NORWEST ADVANTAGE FUNDS, 485APOS, 1997-07-16

NORWEST ADVANTAGE FUNDS
485APOS, 1997-07-16

Previous: INDUSTRIAL TECHNOLOGIES INC, 8-K, 1997-07-16

Next: SEI INSTITUTIONAL MANAGED TRUST, 497, 1997-07-16

<PAGE>

As filed with the Securities and Exchange Commission on July 15, 1997
File No. 33-9645
File No. 811-4881

- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 43

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 45

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

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

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

Catherine S. Wooledge, Esq.
Forum Financial Services, Inc.
Two Portland Square, Portland, Maine 04101
(Name and Address of Agent for Service)

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

It is proposed that this filing will become effective:

immediately upon filing pursuant to Rule 485, paragraph (b)
- -------
on [ ] pursuant to Rule 485, paragraph (b)
- -------
60 days after filing pursuant to Rule 485, paragraph (a)(i)
- -------
X on October 1, 1997 pursuant to Rule 485, paragraph (a)(i)
- -------
75 days after filing pursuant to Rule 485, paragraph (a)(ii)
- -------
on [ ] pursuant to Rule 485, paragraph (a)(ii)
- -------
this post-effective amendment designates a new effective date for a
- -------
previously filed post-effective amendment

Registrant has registered an indefinite number of shares of beneficial interest
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Accordingly, no fee is payable herewith. Registrant filed
a Rule 24f-2 notice for its various portfolios with a May 31 fiscal year end on
July 26, 1996.
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
OF REGISTRANT ARE CURRENTLY STRUCTURED AS FEEDER FUNDS. THIS AMENDMENT INCLUDES
A MANUALLY EXECUTED SIGNATURE PAGE FOR THE REGISTRANTS WHOSE PORTFOLIOS ARE
MASTER FUNDS: SCHRODER CAPITAL FUNDS AND CORE TRUST (DELAWARE).

<PAGE>

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

PART A
(Prospectus offering I Shares)

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

Item 1. Cover Page Cover Page

Item 2. Synopsis Summary

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

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

Item 5. Management of the Fund Summary; Management

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

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

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

Item 8. Redemption or Repurchase Purchases and Redemptions of
Shares

Item 9. Pending Legal Proceedings Not Applicable

<PAGE>

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

PART A
(Prospectuses offering A Shares and B Shares)

FORM N-1A
ITEM NO. (CAPTION) LOCATION IN PROSPECTUS (CAPTION)
- --------- ---------------------- --------------------------------
Item 1. Cover Page Cover Page

Item 2. Synopsis Prospectus Summary

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

Item 5. Management of the Fund Prospectus Summary; Management

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

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

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

Item 8. Redemption or Repurchase How To Sell Shares

Item 9. Pending Legal Proceedings Not Applicable

<PAGE>

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

PART B

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

Item 10. Cover Page Cover Page

Item 11. Table of Contents Cover Page

Item 12. General Information
and History Prospectus

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

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

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

Item 16. Investment Advisory and Management
Other Services

Item 17. Brokerage Allocation and Portfolio Transactions
Other Practices

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

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

Item 20. Tax Status Taxation

Item 21. Underwriters Management - Administration
and Distribution

Item 22. Calculation of Performance Performance and Advertising
Data Data

Item 23 Financial Statements Other Information - Financial
Statements
<PAGE>

NORWEST ADVANTAGE FUNDS

OCTOBER 1, 1997

MONEY MARKET FUNDS

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

FIXED INCOME FUNDS

STABLE INCOME FUND
SHORT GOVERNMENT INCOME FUND
INTERMEDIATE GOVERNMENT INCOME FUND
DIVERSIFIED BOND FUND
INCOME FUND
TOTAL RETURN BOND FUND

TAX-FREE FIXED INCOME FUNDS

LIMITED TERM TAX-FREE FUND
TAX-FREE INCOME FUND
COLORADO TAX-FREE FUND
MINNESOTA INTERMEDIATE TAX-FREE FUND
MINNESOTA TAX-FREE FUND

BALANCED FUNDS

CONSERVATIVE BALANCED FUND
MODERATE BALANCED FUND
GROWTH BALANCED FUND
AGGRESSIVE BALANCED FUND

EQUITY FUNDS

INDEX FUND
INCOME EQUITY FUND
VALUGROWTH SM STOCK FUND
DIVERSIFIED EQUITY FUND
GROWTH EQUITY FUND
LARGE COMPANY GROWTH FUND
SMALL COMPANY STOCK FUND
SMALL COMPANY GROWTH FUND
DIVERSIFIED SMALL CAP FUND
SMALL CAP OPPORTUNITIES FUND
CONTRARIAN STOCK FUND
INTERNATIONAL FUND

Not FDIC Insured

<PAGE>

- --------------------------------------------------------------------------------
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: (i) five
MONEY MARKET FUNDS - Shares of Cash Investment Fund, Investor Shares of Ready
Cash Investment Fund, Shares of U.S. Government Fund, Treasury Fund and
Institutional and Investor Shares of Municipal Money Market Fund (the "Money
Market Funds"); (ii) I Shares of six FIXED INCOME FUNDS - Stable Income Fund,
Short Government Income Fund, Intermediate Government Income Fund, Diversified
Bond Fund, Income Fund and Total Return Bond Fund (the "Fixed Income Funds");
(iii) 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"); (iv) I
Shares of four BALANCED FUNDS - Conservative Balanced Fund, Moderate Balanced
Fund, Growth Balanced Fund and Aggressive Fund (the "Balanced Funds"); and (v) I
Shares of twelve EQUITY FUNDS - 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, Diversified Small Cap
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."

CASH INVESTMENT FUND, DIVERSIFIED BOND FUND, CONSERVATIVE BALANCED FUND,
MODERATE BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE FUND, DIVERSIFIED
EQUITY FUND, GROWTH EQUITY FUND and DIVERSIFIED SMALL CAP FUND each seeks to
achieve its investment objective by investing in various portfolios of another
registered open-end, management investment company, 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, 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 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

2
<PAGE>

ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

3
<PAGE>

TABLE OF CONTENTS

PAGE
1. SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. FINANCIAL HIGHLIGHTS. . . . . . . . . . . . . . . . . . . . . . . .
3. INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . . . . . .
Money Market Funds. . . . . . . . . . . . . . . . . . . . . . . . .
Fixed Income Funds. . . . . . . . . . . . . . . . . . . . . . . . .
Tax-Free Income Funds . . . . . . . . . . . . . . . . . . . . . . .
Balanced Funds. . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core Portfolio Descriptions . . . . . . . . . . . . . . . . . . . .
4. ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS. . . . . . .

- -4-
<PAGE>

General Information . . . . . . . . . . . . . . . . . . . . . . . .
Common Policies of the Funds. . . . . . . . . . . . . . . . . . . .
5. MANAGEMENT OF THE FUNDS . . . . . . . . . . . . . . . . . . . . . .
Investment Advisory Services. . . . . . . . . . . . . . . . . . . .
Management, Administration and Distribution Services. . . . . . . .
Shareholder Servicing and Custody . . . . . . . . . . . . . . . . .
Expenses of the Funds . . . . . . . . . . . . . . . . . . . . . . .
6. PURCHASES AND REDEMPTIONS OF SHARES . . . . . . . . . . . . . . . .
General Purchase Information. . . . . . . . . . . . . . . . . . . .
Purchase Procedures . . . . . . . . . . . . . . . . . . . . . . . .
General Redemption Information. . . . . . . . . . . . . . . . . . .
Redemption Procedures . . . . . . . . . . . . . . . . . . . . . . .
Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder Services* . . . . . . . . . . . . . . . . . . . . . . .
7. DIVIDENDS AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . .
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . .
Banking Law Matters . . . . . . . . . . . . . . . . . . . . . . . .
Determination of Net Asset Value. . . . . . . . . . . . . . . . . .
Performance Information . . . . . . . . . . . . . . . . . . . . . .
The Trust and Its Shares. . . . . . . . . . . . . . . . . . . . . .
Core and Gateway Structure. . . . . . . . . . . . . . . . . . . . .
APPENDIX A. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments, Investment Strategies and Risk Considerations. . . . .

- -5-
<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-four Funds are offered by this Prospectus: (i) five MONEY
MARKET FUNDS - shares of Cash Investment Fund, Institutional and Investor Shares
of Ready Cash Investment Fund, Shares of U.S. Government Fund, Treasury Fund and
Institutional and Investor Shares of Municipal Money Market Fund; (ii) I Shares
of six FIXED INCOME FUNDS - Stable Income Fund, Short Government Income Fund,
Intermediate Government Income Fund, Diversified Bond Fund, Income Fund and
Total Return Bond Fund; (iii) 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; (iv) I Shares
of four BALANCED FUNDS - Conservative Balanced Fund, Moderate Balanced Fund,
Growth Balanced Fund and Aggressive Fund; and (v) I Shares twelve EQUITY FUNDS -
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, 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. SHORT GOVERNMENT INCOME FUND seeks to provide income and safety of
principal by investing primarily in U.S. Government Securities. INTERMEDIATE
GOVERNMENT INCOME FUND seeks income and safety of principal by investing
primarily in U.S. Government Securities. The Fund seeks to moderate its
volatility by using a conservative approach in structuring the maturities of its
investment portfolio. DIVERSIFIED BOND FUND seeks to provide total return by
diversifying its investments among different fixed-income investment styles.
This objective is pursued through investments in several fixed income 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.

- -6-
<PAGE>

TAX-FREE FIXED INCOME FUNDS

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

BALANCED FUNDS

CONSERVATIVE BALANCED FUND seeks a combination of current income and capital
appreciation by diversifying investment of the Fund's assets among stocks, bonds
and other fixed income instruments through investment in several equity and
fixed income investment styles. Of the Balanced Funds, Conservative Balanced
Fund most emphasizes safety of principal through limited exposure to equity
securities. MODERATE BALANCED FUND seeks a combination of current income and
capital appreciation by diversifying investment of the Fund's assets among
stocks, bonds and other fixed income investments through investment in several
equity and fixed income investment styles. Moderate Balanced Fund is more
evenly balanced between fixed income and equity securities than the other
Balanced Funds. 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 FUND seeks to provide a combination of current
income and capital appreciation by diversifying investment of the Fund's assets
between stocks and bonds. Aggressive Fund has the largest equity component of
the Balanced Funds.

EQUITY FUNDS

INDEX FUND seeks to duplicate the return of the Standard & Poor's 500 Composite
Stock Price Index. INCOME EQUITY FUND seeks 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 to seek increased returns. LARGE COMPANY GROWTH FUND seeks long-term
capital appreciation by investing in large, high-quality domestic companies that
the investment adviser believes have superior growth potential. SMALL COMPANY
STOCK FUND seeks long-term capital appreciation. This objective is pursued by
investing primarily in the common stock of small and medium size

- -7-
<PAGE>

domestic companies that have a market capitalization well below that of the
average company in the Standard & Poor's 500 Composite Stock Price Index. 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. 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 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, SMALL CAP OPPORTUNITIES FUND and INTERNATIONAL 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 respective Core Portfolio. See "Other
Information -- Core and Gateway Structure." The Funds and the Core Portfolios
in which they invest are:

FUND CORE PORTFOLIO
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 Fund 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
International Fund International Portfolio

CASH INVESTMENT FUND, DIVERSIFIED BOND FUND, CONSERVATIVE BALANCED FUND,
MODERATE BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE FUND, DIVERSIFIED
EQUITY FUND, DIVERSIFIED SMALL CAP FUND and GROWTH EQUITY FUND each seeks to
achieve its investment objective by investing all of its investable assets in
various portfolios (each a "Core Portfolio") of two 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
CASH INVESTMENT FUND Money Market Portfolio
Prime Money Market Portfolio
DIVERSIFIED BOND FUND Positive Return Portfolio
Total Return Bond Portfolio
Managed Fixed Income Portfolio

- -8-
<PAGE>

- -9-
<PAGE>

FUND CORE PORTFOLIOS

CONSERVATIVE BALANCED FUND Money Market Portfolio
Stable Income Portfolio
Positive Return Portfolio
Total Return Bond Portfolio
Managed Fixed Income Portfolio
Each of the seven Core Portfolios in which
Diversified Equity Fund invests
MODERATE BALANCED FUND Stable Income Portfolio
Positive Return Portfolio
Total Return Bond Portfolio
Managed Fixed Income Portfolio
Each of the seven Core Portfolios in which
Diversified Equity Fund invests
GROWTH BALANCED FUND Positive Return Portfolio
Total Return Bond Portfolio
Managed Fixed Income Portfolio
Each of the seven Core Portfolios in which
Diversified Equity Fund Invests
AGGRESSIVE FUND Positive Return Portfolio
Total Return Bond Portfolio
Managed Fixed Income Portfolio
Each of the seven Core Portfolios in which
Diversified Equity Fund Invests
DIVERSIFIED EQUITY FUND Small Company Stock Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
Index Portfolio
Income Equity Portfolio
Large Company Growth Portfolio
International Portfolio
GROWTH EQUITY FUND Small Company Stock Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
Large Company Growth Portfolio
International Portfolio
DIVERSIFIED SMALL CAP FUND Small Cap Index Portfolio
Small Company Stock Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
Smith Small Cap Value Portfolio

The percentage of each of these Fund's (except Cash Investment Fund) 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, INTERMEDIATE
GOVERNMENT INCOME FUND, INCOME FUND, LIMITED TERM TAX-FREE FUND, TAX-FREE INCOME
FUND, SHORT GOVERNMENT 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.

- -10-
<PAGE>

MANAGEMENT OF THE FUNDS

ADVISORY SERVICES

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 other than Schroder U.S.
Smaller Companies Portfolio and International Portfolio. Norwest provides
investment advice to various institutions, pension plans and other accounts and,
as of December 31, 1996, with its affiliates, managed over $42.6 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 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, CONSERVATIVE BALANCED FUND, Moderate
Balanced Fund, Growth Balanced Fund, Aggressive Fund, Diversified Equity Fund,
Growth Equity Fund and Diversified Small Cap 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.

UNITED CAPITAL MANAGEMENT ("UCM"), a part of Norwest Bank Colorado, N.A., is the
investment subadviser of Total Return Bond Fund/Total Return Bond Portfolio and
Contrarian Stock Fund. It is also an investment subadviser of Diversified Bond
Fund, CONSERVATIVE BALANCED FUND, Moderate Balanced Fund, Growth Balanced Fund
and Aggressive Fund. UCM provides specialized investment advisory services to
various institutional pension accounts. See "Management -- Investment Advisory
Services."

GALLIARD CAPITAL MANAGEMENT, INC. ("Galliard"), an investment advisory
subsidiary of Norwest Bank, is the investment subadviser of Stable Income
Fund/Stable Income Portfolio, and Managed Fixed Income Portfolio. It is also an
investment subadviser of Diversified Bond Fund, Conservative Balanced Fund,
Moderate Balanced Fund, Growth Balanced Fund and Aggressive Fund. 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. See "Management -- Investment Advisory Services."

CRESTONE CAPITAL MANAGEMENT, INC. ("Crestone"), an investment advisory
subsidiary of Norwest Bank, is the investment subadviser of Small Company Stock
Fund/Small Company Stock Portfolio. It is also an investment subadviser of
Conservative Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund,
Aggressive Fund, Diversified Equity Fund and Growth Equity Fund. Crestone
provides investment advice regarding companies with small capitalization to
various clients, including institutional investors. See "Management --
Investment Advisory Services."

PEREGRINE CAPITAL MANAGEMENT, INC. ("Peregrine"), an investment advisory
subsidiary of Norwest Bank, is the 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. It is also an investment subadviser of Diversified Bond Fund,
Conservative Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund,
Aggressive Fund, Diversified Equity Fund and Growth Equity Fund. Peregrine
provides investment advisory services to corporate and public pension plans,
profit sharing plans, savings-investment plans and 401(k) plans. See
"Management -- Investment Advisory Services."

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. ("Schroder") is the investment
adviser of Schroder U.S. Smaller Companies Portfolio and International
Portfolio. It is also an investment subadviser of Conservative Balanced Fund,
Moderate Balanced Fund, Growth Balanced Fund, Aggressive Fund, Diversified
Equity Fund, Growth Equity Fund, Diversified Small Cap Fund, Small Cap
Opportunities Fund and International Fund. Schroder specializes in providing
international investment advice to various clients. See "Management --
Investment Advisory Services."

- -11-
<PAGE>

SMITH ASSET MANAGEMENT GROUP, L.P. ("Smith Group"), is the investment subadviser
of Smith Small Cap Value Portfolio. Schroder specializes in providing
international investment advice to various clients. See "Management --
Investment Advisory Services."

Norwest, UCM, Galliard, Crestone, Peregrine, Schroder and Smith (or Norwest and
a particular investment subadviser) 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, Limited
Liability Company ("FAS") provides administrative services for the Funds and
also serves as administrator of each Core Portfolio, except Schroder U.S.
Smaller Companies Portfolio, for which Forum serves as subadministrator.
Schroder Fund Advisors Inc. Serves as the administrator of Schroder U.S.
Smaller Companies 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 currently are declared and paid at least
annually by each Fund. Dividends of net investment income of each Money Market
Fund, [Short Government Income Fund], Income Fund, Total Return Bond Fund, and
each Tax Exempt Fixed Income Fund currently are declared daily and paid monthly.
Dividends are declared and paid monthly in the case of Stable Income Fund,
Intermediate Government Income Fund and Diversified Bond Fund. In the case of
Income Equity Fund, ValuGrowth Stock Fund, Small Company Stock Fund and
Contrarian Stock Fund dividends are declared and paid quarterly, and dividends
are declared annually in the case of all other Funds. 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.

