years experience in fixed income
    securities management.
 
    STRATEGIC VALUE BOND PORTFOLIO - Richard Merriam. Senior Portfolio
    Manager/Principal of Galliard since 1995. Mr. Merriam directs the management
    of fixed income portfolios and oversees the trading and research functions
    at Galliard. Prior to joining Galliard, Mr. Merriam was Chief Investment
    Officer of Insight Investment Management. Before that, he served as a Senior
    Vice President at Washington Square Capital, where he oversaw management of
    nearly $5.0 billion in assets. Mr. Merriam has over 13 years investment
    management experience. He obtained a BA from the University of Michigan and
    a MBA from the University of Minnesota.
 
70
<PAGE>
    MANAGED FIXED INCOME PORTFOLIO - Richard Merriam. Mr. Merriam has been a
    principal of Galliard since 1995. Prior thereto, he was the Chief Investment
    Officer of Insight Investment Management and prior thereto was associated
    with Washington Square Capital.
 
    DISCIPLINED GROWTH PORTFOLIO - Stephen S. Smith, CFA. Mr. Smith is the Chief
    Investment Officer for Smith Group and is a principal in the firm. He has
    held this position since November, 1995. Prior thereto, Mr. Smith served as
    senior portfolio manager with NationsBank where he managed approximately $1
    billion of client assets. At NationsBank, Mr. Smith held a variety of
    management positions including manager of the institutional asset management
    group, manager of the disciplined equity style and member of the Investment
    Policy Committee. At NationsBank he also served as sub-adviser for a
    portfolio of AIM Management Company's Summit Fund. His educational
    background includes a B.S. in Industrial Engineering and an M.B.A., both
    received from the University of Alabama. He was awarded the Chartered
    Financial Analyst (CFA) designation in 1981.
 
    SMALL CAP INDEX PORTFOLIO - David D. Sylvester and Laurie R. White. For a
    description of Mr. Sylvester and Ms. White, see "Cash Investment Fund/Ready
    Cash Investment Fund."
 
    SMALL COMPANY VALUE PORTFOLIO - Tasso H. Coin, Jr. Mr. Coin has been a
    Senior Vice President of Peregrine since 1995. From 1992 to 1995 he was a
    research officer at Lord Asset Management, an investment adviser and prior
    thereto was associated with Morgan Stanley Asset Management.
 
    SMALL CAP VALUE PORTFOLIO - Stephen S. Smith, CFA. Mr. Smith is the Chief
    Investment Officer for Smith Group and is a principal in the firm. He has
    held this position since November, 1995. Prior thereto, Mr. Smith served as
    senior portfolio manger with NationsBank where he managed approximately $1
    billion of client assets. At NationsBank, Mr. Smith held a variety of
    management positions including manager of the institutional asset management
    group, manager of the disciplined equity style used in a mutual fund and
    member of the Investment Policy Committee. At NationsBank he also served as
    sub-adviser for an identified segment in the disciplined equity style for an
    unaffiliated mutual fund.
 
    INTERNATIONAL PORTFOLIO - Michael Perelstein, a Senior Vice President of
    Schroder, with the assistance of an SCMI investment committee, are primarily
    responsible for the day-to-day management of the Portfolio's investment
    portfolio. Mr. Perelstein has been a Senior Vice President of Schroder since
    January 2, 1997. Prior thereto, Mr. Perelstein was a Managing Director at
    MacKay Shields. Mr. Perelstein has more than twelve years of international
    and global investment experience. Since January 1997, Mr. Perelstein has
    served as portfolio manager of International Portfolio.
 
    SCHRODER EM CORE PORTFOLIO - John A. Troiano, a Vice President of Schroder
    Capital Funds (Delaware) and Schroder Core, assisted by the management team
    of Heather Crighton and Mark Bridgeman, are responsible for the day-to-day
    management of the investment portfolio. Mr. Troiano, Chief Executive Officer
    of Schroder since April 1, 1997, has been a Managing Director of Schroder
    since October 1995 and has been employed by various Schroder Group companies
    in the investment research and portfolio management areas since 1981. Ms.
    Crighton is a Vice President of Schroder and has been employed by various
    Schroder Group companies in the investment research and portfolio management
    areas since 1992. Mr. Bridgeman, also a Vice President of Schroder has been
    employed by various Schroder Group companies in the investment research and
    portfolio management areas since 1990.
 
ADVISORY FEES. For their services, Norwest and Schroder receive investment
advisory fees from the Funds (or to the extent a Fund invests in a single Core
Portfolio, from that Core Portfolio) at the following annual rates of the Fund's
or Portfolio's average daily net assets.
 
                                                                              71
<PAGE>
 
<TABLE>
<CAPTION>
FUND                                                                             INVESTMENT ADVISORY FEE
- ----------------------------------------------------------------------  ------------------------------------------
<S>                                                                     <C>
Cash Investment Fund
  (Prime Money Market Portfolio)                                        0.40% (first $300 million of assets)
                                                                        0.36% (next $400 million of assets)
                                                                        0.32% (remaining assets)
  (Money Market Portfolio)                                              0.20% (first $300 million of assets)
                                                                        0.16% (next $400 million of assets)
                                                                        0.12% (remaining assets)
 
Ready Cash Investment Fund
  (Prime Money Market Portfolio)                                        0.40% (first $300 million of assets)
                                                                        0.36% (next $400 million of assets)
                                                                        0.32% (remaining assets)
 
U.S. Government Fund and Treasury Fund                                  0.20% (first $300 million of assets)
                                                                        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 (Stable Income Portfolio)                                              0.30%
Limited Term Government Income Fund                                                       0.33%
Intermediate Government Income Fund                                                       0.33%
Income Fund                                                                               0.50%
Total Return Bond Fund (Total Return Bond Portfolio)                                      0.35%
Limited Term Tax-Free Fund                                                                0.50%
Tax-Free Income Fund                                                                      0.50%
Colorado Tax-Free Fund, Minnesota Intermediate Tax-Free
  Fund and Minnesota Tax-Free Fund                                      0.50% (first $300 million of assets)
                                                                        0.46% (next $400 million of assets)
                                                                        0.42% (remaining assets)
Index Fund (Index Portfolio)                                                              0.15%
Income Equity Fund (Income Equity Portfolio)                                              0.50%
ValuGrowth Stock Fund                                                   0.80% (first $300 million of assets)
                                                                        0.76% (next $400 million of assets
                                                                        0.72% (remaining assets)
 
Large Company Growth Fund
  (Large Company Growth Portfolio)                                                        0.65%
Small Company Stock Fund
  (Small Company Stock Portfolio)                                                         0.90%
Small Company Growth Fund
  (Small Company Growth Portfolio)                                                        0.90%
Small Cap Opportunities Fund
  (Schroder U.S. Smaller Companies Portfolio)                                             0.60%
Contrarian Stock Fund                                                      0.80% (first $300 million of assets)
                                                                           0.76% (next $400 million of assets)
                                                                        0.72% (remaining assets)
</TABLE>
 
72
<PAGE>
With respect to Diversified Bond Fund, Strategic Income Fund, Moderate Balanced
Fund, Growth Balanced Fund, Aggressive Balanced-Equity Fund, Diversified Equity
Fund, Growth Equity Fund, Diversified Small Cap Fund and International Fund,
Norwest is entitled to receive investment advisory fees for its Asset Allocation
Services at a maximum annual rate of 0.25% of each Fund's average daily net
assets. No advisory fee for Asset Allocation Services is payable by
International Fund until December 1, 1997. In addition, each Fund bears an
investment advisory fee at a blended rate based on the investment advisory fee
of the Core Portfolios in which the Fund invests. Norwest and Schroder receive
investment advisory fees from the Core Portfolios at the following annual rates
of the Portfolios' average daily net assets. The total fee payable by a Fund
through its investments in Core Portfolios will vary based on the percentage of
its assets invested in each Core Portfolio.
 
<TABLE>
<CAPTION>
FUND OR CORE PORTFOLIO                                                            INVESTMENT ADVISORY FEE
- ------------------------------------------------------------------------  ----------------------------------------
 
<S>                                                                       <C>
Money Market Portfolio                                                      0.20% (first $300 million of assets)
                                                                            0.16% (next $400 million of assets)
                                                                                  0.12% (remaining assets)
Stable Income Portfolio                                                                    0.30%
Positive Return Bond Portfolio                                                             0.35%
Strategic Value Bond Portfolio                                                             0.50%
Managed Fixed Income Portfolio                                                             0.35%
Index Portfolio                                                                            0.15%
Income Equity Portfolio                                                                    0.50%
Large Company Growth Portfolio                                                             0.65%
Discplined Growth Portfolio                                                                0.90%
Small Cap Index Portfolio                                                                  0.25%
Small Company Stock Portfolio                                                              0.90%
Small Company Growth Portfolio                                                             0.90%
Small Company Value Portfolio                                                              0.90%
Small Cap Value Portfolio                                                                  0.95%
International Portfolio                                                                    0.45%
Schroder EM Core Portfolio                                                                 1.00%
</TABLE>
 
Norwest (and not the Funds or Core Portfolios) pays each Subadviser a fee for
their investment subadvisory services. This compensation does not increase the
amount paid by the Funds or Core Portfolios to Norwest for investment advisory
services.
 
Each Fund investing its assets in one or more Core Portfolios may withdraw its
investments from its corresponding Core Portfolio(s) at any time if the Board
determines that it is in the best interests of the Fund to do so. (See "Other
Information - Core and Gateway Structure.") Accordingly, each of these Funds has
retained Norwest as its investment adviser. Similarly, in the event that a Fund
withdraws its investment from a Core Portfolio, to the extent the Fund invested
in a Core Portfolio advised by Schroder or a Subadviser, the Fund has retained
Schroder and that Subadviser as an investment subadviser. Under these "dormant"
investment advisory arrangements, none of Norwest, Schroder or any Subadviser
receives any advisory fees with respect to a Fund as long as the Fund remains
completely invested in its respective Core Portfolio(s) or any other investment
companies. In the event that Stable Income Fund, Total Return Bond Fund, Index
Fund, Income Equity Fund, Large Company Growth Fund, Small Company Stock Fund,
Small Company Growth Fund or Small Cap Opportunities Fund were to withdraw there
assets from their respective Core Portfolio, Norwest would receive an investment
advisory fee at an annual rate of 0.30%, 0.35%, 0.15%, 0.50%, 0.65%, 0.90%,
0.90% and 0.925% of the Funds' average daily net assets, respectively.
Similarly, to the extent Diversified Bond Fund, Strategic Income Fund, Moderate
Balanced Fund, Growth Balanced Fund, Aggressive Balanced-Equity Fund,
Diversified Equity Fund, Growth Equity Fund, Diversified Small
 
                                                                              73
<PAGE>
Cap Fund or International Fund were to withdraw any or all of their assets from
their respective Core Portfolios, Norwest would receive an investment advisory
fee on the withdrawn assets at an annual rate of 0.35%, 0.48%, 0.53%, 0.58%,
0.63%, 0.65%, 0.90%, 0.90% and 0.85% of the Funds' average daily net assets,
respectively. To the extent Cash Investment Fund was to withdraw any or all of
its assets from its respective Core Portfolios, Norwest would receive an
investment advisory fee at the annual rate equal to that paid by Money Market
Portfolio. To the extent Ready Cash Investment Fund was to withdraw any or all
of its assets from its respective Core Portfolio, Norwest would receive an
investment advisory fee at the rate equal to that paid by Prime Money Market
Portfolio. Pursuant to the Funds' dormant investment subadvisory agreement,
Norwest (and not the Funds) would pay Schroder and each Subadviser, as
applicable, a fee for its investment subadvisory services.
 
MANAGEMENT, ADMINISTRATION AND DISTRIBUTION SERVICES
 
As manager Forum supervises the overall management of the Trust (including the
Trust's receipt of services for which the Trust is obligated to pay) other than
investment advisory services. In this capacity Forum 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 Funds by others. FAS is responsible for
performing certain administrative services necessary for the Trust's operations
with respect to each Fund including, but not limited to: (1) preparing and
printing updates of the Trust's registration statement and prospectuses, to its
shareholders, the SEC and state securities administrators; (2) preparing proxy
and information statements and any other communications to shareholders; (3)
monitoring the sale of shares and ensuring that such shares are properly and
duly registered with the SEC and applicable state securities administrators; and
(4) supervising the declaration of dividends and distributions to shareholders.
 
As of June 30, 1997, Forum and FAS provided management and administrative
services to registered investment companies and collective investment funds with
assets of approximately $25.5 billion. Forum is a member of the National
Association of Securities Dealers, Inc. For their services, Forum and FAS each
receives a fee with respect to U.S. Government Fund, Treasury Fund,
Institutional Shares of Municipal Money Market Fund, Limited Term Government
Income Fund, Intermediate Government Income Fund, Income Fund, each Tax-Free
Fixed Income Fund, ValuGrowth Stock Fund, Contrarian Stock Fund and
International Fund at an annual rate of 0.05% of the Fund's (of class') average
daily net assets, with respect to Investor Shares of Municipal Money Market Fund
at an annual rate of 0.10% of the class' average daily net assets, with respect
to Investor Shares of Ready Cash Investment Fund at an annual rate of 0.075% of
the class' average daily net asset, and with respect to each other Fund at an
annual rate of 0.025% of the Fund's average daily net assets.
 
FAS also serves as an administrator of each Core Portfolio (except Schroder U.S.
Smaller Companies Portfolio and Schroder EM Core Portfolio) and provides
services to the Core Portfolios that are similar to those provided to the Funds
by Forum and FAS. For its services FAS receives a fee with respect to each Core
Portfolio (other than Schroder U.S. Smaller Companies Portfolio and Schroder EM
Core Portfolio) at an annual rate of 0.05% of the Portfolio's average daily net
assets (0.15% in the case of International Portfolio). Schroder Advisors Inc.
("Schroder Advisors") serves as the administrator of Schroder U.S. Smaller
Companies Portfolio and Schroder EM Core Portfolio and FAS serves as the
subadministrator of those Portfolios. Schroder Advisors and FAS provide certain
management and administrative services necessary for the Portfolios' operations,
other than the administrative services provided to the Portfolios by Schroder.
For their services, Schroder Advisors receives no fee from Schroder U.S. Smaller
Companies Portfolio and 0.075% from Schroder EM Core Portfolio and FAS receives
a fee at an annual rate of 0.10% of each Portfolio's average daily net assets.
 
In addition, pursuant to a separate agreement, Norwest receives a fee with
respect to Small Cap Opportunities Fund and International Fund at an annual rate
of 0.25% of the Funds' average daily net assets. Under
 
74
<PAGE>
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, monitoring and reporting to the
Board on the performance of the applicable Core Portfolio and reimbursing the
Fund for certain excess expenses. No fees are payable under this agreement if
the Fund is not completely invested in a Core Portfolio. Small Cap Opportunities
Fund and International Fund incur total management and administrative fees at a
higher rate than many other mutual funds, including other funds of the Trust.
 
Pursuant to a separate agreement, Forum Accounting Services, LLC ("Forum
Accounting") provides portfolio accounting services to each Fund and to each
Core Portfolio. Forum, FAS, and Forum Accounting 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, 1997,
Forum, FAS and Forum Accounting were controlled by John Y. Keffer, President and
Chairman of the Trust.
 
Forum also acts as the distributor of the Shares but receives no fees for these
services. From its own resources, Forum may pay fees to broker-dealers or other
persons for distribution or other services related to the Funds. None of the
Funds has adopted a plan of distribution applicable to the Shares.
 
SHAREHOLDER SERVICING AND CUSTODY
 
Norwest Bank serves as transfer agent and dividend disbursing agent for the
Trust (in this capacity, the "Transfer Agent"). The Transfer Agent maintains an
account for each shareholder of the Trust (unless such accounts are maintained
by sub-transfer agents or processing agents), performs other transfer agency
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. 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 services, the Transfer Agent receives a
fee with respect to each Fund at an annual rate of 0.25% of each Fund's average
daily net assets attributable to each class of the Fund (0.20% in the case of
Cash Investment Fund and 0.10% in the case of Municipal Money Market Fund -
Institutional Shares).
 
Norwest Bank also serves as each Fund's and each Core Portfolio's (other than
Schroder U.S. Smaller Companies Portfolio and Schroder EM Core Portfolio)
custodian and may appoint subcustodians for the foreign securities and other
assets held in foreign countries. For its custodial services, Norwest Bank
receives a fee with respect to each Fund and each Core Portfolio at an annual
rate of 0.02% of the first $100 million of the Fund's or Core Portfolio's
average daily net assets, 0.015% of the next $100 million of the Fund's or Core
Portfolio's average daily net assets and 0.01% of the Fund's or Core Portfolio's
remaining average daily net assets. No fee is directly payable by a Fund to the
extent the Fund is invested in a Core Portfolio. With respect to International
Portfolio, Norwest receives a fee at an annual rate of 0.075% of the Portfolio's
average daily net assets. The Chase Manhattan Bank, N.A. serves as custodian of
Schroder U.S. Smaller Companies Portfolio and Schroder EM Core Portfolio and is
paid a fee for its services.
 
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. Each service provider to a Fund may
elect to waive (or continue to waive) all or a portion of their
 
                                                                              75
<PAGE>
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. Fee waivers are voluntary and may be reduced or eliminated at any
time.
 
Each Fund bears all costs of its operations. The costs borne by the Funds
include a pro rata portion of the following: legal and accounting expenses;
Trustees' fees and expenses; insurance premiums, custodian and transfer agent
fees and expenses; brokerage fees and expenses; expenses of registering and
qualifying the Fund's shares for sale with the SEC and with various state
securities commissions; expenses of obtaining quotations on fund securities and
pricing of the Fund's shares; a portion of the expenses of maintaining the
Fund's legal existence and of shareholders' meetings; and expenses of
preparation and distribution to existing shareholders of reports, proxies and
prospectuses. Trust expenses directly attributed to the Fund are charged to the
Fund; other expenses are allocated proportionately among all the series of the
Trust in relation to the net assets of each series.
 
Norwest has agreed to waive its investment advisory fee for Money Market
Portfolio through May 31, 1999 to the extent that the fee exceeds an annual rate
of 0.10% of the Portfolio's average daily net assets. In addition, Norwest and
Forum have agreed to waive their respective fees or reimburse expenses in order
to maintain Cash Investment Fund's total combined operating expenses through May
31, 1999 at the same level as the Fund's total operating expenses prior to May
31, 1997 (0.48%). Any reduction or elimination of the Waiver, however, would
require Board approval (and notice to shareholders), which would be given only
if the Board determined that the amount of the fees to be paid to Norwest or
Forum after the reduction or elimination would be fair and reasonable.
 
Norwest and Forum have agreed to waive their respective fees or reimburse
expenses in order to maintain each of Ready Cash Investment Fund's, Total Return
Bond Fund's and Small Company Stock Fund's total combined operating expenses
through May 31, 1998 at the same levels as the respective Fund's total operating
expenses prior to May 31, 1997 (0.82% in the case of Ready Cash Investment Fund
Investor Shares, 0.75% in the case of Total Return Bond Fund and 1.20% in the
case of Small Company Stock Fund). After May 31, 1998, any proposed reduction in
the amount of those waivers and reimbursements would be reviewed by the Board.
 
Norwest and Forum have agreed to waive their respective fees through May 31,
1999 in order to ensure that the fees borne by each of Diversified Bond Fund,
Strategic Income Fund, Moderate Balanced Fund, Growth Balanced Fund, Diversified
Equity Fund and Growth Equity Fund for investment advisory, administrative and
management services would not exceed in the aggregate 0.45%, 0.55%, 0.63%,
0.68%, 0.75% and 1.00%, respectively (the "Waiver"). After May 31, 1999, each
fund's aggregate payment for those services could increase if the Waiver was
reduced or eliminated. Any reduction or elimination of the Waiver, however,
would require Board approval (and notice to shareholders), which would be given
only if the Board determined that the amount of the fees to be paid to Norwest
or Forum after the reduction or elimination would be fair and reasonable.
 
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.
 
The expenses of each Fund that invest in one or more Core Portfolios include the
Fund's pro rata share of the expenses of the Core Portfolios in which the Fund
invests, which are borne indirectly by the Fund's shareholders.
 
76
<PAGE>
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 Cash Investment Fund, 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, or receipt of a redemption request, on every weekday
except customary national holidays (New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas) 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 Funds'
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. You must
pay for your shares in U.S. dollars by check or money order (drawn on a U.S.
bank), by bank or federal funds wire transfer, or by electronic bank transfer;
cash cannot be accepted.
 
When you sign your application for a new Fund account, you are certifying that
your Social Security or other taxpayer ID number is correct and that you are not
subject to backup withholding. If you violate certain federal income tax
provisions, the Internal Revenue Service can require the Funds to withhold 31%
of your distributions and redemptions.
 
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
Cash Investment Fund, U.S. Government Fund and Treasury Fund is $100,000 and
there is no minimum subsequent investment for those shares. The minimum
investment in Investor Shares and I Shares is $1,000; the minimum subsequent
investment in Investor Shares and I Shares is $100. Investor Shares and I Shares
is $1,000; the minimum subsequent investment in Investor Shares and I Shares is
$100. Shareholders who elect to purchase Investor Shares or 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
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.
 
<TABLE>
<CAPTION>
                                                            Order Must Be   Payment Must Be
Money Market Fund                                            Received By      Received By
- ----------------------------------------------------------  --------------  ----------------
<S>                                                         <C>             <C>
Cash Investment Fund                                          3:00 p.m.        4:00 p.m.
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.
</TABLE>
 
                                                                              77
<PAGE>
All times referenced in the above table are Eastern Time. The Trust reserves the
right to close early and advance the time by which the Money Market Funds must
receive purchase or redemption orders and payments on days that the New York
Stock Exchange or Minneapolis Federal Reserve Bank closes early, the Public
Securities Association recommends that the government securities markets close
early or due to other circumstances which may affect a Fund's trading hours.
 
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 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 or money order (cash cannot be accepted)
along with a completed account application form to the Trust at the address
listed above. Checks and money orders 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.
 
For individual or Uniform Gift to Minors Act accounts, the check or money order
used to purchase shares of a Fund must be made payable to "Norwest Funds" or to
one or more owners of that account and endorsed to Norwest Funds. No other
method of payment by check will be accepted. For corporation, partnership,
trust, 401(k) plan or other non-individual type accounts, the check used to
purchase shares of a Fund must be made payable on its face to "Norwest Funds."
No other method of payment by check will be accepted.
 
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.
             A091 000 019
             For Credit to: Norwest Funds 0844-131
             Re: [Name of Fund][Name of Shares if applicable]
             Account No.:
             Account Name:
 
78
<PAGE>
The investor should then promptly complete and mail the account application
form. There may be charges by the investor's bank for transmitting the money by
bank wire. 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.
 
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." The Trust reserves the right to close early and to advance the
times by which the Money Market Funds must receive purchase or redemption
orders. (See "Purchase and Redemption of Shares - General Purchase
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
 
                                                                              79
<PAGE>
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 shareholders and the Funds against fraud, signatures on certain
requests must have a signature guarantee. Requests must be made in writing and
include a signature guarantee for any of the following transactions: (1)
endorsement on a share certificate; (2) instruction to change a shareholder's
record name; (3) modification of a designated bank account for wire redemptions;
(4) instruction regarding an Automatic Investment Plan or Automatic Withdrawal
Plan; (5) dividend and distribution election; (6) telephone redemption; (7)
exchange option election or any other option election in connection with the
shareholder's account; (8) written instruction to redeem Shares whose value
exceeds $50,000; (9) redemption in an account in which the account address has
changed within the last 30 days; (10) redemption when the proceeds are deposited
in a Norwest Funds account under a different account registration; and (11) the
remitting of redemption proceeds to any address, person or account for which
there are not established standing instructions on the 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 want telephone redemption or exchange privileges must elect those
privileges. The Trust and Transfer Agent 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 and Transfer Agent did not
employ such procedures, they could be liable for losses due to unauthorized or
fraudulent telephone instructions. Shareholders should verify the accuracy of
telephone instructions immediately upon receipt of confirmation statements.
During times of drastic economic or market changes, telephone redemption and
exchange privileges may be difficult to implement. In the event that a
shareholder is unable to reach the Transfer Agent by telephone, requests may be
mailed or hand-delivered to the Transfer Agent.
 
Due to the cost to the Trust of maintaining smaller accounts, the Trust reserves
the right to redeem, upon not less than 60 days' written notice, all shares in
any Fund account whose aggregate net asset value is less than $1,000 immediately
following any redemption.
 
REDEMPTION PROCEDURES
 
Shareholders who have invested directly in a Fund may redeem their shares as
described below. Shareholders who have invested through a Processing
Organization may redeem their shares through the Processing Organization as
described 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.")
 
80
<PAGE>
BY TELEPHONE. A shareholder who has elected telephone redemption privileges may
make a telephone redemption request by calling the Transfer Agent at (800)
338-1348 or (612) 667-8833 and providing the shareholder's account number, the
exact name in which the shares are registered and the shareholder's social
security or taxpayer identification number. In response to the telephone
redemption instruction, the Trust will mail a check to the shareholder's record
address or, if the shareholder has elected wire redemption privileges, wire the
proceeds. (See "Purchases and Redemptions of Shares - General Redemption
Information.")
 
BY BANK WIRE. For redemptions of more than $5,000, a shareholder who has elected
wire redemption privileges may request a Fund to transmit the redemption
proceeds by federal funds wire to a bank account designated in writing by the
shareholder. To request bank wire redemptions by telephone, the shareholder also
must have elected the telephone redemption privilege. Redemption proceeds are
transmitted by wire on the day after a redemption request in proper form is
received by the Transfer Agent.
 
EXCHANGES
 
Shareholders of I Shares 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.")
 
                                                                              81
<PAGE>
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 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."
 
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.
Generally, all contributions and investment earnings in an IRA will be
tax-deferred until withdrawn. 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 the
individual (or, in some cases, the married couple), 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.
 
An employer may also contribute to an individual's IRA as part of a Savings
Incentive Match Plan for Employees, or "SIMPLE plan," established after December
31, 1996. Under a SIMPLE plan, an employee may contribute up to $6,000 annually
to the employee's IRA, and the employer must generally match such contributions
up to 3% of the employee's annual salary. Alternatively, the employer may elect
to contribute to the employee's IRA 2% of the lesser of the employee's earned
income or $150,000.
 
The foregoing discussion regarding IRAs is based on regulations in effect as of
June 1, 1997 and summarizes only some of the important federal tax
considerations generally affecting IRA contributions made by individuals or
their employers. It is not intended as a substitute for tax planning. Investors
should consult their tax advisors with respect to their specific tax situations
as well as with respect to state and local taxes.
 
AUTOMATIC WITHDRAWAL PLAN
 
A shareholder of a Fund, other than a shareholder of Cash Investment Fund, U.S.
Government Fund, Treasury Fund and Institutional Shares of 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 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 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.
 
82
<PAGE>
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
 
A shareholder may reopen an account, without filing a new account application
form, at any time within one year after the shareholder's account is closed,
provided that the information on the account application form on file with the
Trust is still applicable.
 
7. DIVIDENDS, DISTRIBUTIONS AND
   TAX MATTERS
 
DIVIDENDS
 
Dividends of net investment income are declared and paid as follows:
 
<TABLE>
<S>                             <C>
Declared daily and paid         Each Money Market Fund, Limited Term Government In-
monthly:                        come Fund, Income Fund, Total Return Bond Fund and
                                each Tax-Exempt Fixed Income Fund.
 
Declared and paid monthly:      Stable Income Fund, Intermediate Government Income
                                Fund and Diversified Bond Fund.
 
Declared and paid quarterly:    Income Equity Fund, ValuGrowth Stock Fund, Small
                                Company Stock Fund and Contrarian Stock Fund.
 
Declared and paid annually:     Strategic Income Fund, Moderate Balanced Fund,
                                Growth Balanced Fund, Aggressive Balanced-Equity
                                Fund, Index Fund, Diversified Equity Fund, Growth
                                Equity Fund, Large Company Growth Fund, Small
                                Company Growth Fund, Diversified Small Cap Fund,
                                Small Cap Opportunities Fund and International Fund.
</TABLE>
 
Each Fund's net capital gain, if any, is distributed at least annually. (See
"Dividends and Tax Matters.")
 
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.
 
                                                                              83
<PAGE>
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, as amended (the
"Code"). As such, each Fund will not be liable for federal income and excise
taxes on the net investment income and net capital gain distributed to its
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 net
short-term capital gain) are taxable to shareholders of the Fund as ordinary
income. Two different tax rates apply to net capital gain - that is, the excess
of gains from capital assets held for more than one year over net losses from
capital assets held for not more than one year. One rate (generally 28%) applies
to net gain on capital assets held for more than one year but not more than 18
months ("mid-term gain"), and a second rate (generally 20%) applies to the
balance of net capital gain ("adjusted net capital gain"). Distributions of
mid-term gain and adjusted net capital gain will be taxable to shareholders as
such, regardless of how long a shareholder has held shares in the Fund. If a
shareholder holds Shares for six months or less and during that period receives
a distribution of net 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. Dividends (other than those of Funds that declare dividends
daily) and distributions reduce the net asset value of the Fund paying the
dividend or distribution by the amount of the dividend or distribution.
Furthermore, these dividends or a distribution made shortly after the purchase
of Shares by a shareholder, although in effect a return of capital to that
particular shareholder, will be taxable to the shareholder.
 
It is expected that a portion of the dividends of each Equity Fund, except
International Fund, and each Balanced Fund 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, a portion of
the dividends of the Fund may qualify for the dividends received deduction for
corporations.
 
CORE PORTFOLIOS
 
Each Core Portfolio is not required to pay federal income taxes on its net
investment income and capital gain, as each is treated as a partnership for
federal income tax purposes. All interest, dividends and gains and losses of a
Core Portfolio are deemed to have been "passed through" to the Funds investing
in the Core Portfolio in proportion to the Funds' holdings of the Core
Portfolio, regardless of whether such interest, dividends or gains have been
distributed by the Core Portfolio.
 
FUNDS INVESTING IN FOREIGN SECURITIES
 
Investment income received by a 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
and
 
84
<PAGE>
Schroder EM Core Portfolio. Shareholders of that Fund will be notified of their
share of those foreign taxes and will be required to treat the amount of such
foreign taxes as additional 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. Persons who are substantial users or related persons
thereof of facilities financed by private activity securities held by a Fund,
however, may be subject to federal income tax on their pro rata share of the
interest income from those securities and should consult their tax advisers
before purchasing Shares. Interest on certain private activity securities is
treated as an item of tax preference for purposes of the AMT imposed on
individuals and corporations. In addition, exempt-interest dividends are
included in the "adjusted current earnings" of corporations for AMT purposes. If
a shareholder holds Shares for six months or less and during that period
receives an exempt-interest dividend, any loss realized on the sale of the
Shares during that six-month period would be disallowed to the extent of the
exempt-interest dividend.
 
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
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 Municipal Money Market
Fund and by each Tax-Exempt Fixed Income 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 Municipal Money Market Fund and Tax-Exempt Fixed Income Fund
advising the shareholder of the portion of the Fund's dividends that is derived
from obligations of issuers in the various states and the portion of the Fund's
dividends that is exempt from federal income taxes. These portions are
determined for a Fund's entire year and, thus, are annual averages, rather than
day-by-day determinations for each shareholder.
 
MUNICIPAL MONEY MARKET FUND, LIMITED TAX-FREE FUND AND TAX-FREE INCOME FUND. 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
a 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 a 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 AMT, because interest on
Colorado private activity bonds is not a preference item for Colorado income tax
purposes. Furthermore, 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 INTERMEDIATE TAX-FREE FUND AND 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
 
                                                                              85
<PAGE>
state income tax purposes, while interest earned on securities 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 securities issued after August
7, 1986, even though those 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.
 
8. OTHER INFORMATION
 
BANKING LAW MATTERS
 
Federal banking rules 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. Forum believes that Norwest and any bank or other bank affiliate also
may perform Processing Organization or similar services for the Trust and its
shareholders without violating applicable federal banking rules. If a bank or
bank affiliate were prohibited in the future from so acting, changes in the
operation of the Trust could occur and a shareholder serviced by the 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 net asset value per share of each class of each Fund, except the Money
Market Funds, is determined 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 net asset value per share
of each class of Cash Investment Fund, U.S. Government Fund, Treasury Fund and
Municipal Money Market Fund is determined as of 3:00 p.m.,
 
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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 or Portfolio (other than a
Money Market Fund or Portfolio in which a Money Market Fund invests) 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 Board or
pursuant to procedures approved by the Board or the Core Board, as applicable.
The Funds only determine net asset value on Fund Business Days.
 
In order to maintain a stable net asset value per share of $1.00, the portfolio
securities of each Money Market Fund and Core Portfolio in which a Money Market
Fund invests 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 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 on 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 Norwest 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
 
A Fund's performance may be quoted 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 for the Money Market Funds, a Fund takes
the 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 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. Published yield quotations are, and total return figures
may be, based on amounts invested in a Fund net of sales
 
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charges that may be paid by an investor. A computation of yield or total return
that does not take into account sales charges paid by an investor will be higher
than a similar computation that takes into account payment of sales charges.
 
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 Financial Data, Inc. In addition, the
performance of a Fund may be compared to securities indices. These indices may
be comprised of a composite of various recognized securities indices to reflect
the investment policies of a Fund that invests its assets using different
investment styles. Indices are not used in the management of a Fund but rather
are standards by which an 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. 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 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); the costs
of doing so will be borne by the Trust. Currently the authorized shares of the
Trust are divided into thirty-nine separate series.
 
OTHER CLASSES OF SHARES
 
Cash Investment Fund, U.S. Government Fund, Treasury Fund, Norwest WealthBuilder
II Growth Portfolio, Norwest WealthBuilder II Growth and Income Portfolio,
Norwest WealthBuilder II Growth Balanced Portfolio and Income Fund, Performa
Disciplined Growth Fund, Performa Small Cap Value Fund, Performa Strategic Value
Bond Fund, Performa Global Growth Fund, Minnesota Intermediate Tax-Free Fund,
Aggressive Balanced-Equity Fund and Diversified Small Cap Fund currently issue
one class of shares. Ready Cash Investment Fund currently issues two classes of
shares - Investor Shares and Exchange Shares. Municipal Money Market Fund
currently issues two classes of shares - Institutional Shares and Investor
Shares. The other Funds issue three classes of shares, I Shares, A Shares and B
Shares. A Shares and B Shares are offered to retail investors. A Shares charge a
front-end sales charge and B Shares (and Exchange Shares) charge a contingent
deferred sales charge. 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 or the Funds' distributor. Investors
may also contact their Norwest sales representative to obtain information on the
other classes.
 
SHAREHOLDER VOTING AND OTHER RIGHTS
 
Each share of each series 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 series or
class, except if the matter affects only one series or class or voting by series
or class is required by law, in which case shares will be voted separately by
series 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
 
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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 series is entitled to the shareholder's pro
rata share of all dividends and distributions arising from that series' assets
and, upon redeeming shares, will receive the portion of the series' net assets
represented by the redeemed shares.
 
Each Core Portfolio normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in a Core Portfolio will be entitled to
vote in proportion to its relative beneficial interest in the respective Core
Portfolio. When required by the 1940 Act and other applicable law, a Fund will
solicit proxies from its shareholders and will vote its interest in a Core
Portfolio in proportion to the votes cast by its shareholders.
 
As of September 2, 1997, Norwest Bank may be deemed to have controlled Stable
Income Fund, Limited Term Tax-Free Fund, Tax-Free Income Fund and Income Equity
Fund, and Norwest Bank Colorado, N.A. may be deemed to have controlled Total
Return Bond Fund, Colorado Tax-Free Fund and ValuGrowth Stock Fund, through
investment in the Funds by their consumers. 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.
 
CORE AND GATEWAY STRUCTURE
 
Ready Cash Investment Fund, Stable Income Fund, Total Return Bond Fund, Index
Fund, Income Equity Fund, Large Company Growth Fund, Small Company Stock Fund,
Small Company Growth Fund and Small Cap Opportunities Fund each seek to achieve
its investment objective by investing all of its investable assets in its
corresponding Core Portfolio, that has the same investment objective and
substantially identical investment policies as the Fund. Cash Investment Fund,
Diversified Bond Fund, Strategic Income Fund, Moderate Balanced Fund, Growth
Balanced Fund, Diversified Equity Fund, Growth Equity Fund and International
Fund each seek to achieve its investment objective by investing all or a part of
its assets in two or more Core Portfolios. Accordingly, each Core Portfolio
directly acquires portfolio securities and a Fund investing in the Core
Portfolio acquires an indirect interest in those securities. Schroder U.S.
Smaller Companies Portfolio and Schroder EM Core Portfolio are a separate series
of Schroder Capital Funds, a business trust organized under the laws of the
State of Delaware in 1995. Each other Core Portfolio is a separate series of
Core Trust (Delaware), a business trust organized under the laws of the State of
Delaware in 1994. Each Core Trust is registered under the 1940 Act as an
open-end, management, investment company. The assets of each Core Portfolio
belong only to, and the liabilities of each Core Portfolio are borne solely by,
that Core Portfolio and no other portfolio of a Core Trust.
 
THE CORE PORTFOLIOS. A Fund's investment in a Core Portfolio is in the form of a
non-transferable beneficial interest. All investors in a Core Portfolio will
invest on the same terms and conditions and will pay a proportionate share of
the Core Portfolio's expenses. As of October 1, 1997, two or more funds of the
Trust invested in each Core Portfolio (except Total Return Bond Portfolio and
Schroder U.S. Smaller Companies Portfolio). As of that date, one other mutual
fund invested in Schroder U.S. Smaller Companies Portfolio.
 
A Core Portfolio will not sell its shares directly to members of the general
public. Another investor in a Core 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 any Fund, and
could have different advisory and other fees and expenses than a Fund.
Therefore, Fund shareholders may have different returns than shareholders in
another investment company that invests in a Core Portfolio. Information
regarding any such funds is available from the Core Trusts by calling Forum at
(207) 879-0001.
 
CERTAIN RISKS OF INVESTING IN CORE PORTFOLIOS. A Funds' investment in a Core
Portfolio may be affected by the actions of other large investors in that Core
Portfolio. For example, if International Portfolio had a large investor other
than International Fund that redeemed its interest International Portfolio's
remaining investors (including the Fund) might, as a result, experience higher
pro rata operating expenses, thereby
 
                                                                              89
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producing lower returns. As there may be other investors in a Core Portfolio,
there can be no assurance that any issue that receives a majority of the votes
cast by a Fund's shareholders will receive a majority of votes cast by all
investors in a Core Portfolio; indeed, other investors hold a majority interest
in a Core Portfolio, could have voting control of the Core Portfolio.
 
Each Fund may withdraw its entire investment from a Core Portfolio 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 a Core Portfolio with power to, and who did by a vote of all
investors (including the Fund), change the investment objective or policies of
the Core 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 Core 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 would incur brokerage fees or other transaction costs. If
the Fund withdrew its investment from a Core Portfolio, the Board would consider
what action might be taken, including the management of the Fund's assets
directly by the Advisers or the investment of the Fund's assets in another
pooled investment entity. The inability of the Fund to find a suitable
replacement investment, in the event the Board decided not to permit the
Advisers to manage the Fund's assets directly could have a significant impact on
shareholders of the Fund.
 
Investment decisions are made by the portfolio managers of each Core Portfolio
independently. Therefore the portfolio manager of one Core Portfolio in which a
Fund invests may purchase shares of the same issuer whose shares are being sold
by the portfolio manager of another Core Portfolio in which the Fund invests.
This could result in an indirect expense to the Fund without accomplishing any
investment purpose.
 
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.
 
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                                   APPENDIX A
           INVESTMENTS, INVESTMENT STRATEGIES AND RISK CONSIDERATIONS
 
COMMON STOCKS, WARRANTS AND PREFERRED STOCK
 
COMMON STOCKS AND WARRANTS - BALANCED FUNDS, EQUITY FUNDS. PREFERRED STOCK -
BALANCED FUNDS, EQUITY FUNDS, TOTAL RETURN BOND FUND. Common stockholders are
the owners of the company issuing the stock and, accordingly, vote on various
corporate governance matters such as mergers. They are not creditors of the
company, but rather, upon liquidation of the company are entitled to their pro
rata share of the company's assets after creditors (including fixed income
security holders) and, if applicable, preferred stockholders are paid. Preferred
stock is a class of stock having a preference over common stock as to dividends
and, 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
nonconvertible debt securities in that they ordinarily provide a stream of
income with generally higher yields than those of common stocks of the same or
similar issuers. These securities are usually senior to common stock in a
company's capital structure, but usually are subordinated to non-convertible
debt securities. In general, the value of a convertible security is the higher
of its investment value (its value as a fixed income security) and its
conversion value (the value of the underlying shares of common stock if the
security is converted). As a fixed income security, the value of a convertible
security generally increases when interest rates decline and generally decreases
when interest rates rise. The value of a convertible security is, however, also
influenced by the value of the underlying common stock. Except for Small Cap
Opportunities Fund, the Funds may only invest in convertible securities that are
investment grade.
 
                                                                             A-1
<PAGE>
ADRS AND EDRS
 
BALANCED FUNDS, EQUITY FUNDS (EXCEPT INDEX FUND). A Fund may invest in sponsored
and unsponsored American Depository Receipts ("ADRs"), which are receipts issued
by an American bank or trust company evidencing ownership of underlying
securities issued by a foreign issuer. ADRs, in registered form, are designed
for use in U.S. securities markets. Unsponsored ADRs may be created without the
participation of the foreign issuer. Holders of these ADRs generally bear all
the costs of the ADR facility, whereas foreign issuers typically bear certain
costs in a sponsored ADR. The bank or trust company depository of an unsponsored
ADR may be under no obligation to distribute shareholder communications received
from the foreign issuer or to pass through voting rights. A Fund (other than
ValuGrowth Stock Fund and Contrarian 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.
 
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 an
investment adviser would not have chosen to sell such securities and which may
result in a taxable gain or loss.
 
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CORPORATE DEBT SECURITIES AND COMMERCIAL PAPER
 
CORPORATE DEBT SECURITIES - CASH INVESTMENT FUND, 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. 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 but may be subject to early withdrawal penalties which could
reduce a Fund's performance. 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
 
CASH INVESTMENT FUND, 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 Norwest 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.
 
                                                                             A-3
<PAGE>
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
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. 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, Diversified Bond Fund and, with respect to their assets
invested in Managed Fixed Income Portfolio, the Balanced Funds, may purchase
securities for investment while any borrowing equal to 5 percent or more of the
Fund's total assets is outstanding or borrow for purposes other than meeting
redemptions in an amount exceeding 5 percent of the value of the Fund's total
assets. A Fund's use of borrowed proceeds to make investments would subject the
Fund to the risks of leveraging. Reverse repurchase agreements, short sales not
against the box, dollar roll transactions and other similar investments that
involve a form of leverage have characteristics similar to borrowings but are
not considered borrowings if the Fund maintains a segregated account; the use of
these techniques in connection with a segregated account may result in a Fund's
assets being 100 percent leveraged. (See "Appendix A - Techniques Involving
Leverage.")
 
PURCHASING SECURITIES ON MARGIN
 
LIMITED TERM GOVERNMENT INCOMEFUND AND INTERMEDIATE GOVERNMENT INCOME FUND. When
a 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 the security exceeds the maximum
permissible borrowing amount, the
 
A-4
<PAGE>
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 Norwest to a Fund believes that the
leveraging and the returns available to the Fund from investing the cash will
provide shareholders a potentially higher return.
 
Leverage exists when a Fund achieves the right to a return on a capital base
that exceeds the Fund's investment. Leverage creates the risk of magnified
capital losses which occur when losses affect an asset base, enlarged by
borrowings or the creation of liabilities, that exceeds the equity base of the
Fund.
 
The risks of leverage include a higher volatility of the net asset value of the
Fund's shares and the relatively greater effect on the net asset value of the
shares caused by favorable or adverse market movements or changes in the cost of
cash obtained by leveraging and the yield obtained from investing the cash. So
long as a Fund is able to realize a net return on its investment portfolio that
is higher than interest expense incurred, if any, leverage will result in higher
current net investment income being realized by the Fund than if the Fund were
not leveraged. On the other hand, interest rates change from time to time as
does their relationship to each other depending upon such factors as supply and
demand, monetary and tax policies and investor expectations. Changes in such
factors could cause the relationship between the cost of leveraging and the
yield to change so that rates involved in the leveraging arrangement may
substantially increase relative to the yield on the obligations in which the
proceeds of the leveraging have been invested. To the extent that the interest
expense involved in leveraging approaches the net return on the Fund's
investment portfolio, the benefit of leveraging will be reduced, and, if the
interest expense on borrowings were to exceed the net return to shareholders,
the Fund's use of leverage would result in a lower rate of return than if the
Fund were not leveraged. Similarly, the effect of leverage in a declining market
could be a greater decrease in net asset value per share than if the Fund were
not leveraged. In an extreme case, if the Fund's current investment income were
not sufficient to meet the interest expense of leveraging, it could be necessary
for the Fund to liquidate certain of its investments at an inappropriate time.
The use of leverage may be considered speculative.
 
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
and 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.
 
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
 
                                                                             A-5
<PAGE>
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.
 
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
 
A-6
<PAGE>
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
Norwest 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, [LIMITED TERM GOVERNMENT INCOMEFUND], INTERMEDIATE
GOVERNMENT INCOME FUND, DIVERSIFIED BOND FUND, BALANCED FUNDS. To manage its
exposure to different types of investments, a Fund may enter into interest rate,
currency and mortgage (or other asset) swap agreements and may purchase and sell
interest rate "caps," "floors" and "collars." In a typical interest rate swap
agreement, one party agrees to make regular payments equal to a floating
interest rate on a specified amount (the "notional principal amount") in return
for payments equal to a fixed interest rate on the same amount for a specified
period. If a swap agreement provides for payment in different currencies, the
parties may also agree to exchange the notional principal amount. Mortgage swap
agreements are similar to interest rate swap agreements, except that the
notional principal amount is tied to a reference pool of mortgages. In a cap or
floor, one party agrees, usually in return for a fee, to make payments under
particular circumstances. For example, the purchaser of an interest rate cap has
the right to receive payments to the extent a specified interest rate exceeds an
agreed upon level; the purchaser of an interest rate floor has the right to
receive payments to the extent a specified interest rate falls below an agreed
upon level. A collar entitles the purchaser to receive payments to the extent a
specified interest rate falls outside an agreed upon range.
 
                                                                             A-7
<PAGE>
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.
 
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" 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 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
 
A-8
<PAGE>
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 Funds 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 Funds will obtain appropriate assurances that the
interest earned by the Funds 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 Norwest, 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
 
LIMITED TERM GOVERNMENT INCOME FUND AND INTERMEDIATE GOVERNMENT INCOME FUND.
Each Fund may make short sales of securities which it does not own or have the
right to acquire 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, a 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 create opportunities to increase a Fund's return but,
at the same time, involve special risk considerations and may be considered a
speculative technique. Since a 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
 
                                                                             A-9
<PAGE>
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.")
 
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 payments at maturity or on specified call dates. In
contrast, mortgage-backed securities provide monthly payments which consist of
interest and, in most cases, principal. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on their
mortgage loans, net of any fees paid to the issuer or guarantor of the
securities or a mortgage loan servicer. Additional payments to holders of these
securities are caused by prepayments resulting from the sale or foreclosure of
the underlying property or refinancing of the underlying loans.
 
UNDERLYING MORTGAGES. Pools of mortgages consist of whole mortgage loans or
participations in mortgage loans. The majority of these loans are made to
purchasers of 1-4 family homes, but may be made to purchasers of mobile homes or
other real estate interests. The terms and characteristics of the mortgage
instruments are generally uniform within a pool but may vary among pools. For
example, in addition to fixed-rate, fixed-term mortgages, the Fund may purchase
pools of variable rate mortgages, growing equity mortgages, graduated payment
mortgages and other types. Mortgage servicers impose qualification standards for
local lending institutions which originate mortgages for the pools as well as
credit standards and underwriting criteria for individual mortgages included in
the pools. In addition, many mortgages included in pools are insured through
private mortgage insurance companies.
 
LIQUIDITY AND MARKETABILITY. The market for mortgage-backed securities has
expanded considerably in recent years. The size of the primary issuance market
and active participation in the secondary market by securities dealers and many
types of investors make government and government-related pass-through pools
highly liquid. The recently introduced private conventional pools of mortgages
(pooled by commercial banks, savings and loan institutions and others, with no
relationship with government and government-related entities) have also achieved
broad market acceptance and consequently an active secondary market has emerged,
however, the market for conventional pools is smaller and less liquid than the
market for government and government-related mortgage pools.
 
AVERAGE LIFE AND PREPAYMENTS. The average life of a pass-through pool varies
with the maturities of the underlying mortgage instruments. In addition, a
pool's terms may be shortened by unscheduled or early payments of principal and
interest on the underlying mortgages. Prepayments with respect to securities
during times of declining interest rates will tend to lower the return of a Fund
and may even result in losses to a Fund if the securities were acquired at a
premium. The occurrence of mortgage prepayments is affected by various factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions.
 
As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of
fixed-rate 30-year mortgages, common industry practice is to assume that
prepayments will result in a 12-year average life. Pools of mortgages with other
maturities or different characteristics will have varying assumptions for
average life. The assumed average life of pools of mortgages having terms of
less than 30 years is less than 12 years, but typically not less than 5 years.
 
A-10
<PAGE>
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.
 
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
 
                                                                            A-11
<PAGE>
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 an investment adviser would not
have chosen to sell such securities and which may result in a taxable gain or
loss.
 
STRIPPED MORTGAGE-BACKED SECURITIES. Stripped mortgage-backed securities are
classes of mortgage-backed securities that receive different proportions of the
interest and principal distributions from the underlying Mortgage Assets. They
may be may be privately issued or U.S. Government Securities. In the most
extreme case, one class will be entitled to receive all or a portion of the
interest but none of the principal from the Mortgage Assets (the interest-only
or "IO" class) and one class will be entitled to receive all or a portion of the
principal, but none of the interest (the "PO" class). Currently, no fund may
purchase IOs or POs.
 
A-12
<PAGE>
ASSET-BACKED SECURITIES
 
LIMITED TERM GOVERNMENT INCOME FUND, INTERMEDIATE GOVERNMENT INCOME FUND,
DIVERSIFIED BOND FUND, INCOME FUND, AND BALANCED FUNDS. Asset-backed securities
represent direct or indirect participations in, or are secured by and payable
from, assets other than mortgage-backed assets such as motor vehicle installment
sales contracts, installment loan contracts, leases of various types of real and
personal property and receivables from revolving credit (credit card)
agreements. No Fund may invest more than 10 percent of its net assets in
asset-backed securities that are backed by a particular type of credit, for
instance, credit card receivables. Asset-backed securities, including adjustable
rate asset-backed securities, have yield characteristics similar to those of
mortgage-backed securities and, accordingly, are subject to many of the same
risks. Assets are securitized through the use of trusts and special purpose
corporations that issue securities that are often backed by a pool of assets
representing the obligations of a number of different parties. Payments of
principal and interest may be guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution.
Asset-backed securities do not always have the benefit of a security interest in
collateral comparable to the security interests associated with mortgage-backed
securities. As a result, the risk that recovery on repossessed collateral might
be unavailable or inadequate to support payments on asset-backed securities is
greater for asset-backed securities than for mortgage-backed securities. In
addition, because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of an interest rate or economic cycle has not been
tested.
 
FOREIGN EXCHANGE CONTRACTS AND FOREIGN CURRENCY FORWARD CONTRACTS
 
DIVERSIFIED BOND FUND, BALANCED FUNDS, DIVERSIFIED SMALL CAP FUND, DIVERSIFIED
EQUITY FUND, GROWTH EQUITY FUND, LARGE COMPANY GROWTH FUND, SMALL COMPANY GROWTH
FUND, AND 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 Fund's
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. Although the
strategy of engaging in foreign currency transactions could reduce the risk of
loss due to a decline in the value of the hedged currency, it could also limit
the potential gain from an increase in the value of the currency. No Fund
intends to maintain a net exposure to such contracts where the fulfillment of
the Fund's obligations under such contracts would obligate the Fund to deliver
an amount of foreign currency in excess of the value of the Fund's portfolio
 
                                                                            A-13
<PAGE>
securities or other assets denominated in that currency. A Fund will not enter
into these contracts for speculative purposes and will not enter into
non-hedging currency contracts. These contracts involve a risk of loss if
Norwest fails to predict currency values correctly.
 
FUTURES CONTRACTS AND OPTIONS
 
STABLE INCOME FUND, LIMITED TERM GOVERNMENT INCOME FUND, INTERMEDIATE GOVERNMENT
INCOME FUND, DIVERSIFIED BOND FUND, BALANCED FUNDS, INDEX FUND, DIVERSIFIED
EQUITY FUND AND 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 debt securities in a segregated account with a value at all times
sufficient to cover the Fund's obligation under the option. Certain futures
strategies employed by a Balanced Fund in making temporary allocations may not
be deemed to be for bona fide hedging purposes, as defined by the Commodity
Futures Trading Commission. A Fund may enter into these futures contracts only
if the aggregate of initial margin deposits for open futures contract positions
does not exceed 5 percent of the Fund's total assets.
 
RISK CONSIDERATIONS. The Fund's use of options and futures contracts subjects
the Fund to certain investment risks and transaction costs to which it might not
otherwise be subject. These risks include: (1) dependence on Norwest's ability
to predict movements in the prices of individual securities and fluctuations in
the general securities markets; (2) imperfect correlations between movements in
the prices of options or futures contracts and movements in the price of the
securities hedged or used for cover which may cause a given hedge not to achieve
its objective; (3) the fact that the skills and techniques needed to trade these
instruments are different from those needed to select the other securities in
which the Fund invests; (4) lack of assurance that a liquid secondary market
will exist for any particular instrument at any particular time, which, among
other things, may hinder a Fund's ability to limit exposures by closing its
positions; (5) the possible need to defer closing out of certain options,
futures contracts and related options to avoid adverse tax consequences; and (6)
the potential for unlimited loss when investing in futures contracts or writing
options for which an offsetting position is not held.
 
Other risks include the inability of the Fund, as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise price and the possible loss of the entire premium paid for options
purchased by the Fund. In addition, the futures exchanges may limit the amount
of fluctuation permitted in certain futures contract prices during a single
trading day. A Fund may be forced, therefore, to liquidate or close out a
futures contract position at a disadvantageous price. There can be no assurance
that a liquid market will exist at a time when a Fund seeks to close out a
futures position or that a counterparty in an over-the-counter option
transaction will be able to perform its obligations. There are a limited number
of options on interest rate futures contracts and exchange traded options
contracts on fixed income securities. Accordingly, hedging transactions
involving these instruments may entail "cross-hedging." As an example, a Fund
may wish to hedge existing holdings of mortgage-backed securities, but no listed
options may exist on those securities. In that event, Norwest 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.
 
A-14
<PAGE>
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. 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
Portfolio's 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 Fund's total assets as of the date the option
is purchased. No Fund may sell a put option if the exercise value of all put
options written by the Fund would exceed 50 percent of the Fund's total assets
or sell a call option if the exercise value of all call options written by the
Fund would exceed the value of the Fund's assets. In addition, the current
market value of all open futures positions held by a Fund will not exceed 50
percent of its total assets.
 
OPTIONS ON SECURITIES. A call option is a contract pursuant to which the
purchaser of the call option, in return for a premium paid, has the right to buy
the security underlying the option at a specified exercise price at any time
during the term of the option. The writer of the call option, who receives the
premium, has the obligation upon exercise of the option to deliver the
underlying security against payment of the exercise price during the option
period. A put option gives its purchaser, in return for a premium, the right to
sell the underlying security at a specified price during the term of the option.
The writer of the put, who receives the premium, has the obligation to buy the
underlying security, upon exercise at the exercise price during the option
period. The amount of premium received or paid is based upon certain factors,
including the market price of the underlying security or index, the relationship
of the exercise price to the market price, the historical price volatility of
the underlying security or index, the option period, supply and demand and
interest rates.
 
OPTIONS ON STOCK INDICES. A stock index assigns relative values to the stock
included in the index, and the index fluctuates with changes in the market
values of the stocks included in the index. Stock index options operate in the
same way as the more traditional stock options except that exercises of stock
index options are effected with cash payments and do not involve delivery of
securities. Thus, upon exercise of stock index options, the purchaser will
realize and the writer will pay an amount based on the differences between the
exercise price and the closing price of the stock index.
 
INDEX FUTURES CONTRACTS. Bond and stock index futures contracts are bilateral
agreements pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the bond or stock index value at the close of trading of the contract and the
price at which the futures contract is originally struck. No physical delivery
of the securities comprising the index is made. Generally, these futures
contracts are closed out prior to the expiration date of the contract. 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.
 
                                                                            A-15
<PAGE>

READY CASH INVESTMENT FUND
EXCHANGE SHARES

Prospectus


October 1, 1997


Not FDIC Insured


This Prospectus offers Exchange Shares of Ready Cash Investment Fund (the
"Fund"), a separate diversified money market portfolio of Norwest Advantage
Funds (the "Trust"), which is a registered, open-end, management investment
company.


The Fund seeks to achieve its investment objective by investing all of its
investable assets in a separate portfolio of another registered, open-end,
management investment company with the same investment objective.  See
"Prospectus Summary" and "Other Information - Core and Gateway-Registered
Trademark- Structure."


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, 1997, as may be amended from
time to time, which is available for reference on the SEC's Web Site
(http://www.sec.gov) and 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) 879-0001.  Investors should read this Prospectus
and retain it for future reference.


- -----------------------------------------------------------------------------
                                  TABLE OF CONTENTS


1.  Prospectus Summary . . . . . . . . . . . . .
2.  Financial Highlights . . . . . . . . . . . .
3.  Investment Objective and Policies. . . . . .
4.  Management . . . . . . . . . . . . . . . . .
5.  Characteristics of the Shares. . . . . . . .
6.  Purchases of Shares. . . . . . . . . . . . .
7.  Redemptions of Shares. . . . . . . . . . . .
8.  Exchanges. . . . . . . . . . . . . . . . . .
9.  Dividends and Tax Matters. . . . . . . . . .
10. Other Information. . . . . . . . . . . . . .
- -----------------------------------------------------------------------------


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


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

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

<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 seeks to provide high current income
to the extent consistent with the preservation of capital and the maintenance of
liquidity. This objective is pursued by investing in a broad spectrum of high
quality money market instruments of United States and foreign issuers.


The Fund seeks to achieve its investment objective by investing all of its
investable assets in Prime Money Market Portfolio (the "Core Portfolio"), a
separate portfolio of Core Trust (Delaware) ("Core Trust"), a registered,
open-end, management investment company, that has the same investment objective
and substantially similar investment policies as the Fund.  Accordingly, the
Fund's investment experience will correspond directly with the investment
experience of Prime Money Market Portfolio.  See "Other Information - Core and
Gateway Structure."



INVESTMENT ADVISER.



  Norwest Investment Management, Inc. ("Norwest"), a subsidiary of Norwest Bank
Minnesota, N.A. ("Norwest Bank"), is the Fund's investment adviser.  The Adviser
also is the investment adviser of the Core Portfolio.  The Adviser provides
investment advice to various institutions, pension plans and other accounts and,
as of August 31, 1997, managed over $22 billion in assets.  See "Management -
Investment Advisory Services."  Norwest Bank serves as transfer agent, dividend
disbursing agent and custodian of the Trust, and serves as the custodian of the
Core Portfolio.  See "Management - Shareholder Servicing and Custody."  The Fund
incurs investment advisory fees indirectly through the investment advisory fees
paid by Prime Money Market Portfolio.



FUND MANAGEMENT AND ADMINISTRATION.


  The manager of the Trust and distributor of its shares is Forum Financial
Services, Inc. ("Forum"), a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. Forum Administrative Services, Limited
Liability Company ("FAS") provides administrative services for the Fund and also
serves as administrator of the Core Portfolio. 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 Shares are offered by a separate prospectus.
READY CASH INVESTMENT FUND CURRENTLY IS NOT OPEN TO NEW INSTITUTIONAL SHARE
INVESTORS.  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 "Characteristics of the Shares."

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."

                                          2

<PAGE>

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 or Core Portfolio will achieve its investment objective or
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 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."

By pooling its assets in the Core Portfolio with other institutional investors,
the Fund may be able to achieve certain efficiencies and economies of scale that
it could not achieve by investing directly in securities.  Nonetheless, these
investments could have adverse effects on the Fund which investors should
consider.  See "Other Information - Core and Gateway Structure -- Certain Risks
of Investing in Core Portfolios."


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

     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%(1)
     Exchange Fee                                                     Zero


ANNUAL FUND OPERATING EXPENSES(2)
     (as a percentage of average daily net assets)



                                                                      None
     Investment Advisory Fees                                         
     Rule 12b-1 Fees (after fee waivers)(3)                           0.75%
     Other Expenses (after reimbursements)                            0.41%
     Investment Advisory Fees - Core Portfolio(4)                     0.34%
     Other Expenses - Core Portfolio (after reimbursements)(5)(6)     0.07%

     Total Operating Expenses (after reimbursements)(4)(5)            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 charge applicable to any


                                          3
<PAGE>

     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 "Characteristics of the Shares."



(2)  For a further description of the various expenses associated with investing
     in the Fund, 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, 1997, restated to reflect
     current fees.  The Fund indirectly bears its pro rata expenses of the Core
     Portfolio.


(3)  Absent fee waivers, "Rule 12b-1 Fees" would be 1.00%.  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.


(4)  "Investment Advisory Fees - Core Portfolio" reflect the investment advisory
     fee of the Core Portfolio and absent fee waivers, would be 0.34%.



(5)  Norwest and Forum have agreed to waive their respective fees or reimburse
     expenses in order to maintain the Fund's total combined operating expenses
     through May 31, 1998 at or below 1.57%.



(6)  Absent estimated expense reimbursements and fee waivers, the expenses of
     Exchange Shares would be: "Other Expenses, 3.09%; "Other Expenses -- Core
     Portfolio," 0.07%; and Total Operating Expenses, 4.50%.  "Other Expenses"
     include transfer agency fees payable to Norwest Bank of 0.25%.  Except as
     otherwise noted, expense reimbursements and fee waivers are voluntary and
     may be reduced or eliminated at any time.


EXAMPLE

The following is a hypothetical example that indicates the dollar amount of
expenses that an investor would pay, assuming a $1,000 investment in the Fund's
Shares, the expenses listed in the "Annual Fund Operating Expenses" table, 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.  The 5% annual
return is not predictive of and does not represent the Fund's projected returns;
rather, it is required by government regulation.





                                        1 Year    3 Years   5 Years   10 Years

                                          4
<PAGE>

Assuming redemption at the end of
     the period                              57        80        108       187
Assuming no redemption                       16        50         86       187


                                          5
<PAGE>







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 years
and periods shown. Information for the periods ended May 31, 1994, and
thereafter, was audited by KPMG Peat Marwick LLP, independent auditors.  The
Fund's financial statements for the fiscal year ended May 31, 1997, and
independent auditors' report thereon, are contained in the Fund's Annual Report.
These financial statements are incorporated by reference into the SAI.  The
Fund's Annual Report may be obtained upon request without charge.





                                               Ready Cash Investment Fund
                                            ------------------------------------
                                                 Year Ended         Period Ended
                                                    May 31,            May 31,
                                            ---------------------- -------------
                                             1997     1996    1995     1994(a)
                                            ---------------------- -------------
Beginning Net Asset Value per Share        $1.00    $1.00   $1.00    $1.00
Net Investment Income                      0.040    0.043   0.038    0.001
Dividends from Net Investment Income      (0.040)  (0.043) (0.038)  (0.001)
Ending Net Asset Value per Share           $1.00    $1.00   $1.00    $1.00
Ratios to Average Net Assets:
   Expenses(b)                              1.57%    1.57%   1.57%    1.53%(c)
   Net Investment Income                    4.03%    4.32%   3.62%    2.48%(c)
Total Return                                4.09%    4.38%   3.69%    2.51%(c)
Net Assets at End of Period (000s omitted)  $655     $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                         5.66%     8.24%     6.32%     1.85%(c)


(c)  Annualized.

                                          6
<PAGE>


3.   INVESTMENT OBJECTIVE AND POLICIES


There can be no assurance that the Fund or Core Portfolio will achieve its
investment objective or maintain a stable net asset value of $1.00 per share.


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.


INVESTMENT POLICIES



The Fund currently pursues its investment objective by investing all of its
investable assets in Prime Money Market Portfolio, which has the same investment
objective and substantially similar investment policies as the Fund.  Because
the Fund and Prime Money Market Portfolio seek to maintain a rating from at
least one nationally recognized statistical rating organization ("NRSRO"),they
may be limited in the type and amount of permissible securities (as described
below) which they may purchase.  The Core Portfolio invests in a broad spectrum
of high quality money market instruments of United States and foreign issuers.
Although the following discusses the investment policies of Prime Money Market
Portfolio, it applies equally to the Fund.


OBLIGATIONS OF FINANCIAL INSTITUTIONS.  The Portfolio 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.  The Portfolio 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.  Investments in foreign
bank obligations are limited to banks, branches and subsidiaries located in
countries which Norwest 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.  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 Portfolio but may be
subject to early withdrawal penalties which could reduce the Portfolio'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 Portfolio 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 Portfolio may not invest more than 25% of its total assets in
any other single industry.

UNITED STATES GOVERNMENT SECURITIES.  The Portfolio may invest without limit in
United States Government Securities.  The U.S. Government Securities in which
the Portfolio 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

                                          7
<PAGE>

Government National Mortgage Association.  In addition, the U.S. Government
Securities in which the Portfolio 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 Portfolio may
invest without limit in U.S. Government and Other Related Zero-Coupon
Securities.  The Portfolio 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 Portfolio 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 Portfolio 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 Portfolio may invest in U.S. dollar
denominated obligations issued or guaranteed by the governments of countries
which Norwest believes do not present undue risk or of those countries'
political subdivisions, agencies or instrumentalities.  The Portfolio 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 BONDS.  The Portfolio may invest without limit in municipal bonds
which 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 Portfolio 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 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 Portfolio 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. The Portfolio may invest without limit in 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.  The Portfolio may invest without limit in 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

                                          8
<PAGE>

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 Portfolio will invest in municipal lease
obligations through certificates of participation.

CORPORATE DEBT SECURITIES.  The Portfolio 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 Portfolio
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, Norwest will determine whether each such
investment is liquid.

PARTICIPATION INTERESTS.  The Portfolio may purchase from financial institutions
participations in loans or securities.  A participation interest gives a
Portfolio an undivided interest in the loan or security in the proportion that
the Portfolio's interest bears to the total principal amount of the security.
For certain participation interests a Portfolio will have the right to demand
payment, on not more than seven days' notice, for all or a part of the
Portfolio's participation interest.  The Portfolio 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
Portfolio's investment portfolio.  The Portfolio will not invest more than 10%
of its total assets in participation interests in which the Portfolio does not
have demand rights.

FOREIGN INSTRUMENTS.  The Portfolio'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.
Norwest considers these factors when making investments in foreign instruments.
The Portfolio has no limit on the amount of its foreign assets which may be
invested in any one type of foreign instrument or in any foreign country;
however, to the extent the Portfolio concentrates its assets in a foreign
country, these risks will be increased.


ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS


The Fund's (and Core Portfolio's) investment objective and all investment
policies of the Fund (and Core 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 Core Portfolio).  A majority of the
outstanding voting securities means the lesser of 67% of the shares present or
represented at a 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 (and Core Portfolio) are not deemed to be fundamental and may be changed by
the Board of Trustees of the Trust (the "Board") or the board of trustees of
Core Trust (the "Core Board"), as applicable, without shareholder approval.


Unless otherwise indicated, the discussion below of the investment policies of
the Core Portfolio refers to the investment policies of the Fund.  A further
description of the Fund's and Core Portfolio's investment policies, including
additional fundamental policies, is contained in the SAI.



The Portfolio may enter into repurchase agreements, 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, the Portfolio may borrow money for
temporary or emergency

                                          9
<PAGE>

purposes (including the meeting of redemption requests), but not in excess of 
33 1/3% of the value of the Portfolio's total assets.  Borrowing for other than
meeting redemption requests will not exceed 5% of the value of a Portfolio's net
assets.  The Portfolio 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 Portfolio'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 Portfolio might
suffer a loss.  Failure by the other party to deliver a security purchased by
the Portfolio may result in a missed opportunity to make an alternative
investment.  Norwest 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.



As part of its regular banking operations, Norwest Bank may make loans to public
companies.  Thus, it may be possible, from time to time, for the Portfolio 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 Portfolio.



GENERAL MONEY MARKET FUND GUIDELINES.  The Portfolio invests only in high
quality, short-term money market instruments that are determined by Norwest,
pursuant to procedures adopted by the Board or Core Board, as applicable, to be
eligible for purchase and to present minimal credit risks.  The Portfolio 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 Portfolio 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 Portfolio will not invest more than 5% of its total
assets in the securities of any one issuer.  Also, the Portfolio may not
purchase a security if the value of all securities held by the Portfolio and
issued or guaranteed by the same issuer (including letters of credit in support
of a security) would exceed 10% of the Portfolio's total assets.  In addition,
to ensure adequate liquidity, the Portfolio may not 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 or Core Board, the
Norwest determines and monitors the liquidity of portfolio securities.



As used herein, high quality instruments include those that: (1) 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 NRSROs or, if
only one NRSRO has issued a rating, by that NRSRO; or(2) are otherwise unrated
and determined by Norwest, pursuant to guidelines adopted by the Core Board, to
be of comparable quality.  The Portfolio 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 Portfolio,
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

                                          10
<PAGE>

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 Portfolio only invests in high quality money market instruments, an
investment in the Portfolio is subject to risk even if all securities in the
Portfolio's investment 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.



REPURCHASE AGREEMENTS.  The Portfolio may enter into repurchase agreements,
which are transactions in which a Portfolio 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 Portfolio 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.  A Portfolio receives interest in
respect of securities loans from the borrower or from investing cash collateral.
The Portfolio may pay fees to arrange the loans.  The Portfolio 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 Portfolio 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 Portfolio 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 Portfolio has the intention of actually acquiring the securities, but the
Portfolio 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 Portfolio may enter into reverse repurchase
agreements, which are transactions in which a Portfolio 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 Portfolio 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 Portfolio
with those monies.



VARIABLE AND FLOATING RATE SECURITIES.  The securities in which the Portfolio
invests 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 Portfolio may be tied to Treasury or other government
securities or indices on those securities as well as any other rate of interest
or index.

                                          11
<PAGE>


There may not be an active secondary market for any particular floating or
variable rate instrument which could make it difficult for the Portfolio to
dispose of the instrument if the issuer defaulted on its repayment obligation
during periods that the Portfolio is not entitled to exercise any demand rights
it may have.  The Portfolio could, for this or other reasons, suffer a loss with
respect to an instrument.  Norwest monitors the liquidity of the Fund's
investments in variable and floating rate instruments, but there can be no
guarantee that an active secondary market will exist.



The Portfolio 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 Portfolio 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 Portfolio 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 Portfolio
must include a portion of the original issue discount of the security as income.
Because the Portfolio distributes substantially all of its net investment
income, the Portfolio may have to sell portfolio securities to distribute
imputed income, which may occur at a time when Norwest 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 Portfolio may invest.



4.   MANAGEMENT



The business of the Trust is managed under the direction of the Board of
Trustees, and the business of the Core Portfolio is managed under the direction
of the Core 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 eight persons.


INVESTMENT ADVISORY SERVICES



NORWEST INVESTMENT MANAGEMENT.  Subject to the general supervision of the Board,
Norwest Investment Management, Inc. makes investment decisions for the Fund and
continuously reviews, supervises and administers the Fund's investment program.
Norwest provides its investment advisory services indirectly to the Fund through
its investment advisory services to the Core Portfolio.  Norwest, which is
located at Norwest Center, Sixth Street and Marquette, Minneapolis, Minnesota
55479, is an indirect subsidiary of Norwest Corporation, a multi-bank holding
company that was incorporated under the laws of Delaware in 1929.  As of June
30, 1997, Norwest Corporation had assets of $83.6 billion which made it the 11th
largest bank holding company in the United States.  As of June 30, 1997, Norwest
Corporation and its affiliates managed assets with a value of approximately
$52.9 billion.

                                          12
<PAGE>


PORTFOLIO MANAGERS.  Many persons on the advisory staff of Norwest contribute to
the investment services provided to the Fund and the Core Portfolio.  The
following persons, however, are primarily responsible for day-to-day management
and, unless otherwise noted, have been since the inception of the Fund or
Portfolio. For periods prior to June 1, 1997, all persons associated with
Norwest served in their current positions with Norwest Bank. Prior to that date
Norwest Bank was the Fund's investment adviser. In addition to their
responsibilities as listed below, each of the portfolio managers may perform
other portfolio management duties for Norwest Bank.



DAVID D. SYLVESTER and LAURIE R. WHITE. Mr. Sylvester has been associated with
Norwest since 1979, and as a Vice President and Senior Portfolio Manager. since
1985.  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.  Ms. White began serving as a portfolio manager of Cash Investment Fund
and Ready Cash Investment Fund in 1991.


ADVISORY FEES.  For its services, Norwest receives investment advisory fees from
the Core Portfolio at an annual rate of 0.40% of the first $300 million of the
Core Portfolios' average daily net assets, 0.36% of the next $400 million of the
Core Portfolios' average daily net assets and 0.32% of the Core Portfolios'
remaining average daily net assets.

The Fund may withdraw its investments from the Core Portfolio at any time if the
Board determines that it is in the best interests of the Fund to do so.  See
"Other Information - Core and Gateway Structure."  Accordingly, the Fund has
retained Norwest as its investment adviser. In the event that the Fund was to
withdraw its assets from the Core Portfolio, Norwest would receive an investment
advisory fee at the same rate as it receives from the Core Portfolio.


MANAGEMENT, ADMINISTRATION AND DISTRIBUTION SERVICES



As manager, Forum supervises the overall management of the Trust (including the
Trust's receipt of services for which the Trust is obligated to pay) other than
investment advisory services.  In this capacity Forum 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 Fund by others, including the Fund's
custodian, transfer agent, accountants, auditors and legal counsel.  FAS is
responsible for performing certain administrative services necessary for the
Trust's operations with respect to the Fund including, but not limited to:  (1)
preparing and printing updates of the Trust's registration statement and
prospectuses, the Trust's tax returns, and reports to its shareholders, the SEC
and state securities administrators;(2) preparing proxy and information
statements and any other communications to shareholders;(3) monitoring the sale
of shares and ensuring that such shares are properly and duly registered with
the SEC and applicable state securities administrators; and(4) determining the
amount of and supervising the declaration of distributions to shareholders.



As of October 1, 1997, Forum and FAS provided management and administrative
services to registered investment companies and collective investment funds with
assets of approximately $25.5 billion. Forum is a member of the National
Association of Securities Dealers, Inc.  For their services Forum and FAS each
receives a fee with respect to the Fund at an annual rate of 0.075% of the
Fund's average daily net assets.  FAS also serves as an administrator of the
Core Portfolio and provides services to the Core Portfolio that are similar to
those provided to the Fund by Forum and FAS.  For its services FAS receives a
fee with respect to the Core Portfolio at an annual rate of 0.05% of the
Portfolio's average daily net assets.



Pursuant to a separate agreement, Forum Accounting Services, Limited Liability
Company ("Forum Accounting") provides portfolio accounting services to the Fund
and to the Core Portfolio.  Forum, FAS, and Forum Accounting 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, 1997, Forum, FAS and Forum Accounting were controlled by John Y.
Keffer, President and Chairman of the Trust.