- -12-
<PAGE>

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 will maintain a stable net asset value
of $1.00 per share and the amount of income earned by each 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." As noted under
"Financial Highlights," the portfolio turnover rate for certain Funds may from
time to time be high, resulting in increased brokerage costs or short-term
capital gains or losses. See "Additional Investment Policies and Risk
Considerations -- Common Policies of the Funds -- Portfolio Transactions."

Normally, the values of the FIXED INCOME FUNDS' and the TAX-EXEMPT FIXED INCOME
FUNDS' investments vary inversely with changes in interest rates. The
securities in which the Fixed Income Funds and Tax-Exempt Fixed Income Funds
invest are subject to "credit risk" relating to the financial condition of the
issuers of the securities. Each Fund (other than Minnesota Tax-Free Fund),
however, invests only in investment grade securities (those rated in the top
four grades by a nationally recognized statistical rating organization ("NRSRO")
such as Standard & Poor's). MINNESOTA 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."

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 CONSERVATIVE BALANCED FUND [STRATEGIC
ALLOCATION: INCOME], MODERATE BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE
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. See "Investment Objectives and Policies -- Equity Funds -- Small
Company Stock Fund (or Small Company Growth Fund, Diversified Small Cap Fund or
Small Cap Opportunities Fund) -- Additional 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
CONSERVATIVE BALANCED FUND [STRATEGIC ALLOCATION: INCOME], MODERATE BALANCED
FUND, GROWTH BALANCED FUND, AGGRESSIVE 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

- -13-
<PAGE>

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, CONSERVATIVE BALANCED FUND
[STRATEGIC ALLOCATION: INCOME], MODERATE BALANCED FUND, GROWTH BALANCED FUND,
AGGRESSIVE 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 --
Certain Risks of Investing in Core Portfolios."

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.

- -14-
<PAGE>

ANNUAL FUND OPERATING EXPENSES

(as a percentage of average daily net assets after applicable fee waivers and
expense reimbursements)
<TABLE>
<CAPTION>

GATEWAY CORE
INVESTMENT INVESTMENT TOTAL
ADVISORY OTHER ADVISORY OTHER OPERATING
CORE PORTFOLIOS FEES EXPENSES FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C> <C>
MONEY MARKET FUNDS
Cash Investment Fund N/A 0.24% 0.22% 0.02% 0.48%
Ready Cash Investment Fund
Institutional Shares N/A 0.24% 0.22% 0.02% 0.48%
Investor Shares N/A 0.46% 0.34% 0.02% 0.82%
U.S. Government Fund 0.15% 0.35% N/A N/A 0.50%
Treasury Fund 0.17% 0.29% N/A N/A 0.46%
Municipal Money Market Fund
Institutional Shares 0.29% 0.16% N/A N/A 0.45%
Investor Shares 0.29% 0.36% N/A N/A 0.65%
FIXED INCOME FUNDS (I SHARES)
Stable Income Fund N/A 0.29% 0.30% 0.06% 0.65%
Short 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% 0.30% 0.35% 0.05% 0.70%
Income Fund 0.40% 0.35% N/A N/A 0.75%
Total Return Bond Fund N/A 0.36% 0.35% 0.04% 0.75%
TAX-FREE FIXED INCOME FUNDS (I SHARES)
Limited Term Tax-Free Fund 0.50% 0.15% N/A N/A 0.65%
Tax-Free Income Fund 0.30% 0.30% N/A N/A 0.60%
Colorado Tax-Free Fund 0.30% 0.30% 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 0.30% 0.30% N/A N/A 0.60%

- -15-

<PAGE>

BALANCED FUNDS (I SHARES)
Conservative Balanced Fund [Strategic
Allocation: Income] 0.10% 0.30% 0.35% 0.05% 0.80%
Moderate Balanced Fund 0.13% 0.30% 0.40% 0.05% 0.88%
Growth Balanced Fund 0.14% 0.30% 0.44% 0.05% 0.93%
Aggressive Balanced Fund 0.25% 0.24% 0.46% 0.05% 1.00%
</TABLE>

- -16-
<PAGE>

GATEWAY CORE
INVESTMENT INVESTMENT TOTAL
ADVISORY OTHER ADVISORY OTHER OPERATING
CORE PORTFOLIOS FEES EXPENSES FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C> <C>

- -17-
<PAGE>

EQUITY FUNDS (I SHARES)
Index Fund N/A 0.09% 0.15% 0.01% 0.25%
Income Equity Fund N/A 0.34% 0.50% 0.01% 0.85%
ValuGrowth Stock Fund 0.79% 0.41% N/A N/A 1.20%
Diversified Equity Fund 0.17% 0.32% 0.48% 0.03% 1.00%
Growth Equity Fund 0.22% 0.29% 0.68% 0.06% 1.25%
Large Company Growth Fund N/A 0.34% 0.65% 0.01% 1.00%
Small Company Stock Fund N/A 0.26% 0.90% 0.04% 1.20%
Small Company Growth Fund N/A 0.33% 0.90% 0.02% 1.25%
Diversified Small Cap Fund 0.25% 0.25% 0.64% 0.06% 1.20%
Small Cap Opportunities Fund N/A 0.40% 0.53% 0.32% 1.25%
Contrarian Stock Fund 0.64% 0.56% N/A N/A 1.20%
International Fund N/A 0.95% 0.45% 0.10% 1.50%
</TABLE>

- -18-
<PAGE>

(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 amounts
incurred during the Funds' most recent fiscal year ended May 31, 1997,
except that the expenses for Short Government Income Fund, Minnesota
Intermediate Tax-Free Fund, Aggressive 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 Portfolios (each of which bears
expenses as noted under "Core Portfolios -- Investment Advisory Fees" and
"Core Portfolios -- 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, Conservative Balanced Fund [Strategic
Allocation: Income], Moderate Balanced Fund, Growth Balanced Fund,
Aggressive Fund, Diversified Equity Fund, Growth Equity Fund, and
Diversified Small Cap Fund "Investment Advisory Fees" reflects the Asset
Allocation Fee. For all Funds that invest in a Core Portfolio, "Core
Portfolios -- Investment Advisory Fees" reflects the investment advisory
fees incurred by the Core Portfolio(s) in which the Fund invests. Absent
estimated waivers, the "Investment Advisory Fee" for Municipal Money Market
Fund -- Institutional Shares, Municipal Money Market Fund -- Investor
Shares, Short Government Income Fund, Bond Fund, Income Fund, Tax-Free
Income Fund, Colorado Tax-Free Fund, Minnesota Intermediate Tax-Free Fund,
Minnesota Tax-Free Fund and ValuGrowth 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, Conservative Balanced Fund [Strategic Allocation:
Income], Moderate Balanced Fund, Growth Balanced Fund, Aggressive Fund,
Diversified Equity Fund, Growth Equity Fund and Diversified Small Cap Fund
would be 0.25%. The "Core Portfolios -- Investment Advisory Fees" paid by
each of Diversified Bond Fund, CONSERVATIVE Balanced FUND [Strategic
Allocation: Income], Moderate Balanced Fund, Growth Balanced Fund,
Aggressive Fund, 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%, which is the same level
as the Fund's total operating expenses prior to May 31, 1997. 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 combined operating expenses through
May 31, 1998 at or below the following amounts: Ready Cash Investment
Fund -- Institutional Shares, 0.48%, and Investor Shares, 0.82%; Total
Return Bond Fund I Shares, 0.75% and Small Company Stock Fund I Shares,
1.20%. 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, Conservative Balanced Fund [Strategic Allocation:
Income], 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. See "Management -- Expenses of
the Funds."

- -19-
<PAGE>

(4) Absent estimated expense reimbursements and fee waivers, the expenses of
Cash Investment Fund, Ready Cash Investment Fund -- Institutional Shares
and Investor Shares, U.S. Government Fund, Treasury Fund, Municipal Money
Market Fund -- Institutional Shares, Municipal Money Market Fund --
Investor Shares, Stable Income Fund, Short 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, Conservative Balanced Fund [Strategic Allocation: Income],
Moderate Balanced Fund, Growth Balanced Fund, Aggressive 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," 0.27%, 0.27%, 0.48%, 0.36%, 0.39%, 0.38%, 0.54%, ___%, 0.46%,
0.83%, ___%, 0.39%, 0.56%, 0.51%, 0.65%, 0.56%, 0.63%, 0.63%, 0.81%, 0.39%,
0.37%, 0.37%, ___%, 0.31%, 0.52%, 0.53%, 0.37%, 0.37%, 0.38%, 0.50%, 0.29%,
___%, 0.98%, 0.66% and 0.89%, respectively; and "Total Operating Expenses,"
0.63%, 0.63%, 0.93%, 0.51%, 0.56%, 0.73%, 0.88%, ___%, 0.93%, 1.16%, ___%,
1.14%, 1.06%, 0.99%, 1.15%, 1.06%, 1.13%, 1.13%, 1.31%, 1.15%, 1.17%,
1.20%, ___%, 0.58%, 1.13%, 1.33%, 1.24%, 1.45%, 1.14%, 1.54%, 1.31%, ___%,
2.29%, 1.46% and 1.54%, respectively. Absent estimated expense
reimbursements and fee waivers, "Core Portfolios - Other Expenses" of Cash
Investment Fund, Ready Cash Investment Fund Institutional and Investor
Shares, Stable Income Fund, Diversified Bond Fund, Total Return Bond Fund,
Conservative Balanced Fund [Strategic Allocation: Income], Moderate
Balanced Fund, Growth Balanced Fund, Aggressive 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 0.12%, 0.12%, 0.12%, ___%, 0.16%, 0.15%, 0.14%, 0.16%, 0.15%,
0.15%, ___%, 0.12%, 0.12%, 0.13%, 0.16%, 0.11%, 0.14%, 0.12%, ___%, 0.71%
and 0.20%, respectively. "Other Expenses" include transfer agency fees
payable to Norwest of 0.25% (0.10% in the case of Municipal Money Market
Fund -- Institutional Shares and 0.20% in the case of Cash Investment
Fund). 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.

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
MONEY MARKET FUNDS
Cash Investment Fund 5 15 27 60
Ready Cash Investment Fund
Institutional Shares 5 15 26 60
Investor Shares 8 26 46 101
U.S. Government Fund 5 16 28 63
Treasury Fund 5 15 26 58
Municipal Money Market Fund
Institutional Shares 5 14 25 57
Investor Shares 7 21 36 81

- -20-
<PAGE>

FIXED INCOME FUNDS (I SHARES)
Stable Income Fund 7 21 36 81
Short Government Income Fund
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

- -21-
<PAGE>

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

BALANCED FUNDS (I SHARES)
Conservative Balanced Fund [Strategic
Allocation: Income] 8 26 44 99
Moderate Balanced Fund 9 28 49 108
Growth Balanced Fund 9 30 51 114
Aggressive 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 12 38 66 145
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
Small Cap Opportunities Fund 13 40 69 151
Contrarian Stock Fund 12 38 66 145
International Fund 15 47 82 179

- -22-
<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 periods shown. Information for the periods ended May 31, 1994, 1995,
1996 and 1997 and for the period ended October 31, 1995 have been audited by
[____________] 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 Annual Report. These financial statements are incorporated by
reference into the SAI. Further information about each Fund's performance is
contained in the Annual Report which may be obtained from the Trust without
charge.

Net Realized
and Dividends Distribution
Beginning Net Net Unrealized from Net from Net
MONEY MARKET FUNDS Asset Value Investment Gain (Loss) Investment Investment
Per Share Income (Loss) on Investments Income Income

<S> <C> <C> <C> <C> <C>
CASH INVESTMENT FUND
June 1, 1996 to May 31, 1997 $1.00
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
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) --

</TABLE>

Ratio to Average Net Assets
-------------------------------------------
Ending
Net Asset Net
MONEY MARKET FUNDS Capital Value Per Investment Net Gross
Contribution Share Income Expenses Expenses(a)

<S> <C> <C> <C> <C> <C>
CASH INVESTMENT FUND
June 1, 1996 to May 31, 1997 $1.00
June 1, 1995 to May 31,1996 -- $1.00 5.36% 0.48% 0.49%
June 1, 1994 to May 31, 1995 -- $1.00 4.87% 0.48% 0.50%
June 1, 1993 to May 31, 1994 -- $1.00 3.11% 0.49% 0.49%
June 1, 1992 to May 31, 1993 -- $1.00 3.29% 0.50% 0.51%
December 1, 1991 to May 31, 1992 -- $1.00 4.23%(b) 0.50%(b) 0.56%(b)
December 1, 1990 to November 30, 1991 -- $1.00 6.11% 0.51%(b) 0.54%
December 1, 1989 to November 30, 1990 -- $1.00 7.92% 0.45% 0.57%
December 1, 1988 to November 30, 1989 -- $1.00 8.81% 0.45% 0.64%
December 1, 1987 to November 30, 1988 -- $1.00 7.00% 0.43% 0.74%
October 14, 1987 to November 30, 1987 -- $1.00 7.16%(b) 0.45%(b) 1.09%(b)
READY CASH INVESTMENT FUND- INVESTOR SHARES
June 1, 1996 to May 31, 1997 $1.00
June 1, 1995 to May 31,1996 -- $1.00 5.02% 0.82% 0.87%
June 1, 1994 to May 31, 1995 -- $1.00 4.64% 0.82% 0.91%
June 1, 1993 to May 31, 1994 -- $1.00 2.70% 0.82% 0.92%
June 1, 1992 to May 31, 1993 -- $1.00 3.04% 0.82% 0.94%
December 1, 1991 to May 31, 1992 -- $1.00 4.01%(b) 0.82%(b) 0.93%(b)
December 1, 1990 to November 30, 1991 -- $1.00 5.81% 0.82% 0.96%
December 1, 1989 to November 30, 1990 -- $1.00 7.56% 0.82% 0.97%
December 1, 1988 to November 30, 1989 -- $1.00 8.51% 0.81% 0.99%
January 20, 1988 to November 30, 1988 -- $1.00 7.11%(b) 0.77%(b) 1.13%(b)

</TABLE>

Net Assets at
MONEY MARKET FUNDS Total End of Period
Return (000's Omitted)

<S> <C> <C>
CASH INVESTMENT FUND
June 1, 1996 to May 31, 1997
June 1, 1995 to May 31,1996 5.50% $1,739,549
June 1, 1994 to May 31, 1995 4.96% $1,464,304
June 1, 1993 to May 31, 1994 3.16% $1,381,402
June 1, 1992 to May 31, 1993 3.36% $1,944,948
December 1, 1991 to May 31, 1992 4.29%(b) $1,292,196
December 1, 1990 to November 30, 1991 6.31% $1,004,979
December 1, 1989 to November 30, 1990 8.22% $747,744
December 1, 1988 to November 30, 1989 9.22% $662,698
December 1, 1987 to November 30, 1988 7.32% $316,349
October 14, 1987 to November 30, 1987 7.40%(b) $53,951
READY CASH INVESTMENT FUND- INVESTOR SHARES
June 1, 1996 to May 31, 1997
June 1, 1995 to May 31,1996 5.17% $473,879
June 1, 1994 to May 31, 1995 4.62% $268,603
June 1, 1993 to May 31, 1994 2.74% $164,138
June 1, 1992 to May 31, 1993 3.08% $162,585
December 1, 1991 to May 31, 1992 4.05%(b) $176,378
December 1, 1990 to November 30, 1991 5.98% $183,775
December 1, 1989 to November 30, 1990 7.83% $166,911
December 1, 1988 to November 30, 1989 8.86% $144,117
January 20, 1988 to November 30, 1988 6.97%(b) $46,736

</TABLE>

- -23-
<PAGE>

Net Realized
and Dividends Distribution
Beginning Net Net Unrealized from Net from Net
MONEY MARKET FUNDS Asset Value Investment Gain (Loss) Investment Investment Capital
Per Share Income (Loss) on Investments Income Income Contribution

<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT FUND
June 1, 1996 to May 31, 1997 $1.00
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
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
INVESTOR SHARES
June 1, 1996 to May 31, 1997 $1.00
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 $1.00 $0.042 -- ($0.042) -- --
INSTITUTIONAL SHARES
June 1, 1996 to May 31, 1997 $1.00
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 $1.00 $0.019 -- ($0.019) -- --
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

* Unaudited
(a) During each period, various fees and expenses were waived and reimbursed.
The ratio of Gross Expenses to Average Net Assets reflects the expense
ratio in the absence of any waivers and reimbursements.
(b) Annualized.
(c) The total return for 1995 includes the effect of a capital contribution
from the Advisor. Without the capital contribution,

Ratio to Average Net Assets
------------------------------------------
Ending
Net Asset Net Net Assets at
MONEY MARKET FUNDS Value Per Investment Net Gross Total End of Period
Share Income Expenses Expenses(a) Return (000's Omitted)

<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT FUND
June 1, 1996 to May 31, 1997 $1.00
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%(b) 0.45%(b) 0.61%(b) 4.07%(b) $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%(b) 0.42%(b) 0.73% 7.13%(b) $254,104
November 16, 1987 to November 30, 1987 $1.00 6.89%(b) 0.00%(b) 2.94%(b) 7.35%(b) $4,343
TREASURY FUND
June 1, 1996 to May 31, 1997 $1.00
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%(b) 0.47%(b) 0.59%(b) 4.07%(b) $374,492
December 3, 1990 to November 30, 1991 $1.00 5.62%(b) 0.31%(b) 0.66%(b) 6.02%(b) $354,200
MUNICIPAL MONEY MARKET FUND
INVESTOR SHARES
June 1, 1996 to May 31, 1997 $1.00
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%(c) $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%(b) 0.63%(b) 0.96%(b) 2.89%(b) $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 $1.00 4.64%(b) 0.62%(b) 1.20%(b) 4.76%(b) $8,963
INSTITUTIONAL SHARES
June 1, 1996 to May 31, 1997 $1.00
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%(c) $278,953
August 3, 1993 to May 31, 1994 $1.00 2.33%(b) 0.45%(b) 0.77%(b) 2.34%(b) $190,356
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

- -24-
<PAGE>

Net Realized
and Dividends Distribution Ending
Beginning Net Net Unrealized from Net from Net Net Asset
FIXED INCOME FUNDS Asset Value Investment Gain (Loss) Investment Realized Value Per
Per Share Income(Loss) on Investments Income Gain Share

<S> <C> <C> <C> <C> <C> <C>
STABLE INCOME FUND - I SHARES
June 1, 1996 to May 31, 1997
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 - I SHARES
June 1, 1996 to May 31, 1997
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(e) $11.11 $0.93 $0.36 -- -- $12.40
DIVERSIFIED BOND FUND - I SHARES
June 1, 1996 to May 31, 1997
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 - I SHARES
June 1, 1996 to May 31, 1997
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 - I SHARES
June 1, 1996 to May 31, 1997
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
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(a) During each period, various fees and expenses were waived and reimbursed.
The ratio of Gross Expenses to Average Net Assets reflects the expense ratio in
the absence of any waivers and reimbursements.
(b) Amount represents the average commission per share paid to brokers on the
purchase or sale of portfolio securities.
(c) Annualized.
(d) Intermediate Government Income Fund declared a stock split as of the close
of business on March 22, 1996 to the record holders of shares of beneficial
interest of the Fund as of the close of business on March 22, 1996.
Each shareholder of the Fund four additional shares of beneficial interest
of the Fund for each outstanding share of beneficial interest of the Fund held
by the shareholder on that date.