Pursuant to a separate Distribution Services Agreement, Forum is the exclusive
representative of the Trust to act as principal underwriter and distributor of
the Fund, except under circumstances specified in that agreement.  In

                                          13
<PAGE>

addition, the Fund has adopted a Rule 12b-1 Plan applicable to the Shares under
which Forum receives distribution fees.  See "Characteristics of the Shares."
From its own resources, Forum may pay a fee to broker-dealers or other persons
for distribution or other services related to the Fund.


SHAREHOLDER SERVICING AND CUSTODY


Norwest Bank serves as transfer agent and dividend disbursing agent for the
Trust (in this capacity, the "Transfer Agent"). The Transfer Agent maintains an
account for each shareholder of the Trust (unless such accounts are maintained
by sub-transfer agents or processing agents), performs other transfer agency
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. 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 services, the Transfer Agent receives a
fee with respect to the Fund at an annual rate of 0.25% of the Fund's average
daily net assets attributable to the Shares.


Norwest Bank also serves as the Fund's and the Core Portfolio's custodian.  For
its custodial services, Norwest Bank receives a fee with respect to the Fund and
the Core Portfolio at an annual rate of 0.02% of the first $100 million of the
Fund's or Core Portfolio's average daily net assets, 0.015% of the next $100
million of the Fund's or Core Portfolio's average daily net assets and 0.01% of
the Fund's or Core Portfolio's remaining average daily net assets.  No fee is
directly payable by the Fund to the extent the Fund is invested in the Core
Portfolio.



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. Each service provider to the Fund 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. Fee waivers are voluntary and may be reduced or eliminated at any time.

Norwest and Forum have agreed to waive their respective fees or reimburse
expenses in order to maintain the Fund's total combined operating expenses
through May 31, 1998 at the same level as the Fund's total operating expenses
prior to May 31, 1997, 1.57%.  After May 31, 1998, any proposed reduction in the
amount of the waiver or reimbursements would be reviewed by the Board.

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.


The expenses of the Fund include the Fund's pro rata share of the operating
expenses of the Core Portfolio which are borne indirectly by the Fund's
shareholders.



5.   CHARACTERISTICS OF THE SHARES


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 Forum,
to compensate Forum for its distribution activities.  The distribution payments
due to Forum from the

                                          14

<PAGE>


Exchange Shares comprise: (1) 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 (2) 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).  Forum 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 Forum at
the time of an exchange of the original B Shares for Exchange Shares.


Under the distribution services agreement between Forum and the Trust, Forum
will receive, in addition to the distribution services fee, all contingent
deferred sales charges due upon redemptions of 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 Forum to
compensate broker-dealers in connection with the sales of the shares.  Proceeds
from the contingent deferred sales charge with respect to the Fund are paid to
Forum to defray the expenses related to providing distribution-related services
in connection with the sales of original B Shares, such as the payment of
compensation to broker-dealers selling original B Shares.  The distribution
services agreement provides that Forum 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 Forum
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
Forum is entitled under the Plan, less all contingent deferred sales charges
previously paid to Forum.  At May 31, 1997, uncovered distribution expenses for
the Fund were $3,393 or approximately 0.52% 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 Forum with respect to the Fund is not related directly to
the amount of expenses incurred by Forum in connection with providing
distribution services to the original B Shares and may be higher or lower than
those expenses.  Forum may be considered to have realized a profit under the
Plan if, at any time, the aggregate amounts of all distribution services fees
and contingent deferred sales charge payments previously made to Forum exceed
the total expenses incurred by Forum in distributing original B Shares. Total
expenses for this purpose include interest expenses, carrying charges or other
financing costs or allocations of Forum's overhead; the Fund is not obligated to
reimburse Forum for those expenses.  The amount of contingent deferred sales
charges paid to Forum by the Fund may affect the amount of: (1) uncovered
distribution charges calculated under the Plan with respect to the Fund; and (2)
the distribution services fee payable to Forum under the Plan with respect to
the Fund.


Pursuant to the Plan, the Fund has agreed also to pay Forum a maintenance fee in
an amount equal to 0.25% of the average daily net assets of the Fund
attributable to the Exchange Shares for providing personal services to
shareholder accounts.  The maintenance fee may be paid by Forum to
broker-dealers in an amount not to exceed 0.25% of the value of the 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 Forum 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 Forum (but only with respect to sales

                                          15
<PAGE>
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 Forum with respect to
those shares in fiscal years subsequent to the years in which those shares were
sold.  The payment delay would in turn result in the incurrence and payment of
increased interest fees under the Plan.

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 Forum 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 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: (1) redemptions of shares
acquired through the reinvestment of dividends and distributions; (2)
involuntary redemptions by the Fund of shareholder accounts with low account
balances; (3) 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; (4) 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 (5) by any registered investment adviser
with whom Forum has entered into a Share purchase agreement and which is acting
on behalf of its fiduciary customer accounts.  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

                                          16
<PAGE>

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.   PURCHASES OF SHARES



GENERAL INFORMATION



Exchange Shares are continuously sold only through an exchange privilege
available to shareholders of B Shares of certain other series of the Trust on
every weekday except customary national business holidays (New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas) and Good Friday ("Fund Business Day").
The purchase price for Exchange Shares equals their net asset value
next-determined after acceptance of an order.  The Trust reserves the right to
advance the time by which the Fund must receive purchase or redemption orders on
days that the New York Stock Exchange or Minneapolis Federal Reserve Bank closes
early or the Public Securities Association recommends that the government
securities markets close early, or due to other unusual circumstances which may
affect the Fund's trading hours.


All payments for Shares must be in U.S. dollars.  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 immediately available funds.  Fund shares
become entitled to receive dividends and distributions 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.


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

                                          17

<PAGE>

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, Forum 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.


SUBSEQUENT EXCHANGES OF SHARES.  Subsequent exchanges of B Shares of certain
other series of 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.
Generally, all contributions and investment earnings in an IRA will be
tax-deferred until withdrawn.  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.

An employer may also contribute to an individual's IRA as part of a Savings
Incentive Match Plan for Employees, or "SIMPLE plan," established after December
31, 1996. Under a SIMPLE plan, an employee may contribute up to $6,000 annually
to the employee's IRA, and the employer must generally match such contributions
up to 3% of the employee's annual salary.  Alternatively, the employer may elect
to contribute to the employee's IRA 2% of the lesser of the employee's earned
income or $150,000.

                                          18

<PAGE>


The foregoing discussion regarding IRAs is based on regulations in effect as of
October 1, 1997 and summarizes only some of the important federal tax
considerations generally affecting IRA contributions made by individuals or
their employers.  It is not intended as a substitute for tax planning.
Investors should consult their tax advisors with respect to their specific tax
situations as well as with respect to state and local taxes.



7.   REDEMPTIONS OF SHARES



GENERAL INFORMATION



Exchange Shares may be redeemed at their net asset value on any Fund Business
Days 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 receipt 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.


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.

Redemption orders will be accepted on Fund Business Day only until 3:00 p.m.
Eastern time.  The Trust reserves the right to close early and advance the time
by which the Fund must receive redemption orders on days that the New York Stock
Exchange or Minneapolis Federal Reserve Bank closes early, the Public Securities
Association recommends that the government securities markets close early or due
to other circumstances which may affect a Fund's trading hours.

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 "Redemptions of Shares - Other Redemption Matters."

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

                                          19

<PAGE>

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



To protect shareholders and the Fund against fraud, signatures on certain
requests must have a signature guarantee.  Requests must be made in writing and
include a signature guarantee for any of the following transactions: (1)
endorsement on a share certificate; (2) instruction to change a shareholder's
record name; (3) modification of a designated bank account for wire redemptions;
 (4) instruction regarding an Automatic Investment Plan or Automatic Withdrawal
Plan; (5) dividend and distribution election; (6) telephone redemption; (7)
exchange option election or any other option election in connection with the
shareholder's account; (8) written instruction to redeem Shares whose value
exceeds $50,000; (9) redemption in an account in which the account address has
changed within the last 30 days; (10) redemption when the proceeds are deposited
in a Norwest Advantage Funds account under a different account registration; and
(11) the remitting of redemption proceeds to any address, person or account for
which there are not established standing instructions on the 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 want telephone redemption or exchange privileges must elect
those privileges. The Trust and Transfer Agent 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 and Transfer Agent did
not employ such procedures, they could be liable for losses due to 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.


8.   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-SM-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
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.

                                          20

<PAGE>


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 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 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 "Redemptions of Shares - Other Redemption Matters."


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."



9.   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 and distributions paid by the Fund with respect
to each class of shares are calculated in the same manner and at the same time.
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 Exchange 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. 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.

TAX MATTERS


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


                                          21

<PAGE>

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 net
short-term capital gain) are taxable to shareholders of the Fund as ordinary
income. Pursuant to the Taxpayer Relief Act of 1997, two different tax rates
apply to net capital gains -- that is, the excess of net gains from capital
assets held for more than one year over net losses from capital assets held for
not more than one year.  One rate (generally 28%) applies to net gains on
capital assets held for more than one year but not more than 18 months
("mid-term gains"), and a second rate (generally 20%) applies to the balance of
such net capital gains ("adjusted net capital gains").  Distributions of
mid-term gains and adjusted net capital gains will be taxable to shareholders as
such, regardless of how long a shareholder has held shares in the Fund.



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 calendar year.

CORE PORTFOLIO.  The Core Portfolio is not required to pay federal income taxes
on its net investment income and capital gain, as it is treated as a partnership
for federal income tax purposes.  All interest, dividends and gains and losses
of the Core Portfolio are deemed to have been "passed through" to the Fund in
proportion to the Fund's holdings of the Core Portfolio, regardless of whether
such interest, dividends or gains have been distributed by the Core Portfolio or
losses have been realized by the Core Portfolio.


10.  OTHER INFORMATION


BANKING LAW MATTERS

Federal banking rules 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. Forum believes that Norwest and any bank or other bank affiliate that
may also perform Processing Organization or similar services for the Trust and
its shareholders without violating applicable federal banking rules.  If a bank
or bank affiliate were prohibited in the future from so acting, changes in the
operation of the Trust could occur and a shareholder serviced by the 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 net asset value per share of each class of the Fund is determined 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 Fund only determines net asset value on Fund Business Days.



In order to maintain a stable net asset value per share of $1.00, the portfolio
securities of the Fund and Core Portfolio 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

                                          22

<PAGE>

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 effect on shareholders.


PERFORMANCE INFORMATION

The Fund's performance may be quoted in terms of yield.  All performance
information 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 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.


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 Financial Data, Inc. In addition, the performance of the
Fund may be compared to securities indices  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 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);
the costs of doing so will be borne by the Trust. Currently the authorized
shares of the Trust are divided into thirty-nine separate series.



OTHER CLASSES OF SHARES.  The Fund currently issues three classes of shares:
Institutional Shares, Investor Shares and Exchange Shares.  INSTITUTIONAL SHARES
ARE NOT CURRENTLY OFFERED TO NEW INVESTORS.  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
or the Fund's distributor.  Investors may also contact their Norwest sales
representative 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 and Investor Shares.


SHAREHOLDER VOTING AND OTHER RIGHTS.  Each share of each series 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 pertains 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 series
or class, except if the matter affects only one series or class or voting by
series or class is required by law, in which case shares will be voted
separately by series 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 series is entitled to
the shareholder's pro rata share of all dividends and distributions arising from
that series' assets and, upon redeeming shares, will receive the portion of the
series' net assets represented by the redeemed shares.

The Core Portfolio normally will not hold meetings of investors except as
required by the 1940 Act.  Each investor in the Core Portfolio will be entitled
to vote in proportion to its relative beneficial interest in the Core Portfolio.

                                          23

<PAGE>

When required by the 1940 Act and other applicable law, the Fund will solicit
proxies from its shareholders and will vote its interest in the Core Portfolio
in proportion to the votes cast by its shareholders.


From time to time, certain 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.


CORE AND GATEWAY STRUCTURE

The Fund seeks to achieve it investment objective by investing all of its
investable assets in the Core Portfolio, that has the same investment objective
and substantially identical investment policies as the Fund.  Accordingly, the
Core Portfolio directly acquires portfolio securities and the Fund acquires an
indirect interest in those securities. The Core Portfolio is a separate series
of Core Trust, a business trust organized under the laws of the State of
Delaware in 1994.  Core Trust is registered under the 1940 Act as an open-end,
management, investment company.  The assets of the Core Portfolio belong only
to, and the liabilities of the Core Portfolio are borne solely by, the Core
Portfolio and no other portfolio of Core Trust.


THE CORE PORTFOLIO.  The Fund's investment in the Core Portfolio is in the form
of a non-transferable beneficial interest.  All investors in the Core Portfolio
will invest on the same terms and conditions and will pay a proportionate share
of the Core Portfolio's expenses.  As of October 1, 1997, one other fund of the
Trust invested a portion of its assets in Prime Money Market Portfolio.


The Core Portfolio will not sell its shares directly to members of the general
public.  Another investor in the Core Portfolio, such as an investment company,
that might sell its shares to members of the general public would not be
required to sell its shares at the same public offering price as the Fund, and
could have different advisory and other fees and expenses than the Fund.
Therefore, Fund shareholders may have different returns than shareholders in
another investment company that invests in the Core Portfolio.  Information
regarding any such funds is available from Core Trust by calling Forum at (207)
879-0001.

CERTAIN RISKS OF INVESTING IN CORE PORTFOLIOS.  The Fund's investment in the
Core Portfolio may be affected by the actions of other large investors in the
Core Portfolio.  For example, if the Core Portfolio had a large investor other
than the Fund that redeemed its interest, the Portfolio's remaining investors
(including the Fund) might, as a result, experience higher pro rata operating
expenses, thereby producing lower returns.  As there may be other investors in
the Core Portfolio, there can be no assurance that any issue that receives a
majority of the votes cast by the Fund's shareholders will receive a majority of
votes cast by all investors in the Core Portfolio; indeed, other investors
holding a majority interest in the Core Portfolio could have voting control of
the Core Portfolio.

The Fund may withdraw its entire investment from the Core Portfolio at any time,
if the Board determines that it is in the best interests of the Fund and its
shareholders to do so.  The Fund might withdraw, for example, if there were
other investors in the Core Portfolio with power to, and who did by a vote of
all investors (including the Fund), change the investment objective or policies
of the Core 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 Core 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 would incur brokerage fees or other transaction
costs. If the Fund withdrew its investment from the Core Portfolio, the Board
would consider what action might be taken, including the management of the
Fund's assets directly by the Adviser or the investment of the Fund's assets in
another pooled investment entity.  The inability of the Fund to find a suitable
replacement investment, in the event the Board decided not to permit the Adviser
to manage the Fund's assets directly, could have a significant impact on
shareholders of the 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 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.

                                          24

<PAGE>

                           NORWEST ADVANTAGE FUNDS
                                           
                    STATEMENT OF ADDITIONAL INFORMATION



                               OCTOBER 1, 1997




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

CASH INVESTMENT FUND                       STRATEGIC INCOME FUND
READY CASH INVESTMENT FUND                 MODERATE BALANCED FUND
U.S. GOVERNMENT FUND                       GROWTH BALANCED FUND
TREASURY FUND                              AGGRESSIVE BALANCED-EQUITY FUND
MUNICIPAL MONEY MARKET FUND                INDEX FUND
STABLE INCOME FUND                         INCOME EQUITY FUND 
LIMITED TERM GOVERNMENT 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                       DIVERSIFIED SMALL CAP FUND
COLORADO TAX-FREE FUND                     SMALL CAP OPPORTUNITIES FUND
MINNESOTA INTERMEDIATE TAX-FREE FUND       CONTRARIAN STOCK FUND
MINNESOTA TAX-FREE FUND                    INTERNATIONAL FUND


<PAGE>

                           NORWEST ADVANTAGE FUNDS
                    STATEMENT OF ADDITIONAL INFORMATION
                                           
                               OCTOBER 1, 1997
                                           
                                           
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, 1997, as may be amended from time to time, 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), A Shares, B Shares
and I Shares of each 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 Stock Fund,
Diversified Equity Fund, Growth Equity Fund, Small Company Stock Fund, Small Cap
Opportunities Fund, Contrarian Stock Fund and International Fund and I Shares of
each of Limited Term Government Income Fund, Diversified Bond Fund, Limited Term
Tax-Free Fund, Minnesota Intermediate Tax-Free Fund, Strategic Income Fund,
Moderate Balanced Fund, Growth Balanced Fund, Aggressive Balanced-Equity Fund,
Index Fund, Large Company Growth Fund, Small Company Growth Fund and Diversified
Small Cap Fund.


THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.

THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ ONLY IN CONJUNCTION WITH
A CORRESPONDING PROSPECTUS, COPIES OF WHICH MAY BE OBTAINED BY AN INVESTOR
WITHOUT CHARGE BY CONTACTING THE DISTRIBUTOR AT THE ADDRESS LISTED ABOVE.


<PAGE>

                              TABLE OF CONTENTS

                                                                            Page
                                                                            ----
    Introduction   

    1.  Investment Policies  
            Security Ratings Information  
            Money Market Fund Matters     
            Fixed Income Investments 
            Mortgage-Backed And Asset-Backed  Securities 
            Interest Rate Protection Transactions   
            Hedging And Option Income Strategies    
            Foreign Currency Transactions 
            Equity Securities and Additional Information Concerning the 
             Equity Funds    
            Illiquid Securities and Restricted Securities     
            Borrowing And Transactions Involving Leverage     
            Repurchase Agreements    
            Temporary Defensive Position  

    2.  Information Concerning Colorado and Minnesota 
            Colorado  
            Minnesota 

    3.  Investment Limitations    
            Fundamental Limitations  
            Non-Fundamental Limitations   

    4.  Performance and Advertising Data    
            SEC Yield Calculations   
            Total Return Calculations     
            Multiclass, Collective Trust Fund and Core-Gateway Performance   
            Other Advertisement Matters   

    5.  Management 
            Trustees and Officers    
            Investment Advisory Services  
            Management and Administrative Services  
            Distribution             
            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   


                                      i

<PAGE>

                              TABLE OF CONTENTS

                                                                            Page
                                                                            ----

    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
            Table 1 - Investment Advisory Fees 
            Table 2 - Management Fees     
            Table 3 - Distribution Fees   
            Table 4 - Sales Charges  
            Table 5 - Accounting Fees     
            Table 6 - Commissions    
            Table 7 - 5% Shareholders     
    Appendix C - Performance Data                                            C-1
            Table 1 - Money Market Fund   
            Table 2 - Yields    
            Table 3 - Total Returns  





                                      ii

<PAGE>

                                 INTRODUCTION
                                           

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" and on June 1, 1997,
changed its name back to "Norwest Funds."  On August 4, 1997, the Trust changed
its name back 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, Inc.
("Norwest"), a subsidiary of Norwest Bank Minnesota, N.A. ("Norwest Bank"). 
Norwest also is the investment adviser of each Core Portfolio other than
Schroder U.S. Smaller Companies Portfolio and International Portfolio. Norwest
Bank, a subsidiary of Norwest Corporation, serves as the Trust's transfer agent,
dividend disbursing agent and custodian.


UNITED CAPITAL MANAGEMENT ("UCM") serves as investment subadviser of Total
Return Bond Fund/Total Return Bond Portfolio and Contrarian Stock Fund. UCM also
serves as an investment subadviser of Diversified Bond Fund, Strategic Income
Fund, Moderate Balanced Fund, Growth Balanced Fund and Aggressive 
Balanced-Equity Fund.

GALLIARD CAPITAL MANAGEMENT, INC. ("Galliard") serves as investment subadviser
of Stable Income Fund/Stable Income Portfolio and Managed Fixed Income
Portfolio. Galliard also serves as an investment subadviser of Diversified Bond
Fund, Strategic Income Fund, Moderate Balanced Fund, Growth Balanced Fund and
Aggressive Balanced-Equity Fund.

CRESTONE CAPITAL MANAGEMENT, INC. ("Crestone") serves as investment subadviser
to Small Company Stock Fund/Small Company Stock Portfolio. Crestone also serves
as investment subadviser of Strategic Income Fund, Moderate Balanced Fund,
Growth Balanced Fund, Aggressive Balanced-Equity Fund, Diversified Equity Fund,
Growth Equity Fund and Diversified Small Cap Fund.

PEREGRINE CAPITAL MANAGEMENT, INC. ("Peregrine") serves as investment subadviser
of Small Company Growth Fund/Small Company Growth Portfolio, Positive Return
Bond Portfolio, Large Company Growth Fund/Large Company Growth Portfolio and
Small Company Value Portfolio. Peregrine also serves as an investment subadviser
of Diversified Bond Fund, Strategic Income Fund, Moderate Balanced Fund, Growth
Balanced Fund, Aggressive Balanced-Equity Fund, Diversified Equity Fund, Growth
Equity Fund and Diversified Small Cap Fund.

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. ("Schroder") serves as investment
adviser to Schroder U.S. Smaller Companies Portfolio and International
Portfolio. Schroder also serves as an investment subadviser of Strategic Income
Fund, Moderate Balanced Fund, Growth Balanced Fund, Aggressive Balanced-Equity
Fund, Diversified Equity Fund, Growth Equity Fund, Small Cap Opportunities Fund
and International Fund.

SMITH ASSET MANAGEMENT GROUP, LP ("SMITH GROUP").  Smith Group, whose principal
business address is 500 Crescent Court, Suite 250, Dallas, Texas, is a
registered investment adviser.  Smith group provides investment management
services to company retirement plans, foundations, endowments, trust companies,
and high net worth individuals.  As of October 1, 1997, the Smith Group managed
over $200 million in assets.  Currently, the Smith Group manages all of
Disciplined Growth Portfolio and Small Cap Value Portfolio.


FORUM FINANCIAL SERVICES, INC. ("Forum"), a registered broker-dealer, serves as
the Trust's manager and as distributor of the Trust's shares.  Forum
Administrative Services, Limited Liability Company ("FAS") serves as each Fund's
administrator.


Each of Ready Cash Investment Fund, Stable Income Fund, Total Return Bond Fund,
Index Fund, Income Equity Fund, Large Company Growth Fund, Small Company Stock
Fund, Small Company Growth Fund, Small Cap Opportunities Fund and International
Fund invests all of its investable assets in a separate portfolio (each a "Core

                                      1

<PAGE>

Portfolio") of a registered, open-end, management investment company that has
the same investment objective and substantially similar investment policies.
Accordingly, the investment experience of each of these Funds will correspond
directly with the investment experience of its respective Core Portfolio.

Each of Cash Investment Fund, Diversified Bond Fund, Strategic Income Fund,
Moderate Balanced Fund, Growth Balanced Fund, Diversified Equity Fund, Growth
Equity Fund, Aggressive Balanced-Equity Fund and Diversified Small Cap Fund
invests all of its investable assets in various portfolios (each a "Core
Portfolio") of a registered, open-end, management investment company portfolios
(each a "Core Trust").  Each Core Portfolio invests using a different investment
style.

The percentage of each of these Fund's (except Cash Investment Fund's) assets
invested in each Core Portfolio may be changed at any time in response to market
or other conditions.  Allocations are made within specified ranges as described
in each Fund's prospectus under "Investment Objectives and Policies".

Each of U.S. Government Fund, Treasury Fund, Municipal Money Market Fund,
Limited Term Government Income Fund, Intermediate Government Income Fund, Income
Fund, Limited Term Tax-Free Fund, Tax-Free Income Fund, Colorado Tax-Free Fund,
Minnesota Tax-Free Fund, Minnesota Intermediate Tax-Free Fund, ValuGrowth Stock
Fund and Contrarian Stock Fund invests directly in portfolio securities.

The expenses of each Fund that invest in one or more Core Portfolios include the
Fund's pro rata share of the expenses of the Core Portfolios in which the Fund
invests, which are borne indirectly by the Fund's shareholders.


As used in this SAI, the following terms shall have the meanings listed:
    
    "Advisers" or "Investment Advisers" shall mean, collectively, Norwest and
    Subadvisors.

    "Board" shall mean the Board of Trustees of the Trust.

    "Balanced Fund" shall mean each of Strategic Income Fund, Moderate
    Balanced Fund and Growth Balanced Fund.

    "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., the investment
    subadvisor to Strategic Income Fund, Moderate Balanced Fund, Growth
    Balanced Fund, Diversified Equity Fund, Growth Equity Fund, Small Company
    Stock Fund/ Small Company Stock Portfolio.


    "Custodian" shall mean Norwest acting in its capacity as custodian of a
    Fund.

    "Equity Fund" shall mean each of 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.

    "FAS" shall mean Forum Administrative Services, Limited Liability Company,
    the Trust's administrator.

    "Fitch" shall mean Fitch Investors Service, L.P.


                                      2

<PAGE>

    "Forum" shall mean Forum Financial Services, Inc., a registered 
     broker-dealer and distributor of the Trust's shares.

    "Forum Accounting" shall mean Forum Accounting Services, Limited Liability
    Company, the Trust's fund accountant.

    "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.


    "Galliard" shall mean Galliard Capital Management, Inc., the investment
    subadviser to Stable Income Fund, Stable Income Portfolio, Managed Fixed
    Income Portfolio, Diversified Bond Fund, Strategic Income Fund, Moderate
    Balanced Fund and Growth Balanced Fund.


    "Income Fund" shall mean each of Stable Income Fund, Intermediate
    Government Income Fund, Diversified Bond Fund, Income Fund and Total Return
    Bond Fund.

    "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.

    "Norwest" shall mean Norwest Investment Management, Inc., a subsidiary of
    Norwest Bank Minnesota, N.A.

    "Norwest Bank" shall mean Norwest Bank Minnesota, N.A., a subsidiary of
    Norwest Corporation.

    "NRSRO" shall mean a nationally recognized statistical rating organization.

    "Peregrine" shall mean Peregrine Capital Management, Inc., the investment
    subadviser to Positive Return Bond Portfolio, Small Company Value
    Portfolio, Diversified Bond Fund, Strategic Income Fund, Moderate Balanced
    Fund, Growth Balanced Fund, Diversified Equity Fund, Growth Equity Fund,
    Large Company Growth Fund/Large Company Growth Portfolio, Small Company
    Growth Fund/Small Company Growth Portfolio.

    "Portfolio" shall mean Prime Money Market Portfolio, Money Market
    Portfolio, Positive Return Bond Portfolio, Stable Income Portfolio, Managed
    Fixed Income Portfolio, Total Return Bond Portfolio, Index Portfolio,
    Income Equity Portfolio, Large Company Growth Portfolio, Small Company
    Growth Portfolio, Small Company Stock Portfolio, Small Company Value
    Portfolio and International Portfolio, thirteen separate portfolios of Core
    Trust.

    "Schroder" shall mean Schroder Capital Management Inc., the investment
    subadviser to Diversified Equity Fund, Growth Equity Fund, International
    Fund, Strategic Income Fund, Moderate Balanced Fund and Growth Balanced
    Fund and investment adviser to International Portfolio.

    "Schroder Advisors" shall mean Schroder Fund Advisors Inc., the
    administrator to Schroder U.S. Smaller Companies Portfolio.

    "Schroder Core" shall mean Schroder Capital Funds, an open-end, management
    investment company registered under the 1940 Act.

    "Schroder Core Board" shall mean the Board of Trustees of Schroder Core.

    "SEC" shall mean the U.S. Securities and Exchange Commission.


                                      3

<PAGE>

    "S&P" shall mean Standard & Poor's.


    "Smith" shall mean Smith Asset Management Group, L.P.


    "Stock Index Futures" shall mean futures contracts that relate to 
    broadly-based stock indices.

    "Subadvisers or "Investment Subadvisers: shall mean, collectively, Crestone
    Capital Management, Inc., Galliard Capital Management, Inc., Schroder
    Capital Management, Inc. and United Capital Management.

    "Tax Free Income Fund" shall mean each of Limited Term Tax-Free Fund, 
    Tax-Free Income Fund, Colorado Tax-Free Fund and Minnesota Tax-Free Fund.

    "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.

    "UCM" shall mean United Capital Management, Inc., the investment subadviser
    to Diversified Bond Fund, Total Return Bond Fund/Total Return Bond
    Portfolio, Strategic Income Fund, Moderate Balanced Fund, Growth Balanced
    Fund and Contrarian Stock Fund.

    "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.


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 (as well as those of the
Portfolio(s), which has the same investment objective and substantially similar
investment policies). Certain of the Funds are designed for investment of that
portion of an investor's funds which can appropriately bear the special risks
associated with certain types of investments (i.e., investment in smaller
capitalization companies).  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 a Fund that invests all or a
portion of its investable assets in a Core Portfolio(s) refers to that Core
Portfolio(s) in which that Fund currently invests its assets.


SECURITY RATINGS INFORMATION


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), Norwest 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 

                                      4

<PAGE>

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 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 Adviser to be of
comparable quality to securities whose rating has been lowered below the lowest
permissible rating category) if the 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 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 with respect to U.S. Government Securities, provided that
in certain cases a Fund may invest five percent 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 Limitations, Nonfundamental Limitations."  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 restrictions only apply with respect to 75% of
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
each of the Prospectuses for those Funds, to investments that are legally
permissible for Federally chartered credit unions under applicable provisions 


                                      5

<PAGE>

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. 

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.  Small Cap
Opportunities Fund may invest in U.S. Government Securities which have remaining
maturities not exceeding one year. Agencies and instrumentalities which issue or
guarantee debt securities and which have been established or sponsored by the
United States government include the Bank for Cooperatives, the Export-Import
Bank, the Federal Farm Credit System, the Federal Home Loan Banks, the Federal
Home Loan Mortgage Corporation, the Federal Intermediate Credit Banks, the
Federal Land Banks, the Federal National Mortgage Association, the Small
Business Administration, the Government National Mortgage Association and the
Student Loan Marketing 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. 
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 


                                      6

<PAGE>

only when Norwest believes that the credit risk with respect thereto is 
consistent with the Fund's investment policies.

BANK OBLIGATIONS

Small cap Opportunities Fund may invest in obligations (including certificates
of deposit and bankers' acceptances) of U.S. banks that have total assets at the
time of purchase in excess of $1 billion and are members of the Federal Deposit
Insurance Corporation.  Each other 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.

A certificate of deposit is an interest-bearing negotiable certificate issued 
by a bank against funds deposited in the bank.  A bankers' acceptance is a 
short-term draft drawn on a commercial bank by a borrower, usually in 
connection with an international commercial transaction.  Although the borrower 
is liable for payment of the draft, the bank unconditionally guarantees to pay 
the draft at its face value on the maturity date.  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.  

The Funds (other than Small Cap Opportunities Fund) may invest in Eurodollar
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 essentially the same as ETDs, except that they
are issued by Canadian offices of major Canadian banks.

Investments that a Fund may make in instruments 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.

SHORT TERM DEBT SECURITIES/COMMERCIAL PAPER

Small Cap Opportunities Fund may invest in commercial paper, i.e., short-term 
unsecured promissory notes issued in bearer form by bank holding companies, 
corporations and finance companies.  The commercial paper purchased by Small 
Cap Opportunities Fund for temporary defensive purposes consists of direct 
obligations of domestic issuers which, at the time of investment, are rated 
"P-1" by Moody's Investors Service ("Moody's") or "A-1" by Standard & Poor's 
("S&P"), or securities which, if not rated, are issued by companies having an 
outstanding debt issue currently rated Aa by Moody's or AAA or AA by S&P.  The 
rating "P-1" is the highest commercial paper rating assigned by Moody's and the 
rating "A-1" is the highest commercial paper rating assigned by S&P.  Except 
for the Money Market Funds and Small Cap Opportunities Fund, 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 Investment Adviser to be of 
comparable quality. Certain additional 

                                      7

<PAGE>

Funds may invest in commercial paper as an investment and not as a temporary 
defensive position.  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 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. 

GUARANTEED INVESTMENT CONTRACTS

The Fixed Income Funds may invest in guaranteed investment contracts ("GICs")
issued by insurance companies.  Pursuant to such contracts, a 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.  A Fund will purchase a GIC only when the Investment 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 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 Investment 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


                                      8

<PAGE>


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 or other private activity bonds that are backed only by the
assets and revenues of the non-governmental user (such as manufacturing
enterprises, hospitals, colleges or other entities).


Municipal securities historically have not been subject to registration with the
SEC, 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 unlimited as to 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.  

Municipal bonds are considered private activity bonds if they are issued to
raise money for privately owned or operated facilities  used for such purposes
as production or manufacturing, housing, health care and other nonprofit or
charitable purposes.  


                                      9

<PAGE>

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 owner or 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 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  organizations described in Section 501(c)(3) of the 
Code,  multi-family rental housing facilities, airports, docks and wharves, 
mass commuting facilities and solid waste disposal projects, among others, and 
for 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  could become 
increasingly limited.


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.

ALTERNATIVE MINIMUM TAX.  Municipal securities are also categorized according to
(i) whether the interest is or is not includable in the calculation of
alternative minimum taxes imposed on individuals and corporations, (ii) whether
the costs of acquiring or carrying the bonds are or are not deductible in part
by banks and other financial institutions, and (iii) other criteria relevant for
Federal income tax purposes.  Due to the increasing complexity of the 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:  (1) 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 (2) 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 


                                      10

<PAGE>

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 Fund's Investment 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 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 and certain other variable and
floating rates securities that do not imply with Rule 2a-7.

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. 
Each Fund's 


                                      11

<PAGE>

investment adviser monitors 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.  Each Fund's investment
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, 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 such securities only when the Fund's
investment adviser believes the interest income from the instrument justifies
any principal risks associated with the instrument. A Fund 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 a Fund will be able to limit principal fluctuations and,
accordingly, a Fund may incur losses on those securities even if held to
maturity without issuer default.


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.

                                      12

<PAGE>


Examples of credit enhancement arising out of the structure of the transaction
include: (1) "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); (2) 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 (3) "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.


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 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 securities ("POs") 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 securities ("IOs") 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.


                                      13

<PAGE>

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.

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, are less liquid than swaps.


HEDGING AND OPTION INCOME STRATEGIES


SMALL CAP OPPORTUNITIES FUND

COVERED CALLS AND HEDGING


As described in the Prospectus, the Schroder U.S. Smaller Companies Portfolio
may write covered calls on up to 100% of its total assets or employ one or more
types of instruments to hedge ("Hedging Instruments").  When hedging to attempt
to protect against declines in the market value of the Portfolio's securities,
to permit the Portfolio 


                                      14

<PAGE>

to retain unrealized gains in the value of portfolio securities which have 
appreciated, or to facilitate selling securities for investment reasons, the 
Portfolio would:  (1) sell Stock Index Futures; (2) purchase puts on such 
futures or securities; or (3) write covered calls on securities or on Stock 
Index Futures.  When hedging to establish a position in the equities markets as 
a temporary substitute for purchasing particular equity securities (which the 
Portfolio will normally purchase and then terminate the hedging position), the 
Portfolio would:  (1) purchase Stock Index Futures, or (2) purchase calls on 
such Futures or on securities.  The Portfolio's strategy of hedging with Stock 
Index Futures and options on such Futures will be incidental to the Portfolio's 
activities in the underlying cash market.

Writing Covered Call Options.  The Portfolio may write (I.E., sell) call options
("calls") if:  (1) the calls are listed on a domestic securities or commodities
exchange and (2) the calls are "covered" (I.E., the Portfolio owns the
securities subject to the call or other securities acceptable for applicable
escrow arrangements) while the call is outstanding.  A call written on a Stock
Index Future must be covered by deliverable securities or segregated liquid
assets.  If a call written by the Portfolio is exercised, the Portfolio forgoes
any profit from any increase in the market price above the call price of the
underlying investment on which the call was written.


When the Portfolio writes a call on a security, it receives a premium and agrees
to sell the underlying securities to a purchaser of a corresponding call on the
same security during the call period (usually not more than 9 months) at a fixed
exercise price (which may differ from the market price of the underlying
security), regardless of market price changes during the call period.  The risk
of loss will have been retained by the Portfolio if the price of the underlying
security should decline during the call period, which may be offset to some
extent by the premium.

To terminate its obligation on a call it has written, the Portfolio may be
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether the net of the amount of option
transaction costs and the premium previously received on the call written was
more or less than the price of the call subsequently purchased.  A profit may
also be realized if the call lapses unexercised, because the Portfolio retains
the underlying security and the premium received.  Any such profits are
considered short-term capital gains for Federal income tax purposes, and when
distributed by the Portfolio are taxable as ordinary income.  If the Portfolio
could not effect a closing purchase transaction due to the lack of a market, it
would have to hold the callable securities until the call lapsed or was
exercised.

The Portfolio may also write calls on Stock Index Futures without owning a
futures contract or a deliverable bond, provided that at the time the call is
written, the Portfolio covers the call by segregating in escrow an equivalent
dollar amount of liquid assets.  The Portfolio will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the current value
of the Stock Index Future.  In no circumstances would an exercise notice require
the Portfolio to deliver a futures contract; it would simply put the Portfolio
in a short futures position, which is permitted by the Portfolio's hedging
policies.


PURCHASING CALLS AND PUTS.  The Portfolio may purchase put options ("puts")
which relate to:  (1) securities held by it; (2) Stock Index Futures (whether or
not it holds such Stock Index Futures in its portfolio); or (3) broadly-based
stock indices.  The Portfolio may not sell puts other than those it previously
purchased, nor purchase puts on securities it does not hold.  The Portfolio may
purchase calls:  (1) as to securities, broadly-based stock indices or Stock
Index Futures or (2) to effect a "closing purchase transaction" to terminate its
obligation on a call it has previously written.  A call or put may be purchased
only if, after such purchase, the value of all put and call options held by the
Portfolio would not exceed 5% of the Portfolio's total assets.


When the Portfolio purchases a call (other than in a closing purchase
transaction), it pays a premium and, except as to calls on stock indices, has
the right to buy the underlying investment from a seller of a corresponding call
on the same investment during the call period at a fixed exercise price.  The
Portfolio benefits only if the call is sold at a profit or if, during the call
period, the market price of the underlying investment is above the sum of the
call price plus the transaction costs and the premium paid for the call and the
call is exercised.  If the call is not exercised or sold (whether or not at a
profit), it will become worthless at its expiration date and the Portfolio will
lose its premium payments and the right to purchase the underlying investment. 
When the Portfolio purchases a call on a stock index, it pays a premium, but
settlement is in cash rather than by delivery of an underlying investment.


                                      15

<PAGE>

When the Portfolio purchases a put, it pays a premium and, except as to puts on
stock indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price.  Buying a put on a security or Stock Index Future the Portfolio
owns enables the Portfolio to attempt to protect itself during the put period
against a decline in the value of the underlying investment below the exercise
price by selling the underlying investment at the exercise price to a seller of
a corresponding put.  If the market price of the underlying investment is equal
to or above the exercise price and, as a result, the put is not exercised or
resold, the put will become worthless at its expiration date and the Portfolio
will lose its premium payment and the right to sell the underlying investment;
the put may, however, be sold prior to expiration (whether or not at a profit).

Purchasing a put on either a stock index or on a Stock Index Future not held by
the Portfolio permits the Portfolio either to resell the put or to buy the
underlying investment and sell it at the exercise price.  The resale price of
the put will vary inversely with the price of the underlying investment.  If the
market price of the underlying investment is above the exercise price and, as a
result, the put is not exercised, the put will become worthless on its
expiration date.  In the event of a decline in price of the underlying
investment, the Portfolio could exercise or sell the put at a profit to attempt
to offset some or all of its loss on its portfolio securities.  When the
Portfolio purchases a put on a stock index, or on a Stock Index Future not held
by it, the put protects the Portfolio to the extent that the index moves in a
similar pattern to the securities held.  In the case of a put on a stock index
or Stock Index Future, settlement is in cash rather than by the Portfolio's
delivery of the underlying investment.

STOCK INDEX FUTURES.  The Portfolio may buy and sell futures contracts only if
they are Stock Index Futures.  A stock index is "broadly-based" if it includes
stocks that are not limited to issuers in any particular industry or group of
industries.  Stock Index Futures obligate the seller to deliver (and the
purchaser to take) cash to settle the futures transaction, or to enter into an
offsetting contract.  No physical delivery of the underlying stocks in the index
is made.

No price is paid or received upon the purchase or sale of a Stock Index Future. 
Upon entering into a futures transaction, the Portfolio will be required to
deposit an initial margin payment in cash or U.S. Treasury bills with a futures
commission merchant (the "futures broker").  The initial margin will be
deposited with the Portfolio's custodian in an account registered in the futures
broker's name; however the futures broker can gain access to that account only
under specified conditions.  As the future is marked to market to reflect
changes in its market value, subsequent margin payments, called variation
margin, will be paid to or by the futures broker on a daily basis.  Prior to
expiration of the future, if the Portfolio elects to close out its position by
taking an opposite position, a final determination of variation margin is made,
additional cash is required to be paid by or released to the Portfolio, and any
loss or gain is realized for tax purposes.  Although Stock Index Futures by
their terms call for settlement by the delivery of cash, in most cases the
obligation is fulfilled without such delivery, by entering into an offsetting
transaction.  All futures transactions are effected through a clearinghouse
associated with the exchange on which the contracts are traded.

Puts and calls on broadly-based stock indices or Stock Index Futures are similar
to puts and calls on securities or futures contracts except that all settlements
are in cash and gain or loss depends on changes in the index in question (and
thus on price movements in the stock market generally) rather than on price
movements in individual securities or futures contracts.  When the Portfolio
buys a call on a stock index or Stock Index Future, it pays a premium.  During
the call period, upon exercise of a call by the Portfolio, a seller of a
corresponding call on the same index will pay the Portfolio an amount of cash to
settle the call if the closing level of the stock index or Stock Index Future
upon which the call is based is greater than the exercise price of the call;
that cash payment is equal to the difference between the closing price of the
index and the exercise price of the call times a specified multiple (the
"multiplier") which determines the total dollar value for each point of
difference.  When the Portfolio buys a put on a stock index or Stock Index
Future, it pays a premium and has the right during the put period to require a
seller of a corresponding put, upon the Portfolio's exercise of its put, to
deliver to the Portfolio an amount of cash to settle the put if the closing
level of the stock index or Stock Index Future upon which the put is based is
less than the exercise price of the put; that cash payment is determined by the
multiplier, in the same manner as described above as to calls.


                                      16
<PAGE>


ADDITIONAL INFORMATION ABOUT HEDGING INSTRUMENTS AND THEIR USE.  The 
Portfolio's custodian, or a securities depository acting for the custodian, 
will act as the Portfolio's escrow agent, through the facilities of the 
Options Clearing Corporation ("OCC"), as to the securities on which the 
Portfolio has written options, or as to other acceptable escrow securities, 
so that no margin will be required for such transactions.  OCC will release 
the securities on the expiration of the option or upon the Portfolio's 
entering into a closing transaction.  An option position may be closed out 
only on a market which provides secondary trading for options of the same 
series, and there is no assurance that a liquid secondary market will exist 
for any particular option.


The Portfolio's option activities may affect its portfolio turnover rate and 
brokerage commissions.  The exercise of calls written by the Portfolio may 
cause the Portfolio to sell related portfolio securities, thus increasing its 
turnover rate in a manner beyond the Portfolio's control.  The exercise by 
the Portfolio of puts on securities or Stock Index Futures may cause the sale 
of related investments, also increasing portfolio turnover.  Although such 
exercise is within the Portfolio's control, holding a put might cause the 
Portfolio to sell the underlying investment for reasons which would not exist 
in the absence of the put.  The Portfolio will pay a brokerage commission 
each time it buys or sells a call, a put or an underlying investment in 
connection with the exercise of a put or call.  Such commissions may be 
higher than those which would apply to direct purchases or sales of the 
underlying investments.  Premiums paid for options are small in relation to 
the market value of such investments, and, consequently, put and call options 
offer large amounts of leverage.  The leverage offered by trading in options 
could result in the Portfolio's net asset value being more sensitive to 
changes in the value of the underlying investments.

REGULATORY ASPECTS OF HEDGING INSTRUMENTS AND COVERED CALLS.  The Portfolio 
must operate within certain restrictions as to its long and short positions 
in Stock Index Futures and options thereon under a rule (the "CFTC Rule") 
adopted by the CFTC under the Commodity Exchange Act (the "CEA"), which 
excludes the Portfolio from registration with the CFTC as a "commodity pool 
operator" (as defined in the CEA) if it complies with the CFTC Rule.  Under 
these restrictions the Portfolio will not, as to any positions, whether 
short, long or a combination thereof, enter into Stock Index Futures and 
options thereon for which the aggregate initial margins and premiums exceed 
5% of the fair market value of its total assets, with certain exclusions as 
defined in the CFTC Rule.  Under the restrictions, the Portfolio also must, 
as to its short positions, use Stock Index Futures and options thereon solely 
for bona-fide hedging purposes within the meaning and intent of the 
applicable provisions under the CEA.

Transactions in options by the Portfolio are subject to limitations 
established by each of the exchanges governing the maximum number of options 
that may be written or held by a single investor or group of investors acting 
in concert, regardless of whether the options were written or purchased on 
the same or different exchanges or are held in one or more accounts or 
through one or more exchanges or brokers.  Thus, the number of options which 
the Portfolio may write or hold may be affected by options written or held by 
other entities, including other investment companies having the same or an 
affiliated investment adviser. Position limits also apply to Stock Index 
Futures.  An exchange may order the liquidation of positions found to be in 
violation of those limits and may impose certain other sanctions.  Due to 
requirements under the 1940 Act, when the Portfolio purchases a Stock Index 
Future, the Portfolio will maintain, in a segregated account or accounts with 
its custodian bank, cash or liquid assets in an amount equal to the market 
value of the securities underlying such Stock Index Future, less the margin 
deposit applicable to it.


LIMITS ON USE OF HEDGING INSTRUMENTS.  The Portfolio intends to qualify as a 
"regulated investment company" under the Internal Revenue Code of 1986, as 
amended (the "Code").  One of the tests for such qualification for taxable 
years beginning on or before August 5, 1997 is that less than 30% of its 
gross income in that year must be derived from gains realized on the sale of 
securities held for less than three months.  Due to this limitation, the 
Portfolio will limit the extent to which it engages in the following 
activities, but will not be precluded from them:  (1) selling investments, 
including Stock Index Futures, held for less than three months, whether or 
not they were purchased on the exercise of a call held by the Portfolio; (2) 
purchasing calls or puts which expire in less than three months; (3) 
effecting closing transactions with respect to calls or puts purchased less 
than three months previously; (4) exercising puts held for less than three 
months; and (5) writing calls on investments held for less than three months.


                                      17

<PAGE>

POSSIBLE RISK FACTORS IN HEDGING.  In addition to the risks discussed above, 
there is a risk in using short hedging by selling Stock Index Futures or 
purchasing puts on stock indices that the prices of the applicable index 
(thus the prices of the Hedging Instruments) will correlate imperfectly with 
the behavior of the cash (I.E., market value) prices of the Portfolio's 
equity securities.  The ordinary spreads between prices in the cash and 
futures markets are subject to distortions due to differences in the natures 
of those markets. First, all participants in the futures markets are subject 
to margin deposit and maintenance requirements.  Rather than meeting 
additional margin deposit requirements, investors may close futures contracts 
through offsetting transactions which could distort the normal relationship 
between the cash and futures markets.  Second, the liquidity of the futures 
markets depends on participants entering into offsetting transactions rather 
than making or taking delivery.  To the extent participants decide to make or 
take delivery, liquidity in the futures markets could be reduced, thus 
producing distortion.  Third, from the point of view of speculators, the 
deposit requirements in the futures markets are less onerous than margin 
requirements in the securities markets. Therefore, increased participation by 
speculators in the futures markets may cause temporary price distortions.

The risk of imperfect correlation increases as the composition of the 
Portfolio's portfolio diverges from the securities included in the applicable 
index.  To compensate for the imperfect correlation of movements in the price 
of the equity securities being hedged and movements in the price of the 
Hedging Instruments, the Portfolio may use Hedging Instruments in a greater 
dollar amount than the dollar amount of equity securities being hedged if the 
historical volatility of the prices of such equity securities being hedged is 
more than the historical volatility of the applicable index.  It is also 
possible that where the Portfolio has used Hedging Instruments in a short 
hedge, the market may advance and the value of equity securities held in the 
Portfolio's portfolio may decline. If this occurred, the Portfolio would lose 
money on the Hedging Instruments and also experience a decline in value in 
its equity securities.  However, while this could occur for a very brief 
period or to a very small degree, the value of a diversified portfolio of 
equity securities will tend to move over time in the same direction as the 
indices upon which the Hedging Instruments are based.

If the Portfolio uses Hedging Instruments to establish a position in the 
equities markets as a temporary substitute for the purchase of individual 
equity securities (long hedging) by buying Stock Index Futures and/or calls 
on such Futures, on securities or on stock indices, it is possible that the 
market may decline; if the Portfolio then concludes not to invest in equity 
securities at that time because of concerns as to possible further market 
decline or for other reasons, the Portfolio will realize a loss on the 
Hedging Instruments that is not offset by a reduction in the price of the 
equity securities purchased.

Additionally, each other Fund (other than the Money Market Funds), 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.  Certain Funds currently do no not intend to enter into any 
such transactions.  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.  
Principal among such risks are:  (1) the possible failure of such instruments 
as hedging techniques in cases where the price movements of the securities 
underlying the options or futures do not follow the price movements of the 
portfolio securities subject to the hedge; (2) potentially unlimited loss 
associated with futures transactions and the possible lack of a liquid 
secondary market for closing out a futures position; and (3) possible losses 
resulting from the inability of the Portfolio's investment adviser to 
correctly predict the direction of stock prices, interest rates and other 
economic factors. 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 CFTC.

No assurance can be given, however, that any hedging or option income 
strategy will succeed in achieving its intended result.

                                      18

<PAGE>


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:  (1) an offsetting ("covered") position or (2) cash, U.S. Government 
Securities or other liquid 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 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 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 
Investment 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 Fund's 
Investment 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 Investment 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.

                                      19

<PAGE>

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

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.

                                      20

<PAGE>

    (5)  When a Fund enters into an over-the-counter contract with a 
counterparty, the Fund will assume the risk that the counterparty will fail 
to perform its obligations, in which case the Fund could be worse off than if 
the contract had not been entered into.

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 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 (typically 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

                                      21

<PAGE>

positions. In that 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 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 Norwest'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 
a Fund will not enter into any futures contract or option on a futures 
contract if, as a result, the aggregate initial margin and premiums required 
to establish such positions would exceed 5% of the Fund's net assets.


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 
programs.

                                      22

<PAGE>

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.

When required by applicable regulatory guidelines, a Fund will set aside 
cash, U.S. Government Securities or other liquid assets in a segregated 
account with its custodian in the prescribed amount.

                                      23

<PAGE>


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 Norwest 
believes there is significant potential for price appreciation.  The basic 
premise to Norwest's "contrarian" investment approach is that security prices 
change more than fundamental investment values.  Norwest 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 general, 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 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 

                                      24

<PAGE>

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.

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 either at any time or 
when 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 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 

                                      25

<PAGE>

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. The price of warrants does not necessarily 
move parallel to the prices of the underlying securities.  Warrants have no 
voting rights, receive no dividends and have no rights with respect to the 
assets of the issuer.  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. Small Cap Opportunities Fund 
may not invest in warrants if as a result more than 5% of its net assets 
would be so invested, or if more than 2% of its net assets would be so 
invested in warrants that are not listed on the New York or American Stock 
Exchanges.

HIGH YIELD/JUNK BONDS


Each of Minnesota Intermediate Tax-Free Fund, Minnesota Tax-Free Fund and 
Small Cap Opportunities Fund may invest in bonds rated below "Baa" by Moody's 
or "BBB" by S&P (commonly known as "high yield/high risk securities" or "junk 
bonds"). Securities rated less than "Baa" by Moody's or "BBB" by S&P are 
classified as non-investment grade securities and are considered speculative 
by those rating agencies.  Junk bonds may be issued as a consequence of 
corporate restructurings, such as leveraged buyouts, mergers, acquisitions, 
debt recapitalizations, or similar events or by smaller or highly leveraged 
companies.  Although the growth of the high yield/high risk securities market 
in the 1980's had paralleled a long economic expansion, many issuers 
subsequently have been affected by adverse economic and market conditions.  
It should be recognized that an economic downturn or increase in interest 
rates is likely to have a negative effect on:  (1) the high yield bond 
market; (2) the value of high yield/high risk securities; and (3) the ability 
of the securities' issuers to service their principal and interest payment 
obligations, to meet their projected business goals or to obtain additional 
financing.  In addition, the market for high yield/high risk securities, 
which is concentrated in relatively few market makers, may not be as liquid 
as the market for investment grade securities.  Under adverse market or 
economic conditions, the market for high yield/high risk securities could 
contract further, independent of any specific adverse changes in the 
condition of a particular issuer.  As a result, the Fund could find it more 
difficult to sell these securities or may be able to sell the securities only 
at prices lower than if such securities were widely traded. Prices realized 
upon the sale of such lower rated or unrated securities, under these 
circumstances, may be less than the prices used in calculating the Fund's net 
asset value.


In periods of reduced market liquidity, prices of high yield/high risk 
securities may become more volatile and may experience sudden and substantial 
price declines.  Also, there may be significant disparities in the prices 
quoted for high yield/high risk securities by various dealers.  Under such 
conditions, the Fund may have to use subjective rather than objective 
criteria to value its high yield/high risk securities investments accurately 
and rely more heavily on the judgment of the Fund's investment adviser.

Prices for high yield/high risk securities also may be affected by 
legislative and regulatory developments.  For example, Congress has 
considered legislation to restrict or eliminate the corporate tax deduction 
for interest payments or to regulate corporate restructurings such as 
takeovers, mergers or leveraged buyouts.  These laws could adversely affect 
the Fund's net asset value and investment practices, the market for high 
yield/high risk securities, the financial condition of issuers of these 
securities and the value of outstanding high yield/high risk securities.

                                      26

<PAGE>


Lower rated or unrated debt obligations also present risks based on payment
expectations.  If an issuer calls the obligation for redemption, the Fund's
Investment Adviser may have to replace the security with a lower yielding
security, resulting in a decreased return for investors.  If a Fund experiences
unexpected net redemptions, the Fund's Investment Adviser may be forced to sell
the Fund's higher rated securities, resulting in a decline in the overall
credit quality of the Fund's portfolio and increasing the exposure of the
Portfolio to the risks of high yield/high risk securities.



ILLIQUID 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 the Portfolios, 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 Investment 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 Investment 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.



In connection with a Fund's original purchase of restricted securities, it 
may negotiate rights with the issuer to have such securities registered for 
sale at a later time.  Further, the expenses of registration of restricted 
securities that are illiquid may also be negotiated by the Fund with the 
issuer at the time such securities are purchased by a Fund.  When 
registration is required, however, a considerable period may elapse between a 
decision to sell the securities and the time the Fund would be permitted to 
sell such securities.  A similar delay might be experienced in attempting to 
sell such securities pursuant to an exemption from registration.  Thus, a 
Fund may not be able to obtain as favorable a price as that prevailing at the 
time of the decision to sell.


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 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 Investment 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.

                                      27

<PAGE>


LOANS OF PORTFOLIO SECURITIES


Each Fund may lend its portfolio securities subject to the restrictions 
stated in its Prospectus.  Under applicable regulatory requirements (which 
are subject to change), the loan collateral must, on each business day, at 
least equal the market value of the loaned securities and must consist of 
cash, bank letters of credit, U.S. Government securities, or other cash 
equivalents in which the Fund is permitted to invest.  To be acceptable as 
collateral, letters of credit must obligate a bank to pay amounts demanded by 
the Fund if the demand meets the terms of the letter.  Such terms and the 
issuing bank must be satisfactory to the Fund.  In a portfolio securities 
lending transaction, the Fund receives from the borrower an amount equal to 
the interest paid or the dividends declared on the loaned securities during 
the term of the loan as well as the interest on the collateral securities, 
less any finders' or administrative fees the Fund pays in arranging the loan. 
The Fund may share the interest it receives on the collateral securities 
with the borrower as long as it realizes at least a minimum amount of 
interest required by the lending guidelines established by the Trust's Board 
of Trustees.  The Fund will not lend its portfolio securities to any officer, 
director, employee or affiliate of the Fund or an Adviser. The terms of the 
Portfolio's loans must meet certain tests under the Internal Revenue Code and 
permit the Portfolio to reacquire loaned securities on five business days' 
notice or in time to vote on any important matter.


BORROWING AND TRANSACTIONS INVOLVING LEVERAGE


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 Norwest 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).

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 

                                      28

<PAGE>

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


SEGREGATED ACCOUNT

In order to limit the risks involved in various transactions involving 
leverage, the Trust's custodian will set aside and maintain in a segregated 
account cash and other liquid securities in accordance with SEC guidelines.  
The account 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:  (1) 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"); and (2) 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.


MARGIN AND SHORT SALES


Certain Funds may enter into short sales as described in the prospectus of 
that Fund.  The Funds may make short sales of securities against the box.  A 
short sale is "against the box" to the extent that while the short position 
is open, the Fund must own an equal amount of the securities sold short, or 
by virtue of ownership of securities have the right, without payment of 
further consideration, to obtain an equal amount of the securities sold 
short.  Short sales against-the-box may in certain cases be made to defer, 
for Federal income tax purposes, recognition of gain or loss on the sale of 
securities "in the box" until the short position is closed out.  Under 
recently enacted legislation, if a Portfolio has unrealized gain with respect 
to a long position and enters into a short sale against-the-box, the 
Portfolio generally will be deemed to have sold the long position for tax 
purposes and thus will recognize gain. 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 

                                      29

<PAGE>

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 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 an 
Investment 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.

                                      30

<PAGE>


REPURCHASE AGREEMENTS


The Funds may invest in securities subject to repurchase agreements with U.S. 
banks or broker-dealers. Small Cap Opportunities Fund may invest only in 
repurchase agreements maturing in seven days or less.  In a typical 
repurchase agreement, the seller of a security commits itself at the time of 
the sale to repurchase that security from the buyer at a mutually agreed-upon 
time and price.  The repurchase price exceeds the sale price, reflecting an 
agreed-upon interest rate effective for the period the buyer owns the 
security subject to repurchase.  The agreed-upon rate is unrelated to the 
interest rate on that security. The Adviser will monitor the value of the 
underlying security at the time the transaction is entered into and at all 
times during the term of the repurchase agreement to ensure that the value of 
the security always equals or exceeds the repurchase price (including accrued 
interest).  In the event of default by the seller under the repurchase 
agreement, the Portfolio may have difficulties in exercising its rights to 
the underlying securities and may incur costs and experience time delays in 
connection with the disposition of such securities.  To evaluate potential 
risks, the Adviser reviews the credit-worthiness of those banks and dealers 
with which the Portfolio enters into repurchase agreements.

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.

Securities subject to repurchase agreements will be held by the Fund's 
custodian or another qualified 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 other than a Money Market Fund, in accordance with the policies 
described in its Prospectus, assumes a temporary defensive position, it may 
invest in:  (1) short-term U.S. Government Securities; (2) 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, except in the case of International Fund total assets in 
excess of one billion dollars and that are insured by the Federal Deposit 
Insurance Corporation; (3) 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 
investment adviser to be of comparable quality; (4) repurchase agreements 
covering any of the securities in which the Fund may invest directly; and (5) 
money market mutual funds.


II. 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 Tax Free Fund, Minnesota Intermediate Tax-Free Fund and Minnesota
Tax-Free Fund 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 following summary is based on publicly available information that has not 
been independently verified by the Trust or its legal counsel.

                                      31

<PAGE>


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  1996, there has been moderate but steady improvement in 
the Colorado economy:  per-capita income increased approximately 54.9% (4.5% 
in 1996) and retail trade sales increased approximately 81.9% (6.9% in 1996). 
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  
1996 the State's unemployment rate was 4.2% and the United State's 
unemployment rate was 5.4%).


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.

STATE REVENUES


The State operates on a fiscal year beginning July 1 and ending June 30.  
Fiscal year 1996 refers to the fiscal year ended June 30, 1996.

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 31.5% and 53.2%, 
respectively, of total General Fund revenues during fiscal year 1995 and 
approximately 31.0% and 54.3%, respectively, of total General Fund revenues 
during fiscal year 1996.  The ending General Fund balance for fiscal year  
1995 was $488.5 million and for fiscal years 1996 was approximately $368.5 
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 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,  1997, 
was given the highest rating available for short-term obligations by S&P 
(SP-1+) and Fitch Investors Service, L.P. (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.

                                      32

<PAGE>

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.  The State anticipates that revenues in excess of the limits 
applicable for the 1996 fiscal year will be refunded to certain taxpayers in 
the State in accordance with the Amendment.  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.


MINNESOTA

The following information has been derived from the 1997 edition of 
Historical Economic Statistics and the Economic Report to the Governor for 
1993 and 1994, both prepared by the Economic Resource Group, and Compare 
Minnesota: An Economic and Statistical Fact Book 1996/1997 by the Minnesota 
Department of Trade and Economic Development.  In a number of instances, the 
information in these sources is current through 1994.


THE STRUCTURE OF THE MINNESOTA STATE'S ECONOMY

Diversity and a significant natural resource base are two important
characteristics of the State's economy.

                                      33

<PAGE>


When viewed in  1994 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  2.5 percentage points of national employment share.

Some unique characteristics of the State's economy are apparent in employment
concentrations in many major industries.  The State's high technology industries
accounted for more than 7% of all employment in the State of 1994, and the
State's concentration of high technology employment is 50% higher than the
United States average.  This emphasis is partly explained by the location in the
State of Honeywell, IBM, 3M Company, Unisys and Seagate Technology.

The importance of the State's resource base for overall employment is apparent
in the employment mix in non-durable goods industries. The State's
concentration of employment in 1994 was 50% higher than the United States
average in the food and kindred products industry and almost 50% higher in the
forest and forestry products industry.  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.

The printing and publishing industry and medical products manufacturing 
industry are also relatively more important in the State than in the United 
States. From 1985 to 1994, employment in the State's printing and publishing 
industry grew 28.2%, compared to the United States growth rate of 7.8% over 
the same period. Printing and publishing companies provided 2.9% of all of 
the State's private industry jobs in 1994.  In the medical products 
manufacturing industry, the State's concentration of employment in 1994 was 
the second highest in the nation and twice the United States average.

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  1994.  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 1985 to 1994, employment in non-farm industries increased 
24.1%, compared to an increase of 16.9% in the United States. Manufacturing 
has been a strong sector, with Minnesota employment outperforming its United 
States counterpart in the period from 1985 to 1994 with an increase of 10.5% 
compared to a decrease of 4.9% in the United States in the same period.  Over 
40% of the total increase in Minnesota non-farm employment between the years 
1985-1994 resulted from a 45.5% increase in employees in the services 
industry during this period.  Mining was the only industry where employment 
decreased between 1985-1994 in both Minnesota and the United States, dropping 
by 9.4% in Minnesota and 34.8% in the United States.


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  1994, Minnesota per
capita personal income was  102.6% of its U.S. counterpart.

In the level of personal income per capita, Minnesota ranked second among twelve
north central states in both 1992 and 1994.  During the period 1985 to 1994,
Minnesota ranked second among such states in annual average growth of personal
income and fifth during the period 1993 to 1994.  Minnesota ranked twentieth
nationally and third among the twelve north central states with a per capita
disposable income of $18,792 in 1994.  During 1990-1992, wage and salary
disbursements which constitute some 60% of total personal income grew 12.3% in
Minnesota as compared to 8.3% for the United States.  Personal income in
Minnesota grew more rapidly than seven other north central states' averages
during  1993-

                                      34

<PAGE>

1994, and faster than the United States average.  From 1985 to 1994, 
Minnesota non-agricultural employment grew 24.1% while such employment in 
the United States grew 16.9%.  During the 1990-1993 period, Minnesota 
non-agricultural employment increased 5.1%, while regional employment 
increased 1.3 %.

The annual employment rate in Minnesota was below that of the United States and
of the twelve north central states for every year during the ten-year period of
1985 to 1994.  In 1994, the State's unemployment rate was 3.9% compared to the
United States average of 6.1% and the twelve north central state's average of
5.1%.


POPULATION TRENDS IN THE STATE


Minnesota resident population grew from 4,074,000 in 1980 to 4,565,000 in 
1994, for a growth rate of 12.1%.  The United States growth rate between 1980 
and 1994 was 15.1% and the overall growth rate for the twelve north central 
states was 4.4%.  Minnesota population is currently forecast to grow 12.3% 
between 1994 and 2010.


III.   INVESTMENT LIMITATIONS


For purposes of all fundamental and nonfundamental investment policies of the 
Fund:  (1) the term 1940 Act includes the rules thereunder, SEC 
interpretations and any exemptive order upon which the Fund may rely and (2) 
the term Code includes the rules thereunder, IRS interpretations and any 
private letter ruling or similar authority upon which the Fund may rely.


The Fund has adopted the investment policies listed in this section which are 
nonfundamental policies unless otherwise noted.  Except for its investment 
objective, which is fundamental, the Fund has not adopted any fundamental 
policies except as required by the 1940 Act.

Except as required by the 1940 Act or the Code, 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.


A fundamental policy cannot be changed without the affirmative vote of the 
lesser of:  (1) more than 50% of the outstanding shares of the Fund or (2) 
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 has adopted the following investment limitations which are 
fundamental policies of the Fund.  Reference to any Fund that invests in one 
or more Core Portfolios includes reference to the Core Portfolio(s) in which 
that Fund invests, which has the same fundamental policies as the Fund.

(1) DIVERSIFICATION


         EACH FUND (other than Colorado Tax-Free Fund, Minnesota Intermediate
         Tax-Free Fund and Minnesota Tax-Free Fund) may not, with respect to
         75% of its assets, purchase a security (other than a U.S. Government
         Security or a security of an investment company) if, as a result: (1)
         more than 5% of the Fund's total assets would be invested in the
         securities of a single issuer or (2) the Fund would own more than 10%
         of the outstanding voting securities of any single issuer


(2) CONCENTRATION

    (a)  CASH INVESTMENT FUND and READY CASH INVESTMENT FUND may not purchase a
         security if, as a result, more than 25% of the Fund's total assets
         would be invested in securities of issuers 

                                      35

<PAGE>


         conducting their principal business activities in the same industry; 
         provided:  (1) there is no limit on investments in U.S. Government 
         Securities, in repurchase agreements covering U.S. Government 
         Securities or in foreign government securities; (2) municipal 
         securities are not treated as involving a single industry; (3) there 
         is no limit on investment in issuers domiciled in a single country; 
         (4) financial service companies are classified according to the end 
         users of their services (for example, automobile finance, bank 
         finance and diversified finance); and (5) 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.  Notwithstanding anything 
         to the contrary, to the extent permitted by the 1940 Act, the Fund 
         may invest in one or more investment companies; provided that, except 
         to the extent the Fund invests in other investment companies pursuant 
         to Section 12(d)(1)(A) of the 1940 Act, the Fund treats the assets 
         of the investment companies in which it invests as its own for 
         purposes of this policy.

    (b)  TREASURY FUND, U.S. GOVERNMENT FUND and MUNICIPAL MONEY MARKET FUND
         may not purchase a security if, as a result, more than 25% of the
         Fund's total assets would be invested in securities of issuers
         conducting their principal business activities in the same industry;
         provided: (1) 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 its parent is unconditionally liable for the
         obligation, foreign branches of U.S. banks); (2) municipal securities
         are not treated as involving a single industry; (3) there is no limit
         on investment in issuers domiciled in a single country; (4) financial
         service companies are classified according to the end users of their
         services (for example, automobile finance, bank finance and
         diversified finance); and (5) utility companies are classified
         according to their services (for example, gas, gas transmission,
         electric and gas, electric and telephone).  Notwithstanding anything
         to the contrary, to the extent permitted by the 1940 Act, the Fund may
         invest in one or more investment companies; provided that, except to
         the extent the Fund invests in other investment companies pursuant to
         Section 12(d)(1)(A) of the 1940 Act, the Fund treats the assets of the
         investment companies in which it invests as its own for purposes of
         this policy.

    (c)  INCOME FUND, LIMITED TERM TAX-FREE FUND, TAX-FREE INCOME FUND,
         COLORADO TAX-FREE FUND, MINNESOTA INTERMEDIATE TAX-FREE FUND,
         MINNESOTA TAX-FREE FUND and VALUGROWTH STOCK FUND may not purchase a
         security if, as a result, more than 25% of the Fund's total assets
         would be invested in securities of issuers conducting their principal
         business activities in the same industry; provided:  (1) there is no
         limit on investments in repurchase agreements covering U.S. Government
         Securities; (2) municipal securities are not treated as involving a
         single industry; (3) financial service companies are classified
         according to the end users of their services (for example, automobile
         finance, bank finance and diversified finance); and (4) utility
         companies are classified according to their services (for example,
         gas, gas transmission, electric and gas, electric and telephone). 
         Notwithstanding anything to the contrary, to the extent permitted by
         the 1940 Act, the Fund may invest in one or more investment companies;
         provided that, except to the extent the Fund invests in other
         investment companies pursuant to Section 12(d)(1)(A) of the 1940 Act,
         the Fund treats the assets of the investment companies in which it
         invests as its own for purposes of this policy.


    (d)  TOTAL RETURN BOND FUND may not purchase a security if, as a result,
         more than 25% of the Fund's total assets would be invested in
         securities of issuers conducting their principal business activities
         in the same industry; provided:  (1) there is no limit on investments
         in U.S. Government Securities, or in repurchase agreements covering
         U.S. Government Securities; (2) mortgage-related or housing-related
         securities (including mortgage-related or housing-related U.S.
         Government Securities) and municipal securities are not treated as
         involving a single industry;

                                      36

<PAGE>

     (3) financial service companies are classified according to the end 
         users of their services (for example, automobile finance, bank 
         finance and diversified finance); and (4) utility companies are 
         classified according to their services (for example, gas, gas 
         transmission, electric and gas, electric and telephone).  
         Notwithstanding anything to the contrary, to the extent
         permitted by the 1940 Act, the Fund may invest in one or more
         investment companies; provided that, except to the extent the Fund
         invests in other investment companies pursuant to Section 12(d)(1)(A)
         of the 1940 Act, the Fund treats the assets of the investment
         companies in which it invests as its own for purposes of this policy.

    (e)  SMALL COMPANY STOCK FUND and CONTRARIAN STOCK FUND may not purchase a
         security if, as a result, more than 25% of the Fund's total assets
         would be invested in securities of issuers conducting their principal
         business activities in the same industry; provided:  (1) there is no
         limit on investments in U.S. Government Securities, or in repurchase
         agreements covering U.S. Government Securities, municipal securities
         are not treated as involving a single industry; (2) financial service
         companies are classified according to the end users of their services
         (for example, automobile finance, bank finance and diversified
         finance); and (3) utility companies are classified according to their
         services (for example, gas, gas transmission, electric and gas,
         electric and telephone).  Notwithstanding anything to the contrary, to
         the extent permitted by the 1940 Act, the Fund may invest in one or
         more investment companies; provided that, except to the extent the
         Fund invests in other investment companies pursuant to Section
         12(d)(1)(A) of the 1940 Act, the Fund treats the assets of the
         investment companies in which it invests as its own for purposes of
         this policy.


    (f)  DIVERSIFIED SMALL CAP FUND and SMALL CAP OPPORTUNITIES FUND may not
         purchase a security if, as a result, more than 25% of the Fund's total
         assets would be invested in 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. 
         Notwithstanding anything to the contrary, to the extent permitted by
         the 1940 Act, the Fund may invest in one or more investment companies;
         provided that, except to the extent the Fund invests in other
         investment companies pursuant to Section 12(d)(1)(A) of the 1940 Act,
         the Fund treats the assets of the investment companies in which it
         invests as its own for purposes of this policy.


    (g)  STABLE INCOME FUND, LIMITED TERM GOVERNMENT INCOME FUND, INTERMEDIATE
         GOVERNMENT INCOME FUND, DIVERSIFIED BOND FUND,  STRATEGIC INCOME FUND,
         MODERATE BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE BALANCED
         FUND, INCOME EQUITY FUND, INDEX FUND, DIVERSIFIED EQUITY FUND, GROWTH
         EQUITY FUND, LARGE COMPANY GROWTH FUND, and SMALL COMPANY GROWTH FUND
         may not purchase a security if, as a result, more than 25% of the
         Fund's total assets would be invested in 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); and that utility
         companies are classified according to their services (for example,
         gas, gas transmission, electric and gas, electric and telephone. 
         Notwithstanding anything to the contrary, to the extent permitted by
         the 1940 Act, the Fund may invest in one or more investment companies;
         provided that, except to the extent the Fund invests in other
         investment companies pursuant to Section 12(d)(1)(A) of the 1940 Act,
         the Fund treats the assets of the investment companies in which it
         invests as its own for purposes of this policy.

    (h)  INTERNATIONAL FUND may not purchase a security if, as a result, more
         than 25% of the Fund's total assets would be invested in securities of
         issuers conducting their principal business activities in the same
         industry; provided:  (1) there is no limit on investments in U.S.
         Government Securities, or in repurchase agreements covering U.S.
         Government Securities; (2) there is no limit on investment

                                      37

<PAGE>

         in issuers domiciled in a single country; (3) financial service 
         companies are classified according to the end users of their services 
         (for example, automobile finance, bank finance and diversified 
         finance); and (4) utility companies are classified according to their 
         services (for example, gas, gas transmission, electric and gas, 
         electric and telephone).  Notwithstanding anything to the contrary, 
         to the extent permitted by the 1940 Act, the Fund may invest in one 
         or more investment companies; provided that, except to the extent the 
         Fund invests in other investment companies pursuant to 
         Section 12(d)(1)(A) of the 1940 Act, the Fund treats the assets of the 
         investment companies in which it invests as its own for purposes of 
         this policy.


(3) BORROWING

    (a)  Each MONEY MARKET FUND, INCOME FUND, TOTAL RETURN BOND FUND, each
         TAX-FREE INCOME FUND, VALUGROWTH STOCK FUND, SMALL COMPANY STOCK FUND,
         CONTRARIAN STOCK FUND, DIVERSIFIED SMALL CAP FUND and SMALL CAP
         OPPORTUNITIES 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, [LIMITED TERM GOVERNMENT INCOME FUND],
         INTERMEDIATE GOVERNMENT INCOME FUND, DIVERSIFIED BOND FUND, STRATEGIC
         INCOME FUND, MODERATE BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE
         BALANCED-EQUITY FUND, INDEX FUND, INCOME EQUITY 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 (as computed immediately after the borrowing).


(4) ISSUANCE OF SENIOR SECURITIES

    NO FUND may issue senior securities except to the extent permitted by the
    1940 Act.

(5) UNDERWRITING ACTIVITIES

    NO FUND may 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

    NO FUND may make loans, except a 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 (other than [DIVERSIFIED SMALL CAP FUND], and SMALL CAP
    OPPORTUNITIES 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.

    DIVERSIFIED SMALL CAP FUND and SMALL CAP OPPORTUNITIES FUND may not
    purchase or sell real estate or any interest therein, except that it 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

                                      38


<PAGE>

    EACH FIXED INCOME FUND, EQUITY FUND (other than DIVERSIFIED SMALL CAP FUND
    and SMALL CAP OPPORTUNITIES FUND) and BALANCED FUND may not purchase or
    sell physical commodities or contracts, options or options on contracts to
    purchase or sell physical commodities; provided that currency and 
    currency-related contracts and contracts on indices will not be deemed to 
    be physical commodities.

    DIVERSIFIED SMALL CAP FUND and SMALL CAP OPPORTUNITIES FUND may not
    purchase or sell physical commodities unless acquired as a result of owning
    securities or other instruments, but it may purchase, sell or enter into
    financial options and futures and forward currency contracts and other
    financial contracts or derivative instruments.


NONFUNDAMENTAL LIMITATIONS


Each Fund has adopted the following investment limitations which are not 
fundamental policies of the Fund.  Reference to a Fund includes reference to 
its corresponding Portfolio, if applicable, which has the same fundamental 
policies as the Fund.  The policies of a Fund may be changed by the Board, or 
in the case of its corresponding Portfolio, the Core Trust Board.