Ratio to Average Net Assets
---------------------------------------------
Net Portfolio Average Net Assets at
FIXED INCOME FUNDS Investment Net Gross Total Turnover Commission End of Period
Income Expenses Expenses(a) Return Rate Rate (b) (000's Omitted)

<S> <C> <C> <C> <C> <C> <C> <C>
STABLE INCOME FUND - I SHARES
June 1, 1996 to May 31, 1997
November 1, 1995 to May 31, 1996 5.74%(c) 0.65%(c) 0.92%(c) 2.97% 109.95% N/A $83,404
November 11, 1994 to October 31, 1995 5.91%(c) 0.65%(c) 0.98%(c) 7.20% 115.85% N/A $48,087
INTERMEDIATE GOVERNMENT INCOME FUND - I SHARES
June 1, 1996 to May 31, 1997
November 1, 1995 to May 31, 1996 6.71%(c) 0.71%(c) 1.17%(c) 0.60% 74.64% N/A $399,324
November 11, 1994 to October 31, 1995(e) 7.79%(c) 0.68%(c) 0.93%(c) 11.58% 240.90% N/A $50,213
DIVERSIFIED BOND FUND - I SHARES
June 1, 1996 to May 31, 1997
November 1, 1995 to May 31, 1996 6.78%(c) 0.70%(c) 0.77%(c) 0.22% 118.92% N/A $167,159
November 11, 1994 to October 31, 1995 5.87%(c) 0.67%(c) 0.82%(c) 11.32% 58.90% N/A $171,453
INCOME FUND - I SHARES
June 1, 1996 to May 31, 1997
June 1, 1995 to May 31, 1996 $0.06 0.75% 1.06% 2.58% 270.17% N/A $271,157
June 1, 1994 to May 31, 1995 $0.07 0.75% 1.06% 8.49% 98.83% N/A $109,994
August 2, 1993 to May 31, 1994 6.75%(c) 0.61%(c) 1.09%(c) (4.04%)(c) 26.67% N/A $93,665
TOTAL RETURN BOND FUND - I SHARES
June 1, 1996 to May 31, 1997
June 1, 1995 to May 31, 1996 $0.07 0.75% 1.07% 3.41% 77.49% N/A $120,767
June 1, 1994 to May 31, 1995 $0.07 0.71% 1.17% 9.43% 35.19% N/A $96,199
December 31, 1993 to May 31, 1994 6.81%(c) 0.46%(c) 2.10%(c) (4.62%)(c) 37.50% N/A $11,694
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

- -25-
<PAGE>

Net Realized
and Dividends Distribution Ending
TAX-FREE FIXED Beginning Net Net Unrealized from Net from Net Net Asset
INCOME FUNDS Asset Value Investment Gain (Loss) Investment Realized Value Per
Per Share Income (Loss) on Investments Income Gain Share
LIMITED TAX-FREE FUND - I SHARES
<S> <C> <C> <C> <C> <C> <C>
October 1, 1996 to May 31, 1997
TAX-FREE INCOME FUND - I SHARES
June 1, 1996 to May 31, 1997
June 1, 1995 to May 31, 1996 $9.82 $0.55 ($0.040) ($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 ($0.470) ($0.47) ($0.07) $9.60
COLORADO TAX-FREE FUND - I SHARES
June 1, 1996 to May 31, 1997
June 1, 1995 to May 31, 1996 $9.90 $0.53 ($0.010) ($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 ($0.520) ($0.39) ($0.01) $9.69
MINNESOTA FAX-FREE FUND - I SHARES
June 1, 1996 to May 31, 1997
June 1, 1995 to May 31, 1996 $10.45 $0.56 ($0.150) ($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 ($0.390) ($0.43) ($0.19) $10.16

Ratio to Average Net Assets
---------------------------

TAX-FREE FIXED Net Portfolio Average Net Assets at
INCOME FUNDS Investment Net Gross Total Turnover Commission End of Period
Income Expenses Expenses(a) Return Rate Rate (b) (000's Omitted)
LIMITED TAX-FREE FUND - I SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
October 1, 1996 to May 31, 1997
TAX-FREE INCOME FUND - I SHARES
June 1, 1996 to May 31, 1997
June 1, 1995 to May 31, 1996 $0.06 0.32% 1.06% 5.29% 126.20% N/A $276,159
June 1, 1994 to May 31, 1995 $0.06 0.60% 1.05% 8.42% 130.90% N/A $94,454
August 2, 1993 to May 31, 1994 5.71%(c) 0.60%(c) 1.10%(c) (0.21%)(c) 116.54% N/A $102,084
COLORADO TAX-FREE FUND - I SHARES
June 1, 1996 to May 31, 1997
June 1, 1995 to May 31, 1996 $0.05 0.30% 1.13% 5.35% 171.41% N/A $24,074
June 1, 1994 to May 31, 1995 $0.05 0.30% 1.16% 7.47% 47.88% N/A $24,539
August 23, 1993 to May 31, 1994 5.03%(c) 0.11%(c) 1.21%(c) 0.90%(c) 40.92% N/A $15,153
MINNESOTA FAX-FREE FUND - I SHARES
June 1, 1996 to May 31, 1997
June 1, 1995 to May 31, 1996 $0.05 0.51% 1.30% 3.97% 77.10% N/A $3,988
June 1, 1994 to May 31, 1995 $0.05 0.48% 1.58% 8.44% 139.33% N/A $1,799
August 2, 1993 to May 31, 1994 4.90%(c) 0.61%(c) 1.54%(c) 0.29%(c) 84.23% N/A $872
- -------------------------------------------------------------------------------------------------------------------------------

</TABLE>
(a) During each period, various fees and expenses were waived and reimbursed.
The ratio of Gross Expenses to Average Net Assets reflects the expense
ratio in the absence of any waivers and reimbursements.
(b) Amount represents the average commission per share paid to brokers on the
purchase or sale of portfolio securities.
(c) Annualized.

- -26-
<PAGE>

Net Realized
and Dividends Distribution Ending
Beginning Net Net Unrealized from Net from Net Net Asset
BALANCED FUNDS Asset Value Investment Gain (Loss) Investment Realized Value Per
Per Share Income (Loss) on Investments Income Gain Share
CONSERVATIVE BALANCED FUND
[STRATEGIC ALLOCATION: INCOME] -
I SHARES
<S> <C> <C> <C> <C> <C> <C>
June 1, 1996 to May 31, 1997
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 - I SHARES
June 1, 1996 to May 31, 1997
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 - I SHARES
June 1, 1996 to May 31, 1997
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

Ratio to Average Net Assets
---------------------------

Net Portfolio Average Net Assets at
BALANCED FUNDS Investment Net Gross Total Turnover Commission End of Period
Income Expenses Expenses(a) Return Rate Rate (b) (000's Omitted)
CONSERVATIVE BALANCED FUND
[STRATEGIC ALLOCATION: INCOME] -
I SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
June 1, 1996 to May 31, 1997
November 1, 1995 to May 31, 1996 4.65%(c) 0.82%(c)(d) 0.97%(c)(d) 5.14% 56.47% 0.0648 $146,950
November 11, 1994 to October 31, 1995 4.67%(c) 0.82%(c)(d) 1.03%(c)(d) 12.48% 65.53% N/A $136,710
MODERATE BALANCED FUND - I SHARES
June 1, 1996 to May 31, 1997
November 1, 1995 to May 31, 1996 3.95%(c) 0.90%(c)(d) 1.04%(c)(d) 7.03% 52.71% 0.0658 $398,005
November 11, 1994 to October 31, 1995 3.76%(c) 0.92%(c)(d) 1.11%(c)(d) 15.01% 62.08% N/A $373,998
GROWTH BALANCED FUND - I SHARES
June 1, 1996 to May 31, 1997
November 1, 1995 to May 31, 1996 2.66%(c) 0.98%(c)(d) 1.16%(c)(d) 10.87% 38.78% 0.0696 $484,641
November 11, 1994 to October 31, 1995 2.63%(c) 0.99%(c)(d) 1.23%(c)(d) 18.38% 41.04% N/A $374,892
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) During each period, various fees and expenses were waived and reimbursed.
The ratio of Gross Expenses to Average Net Assets reflects the expenses
ratio in the absence of any waivers and reimbursements and, in the case of
CONSERVATIVE Balanced FUND [Strategic Allocation: Income],
Moderate Balanced Fund and Growth Balanced Fund, the absence of waivers and
reimbursements from the Core Portfolio in which the Fund invests.
(b) Amount 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
invests -- Index Portfolio, Small Company Portfolio and International
Portfolio II of Core Trust (Delaware) and Schroder U.S. Companies Portfolio
of Schroder Capital Funds.

- -27-
<PAGE>

<TABLE>
<CAPTION>
Net Realized
and Dividends Distribution Ending
Beginning Net Net Unrealized from Net from Net Net Asset
EQUITY FUNDS Asset Value Investment Gain (Loss) Investment Realized Value Per
Per Share Income (Loss) on Investments Income Gain Share
INCOME EQUITY FUND - I SHARES
<S> <C> <C> <C> <C> <C> <C>
June 1, 1996 to May 31, 1997
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 SM STOCK FUND - I SHARES
June 1, 1996 to May 31, 1997
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
INDEX FUND - I SHARES
June 1, 1996 to May 31, 1997
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
DIVERSIFIED EQUITY FUND - I SHARES
June 1, 1996 to May 31, 1997
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 - I SHARES
June 1, 1996 to May 31, 1997
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 ($0.020) $4.71 -- -- $26.97
LARGE COMPANY GROWTH FUND - I SHARES
June 1, 1996 to May 31, 1997
November 1, 1995 to May 31, 1996 $23.59 ($0.040) $3.64 -- ($0.22) $26.97
November 11, 1994 to October 31, 1995 $18.50 ($0.050) $5.14 -- -- $23.59
SMALL COMPANY STOCK FUND - I SHARES
June 1, 1996 to May 31, 1997
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 ($0.200) ($0.08) -- $9.80

Ratio to Average Net Assets
---------------------------

Net Portfolio Average Net Assets at
EQUITY FUNDS Investment Net Gross Total Turnover Commission End of Period
Income Expenses Expenses(a) Return Rate Rate (b) (000's Omitted)
INCOME EQUITY FUND - I SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
June 1, 1996 to May 31, 1997
November 1, 1995 to May 31, 1996 2.72%(d) 0.86%(d) 1.13%(d) 18.14% 0.69% 0.0942 $230,831
November 11, 1994 to October 31, 1995 2.51%(d) 0.85%(d) 1.12%(d) 27.09% 7.03% N/A $49,000
VALUGROWTHS M STOCK FUND - I SHARES
June 1, 1996 to May 31, 1997
June 1, 1995 to May 31, 1996 $0.01 1.20% 1.32% 21.72% 105.43% 0.0603 $156,553
June 1, 1994 to May 31, 1995 $0.01 1.20% 1.33% 10.67% 63.82% N/A $136,589
August 2, 1993 to May 31, 1994 0.92%(d) 1.20%(d) 1.39%(d) 2.99%(d) 86.07% N/A $113,061
INDEX FUND - I SHARES
June 1, 1996 to May 31, 1997
November 1, 1995 to May 31, 1996 2.25%(d) 0.31%(d) 0.57%(d) 16.27% 9.12% 0.0517 $249,644
November 11, 1994 to October 31, 1995 2.12%(d) 0.50%(d) 0.64%(d) 26.93% 14.48% N/A $186,197
DIVERSIFIED EQUITY FUND - I SHARES
June 1, 1996 to May 31, 1997
November 1, 1995 to May 31, 1996 1.00%(d) 1.06%(d)(f) 1.30%(d)(f) 16.38% 5.76% 0.0671 $907,223
November 11, 1994 to October 31, 1995 1.01%(d) 1.09%(d)(f) 1.37%(b)(f) 23.95% 10.33% N/A $711,111
GROWTH EQUITY FUND - I SHARES
June 1, 1996 to May 31, 1997
November 1, 1995 to May 31, 1996 0.01%(d) 1.35%(d)(f) 1.85%(d)(f) 15.83% 7.39% 0.0617 $735,728
November 11, 1994 to October 31, 1995 (0.11%)(d) 1.38%(d)(f) 1.92%(d)(f) 21.10% 8.90% N/A $564,004
LARGE COMPANY GROWTH FUND - I SHARES
June 1, 1996 to May 31, 1997
November 1, 1995 to May 31, 1996 (0.30%)(d) 1.00%(d) 1.13%(d) 15.40% 16.93% 0.0616 $82,114
November 11, 1994 to October 31, 1995 (0.23%)(d) 1.00%(d) 1.20%(d) 27.51% 31.60% N/A $63,567
SMALL COMPANY STOCK FUND - I SHARES
June 1, 1996 to May 31, 1997
June 1, 1995 to May 31, 1996 $0.00 1.21% 1.60% 38.30% 134.53% 0.0555 $125,986
June 1, 1994 to May 31, 1995 $0.01 0.52% 1.82% 10.13% 68.09% N/A $54,240
December 31, 1993 to May 31, 1994 2.03%(d) 0.20%(d) 4.33%(d) (2.93%)(d) 14.98% N/A $9,251

</TABLE>

- -28-
<PAGE>

Ratio to Average Net Assets
---------------------------

Net Portfolio Average Net Assets at
EQUITY FUNDS Investment Net Gross Total Turnover Commission End of Period
Income Expenses Expenses(a) Return Rate Rate (b) (000's Omitted)
SMALL COMPANY GROWTH FUND - I SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
June 1, 1996 to May 31, 1997
November 1, 1995 to May 31, 1996 (0.41%)(d) 1.25%(d) 1.29%(d) 21.43% 62.06% 0.0583 $378,546
November 11, 1994 to October 31, 1995 (0.47%)(d) 1.25%(d) 1.35%(d) 37.07% 106.55% N/A $278,058
SMALL CAP OPPORTUNITIES FUND - I SHARES
August 15, 1996 to May 31, 1997
CONTRARIAN STOCK FUND - I SHARES
June 1, 1996 to May 31, 1997
June 1, 1995 to May 31, 1996 $0.01 1.20% 1.45% 10.90% 28.21% 0.0467 $36,020
June 31, 1994 to May 31, 1995 $0.01 1.12% 1.57% 13.52% 30.32% N/A $45,832
December 31, 1993 to May 31, 1994 1.82%(d) 0.62%(d) 3.52%(d) (5.35%)(d) 2.67% N/A $4,548
INTERNATIONAL FUND - I SHARES
June 1, 1996 to May 31, 1997
November 1, 1995 to May 31, 1996 0.60%(d) 1.50%(d)(f) 1.52%(d)(f) 12.31% N/A N/A $143,643
November 11, 1994 to October 31, 1995 0.54%(d) 1.50%(d)(f) 1.66%(d)(f) 4.11% N/A N/A $91,401
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>
(a) During each period, various fees and expenses were waived and reimbursed.
The ratio of Gross Expenses to Average Net Assets reflects the expense ratio
in the absence of any waivers and reimbursements and, in the case of
Diversified Equity Fund, Growth Equity Fund, Small Cap Opportunities Fund
and International Fund, the absence of waivers and reimbursements from the
Core Portfolios in which the Fund invests.
(b) Amount 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
invests -- Index Portfolio, Small Company Portfolio and International
Portfolio II of Core Trust (Delaware and Schroder U.S. Companies
Portfolio of Schroder Capital Funds.

- -29-
<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 (as described below) 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

-30-
<PAGE>

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.

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.

-31-
<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. "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.