(1) DIVERSIFICATION

    (a)  To the extent required to qualify as a regulated investment company,
         and with respect to 50% of its assets, MUNICIPAL MONEY MARKET 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 section as a single issuer or the Fund would own more than 10% of
         the outstanding rated securities of any single issuer.

    (b)  With respect to each of COLORADO TAX-FREE FUND, MINNESOTA INTERMEDIATE
         TAX-FREE FUND and MINNESOTA TAX-FREE FUND, the Fund is 
         "non-diversified" as that term is defined in the 1940 Act.


    (c)  With respect to each of COLORADO TAX-FREE FUND, MINNESOTA INTERMEDIATE
         TAX-FREE FUND and MINNESOTA TAX-FREE FUND, to the extent required to
         qualify as a regulated investment company under the Internal Revenue
         Code of 1986, as amended, the Fund may not purchase a security (other
         than a U.S. Government security or a security of an investment
         company) if, as a result:  (1) with respect to 50% of its assets,
         more than 5% of the Fund's total assets would be invested in the
         securities of any single issuer; (2) with respect to 50% of its
         assets, the Fund would own more than 10% of the outstanding securities
         of any single issuer; or (3) more than 25% of the Fund's total assets
         would be invested in the securities of any single issuer.


(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, 
    LIMITED TERM GOVERNMENT INCOME FUND, INTERMEDIATE GOVERNMENT INCOME FUND,
    DIVERSIFIED BOND FUND,  STRATEGIC INCOME FUND, MODERATE BALANCED FUND,
    GROWTH BALANCED FUND, AGGRESSIVE BALANCED-EQUITY 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

                                      39
<PAGE>

    (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 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, as amended
         ("Restricted Securities").

    (b)  EACH FIXED INCOME FUND, EQUITY FUND and BALANCED FUND may not acquire
         securities or invest in repurchase agreements with respect to any
         securities if, as result, more than 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, as amended ("Restricted Securities").

(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 LIMITED TERM GOVERNMENT INCOME FUND and INTERMEDIATE
    GOVERNMENT INCOME 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 (other than [DIVERSIFIED SMALL CAP
    FUND] and SMALL CAP OPPORTUNITIES Fund) may 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 (other than DIVERSIFIED SMALL CAP FUND and SMALL CAP OPPORTUNITIES
    FUND) may 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 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.

(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.

(9) 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.

(10) LENDING OF PORTFOLIO SECURITIES

                                      40
<PAGE>

     NO FUND (other than [DIVERSIFIED SMALL CAP FUND] and SMALL CAP
     OPPORTUNITIES FUND) may lend portfolio securities if the total value of 
     all loaned securities would exceed 33 1/3% of the Fund's total assets.

     [DIVERSIFIED SMALL CAP FUND and SMALL CAP OPPORTUNITIES FUND may not lend
     portfolio securities if the total value of all loaned securities would
     exceed 25% of its total assets.

(11) REAL ESTATE LIMITED PARTNERSHIPS 

     NO FUND may invest in real estate limited partnerships.

(12) OPTIONS AND FUTURES CONTRACTS

     (a)  NO MONEY MARKET FUND may invest in options, futures contracts or
          options on futures contracts. 

     (b)  NO FIXED INCOME FUND, EQUITY FUND (other than [DIVERSIFIED SMALL CAP
          FUND] and SMALL CAP OPPORTUNITIES FUND) or BALANCED 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.

(13) WARRANTS


     NO FUND may invest in warrants if:  (1) 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 (2) 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.


(14) 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.

(15) 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.

(16) VALUGROWTH STOCK FUND INVESTMENT LIMITATIONS

     VALUGROWTH STOCK FUND may not enter into commitments under when-issued and
     forward commitment obligations in an amount greater than 15% of the value 
     of the Fund's total assets.

IV. 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 to maintain a stable net asset value of $1.00.  For purposes of 
advertising performance, and in accordance with SEC interpretations, Small 
Cap Opportunities Fund may refer to the performance of the Core Portfolio in 
which it invests (Schroder U.S. Smaller

                                      41
<PAGE>

Companies Portfolio).  That Portfolio in turn has adopted the performance of 
Schroder U.S. Smaller Companies Fund, a series of Schroder Capital Funds 
(Delaware), which has an identical investment objective to the Fund and the 
Portfolio.  Like the Fund, the Schroder U.S. Smaller Companies Fund also 
invests all of its investable assets in the Portfolio.

For a listing of certain performance data as of May 31, 1997 (see Appendix C --
Performance Data).


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").  In addition, 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, 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 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

                                      42
<PAGE>

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, any change in the Fund's net asset value per 
share over the period and maximum sales charge, if any, applicable to 
purchases of the Fund's shares. Average annual total returns are calculated, 
through the use of a formula prescribed by the SEC, 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. The average annual total return is computed separately for each 
class of shares of a Fund. 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 
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:

                                      43
<PAGE>

    PT = (ERV/P-1)

    Where:
         PT = period total return
         The other definitions are the same as in average annual total return
         above


MULTICLASS, COLLECTIVE TRUST FUND AND MASTER-FEEDER PERFORMANCE


MULTICLASS PERFORMANCE

When a Fund has more than one class of shares, 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 initial sales load on A Shares 
would 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


Prior to November 11, 1994, Norwest Bank Minnesota, N.A. managed several 
collective investment funds with investment objectives and investment 
policies that were in all material respects equivalent to certain of the 
Funds. Therefore, the performance for those applicable Funds includes the 
performance of their predecessor collective investment funds for periods 
before those funds became mutual funds on November 11, 1994.  The collective 
investment fund performance was adjusted by netting those Funds 1994 estimate 
of their expense ratios for the first year of operations as a mutual fund, 
including any applicable sales load.  The collective investment funds were 
not  subject to certain limitations, diversification requirements, and other 
restrictions imposed by the 1940 Act and the Internal Revenue Code, which, if 
applicable, may have adversely affected the performance result.  Prior 
performance is not indicative of the Funds' future performance.  The 
performance of International Fund reflects the historical performance of 
Schroder International Equity Fund (managed by Schroder Capital Management 
International Inc.) in which the collective investment fund invested.  
Performance of International Fund has been adjusted to reflect fees and 
expenses of the Schroder International Equity Fund.



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 these 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
including, but not limited to: (1) 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; (2) 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

                                      44
<PAGE>

as funding retirement, paying for children's education and financially 
supporting aging parents; (3) 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); (4) 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; (5) 
information regarding the effects of automatic investment and systematic 
withdrawal plans, including the principal of dollar cost averaging; (6) 
descriptions of the Funds' portfolio managers and the portfolio management 
staff of the Investment Advisers or summaries of the views of the portfolio 
managers with respect to the financial markets; (7) 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; (8) 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 (9) 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 for 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 
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:

                                      45
<PAGE>


               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 and other 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 and 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 or its parent corporation that Norwest has for more 
than 60 years been committed to quality products and outstanding service to 
assist its customers in meeting their financial goals and setting forth the 
reasons that Norwest believes that it has been successful as a national 
financial service firm.

CORE-GATEWAY PERFORMANCE

When a Fund such as International Fund (a "Gateway fund") invests all of its 
investable assets in another investment company such as International 
Portfolio (a "Core fund"), special performance calculation rules apply.  For 
instance, if a Gateway fund invests in a Core fund that has a performance 
history prior to the investment by the Gateway fund, the Gateway fund will 
assume the performance history of the Core fund. That history will not be 
restated to reflect the internal expense ratio of the Gateway fund.  However, 
a Core fund's performance will be restated to reflect any sales charges that 
are applicable to the Gateway fund's shares.

V. 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.


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 May 31, 1997 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. 

                                      46
<PAGE>

JOHN Y. KEFFER, Chairman and President,* Age 54.

    President and Owner, Forum Financial Services, Inc. (a registered 
    broker-dealer), Forum Administrative Services, Limited Liability Company 
    (a mutual fund administrator), Forum Financial Corp. (a registered 
    transfer agent), and other companies within the Forum Financial Group of 
    companies.  Mr. Keffer is a Director, Trustee and/or officer of various 
    registered investment companies for which Forum Financial Services, Inc. 
    or its affiliates serves as manager, administrator 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 Corporation since February 1993.  Prior
    thereto, he was Manager of Capital Markets Group, Norwest Corporation (a
    multi-bank holding company and parent of Norwest), until 1991.  His address
    is 1431 Landings Place, Sarasota, Florida 34231.

DONALD H. BURKHARDT, Trustee, Age 70.

    Principal of 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.

    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 of Digital Techniques,
    Inc. (an interactive video design and manufacturing company).  His address
    is P.O. Box 1888, New London, New Hampshire 03257.

JOHN S. MCCUNE, Trustee, Age 46.

    President, Norwest Investment Services, Inc.  His address is 608 2nd Avenue
    South, Minneapolis, Minnesota 55479.

TIMOTHY J. PENNY, Trustee, Age 45.

    Senior Counselor to the public relations firm of Himle-Horner since January
    1995 and Senior Fellow at the Humphrey Institute, Minneapolis, Minnesota (a
    public policy organization) since January 1995.  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.

                                      47
<PAGE>

ROBERT CAMPBELL, Treasurer, Age 35.

    Director of Fund Accounting, Forum Financial Services, Inc., with which he
    has been associated since April 1997.  Prior thereto, from February 1994 -
    April 1996 Mr. Campbell was Vice President-Business Unit Head, Domestic
    Fund Services at State Street Fund Services, Inc.  Prior thereto, from
    September 1992 - January 1994 Mr. Campbell was Assistant Vice President -
    Fund Manager at State Street Bank & Trust Company, and prior thereto First
    Line Manager.  His address is Two Portland Square, Portland, Maine 04101.

DAVID I. GOLDSTEIN, Vice President and Secretary, Age 35.

    Managing Director and Counsel, Forum Financial Services, Inc., with which
    he has been associated since 1991.  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.

    Managing Director and 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.

CATHERINE S. WOOLEDGE, Assistant Secretary, Age  55.

    Counsel, Forum Financial Services, Inc., with which she has been associated
    since 1996.  Prior thereto, Ms. Wooledge was an associate at the law firm
    of Morrison & Foerster since September 1994, prior thereto Ms. Wooledge was
    an associate corporate counsel at Franklin Resources, Inc. since September
    1993, and prior thereto associate at the law firm of Drinker Biddle &
    Reath, Washington, D.C. Ms. Wooledge 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.

DON L. EVANS, Assistant Secretary, Age  49.

    Assistant Counsel, Forum Financial Services, Inc., with which he has been
    associated since 1995.  Prior thereto, Mr. Evans was associated with the
    law firm of Bisk & Lutz and prior thereto was associated with the law firm
    of Weiner & Strother.  Mr. Evans 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.

                                      48
<PAGE>

RENEE A. WALKER, Assistant Secretary, Age 27.

    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 from 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.

COMPENSATION OF TRUSTEES AND OFFICERS OF THE TRUST

Each Trustee of the Trust is paid a retainer fee in the total amount of $5,000,
payable quarterly, 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.  In addition, each Trustee is paid $3,000 for
each regular 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 or
compensation or reimbursement for his associated expenses.  In addition, no
officer of the Trust is compensated by the Trust.

Mr. Burkhardt, Chairman of the Trust's and Norwest Select Funds' audit
committees, receives additional compensation of $6,000 from the Trust and
Norwest Select Funds allocated pro rata between the Trust and Norwest Select
Funds based upon relative net assets, for his services as Chairman.  Each
Trustee was elected by shareholders on April 30, 1997.

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,  1997, 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. Burkhardt         $36,223                 $36,250
    Mr. Harris            $27,975                 $28,000
    Mr. Leach             $32,970                 $33,000
    Mr. Penny             $15,985                 $16,000
    Mr. Willeke           $29,973                 $30,000
    Mr. McCune                 $0                      $0


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, 
1997 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, 1997, 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.  Messrs. Keffer, Goldstein, Butt, Sheehan, and Misses. Clark and
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.")


                                      49
<PAGE>

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 Reid & Priest.  Prior thereto he was a partner
    at the law firm of Winthrop Stimson Putnam & Roberts since 1989.  His
    address is 40 Wall Street, New York, New York 10005.

RICHARD C. BUTT, Treasurer

    CPA, Managing Director, Operations, Forum Financial Corp. since 1996. 
    Prior thereto, Mr. Butt was a consultant in the financial services 
    division of KPMG Peat Marwick LLP ("KPMG").  Prior to his employment at 
    KPMG, Mr. Butt was President of 440 Financial Distributors, Inc., the 
    distribution  subsidiary of 440 Financial Group, and Senior Vice 
    President of the parent company. Prior thereto, he was a Vice President 
    at Fidelity Services Company.  Mr. Butt is responsible for fund 
    accounting and transfer agency at Forum. His address is Two Portland 
    Square, Portland, Maine 04101.

SARA M. CLARK, Vice President, Assistant Secretary and Assistant Treasurer.

DAVID I. GOLDSTEIN, Secretary.

THOMAS G. SHEEHAN, Assistant Secretary.

RENEE A. WALKER, Assistant Secretary

TRUSTEES AND OFFICERS OF SCHRODER CORE


The following information relates to the principal occupations of each Trustee
and executive officer of the Schroder Core during the past five years and shows
the nature of any affiliation with Schroder.  Messrs. Keffer, Goldstein and
Sheehan and Ms. Wooledge, officers of Schroder Core, all currently serve as
officers of the Trust.  Accordingly, for background information pertaining to
these officers.  (See "Trustees and Officers of the Trust.")


PETER E. GUERNSEY, Oyster Bay, New York - Trustee of the Trust - Insurance
Consultant since August 1986; prior thereto Senior Vice President, Marsh &
McLennan, Inc., insurance brokers.

JOHN I. HOWELL, Greenwich, Connecticut - Trustee of the Trust - Private
Consultant since February 1987; Honorary Director, American International Group,
Inc.; Director, American International Life Assurance Company of New York.

CLARENCE F. MICHALIS, 44 East 64th Street, New York, New York - Trustee of the
Trust - Chairman of the Board of Directors, Josiah Macy, Jr. Foundation
(charitable foundation).

                                      50
<PAGE>

HERMANN C. SCHWAB, 787 Seventh Avenue, New York, New York - Chairman 
(Honorary) and Trustee of the Trust - retired since March, 1988; prior 
thereto, consultant to SCMI since February 1, 1984.

MARK J. SMITH (b), 33 Gutter Lane, London, England - President and Trustee of 
the Trust - First Vice President of SCMI since April 1990; Director and Vice 
President, Schroder Advisors.

ROBERT G. DAVY, 787 Seventh Avenue, New York, New York - a Vice President of 
the Trust - Director of SCMI and Schroder Capital Management International 
Ltd. since 1994; First Vice President of SCMI since July, 1992; prior 
thereto, employed by various affiliates of Schroders plc in various positions 
in the investment research and portfolio management areas since 1986.

MARGARET H. DOUGLAS-HAMILTON (b)(c), 787 Seventh Avenue, New York, New York - 
Vice President of the Trust - Secretary of SCM since July 1995; Secretary of 
Schroder Advisors since April 1990; First Vice President and General Counsel 
of Schroders Incorporated(b) since May 1987; prior thereto, partner of 
Sullivan & Worcester, a law firm.

RICHARD R. FOULKES, 787 Seventh Avenue, New York, New York - a Vice President 
of the Trust; Deputy Chairman of SCMI since October 1995; Director and 
Executive Vice President of Schroder Capital Management International Ltd. 
since 1989.

CATHERINE S. WOOLEDGE, Assistant Treasurer and Assistant Secretary of the 
Trust.

BARBARA GOTTLIEB(c), 787 Seventh Avenue, New York, New York - Assistant 
Secretary of the Trust - Assistant Vice President of SWIS since July 1995 
prior thereto held various positions with SWIS affiliates.

ROBERT JACKOWITZ(b)(c), 787 Seventh Avenue, New York, New York - Treasurer of 
the Trust - Vice President of SCM since September 1995; Treasurer of SCM and 
Schroder Advisors since July 1995; Vice President of SCMI since June 1995; 
and Assistant Treasurer of Schroders Incorporated since January 1993.

JOHN Y. KEFFER, Vice President of the Trust.

JANE P. LUCAS(c), 787 Seventh Avenue, New York, New York - Vice President of 
the Trust - Director and Senior Vice President SCMI; Director of SCM since 
September 1995; Assistant Director Schroder Investment Management Ltd. since 
June 1991.

GERARDO MACHADO, 787 Seventh Avenue, New York, New York - Assistant Secretary 
of the Trust - Associate, SCMI.

CATHERINE A. MAZZA, 787 Seventh Avenue, New York, New York - Vice President 
of the Trust - President of Schroder Advisors since 1997; First Vice 
President of SCMI and SCM since 1996; prior thereto, held various marketing 
positions at Alliance Capital, an investment adviser, since July 1985.

THOMAS G. SHEEHAN, Assistant Treasurer and Assistant Secretary of the Trust.

FARIBA TALEBI, 787 Seventh Avenue, New York, New York - Vice President of the 
Trust - First Vice President of SCMI since April 1993, employed in various 
positions in the investment research and portfolio management areas since 
1987.

JOHN A. TROIANO(b), 787 Seventh Avenue, New York, New York - Vice President 
of the Trust - Managing Director and Senior Vice President of SCMI since 
October 1995; Director of Schroder Advisors since October 1992; Director of 
SCMI since 1991; prior thereto, employed by various affiliates of SCMI in 
various positions in the investment research and portfolio management areas 
since 1981.

                                      51
<PAGE>

IRA L. UNSCHULD, 787 Seventh Avenue, New York, New York - Vice President of 
the Trust - Vice President of SCMI since April, 1993 and an Associate from 
July, 1990 to April, 1993; prior to July, 1990, employed by various financial 
institutions as a securities or financial analyst.

ALEXANDRA POE, 787 Seventh Avenue, New York, New York - Secretary and Vice 
President of the Trust - Vice President of SCMI since August 1996; Fund 
Counsel and Senior Vice President of Schroder Advisors since August 1996; 
prior thereto an investment management attorney with Gordon Altman Butowsky 
Weitzen Shalov & Wein since July 1994; prior thereto counsel and Vice 
President of Citibank, N.A. since 1989.

MARY KUNKEMUELLER, 787 Seventh Avenue, New York, New York - Assistant 
Secretary of the Trust.

    (a)  Interested Trustee of the Trust within the meaning of the 1940 Act.

    (b)  Schroder Advisors is a wholly owned subsidiary of SCMI, which is a
         wholly owned subsidiary of Schroders Incorporated, which in turn is an
         indirect, wholly owned U.S. subsidiary of Schroders plc.

    (c)  Schroder Capital Management, Inc. ("SCM") is a wholly owned subsidiary
         of Schroder Wertheim Holdings Incorporated which is a wholly owned
         subsidiary of Schroders, Incorporated, which in turn is an indirect
         wholly owned U.S. subsidiary of Schroders plc.


INVESTMENT ADVISORY SERVICES


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 a shorter period if the Fund has 
been in operation for a shorter period.

The advisory fee for each Fund is based on the average daily net assets of 
the Fund at the annual rate disclosed in the Fund's prospectus.  If the Fund 
invests in one or more core portfolios, the advisory fee paid by the Fund 
will be with respect to advisory services rendered at the portfolio level.

All investment advisory fees are accrued daily and paid monthly.  Each 
investment adviser, in its sole discretion, may waive or continue to waive 
all or any portion of its investment advisory fees.

In addition to receiving its advisory fee from the Funds, each investment 
adviser or its affiliates may act and be compensated as investment manager 
for its clients with respect to assets which are invested in a Fund.  In some 
instances Norwest 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 Norwest or any of its affiliates from a Fund 
with respect to the client's assets invested in the Fund.

NORWEST INVESTMENT MANAGEMENT

Norwest 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.," "-- 
Sub-Advisers," Crestone Capital Management, Inc.," "Galliard Capital 
Management, Inc.," "Peregrine Capital Management, Inc.," and "United Capital 
Management, Inc.") Under its various Investment Advisory Agreements, Norwest 
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 Norwest 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, by a majority of the Trustees who are not 

                                      52
<PAGE>

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:  (1) by the Board or by a vote of a 
majority of the outstanding voting securities of the Fund to the Adviser or 
(2) by the Adviser on 60 days' written notice to the Trust.  Each Investment 
Advisory Agreement shall terminate upon assignment.  The Investment Advisory 
Agreements also provide that, with respect to the Funds, neither Norwest nor 
its personnel shall be liable for any mistake of judgment or in any event 
whatsoever, except for lack of good faith, provided that nothing in the 
Investment Advisory Agreements shall be deemed to protect, or purport to 
protect, the Adviser against liability by reason of willful misfeasance, bad 
faith or gross negligence in the performance of Norwest's duties or by reason 
of reckless disregard of its obligations and duties under the Investment 
Advisory Agreements.  The Investment Advisory Agreements provide that Norwest 
may render services to others.

Norwest acts as investment adviser to Cash Investment Fund, Ready Cash 
Investment Fund, U.S. Government Fund, Treasury Fund, Municipal Money Market 
Fund, Stable Income Fund, Limited Term Government Income Fund, Intermediate 
Government Income Fund, Diversified Bond Fund, Income Fund, Total Return Bond 
Fund, Limited Term Tax-Free Fund, Tax-Free Income Fund, Colorado Tax-Free 
Fund, Minnesota Intermediate Tax-Free Fund, Minnesota Tax-Free Fund, 
Strategic Income Fund, Moderate Balanced Fund, Growth Balanced Fund, 
Aggressive Balanced-Equity Fund, Index Fund, Income Equity Fund, ValuGrowthSM 
Stock Fund, Diversified Equity Fund, Growth Equity Fund, Large Company Growth 
Fund, Small Company Stock Fund, Small Company Growth Fund, Small Cap 
Opportunities Fund, Diversified Small Cap Fund, Contrarian Stock Fund and 
International Fund. The investment advisory agreements between Core Trust on 
behalf of the portfolios are identical to the Investment Advisory Agreements 
between the Trust and Norwest, except for the fees payable thereunder and 
certain immaterial matters.


SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. -- SCHRODER U.S. SMALLER 
COMPANIES PORTFOLIO/INTERNATIONAL PORTFOLIO


Small Cap Opportunities Fund invests all of its assets in Schroder U.S. 
Smaller Companies Portfolio, International Fund invests all of its assets in 
International Portfolio and each Blended Fund invests a portion of its assets 
in International Portfolio.  Pursuant to a separate Advisory Agreement 
between Schroder Core and Schroder, Schroder acts as investment adviser to 
Schroder U.S. Smaller Companies Portfolio and is required to furnish at its 
expense all services, facilities and personnel necessary in connection with 
managing Schroder U.S. Smaller Companies Portfolio's investments and 
effecting portfolio transactions for Schroder U.S. Smaller Companies 
Portfolio. Pursuant to a separate Advisory Agreement between Core Trust and 
Schroder, Schroder acts as investment adviser to International Portfolio 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 Agreements between Schroder U.S. Smaller Companies Portfolio, 
International Portfolio and Schroder will continue in effect only if such 
continuance is specifically approved at least annually:  (1) by the 
applicable Trust Board or by vote of a majority of the outstanding voting 
interests of the Portfolio, and, in either case (2) by a majority of the 
applicable Trust's trustees who are not parties to the Advisory Agreement or 
interested persons of any such party (other than as trustees of the 
applicable Trust), at a meeting called for the purpose of voting on the 
Advisory Agreement; provided further, however, that if the Advisory Agreement 
or the continuation of the Agreement is not approved as to a Portfolio, the 
Adviser may continue to render to that Portfolio the services described 
herein in the manner and to the extent permitted by the Act and the rules and 
regulations thereunder.


On behalf of each Fund that invests all or a portion of its assets in 
Schroder U.S. Smaller Companies Portfolio or International Portfolio, Norwest 
and the Trust have entered into an Investment Subadvisory Agreement with 
Schroder.  An Investment Subadvisory Agreement would become operative and 
Schroder would directly manage a Fund's assets if the Board determined it was 
no longer in the best interest of the Fund to invest in smaller companies or 
international securities by investing in another registered investment 
company.  In that event, pursuant to the Investment Subadvisory Agreement 
Schroder would makes investment decisions directly for a Fund and

                                      53
<PAGE>

continuously review, supervise and administer the Fund's investment program 
with respect to that portion, if any, of the Fund's portfolio that Norwest 
has so delegated.  Schroder would be required to furnish at its own expense 
all services, facilities and personnel necessary in connection with managing 
of the Funds' investments and effecting portfolio transactions for the Funds 
(to the extent of Norwest's delegation).  


The Investment Subadvisory Agreements will continue in effect only if such 
continuance is specifically approved at least annually:  (1) by the Board or 
by vote of a majority of the outstanding voting securities of the applicable 
Fund, and, in either case, (2) by a majority of the applicable Trust's 
trustees who are not parties to the Investment Subadvisory Agreements or 
interested persons of any such party (other than as trustees of the 
applicable Trust), at a meeting called for the purpose of voting on the 
Investment Subadvisory Agreements; provided further, however, that if the 
Investment Subadvisory Agreements or the continuation of the Agreements is 
not approved as to a Fund, the Subadviser may continue to render to that Fund 
the services described herein in the manner and to the extent permitted by 
the Act and the rules and regulations thereunder.


Each Investment Subadvisory Agreement is terminable without penalty with 
respect to the Fund on 60 days' written notice when authorized either by 
majority vote of the Fund's shareholders or by the Board, or by Schroder on 
60 days written notice to the Trust, and will automatically terminate in the 
event of its assignment.  The Investment Subadvisory Agreements also provide 
that, with respect to the Funds, neither Schroder nor its personnel shall be 
liable for any mistake of judgment or in any event whatsoever, except for 
lack of good faith, provided that nothing shall be deemed to protect the 
Adviser against liability by reason of willful misfeasance, bad faith or 
gross negligence in the performance of Schroder's duties or by reason of 
reckless disregard of its obligations and duties under the Investment 
Subadvisory Agreements.  The Investment Subadvisory Agreements provide that 
Schroder may render services to others.

No payments are made under the Funds' Investment Subadvisory Agreements with 
Schroder because no assets are allocated to Schroder to manage directly.

The Advisory Agreements between Schroder and Core Trust and Schroder and 
Schroder Core on behalf of International Portfolio and Schroder U.S. Smaller 
Companies Portfolio, respectively are identical to the Investment Advisory 
Agreements between the Trust and Norwest, except for the fees payable 
thereunder and certain immaterial matters.

SUB-ADVISERS

The Adviser pays a fee to each of the subadvisers. These fees do not increase 
the fees paid by shareholders of the Funds. The amount of the fees paid by 
Norwest to each Subadviser may vary from time to time as a result of periodic 
negotiations with the Subadviser regarding such matters as the nature and 
extent of the services (other than investment selection and order placement 
activities) provided by the Subadviser to the Fund, the increased cost and 
complexity of providing services to the Fund, the investment record of the 
Subadviser in managing the Fund and the nature and magnitude of the expenses 
incurred by the Subadviser in managing the Fund's assets and by the Adviser 
in overseeing and administering management of the Fund. However, the 
contractual fee payable to each Fund by Norwest for investment advisory 
services will not vary as a result of those negotiations.

Norwest performs internal due diligence on each Subadviser and monitors each 
Subadviser's performance using its proprietary investment adviser selection 
and monitoring process.  Norwest will be responsible for communicating 
performance targets and evaluations to Subadvisers, supervising each 
Subadviser's compliance with the Fund's fundamental investment objectives and 
policies, authorizing Subadvisers to engage in certain investment techniques 
for the Fund, and recommending to the Board of Trustees whether sub-advisory 
agreements should be renewed, modified or terminated.  Norwest also may from 
time to time recommend that the Board of Trustees replace one or more 
Subadvisers or appoint additional Subadvisers, depending on the Adviser's 
assessment of what combination of Subadvisers it believes will optimize each 
Fund's chances of achieving its investment objectives.

CRESTONE CAPITAL MANAGEMENT, INC.

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<PAGE>

To assist Norwest in carrying out its obligations under the Investment 
Advisory Agreement with the Small Company Stock Fund (the "Fund"), Norwest 
has entered into an Investment Subadvisory 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 
Norwest believes should be invested using Crestone as a subadviser.  
Currently, Crestone manages the entire portfolio of the Fund and has done so 
since the Fund's inception.  Norwest 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, Norwest 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, Norwest paid Crestone 
subadvisory fees of $180,748, $137,862 and $8,792, respectively.

Under its 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 for which Norwest has delegated management responsibility.  
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 Norwest's 
delegation).


The Investment Subadvisory Agreement will continue in effect only if such
continuance is specifically approved at least annually:  (1) by the Board or by
vote of a majority of the outstanding voting securities of the Fund, and, in
either case, (2) by a majority of the Trust's trustees who are not parties to
the Investment Subadvisory Agreement or interested persons of any such party
(other than as trustees of the Trust), at a meeting called for the purpose of
voting on the Investment Subadvisory Agreements; provided further, however, that
if the Investment Subadvisory Agreement or the continuation of the Agreement is
not approved, the Subadviser may continue to render to the Fund the services
described in the Investment Subadvisory Agreement in the manner and to the
extent permitted by the Act and the rules and regulations thereunder.


The Investment Subadvisory Agreement is terminable without penalty with 
respect to the Fund on 60 days' written notice when authorized either by 
majority vote of the Fund's shareholders or by the Board, or by Crestone on 
60 days written notice to the Trust, and will automatically terminate in the 
event of its assignment.  The Investment Subadvisory Agreement also provides 
that, with respect to the Fund, neither Crestone nor its personnel shall be 
liable for any mistake of judgment or in any event whatsoever, except for 
lack of good faith, provided that nothing shall be deemed to protect Crestone 
against liability by reason of willful misfeasance, bad faith or gross 
negligence in the performance of Crestone's duties or by reason of reckless 
disregard of its obligations and duties under the Investment Subadvisory 
Agreement.  The Investment Subadvisory Agreements provides that Crestone may 
render services to others.

GALLIARD


To assist Norwest in carrying out its obligations under the Investment Advisory
Agreement with Stable Income Fund, Diversified Bond Fund,  Strategic Income
Fund, Moderate Balanced Fund and Growth Balanced Fund (the "Funds"), Norwest has
entered into an Investment Subadvisory Agreement with Galliard, located at 800
LaSalle Avenue, Suite 2060, Minneapolis, Minnesota 55479. Galliard is registered
with the SEC as an investment adviser and is an investment advisory subsidiary
of Norwest Bank.  Pursuant to the Sub-Investment Advisory Agreement, Galliard
makes investment decisions for each of the Funds and continuously reviews,
supervises and administers each Fund's investment program with respect to that
portion, if any, of the Fund's portfolio that Norwest believes should be
invested using Galliard as a subadviser.  Currently, Galliard manages the entire
portfolio of each Fund and has done so since the Fund's inception.  Norwest
supervises the performance of Galliard including its adherence to the
Portfolio's investment objectives and policies and pays Galliard a fee for its
investment management services.

                                      55
<PAGE>


Under its Investment Subadvisory Agreement, Galliard 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 
Fund's portfolio for which Norwest has delegated management responsibility. 
Galliard is required to furnish at its own expense all services, facilities 
and personnel necessary in connection with managing of each Fund's 
investments and effecting portfolio transactions for each Fund (to the extent 
of Norwest's delegation).


The Investment Subadvisory Agreement will continue in effect only if such 
continuance is specifically approved at least annually:  (1) by the Board or 
by vote of a majority of the outstanding voting securities of the Funds, and, 
in either case, (2) by a majority of the Trust's trustees who are not parties 
to the Investment Subadvisory Agreement or interested persons of any such 
party (other than as trustees of the Trust), at a meeting called for the 
purpose of voting on the Investment Subadvisory Agreements; provided further, 
however, that if the Investment Subadvisory Agreement or the continuation of 
the Agreement is not approved, the Subadviser may continue to render to each 
Fund the services described in the Investment Subadvisory Agreement in the 
manner and to the extent permitted by the Act and the rules and regulations 
thereunder.


The Investment Subadvisory Agreement is terminable without penalty with 
respect to a Fund on 60 days' written notice when authorized either by 
majority vote of the Fund's shareholders or by the Board, or by Galliard on 
60 days written notice to the Trust, and will automatically terminate in the 
event of its assignment.  The Investment Subadvisory Agreement also provides 
that, with respect to each Fund, neither Galliard nor its personnel shall be 
liable for any mistake of judgment or in any event whatsoever, except for 
lack of good faith, provided that nothing shall be deemed to protect Galliard 
against liability by reason of willful misfeasance, bad faith or gross 
negligence in the performance of Galliard's duties or by reason of reckless 
disregard of its obligations and duties under the Investment Subadvisory 
Agreement.  The Investment Subadvisory Agreements provides that Galliard may 
render services to others.

PEREGRINE CAPITAL MANAGEMENT, INC.


To assist Norwest in carrying out its obligations under the Investment 
Advisory Agreement with Diversified Bond Fund, Strategic Income Fund, 
Moderate Balanced Fund, Growth Balanced Fund, Diversified Equity Fund, Growth 
Equity Fund, Large Company Growth Fund and Small Company Growth Fund (the 
"Funds"), Norwest has entered into an Investment Subadvisory Agreement with 
Peregrine, located at 800 LaSalle Avenue, Suite 1850, Minneapolis, Minnesota 
55479. Peregrine is registered with the SEC as an investment adviser and is 
an investment advisory subsidiary of Norwest Bank.  Pursuant to the 
Sub-Investment Advisory Agreement, Peregrine makes investment decisions for 
each of the Funds and continuously reviews, supervises and administers each 
Fund's investment program with respect to that portion, if any, of the Fund's 
portfolio that Norwest believes should be invested using Peregrine as a 
subadviser.  Currently, Peregrine manages the entire portfolio of each Fund 
and has done so since the Fund's inception. Norwest supervises the 
performance of Peregrine including its adherence to the Portfolio's 
investment objectives and policies and pays Peregrine a fee for its 
investment management services.


Under its Investment Subadvisory Agreement, Peregrine 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 
Fund's portfolio for which Norwest has delegated management responsibility. 
Peregrine is required to furnish at its own expense all services, facilities 
and personnel necessary in connection with managing of each Fund's 
investments and effecting portfolio transactions for each Fund (to the extent 
of Norwest's delegation).


The Investment Subadvisory Agreement will continue in effect only if such 
continuance is specifically approved at least annually:  (1) by the Board or 
by vote of a majority of the outstanding voting securities of the Funds, and, 
in either case, (2) by a majority of the Trust's trustees who are not parties 
to the Investment Subadvisory Agreement 

                                      56
<PAGE>

or interested persons of any such party (other than as trustees of the 
Trust), at a meeting called for the purpose of voting on the Investment 
Subadvisory Agreements; provided further, however, that if the Investment 
Subadvisory Agreement or the continuation of the Agreement is not approved, 
the Subadviser may continue to render to each Fund the services described in 
the Investment Subadvisory Agreement in the manner and to the extent 
permitted by the Act and the rules and regulations thereunder.


The Investment Subadvisory Agreement is terminable without penalty with 
respect to a Fund on 60 days' written notice when authorized either by 
majority vote of the Fund's shareholders or by the Board, or by Peregrine on 
60 days written notice to the Trust, and will automatically terminate in the 
event of its assignment.  The Investment Subadvisory Agreement also provides 
that, with respect to each Fund, neither Peregrine nor its personnel shall be 
liable for any mistake of judgment or in any event whatsoever, except for 
lack of good faith, provided that nothing shall be deemed to protect 
Peregrine against liability by reason of willful misfeasance, bad faith or 
gross negligence in the performance of Peregrine's duties or by reason of 
reckless disregard of its obligations and duties under the Investment 
Subadvisory Agreement.  The Investment Subadvisory Agreements provides that 
Peregrine may render services to others.

UNITED CAPITAL MANAGEMENT


To assist Norwest in carrying out its obligations under the Investment 
Advisory Agreement with Diversified Bond Fund, Total Return Bond Fund,  
Strategic Income Fund, Moderate Balanced Fund, Growth Balanced Fund and 
Contrarian Stock Fund (the "Funds"), Norwest has entered into an Investment 
Subadvisory Agreement with UCM, located at 1700 Lincoln Street, Suite 3301, 
Denver, Colorado 80274.  UCM is registered with the SEC as an investment 
adviser and is a division of Norwest Bank Colorado, N.A..  Pursuant to the 
Sub-Investment Advisory Agreement, UCM makes investment decisions for each of 
the Funds and continuously reviews, supervises and administers each Fund's 
investment program with respect to that portion, if any, of the Fund's 
portfolio that Norwest believes should be invested using UCM as a subadviser. 
Currently, UCM manages the entire portfolio of each Fund and has done so 
since the Fund's inception.  Norwest supervises the performance of UCM 
including its adherence to the Portfolio's investment objectives and policies 
and pays UCM a fee for its investment management services.


Under its Investment Subadvisory Agreement, UCM 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 Fund's 
portfolio for which Norwest has delegated management responsibility. UCM is 
required to furnish at its own expense all services, facilities and personnel 
necessary in connection with managing of each Fund's investments and 
effecting portfolio transactions for each Fund (to the extent of Norwest's 
delegation).


The Investment Subadvisory Agreement will continue in effect only if such 
continuance is specifically approved at least annually:  (1) by the Board or 
by vote of a majority of the outstanding voting securities of the Funds, and, 
in either case, (2) by a majority of the Trust's trustees who are not parties 
to the Investment Subadvisory Agreement or interested persons of any such 
party (other than as trustees of the Trust), at a meeting called for the 
purpose of voting on the Investment Subadvisory Agreements; provided further, 
however, that if the Investment Subadvisory Agreement or the continuation of 
the Agreement is not approved, the Subadviser may continue to render to each 
Fund the services described in the Investment Subadvisory Agreement in the 
manner and to the extent permitted by the Act and the rules and regulations 
thereunder.