-32-
<PAGE>

Although the Fund invests primarily in municipal securities, it is anticipated
that a substantial amount of the securities held by the Fund will be supported
by credit and liquidity enhancements, such as letters of credit (which are not
covered by federal deposit insurance) or put or demand features, of third party
financial institutions, generally domestic and foreign banks. Accordingly, the
credit quality and liquidity of the Fund will be dependent in part upon the
credit quality of the banks supporting the Fund's investments. This will result
in exposure to risks pertaining to the banking industry, including the foreign
banking industry. See "Investment Objectives and Policies -- Money Market Funds
- --Cash Investment Fund and Ready Cash Investment Fund" above. Brokerage firms
and insurance companies also provide certain liquidity and credit support. The
Fund's policy is to purchase municipal securities with third party credit or
liquidity support only after 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 defensive position and invest without
limit in cash or cash equivalents the interest income on which is subject to
federal income taxation, which include: (i) short-term U.S. Government
Securities; (ii) certificates of deposit, Bankers' acceptances and interest-

-33-
<PAGE>

bearing savings deposits; (iii) commercial paper; (iv) repurchase agreements
covering any of the preceding securities; and (v) to the extent permitted by the
Investment Company Act of 1940, money market mutual funds.

FIXED INCOME FUND

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" below. Each Fixed Income Fund, except Intermediate
Government Income Fund, may invest in foreign issuers. These investments may
involve certain risks. See "Investment Policies -- Equity Funds --
International Fund -- Foreign Investment Risks and Considerations."

STABLE INCOME FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to maintain
safety of principal while providing low-volatility total return. 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 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" below.

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

-34-
<PAGE>

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..

SHORT 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. 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" below.

-35-
<PAGE>

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

-36-
<PAGE>

so long as the Fund is obligated under the option, it owns an offsetting
position in the underlying security or futures contract or maintains a
segregated account of liquid 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: (i) Total Return Bond style; (ii) Managed Fixed Income
style; and (iii) 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 of the Fund's assets among the Core Portfolios.

CURRENT RANGE OF
ALLOCATION INVESTMENT
Total Return Bond Portfolio 33 1/3% 30% - 37%
Managed Fixed Income Portfolio 33 1/3% 30% - 37%
Positive Return Portfolio 33 1/3% 30% - 37%

TOTAL FUND ASSETS 100%

Consistent with the Fund's investment objective and policies and under the
general supervision of the Trust's Board of Trustees, 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 Trust's Board of Trustees 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.

-37-
<PAGE>

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 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 guaranteed investment
contracts. The Fund may invest in securities that are restricted as to
disposition under the federal securities laws (sometimes referred to as "private
placements" or "restricted securities").

To limit credit risk, the Fund will only purchase securities that are rated, at
the time of purchase, within the four highest rating categories assigned by an
NRSRO, such as Moody's Investors Service ("Moody's"), Standard & Poor's or Fitch
Investors Services, L.P., or which are unrated and determined by 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 will invest primarily in securities with maturities (or average life in
the case of mortgage-backed and similar securities) ranging from short-term
(including overnight) to 30 years, and it is anticipated that the Fund's
portfolio of securities will have an average dollar-weighted maturity of between
3 and 15 years. The Fund's portfolio of securities will normally have a
duration of between 70% and 130% of the duration of the Lipper Corporate A-Rated
Debt Average. Duration is a measure of a debt security's average life that
reflects the present value of the security's cash flow and, accordingly, is a
measure of price sensitivity to interest rate changes ("duration risk").
Because earlier payments on a debt security have a higher present value,
duration of a security, except a zero-coupon security, will be less than the
security's stated maturity. The Fund may invest in debt securities registered
and sold in the United States by foreign issuers (Yankee Bonds) and debt
securities sold outside the United States by foreign or U.S. issuers
(Euro-bonds). The Fund intends to restrict its purchases of debt securities to
issues denominated and payable in United States dollars. For a description of
the risks involved in investments in foreign securities, see "Investment
Objectives and Policies -- Equity Funds -- International Fund -- Investment
Policies -- Foreign Investment Considerations and Risk Factors." The Fund may
invest in guaranteed investment contracts ("GICs"). .A GIC is an arrangement
with an insurance company under which the Fund contributes cash to the insurance
company's general account and the insurance company credits the contribution
with interest on a monthly basis. The interest rate is tied to a specified
market index and is guaranteed by the insurance company not to be less than a
certain minimum rate. The Fund will purchase a GIC only when Norwest has
determined that the GIC presents minimal credit risks to the Fund and is of
comparable quality to instruments that the Fund may purchase.

-38-
<PAGE>

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.

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 Services, 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" below.

-39-
<PAGE>

LIMITED TERM TAX-FREE FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to produce
current income exempt from federal income taxes. The Fund pursues this
objective by investing primarily in a portfolio of investment grade fixed income
securities the interest on which is free from federal income tax and maintains
an average dollar weighted portfolio maturity of between 1 and 5 years.

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" below, 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 shorter maturity
is generally associated with a lower level of volatility in the market value of
a security. Because the Fund's objective is to provide current income, the Fund
will invest in municipal securities with an emphasis on income. The average
maturity of the Fund's portfolio will vary depending on anticipated market
conditions.

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

-40-
<PAGE>

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

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.

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" below, "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.

-41-
<PAGE>

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

MINNESOTA INTERMEDIATE TAX-FREE FUND
MINNESOTA TAX-FREE FUND

INVESTMENT OBJECTIVE. The investment objective of the Funds 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.

-42-
<PAGE>

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" below, "Additional Investment Policies -- Common
Policies of the Funds -- Temporary Defensive Position" and "Dividends,
Distributions and Tax Matters."

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

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. In
general, the longer the maturity of a municipal security, the higher the rate of
interest it pays. However, a longer average maturity is generally associated
with a higher level of volatility in the market value of a municipal security.
Since the Fund's objective is to provide high current income, the Fund will
invest in municipal securities with an emphasis on income rather than stability
of the Fund's net asset value.

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. Since the Fund's
objective is to provide high current income, the Fund will invest in municipal
securities with an emphasis on income rather than stability of the Fund's net
asset value.

Normally, at least 75% of the 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
Services, L.P. ("Fitch"). These securities are generally considered to be
investment grade securities, although Moody's indicates that municipal
securities rated "Baa" have speculative characteristics. The Funds also may
invest in unrated securities that Norwest believes are comparable in quality to

-43-
<PAGE>

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 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 issuers' creditworthiness than do higher quality securities. The
market for these securities may be thinner and less active than that for higher
quality securities, which may affect the price at which the lower rated
securities can be sold. In addition, the market prices of lower rated
securities may fluctuate more than the market prices of higher quality
securities and may decline significantly in periods of general economic
difficulty or rising interest rates.

During its most recent fiscal year ended May 31, 1996, the Minnesota Tax-Free
Fund had 93.0% of its average annual assets in municipal securities rated by
Moody's or S&P and 7.0% of its average annual assets in unrated investments,
including cash and short-term cash equivalents which are typically unrated.
During that year, the Fund had the following percentages of its average annual
net assets invested in rated securities: "Aaa"/"AAA"-52.0%, "Aa"/"AA"-24.0%,
"A"/"A"-14.0%, "Baa"/"BBB"-3.0% and "Ba"/"BB" and below-0.0%. For this purpose,
securities with different NRSRO ratings were assigned the higher rating. This
information reflects the average composition of the Fund's assets for the Fund's
last fiscal year and is not necessarily representative of the Fund as of the
current fiscal year or any other time.

TAXABLE INVESTMENTS

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

INVESTMENT CONSIDERATIONS AND RISK FACTORS

GEOGRAPHIC CONCENTRATION. Because COLORADO TAX-FREE FUND, 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

-44-
<PAGE>

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

DIVERSIFICATION MATTERS. Each of COLORADO TAX-FREE FUND, MINNESOTA INTERMEDIATE
FAX-FREE FUND and MINNESOTA TAX-FREE FUND is non-diversified, which means that
they each have greater latitude than a diversified fund with respect to the
investment of their assets in the securities of relatively few municipal
issuers. As non-diversified portfolios, these Funds may present greater risks
than a diversified fund. However, each Fund intends to comply with applicable
diversification requirements of the Internal Revenue Code. These requirements
provide that, as of the last day of each fiscal quarter, with respect to 50% of
its assets, a Fund may not: (i) own the securities of a single issuer, other
than a U.S. Government security, with a value of more than 5% of the Fund's
total assets; or (ii) own more than 10% of the outstanding voting securities of
a single issuer.

Except for investment in U.S. Government Securities, no more than 25% of the
total assets of Colorado Tax-Free Fund, 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."

-45-
<PAGE>

BALANCED FUNDS

Each of the Balanced Funds invests in a balanced portfolio of fixed income and
equity securities. Conservative Balanced Fund [Strategic Allocation: Income] has
the smallest equity securities component of the four Funds and is the most
conservative of the Balanced Funds. Aggressive Fund has the largest equity
securities component of the four Funds and is the most aggressive of the
Balanced Funds.

The equity portion of each Balanced Fund's portfolio uses the seven 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 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."

CONSERVATIVE BALANCED FUND [STRATEGIC ALLOCATION: INCOME]

INVESTMENT OBJECTIVE: . The investment objective of the Fund is to provide a
combination of current income and capital appreciation by diversifying
investment of its assets among stocks, bonds and other fixed income investments.
The Fund emphasizes safety of principal through limited exposure to equity
securities and has the smallest equity securities position of the three Balanced
Funds. 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 Total Return Bond style, Managed
Fixed Income style, Positive Return style, 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.

CONSERVATIVE BALANCED FUND

Set forth below are the ranges of investments by the Fund in each Core Portfolio
and current allocation of the Fund's assets among the Core Portfolios.

CURRENT RANGE OF
INVESTMENT STYLE ALLOCATION INVESTMENT

Diversified Equity Fund style 25%
Index Portfolio 6.25% 3% - 10.5%
Income Equity Portfolio 6.25% 3% - 10.5%
Large Company Growth Portfolio 6.25% 3% - 10.5%
Small Company style 2.5% 0.75% - 5.25%
(1/3 in each of Small Company Stock Portfolio,
Small Company Growth Portfolio and Small

-46-
<PAGE>

Company Value Portfolio)
International Portfolio 3.75% 1.75% - 7%
Total Return Bond Portfolio 16 2/3% 13.33% - 20%
Managed Fixed Income Portfolio 16 2/3% 13.33% - 20%
Positive Return Portfolio 16 2/3% 13.33% - 20%
Stable Income Portfolio 15% 15%
Money Market Portfolio 10% 10%

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

TOTAL FUND ASSETS 100%
- --------------------------------------------------------------------------------

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 Trust's Board of
Trustees, 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 Trust's Board of Trustees 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 Total Return Bond style,
Managed Fixed Income style, 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 of the Fund's assets among the Core Portfolios.

- --------------------------------------------------------------------------------
CURRENT RANGE OF
INVESTMENT STYLE ALLOCATION INVESTMENT
- --------------------------------------------------------------------------------

Diversified Equity Fund style 40%
Index Portfolio 10% 5% - 16.5%
Income Equity Portfolio 10% 5% - 16.5%
Large Company Growth Portfolio 10% 5% - 16.5%
Small Company style 4% 1.25% - 8.25%

-47-
<PAGE>

(1/3 in each of Small Company Stock Portfolio,
Small Company Growth Portfolio and Small
Company Value Portfolio)
International Portfolio 6% 2.5% - 11%
Total Return Bond Portfolio 15% 10% - 20%
Managed Fixed Income Portfolio 15% 10% - 20%
Positive Return Portfolio 15% 10% - 20%
Stable Income Portfolio 15%

TOTAL FUND ASSETS 100%

GROWTH BALANCED FUND

-48-
<PAGE>

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 of the Fund's assets among the Core Portfolios.

CURRENT RANGE OF
INVESTMENT STYLE ALLOCATION INVESTMENT

Diversified Equity Fund style 65%
Index Portfolio 16.25% 9% - 25%
Income Equity Portfolio 16.25% 9% - 25%
Large Company Growth Portfolio 16.25% 9% - 25%
Small Company style 6.5% 2.25% - 12.75%
(1/3 in each of Small Company Stock
Portfolio, Small Company Growth
Portfolio and Small Company
Value Portfolio)
International Portfolio 9.75% 4.5% - 17%
Total Return Bond Portfolio 11 2/3% 5% - 18.33%
Managed Fixed Income Portfolio 11 2/3% 5% - 18.33%
Positive Return Portfolio 11 2/3% 5% - 18.33%

TOTAL FUND ASSETS 100%

AGGRESSIVE 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 Total Return Bond style,
Managed Fixed Income 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.

-49-
<PAGE>

AGGRESSIVE FUND ALLOCATION

Set forth below are the ranges of investments by the Fund in each Core Portfolio
and current allocation of the Fund's assets among the Core Portfolios.

CURRENT RANGE OF
INVESTMENT STYLE ALLOCATION INVESTMENT

Diversified Equity Fund style 80.0%
Index Portfolio 20.0% 16.25% - 23.75%
Income Equity Portfolio 20.0% 16.25% - 23.75%
Large Company Growth Portfolio 20.0% 16.25% - 23.75%
Small Company style 8.0% 6.5% - 9.5%
(1/3 in each of Small Company Stock
Portfolio, Small Company Growth
Portfolio and Small Company
Value Portfolio)
International Portfolio 12.0% 9.75% - 14.25%
Total Return Bond Portfolio 6 2/3% 1.67% - 11.67%
Managed Fixed Income Portfolio 6 2/3% 1.67% - 11.67%
Positive Return Portfolio] 6 2/3% 1.67% - 11.67%

TOTAL FUND ASSETS 100%

-50-
<PAGE>

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, the Fund
would not be invested in nor subject to the risks related to the types of
individual securities purchased in accordance with the various investment styles
used by the Fund. Rather, the Fund would be invested in and subject to the
risks related to futures contracts. For a description of futures contracts and
their risks, see "Appendix A -- 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. 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." Under normal
circumstances, each of the Equity Funds will invest substantially all of its
assets, but not less than 65 percent of its total assets, in equity securities.

INDEX FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to duplicate the
return of the Standard & Poor's 500 Composite Stock Price Index. 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-

-51-
<PAGE>

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 Fund.
For a description of futures contracts and their risks, see "Appendix A --
Futures Contracts and Options."

The Index tracks the total return performance of 500 common stocks which are
chosen for inclusion in the Index by Standard & Poor's ("S&P") on a statistical
basis. The inclusion of a stock in the Index in no way implies that S&P
believes the stock to be an attractive investment. The 500 securities, most of
which trade on the New York Stock Exchange, represent approximately 70 percent
of the total market value of all U.S. common stocks. Each stock in the Index is
weighted by its market value. Because of the market-value weighting, the 50
largest companies in the Index currently account for approximately 47 percent of
its value. The Index emphasizes large capitalizations and, typically, companies
included in the Index are the largest and most dominant firms in their
respective industries.

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.

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

-52-
<PAGE>

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 at least $600 million at
the time of purchase. 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 (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 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.

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: (i) an index style;
(ii) an income equity style; (iii) a large company growth style; (iv) small
company styles; and (v) an international style. In addition, the Fund allocates
the assets dedicated to small company investments to three distinct small
company investment styles. 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

-53-
<PAGE>

Set forth below are the ranges of investments by the Fund in each Core
Portfolio and current allocation of the Fund's assets among the Core Portfolios.

- --------------------------------------------------------------------------------
CURRENT RANGE OF
ALLOCATION INVESTMENT

Index Portfolio 25% 23% - 27%
Income Equity Portfolio 25% 23% - 27%
Large Company Growth Portfolio 25% 23% - 27%
Small Company style 10% 8% - 12%
Small Company Stock Portfolio 3 1/3%
Small Company Growth Portfolio 3 1/3%
Small Company Value Portfolio 3 1/3%
International Portfolio 15% 13% - 17%

- --------------------------------------------------------------------------------
TOTAL FUND ASSETS 100%
- --------------------------------------------------------------------------------

Consistent with the Fund's investment objective and policies and under the
general supervision of the Trust's Board of Trustees, 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 Trust's Board of Trustees 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.

-54-
<PAGE>

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 investment styles: (i) a large
company growth style; (ii) small company styles; and (iii) an international
style. In addition, the Fund allocates the assets dedicated to small company
investments to three distinct small company investment styles. The Fund
utilizes different equity investment styles in order to reduce the risk of price
and return volatility associated with reliance on a single investment style. It
is anticipated that the Fund's price and return volatility will be somewhat
greater than those of Diversified Equity Fund, which blends five equity
investment styles.

GROWTH EQUITY FUND ALLOCATION

Set forth below are the ranges of investments by the Fund in each Core Portfolio
and current allocation of the Fund's assets among the Core Portfolios.

CURRENT RANGE OF
ALLOCATION INVESTMENT

Large Company Growth Portfolio 35% 32% - 38%
Small Company style 35% 33% - 38%
Small Company Stock Portfolio 11 2/3%
Small Company Growth Portfolio 11 2/3%
Small Company Value Portfolio 11 2/3%
International Portfolio 30% 27% - 33%

TOTAL FUND ASSETS 100%

-55-
<PAGE>

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.

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 whose market capitalizations are at least $500 million
at the time of the Portfolio's purchase and whose equity trading volume would
permit the sale or purchase of a large position in the securities of the company
in 2 or 3 trading days. Market capitalization refers to the total market value
of a company's outstanding shares of common stock. In selecting securities for
the 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 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 and medium companies are those whose
market capitalization is less than $1 billion at the time of purchase, although
it is anticipated that investments primarily will be in companies with
capitalization of less than $750 million.

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

-56-
<PAGE>

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 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. See "Investment Objectives and Policies --
Equity Funds -- International Fund -- Foreign 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 the 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 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 that have market capitalizations well
below that of the average company in the Standard & Poor's 500 Composite Stock
Price 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

-57-
<PAGE>

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.

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 income
and safety of principal by investing primarily in U.S. Government Securities.