The Investment Subadvisory Agreement is terminable without penalty with 
respect to a Fund on 60 days' written notice when authorized either by 
majority vote of the Fund's shareholders or by the Board, or by UCM on 60 
days written notice to the Trust, and will automatically terminate in the 
event of its assignment.  The Investment Subadvisory Agreement also provides 
that, with respect to each Fund, neither UCM nor its personnel shall be 
liable for any mistake of judgment or in any event whatsoever, except for 
lack of good faith, provided that nothing shall be deemed to protect UCM 
against liability by reason of willful misfeasance, bad faith or gross 
negligence in the performance of UCM's duties or by reason of reckless 
disregard of its obligations and duties under the Investment 

                                      57
<PAGE>

Subadvisory Agreement.  The Investment Subadvisory Agreements provides that 
UCM may render services to others.


[SMITH ASSET MANAGEMENT GROUP, L.P.

To assist Norwest in carrying out its obligations under the Investment Advisory
Agreement with Disciplined Growth Portfolio and Small Cap Value Portfolio,
Norwest has entered into an Investment Subadvisory Agreement with Smith, located
at 500 Crescent Court, Suite 250, Dallas, Texas.  Smith is registered with the
SEC as an investment adviser and is an investment advisory subsidiary of Norwest
Bank.  Pursuant to the Sub-Investment Advisory Agreement, Smith makes Investment
decisions for each of the Portfolios and continuously reviews, supervises and
administers each Portfolio's investment program with respect to that portion, if
any, of the Fund's portfolio that Norwest believes should be invested using
Smith as a subadviser.  Currently, Smith manages the entire portfolio of each
Portfolio and has done so since the Portfolio's inception.  Norwest supervises
the performance of Smith including its adherence to the Portfolio's investment
objectives and policies and pays Smith a fee for its investment management
services.  [As of June 1, 1997, for its services under the Investment
Subadvisory Agreement, Norwest pays Smith a fee based on Disciplined Growth
Portfolio's and Small Cap Value Portfolio's average daily net assets at an
annual rate of   %.]

Under its Investment Subadvisory Agreement, Smith makes investment decisions for
each Portfolio and continuously reviews, supervises and administers each
Portfolio's investment program with respect to that portion, if any, of the
Portfolio's portfolio for which Norwest has delegated management responsibility.
Galliard is required to furnish at its own expense all services, facilities and
personnel necessary in connection with managing of each Portfolio's investments
and effecting portfolio transactions for each Portfolio (to the extent of
Norwest's delegation).

The Investment Subadvisory Agreement will continue in effect with respect to a
Portfolio only if such continuance is specifically approved at least annually: 
(1) by the Core Trust Board or by vote of a majority of the outstanding voting
securities of the Portfolios, and, in either case; (2) by a majority of the Core
Trust's trustees who are not parties to the Investment Subadvisory Agreement or
interested persons of any such party (other than as trustees of the Core Trust),
at a meeting called for the purpose of voting on the Investment Subadvisory
Agreements; provided further, however, that if the Investment Subadvisory
Agreement or the continuation of the Agreement is not approved, the Subadviser
may continue to render to each Portfolio the services described in the
Investment Subadvisory Agreement in the manner and to the extent permitted by
the Act and the rules and regulations thereunder.

The Investment Subadvisory Agreement is terminable without penalty with respect
to a Portfolio on 60 days' written notice when authorized either by majority
vote of the Portfolio's shareholders or by the Core Trust Board, or by Smith on
60 days written notice to the Core Trust, and will automatically terminate in
the event of its assignment.  The Investment Subadvisory Agreement also provides
that, with respect to each Portfolio, neither Smith nor its personnel shall be
liable for any mistake of judgment or in any event whatsoever, except for lack
of good faith, provided that nothing shall be deemed to protect Smith against
liability by reason of willful misfeasance, bad faith or gross negligence in the
performance of Smith's duties or by reason of reckless disregard of its
obligations and duties under the Investment Subadvisory Agreement.  The
Investment Subadvisory Agreements provides that Smith may render services to
others.

Smith also currently serves as Investment Subadviser to the Funds pursuant to an
investment advisory agreement between Smith and Norwest.  The investment
subadvisory agreement with respect to the Funds is identical to the Investment
Subadvisory Agreement, except for the fees payable thereunder (no fee is payable
under the investment subadvisory agreement with respect to a Fund to the extent
that the Fund is invested in an investment company) and certain immaterial
matters.]


                                     58
<PAGE>


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 FAS, Norwest, 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:  (1) 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, prepares and maintains) 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; (2)
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;  (3) oversees 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; (4) provides the Trust with adequate general
office space and facilities and provides, at the Trust's request and expense,
persons suitable to the Board to serve as officers of the Trust; (5) 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; (6) oversees the preparation of proxy and information statements
and any other communications to shareholders; (7) 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; (8)
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; (9) 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; (10) oversees the
calculation of performance data for dissemination to information services
covering the investment company industry, sales literature of the Trust and
other appropriate purposes; (11) oversees the determination of the amount of and
supervises 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 oversees the preparation and distribution to appropriate parties of
notices announcing the declaration of dividends and other distributions to
shareholders; (12) reviews and negotiates on behalf of the Trust normal course
of business contracts and agreements; (13) maintains and reviews periodically
the Trust's fidelity bond and errors and omission insurance coverage; and (14)
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.

FAS manages all aspects of the Trust's operations with respect to each Fund
except those which are the responsibility of Forum, Norwest, 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 

                                      59
<PAGE>

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, FAS:  (1) provides the
Trust with, or arranges 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; (2) 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; (3) assists in the preparation of proxy and information
statements and any other communications to shareholders; (4) assists the
Advisers in monitoring Fund holdings for compliance with Prospectus and SAI
investment restrictions and assist in preparation of periodic compliance
reports; (5) with the cooperation of the Trust's counsel, the Investment
Advisers, the officers of the Trust and other relevant parties, is responsible
for the preparation and dissemination of materials for meetings of the Board;
(6) 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; (7) is responsible for maintaining
the Trust's existence and good standing under state law; (8) monitors sales of
shares and ensures that such shares are properly and duly registered with the
SEC and applicable state and other securities commissions; (9) is responsible
for the calculation of performance data for dissemination to information
services covering the investment company industry, sales literature of the Trust
and other appropriate purposes; and (10) is responsible for the determination of
the amount of and supervises 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 Code, as
amended, and prepares and distributes 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 FAS 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 FAS'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 FAS 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 FAS's Administration
Agreement, respectively.  Forum and FAS may compensate those agents for their
services; however, no such compensation may increase the aggregate amount of
payments by the Trust to Forum or FAS 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.  

PORTFOLIOS OF CORE TRUST 

Forum manages all aspects of Core Trust's operations with respect to the
portfolios except those which are the responsibility of Norwest or Schroder. 
With respect to each Portfolio, Forum has entered into a management agreement
(the "Core Trust Management Agreement") that will continue in effect only if
such continuance is specifically approved at least annually by the Core Trust
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 Core Trust Management
Agreement.  Under the Core Trust Management Agreement, Forum performs similar
services for each Portfolio as it and FAS perform for the Blended Funds under
the Management and Administration Agreements, to the extent the services are
applicable to the Portfolios and their structure.  Forum and FAS waive their
fees payable by each of the Blended Funds under the Management and
Administration Agreements to the extent those Funds incur indirectly management
fees charged by Forum to a Blended Portfolio.

                                      60
<PAGE>

NORWEST ADMINISTRATIVE SERVICES

Under an Administrative Servicing Agreement between the Trust and Norwest with
respect to Small Cap Opportunities Fund and International Fund, Norwest performs
ministerial, administrative and oversight functions for the Funds and undertakes
to reimburse certain excess expenses of the Funds.  Among other things, Norwest
gathers performance and other data from Schroder as the adviser of Schroder U.S.
Smaller Companies Portfolio and International Portfolio and from other sources,
formats the data and prepares reports to the Funds' shareholders and the
Trustees.  Norwest also ensures that Schroder is aware of pending net purchases
or redemptions of each Fund's shares and other matters that may affect
Schroder's performance of its duties.  Lastly, Norwest has agreed to reimburse
each 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 Funds' shares
are qualified for sale.  No fees will be paid to Norwest under the
Administrative Servicing Agreement unless the each of the Fund's assets are
invested solely in Schroder U.S. Smaller Companies Portfolio or International
Portfolio (in the case of Small Cap Opportunities Fund and International Fund,
respectively) or in a portfolio of another registered investment company.  This
agreement will continue in effect only if such continuance is specifically
approved at least annually by the Board or by the shareholders and, in either
case, by a majority of the Trustees who are not parties to the Management
Agreement or interested persons of any such party.

The Administrative Service 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.

Table 2 in Appendix B shows the dollar amount of fees payable under the
Servicing Agreement, the amount of the fee that was waived, if any, and the
amount received by Norwest for the past three fiscal years of the Fund.

SCHRODER ADMINISTRATIVE SERVICES

Schroder Core has entered into an Administrative Services Agreement with
Schroder Advisors, 787 Seventh Avenue, New York, New York 10019, pursuant to
which Schroder Advisors provides management and administrative services
necessary for the operation of Schroder U.S. Smaller Companies Portfolio,
including coordination of the services performed by the Portfolio's investment
adviser, transfer agent, custodian, independent accountants, legal counsel and
others.  Schroder Advisors is a wholly-owned subsidiary of Schroder, and is a
registered broker-dealer organized to act as administrator and distributor of
mutual funds.

For these services, Schroder Advisors will receive a fee from Schroder Core at
the annual rate of 0.10% of the average daily net assets of the Portfolio.  The
Administrative Services Agreement is terminable with respect to the Portfolio
without penalty, at any time, by vote of a majority of the trustees of Schroder
Core who are not "interested persons" of Schroder Core and who have no direct or
indirect financial interest in the operation of the Administrative Services
Agreement, upon not more than 60 days' written notice to Schroder Advisors or by
vote of the holders of a majority of the shares of the Portfolio, or, upon 60
days' notice, by Schroder Advisors.  The Administrative Services Agreement will
terminate automatically in the event of its assignment.

On behalf of the Portfolio, Schroder Core has entered into a Sub-Administration
Agreement with Forum.  Pursuant to the Sub-Administration Agreement, Forum
assists Schroder Advisors with certain of its responsibilities under the
Administrative Services Agreement, including shareholder reporting and
regulatory compliance.

The Sub-Administration Agreement is terminable with respect to the Portfolio
without penalty, at any time, by the board of trustees of Schroder Core upon 60
days' written notice to Forum or by Forum upon 60 days' written notice to the
Portfolio.

                                      61
<PAGE>


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 ("12b-1 Trustees").


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:  (1) 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 12b-1 Trustees, on 60 days' written notice to Forum or (2) by Forum on 60
days' written notice to the Trust.


Under the Distribution Services Agreement related to the Funds that offer A
Shares, 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 Fund that offers B Shares, 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.

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 the 12b-1 trustees.  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.

                                      62
<PAGE>


The Plan is "semi-enhanced" 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:  (1) 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; (2) 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; (3) 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 assignee
(unless the distributor at the time of the termination was in material breach
under the Distribution Agreement in respect of the Fund); and (4) the Fund does
not adopt a distribution plan relating to a class of shares of the Fund that has
a sales load structure substantially similar (as defined in the Plan) to that of
the B shares.

In the event of a termination of the Plan that does not satisfy clauses (2), (3)
and (4) of the definition of a Complete Termination above, Ready Cash Investment
Fund, ValuGrowth Stock Fund, Small Company Stock Fund, Contrarian Stock Fund,
Income Fund, Tax-Free Income Fund, Total Return Bond Fund and Minnesota Tax-Free
Fund would continue to pay distribution services fees for no more than four
years.  In contrast, payments by Stable Income Fund, Intermediate Government
Income Fund, Growth 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, Intermediate Government Income Fund, Diversified Equity 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 by the Fund and (ii) any other amounts expended for distribution
on behalf of such fund that are not reimbursed or paid by the fund upon the
merger or combination with or acquisition of substantially all of the assets of
that fund.

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,
1994, 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.

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 Bank, Sixth Street and Marquette, Minneapolis, Minnesota 55479 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.


The responsibilities of the Transfer Agent include:  (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) 

                                      63
<PAGE>

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 a fee computed daily and paid
monthly from the Trust, with respect to each Fund, at an annual rate of 0.25% of
the Fund's average daily net assets attributable to each class of the Fund
(0.20% plus expenses in the case of Cash Investment Fund and 0.10% plus expenses
in the case of Municipal Money Market Fund - Institutional Shares).


CUSTODIAN


Pursuant to a Custodian Agreement, Norwest Bank, Sixth Street and Marquette,
Minneapolis, Minnesota 55479 serves as each Fund's and each Core Portfolio's
(other than Schroder U.S. Smaller Companies Portfolio's) custodian (in this
capacity the "Custodian").  The Chase Manhattan Bank, N.A., acts as custodian
for Schroder U.S. Smaller Companies Portfolio, but plays no role in making
decisions as to the purchase or sale of portfolio securities.  The Custodian's
responsibilities include safeguarding and controlling the Trust's cash and
securities, determining income and collecting interest on Fund investments.  The
fee is 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.

Pursuant to rules adopted under the 1940 Act, a 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 upon 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
possible risks of potential nationalization or expropriation of Fund assets. 
The Custodian employs qualified foreign subcustodians to provide custody of the
Funds foreign assets in accordance with applicable regulations. 

No Fund will pay custodian fees to the extent the Fund invests in shares of
another registered investment company.  Each Fund so invested incurs, however,
its proportionate share of the custodial fees of the Core Portfolio(s) in which
it invests.


PORTFOLIO ACCOUNTING


Forum Accounting, 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 the Fund Accounting Agreement, Forum Accounting 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, Forum
Accounting receives from the Trust with respect to each Fund a fee of $3,000 per
month plus for each additional class of the Fund above one $1,000 per month.  In
addition, Forum Accounting is paid additional surcharges for each of the
following:  (1) Funds with asset levels exceeding $100 million - $500/month,
Funds with asset levels exceeding $250 million - $1000/month, Funds with asset
levels exceeding $500 million - $1,500/month, Funds with asset levels exceeding
$1,000 million - $2,000/month; (2) Funds requiring international custody -
$1,000/month; (3) Funds with more than 30 international positions -
$1,000/month; (4) Tax free money market Funds - $1,000/month; (5) Funds with
more than 25% of net assets 

                                      64
<PAGE>

invested in asset backed securities - $1,000/month, Funds with more than 50% of 
net assets invested in asset backed securities - $2,000/month; (6) Funds with 
more than 100 security positions - $1,000/month; and (7) Funds with a monthly 
portfolio turnover rate of 10% or greater -$1,000/month.


Forum Accounting receives from the Trust with respect to each Gateway Fund a
standard gateway fee of $1,000 per month plus for each additional class of the
Fund above one - $1,000 per month.  Forum Accounting also receives a fee of
$2,000 per month for each Gateway Fund operating pursuant to Section 12(d)(1)(E)
of the 1940 Act that invests in more than one security.  In addition to the
standard gateway fees, Forum Accounting is entitled to receive from the Trust
with respect to each Gateway Fund operating pursuant to Section 12(d)(1)(H) of
the 1940 Act additional surcharges as described above if the Fund invests in
securities other than investment companies (calculated as if the securities were
the Fund's only assets)

Surcharges are determined based upon the total assets, security positions or
other factors as of the end of the prior month and on the portfolio turnover
rate for the prior month.  The rates set forth above shall remain fixed through
December 31, 1997.  On January 1, 1998, and on each successive January 1, the
rates may be adjusted automatically by Forum without action of the Trust to
reflect changes in the Consumer Price Index for the preceding calendar year, as
published by the U.S. Department of Labor, Bureau of Labor Statistics.  Forum
shall notify the Trust each year of the new rates, if applicable

Forum Accounting 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. 
Forum Accounting 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 Forum Accounting, 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 Forum Accounting'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 Forum Accounting by an officer of the
Trust duly authorized.  This indemnification does not apply to Forum
Accounting's actions taken or failures to act in cases of Forum Accounting's own
bad faith, willful misconduct or gross negligence.

Forum Accounting performs similar services for the Portfolios and, in addition,
acts as the Portfolios' transfer agent.

Table 5 in Appendix B shows the dollar amount of fees payable to Forum
Accounting for its accounting services with respect to each Fund, the amount of
fee that was waived by Forum Accounting, if any, and the actual fee received by
Forum Accounting.  The data is for the past three fiscal years or shorter period
if the Fund has been in operation for a shorter period.


EXPENSES

Subject to the obligations of Norwest 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: 
(1) interest charges, taxes, brokerage fees and commissions; (2) certain
insurance premiums; (3) fees, interest charges and expenses of the Trust's
custodian, transfer agent and dividend disbursing agent; (4) telecommunications
expenses; (5) auditing, legal and compliance expenses; (6) costs of the Trust's
formation and maintaining its existence; (7) 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; (8) 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; (9) costs of reproduction, stationery and
supplies; (10) compensation of the Trust's trustees, officers and employees and
costs of other personnel performing services for the Trust who are not officers
of Norwest, Forum or affiliated persons of Norwest or Forum; (11) costs of
corporate meetings; (12) 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; (13) state securities law registration fees
and related expenses; (14) fees and out-of-pocket expenses 

                                      65
<PAGE>

payable to Forum Financial Services, Inc. under any distribution, management or 
similar agreement; (15) 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.

VI.   PORTFOLIO TRANSACTIONS


The following discussion of portfolio transactions, while referring to the
Funds, relates equally to the Portfolios.

Purchases and sales of portfolio securities for the Money Market Funds and Fixed
Income Funds usually are principal transactions.  Debt instruments 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.  The Equity Funds and the Balanced Funds generally will effect
purchases and sales of equity securities through brokers who charge commissions
except in the over-the-counter markets.  Purchases of debt and equity securities
from underwriters of the securities include a disclosed fixed 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 debt securities and equity 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.  Allocations of
transactions to brokers and dealers and the frequency of transactions are
determined by the Advisers in their best judgment and in a manner deemed to be
in the best interest of shareholders of each Fund 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, commissions are negotiated, whereas on foreign
stock exchanges commissions are generally fixed.  Where transactions are
executed in the over-the-counter market, each Fund 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 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 do so.  Table 6 in Appendix B shows the
aggregate brokerage commissions with respect to each Fund.  The data presented
is for the past three fiscal years or a shorter period if the Fund has been in
operation for a shorter period, except as otherwise noted.  Any material change
in the last two years in the amount of brokerage commissions paid by a fund was
due to an increase or decrease in the Fund's assets.


Subject to the general policies regarding allocation of portfolio brokerage as
set forth above, each of the Board, Core Trust Board and Schroder Core Board has
authorized the Investment Advisers to employ their respective affiliates to
effect securities transactions of the Funds or the Portfolios, 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
Fund's policy that commissions paid to Schroder Securities Limited, Norwest
Investment Services, 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:  (1) at least as favorable as commissions
contemporaneously charged by the affiliate on comparable transactions for its
most favored unaffiliated customers and (2) 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
disinterested Trustees, has adopted procedures to ensure that commissions paid
to affiliates of an Adviser by the Funds satisfy the foregoing standards.  The
Core Trust and Schroder Core Boards have adopted similar policies with respect
to the Portfolios.


No Fund has an 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.

                                      66
<PAGE>

From time to time, a Fund may purchase securities of a broker or dealer through
which it regularly engages in securities transactions.

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
brokerage commissions paid to NISI and the percentage of the aggregate dollar
amount of transactions involving payment of commissions that were effected
through NISI.  

<TABLE>
<CAPTION>
                                                                    PERCENTAGE OF
                                                                     COMMISSION
                                      AGGREGATE      PERCENTAGE     TRANSACTIONS
                                     COMMISSIONS   OF COMMISSIONS     EXECUTED
                                     PAID TO NISI   PAID TO NISI    THROUGH NISI
                                     ------------  --------------   -------------
VALUGROWTH STOCK FUND
- ---------------------
<S>                                  <C>           <C>              <C>
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%
</TABLE>

The practice of placing orders with NISI is consistent with each Fund's
objective of obtaining best execution and is not dependent on the fact that NISI
is an affiliate of Norwest.


The Funds and the Portfolios may not always pay the lowest commission or spread
available.  Rather, in determining the amount of commissions, including certain
dealer spreads, paid in connection with securities transactions, an Investment
Adviser takes into account factors such 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 Portfolio:  (1) to the Fund or Portfolio or
(2) to other persons on behalf of the Fund or Portfolio for services provided to
the Fund or Portfolio for which it 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
Portfolios 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 Investment Adviser's own internal research and
investment strategy capabilities.  Such research and analysis may be used by the
Investment Advisers in connection with services to clients other than the Funds
and Portfolios, and not all such services may be used by the Investment Adviser
in connection with the Funds.  An Investment Adviser's fees are not reduced by
reason of the Investment Adviser's receipt of the research services.

Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to the obligation to seek the most
favorable price and execution available and such other policies as the Boards
may determine, an Adviser may consider sales of shares of the Fund as a factor
in the selection of broker-dealers to execute portfolio transactions for the
Fund.

Investment decisions for the Funds (and for the Portfolios) will be made 
independently from those for any other account or investment company that is or 
may in the future become managed by the Investment 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 
investment adviser's opinion, is equitable to 

                                      67
<PAGE>

each and in accordance with the amount being purchased or sold by each.  There 
may be circumstances when purchases or sales of a portfolio security for one 
client could have an adverse effect on another client that has a position in 
that security.  In addition, when purchases or sales of the same security for a 
Fund and other client accounts managed by the investment 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 securities issued by their
"regular brokers and dealers" or the parents of those brokers and dealers. 
Regular brokers and dealers means the 10 brokers or dealers that:  (1) received
the greatest amount of brokerage commissions during the Fund's last fiscal year;
(2) engaged in the largest amount of principal transactions for portfolio
transactions of the Fund during the Fund's last fiscal year; or (3) sold the
largest amount of the Fund's shares during the Fund's last fiscal year. 
Following is 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,  1997.

<TABLE>
<CAPTION>
                                          REGULAR BROKER                       VALUE OF
                                             OR DEALER                     SECURITIES HELD
                                             ---------                     ---------------
<S>                                  <C>                                   <C>
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 Witter                                     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



                                      68
<PAGE>

CONVERSATIVE STRATEGIC INCOME 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 Corporation                      487,425
                                     Donaldson, Lufkin & Jenrette, Inc.              111,562

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 Schwab Corporation                    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 Brothers, 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

</TABLE>

PORTFOLIO TURNOVER.  A high rate of portfolio turnover involves corresponding
greater expenses than a lower rate, which expenses must be borne by a fund and
its shareholders.  High portfolio turnover also may result in the realization of
substantial net short-term capital gains.  In order to  qualify as a regulated
investment company for Federal tax purposes for taxable years beginning on or
before August 5, 1997, less than 30% of the 


                                      69
<PAGE>

gross income of the Fund in that year must be derived from the sale of 
securities held by the Fund for less than three months.  See "Taxation" below.  
Portfolio turnover rates are set forth under "Financial Highlight's" in the 
Funds Prospectuses.  The change in portfolio turnover rate for Income Fund and 
Intermediate Government Income Fund from 1995 to 1996 was due in part to the 
change in portfolio managers.  Other significant changes in portfolio turnover 
rates was due to changing market conditions and the effect of those conditions 
on the Funds' investment policies.

VII.   ADDITIONAL PURCHASE, REDEMPTION AND
       EXCHANGE INFORMATION GENERAL


Shares of all Funds are sold on a continuous basis by the distributor.

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.


MONEY MARKET FUNDS


As described in the Prospectuses, under certain circumstances a Money Market
Fund may close early and advance time by which the Fund must receive a purchase
or redemption order and payments.  In that case, if an investor placed an order
after the cut-off time the order would be processed on the follow-up business
day and the investor's access to the fund would be temporarily limited.


CLASS A SHARES

OFFERING PRICE.  Set forth below is an example of the method of computing the
offering price of the A Shares of the Funds that offer A Shares.  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, 1997.  The maximum sales charge as of 
October 1, 1997 are 5.5% for each Equity Fund and 4.0% for each Fixed Income
Fund, except Stable Income Fund, for which 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 5.5% would equal 
0.055).

<TABLE>
<CAPTION>
                                                     NET ASSET      OFFERING 
                                                  VALUE PER SHARE     PRICE
                                                  ---------------     -----
            <S>                                   <C>               <C>
            STABLE INCOME FUND                         $10.24        $10.39
            INTERMEDIATE GOVERNMENT INCOME FUND        $10.84        $11.27
            INCOME FUND                                $ 9.27        $ 9.64
            TOTAL RETURN BOND FUND                     $ 9.40        $ 9.78
            TAX-FREE INCOME FUND                       $10.05        $10.45
            COLORADO TAX-FREE FUND                     $10.22        $10.63
            MINNESOTA TAX-FREE FUND                    $10.57        $10.99
            INCOME EQUITY FUND                         $33.16        $34.98
            VALUGROWTH STOCK FUND                      $25.06        $26.44
            DIVERSIFIED EQUITY FUND                    $36.51        $38.52
            GROWTH EQUITY FUND                         $32.49        $34.28
            SMALL COMPANY STOCK FUND                   $13.95        $14.72

                                      70
<PAGE>

            SMALL CAP OPPORTUNITIES FUND               $19.83        $20.92
            INTERNATIONAL FUND                         $21.66        $22.85
</TABLE>


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
Funds by means of a written Statement of Intention, which expresses the
investor's intention to invest $50,000 or more 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.


EXCHANGES


By making an exchange by telephone, the investor authorizes the Trust's transfer
agent to act on telephonic instructions believed by the Trust's transfer agent
to be genuine instructions from any person representing himself or herself to be
the investor.  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 the shareholder's 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 Funds that offer A Shares 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 Funds that offer B Shares 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 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 Funds
that offer A Shares.  Shareholders of Exchange Shares of Ready Cash Investment
Fund may purchase, with the proceeds from a redemption of all or part of their
shares, B Shares of the Funds that offer B Shares.

Shareholders of Institutional Shares of Ready Cash Investment Fund and Municipal
Money Market Fund and others 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 these Funds, or I Shares of the other Funds of the
Trust.

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.

                                      71
<PAGE>

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.

Exchange Shares may only be acquired in exchange for B Shares of a Fund.  B
Shares ("original B Shares") may be exchanged for Exchange Shares without the
payment of any contingent deferred sales charge; however, B Shares or Exchange
Shares acquired as a result of an exchange and subsequently redeemed will
nonetheless be subject to the contingent deferred sales charge applicable to the
original B Shares as if those shares were being redeemed at that time.  Exchange
Shares may be exchanged without the payment of any contingent deferred sales
charge; however, B Shares acquired as a result of such exchange and subsequently
redeemed will nonetheless be subject to the contingent deferred sales charge
applicable to the original B 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)


A Shares of the Funds on which no initial sales charge was assessed pursuant to
the Right of Accumulation or Statement of Intention, 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 A Shares purchased without
an initial sales charge pursuant to the Cumulative Quantity Discount (Right of
Accumulation) that are redeemed within the first two years after purchase. No
initial 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 all A Shares held by
the shareholder (as of the close of business on the previous Fund Business Day)
exceed $1,000,000.  In that case the contingent deferred sales charge will apply
to redemptions of shares within the first two years after purchase.  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 without an initial sales charge pursuant to a Statement of Intention
("SOI") that are redeemed within the first two years after purchase.  If a
shareholder purchases $1,000,000 or more within a 13 month period under an SOI,
no initial sales charge will apply 

                                      72
<PAGE>

with respect to the entire amount purchased. However, the contingent deferred 
sales charge will apply with respect to the entire amount purchased amount if 
the shareholder never purchases $1,000,000 or more of A Shares under the 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.  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.

REINSTATEMENT PRIVILEGE

A Shares purchased by a shareholder within 60 days following the redemption by
the shareholder of A Shares in the same Fund with a value at least equal to the
A Shares being purchased will not be subject to a contingent deferred sales
charge; provided, however, that this exemption is not applicable to more than
two purchases within a 12-month period.


CONTINGENT DEFERRED SALES CHARGE (A SHARES AND B SHARES)

With respect to A Shares and B Shares of the Funds, certain redemptions are not
subject to any contingent deferred sales charge.  No contingent deferred sales
charge is imposed on:  (1) redemptions of shares acquired through the
reinvestment of dividends and distributions; (2) involuntary redemptions by a
Fund of shareholder accounts with low account balances; (3) 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 (4)
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 AND EXCHANGE SHARES

The conversion of Exchange Shares to Investor Shares and B Shares to A Shares is
subject to the continuing availability of an opinion of counsel to the effect
that:  (1) the assessment of the distribution services fee with respect to the
Exchange Shares and B Shares does not result in the Funds dividends or
distributions constituting "preferential dividends" under the Code and (2) the
conversion of Exchange Shares and B Shares does not constitute a taxable event
under Federal income tax law.  The conversion of Exchange Shares to Investor
Shares and 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 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.


VIII.   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.

                                      73
<PAGE>


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 such  Funds' dividends or
distributions will qualify for the dividends-received deduction for
corporations.

Certain listed options, regulated futures contracts and forward currency
contracts are considered "section 1256 contracts" for Federal income tax
purposes.  Section 1256 contracts held by a Fund or Core Portfolio 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 or Core Portfolio on section 1256
contracts generally will be considered 60% long-term and 40% short-term capital
gain or loss.  Each Fund or Core Portfolio 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 or Core Portfolio upon the lapse or sale of such options held by such
Fund or Core Portfolio will be either long-term or short-term capital gain or
loss depending upon the Fund's (or Core Portfolio'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 or Core Portfolio will be treated as
short-term capital gain or loss.  In general, if a Fund or Core Portfolio
exercises an option, or an option that a Fund or Core Portfolio 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 or Core Portfolio 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 (or Core Portfolio's) gains and
losses with respect to straddle positions by requiring, among other things,
that:  (1) 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; (2) a Fund's (or Core Portfolio'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); (3) 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; (4) losses recognized
with respect to certain straddle positions which would otherwise constitute
short-term capital losses be treated as long-term capital losses; and (5) the
deduction of interest and carrying charges attributable to certain straddle
positions may be deferred.  Various elections are available to a Fund or Core
Portfolio 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 or Core Portfolio all of the
offsetting positions of which consist of section 1256 contracts.

For federal income tax purposes, gains and losses attributable to fluctuations
in exchange rates which occur between the time a Fund accrues interest or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities are treated as ordinary income or ordinary loss.  Similarly, gains
or losses from the disposition of foreign currencies, from the disposition of
debt securities denominated in a foreign currency, or from the disposition of a
forward contract denominated in a foreign currency which are attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the asset and the date of disposition also are treated as
ordinary gain or loss.

A Fund's (or Core Portfolio'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 or Core Portfolio may be forced to sell other portfolio
securities.

If International Fund is eligible to do so, the Fund intends to file an
election with the Internal Revenue Service to pass through to its shareholders
its share of the foreign taxes paid by the Fund.  Pursuant to this election, a

                                      74
<PAGE>

shareholder will be required to:  (1) include in gross income rata share of
foreign taxes paid by the Fund; (2) treat his pro rata share of such foreign
taxes as having been paid by him; and (3) either deduct such pro rata share of
foreign taxes in computing his taxable income or treat such foreign taxes as a
credit against federal income taxes.  No deduction for foreign taxes may be
claimed by an individual shareholder who does not itemize deductions.  In
addition, certain shareholders may be subject to rules which limit or reduce
their ability to fully deduct, or claim a credit for, their pro rata share of
the foreign taxes paid by the Fund.  Under recently enacted legislation, a
shareholder's foreign tax credit with respect to a dividend received from the
Fund will be disallowed unless the shareholder holds shares in the Fund at least
16 days during the 30-day period beginning 15 days before the date on which the
shareholder becomes entitled to receive the dividend.

IX.   ADDITIONAL INFORMATION ABOUT THE TRUST AND
      THE SHAREHOLDERS OF THE FUNDS

DETERMINATION OF NET ASSET VALUE - MONEY MARKET FUNDS


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, 1994 and thereafter.  For the prior fiscal periods another audit firm acted
as independent auditors of the Trust's predecessor corporation.

GENERAL INFORMATION

The Trust is divided into thirty nine separate series representing shares of
the Funds.  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.


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 

                                      75
<PAGE>

similar statutory or other authority limiting business trust shareholder 
liability exists in many other states.  As a result, to the extent that the 
Trust or a shareholder is subject to the jurisdiction of courts in those 
states, the courts may not apply Delaware law, and may thereby subject the 
Trust shareholders to liability.  To guard against this risk, the Trust 
Instrument of the Trust disclaims shareholder liability for acts or obligations 
of the Trust and requires that notice of such disclaimer be given in each 
agreement, obligation and instrument entered into by the Trust or its Trustees, 
and provides for indemnification out of Trust property of any shareholder held 
personally liable for the obligations of the Trust.  Thus, the risk of a 
shareholder incurring financial loss beyond his investment because of 
shareholder liability is limited to circumstances in which:  (1) a court 
refuses to apply Delaware law; (2) no contractual limitation of liability is in 
effect; and (3) the Trust itself is unable to meet its obligations.  In light 
of Delaware law, the nature of the Trust's business, and the nature of its 
assets, the Board believes that the risk of personal liability to a Trust 
shareholder is extremely remote.


In order to adopt the name Norwest Funds, the Trust agreed in each Investment
Advisory Agreement with Norwest that if Norwest ceases to act as investment
adviser to the Trust or any Fund whose name includes the word "Norwest," or if
Norwest requests in writing, the Trust shall take prompt action to change the
name of the Trust and any such Fund to a name that does not include the word
"Norwest."  Norwest may from time to time make available without charge to the
Trust for the Trust's use any marks or symbols owned by Norwest, including marks
or symbols containing the word "Norwest" or any variation thereof, as Norwest
deems appropriate.  Upon Norwest's request in writing, the Trust shall cease to
use any such mark or symbol at any time.  The Trust has acknowledged that any
rights in or to the word "Norwest" and any such marks or symbols which exist or
may exist, and under any and all circumstances, shall continue to be, the sole
property of Norwest.  Norwest 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 Norwest.


RECENT MERGERS 


As of May 17, 1996, three portfolios of the Trust, 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 through the
acquisition of all the assets and liabilities of the Acquired Funds by the
corresponding Acquiring Funds.  Each Acquiring Fund commenced operations prior
to that date and was the entity that continued its existence after the
transactions.  Performance information for the Acquiring Funds only reflects the
Acquiring Funds, performance 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 September 2, 1997.

FINANCIAL STATEMENTS


The financial statements of each Fund for the semi-annual period ended November 
30, 1996 (which include statements of assets and liabilities, statements of 
operations, statements of changes in net assets, notes to financial statements, 
financial highlights and portfolios of investments) are included in the 
Semi-Annual Report to Shareholders of the Trust delivered along with this SAI 
and are incorporated herein by reference.  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.

                                      76
<PAGE>


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 1933 Act 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 or other documents are not necessarily complete, and, in each instance,
are qualified by, reference is made to the copy of such contract or other
documents filed as exhibits to the registration statement.










                                      77

<PAGE>

                APPENDIX A - DESCRIPTION OF SECURITIES RATINGS

         MUNICIPAL AND CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)
                                           

MOODY'S INVESTORS SERVICE ("MOODY'S")

Moody's rates corporate bond issues, including convertible debt issues, as
follows:


Bonds which are rated "Aaa" are judged by Moody's to be of the best quality. 
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge."  Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure.  While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Bonds which are rated "Aa" are judged to be of high quality by all standards. 
Together with the Aaa group, they comprise what are generally known as 
high-grade bonds.  They are rated lower than the best bonds because margins of 
protection may not be as large as in "Aaa" securities or fluctuation of 
protective elements may be of greater amplitude or there may be other elements 
present which make the long term risks appear somewhat larger than in "Aaa" 
securities.

Bonds which are rated "A" possess many favorable investment attributes and are
to be considered as upper medium grade obligations.  Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.

Bonds which are rated "Baa" are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured.  Interest payment and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time.  Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Bonds which are rated "Ba" are judged to have speculative elements; their future
cannot be considered as well assured.  Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future.  Uncertainty of position characterizes
bonds in this class.

Bonds which are rated "B" generally lack characteristics of the desirable
investment.  Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Bonds which are rated "Caa" are of poor standing.  Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.

Bonds which are rated "Ca" represent obligations which are speculative in a high
degree.  Such issues are often in default or have other marked shortcomings.

Bonds which are rated "C" are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Note:  Those bonds in the "Aa", "A", "Baa", "Ba" or "B" groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols "Aa1", "A1", "Baa1", "Ba1", and "B1".


                                      A-1
<PAGE>

STANDARD AND POOR'S 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.  The "D" rating category is used when interest payments or
principal payments are not made on the date due, even if the applicable grace
period has not expired, unless S&P believes that such payments will made during
such grace period.

Note:  The ratings from "AA" to "CCC" may be modified by the addition of a plus
(+) or minus (-) sign to show the relative standing within the rating category.

                                      A-2
<PAGE>

FITCH INVESTORS SERVICE,  L.P. ("FITCH")


Fitch rates corporate bond issues, including convertible debt issues, as
follows:


"AAA" Bonds are considered to be investment grade and of the highest credit
quality.  The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.

"AA" Bonds are considered to be investment grade and of very high credit
quality.  The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA".  Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, shorter-term debt of these issuers is generally rated F-1+.

"A" Bonds are considered to be investment grade and of high credit quality.  The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

"BBB" Bonds are considered to be investment grade and of satisfactory credit
quality.  The obligor's ability to pay interest and repay principal is
considered to be adequate.  Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment.  The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.

"BB" Bonds are considered speculative.  The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes. 
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.

"B" Bonds are considered highly speculative.  While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

"CCC" Bonds have certain identifiable characteristics which, if not remedied,
may lead to default.  The ability to meet obligations requires an advantageous
business and economic environment.

"CC" Bonds are minimally protected.  Default in payment of interest and/or
principal seems probable over time.

"C" Bonds are in imminent default in payment of interest or principal.

"DDD", "DD", and "D" Bonds are in default on interest and/or principal 
payments. Such bonds are extremely speculative and should be valued on the 
basis of their ultimate recovery value in liquidation or reorganization of the 
obligor.  "DDD" represents the highest potential for recovery on these bonds, 
and "D" represents the lowest potential for recovery.

Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category.  Plus and minus signs,
however, are not used in the "AAA", "DDD", "DD", or "D" categories.