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's portfolio combines five different small capitalization
equity portfolios: a small cap, index style; two small company growth styles;
two small company value styles. 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.

DIVERSIFIED SMALL CAP FUND ALLOCATION

Set forth below are the ranges of investments by the Fund in each Core Portfolio
and current allocation of the Fund's assets among the Core Portfolios.

CURRENT RANGE OF
ALLOCATION INVESTMENT

Smith Disciplined Growth Portfolio 15% 32% - 38%
Small Company style 00% 33% - 38%
Small Company Stock Portfolio 15%
Small Company Growth Portfolio 15%
Small Company Value Portfolio 15%
Small Cap Index Portfolio 40% 27% - 33%

- --------------------------------------------------------------------------------
TOTAL FUND ASSETS 100%
- --------------------------------------------------------------------------------

-58-
<PAGE>

Consistent with the Fund's investment objective and policies and under the
general supervision of the Trust's Board of Trustees, 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 Trust's Board of Trustees 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.

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: (i) 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 (ii) 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: (i) 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; (ii) potentially
unlimited loss associated with futures transactions and the possible lack of a
liquid secondary market for closing out a futures position; and (iii) 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.

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.

-59-
<PAGE>

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. 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.

-60-
<PAGE>

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.

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 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" below.
The Fund may also invest in convertible securities, including convertible debt
and convertible preferred stock, that may be rated in any category by an NRSRO
or may be unrated.

The Fund also may invest in corporate debt obligations and U.S. Government
Securities. These instruments may have fixed, floating or variable rates of
interest. These debt securities must be rated in one of the three highest
rating categories by an NRSRO or, if unrated by any NRSRO, judged by 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 all of its investable assets in
International Portfolio, which has the

-61-
<PAGE>

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

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

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

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

FOREIGN INVESTMENT CONSIDERATIONS AND RISK FACTORS. All investments, domestic
and foreign, involve certain risks. Investments in the securities of foreign
issuers may involve risks in addition to those normally associated

-62-
<PAGE>

with investments in the securities of U.S. issuers. All foreign investments are
subject to risks of foreign political and economic instability, adverse
movements in foreign exchange rates, the imposition or tightening of exchange
controls or other limitations on repatriation of foreign capital, and changes in
foreign governmental attitudes towards private investment, possibly leading to
nationalization, increased taxation or confiscation of foreign investors'
assets.

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

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

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

CORE PORTFOLIO DESCRIPTIONS

MONEY MARKET PORTFOLIO. See "Investment Objectives and Policies -- Money Market
Funds -- Cash Investment Fund and Ready Cash Investment Fund."

POSITIVE RETURN PORTFOLIO. Positive Return 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: (i) 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 Services, L.P.;
or (ii) 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."

-63-
<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: (i) 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; (ii) obligations of supranational organizations; and (iii)
obligations of the states, territories or possessions of the United States and
their subdivisions, authorities and corporations ("municipal securities").

The 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 Services, L.P., or which are unrated and determined by Norwest
to be of comparable quality. See "Additional Investment Policies and Risk
Considerations -- Rating Matters" below.

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.

-64-
<PAGE>

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."

SMALL CAP INDEX PORTFOLIO. Small Cap Index Portfolio seeks to provide
________________________.

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 whose market
capitalization is less than $1 billion at the time of purchase.

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. Investing in the securities of small
companies entails certain risks. See "Investment Objectives and Policies --
Equity Funds -- Small Company Stock Fund -- Additional Investment Considerations
and Risk Factors."

ADDITIONAL INVESTMENT CONSIDERATIONS AND RISK FACTORS. The investments of Small
Company Value Portfolio are subject to the risks of investing in smaller
capitalization companies. See "Investment Objectives and Policies -- Equity
Funds -- Small Company Stock Fund" and " -- Small Company Growth Fund." 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 the 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.

-65-
<PAGE>

ADDITIONAL INVESTMENT CONSIDERATIONS AND RISK FACTORS. The investments of Small
Cap Index Portfolio are subject to the risks of investing in smaller
capitalization companies. See "Investment Objectives and Policies -- Equity
Funds -- Small Company Stock Fund" and " -- Small Company Growth Fund."

INTERNATIONAL PORTFOLIO. See "Investment Objectives and Policies -- Equity
Funds -- International Fund."

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 Trust's Board
of Trustees (the "Board") without shareholder approval. Likewise,
non-fundamental investment policies of the Core Portfolios may be changed by the
respective Core Trust's board of trustees ("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.

Each investment adviser monitors the creditworthiness of counterparties to the
Funds' transactions and intends to enter into a transaction only when it
believes that the counterparty presents minimal credit risks and the benefits
from the transaction justify the attendant risks. As used herein, the term U.S.
Government Securities means obligations issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities. These
policies relate to each Fund and, unless otherwise noted, not to a portion of a
Fund invested in a particular investment style.

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

-66-
<PAGE>

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: (i) are rated (or,
if unrated, are issued by an issuer with comparable outstanding short-term debt
that is rated) in one of the two highest rating categories by two nationally
recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has
issued a rating, by that NRSRO; or (ii) are otherwise unrated and determined by
Norwest, pursuant to guidelines adopted by the Board, to be of comparable
quality. Except for Municipal Money Market Fund, each Fund will invest at least
95% of its total assets in securities in the highest rating category as
determined pursuant to Rule 2a-7. A description of the rating categories of
Standard & Poor's, Moody's Investors Service and certain other NRSROs is
contained in the SAI.

The market value of the interest-bearing debt securities held by the Funds,
including municipal securities, will be affected by changes in interest rates.
There is normally an inverse relationship between the market value of securities
sensitive to prevailing interest rates and actual changes in interest rates;
I.E., a decline in interest rates produces an increase in market value, while an
increase in rates produces a decrease in market value. Moreover, the longer the
remaining maturity of a security, the greater will be the effect of interest
rate changes on the market value of that security. In addition, changes in the
ability of an issuer to make payments of interest and principal and in the
market's perception of an issuer's creditworthiness will also affect the market
value of the debt securities of that issuer. Obligations of issuers of debt
securities, including municipal securities, are also subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. The possibility exists, therefore, that, as a result of bankruptcy,
litigation or other conditions, the ability of any issuer to pay, when due, the
principal of and interest on its debt securities may be materially affected.

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

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, Short 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

-67-
<PAGE>

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 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.

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.

A Fund's investment in Index Portfolio subjects the Fund to certain investment
risks and transaction costs to which it might not otherwise be subject. These
risks include: (i) 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; (ii) the fact that the skills
and techniques needed to trade futures are different from those needed to select
the other securities in which the Fund invests; (iii) lack of assurance that a
liquid secondary market will exist for any particular instrument at any
particular time, which, among other things, may hinder a Fund's ability to limit
exposures by closing its positions; and (iv) the possible need to defer closing
out of certain futures contracts to avoid adverse tax consequences.

MARGIN AND SHORT SALES

Except for Intermediate Government Income Fund, no Fund may purchase securities
on margin or make short sales of securities, except short sales against the box.
A short sale is "against the box" to the extent that the Fund contemporaneously
owns or has the right to obtain at no added cost securities identical to those
sold short. For federal income tax purposes, short sales against-the-box may be
made to defer recognition of gain or loss on the sale of securities until the
short position is closed out. These prohibitions do not restrict the Fund's
ability to use short-term credits necessary for the clearance of portfolio
transactions and to make margin deposits in connection with permitted
transactions in options and futures contracts.

DIVERSIFICATION AND CONCENTRATION

Each Fund (other than Colorado Tax-Free Fund, 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: (i) more than 5% of the Fund's total assets would be invested in the
securities of a single issuer; or (ii) the Fund would own more than 10% of the
outstanding voting securities of any single issuer. 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

-68-
<PAGE>

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.

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

-69-
<PAGE>

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 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 Tax-Free Fund and 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 an 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

-70-
<PAGE>

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: (i) short-term U.S. Government Securities; (ii)
certificates of deposit, bankers acceptances and interest-bearing savings
deposits of commercial banks doing business in the United States (United States
banks in the case of Small Cap Opportunities Fund); (iii) commercial paper; (iv)
repurchase agreements; and (v) shares of money market funds registered under the
1940 Act within the limits specified therein. During periods when and to the
extent that a Fund has assumed a temporary defensive position, it may not be
pursuing its investment objective. Prime quality instruments are those that are
rated in one of the two highest short-term rating categories by an NRSRO or, if
not rated, determined by the investment adviser to be of comparable quality.
Apart from temporary defensive purposes, a Fund may at any time invest a portion
of its assets in cash and cash equivalents as described above (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 will have at
least 65% of its total assets invested in common stock. International 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 place orders for the purchase and sale of assets they manage with
brokers and dealers selected by and in the discretion of the respective adviser.
The investment advisers seek "best execution" for all portfolio transactions,
but a Fund may pay higher than the lowest available commission rates when an
investment adviser believes it is reasonable to do so in light of the value of
the brokerage and research services provided by the broker effecting the
transaction.

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

Subject to the Funds' policy of obtaining the best price consistent with quality
of execution of transactions, each investment adviser may employ broker-dealer
affiliates of the investment adviser (collectively "Affiliated Brokers") to
effect brokerage transactions for the Funds. The Fund's payment of commissions
to Affiliated Brokers is subject to procedures adopted by the Board 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." Schroder anticipates that the annual portfolio
turnover rate of U.S. Small Companies Portfolio, and Norwest anticipates that
the annual portfolio turnover rate of [NEW FUNDS?] Limited Term Tax-Free 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

-71-
<PAGE>

replaced once in a period of one year. Higher portfolio turnover rates may
result in increased brokerage costs to a Fund or a Portfolio and a possible
increase in short-term capital gains or losses. Tax rules applicable to
short-term trading may effect the timing of portfolio transactions or the
ability to realize short-term trading profits or establish short-term positions.

-72-
<PAGE>

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.

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 indirectly to each Fund that operates in a Core
and Gateway Structure (other than Schroder U.S. Smaller Companies
Portfolio and International Portfolio) through its investment
advisory services of the Core Portfolios. Norwest provides its
investment advisory services directly to the other Funds. In
addition, subject to the general supervision of the Board,
Norwest continuously reviews and determines the allocation of the
assets of Diversified Bond Fund, Conservative Balanced Fund
[Strategic Allocation: Income], Moderate Balanced Fund, Growth
Balanced Fund, Aggressive Fund, Diversified Equity Fund, Growth
Equity Fund and Diversified Small Cap 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 March 31, 1997, Norwest Corporation had assets of $83.6
billion, which made it the 11th largest bank holding company in
the United States. As of December 31, 1996, Norwest and its
affiliates managed assets with a value of approximately $42.6
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) and International Portfolio (in which
International Fund invests) 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:

INVESTMENT
SUBADVISER
FUND CORE PORTFOLIO(S) OF CORE PORTFOLIO

Stable Income Fund Stable Income Portfolio Galliard
Diversified Bond Fund Positive Return Bond Portfolio
Peregrine
Managed Fixed Income Portfolio
Galliard
Total Return Bond Portfolio UCM
Total Return Bond Fund Total Return Bond Portfolio UCM
Conservative Balanced Fund Stable Income Portfolio
Galliard

-73-
<PAGE>

Positive Return Portfolio
Peregrine
Managed Fixed Income Portfolio
Galliard
Total Return Bond Portfolio UCM
Large Company Growth Portfolio
Peregrine
Small Company Stock Portfolio
Crestone
Small Company Growth Portfolio
Peregrine
Small Company Value Portfolio
Peregrine

FUND CORE INVESTMENT
SUBADVISER
Moderate Balanced Fund Stable Income Portfolio
Galliard
Positive Return Portfolio
Peregrine
Managed Fixed Income Portfolio Galliard
Total Return Bond Portfolio UCM
Large Company Growth Portfolio Peregrine
Small Company Stock Portfolio Crestone
Small Company Growth Portfolio Peregrine
Small Company Value Portfolio Peregrine
Growth Balanced Fund Positive Return Portfolio Peregrine
Managed Fixed Income Portfolio Galliard
Total Return Bond Portfolio UCM
Large Company Growth Portfolio Peregrine
Small Company Stock Portfolio Crestone
Small Company Growth Portfolio Peregrine
Small Company Value Portfolio Peregrine
Aggressive Fund Positive Return Portfolio Peregrine
Managed Fixed Income Portfolio Galliard
Total Return Bond Portfolio UCM
Large Company Growth Portfolio Peregrine

-74-
<PAGE>

Small Company Stock Portfolio Crestone
Small Company Growth Portfolio Peregrine
Small Company Value Portfolio Peregrine
Diversified Equity Fund Large Company Growth Portfolio Peregrine
Small Company Stock Portfolio Crestone
Small Company Growth Portfolio Peregrine
Small Company Value Portfolio Peregrine
Growth Equity Fund Large Company Growth Portfolio Peregrine
Small Company Stock Portfolio Crestone
Small Company Growth Portfolio Peregrine
Small Company Value Portfolio Peregrine
Large Company Growth Fund Large Company Growth Port Peregrine
Small Company Stock Fund Small Company Stock Portfolio Crestone
Small Company Growth Fund Small Company Growth Portfolio Peregrine
Diversified Small Cap Fund Small Cap Index Portfolio
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

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 Portfolios
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 they subadvise. Norwest supervises the
performance of each Subadviser, including their adherence to the
Funds' and Portfolios' investment objectives and policies.

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, 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 has assets under management in
excess of $150 billion.

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 over $2.95
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 $2.05 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 March 31, 1997
Peregrine managed over $4.25 billion in assets.

-75-
<PAGE>

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 December 31, 1996, Crestone managed assets with
a value of approximately $465 million.

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 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
for 16 years, the last 8 years as a Vice President and Senior
Portfolio Manager. He has over 20 years' experience in managing
securities portfolios. Ms. White has been a Vice President and
Senior Portfolio Manager of Norwest since 1991; from 1989 to
1991, she was a Portfolio Manager at Richfield Bank and Trust.
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" above. Ms. White
began serving as a portfolio manager of the Fund in 1991.

TREASURY FUND -- David D. Sylvester and Laurie R. White. For a
description of Mr. Sylvester and Ms. White see "Cash Investment
Fund/Ready Cash Investment Fund" above. Ms. White began serving
as a portfolio manager of the Fund in 1991.

MUNICIPAL MONEY MARKET FUND -- David D. Sylvester. For a
description of Mr. Sylvester see "Cash Investment Fund/Ready Cash
Investment Fund" above.

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.

INTERMEDIATE GOVERNMENT INCOME FUND and SHORT 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 this 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 each of the Core Portfolios in which the Fund
invests. Mr. Giese, portfolio manager of Positive Return
Portfolio, has served as a portfolio manager of the Fund since
1995. Mr. Merriam, portfolio manager of Managed Fixed Income
Portfolio, has served as a portfolio manager of the Fund since
1995. Mr. Kinney, portfolio manager of Total Return Bond
Portfolio, has served as a portfolio manager of the Fund since
1995.

-76-
<PAGE>

INCOME FUND -- Ms. Marjorie H. Grace, CFA. For a description of
Ms. Grace, see "Intermediate Government Income Fund" above. 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. 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. For a
description of Mr. Jackson, see "Limited Term Tax-Free Fund"
above. Mr. Jackson, has served as portfolio manager of the Fund
since 1993.

COLORADO TAX-FREE FUND -- Mr. William T. Jackson. For a
description of Mr. Jackson, see "Limited Tax-Free Income Fund"
above. 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.

CONSERVATIVE BALANCED FUND [STRATEGIC ALLOCATION: INCOME],
MODERATE BALANCED FUND, GROWTH BALANCED FUND and AGGRESSIVE 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. For example, there are twelve portfolio
managers of Growth Balanced Fund - the portfolio managers of
Index Portfolio, Income Equity Portfolio, Large Company Growth
Portfolio, Small Company Stock Portfolio, Small Company Growth
Portfolio, Small Company Value Portfolio, International
Portfolio, Total Return Bond Portfolio, Managed Fixed Income
Portfolio and Positive Return 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 on January 1, 1996. For a
description of Mr. Sylvester and Ms. White see "Cash Investment
Fund/Ready Cash Investment Fund".

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 received an MBA from the
University of Nebraska at Omaha.

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. For example, there are six portfolio managers of
Growth Equity Fund -- the portfolio managers of Large Company
Growth Portfolio, Small Company Stock Portfolio, Small Company
Growth Portfolio, Small Company Value Portfolio and International
Portfolio.

-77-
<PAGE>

LARGE COMPANY GROWTH FUND /LARGE COMPANY GROWTH PORTFOLIO -- John S. Dale.
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.

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. 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.

DIVERSIFIED SMALL CAP FUND/SMALL CAP INDEX PORTFOLIO -- David D. Sylvester and
Laurie R. White. Mr. Sylvester and Ms. White began serving as portfolio
managers of Index Portfolio on January 1, 1996. For a description of Mr.
Sylvester and Ms. White see "Cash Investment Fund/Ready Cash Investment Fund".

SMALL CAP OPPORTUNITIES FUND/SCHRODER U.S. SMALLER COMPANIES PORTFOLIO --
Ms. Fariba Talebi. Ms. Talebi is a Group Vice President of Schroder, leads an
investment committee, and 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/INTERNATIONAL PORTFOLIO -- Mark J. Smith, a Director and
First Vice President of Schroder along with Michael Perelstein, a Senior Vice
President of Schroder, with the assistance of an SCMI investment committee. Mr.
Smith has been a First Vice President of SCMI since April 1990 and a Director
thereof since April 1993. He has been employed by various Schroder Group
companies in the investment research and portfolio management areas since 1983.
Mr. Perelstein has been a Senior Vice President of SCMI 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, Messrs. Smith and Perelstein have served as
portfolio managers of International Portfolio.

POSITIVE RETURN PORTFOLIO -- William D. Giese. 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.

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.

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.

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.

FUND INVESTMENT ADVISORY FEE

-78-
<PAGE>

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% (next $300 million of 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%
Short 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-
FreeFund 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)
International Fund (International
Portfolio) 0.45%

-79-
<PAGE>

With respect to Diversified Bond Fund, Conservative Balanced Fund [Strategic
Allocation: Income], Moderate Balanced Fund, Growth Balanced Fund, Aggressive
Fund, Diversified Equity Fund, Growth Equity Fund and Diversified Small Cap
Fund, Norwest receives investment advisory fees for its Asset Allocation
Services and Norwest and Schroder receive investment advisory fees from the Core
Portfolios in which the Funds invest at the following annual rates of the Fund's
or 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.

FUND OR CORE PORTFOLIO INVESTMENT ADVISORY FEE

Diversified Bond Fund (for Asset Allocation Services) 0.25%
Conservative Balanced Fund
[Strategic Allocation: Income] (for Asset Allocation Services) 0.25%

-80-
<PAGE>

Moderate Balanced Fund (for Asset Allocation Services) 0.25%

Growth

Fund (for Asset Allocation Services) 0.25%
Aggressive Fund (for Asset Allocation Services) 0.25%
Diversified Equity Fund (for Asset Allocation Services) 0.25%
Growth Equity Fund (for Asset Allocation Services) 0.25%
Diversified Small Cap Fund (for Asset Allocation Services) 0.25%

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%
Total Return Bond Portfolio 0.35%
Managed Fixed Income Portfolio 0.35%
Positive Return Portfolio 0.35%
Index Portfolio 0.15%
Income Equity Portfolio 0.50%
Large Company Growth Portfolio 0.65%
Small Company Stock Portfolio 0.90%
Small Company Growth Portfolio 0.90%
Small Company Value Portfolio 0.90%
Small Cap Index Portfolio ____%
International Portfolio 0.45%

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 Portfolio 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, Diversified Small Cap Fund, Small Cap
Opportunities Fund or International Fund were to withdraw there assets from
their respective Core Portfolio, Norwest would receive an investment advisory
fee at an annual rate of 0.35%, 0.35%, 0.15%, 0.50%, 0.65%, 0.90%, 0.90%, ____%,
0.925% and 0.85% of the Funds' average daily net assets, respectively.
Similarly, to the extent Diversified Bond Fund, Conservative Balanced Fund
[Strategic Allocation: Income], Moderate Balanced Fund, Growth Balanced Fund,
Aggressive Fund, Diversified Equity Fund, Growth Equity Fund or Diversified
Small Cap 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%, ____%, 0.65%,
0.90% and ____% 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
an annual rate equal to that paid by 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.

-81-
<PAGE>

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, including the Funds'
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 each Fund including, but not limited to: (i)
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; (ii) preparing proxy and information
statements and any other communications to shareholders; (iii) monitoring the
sale of shares and ensuring that such shares are properly and duly registered
with the SEC and applicable state securities administrators; and (iv)
determining the amount of and 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 to Cash Investment
Fund, U.S. Government Fund and Treasury Fund, Forum and FAS each receives a fee
at the rate of 0.05% (first $300 million of assets), 0.0375% (next $400 million
of assets) and 0.025% (remaining assets). For their services to Ready Cash
Investment Fund, Municipal Money Market Fund, Stable Income Fund, Short
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, Conservative Balanced Fund, Moderate Balanced Fund,
Growth Balanced Fund, Aggressive Balanced 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, Forum and FAS each receives a fee at the rate of 0.05%.]

FAS also serves as an administrator of each Core Portfolio (except Schroder U.S.
Smaller Companies 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) at an annual rate of 0.10% of the Portfolio's
average daily net assets. Schroder Advisors Inc. ("Schroder Advisors") serves
as the administrator of Schroder U.S. Smaller Companies Portfolio and Forum
serves as the subadministrator of that Portfolio. Schroder Advisors and Forum
provide certain management and administrative services necessary for the
Portfolio's operations, other than the administrative services provided to the
Portfolio by Schroder. For their services, Schroder Advisors. Inc. receives no
fee from the Portfolio and Forum receives a fee at an annual rate of 0.075% of
the 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 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, Limited Liability
Company ("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

-82-
<PAGE>

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 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 Global Growth 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, 0.01% of the next $200 million of the Fund's or Core
Portfolio's average daily net assets and 0.005% of the Fund's or Core
Portfolio's remaining average daily net assets. No fee is 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 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 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 of Short Government Income Fund, Minnesota Intermediate Tax-Free Fund,
Aggressive Balanced Fund and Diversified Small Cap Fund bears all costs of its
operations other than expenses specifically assumed by the Investment Adviser.
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. The
Investment Adviser has undertaken voluntarily to waive a portion of its fees and
or assume certain expenses of the Fund in order to limit total Fund expenses
excluding taxes, interest, brokerage commissions and other Fund transaction
expenses and extraordinary

-83-
<PAGE>

expenses to [2.00%] of the average daily net assets of the Fund. This expense
limitation cannot be modified or withdrawn except by a majority vote of the
Trust Board. If expense reimbursements are required, they will be made on a
monthly basis.

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 (0.48% and 0.82% in the case of Ready Cash
Investment Fund Institutional Shares and 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,
Conservative Balanced Fund [Strategic Allocation: Income], Moderate Balanced
Fund, Growth Balanced Fund, Aggressive 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%, [1.00]%,
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.

-84-
<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 on every weekday except customary national holidays and
Good Friday ("Fund Business Day").

GENERAL PURCHASE INFORMATION

Investments in the Funds may be made either through certain financial
institutions or by an investor directly. An investor who invests in a Fund
directly will be the shareholder of record. All transactions in the 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.

ORDER MUST BE PAYMENT MUST BE
MONEY MARKET FUND RECEIVED BY RECEIVED BY

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.

-85-
<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.

-86-
<PAGE>

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:

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.

-87-
<PAGE>

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 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: (i)
endorsement on a share certificate; (ii) instruction to change a shareholder's
record name; (iii) modification of a designated bank account for wire
redemptions; (iv) instruction regarding an Automatic Investment Plan or
Automatic Withdrawal Plan; (v) dividend and distribution election; (vi)
telephone redemption; (vii) exchange option election or any other option
election in connection with the shareholder's account; (viii) written
instruction to redeem Shares whose value exceeds $50,000; (ix) redemption in an
account in which the account address has changed within the last 30 days; (x)
redemption when the proceeds are deposited in a Norwest 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.

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

-88-
<PAGE>

described under "Purchases and Redemptions of Shares -- Purchase Procedures --
Through Financial Institutions." Shareholders that wish to redeem shares by
telephone or receive redemption proceeds by bank wire must elect these options
by properly completing the appropriate sections of their account application
form. These privileges may not be available until several weeks after a
shareholder's application is received. Shares for which certificates have been
issued may not be redeemed by telephone.

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

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

BY BANK WIRE. For redemptions of more than $5,000, a shareholder who has
elected wire redemption privileges may request a Fund to transmit the redemption
proceeds by federal funds wire to a bank 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,

-89-
<PAGE>

and all certificates submitted for exchange must be endorsed by the shareholder
with signature guaranteed. See "Purchases and Redemptions of Shares -- General
Redemption Information."

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

SHAREHOLDER SERVICES

AUTOMATIC INVESTMENT PLAN

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

-90-
<PAGE>

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.

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 AND TAX MATTERS

DIVIDENDS

Dividends of net investment income of each Money Market Fund, [each Fixed Income
Fund (other than Stable Income Fund, Diversified Bond Fund and Intermediate
Government Income Fund) and each Tax Exempt Fixed Income Fund] are declared
daily and paid monthly. Dividends of Stable Income Fund's, Diversified Bond
Fund's and Intermediate Government Income Fund's net investment income are
declared and paid monthly. Dividends of Income Equity Fund's, ValuGrowth Stock
Fund's, Small Company Stock Fund's and Contrarian 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.

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.

-91-
<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 (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. Distributions of net long-term capital gain by a Fund are taxable to
shareholders of the Fund as long-term capital gain regardless of the length of
time the shareholder may have held Shares in the Fund at the time of
distribution. If a shareholder holds Shares for six months or less and during
that period receives a long-term capital gain distribution, 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 as described above.

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, 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 it is treated as partnerships 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 Portfolio or losses have been realized 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.
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

-92-
<PAGE>

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 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 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 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

-93-
<PAGE>

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., 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 do
not determine net asset value on the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.

In order to maintain a stable net asset value per share of $1.00, 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

-94-
<PAGE>

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 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/Donoghue, 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.

-95-
<PAGE>

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-three separate series.

OTHER CLASSES OF SHARES

Cash Investment Fund, U.S. Government Fund, Treasury Fund, WealthBuilder High
Growth Fund, WealthBuilder Growth Fund, WealthBuilder Growth and Income Fund,
Pinnacle Smith Disciplined Growth Fund, Pinnacle Smith Small Cap Value Fund,
Pinnacle Large Cap Value Fund, Pinnacle Galliard Strategic Value Bond Fund,
Minnesota Intermediate Tax4Free Fund, Aggressive Balanced Fund and Diversified
Small Cap Fund currently issue one class of shares. Ready Cash Investment Fund
currently issues two classes of shares 4 Investor Shares and Exchange Shares.
Municipal Money Market Fund currently issues two classes of shares 4
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
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 __, 1997,_______: (i) may be deemed to have controlled ______
Fund; (ii) owned of record more than 25% of the outstanding I Shares of _______
Fund; and (iii) owned of record more than 25% of the outstanding I Shares of

-96-
<PAGE>

________ Fund.] From time to time, these shareholders or other shareholders may
own a large percentage of the Shares of a Fund and, accordingly, may be able to
greatly affect (if not determine) the outcome of a shareholder vote.

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, Small Cap Opportunities Fund and International 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, Conservative Balanced Fund [Strategic
Allocation: Income], Moderate Balanced Fund, Growth Balanced Fund, Diversified
Equity Fund and Growth Equity 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 is 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 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 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

-97-
<PAGE>

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.

-98-
<PAGE>

APPENDIX A

INVESTMENTS, INVESTMENT STRATEGIES AND RISK CONSIDERATIONS

COMMON STOCKS, WARRANTS AND PREFERRED STOCK

COMMON STOCKS AND WARRANTS - Balanced Funds, Equity Funds. Preferred Stock -
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 Fund may invest in equity-linked securities, including Preferred Equity
Redemption Cumulative Stock ("PERCS"), Equity-Linked Securities ("ELKS"), and
Liquid Yield Option Notes ("LYONS"). Equity-Linked Securities are securities
that are convertible into or based upon the value of, equity securities upon
certain terms and conditions. The amount received by an investor at

-99-
<PAGE>

maturity of these securities is not fixed but is based on the price of the
underlying common stock, which may rise or fall. In addition, it is not
possible to predict how equity-linked securities will trade in the secondary
market or whether the market for them will be liquid or illiquid.

ADRS AND EDRS

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

U.S. GOVERNMENT SECURITIES

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

ZERO-COUPON SECURITIES

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

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.

-100-
<PAGE>

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.

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

-101-
<PAGE>

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

INTERMEDIATE GOVERNMENT INCOME FUND. When the Fund purchases securities on
margin, it only pays part of the purchase price and borrows the remainder. As a
borrowing, a Fund's purchase of securities on margin is subject to the
limitations and risks described in Borrowing above. In addition, if the value
of the securities purchased on margin decreases such that the Fund's borrowing
with respect to the security exceeds the maximum permissible borrowing amount,
the Fund will be required to make margin payments (additional payments to the
broker to

-102-
<PAGE>

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.

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

REPURCHASE AGREEMENTS, SECURITIES LENDING, REVERSE REPURCHASE AGREEMENTS,
WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DOLLAR ROLL TRANSACTIONS.

-103-
<PAGE>

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

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

SECURITIES LENDING - ALL FUNDS. A Fund may lend securities from its portfolios
to brokers, dealers and other financial institutions. Securities loans must be
continuously secured by cash or U.S. Government Securities with a market value,
determined daily, at least equal to the value of the Fund's securities loaned,
including accrued interest. A Fund receives interest in respect of securities
loans from the borrower or from investing cash collateral. A Fund may pay fees
to arrange the loans. Schroder U.S. Smaller Companies Portfolio will not lend
portfolio securities in excess of 25% of the value of the Portfolio's total
assets. No other Fund will lend portfolio securities in excess of 33 1/3
percent of the value of the Fund's total assets.

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

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS - ALL FUNDS. A Fund may purchase
fixed income securities on a "when-issued" or "forward commitment" basis. When
these transactions are negotiated, the price, which is generally expressed in
yield terms, is fixed at the time the commitment is made, but delivery and
payment for the securities take place at a later date. Normally, the settlement
date occurs within 3 months after the transaction. During the period between a
commitment and settlement, no payment is made for the securities purchased and
no interest on the security accrues to the purchaser. At the time a

-104-
<PAGE>

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, 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.

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

-105-
<PAGE>

transactions. Norwest monitors the creditworthiness of counterparties to
these transactions and intends to enter into these transactions only when
they believe the counterparties present minimal credit risks and the income
expected to be earned from the transaction justifies the attendant risks.

MUNICIPAL SECURITIES

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

MUNICIPAL BONDS. Municipal bonds can be classified as either "general
obligation" 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 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

-106-
<PAGE>

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

INTERMEDIATE GOVERNMENT INCOME FUND. The Fund is authorized to make short sales
of securities it owns or has the right to acquire at no added cost through
conversion or exchange of other securities it owns (referred to as short sales
"against the box") and to make short sales of securities which it does not own
or have the right to acquire. A short sale that is not made "against the box"
is a transaction in which a Fund sells a security it does not own in
anticipation of a decline in the market price for the security. When the Fund
makes a short sale, the proceeds it receives are retained by the broker until
the Fund replaces the borrowed security. In order to deliver the security to
the buyer, the Fund must arrange through a broker to borrow the security and, in
so doing, the Fund becomes obligated to replace the security borrowed at its
market price at the time of replacement, whatever that price may be. Short sales
that are not made "against the box" create opportunities to increase the Fund's
return but, at the same time, involve special risk considerations and may be
considered a speculative technique. Since the Fund in effect profits from a
decline in the price of the securities sold short without the need to invest the
full purchase price of the securities on the date of the short sale, the Fund's
net asset value per share, will tend to increase more when the securities it has
sold short decrease in value, and to decrease more when the securities it has
sold short increase in value, than would otherwise be the case if it had not
engaged in such short sales. Short sales theoretically involve unlimited loss
potential, as the market price of securities sold short may continuously
increase, although a Fund may mitigate such losses by replacing the securities
sold short before the market price has increased significantly. Under adverse
market conditions a Fund might have difficulty purchasing securities to meet its
short sale delivery obligations and might have to sell portfolio securities to
raise the capital necessary to meet its short sale obligations at a time when
fundamental investment considerations would not favor those sales. See
"Appendix A -- Techniques Involving Leverage."

If the Fund makes a short sale "against the box," the Fund would not immediately
deliver the securities sold and would not receive the proceeds from the sale.
The seller is said to have a short position in the securities sold until it
delivers the securities sold, at which time it receives the proceeds of the
sale. The Fund's decision to make a short sale "against the box" may be a
technique to hedge against market risks

-107-
<PAGE>

when Norwest believes that the price of a security may decline, causing a
decline in the value of a security owned by the Fund or a security
convertible into or exchangeable for such security. In such case, any future
losses in the Fund's long position would be reduced by an offsetting future
gain in the short position. The Fund's ability to enter into short sales
transactions is limited by certain tax requirements. See "Dividends --
Distributions and Taxes" in the SAIs.

MORTGAGE-BACKED SECURITIES

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

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

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

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

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

As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of
fixed-rate 30-year mortgages, common industry practice is to 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.

-108-
<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 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

-109-
<PAGE>

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.

ASSET-BACKED SECURITIES

INTERMEDIATE GOVERNMENT INCOME FUND, DIVERSIFIED BOND FUND, INCOME FUND,
BALANCED FUNDS. Asset-backed securities represent direct or indirect
participations in, or are secured by and payable from, assets other than
mortgage-backed assets such as motor vehicle installment sales contracts,
installment loan contracts, leases of

-110-
<PAGE>

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

A Fund may enter into foreign currency forward contracts or currency futures or
options contracts for the purchase or sale of foreign currency to "lock in" the
U.S. dollar price of the securities denominated in a foreign currency or the
U.S. dollar value of interest and dividends to be paid on such securities, or to
hedge against the possibility that the currency of a foreign country in which a
Fund has investments may suffer a decline against the U.S. dollar. Like foreign
exchange contracts and foreign currency forward contracts, these instruments are
often referred to as derivatives, which may be defined as financial instruments
whose performance is derived, at least in part, from the performance of another
asset (such as a security, currency or an index of securities. The Funds have
no present intention to enter into currency futures or options contracts but may
do so in the future. A forward currency contract is an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. This method of attempting to hedge the value of a
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
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, INTERMEDIATE GOVERNMENT INCOME FUND, DIVERSIFIED BOND FUND,
BALANCED FUNDS, INDEX FUND, SMALL CAP OPPORTUNITIES FUND. A Fund may seek to
enhance its return through the writing (selling) and purchasing of
exchange-traded and over-the-counter options on fixed income securities or
indices. A Fund may also to attempt to hedge against a decline in the value of
securities owned by it or an increase

-111-
<PAGE>

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: (i) dependence on Norwest's ability
to predict movements in the prices of individual securities and fluctuations in
the general securities markets; (ii) 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; (iii) 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; (iv) 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; (v) the possible need to defer closing out of certain options,
futures contracts and related options to avoid adverse tax consequences; and
(vi) 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.