                                      A-3
<PAGE>

PREFERRED STOCK

MOODY'S INVESTORS SERVICE

Moody's rates preferred stock as follows:


An issue rated "aaa" is considered to be a top-quality preferred stock.  This
rating indicates good asset protection and the least risk of dividend impairment
among preferred stock issues.

An issue rated "aa" is considered a high-grade preferred stock.  This rating
indicates that there is a reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.

An issue rated "a" is considered to be an upper-medium grade preferred stock. 
While risks are judged to be somewhat greater than in the "aaa" and "aa"
classification, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.

An issue rated "baa" is considered to be a medium-grade, neither highly
protected nor poorly secured.  Earnings and asset protection appear adequate at
present but may be questionable over any great length of time.

An issue rated "ba" is considered to have speculative elements and its future
cannot be considered well assured.  Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods.  Uncertainty of
position characterizes preferred stocks in this class.

An issue which is rated "b" generally lacks the characteristics of a desirable
investment.  Assurance of dividend payments and maintenance of other terms of
the issue over any long period of time may be small.

An issue which is rated "caa" is likely to be in arrears on dividend payments. 
This rating designation does not purport to indicate the future status of
payments.

An issue which is rated "ca" is speculative in a high degree and is likely to be
in arrears on dividends with little likelihood of eventual payment.

An issue which is rated "c" can be regarded as having extremely poor prospects
of ever attaining any real investment standing.  This is the lowest rated class
of preferred or preference stock.

Note:  Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification from "aa" through "b" in its preferred stock rating system.  The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issuer ranks in the lower end of its generic rating
category.


STANDARD & POOR'S

S&P rates preferred stock as follows:


"AAA" is the highest rating that is assigned by S&P to a preferred stock issue
and indicates an extremely strong capacity to pay the preferred stock
obligations.

A preferred stock issue rated "AA" also qualifies as a high-quality fixed income
security.  The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated "AAA". 

An issue rated "A" is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.

                                      A-4
<PAGE>

An issue rated "BBB" is regarded as backed by an adequate capacity to pay the
preferred stock obligations.  Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the "A" category.

Preferred stock rated "BB", "B", and "CCC" are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations.  "BB" indicates the lowest degree of speculation and "CCC"
the highest degree of speculation.  While such issues will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.

The rating "CC" is reserved for a preferred stock issue in arrears on dividends
or sinking fund payments but that is currently paying.

A preferred stock rated "C" is a non-paying issue.

A preferred stock rated "D" is a non-paying issue with the issuer in default on
debt instruments.

To provide more detailed indications of preferred stock quality, the ratings
from "AA" to "CCC" may be modified by the addition of a plus (+) or minus (-)
sign to show relative standing within the major rating categories.


SHORT TERM MUNICIPAL LOANS


MOODY'S INVESTORS SERVICE.  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.  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, L.P.  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".



                                      A-5
<PAGE>

OTHER MUNICIPAL SECURITIES AND COMMERCIAL PAPER

MOODY'S INVESTORS SERVICE


Moody's two highest ratings for short-term debt, including commercial paper, are
"Prime-1" and "Prime-2".  Both are judged investment grade, to indicate the
relative repayment ability of rated issuers.

Issuers rated Prime-1 have a superior ability for repayment of senior short-term
debt obligations.  "Prime- 1" repayment ability will often be evidenced by many
of the following characteristics:  Leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structure with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; well-established access to a range of financial markets and assured
sources of alternate liquidity.

Issuers rated "Prime-2" by Moody's have a strong ability for repayment of senior
short-term debt obligations.  This will normally be evidenced by many of the
characteristics of issuers rated "Prime-1" but to a lesser degree.  Earnings
trends and coverage ratios, while sound, may be more subject to variation. 
Capitalization characteristics, while still appropriate, may be more affected by
external conditions.  Ample alternate liquidity is maintained.


STANDARD AND POOR'S


S&P's two highest commercial paper ratings are "A-1" and "A-2".  Issues assigned
an "A" rating are regarded as having the greatest capacity for timely payment. 
Issues in this category are delineated with the numbers 1, 2 and 3 to indicate
the relative degree of safety.  An "A-1" designation indicates that the degree
of safety regarding timely payment is either overwhelming or very strong.  Those
issues determined to possess overwhelming safety characteristics are denoted
with a plus (+) sign designation.  The capacity for timely payment on issues
with an "A-2" designation is strong.  However, the relative degree of safety is
not as high as for issues designated "A-1".  "A-3" issues have a satisfactory
capacity for timely payment.  They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying the higher
designations.  Issues rated "A-2" are regarded as having only an adequate
capacity for timely payment.  However, such capacity may be damaged by changing
conditions or short-term adversities.

FITCH INVESTORS SERVICE, L.P.


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+".

                                      A-6


<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.  The data is for the past three fiscal
years or shorter period if the Fund/Portfolio has been in operation for a
shorter period.


<TABLE>
<CAPTION>

                                       ADVISORY FEE   ADVISORY FEE   ADVISORY FEE
                                          PAYABLE        WAIVED        RETAINED
                                          -------        ------        --------
<S>                                    <C>            <C>            <C>
CASH INVESTMENT FUND

* 1 moved from here; text not shown
YearEnded May 31, 1997                  2,805,919             0      2,805,919
    Year Ended May 31, 1996             2,383,128             0      2,383,128
    Year Ended May 31, 1995             2,067,323             0      2,067,323

READY CASH INVESTMENT FUND

* 2 moved from here; text not shown
Year Ended May 31, 1997                 6,267,045        50,148      6,216,897
    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

U.S. GOVERNMENT FUND

    Year Ended May 31, 1997             2,538,240             0      2,538,240
    Year Ended May 31, 1996             2,205,102             0      2,205,102
    Year Ended May 31, 1995             1,687,958             0      1,687,958

TREASURY FUND

    Year Ended May 31, 1997             1,548,275             0      1,548,275
    Year Ended May 31, 1996             1,308,984             0      1,308,984
    Year Ended May 31, 1995             1,152,801             0      1,152,801

MUNICIPAL MONEY MARKET FUND

    Year Ended May 31, 1997             2,394,475       369,405      2,025,070
    Year Ended May 31, 1996             1,907,103       303,321      1,603,782
    Year Ended May 31, 1995               987,273       175,377        811,896

STABLE INCOME FUND                               

    Year Ended May 31, 1997               334,768             0        334,768
    Year Ended May 31, 1996               106,127             0        106,127
    Year End October 31, 1995             114,429             0        114,429
</TABLE>


                                       B-1
<PAGE>


<TABLE>
<CAPTION>
                                       ADVISORY FEE   ADVISORY FEE   ADVISORY FEE
                                          PAYABLE        WAIVED        RETAINED
                                          -------        ------        --------
<S>                                    <C>            <C>            <C>
INTERMEDIATE GOVERNMENT INCOME FUND

    Year Ended May 31, 1997             1,355,907             0      1,355,907
    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, 1997               598,019             0        598,019
    Year Ended May 31, 1996               344,777             0        344,777
    Year End October 31, 1995             607,061             0        607,061

INCOME FUND

    Year Ended May 31, 1997             1,385,988       277,198       1,108790
    Year Ended May 31, 1996               981,244       196,249        784,995
    Year Ended May 31, 1995               560,463       149,529        410,934

TOTAL RETURN BOND FUND

    Year Ended May 31, 1997               651,181       357,998        293,183
    Year Ended May 31, 1996               584,872       352,590        232,282
    Year Ended May 31, 1995               305,162       244,711         60,451

LIMITED TERM TAX-FREE FUND

    Year Ended May 31, 1997                88,741        63,145         25,596                       
    Year Ended May 31, 1996                   N/A           N/A            N/A

TAX-FREE INCOME FUND

    Year Ended May 31, 1997             1,537,966     1,236,539        301,427
    Year Ended May 31, 1996             1,187,026     1,032,179        154,847
    Year Ended May 31, 1995               671,570       306,789        364,781

COLORADO TAX-FREE FUND

    Year Ended May 31, 1997               299,582       238,690         60,892
    Year Ended May 31, 1996               286,768       286,768              0
    Year Ended May 31, 1995               257,147       257,147              0

MINNESOTA TAX-FREE FUND

    Year Ended May 31, 1997               212,616       190,702         21,914
    Year Ended May 31, 1996               154,733       154,733              0
    Year Ended May 31, 1995                67,504        67,504              0
</TABLE>


                                       B-2
<PAGE>


<TABLE>
<CAPTION>
                                       ADVISORY FEE   ADVISORY FEE   ADVISORY FEE
                                          PAYABLE        WAIVED        RETAINED
                                          -------        ------        --------
<S>                                    <C>            <C>            <C>
STRATEGIC INCOME FUND

    Year Ended May 31, 1997               589,365             0        589,365
    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, 1997             2,185,490             0      2,185,490
    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, 1997             2,688,223             0      2,688,223
    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, 1997             1,906,693             0      1,906,693
    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, 1997               563,081       212,327        350,754
    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, 1997             1,475,664        18,446      1,457,218
    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


DIVERSIFIED EQUITY FUND

    Year Ended May 31, 1997             6,874,776             0      6,874,776
    Year Ended May 31, 1996             3,038,858             0      3,038,858
    Year End October 31, 1995           3,737,147             0      3,737,147
</TABLE>


                                       B-3
<PAGE>


<TABLE>
<CAPTION>
                                       ADVISORY FEE   ADVISORY FEE   ADVISORY FEE
                                          PAYABLE        WAIVED        RETAINED
                                          -------        ------        --------
<S>                                    <C>            <C>            <C>
GROWTH EQUITY FUND

    Year Ended May 31, 1997             7,205,405             0      7,205,405
    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, 1997               651,110             0        651,110
    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, 1997             1,481,914       419,413      1,062,501
    Year Ended May 31, 1996               909,200       327,218        581,982
    Year Ended May 31, 1995               322,908       322,908              0

SMALL COMPANY GROWTH FUND

    Year Ended May 31, 1997             3,513,581             0      3,513,581
    Year Ended May 31, 1996             1,653,578             0      1,653,578
    Year End October 31, 1995           1,984,348             0      1,984,348

DIVERSIFIED SMALL CAP FUND                       

    Year Ended May 31, 1997                   N/A           N/A            N/A

SMALL CAP OPPORTUNITIES FUND                     

    Year Ended May 31, 1997                   N/A           N/A            N/A

CONTRARIAN STOCK FUND

    Year Ended May 31, 1997               161,601        61,290        100,311
    Year Ended May 31, 1996               349,877        70,170        279,707
    Year Ended May 31, 1995               258,669       128,979        129,690

INTERNATIONAL FUND*

    Year Ended May 31, 1997                   N/A           N/A            N/A                       
    Year Ended May 31, 1996               316,701             0        316,701
    Year End October 31, 1995             367,007             0        367,007
</TABLE>


*   Represents investment advisory fees paid to Schroder Capital Management
Inc. by International Portfolio of Core Trust.


                                         B-4
<PAGE>

TABLE 2 - MANAGEMENT FEES



The following table shows the dollar amount of fees payable to:  (1) Forum for
its management services with respect to each Fund (or class thereof for those
periods when multiple classes were outstanding); (2) Norwest for its
administrative services with respect to International Fund; and (3) 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.



(I) MANAGEMENT FEES TO FORUM


<TABLE>
<CAPTION>
                                         MANAGEMENT    MANAGEMENT     MANAGEMENT
                                            FEE           FEE            FEE
                                          PAYABLE        WAIVED        RETAINED
                                          -------        ------        --------
<S>                                      <C>           <C>            <C>
CASH INVESTMENT FUND

    Year Ended May 31, 1997             1,252,466       127,192      1,125,274
    Year Ended May 31, 1996             1,076,303       160,959        915,344
    Year Ended May 31, 1995               944,718       263,073        681,645

U.S. GOVERNMENT FUND

    Year Ended May 31, 1997             1,140,934        12,114      1,128,820
    Year Ended May 31, 1996             1,002,126        40,949        961,177
    Year Ended May 31, 1995               786,649       135,127        651,522

TREASURY FUND

    Year Ended May 31, 1997               728,447       595,668        132,749
    Year Ended May 31, 1996               627,992       448,841        179,151
    Year Ended May 31, 1995               558,734       467,978         90,756

READY CASH INVESTMENT FUND

Investor Shares
    Year Ended May 31, 1997             1,070,654        14,082      1,056,572
    Year Ended May 31, 1996               760,979        60,072        700,907
    Year Ended May 31, 1995               391,466       147,704        243,762
Institutional Shares
    Year Ended May 31, 1997             2,595,399     2,413,208        182,191
    Year Ended May 31, 1996             1,569,081     1,569,081              0
    Year Ended May 31, 1995               739,794       589,996        149,797
Exchange Shares
    Year Ended May 31, 1997                   850           850              0
    Year Ended May 31, 1996                   273           273              0
    Year Ended May 31, 1995                   417           331             86
</TABLE>



                                       B-5
<PAGE>


<TABLE>
<CAPTION>
                                         MANAGEMENT    MANAGEMENT     MANAGEMENT
                                            FEE           FEE            FEE
                                          PAYABLE        WAIVED        RETAINED
                                          -------        ------        --------
<S>                                      <C>           <C>            <C>
MUNICIPAL MONEY MARKET FUND

Investor Shares
    Year Ended May 31, 1997               121,330       78,8344         42,496          
    Year Ended May 31, 1996               115,294        65,869         49,425
    Year Ended May 31, 1995                82,763        75,983          6,780
Institutional Shares
    Year Ended May 31, 1997             1,275,270     1,017,363        257,907
    Year Ended May 31, 1996               990,763       814,669        176,094
    Year Ended May 31, 1995               481,393       393,600         87,793

STABLE INCOME FUND
A Shares
    Year Ended May 31, 1997                12,730        12,730              0
    Year Ended May 31, 1996                   623           623              0
B Shares
    Year Ended May 31, 1997                   799           799              0
    Year Ended May 31, 1996                    33            33              0
I Shares
    Year Ended May 31, 1997                98,060        98,060              0
    Year Ended May 31, 1996                34,720        34,720              0
    Year End October 31, 1995              38,143        38,143              0

INTERMEDIATE GOVERNMENT INCOME FUND

A Shares
    Year Ended May 31, 1997                14,471        14,471              0
    Year Ended May 31, 1996                   666           666              0
B Shares
    Year Ended May 31, 1997                 9,953         9,953              0
    Year Ended May 31, 1996                   412           412              0
I Shares
    Year Ended May 31, 1997               386,457       386,457              0
    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, 1997               170,862       110,901         59,961
    Year Ended May 31, 1996                98,508        69,269         29,239
    Year Ended October 31, 1995           173,446       147,461         25,985
</TABLE>



                                       B-6
<PAGE>


<TABLE>
<CAPTION>
                                         MANAGEMENT    MANAGEMENT     MANAGEMENT
                                            FEE           FEE            FEE
                                          PAYABLE        WAIVED        RETAINED
                                          -------        ------        --------
<S>                                      <C>           <C>            <C>
INCOME FUND

A Shares
    Year Ended May 31, 1997                10,585        10,585              0          
    Year Ended May 31, 1996                11,894        11,894              0
    Year Ended May 31, 1995                12,210        11,607            603
B Shares
    Year Ended May 31, 1997                 6,826         6,826              0
    Year Ended May 31, 1996                 6,732         6,732              0
    Year Ended May 31, 1995                 5,559         3,553          2,006
I Shares
    Year Ended May 31, 1997               536,985       436,300        100,685          
    Year Ended May 31, 1996               373,872       353,908         19,964
    Year Ended May 31, 1995               206,416       124,725         81,691

TOTAL RETURN BOND FUND

A Shares
    Year Ended May 31, 1997                 5,187         5,187              0          
    Year Ended May 31, 1996                 2,416         2,416              0
    Year Ended May 31, 1995                   674           674              0
B Shares
    Year Ended May 31, 1997                  4508          4508              0          
    Year Ended May 31, 1996                 3,264         3,264              0
    Year Ended May 31, 1995                   923           923              0
I Shares
    Year Ended May 31, 1997               250,777        24,127        226,650
    Year Ended May 31, 1996               228,269        12,744        215,525
    Year Ended May 31, 1995               120,468        17,639        102,829

LIMITED TERM TAX-FREE FUND

A Shares
    Year Ended May 31, 1997                   N/A           N/A            N/A
    Year Ended May 31, 1996                   N/A           N/A            N/A
B Shares
    Year Ended May 31, 1997                   N/A           N/A            N/A                       
    Year Ended May 31, 1996                   N/A           N/A            N/A
I Shares
    Year Ended May 31, 1997                17,748        17,748              0                       
    Year Ended May 31, 1996                   N/A           N/A            N/A
</TABLE>



                                       B-7
<PAGE>


<TABLE>
<CAPTION>
                                         MANAGEMENT    MANAGEMENT     MANAGEMENT
                                            FEE           FEE            FEE
                                          PAYABLE        WAIVED        RETAINED
                                          -------        ------        --------
<S>                                      <C>           <C>            <C>
TAX-FREE INCOME FUND

A Shares
    Year Ended May 31, 1997                58,862        42,638         16,224          
    Year Ended May 31, 1996                67,046        27,085         39,961
    Year Ended May 31, 1995                64,084        64,084              0
B Shares
    Year Ended May 31, 1997                13,295        13,295              0          
    Year Ended May 31, 1996                 9,866         9,866              0
    Year Ended May 31, 1995                 6,348         5,591            757
I Shares
    Year Ended May 31, 1997               543,029       288,245        254,784          
    Year Ended May 31, 1996               397,898       304,725         93,173
    Year Ended May 31, 1995               198,196       139,199         58,997

COLORADO TAX-FREE FUND

A Shares
    Year Ended May 31, 1997                54,902        49,840          5,062
    Year Ended May 31, 1996                53,988        48,022          5,966
    Year Ended May 31, 1995                56,039        40,684         15,355
B Shares
    Year Ended May 31, 1997                13,532        13,532              0
    Year Ended May 31, 1996                11,566        11,566              0
    Year Ended May 31, 1995                 9,429         7,791          1,638
I Shares
    Year Ended May 31, 1997                51,399        44,432          6,967
    Year Ended May 31, 1996                49,153        41,507          7,646
    Year Ended May 31, 1995                37,392        31,974          5,418

MINNESOTA TAX-FREE FUND

A Shares
    Year Ended May 31, 1997                51,795        33,434         18,361
    Year Ended May 31, 1996                43,885        26,289         17,596
    Year Ended May 31, 1995                19,236        19,236              0
B Shares
    Year Ended May 31, 1997                20,364        14,581          5,783
    Year Ended May 31, 1996                13,910        10,499          3,411
    Year Ended May 31, 1995                 5,974         5,974              0
I Shares
    Year Ended May 31, 1997                12,888        10,362          2,526
    Year Ended May 31, 1996                 4,098         2,630          1,468
    Year Ended May 31, 1995                 1,781         1,622            159

 STRATEGIC INCOME FUND

    Year Ended May 31, 1997               130,970       115,223         15,747
    Year Ended May 31, 1996                83,673        69,584         14,089
    Year Ended October 31, 1995           121,634       121,634              0
</TABLE>



                                       B-8
<PAGE>


<TABLE>
<CAPTION>
                                         MANAGEMENT    MANAGEMENT     MANAGEMENT
                                            FEE           FEE            FEE
                                          PAYABLE        WAIVED        RETAINED
                                          -------        ------        --------
<S>                                      <C>           <C>            <C>
MODERATE BALANCED FUND

    Year Ended May 31, 1997               412,357       278,998        133,359          
    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, 1997               463,486       303,389        160,097
    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, 1997                37,101        30,944          6,157
    Year Ended May 31, 1996                 1,196         1,196              0
B Shares
    Year Ended May 31, 1997                23,583        23,583              0
    Year Ended May 31, 1996                   670           670              0
I Shares
    Year Ended May 31, 1997               320,654       168,477        152,177                       
    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, 1997               375,387       213,759        161,628
    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, 1997                33,232        29,323          3,909          
    Year Ended May 31, 1996                27,427        27,427              0
    Year Ended May 31, 1995                24,465        24,465              0
B Shares
    Year Ended May 31, 1997                11,318        11,318              0
    Year Ended May 31, 1996                 8,763         8,763              0
    Year Ended May 31, 1995                 5,593         4,617            976
I Shares
    Year Ended May 31, 1997               324,366       194,534        129,832
    Year Ended May 31, 1996               297,630       147,086        150,544
    Year Ended May 31, 1995               253,243       148,800        104,443
</TABLE>



                                       B-9
<PAGE>


<TABLE>
<CAPTION>
                                         MANAGEMENT    MANAGEMENT     MANAGEMENT
                                            FEE           FEE            FEE
                                          PAYABLE        WAIVED        RETAINED
                                          -------        ------        --------
<S>                                      <C>           <C>            <C>
DIVERSIFIED EQUITY FUND

A Shares
    Year Ended May 31, 1997                14,322        14,322              0
    Year Ended May 31, 1996                    99            99              0
B Shares
    Year Ended May 31, 1997                15,913        15,913              0
    Year Ended May 31, 1996                    96            96              0
I Shares
    Year Ended May 31, 1997             1,027,423       723,040        304,383
    Year Ended May 31, 1996               467,322       238,224        229,098
    Year Ended October 31, 1995           574,946       287,473        287,473

GROWTH EQUITY FUND

A Shares
    Year Ended May 31, 1997                10,336        10,336              0
    Year Ended May 31, 1996                   100           100              0
B Shares
    Year Ended May 31, 1997                 4,347         4,347              0                       
    Year Ended May 31, 1996                    25            25              0
I Shares
    Year Ended May 31, 1997               785,917       545,815        240,102          
    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, 1997               100,171        87,896         12,275          
    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, 1997                11,966        10,318          1,648          
    Year Ended May 31, 1996                 5,800         5,800              0
    Year Ended May 31, 1995                 1,655         1,515            140
    
B Shares
    Year Ended May 31, 1997                 8,329         8,329              0          
    Year Ended May 31, 1996                 4,426         4,426              0
    Year Ended May 31, 1995                 1,051         1,051              0
I Shares
    Year Ended May 31, 1997               276,089        90,214        185,875
    Year Ended May 31, 1996               171,614        15,664        155,950
    Year Ended May 31, 1995                61,876        14,997         46,878


                                       B-10
<PAGE>

SMALL COMPANY GROWTH FUND

    Year Ended May 31, 1997               390,398       185,644        204,754
    Year Ended May 31, 1996               183,731        76,278        107,453
    Year Ended October 31, 1995           220,483       177,287         43,196

SMALL CAP OPPORTUNITIES FUND

A Shares
    Year Ended May 31, 1997                   122           122              0
B Shares                                         
    Year Ended May 31, 1997                    44            44              0
I Shares
    Year Ended May 31, 1997                26,560        26,560              0

CONTRARIAN STOCK FUND

A Shares
    Year Ended May 31, 1997                   995           995              0                       
    Year Ended May 31, 1996                 1,439         1,439              0
    Year Ended May 31, 1995                   646           646              0
B Shares
    Year Ended May 31, 1997                   668           668              0                       
    Year Ended May 31, 1996                 1,194         1,194              0
    Year Ended May 31, 1995                   328           328              0
I Shares
    Year Ended May 31, 1997                38,738        35,570          3,168                       
    Year Ended May 31, 1996                84,836        37,213         47,623
    Year Ended May 31, 1995                63,693           543         63,150

INTERNATIONAL FUND

A Shares
    Year Ended May 31, 1997                 1,494         1,494              0                       
    Year Ended May 31, 1996                   345           345              0
B Shares
    Year Ended May 31, 1997                 1,247         1,247              0                       
    Year Ended May 31, 1996                   395           395              0
I Shares
    Year Ended May 31, 1997               177,707         4,264        173,443          
    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, 1997               451,118             0        451,118                       
    Year Ended May 31, 1996               175,887             0        175,887
    Year Ended October 31, 1995           205,150             0        205,150


                                       B-11
<PAGE>

(iii) ADMINISTRATIVE FEES TO FORUM

INTERNATIONAL PORTFOLIO
    Year Ended May 31, 1997               180,447         7,005        173,442
    Year Ended May 31, 1996               105,567        11,873         93,694
    Year Ended October 31, 1995           122,669        70,043         52,626
</TABLE>


                                       B-12
<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.


<TABLE>
<CAPTION>

                                         DISTRIBUTION  DISTRIBUTION    DISTRIBUTION
                                              FEE          FEE             FEE
                                            PAYABLE       WAIVED         RETAINED
                                            -------       ------         --------
<S>                                      <C>           <C>             <C>
READY CASH INVESTMENT FUND
Exchange Shares
    Year Ended May 31, 1997                 4,249         1,062          3,187
    Year Ended May 31, 1996                 1,023         1,023              0
    Year Ended May 31, 1995                 2,050         2,050              0

STABLE INCOME FUND
B Shares
    Year Ended May 31, 1997                 7,992         1,998          5,994
    Year Ended May 31, 1996                   245           245              0

INTERMEDIATE GOVERNMENT INCOME FUND
B Shares
    Year Ended May 31, 1997                99,968        24,882         75,086
    Year Ended May 31, 1996                 2,646         2,646              0

INCOME FUND
B Shares
    Year Ended May 31, 1997                34,127         8,532         25,595
    Year Ended May 31, 1996                25,247         6,666         18,581
    Year Ended May 31, 1995                27,796         6,949         20,847

TOTAL RETURN BOND FUND
B Shares
    Year Ended May 31, 1997                22,540         5,635         16,905
    Year Ended May 31, 1996                12,239         3,619          8,620
    Year Ended May 31, 1995                 4,612         1,153          3,459

TAX-FREE INCOME FUND
B Shares
    Year Ended May 31, 1997                66,476        16,619         49,857
    Year Ended May 31, 1996                36,997         2,390         34,607
    Year Ended May 31, 1995                31,738         7,934         23,803

COLORADO TAX-FREE FUND
B Shares
    Year Ended May 31, 1997                67,660        16,915         50,745
    Year Ended May 31, 1996                43,374           207         43,167
    Year Ended May 31, 1995                47,144        11,786         35,358
</TABLE>



                                       B-13
<PAGE>


<TABLE>
<CAPTION>
                                         DISTRIBUTION  DISTRIBUTION    DISTRIBUTION
                                              FEE          FEE             FEE
                                            PAYABLE       WAIVED         RETAINED
                                            -------       ------         --------
<S>                                      <C>           <C>             <C>
MINNESOTA TAX-FREE FUND
B Shares                                         
    Year Ended May 31, 1997               101,817        25,454         76,363
    Year Ended May 31, 1996                52,163             0         52,163
    Year Ended May 31, 1995                30,386         8,880         21,506

INCOME EQUITY FUND
B Shares
    Year Ended May 31, 1997               235,827        58,957        176,872
    Year Ended May 31, 1996                 5,031             0          5,031

VALUGROWTH STOCK FUND
B Shares                                         
    Year Ended May 31, 1997                56,592        14,148         42,444
    Year Ended May 31, 1996                32,860         5,269         27,591
    Year Ended May 31, 1995                27,965         6,991         20,974

DIVERSIFIED EQUITY FUND 
B Shares
    Year Ended May 31, 1997               159,132        39,783        119,349
    Year Ended May 31, 1996                   719           719              0

GROWTH EQUITY FUND
B Shares
    Year Ended May 31, 1997                43,471        10,868         32,603
    Year Ended May 31, 1996                   187           187              0

SMALL COMPANY STOCK FUND
B Shares
    Year Ended May 31, 1997                41,641        10,410         31,231
    Year Ended May 31, 1996                16,598         4,077         12,521
    Year Ended May 31, 1995                 5,256         2,038          3,218

SMALL CAP OPPORTUNITIES FUND
B Shares
    Year Ended May 31, 1997                   431           108            323

CONTRARIAN STOCK FUND
B Shares
    Year Ended May 31, 1997                 3,340           835          2,505          
    Year Ended May 31, 1996                 4,479         4,479              0
    Year Ended May 31, 1995                 1,642           411          1,232

INTERNATIONAL FUND
B Shares
    Year Ended May 31, 1997                12,465         3,116          9,349
    Year Ended May 31, 1996                 2,959         2,930             29
</TABLE>



                                         B-14
<PAGE>

TABLE 4 - SALES CHARGES



The following table shows:  (1) 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); (2) the amount of sales charge retained
by Forum and not reallowed to other persons; and (3) 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.


<TABLE>
<CAPTION>
                                            SALES        RETAINED          CDSL
                                           CHARGES        AMOUNT           PAID
                                           -------        ------           ----
<S>                                      <C>           <C>             <C>
STABLE INCOME FUND
A Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                   423            52             --
B Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                    --            --             75

INTERMEDIATE GOVERNMENT INCOME FUND
A Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                 1,482           129             --
B Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                    --            --            964

INCOME FUND
A Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996             1,567,755         4,428             --
B Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                    --            --          8,272

TOTAL RETURN BOND FUND
A Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996             1,194,198         3,074             --
B Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                    --            --          2,853

TAX-FREE INCOME FUND
A Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996             5,429,389        12,264             --
B Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                    --            --          6,576
</TABLE>

                                         B-15
<PAGE>

<TABLE>
<CAPTION>
                                            SALES        RETAINED          CDSL
                                           CHARGES        AMOUNT           PAID
                                           -------        ------           ----
<S>                                     <C>              <C>            <C>
COLORADO TAX-FREE FUND
A Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996             2,889,945         7,135             --
B Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                    --            --         12,557

MINNESOTA TAX-FREE FUND
A Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996             4,598,204        12,506             --
B Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                    --            --          8,412

INCOME EQUITY FUND
A Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                10,996         1,088             --
B Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                    --            --            570

VALUGROWTH STOCK FUND
A Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996             1,162,647         4,628             --
B Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                    --            --         12,911

DIVERSIFIED EQUITY FUND 
A Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                50,658            15             --
B Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                    --            --              0

GROWTH EQUITY FUND
A Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                26,825             7             --
B Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                    --            --              0
</TABLE>

                                         B-16
<PAGE>


<TABLE>
<CAPTION>
                                            SALES        RETAINED          CDSL
                                           CHARGES        AMOUNT           PAID
                                           -------        ------           ----
<S>                                     <C>              <C>             <C>
SMALL COMPANY STOCK FUND
A Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996             1,309,565         5,153          2,972
B Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                    --            --             --

SMALL CAP OPPORTUNITIES FUND
I Shares
    ** 1 Year Ended May 31, 1997                                              

CONTRARIAN STOCK FUND
A Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996               103,499           425             --
B Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                    --            --          1,432

INTERNATIONAL FUND
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                   269            30             --
B Shares
    Year Ended May 31, 1997                                                   
    Year Ended May 31, 1996                    --            --            213
</TABLE>



                                         B-17
<PAGE>

TABLE 5 - ACCOUNTING FEES

The following table shows the dollar amount of fees payable to Forum Accounting
for its accounting services with respect to each Fund, the amount of fee that
was waived by Forum Accounting, if any, and the actual fee received by Forum
Accounting.  The table also shows similar information with respect 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.


<TABLE>
<CAPTION>
                                              FEE           FEE           FEE
                                            PAYABLE        WAIVED       RETAINED
                                            -------        ------       --------
<S>                                         <C>            <C>          <C>
CASH INVESTMENT FUND
    Year Ended May 31, 1997                65,000             0         65,000
    Year Ended May 31, 1996                49,000             0         49,000
    Year Ended May 31, 1995                36,000             0         36,000

U.S. GOVERNMENT FUND
    Year Ended May 31, 1997                60,000             0         60,000
    Year Ended May 31, 1996                46,000             0         46,000
    Year Ended May 31, 1995                36,000             0         36,000

TREASURY FUND
    Year Ended May 31, 1997                54,500             0         54,500
    Year Ended May 31, 1996                43,500             0         43,500
    Year Ended May 31, 1995                36,000             0         36,000

READY CASH INVESTMENT FUND
    Year Ended May 31, 1997                86,000             0         86,000
    Year Ended May 31, 1996                63,000             0         63,000
    Year Ended May 31, 1995                48,000             0         48,000

MUNICIPAL MONEY MARKET FUND
    Year Ended May 31, 1997                90,000             0         90,000
    Year Ended May 31, 1996                72,500             0         72,500
    Year Ended May 31, 1995                60,000             0         60,000

STABLE INCOME FUND
    Year Ended May 31, 1997                92,500        26,041         66,459
    Year Ended May 31, 1996                37,452         7,136         30,316
    Year Ended October 31, 1995            51,700             0         51,700

INTERMEDIATE GOVERNMENT INCOME FUND
    Year Ended May 31, 1997                85,500        24,146         61,354
    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, 1997                54,000        15,223         38,777
    Year Ended May 31, 1996                29,500         5,561         23,939
    Year Ended October 31, 1995            36,700             0         36,700

INCOME FUND
    Year Ended May 31, 1997                93,000             0         93,000
    Year Ended May 31, 1996                79,500             0         79,500
    Year Ended May 31, 1995                64,000             0         64,000
</TABLE>



                                         B-18
<PAGE>


<TABLE>
<CAPTION>
                                              FEE           FEE           FEE
                                            PAYABLE        WAIVED       RETAINED
                                            -------        ------       --------
<S>                                         <C>            <C>          <C>
TOTAL RETURN BOND FUND
    Year Ended May 31, 1997                66,000             0         66,000
    Year Ended May 31, 1996                57,500             0         57,500
    Year Ended May 31, 1995                50,000             0         50,000

LIMITED TERM TAX-FREE FUND
    Year Ended May 31, 1997                24,000             0         24,000
    Year Ended May 31, 1996                   N/A           N/A            N/A

TAX-FREE INCOME FUND
    Year Ended May 31, 1997                91,000             0         91,000
    Year Ended May 31, 1996                66,000             0         66,000
    Year Ended May 31, 1995                62,000             0         62,000

COLORADO TAX-FREE FUND
    Year Ended May 31, 1997                66,000             0         66,000
    Year Ended May 31, 1996                60,000             0         60,000
    Year Ended May 31, 1995                55,000             0         55,000

MINNESOTA TAX-FREE FUND
    Year Ended May 31, 1997                64,000             0         64,000
    Year Ended May 31, 1996                56,000             0         56,000
    Year Ended May 31, 1995                55,300             0         55,300

STRATEGIC INCOME  FUND
    Year Ended May 31, 1997                60,000        17,019         42,981
    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, 1997                62,000        17,546         44,454
    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, 1997                61,000        17,237         43,763
    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, 1997                71,500        20,160         51,340
    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, 1997                66,000             0         66,000
    Year Ended May 31, 1996                57,500             0         57,500
    Year Ended May 31, 1995                48,500             0         48,500
</TABLE>



                                         B-19
<PAGE>


<TABLE>
<CAPTION>
                                              FEE           FEE           FEE
                                            PAYABLE        WAIVED       RETAINED
                                            -------        ------       --------
<S>                                         <C>            <C>          <C>
INDEX FUND
    Year Ended May 31, 1997                60,000         8,393         51,607
    Year Ended May 31, 1996                30,500         5,659         24,841
    Year Ended October 31, 1995            46,266             0         46,266

DIVERSIFIED EQUITY FUND
    Year Ended May 31, 1997                81,500        22,995         58,505
    Year Ended May 31, 1996                30,306         6,216         24,090
    Year Ended October 31, 1995            34,700             0         34,700

GROWTH EQUITY FUND
    Year Ended May 31, 1997                79,000        22,311         56,689
    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, 1997                38,000        10,750         27,250
    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, 1997                76,000             0         76,000
    Year Ended May 31, 1996                60,500             0         60,500
    Year Ended May 31, 1995                51,000             0         51,000

SMALL COMPANY GROWTH FUND
    Year Ended May 31, 1997                55,000         5,536         49,464
    Year Ended May 31, 1996                30,000         5,759         24,241
    Year Ended October 31, 1995            36,700             0         36,700

SMALL CAP OPPORTUNITIES FUND
    Year Ended May 31, 1997                26,057        26,057              0

CONTRARIAN STOCK FUND
    Year Ended May 31, 1997                60,000             0         60,000
    Year Ended May 31, 1996                52,000             0         52,000
    Year Ended May 31, 1995                50,000             0         50,000

INTERNATIONAL FUND
    Year Ended May 31, 1997                36,000        10,148         25,852
    Year Ended May 31, 1996                23,000         3,952         19,048
    Year Ended October 31, 1995            51,766        39,766         12,000

INTERNATIONAL PORTFOLIO
    Year Ended May 31, 1997                90,000             0         90,000
    Year Ended May 31, 1996                50,500         8,500         42,000
    Year Ended October 31, 1995            77,967         8,567         69,400
</TABLE>



                                         B-20
<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.


<TABLE>
<CAPTION>
                                                        AGGREGATE
                                                     COMMISSIONS PAID
<S>                                                  <C>
DIVERSIFIED BOND FUND                            
    Year Ended May 31, 1997                                 N/A
    Year Ended May 31, 1996                               5,261
    Year Ended October 31, 1995                           1,750
    
STRATEGIC INCOME FUND                            
    Year Ended May 31, 1997                              14,867
    Year Ended May 31, 1996                               8,406
    Year Ended October 31, 1995                           9,298

MODERATE BALANCED FUND                           
    Year Ended May 31, 1997                              50,414
    Year Ended May 31, 1996                              54,332
    Year Ended October 31, 1995                          57,931

GROWTH BALANCED FUND                             
    Year Ended May 31, 1997                              83,720
    Year Ended May 31, 1996                              69,732
    Year Ended October 31, 1995                          66,361

INCOME EQUITY FUND
    Year Ended May 31, 1997                             301,308
    Year Ended May 31, 1996                              52,904
    Year Ended October 31, 1995                          25,321

INDEX FUND                                       
    Year Ended May 31, 1997                             157,319
    Year Ended May 31, 1996                             121,170
    Year Ended October 31, 1995                         107,321

VALUGROWTH STOCK FUND
    Year Ended May 31, 1997                             502,785
    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, 1997                             226,652
    Year Ended May 31, 1996                             175,648
    Year Ended October 31, 1995                         180,093
</TABLE>



                                         B-21
<PAGE>


<TABLE>
<CAPTION>
                                                        AGGREGATE
                                                     COMMISSIONS PAID
<S>                                                  <C>
    Year Ended May 31, 1997                             130,483
    Year Ended May 31, 1996                             127,666
    Year Ended October 31, 1995                         115,993

LARGE COMPANY GROWTH FUND                        
    Year Ended May 31, 1997                              59,924
    Year Ended May 31, 1996                              42,229
    Year Ended October 31, 1995                          60,264

SMALL COMPANY STOCK FUND
    Year Ended May 31, 1997                             458,447
    Year Ended May 31, 1996                             208,021
    Year Ended May 31, 1995                              67,471

SMALL COMPANY GROWTH FUND                        
    Year Ended May 31, 1997                           1,365,750
    Year Ended May 31, 1996                             785,875
    Year Ended October 31, 1995                         600,341

SMALL CAP OPPORTUNITIES FUND
    ** 2 Year Ended May 31, 1997                            N/A
    
CONTRARIAN STOCK FUND
    Year Ended May 31, 1997                              74,313
    Year Ended May 31, 1996                              52,162
    Year Ended May 31, 1995                              43,397

INTERNATIONAL FUND*
    Year Ended May 31, 1997                                 N/A
    Year Ended May 31, 1996                             188,849
    Year Ended October 31, 1995                         348,358
</TABLE>


*   Reflects commission paid by International Portfolio; International Fund
paid no commissions directly during either year.


                                         B-22
<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, 1997, 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.]


<TABLE>
<CAPTION>

                                                                       SHARE             % OF         % OF
                             NAME AND ADDRESS                         BALANCE            CLASS        FUND
                             ----------------                         -------            -----        ----
<S>                          <C>                                   <C>                  <C>          <C>
CASH INVESTMENT FUND         Gas Marketing, Inc.                         2,389,160      59.99%       59.99%
                             PO Box 594
                             630 W 23rd St. Suite 7
                             Yankton  SD  57078                                               

                             Norwest Investment Services           942,670,406.360      23.66%       23.66%
                             c/o Greg Wraalstad
                             608 2nd Ave S, 8th Fl, MS 0162
                             Minneapolis  MN  55479-0162                          
                             
                             Norwest Bank Minnesota NA             283,517,274.650       7.12%        7.12%
                             VP 4600301
                             Attn: Cash Sweep Processing-
                             Judy Jeska
                             Minneapolis  MN  55479-0050                          
                                                                                  
                             Norwest Bank Minnesota NA             642,113,439.640      16.12%       16.12%
                             VP 4500022
                             Attn: Cash Sweep Processing-
                             Judy Jeska
                             733 Marquette Ave, 4th Fl.
                             Minneapolis  MN  55479-0050                          

                             Norwest Bank Minnesota NA             384,772,245.000       9.66%        9.66%
                             VP 4500030
                             Attn: Cash Sweep Processing -
                             Judy Jeska
                             733 Marquette Ave., 4th Fl.
                             Minneapolis  MN  55479-0050                          

READY CASH INVESTMENT FUND                                                                                 
  Investor Shares            Norwest Investment Services           602,513,033.400      99.22%       99.05%
                             c/o Greg Warrlstad
                             608 2nd Avenue South
                             8th Floor, MS 0162
                             Minneapolis  MN 55479-0162                           


                                       B-23
<PAGE>

  ** 6 Institutional Shares  Norwest Advantage IRA                     347,346.710     100.00%        0.06%
                             Rollovers
                             Omnibus Account
                             733 Marquette Ave. S
                             Minneapolis  MN  55479                               

  Exchange Shares            Stephen P. Arkulary                        65,561.130       9.42%        0.01%
                             and Helen M. Doane
                             JT TEN  711266
                             595 W. Wabasha Street
                             Duluth  MN  55803                                    
                             
                             Dennis M. Dougherty                       470,796.170      67.66%        0.08%
                             RD. 1, Box 1444
                             East Stroudsburg  PA  18301                          
                             
                             BHC Securities Inc.                        45,885.610       6.59%        0.01%
                             ** 8 One Commerce Square
                             ** 9 2005 Market Street
                             ** 10 Philadelphia  PA  19103-
                             3212                                                 

U.S. GOVERNMENT FUND         Alpine & Co                           143,913,278.630       6.50%        6.50%
                             Non-Discretionary
                             1740 Broadway MS 8751
                             Denver, CO 80274                                     
                             
                             Norwest Bank Minnesota NA             572,577,302.090      25.85%       25.85%
                             AMS
                             Collective Trust Funds 
                               Clearing Account
                             Attn:  Cash Sweep Processing -
                             Judy Jeska
                             733 Marquette Avenue 4th Floor
                             Minneapolis, MN 55479-0050                           
                             
                             Norwest Investment Services           337,724,309.420      15.24%       15.24%
                             c/o Greg Wraalstad
                             ** 11 608 2nd Avenue South
                             8th Floor - MS 0162
                             Minneapolis  MN  55479-0162                          

TREASURY FUND                Norwest Investment Services           266,416,807.670      24.68%       24.68%
                             c/o Greg Wraalstad
                             608 2nd Avenue South
                             8th Floor -- MS 0162
                             Minneapolis  MN  55479-0162                          
                             
                             Norwest Bank Minnesota NA             567,055,207.700      52.52%       52.52%
                             AMS
                             Collective Trust Funds 
                               Clearing Account
                             Attn: Cash Sweep Processing - 
                             Judy Jeska


                                       B-24
<PAGE>

                             733 Marquette Avenue 4th Floor                       
                             Minneapolis, MN 55479-0050                           

                             Norwest Bank Colorado Springs          76,443,473.150       7.08%        7.08%
                             Attn: Jan Peto
                             P.O. Box 400
                             Colorado Springs, CO 80901                           


                                       B-25
<PAGE>

MUNICIPAL MONEY MARKET FUND  
     Investor Shares         Norwest Investment Services            47,457,009.540      97.22%        6.22%
                             c/o Greg Wraalstad

                             * 11 moved from here; text not
                             shown
                             608 2nd Ave S.
                             8th Floor  MS - 0162
                             Minneapolis  MN  55479-0162                          

     Institutional Shares    Norwest Bank Minnesota NA AMS         170,300,262.470      23.86%       22.33%
                             Collective Trust Funds
                               Clearing Account
                             Attn: Cash Sweep Processing -
                             Judy Jeska
                             733 Marquette Ave., 4th Floor
                             Minneapolis  MN  55479-0050                          

                             Norwest Bank Minnesota NA             290,683,010.630      40.73%       38.12%
                             VP4620002
                             Attn: Cash Sweep Processing
                             733 Marquette Avenue 4th Floor
                             Minneapolis, MN 55479-0050                           

                             Alpine & Co.                           44,351,987.450       6.21%        5.82%
                             Non Discretionary
                             ** 12  1740 Broadway MS 0076                         
                             Denver  CO  80274                                    

STABLE INCOME FUND           
    A Shares                 Hichory Tech Corporation                   98,014.916      10.51%        0.79%
                             Attn:  Craig Thill
                             PO Box 3248
                             Mankato  MN  56002

                             Ramsey Foundation                         136,738.146      14.66%        1.11%
                             Attn:  Him Kleist 6th Fl., 310146
                             8100 34th Ave. S
                             PO Box 1309
                             Minneapolis  MN  55440-1309

                             Aspen Medical Group, PA                    90,810.627       9.73%        0.73%
                             Attn:  Cheryl Feller  926011
                             1021 Bandana Blvd. E
                             Suite 200
                             St. Paul  MN  55108

                             Analysts International Corp.              216,969.473      23.26%        1.75%
                             Attn:  Gerald McGrath 700284


                                       B-26
<PAGE>

                             7615 Metro Blvd.
                             Minneapolis  MN  55439

     B Shares                Fred P. Mattson                             7,979.991       6.18%        0.06%
                             and Berry J. Matton
                             P.O. Box 248
                             Elmwood, WI 54740-0248

                             Norwest Investment Services, Inc.          10,386.414       8.04%        8.08%
                             FBO 800059291
                             Northstar Building East - 8th Fl.
                             618 Second Avenue - South
                             Minneapolis  MN  55479-0162

                             Charles Anjad-Ali                           9,545.939       7.39%        0.08%
                             1305 Dayton Avenue
                             St. Paul  MN  55104                        16,496.593      12.77%        0.13%

                             UTE Plumbing Heating, Inc.                 10,137.871       7.85%        0.08%
                             Retirement Account
                             Employee Pension Plan Trust
                             UA DTD 07-01-86
                             2315 Bott Ave.
                             Colorado Springs CO 80904-3727


                             Norwest Investment Svcs., Inc.
                             FBO 302900271                              13,659.617      10.57%       0.11% 
                             Northstar Building E - 8th Floor
                             608 Second Avenue S
                             Minneapolis  MN  55479-0162                          

                             Norwest Investment Svcs., Inc.
                             FBO 102953761
                             Northstar Building E - 8th Floor
                             608 Second Ave. S
                             Minneapolis  MN  55479-0162                          

     I Shares                EMSEG & Co.                                 9,446,876      83.54%       76.37%
                             c/o Norwest Bank MN
                             733 Marquette Ave., MS 0036                          
                             Minneapolis  MN  55479-0036

                             Norwest Advantage IRA RO                  692,279.612       6.12%        5.60%
                             1500 Broadway
                             Lubbock  TX  79408


                                       B-27
<PAGE>

INTERMEDIATE GOVERNMENT
INCOME FUND                                                                                                
     A Shares                Ibrahim M. Almadani                       101,920.942       8.63%        5.19%
                             and Salwa A. Aboulghaffar
                             c/o Bernie Harkel
                             10010 Regency Circle
                             Omaha  NE  68114


                                       B-28
<PAGE>

INCOME FUND                                                                                                
     A Shares                Norwest Wealthbuilder                      50,173.443       8.84%        0.17%
                             Reinvest Account
                             733 Marquette Ave.
                             Minneapolis  MN  55479-0040                          

     I Shares                Norwest Income Bond CTF                14,414,374.536      51.80%       50.09%
                             14380000
                             PO Box 1450 NW 8477
                             Minneapolis  MN  55480-8477

                             Dentru & Co.                            5,766,397.937      20.72%       20.04%
                             ** 13 Non-Discretionary Cash
                             1740 Broadway Mail 8676
                             Denver  CO  80274

                             FINABA                                  2,327,763.313       8.37%        8.08%
                             Non-Discretionary Cash Acct.
                             Attn: Jon Rutter
                             PO Box 10523
                             Lubbock  TX  79408                                   

TOTAL RETURN BOND FUND                                                                                     
     A Shares                Norwest Wealthbuilder                     210,795.954      59.09%        1.49%
                             Reinvest Account
                             733 Marquette Avenue
                             Minneapolis, MN 55479-0050

     I Shares                Kiwils & Co.                              830,986.693       6.12%        5.86%
                             Discretionary Reinvest
                             1700 Broadway MS 0076
                             Denver  CO  80274

                             Dentru & Co                             3,226,054.237      23.76%       22.74%
                             Non-Discretionary Cash
                             1740 Broadway Mail 8676
                             Denver CO 80274

                             Seret & Co.                             6,957,002.422      51.24%       49.04%
                             Discretionary Reinvest

                             * 12 moved from here; text not
                             shown
                             1740 Broadway MS 8751
                             Denver, CO 80274

LIMITED TERM TAX-FREE FUND                                                                                 
      I Shares               Victoria & Co. Special                    682,704.508      16.45%       16.45%


                                       B-29
<PAGE>

                             Common Trust Fund                       2,901,067.860      69.89%       69.89%
                             Trust Operations
                             One O'Connor Plaza
                             Victoria  TX  77901

                             Norwest Limited Term
                             Tax-Exempt Bond Fund
                             PO Box 1450 NW 8477
                             Minneapolis  MN  55480-8477                          

TAX-FREE INCOME FUND                                                                                       
     A Shares                Norwest Wealthbuilder                     157,598.599       5.45%        0.52%
                             Reinvest Account
                             733 Marquette Ave.                                   
                             Minneapolis  MN  55479-0040                          

     B  Shares               Martha M. George                           42,396.662       5.39%        0.14%
                             3130 Ward Road
                             Bismarck  ND  58501                                  

     I Shares                Dentru & Co                             6,772,836.133      25.49%       22.39%
                             Non-Discretionary Cash
                             1740 Broadway Mail 8676
                             Denver CO 80274

                             FINABA                                  1,574,547.942       5.93%        5.21%
                             Non-Discretionary Cash Acct.
                             PO Box 10523
                             Lubbock, TX 79408

                             * 14 moved from here; text not         14,186,350.784      53.39%       46.90%
                             shown

                             Norwest Tax Exempt Bond Fund
                             14931100
                             P.O. Box 1450  NW 8477
                             Minneapolis, MN 55480-8477

COLORADO TAX-FREE FUND                                                                                     
     A Shares                Walter Stonehocker and                    548,481.947      18.90%        9.02%
                             Roswitha Stonehocker
                             TEN COM 639254
                             15600 Holly
                             Brighton, CO 80601                                   

     I  Shares               Dentru & Co                             2,407,875.122      96.26%       39.59%



                                       B-30
<PAGE>

                             Non Discretionary Cash

                             * 13 moved from here; text not shown
                             1740 Broadway Mail 8676
                             Denver CO 80274                                      

MINNESOTA TAX-FREE FUND                                                                                    
      I Shares                Norwest Bank Minnesota, NA               174,616.136      13.78%        3.45%

                             * 8 moved from here; text not
                             shown

                             * 9 moved from here; text not
                             shown

                             * 7 moved from here; text not shown

                             Agnt Madri Inc. Agency
                             U/A/DT 5/14/96
                             733 Marquette Avenue MS-0036
                             Minneapolis,  MN 55479-0036                          


                                       B-31
<PAGE>

INCOME EQUITY FUND                                                                                         
    I Shares                 EMSEG & Co.                             8,977,318.760      64.24%       64.24%
                             c/o Norwest Bank MN
                             733 Marquette Ave. MS 0036
                             Minneapolis  MN 55479-0036

                             Dentru & Co.                            2,229,198.533      15.95%       15.95%
                             c/o Norwest Bank Co NA
                             Denver CO 80274-8676

                             Norwest Bank Texas NA                   1,251,536.113       8.95%        8.95%
                             1500 Broadway
                             Lubbock  TX  79408


VALUGROWTH STOCK FUND                                                                                      
    I Shares                 Dentru & Co.                            3,108,986.881      41.97%       36.40%
                             c/o Norwest Bank Co NA
                             Denver CO 80274-8676

                             FINABA                                  1,028,804.846      13.89%       12.05%
                             Non-Discretionary Cash Acct.
                             Attn: Jon Rutter
                             PO Box 10523
                             ** 14 Lubbock, TX  79408                             

DIVERSIFIED EQUITY FUND                                                                                    
     A Shares                Norwest Investment Services, Inc.          44,458.710       5.51%        2.28%
                             FBO 302660761
                             Northstar Building E - 8th Fl.
                             608 Second Ave. S.                                   
                             Minneapolis  MN  55479-0162                          
GROWTH EQUITY FUND                                                                                         
     A Shares                Norwest Wealthbuilder                     183,744.799      38.36%       23.78%
                             Reinvest Account
                             733 Marquette Avenue
                             Minneapolis  MN  55479-0040                          
SMALL COMPANY STOCK FUND                                                                                   
     A Shares                Norwest Wealthbuilder                     125,850.376      21.17%        0.97%


                                       B-32
<PAGE>
                             Reinvest Account
                             733 Marquette Avenue
                             Minneapolis, MN 55479-0040                           

     B Shares                Norwest Investment Services, Inc.          30,123.636       7.65%        0.23%
                             FBO 7311400141
                             Northstar Building E - 8th Fl.
                             608 Second Ave. S
                             Minneapolis  MN  55479-0162                          

     I Shares                Dentru & Co                             2,309,493.178      19.35%       17.87%
                             Non-Discretionary Cash
                             1740 Broadway Mail 8676
                             Denver CO 80274                                      
                             
                             Norwest Bank Minnesota                    779,625.000       6.53%        6.03%
                             Cust Norwest Foundation - NIM
                             A/C 12928201
                             PO Box 1450 NW 0477
                             Minneapolis  MN  55480-8477                          

SMALL CAP OPPORTUNITIES FUND                                                                               
     A Shares                Norwest Investment                          2,619.172       5.94%        0.04%
                              Services, Inc.
                             FBO 702167001
                             Northstar Building East - 8th Fl.
                             608 Second Avenue  South
                             Minneapolis  MN  55479-0162

                             Norwest Investment                          6,920.371      15.69%        0.12%
                                Services, Inc.
                             FBO  103482111
                             Northstar Building East - 8th Fl.
                             608 Second Avenue  South
                             Minneapolis  MN  55479-0162

                             ** 15 Norwest Investment                    2,762.148       6.26%        0.05%
                               ** 16 Services, Inc.
                             FBO 102180141
                             Northstar Building E - 8th Fl.
                             608 Second Ave. S
                             Minneapolis  MN  55479-0162                          
                             


B Shares                     Norwest Investment                         1,728.180        7.97%        0.03%
                                Services, Inc.                                    
                             FBO  731123361
                             Northstar Building East - 8th Fl.
                             608 Second Avenue  South
                             Minneapolis  MN  55479-0162


                                       B-33
<PAGE>

                             Norwest Investment                          2,418.821       11.15       0.04%
                                Services, Inc.
                             FBO 701942871
                             Northstar Building East - 8th Fl.
                             608 Second Avenue  South
                             Minneapolis  MN  55479-0162

                             Charles W. Gaillard                         2,294.725      10.58%        0.04%
                              2580 Cedar Ridge Rd.
                             Wayzata  MN  55391

                             Harold B. Metzger                           1,129.688       5.21%        0.02%
                             and Carol E. Metzger Jtten
                             5326 Norwood St.
                             Duluth  MN  55804

                             * 10 moved from here; text not shown

SMALL COMPANY GROWTH FUND                                                                                  
    I  Shares                 EMSEG & Co.                           14,103,302.706      90.01%       90.01%
                              c/o Norwest Bank MN
                              733 Marquette Ave., MS 0036

                             * 15 moved from here; text not shown


                                       B-34
<PAGE>

                             * 16 moved from here; text not shown

                             Minneapolis  MN  55479-0036

                             Vanguard Fiduciary Trust Co.            1,438,387.501       9.18%        9.18%
                             PO Box 2600
                             Valley Forge  PA  19482

LARGE COMPANY GROWTH FUND                                                                                  
    I Shares                 EMSEG & Co.                             3,096,084.493      73.98%       73.98%
                             c/o Norwest Bank MN
                             733 Marquette Ave., MS 0036
                             Minneapolis  MN  55479-0036

                             Victoria & Co.                            220,768.250       5.28%        5.28%
                             NorwestBank TX South Central
                             PO Box 6000
                             San Antonio  TX  78286-9646

CONTRARIAN STOCK FUND                                                                                      
I Shares                     Norwest Bank Minnesota                     40,241.000       5.36%        5.36%
                             Agnt: Merle D. & Dyanne R.
                                Kerr Agency
                             A/C 07183400
                             PO Box 1450 NW 8477
                             Minneapolis  MN  55480-8477

                             Dentru & Co                               345,757.574      46.07%       46.07%
                             Non-Discretionary Cash
                             1740 Broadway Mail 8676
                             Denver CO 80274

                             Kiwils & Co.                              159,053.929      21.19%       21.19%
                             Discretionary Reinvest
                             1740 Broadway MS 8751
                             Denver  CO  80274

                             Seret & Co.                                63,119.198       8.41%        8.41%
                             Discretionary Reinvest
                             1740 Broadway MS 8751
                             Denver, CO 80274                                     



                                       B-35
<PAGE>

INTERNATIONAL  FUND
     A Shares                Norwest Wealthbuilder                      40,577.877      34.47%       20.14%
                             Reinvest Account
                             733 Marquette Avenue                                 
                             Minneapolis, MN 55479-0040

                             Norwest Investment                          6,328.014       5.37%        3.14%
                               Services, Inc.
                             FBO 732267711
                             Northstar Building E - 8th Fl.
                             608 Second Ave. S
                             Minneapolis  MN  55479-0162


     B Shares                David A. Struvk                             4,764.293       5.69%        2.36%
                             1941 Crestview Circle
                             Ewcelsior MN  55331

                             Norwest Investment                          7,722.102       9.22%        3.83%
                               Services, Inc.
                             FBO 015097851
                             Northstar Building E - 8th Fl.
                             608 Second Ave. S
                             Minneapolis  MN  55479-0162                          
INDEX FUND
    I Shares                 EMSEG & Co.                            11,399,385.666      92.19%       92.19%
                             c/o Norwest Bank MN
                             733 Marquette Ave. MS 0036
                             Minneapolis  MN  55479-0036                          
DIVERSIFIED BOND FUND
                             EMSEG & Co.                             5,169,536.113      82.81%       82.81%
                             c/o Norwest Bank MN
                             733 Marquette Ave. MS 0036
                             Minneapolis  MN  55479-0036

                             Kiwils & Co.                              342,107.622       5.48%        5.48%
                             c/o Norwest Bank CO NA
                             1740 Broadway MS 8676
                             Denver CO  80274-8676
STRATEGIC INCOME FUND
    I Shares                 EMSEG & Co.                             6,322,210.779      89.18%       89.18%
                             c/o Norwest Bank MN
                             733 Marquette Ave. MS 0036
                             Minneapolis  MN  55479-0036                          

                             Seret & Co.                               383,346.369       5.41%        5.41%
                             c/o Norwest Bank CO
                             1740 Broadway MS 8676
                             Denver, CO 80274-8676                                


                                       B-36
<PAGE>

MODERATE BALANCED FUND
    I Shares                 EMSEG & Co.                            16,309,251.531      88.43%       88.43%
                             c/o Norwest Bank MN
                             733 Marquette Ave. MS 0036
                             Minneapolis  MN  55479-0036                          
GROWTH BALANCED FUND
    I Shares                 EMSEG & Co.                            17,655,722.442      87.10%       87.10%
                             c/o Norwest Bank MN
                             733 Marquette Ave. MS 0036
                             Minneapolis  MN  55479-0036                          

                             Seret & Co.                             1,174,525.257       5.79%        5.79%
                             c/o Norwest Bank CO
                             1740 Broadway MS 8676
                             Denver, CO 80274-8676                                
</TABLE>



                                       B-37
<PAGE>

                         APPENDIX C - PERFORMANCE DATA
                                           

TABLE 1 - MONEY MARKET FUND YIELDS


As of May 31, 1997, the seven day yield, seven day effective yield and, for
Municipal Money Market Fund, the seven day 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%.

<TABLE>
<CAPTION>
                                       EFFECTIVE   TAX-EQUIVALENT   TAX-EQUIVALENT
                              YIELD      YIELD          YIELD       EFFECTIVE YIELD
                              -----      -----          -----       ---------------
<S>                           <C>        <C>            <C>         <C>
CASH INVESTMENT FUND          5.26%      5.40%           N/A              N/A
                                                                         
READY CASH INVESTMENT FUND                                               
    Investor Shares           4.92%      5.04%           N/A              N/A
    Institutional Shares      5.26%      5.40%           N/A              N/A
    Exchange Shares           4.17%      4.26%           N/A              N/A
                                                                         
U.S. GOVERNMENT FUND          5.00%      5.13%           N/A              N/A
                                                                         
TREASURY FUND                 4.85%      4.96%           N/A              N/A
                                                                         
MUNICIPAL MONEY MARKET FUND                                              
    Investor Shares           3.34%      3.40%           N/A              N/A  
    Institutional Shares      3.54%      3.61%           N/A              N/A
</TABLE>


* 6 moved from here; text not shown

TABLE 2 - YIELDS

For the 30-day period ended May 31, 1997 the annualized yield and, where
applicable, the tax equivalent yield of each class of the Fixed Income Funds,
Balanced Funds and Equity 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 Funds, the assumed
Colorado and Minnesota income tax rates are 5% and 8.5%, respectively.  Limited
Term Tax-Free Fund had not commenced operations as of November 30, 1996.


<TABLE>
<CAPTION>
                                                          TAX EQUIVALENT
                                               YIELD          YIELD
                                               -----          -----
<S>                                            <C>            <C>
STABLE INCOME FUND
    A Shares                                   5.84%           N/A
    B Shares                                   5.18%           N/A
    I Shares                                   5.93%           N/A

INTERMEDIATE GOVERNMENT INCOME FUND
    A Shares                                   5.81%           N/A
    B Shares                                   5.29%           N/A
    I Shares                                   6.03%           N/A

DIVERSIFIED BOND FUND
    A Shares                                    N/A            N/A
    B Shares                                    N/A            N/A
    I Shares                                   6.03%           N/A


                                      C-1
<PAGE>
                                                          TAX EQUIVALENT
                                               YIELD          YIELD
                                               -----          -----
INCOME FUND
    A Shares                                   6.09%           N/A
    B Shares                                   5.59%           N/A
    I Shares                                   6.34%           N/A

TOTAL RETURN BOND FUND
    A Shares                                   5.70%           N/A
    B Shares                                   5.15%           N/A
    I Shares                                   5.92%           N/A

LIMITED TERM TAX-FREE FUND
    A Shares                                    N/A           N/A
    B Shares                                    N/A           N/A
    I Shares                                   4.65%         7.69%

TAX-FREE INCOME FUND
    A Shares                                   5.18%         8.57%
    B Shares                                   4.63%         7.66%
    I Shares                                   5.38%         8.90%

COLORADO TAX-FREE FUND
    A Shares                                   5.22%         9.09%
    B Shares                                   4.66%         8.12%
    I Shares                                   5.42%         9.45%

MINNESOTA TAX-FREE FUND
    A Shares                                   4.93%         8.91%
    B Shares                                   4.36%         7.90%
    I Shares                                   5.12%         9.26%

STRATEGIC INCOME FUND
    I Shares                                    N/A           N/A

MODERATE BALANCED FUND
    I Shares                                    N/A           N/A

GROWTH BALANCED FUND
    I Shares                                    N/A           N/A

DIVERSIFIED EQUITY FUND
    A Shares                                    N/A           N/A
    B Shares                                    N/A           N/A
    I Shares                                    N/A           N/A

GROWTH EQUITY FUND
    A Shares                                    N/A           N/A
    B Shares                                    N/A           N/A
    I Shares                                    N/A           N/A

INDEX FUND
    I Shares                                   2.44%          N/A 

                                      C-2
<PAGE>
                                                          TAX EQUIVALENT
                                               YIELD          YIELD
                                               -----          -----
VALUGROWTH STOCK FUND
    A Shares                                   1.03%           N/A
    B Shares                                   0.40%           N/A
    I Shares                                   1.08%           N/A
                                                           
** 17 INCOME EQUITY FUND                                   
                                                           
    A Shares                                   2.38%           N/A
    B Shares                                   1.76%           N/A
    I Shares                                   2.50%           N/A
                                                           
** 18 LARGE COMPANY GROWTH FUND                            
    I Shares                                   0.08%           N/A
                                                           
** 19 SMALL COMPANY STOCK FUND                             
    A Shares                                   0.56%           N/A
    B Shares                                   1.26%           N/A
    I Shares                                   0.59%           N/A
                                                           
** 20 SMALL COMPANY GROWTH FUND                            
    I Shares                                   0.80%           N/A
                                                           
SMALL CAP OPPORTUNITIES FUND                               
    A Shares                                    N/A            N/A
    B Shares                                    N/A            N/A
    I Shares                                    N/A            N/A

* 17 moved from here; text not shown

* 18 MOVED FROM HERE; TEXT NOT SHOWN

* 19 MOVED FROM HERE; TEXT NOT SHOWN

* 20 MOVED FROM HERE; TEXT NOT SHOWN

CONTRARIAN STOCK FUND
    A Shares                                    N/A            N/A
    B Shares                                    N/A            N/A
    I Shares                                   0.39%           N/A 

INTERNATIONAL FUND


                                      C-3
<PAGE>

    A Shares                                    N/A            N/A
    B Shares                                    N/A            N/A
    I Shares                                    N/A            N/A
</TABLE>







                                      C-4
<PAGE>

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, 1997 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.  The 
performance of the Funds marked with an asterisk (*) includes the performance 
of a collective investment fund prior to its conversion into the Fund.  (See 
"Performance and Advertising Data -- Multiclass, Collective Trust Fund and 
Core-Gateway Performance.")  Prior to 1989, the collective investment funds 
were valued on the calendar quarter; therefor the following chart does not 
reflect a since inception figure as of the fiscal year end for those funds 
adopting collective investment fund performance.  Calendar quarter performance 
is available from the adviser.



<TABLE>
<CAPTION>
                                                      CALENDAR
                                   ONE      THREE     YEAR TO     ONE      THREE     FIVE      TEN       SINCE
                                  MONTHS    MONTHS      DATE     YEAR      YEARS     YEARS     YEARS   INCEPTION
                                  ------    ------      ----     ----      -----     -----     -----   ---------
<S>                               <C>       <C>         <C>      <C>       <C>       <C>       <C>     <C>
CASH INVESTMENT FUND               0.44%     1.31%      2.58%     5.21%     5.22%     4.43%      N/A      5.84%
READY CASH INVESTMENT FUND                                       
Investor Shares                    0.42%     1.22%      2.00%     4.87%     4.89%     4.09%      N/A      5.45%
Institutional Shares               0.44%     1.31%      2.14%     5.23%     5.24%     4.33%      N/A      5.58%
Exchange Shares                    0.35%     1.03%      1.69%     4.09%      N/A       N/A       N/A      4.07%
U.S. GOVERNMENT FUND               0.43%     1.26%      2.07%     5.04%     5.04%     4.25%      N/A      5.57%
TREASURY FUND                      0.41%     1.22%      1.99%     4.87%     4.85%     4.07%      N/A      4.36%
MUNICIPAL MONEY MARKET FUND                                      
Investor Shares                    0.29%     0.80%      1.28%     3.08%     3.17%     2.76%      N/A      3.73%
Institutional Shares               0.31%     0.85%      1.36%     3.28%     3.38%     2.91%      N/A      3.82%
STABLE INCOME FUND                                               
  A Shares                         0.53%     1.56%      2.31%     6.24%      N/A       N/A       N/A      6.42%
  B Shares                         0.46%     1.37%      2.07%     5.43%      N/A       N/A       N/A      5.32%
  I Shares                         0.53%     1.56%      2.31%     6.24%      N/A       N/A       N/A      6.41%
INTERMEDIATE GOVERNMENT                                          
INCOME FUND*                                                     
  A Shares                         0.78%     1.04%      1.40%     6.36%     6.04%     5.12%     6.94%      N/A
  B Shares                         0.71%     0.75%      1.04%     5.51%      N/A       N/A       N/A      9.02%
  I Shares                         0.78%     0.94%      1.40%     6.36%     6.03%     5.12%     6.93%      N/A
DIVERSIFIED BOND FUND*                                           
  A Shares                          N/A       N/A        N/A       N/A       N/A       N/A       N/A       N/A
  B Shares                          N/A       N/A        N/A       N/A       N/A       N/A       N/A       N/A
  I Shares                         0.79%     0.91%      1.07%     6.23%     5.80%     5.14%     7.08%      N/A
INCOME FUND                                                      
  A Shares                         0.78%     0.89%      1.02%     6.79%     5.93%     5.45%      N/A      7.67%
  B Shares                         0.72%     0.70%      0.70%     6.03%     5.15%      N/A       N/A      2.90%
  I Shares                         0.89%     0.89%      1.12%     6.90%     5.96%     5.45%      N/A      7.67%
TOTAL RETURN BOND FUND                                           
  A Shares                         0.86%     1.16%      2.03%     6.84%     6.52%      N/A       N/A      5.10%
  B Shares                         0.80%     1.08%      1.83%     6.27%     5.80%      N/A       N/A      4.39%
  I Shares                         0.76%     1.16%      2.03%     6.95%     6.57%      N/A       N/A      5.14%
LIMITED TERM TAX-FREE FUND                                       
  A Shares                          N/A       N/A        N/A       N/A       N/A       N/A       N/A       N/A
  B Shares                          N/A       N/A        N/A       N/A       N/A       N/A       N/A       N/A
  I Shares                         0.78%     0.73%      1.75%      N/A       N/A       N/A       N/A      6.99%
TAX-FREE INCOME FUND                                             
  A Shares                         1.47%     1.05%      2.14%     8.43%     7.37%     6.32%      N/A      6.63%
  B Shares                         1.40%     0.86%      1.82%     7.63%     6.57%      N/A       N/A      4.88%
  I Shares                         1.57%     1.15%      2.24%     8.54%     7.41%     6.34%      N/A     10.68%
COLORADO TAX-FREE FUND                                           
  A Shares                         1.54%     1.10%      2.37%     9.00%     7.26%      N/A       N/A      5.92%
  B Shares                         1.47%     0.92%      2.05%     8.19%     6.46%      N/A       N/A      5.08%
  I Shares                         1.54%     1.10%      2.37%     9.00%     7.26%      N/A       N/A      5.92%
MINNESOTA TAX-FREE FUND

                                      C-5 
<PAGE>

  A Shares                         1.39%    1.09%       1.85%     7.98%     6.81%     6.32%      N/A      6.75%
  B Shares                         1.42%    0.90%       1.53%     7.18%     6.01%      N/A       N/A      4.54%
  I Shares                         1.39%    1.09%       1.85%     7.98%     6.78%     6.32%      N/A      6.73%

                                      C-6
<PAGE>

<CAPTION>
                                                      CALENDAR
                                   ONE      THREE     YEAR TO     ONE      THREE     FIVE      TEN       SINCE
                                  MONTHS    MONTHS      DATE     YEAR      YEARS     YEARS     YEARS   INCEPTION
                                  ------    ------      ----     ----      -----     -----     -----   ---------
<S>                               <C>       <C>         <C>      <C>       <C>       <C>       <C>     <C>
STRATEGIC INCOME FUND*
  I Shares                         2.27%     2.55%      4.06%    9.58%      9.52%     7.95%      N/A       N/A
MODERATE BALANCED FUND*                                        
  I Shares                         3.15%     3.40%      5.83%   12.04%     11.98%     9.64%      N/A     10.68%
GROWTH BALANCED FUND*                                          
  I Shares                         4.91%     5.00%      8.50%   15.81%     15.83%    12.17%      N/A     12.56%
INCOME EQUITY FUND*                                            
  A Shares                         4.64%     4.61%     11.36%   22.40%     24.98%    16.95%      N/A     16.49%
  B Shares                         4.58%     4.40%     10.99%   21.48%       N/A       N/A       N/A     22.10%
  I Shares                         4.64%     4.61%     11.36%   22.41%     25.01%    16.95%      N/A     17.49%
INDEX  FUND*                                                   
  A Shares                          N/A       N/A        N/A      N/A        N/A       N/A       N/A       N/A
  B Shares                          N/A       N/A        N/A      N/A        N/A       N/A       N/A       N/A
  I Shares                         6.07%     7.78%     15.47%   29.02%     25.14%    17.66%    14.08%    14.33%



                                      C-7
<PAGE>

VALUGROWTH STOCK FUND                                          
  A Shares                         5.56%     5.92%     11.87%   23.32%     18.44%    13.06%      N/A     13.65%
  B Shares                         5.46%     5.68%     11.49%   22.33%     17.53%      N/A       N/A     14.05%
  I Shares                         5.57%     5.93%     11.83%   23.30%     18.42%    13.01%      N/A     13.63%
DIVERSIFIED EQUITY FUND*                                       
  A Shares                         6.82%     6.79%     11.93%   20.75%     21.77%    16.18%      N/A     16.73%
  B Shares                         6.73%     6.57%     11.59%   19.86%       N/A       N/A       N/A     22.71%
  I Shares                         6.79%     6.76%     11.93%   20.76%     21.76%    16.18%      N/A     16.73%
GROWTH EQUITY FUND*                                            
  A Shares                         9.03%     6.95%      9.14%   14.11%     18.04%    15.69%     N/A     16.24%
  B Shares                         8.98%     6.75%      8.80%   13.28%       N/A       N/A      N/A     15.55%
  I Shares                         9.06%     6.95%      9.14%   14.11%     18.04%    15.69%     N/A     16.24%
LARGE COMPANY GROWTH FUND*                                     
  A Shares                          N/A       N/A        N/A      N/A        N/A       N/A       N/A       N/A
  B Shares                          N/A       N/A        N/A      N/A        N/A       N/A       N/A       N/A
  I Shares                         7.55%     7.73%     13.73%   21.93%     22.69%    14.42%    13.10%      N/A
SMALL COMPANY STOCK FUND                                       
  A Shares                        20.57%     7.06%      3.49%    6.34%     17.45%      N/A       N/A     14.88%
  B Shares                        20.41%     6.82%      3.18%    5.46%     16.55%      N/A       N/A     13.99%
  I Shares                        20.49%     7.02%      3.50%    6.30%     17.44%      N/A       N/A     14.73%
SMALL COMPANY GROWTH FUND*                                     
  I Shares                        10.45%     4.47%      3.70%    5.65%     21.96%    20.18%    16.82%      N/A
SMALL CAP OPPORTUNITIES FUND                                   
  A Shares                        11.78%     8.01%     10.23%   11.37%     27.54%      N/A       N/A     25.02%
  B Shares                        11.71%     7.81%      9.91%     N/A        N/A       N/A       N/A     25.35%
  I Shares                        11.77%     8.00%     10.22%   11.42%     27.56%      N/A       N/A     25.03%
CONTRARIAN STOCK FUND                                          
  A Shares                          N/A       N/A        N/A      N/A        N/A       N/A       N/A       N/A
  B Shares                          N/A       N/A        N/A      N/A        N/A       N/A       N/A       N/A
  I Shares                         9.98%    10.15%     16.52%   13.02%     12.48%      N/A       N/A     10.13%
INTERNATIONAL FUND*                                            
  A Shares                         6.13%     7.55%      8.42%   10.33%       N/A       N/A       N/A     14.81%
  B Shares                         6.00%     7.32%      8.19%    9.44%       N/A       N/A       N/A     13.97%
  I Shares                         6.07%     7.55%      8.52%   10.27%       N/A       N/A       N/A     10.44%
</TABLE>


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