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

-112-
<PAGE>

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

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

INDEX FUTURES CONTRACTS. Bond and stock index futures contracts are bilateral
agreements pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the bond or stock index value at the close of trading of the contract and the
price at which the futures contract is originally struck. No physical delivery
of the securities comprising the index is made. Generally, these futures
contracts are closed out prior to the expiration date of the contract. In
addition to the Funds listed at the beginning of this section, "Futures
Contracts and Options," a Fund using the Index Fund investment style may invest
in index futures contracts to a limited extent.

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE 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.

-113
<PAGE>

[LOGO]

Shareholder Services
Minneapolis/St. Paul 612-667-8833
Elsewhere 800-338-1348
Norwest Bank Minnesota, N.A.
Investment Adviser
Transfer Agent
Custodian
Forum Financial Services, Inc.
Manager and Distributor

- -C--1997 NORWEST ADVANTAGE FUNDS
MHPA ___ (10/97)

-114-
<PAGE>

NORWEST ADVANTAGE FUNDS

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

A SHARES
B SHARES

June 1, 1997

The above Prospectus, as filed via EDGAR on June 2, 1997, accession number
0000912057-97-019290 is incorporated in its entirety. The following changes to
the sales load structure of the Funds will be effective on October 1, 1997.

The Shareholder Transaction Expenses table on Page 8 of the Prospectus is
replaced in its entireity with the following:

HAREHOLDER TRANSACTION EXPENSES
(APPLICABLE TO EACH FUND)

A B
Shares Shares
Maximum sales charge imposed on purchases
(as a percentage of public offering price) 5.5%(1) Zero
Maximum deferred sales charge
price or redemption proceeds) Zero(2) 4.0%(1)(3)
Exchange Fee Zero Zero

The table at the bottom of Page 54 of the Prospectus is replaced in its
entireity with the following:

A SHARES

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

BROKER-DEALERS'
SALES CHARGE REALLOWANCE
AS A PERCENTAGE OF AS A
--------------------------------- PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE NET ASSET VALUE* OFFERING PRICE
- ------------------------ -------------- ---------------- ----------------
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 $499,999 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

<PAGE>

NORWEST ADVANTAGE FUNDS

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

A SHARES
B SHARES

June 1, 1997

The Shareholder Transaction Expenses table on Pages 6-7 of the Prospectus is
replaced in its entireity with the following:

SHAREHOLDER TRANSACTION EXPENSES
(APPLICABLE TO EACH FUND)

Intermediate
Government Income Fund,
Income Fund and
Stable 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 Zero(2) 1..5%(1)(3) Zero(2) 3.0%(1)(3)
the lesser of original purchase price or
redemption proceeds)
Exchange Fee Zero Zero Zero Zero

</TABLE>

The table at the bottom of Page 47 of the Prospectus is replaced in its
entireity with the following:

INTERMEDIATE GOVERNMENT INCOME FUND,
INCOME FUND AND TOTAL RETURN BOND FUND

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

-2-

<PAGE>

The table on Page 53 of the Prospectus is replaced in its entireity with the
following:

CONTINGENT DEFERRED SALES CHARGE AS A % OF DOLLAR
AMOUNT SUBJECT TO CHARGE YEAR
SINCE PURCHASE
-----------------------------------------------------
INTERMEDIATE GOVERNMENT
INCOME FUND, INCOME FUND AND
YEARS SINCE PURCHASED STABLE INCOME FUND TOTAL RETURN BOND FUND
- --------------------- ------------------ -----------------------------
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

-3-

<PAGE>

NORWEST ADVANTAGE FUNDS

STATEMENT OF ADDITIONAL INFORMATION

OCTOBER 1, 1997

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

CASH INVESTMENT FUND CONSERVATIVE BALANCED FUND
READY CASH INVESTMENT FUND MODERATE BALANCED FUND
U.S. GOVERNMENT FUND AGGRESSIVE BALANCED FUND
TREASURY FUND GROWTH BALANCED FUND
MUNICIPAL MONEY MARKET FUND INDEX FUND
STABLE INCOME FUND INCOME EQUITY FUND
SHORT GOVERNMENT INCOME FUND VALUGROWTHSM 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 Diversified Bond Fund, Limited Term Tax-Free Fund, Conservative Balanced
Fund, Moderate Balanced Fund, Growth Balanced Fund, Index Fund, Large Company
Growth Fund, Small Company Growth Fund and I Shares of Short Government Income
Fund, Minnesota Intermediate Tax-Free Fund, Aggressive Balanced 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

<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

<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 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, Conservative
Balanced Fund, Moderate Balanced Fund and Growth Balanced 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, Conservative Balanced Fund, Moderate Balanced Fund and Growth Balanced
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 Conservative Balanced Fund, Moderate Balanced Fund,
Growth Balanced Fund, Diversified Equity Fund and Growth Equity 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, Conservative Balanced Fund, Moderate Balanced Fund,
Growth Balanced Fund, Diversified Equity Fund and Growth Equity 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 Conservative
Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund, Diversified Equity
Fund, Growth Equity Fund, Small Cap Opportunities Fund and International Fund.

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.

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 Conservative Balanced 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.

<PAGE>

"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 Conservative Balanced 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.

"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, Conservative Balanced 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, Inc.

"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, Conservative Balanced 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.

<PAGE>

"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, Conservative Balanced 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.

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

"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, Conservative Balanced 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

<PAGE>

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 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,

<PAGE>

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 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

<PAGE>

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 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.

<PAGE>

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 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

<PAGE>

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

Municipal securities are issued by the States, territories and possessions of
the United States, their political subdivisions (such as cities, counties and
towns) and various authorities (such as public housing or redevelopment
authorities), instrumentalities, public corporations and special districts (such
as water, sewer or sanitary districts) of the States, territories and
possessions of the United States or their political subdivisions. In addition,
municipal securities include securities issued by or on behalf of public
authorities to finance various privately operated facilities, such as industrial
development bonds, that are backed only by the assets and revenues of the
non-governmental user (such as hospitals and airports).

Municipal securities historically have not been subject to registration with the
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 the rate or amount. Revenue bonds in recent years
have come to include an increasingly wide variety of types of municipal
obligations. As with other kinds of municipal obligations, the issuers of
revenue

<PAGE>

bonds may consist of virtually any form of state or local governmental entity.
Generally, revenue bonds are secured by the revenues or net revenues derived
from a particular facility, class of facilities, or, in some cases, from the
proceeds of a special excise or other specific revenue source, but not from
general tax revenues. Revenue bonds are issued to finance a wide variety of
capital projects including electric, gas, water and sewer systems; highways,
bridges, and tunnels; port and airport facilities; colleges and universities;
and hospitals. Many of these bonds are additionally secured by a debt service
reserve fund which can be used to make a limited number of principal and
interest payments should the pledged revenues be insufficient. Various forms of
credit enhancement, such as a bank letter of credit or municipal bond insurance,
may also be employed in revenue bond issues. Revenue bonds issued by housing
authorities may be secured in a number of ways, including partially or fully
insured mortgages, rent subsidized and/or collateralized mortgages, and/or the
net revenues from housing or other public projects. Some authorities provide
further security in the form of a state's ability (without obligation) to make
up deficiencies in the debt service reserve fund. In recent years, revenue
bonds have been issued in large volumes for projects that are privately owned
and operated, as discussed below.

Private activity bonds are considered municipal bonds if the interest paid
thereon is exempt from Federal income tax and are issued by or on behalf of
public authorities to raise money to finance various privately operated
facilities for business and manufacturing, housing, and health care and other
nonprofit or charitable purposes. These bonds are also used to finance public
facilities such as airports, mass transit systems and ports. The payment of the
principal and interest on such bonds is dependent solely on the ability of the
facility's user to meet its financial obligations and the pledge, if any, of
real and personal property as security for such payment.

While at one time the pertinent provisions of the Code permitted private
activity bonds to bear tax-exempt interest in connection with virtually any type
of commercial or industrial project (subject to various restrictions as to
authorized costs, size limitations, state per capita volume restrictions, and
other matters), the types of qualifying projects under the Code have become
increasingly limited, particularly since the enactment of the Tax Reform Act of
1986. Under current provisions of the Code, tax-exempt financing remains
available, under prescribed conditions, for certain privately owned and operated
facilities of a organization described in Section 501(c)(3) of the Code, rental
multi-family 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 are expected to
become increasingly limited.

Because of terminology formerly used in the Internal Revenue Code, virtually any
form of private activity bond may still be referred to as an "industrial
development bond," but more and more frequently revenue bonds have become
classified according to the particular type of facility being financed, such as
hospital revenue bonds, nursing home revenue bonds, multifamily housing revenues
bonds, single family housing revenue bonds, industrial development revenue
bonds, solid waste resource recovery revenue bonds, and so on.

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

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

<PAGE>

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 (i) the Fund's acquisition cost of the municipal securities (excluding
any accrued interest which the Fund paid on their acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Fund owned the securities, plus (ii) all interest accrued
on the securities since the last interest payment date during that period.

Puts may be acquired by the Funds to facilitate the liquidity of its portfolio
assets. Puts may also be used to facilitate the reinvestment of a Fund's assets
at a rate of return more favorable than that of the underlying security. The
Funds expect that they will generally acquire puts only where the puts are
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, the Funds may pay for a put either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to the puts (thus reducing the yield to maturity otherwise available for the
same securities). The Funds intend to enter into puts only with dealers, banks
and broker-dealers which, in Norwest'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

<PAGE>

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 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.

<PAGE>

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES

TYPES OF CREDIT ENHANCEMENT

To lessen the effect of failures by obligors on Mortgage Assets (as defined in
the Prospectus) to make payments, mortgage-backed securities may contain
elements of credit enhancement. Credit enhancement falls into two categories:
(1) liquidity protection; and (2) protection against losses resulting after
default by an obligor on the underlying assets and collection of all amounts
recoverable directly from the obligor and through liquidation of the collateral.
Liquidity protection refers to the provisions of advances, generally by the
entity administering the pool of assets (usually the bank, savings association
or mortgage banker that transferred the underlying loans to the issuer of the
security), to ensure that the receipt of payments on the underlying pool occurs
in a timely fashion. Protection against losses resulting after default and
liquidation ensures ultimate payment of the obligations on at least a portion of
the assets in the pool. Such protection may be provided through guarantees,
insurance policies or letters of credit obtained by the issuer or sponsor from
third parties, through various means of structuring the transaction or through a
combination of such approaches. The Funds will not pay any additional fees for
such credit enhancement, although the existence of credit enhancement may
increase the price of security.

Examples of credit enhancement arising out of the structure of the transaction
include (i) "senior-subordinated securities" (multiple class securities with one
or more classes subordinate to other classes as to the payment of principal
thereof and interest thereon, with the result that defaults on the underlying
assets are borne first by the holders of the subordinated class), (ii) creation
of "spread accounts" or "reserve funds" (where cash or investments, sometimes
funded from a portion of the payments on the underlying assets are held in
reserve against future losses) and (iii) "over-collateralization" (where the
scheduled payments on, or the principal amount of, the underlying assets exceeds
that required to make payment of the securities and pay any servicing or other
fees). The degree of credit enhancement provided for each issue generally is
based on historical information regarding the level of credit risk associated
with the underlying assets. Delinquency or loss in excess of that covered by
credit enhancement protection could adversely affect the return on an investment
in such a security.

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

<PAGE>

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.

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

<PAGE>

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

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

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

To terminate its obligation on a call it has written, the Portfolio may be
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether the net of the amount of option
transaction costs and the premium previously received on the call written was
more or less than the price of the call 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.

<PAGE>

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

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

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

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

Stock Index Futures. The Portfolio may buy and sell 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.

<PAGE>

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

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

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

<PAGE>

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 is that less
than 30% of its gross income must be derived from gains realized on the sale of
securities held for less than three months. Due to this limitation, the
Portfolio will limit the extent to which it engages in the following activities,
but will not be precluded from them: (i) selling investments, including Stock
Index Futures, held for less than three months, whether or not they were
purchased on the exercise of a call held by the Portfolio; (ii) purchasing calls
or puts which expire in less than three months; (iii) effecting closing
transactions with respect to calls or puts purchased less than three months
previously; (iv) exercising puts held for less than three months; and (v)
writing calls on investments held for less than three months.

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

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

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

<PAGE>

investments of a Fund. Principal among such risks are: (a) the possible failure
of such instruments as hedging techniques in cases where the price movements of
the securities underlying the options or futures do not follow the price
movements of the portfolio securities subject to the hedge; (b) potentially
unlimited loss associated with futures transactions and the possible lack of a
liquid secondary market for closing out a futures position; and (c) possible
losses resulting from the inability of the Portfolio's investment adviser to
correctly predict the direction of stock prices, 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.

Except as otherwise noted in the Prospectus or herein, the Funds will not use
leverage in their option income and hedging strategies. In the case of
transactions entered into as a hedge, a Fund will hold securities, currencies or
other options or futures positions whose values are expected to offset ("cover")
its obligations thereunder. A Fund will not enter into a hedging strategy that
exposes it to an obligation to another party unless it owns either (i) an
offsetting ("covered") position or (ii) cash, U.S. Government Securities or
other liquid 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 Norwest 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

<PAGE>

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.

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.

<PAGE>

(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.

(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

<PAGE>

a call on a futures contract, variation margin must be deposited in accordance
with applicable exchange rules. The initial margin in futures transactions is in
the nature of a performance bond or good-faith deposit on the contract that is
returned to the Fund upon termination of the contract, assuming all contractual
obligations have been satisfied.

Holders and writers of futures and options on futures contracts can enter into
offsetting closing transactions, similar to closing transactions on options, by
selling or purchasing, respectively, a futures contract or related option with
the same terms as the position held or written. Positions in futures contracts
may be closed only on an exchange or board of trade providing a secondary market
for such futures contracts.

Under certain circumstances, futures exchanges may establish daily limits in the
amount that the price of a futures contract or related option may vary either up
or down from the previous day's settlement price. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. Prices could move to the daily limit for several consecutive
trading days with little or no trading and thereby prevent prompt liquidation of
positions. In 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.

21
<PAGE>

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.
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

<PAGE>

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.

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

<PAGE>

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 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

<PAGE>

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 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

Small cap Opportunities Fund may invest up to 5% of its assets in bonds rated
below Baa by Moody's or BBB by S&P (commonly known as "high yield/high risk
securities" or "junk bonds"). Securities rated less than Baa by Moody's or BBB
by S&P are classified as non-investment grade securities and are considered
speculative by those rating agencies. Junk bonds may be issued as a consequence
of corporate restructurings, such as leveraged buyouts, mergers, acquisitions,
debt recapitalizations, or similar events or by smaller or highly leveraged
companies. Although the growth of the high yield/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 (i) the high yield bond market, (ii) the value of high
yield/high risk securities and (iii) the ability of the securities' issuers to
service their principal and interest payment obligations, to meet their
projected business goals or to obtain additional financing. In addition, the
market for high yield/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.

<PAGE>

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.

Lower rated or unrated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, Schroder may
have to replace the security with a lower yielding security, resulting in a
decreased return for investors. If the Portfolio experiences unexpected net
redemptions, Schroder may be forced to sell the Portfolio's higher rated
securities, resulting in a decline in the overall credit quality of the
Portfolio's portfolio and increasing the exposure of the Portfolio to the risks
of high yield/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 the Portfolio's original purchase of restricted securities,
it may negotiate rights with the issuer to have such securities registered for
sale at a later time. Further, the expenses of registration of restricted
securities that are illiquid may also be negotiated by the Portfolio with the
issuer at the time such securities are purchased by the Portfolio. When
registration is required, however, a considerable period may elapse between a
decision to sell the securities and the time the Portfolio would be permitted to
sell such securities. A similar delay might be experienced in attempting to
sell such securities pursuant to an exemption from registration. Thus, the
Portfolio may not be able to obtain as favorable a price as that prevailing at
the time of the decision to sell.

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

<PAGE>

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.

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

<PAGE>

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).

SEGREGATED ACCOUNT

In order to limit the risks involved in various transactions involving leverage,
the Trust's custodian will set and maintain in a segregated account cash, U.S.
Government Securities (or other assets as may be permitted by the SEC) in
accordance with SEC guidelines. The account's value, which is marked to market
daily, will be at least equal to the Fund's commitments under these
transactions. The Fund's commitments include the Fund's obligations to
repurchase securities under a reverse repurchase agreement and settle
when-issued and forward commitment transactions.

MARGIN AND SHORT SALES

Certain Funds may enter into short sales as described in the prospectus of that
Fund. The Funds may 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 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. 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

<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.

<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 (i) short-term U.S. Government Securities, (ii) certificates of
deposit, bankers' acceptances and interest-bearing savings deposits of
commercial banks doing business in the United States that have, at the time of
investment, 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, (iii) commercial paper of prime quality rated Prime-2 or higher by
Moody's or A-2 or higher by S&P or, if not rated, determined by the investment
adviser to be of comparable quality, (iv) repurchase agreements covering any of
the securities in which the Fund may invest directly and (v) money market mutual
funds.

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 invest all of their investable assets in a separate portfolio (each a "Core
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, Conservative Balanced Fund,
Moderate Balanced Fund, Growth Balanced Fund, Diversified Equity Fund and Growth
Equity Fund invest all of their 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,
Intermediate Government Income Fund, Income Fund, Limited Term Tax-Free Fund,
Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota Tax-Free Fund,
ValuGrowth Stock Fund and Contrarian Stock Fund invests directly in portfolio
securities.

<PAGE>

2. INFORMATION CONCERNING COLORADO AND MINNESOTA

Following is a brief summary of some of the factors that may affect the
financial condition of the State of Colorado and the State of Minnesota and
their respective political subdivisions. It is not a complete or comprehensive
description of these factors or an analysis of financial conditions and may not
be indicative of the financial condition of issuers of obligations held by
Colorado 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.

COLORADO

THE COLORADO STATE ECONOMY

Among the most significant sectors of the State's economy are services, trade,
manufacture of durable and non-durable goods and tourism. Between late 1984 and
mid-1987, the State's economy was adversely affected by numerous factors,
including the contraction of the energy sector, layoffs by advanced technology
firms and an excess supply of both residential and nonresidential buildings
causing employment in the construction sector to decline. As a result of these
conditions, certain areas of the State experienced particularly high
unemployment. Furthermore, in 1986, for the first time in 32 years, job
generation in the State was negative and, in 1986, for the first time in 21
years, the State experienced negative migration, with more people leaving the
State than moving in.

From 1987 through 1995, there has been moderate but steady improvement in the
Colorado economy: per-capita income increased approximately 48.4% (4.4% in
1995) and retail trade sales increased approximately 63.3% (5.2% in 1995). The
State's estimated growth rate is above the national growth rate and the State's
unemployment rate is still below the national unemployment rate (in 1995 the
State's unemployment rate was 4.2% and the United State's unemployment rate was
5.6%).

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 1995 refers to the fiscal year ended June 30, 1995.

The State derives all of its General Fund revenues from taxes. The two most
important sources of these revenues are sales and use taxes and personal income
taxes, which accounted for approximately 31.2% and 53.3%, respectively, of total
General Fund revenues during fiscal year 1994 and approximately 31.5% and 53.2%,
respectively, of total General Fund revenues during fiscal year 1995. The
ending General Fund balance for fiscal year 1994 was $405.1 million and for
fiscal year 1995 was approximately $396.7 million.

The Colorado Constitution contains strict limitations on the ability of the
State to create debt except under certain very limited circumstances. However,
the constitutional provision has been interpreted not to limit the ability of
the

<PAGE>

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, 1996, was given the highest rating
available for short-term obligations by S&P (SP-1+) and Fitch Investors Service,
Inc. (F-1+) (A rating on such notes was not requested from, and consequently no
rating was given by, Moody's) Because of the short-term nature of such notes,
their ratings should not be considered necessarily indicative of the State's
general financial condition.

TAX AND SPENDING LIMITATION AMENDMENT

On November 3, 1992, the Colorado voters approved a State constitutional
amendment (the "Amendment") that restricts the ability of the State and local
governments to increase taxes, revenues, debt and spending. The Amendment
provides that its provisions supersede conflicting State constitutional, State
statutory, charter or other State or local provisions.

The provisions of the Amendment apply to "districts," which are defined in the
Amendment as the State or any local government, with certain exclusions. Under
the terms of the Amendment, districts must have prior voter approval to impose
any new tax, tax rate increase, mill levy increase, valuation for assessment
ratio increase and extension of an expiring tax. Such prior voter approval is
also required, except in certain limited circumstances, for the creation of "any
multiple-fiscal year direct or indirect district debt or other financial
obligation." The Amendment prescribes the timing and procedures for any
elections required by the Amendment.

Because the Amendment's voter approval requirements apply to any "multiple
fiscal year" debt or financial obligation, short-term obligations which do not
extend beyond the fiscal year in which they are incurred are exempt from the
voter approval requirements of the Amendment. In addition, the Colorado Court
of Appeals has determined that lease purchase obligations subject to annual
appropriation are not subject to the voter approval requirements of the
Amendment. The Amendment's voter approval requirements and other limitations
(discussed in the following paragraph) do not apply to "enterprises," which are
defined in the Amendment as follows: "a government-owned business authorized to
issue its own revenue bonds and receiving under 10% of annual revenue in grants
from all Colorado state and local governments combined."

Among other provisions, the Amendment requires the establishment of emergency
reserves, limits increases in district revenues and limits increases in district
fiscal year spending. As a general matter, annual State fiscal year spending
may change not more than inflation plus the percentage change in State
population in the prior calendar year. Annual local district fiscal year
spending may change no more than inflation in the prior calendar year plus
annual local growth, as defined in and subject to the adjustments provided in
the Amendment. The Amendment provides that annual district property tax
revenues may change no more than inflation in the prior calendar year plus
annual local growth, as defined in and subject to the adjustments provided in
the Amendment. District revenues in excess of the limits prescribed by the
Amendment are required, absent voter approval, to be refunded by any reasonable
method, including temporary tax credits or rate reductions. In addition, the
Amendment prohibits new or increased real property transfer taxes, new State
real property taxes and new local district income taxes. The Amendment also
provides that a local district may reduce or end its subsidy to any program
(other than public education through grade 12 or as required by federal law)
delegated to it by the State General Assembly for administration.

This description is not intended to constitute a complete description of all of
the provisions of the Amendment. Furthermore, many provisions of the Amendment
and their application are unclear. Several statutes have been enacted since the
passage of the Amendment attempting to clarify the application of the Amendment
with respect to certain governmental entities and activities and numerous court
decisions have been rendered interpreting certain of the Amendment's provisions.
However, many provisions of the Amendment may require further legislative or
judicial clarification. The future impact of the Amendment on the financial
operations and obligations of the State and local governments in the State
cannot be determined at this time. Attempts to apply the provisions of the
Amendment to obligations issued prior to the approval of the Amendment may be
challenged as violation of protections afforded by the federal constitution
against impairment of contracts.

<PAGE>

MINNESOTA

The following information has been derived from the ECONOMIC REPORT TO THE
GOVERNOR for 1993 and 1994, prepared by the Economic Resource Group, and COMPARE
MINNESOTA: AN ECONOMIC AND STATISTICAL FACT BOOK 1994/1995 by the Minnesota
Department of Trade and Economic Development. More recent editions of such
publications were not available at the time this prospectus was prepared.

THE STRUCTURE OF THE MINNESOTA STATE'S ECONOMY

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

When viewed in 1993 on an aggregate level, the structure of the State's economy
parallels the structure of the United States economy as a whole. State
employment in 10 major sectors was distributed in approximately the same
proportions as national employment. In all sectors, the share of total State
employment was within 2 percentage points of national employment share.

Some unique characteristics of the State's economy are apparent in employment
concentrations in industries that comprise the durable goods and non-durable
goods manufacturing categories. In the durable goods industries, the State's
employment in 1993 was highly concentrated in industrial machinery, fabricated
metals, instruments and miscellaneous categories. Of particular importance is
the industrial machinery category in which 32.6 percent of the State's durable
goods employment was concentrated in 1993, as compared to 18.9 percent for the
United States as a whole. The emphasis is partly explained by the location in
the State of Ceridian, Unisys, IBM, Cray Research, and other computer equipment
manufacturers which are included in the industrial machinery classification.

The importance of the State's resource base for overall employment is apparent
in the employment mix in non-durable goods industries. In 1993, 29.4 percent of
the State's non-durable goods employment was concentrated in food and kindred
industries, and 19.1 percent in paper and allied industries. This compares to
21.4 percent and 8.8 percent, respectively, for comparable sectors in the
national economy. Both of these rely heavily on renewable resources in the
State. Over half of the State's acreage is devoted to agricultural purposes,
and nearly one-third to forestry. Printing and publishing is also relatively
more important in the State than in the U.S.

Mining is currently a less significant factor in the State economy than it once
was. Mining employment, primarily in the iron ore or taconite industry, dropped
from 17.3 thousand in 1979 to 7.4 thousand in 1993. It is not expected that
mining employment will return to 1979 levels. However, Minnesota retains
significant quantities of taconite as well as copper, nickel, cobalt, and peat
which may be utilized in the future.

EMPLOYMENT GROWTH IN THE STATE

In the period 1980 to 1993, overall employment growth in Minnesota lagged behind
national growth. However, manufacturing has been a strong sector, with
Minnesota employment outperforming its U.S. counterpart in both the 1980-1990
and 1990-1993 periods. Over 40 percent of the total increase in Minnesota
employment between the years 1983-1992 resulted from a 50.2 percent increase in
employees in the services industry during this period. Mining was the only
industry where employment decreased between 1983-1992 in both Minnesota and the
United States, dropping by almost 14 percent in Minnesota and 33 percent in the
United States.

In spite of a strong manufacturing sector, during the 1980 to 1990 period total
employment in Minnesota increased 18.1 percent while increasing 20.1 percent
nationally. Most of Minnesota's relatively slower growth is associated with
declining agricultural employment and with the two recessions in the U.S.
economy during the early 1980's which were more severe in Minnesota than
nationwide. Minnesota non-farm employment growth generally kept pace with the
nation in the period after the 1981-82 recession ended in late 1982. Employment
data through December, 1993 indicate the recession which began in July, 1990 was
less severe in Minnesota than in the national economy, and that Minnesota's
recovery has been more rapid than the nation's. Between 1990 and 1993,
Minnesota's non-farm employment grew 5.1 percent compared to only 0.7 percent
nationwide.

<PAGE>

PERFORMANCE OF THE STATE'S ECONOMY

Since 1980, State per capita personal income has been within three percentage
points of national per capita personal income. The State's per capita income,
which is computed by dividing personal income by total resident population, has
generally remained above the national average in spite of the early 1980's
recessions and some difficult years in agriculture. In 1992, Minnesota per
capita personal income was 101.6 percent of its U.S. counterpart.

In the level of personal income per capita, Minnesota ranked second among twelve
north central states in both 1990 and 1992. During the period 1983 to 1992,
Minnesota ranked first among such states in growth of personal income and third
during the period 1991 to 1992. Minnesota ranked seventeenth nationally and
second among the twelve north central states with a per capita disposable income
of $17,448 in 1992. During 1990-1992, wage and salary disbursements which
constitute some 60% of total personal income grew 12.3 percent in Minnesota as
compared to 8.3 percent for the United States. Personal income in Minnesota
grew more rapidly than eleven other north central states' averages during
1991-1992, and faster than the United States average. From 1983 to 1992,
Minnesota non-agricultural employment grew 27.4 percent while such employment in
the United States grew 19.7 percent. During the 1990-1993 period, Minnesota
non-agricultural employment increased 5.1 percent, while regional employment
increased 1.3 percent.

Retail sales in Minnesota increased an average of 5.9 percent per year,
compounded, between 1983 and 1992. This growth, however, was not uniform from
year to year. Retail sales grew only 3.4 percent in 1982, a recession year, and
3.0 percent in 1985, while growing 12.1 percent in 1984, and 2.0 percent in
1986.

During 1992 and 1993, the State's monthly unemployment rate was generally less
than the national unemployment rate, averaging 5.1 percent in 1993, as compared
to the national average of 7.4 percent.

POPULATION TRENDS IN THE STATE

Minnesota resident population grew from 4,085,000 in 1980 to 4,390,000 in 1990,
or at an average annual compound rate of 0.7 percent. In comparison, U.S.
population grew at an annual compound rate of 0.9 percent during this period.
Minnesota resident population was 4,625,000 in 1995. Minnesota population is
currently forecast to grow at an annual compound rate of 0.6 percent between
1990 and 2000.

3. INVESTMENT LIMITATIONS

For purposes of all fundamental and nonfundamental investment policies of the
Fund, (i) the term 1940 Act includes the rules thereunder, SEC interpretations
and any exemptive order upon which the Fund may rely and (ii) 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 (i) more than 50% of the outstanding shares of the Fund or (ii) 67% of
the shares of the Fund present or represented at a shareholders meeting at which
the holders of more than 50% of the outstanding shares of the Fund are present
or represented.

<PAGE>

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 (i)
more than 5% of the Fund's total assets would be invested in the
securities of a single issuer, or (ii) the Fund would own more than
10% of the outstanding voting securities of any single issuer

(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 conducting their principal
business activities in the same industry; provided, (i) there is no
limit on investments in U.S. Government Securities, in repurchase
agreements covering U.S. Government Securities or in foreign
government securities, (ii) municipal securities are not treated as
involving a single industry, (iii) there is no limit on investment in
issuers domiciled in a single country, (iv) financial service
companies are classified according to the end users of their services
(for example, automobile finance, bank finance and diversified
finance) and (v) utility companies are classified according to their
services (for example, gas, gas transmission, electric and gas,
electric and telephone); and provided the Fund will invest more than
25% of the value of the Fund's total assets in obligations of domestic
and foreign financial institutions and their holding companies.
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, (i) there is no limit on investments in U.S. Government
Securities, in repurchase agreements covering U.S. Government
Securities, in foreign government securities, or in obligations of
domestic commercial banks (including U.S. branches of foreign banks
subject to regulations under U.S. laws applicable to domestic banks
and, to the extent that its parent is unconditionally liable for the
obligation, foreign branches of U.S. banks), (ii) municipal securities
are not treated as involving a single industry, (iii) there is no
limit on investment in issuers domiciled in a single country, (iv)
financial service companies are classified according to the end users
of their services (for example, automobile finance, bank finance and
diversified finance) and (v) utility companies are classified
according to their services (for example, gas, gas transmission,
electric and gas, electric and telephone). 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

<PAGE>

industry; provided, (i) there is no limit on investments in repurchase
agreements covering U.S. Government Securities or (ii) municipal
securities are not treated as involving a single industry, (iii)
financial service companies are classified according to the end users
of their services (for example, automobile finance, bank finance and
diversified finance) and (iv) 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, (i) there is no limit on investments
in U.S. Government Securities, or in repurchase agreements covering
U.S. Government Securities, (ii) 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, (iii) financial service companies are
classified according to the end users of their services (for example,
automobile finance, bank finance and diversified finance), (iv)
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, (i) 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, (iii) financial
service companies are classified according to the end users of their
services (for example, automobile finance, bank finance and
diversified finance) and (iv) 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, [SHORT GOVERNMENT INCOME FUND], INTERMEDIATE
GOVERNMENT INCOME FUND, DIVERSIFIED BOND FUND, CONSERVATIVE BALANCED
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

<PAGE>

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, (i) there is no limit on investments in U.S.
Government Securities, or in repurchase agreements covering U.S.
Government Securities, (ii) there is no limit on investment in issuers
domiciled in a single country, (iii) financial service companies are
classified according to the end users of their services (for example,
automobile finance, bank finance and diversified finance) and (iv)
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, [SHORT GOVERNMENT INCOME FUND], INTERMEDIATE
GOVERNMENT INCOME FUND, DIVERSIFIED BOND FUND, CONSERVATIVE BALANCED
FUND, MODERATE BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE
BALANCED 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.

<PAGE>

(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], 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

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 (i) 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, (ii) with respect to 50% of its assets, the Fund
would own more than 10% of the outstanding securities of any single
issuer, or (iii) more than 25% of the Fund's total assets would be
invested in the securities of any single issuer.

<PAGE>

(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, [SHORT
GOVERNMENT INCOME FUND], INTERMEDIATE GOVERNMENT INCOME FUND, DIVERSIFIED
BOND FUND, CONSERVATIVE BALANCED 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,
SMALL COMPANY GROWTH FUND and INTERNATIONAL FUND establish a segregated
account to limit the amount of leveraging with respect to certain
investment techniques, they do not treat those techniques as involving
borrowings for purposes of this or other borrowing limitations.

(3) ILLIQUID SECURITIES

(a) EACH MONEY MARKET FUND may not acquire securities or invest in
repurchase agreements with respect to any securities if, as a result,
more than 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 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

<PAGE>

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

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 (i) more than 5% of the value of the
Fund's net assets would will be invested in warrants (valued at the lower
of cost or market) or (ii) more than 2% of the value of the Fund's net
assets would be invested in warrants which are not listed on the New York
Stock Exchange or the American Stock Exchange; provided, that warrants
acquired by a Fund attached to securities are deemed to have no value.

(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.

<PAGE>

(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.

4. PERFORMANCE AND ADVERTISING DATA

Quotations of performance may from time to time be used in advertisements, sales
literature, shareholder reports or other communications to shareholders or
prospective investors. All performance information supplied by the Funds is
historical and is not intended to indicate future returns. Each Fund's yield
and total return fluctuate in response to market conditions and other factors.
The value of a Fund's shares when redeemed may be more or less than their
original cost. There can be no assurance that the Money Market Funds will be
able maintain a stable net asset value of $1.00. For purposes of advertising
performance, and in accordance with SEC interpretations, Small Cap Opportunities
Fund may refer to the performance of Core Portfolio in which it invests
(Schroder U.S. Smaller 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

<PAGE>

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

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

<PAGE>

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:

P(1+T)n = 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:

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 trust funds with investment objectives and investment policies
substantially similar to those of 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 to reflect those Funds 1994 estimate of their expense ratios for
the first year of operations as a mutual fund. The collective investment funds
were not registered under the 1940 Act or subject to certain investment
restrictions that are imposed by the Act. If the collective investment fund had
been registered under the 1040 Act, the collective

43
<PAGE>

investment fund historical return may have been adversely affected. 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 (i) portfolio holdings and portfolio allocation as
of certain dates, such as portfolio diversification by instrument type, by
instrument, by location of issuer or by maturity, (ii) statements or
illustrations relating to the appropriateness of types of securities and/or
mutual funds that may be employed by an investor to meet specific financial
goals, such as funding retirement, paying for children's education and
financially supporting aging parents, (iv) information (including charts and
illustrations) showing the effects of compounding interest (compounding is the
process of earning interest on principal plus interest that was earned earlier;
interest can be compounded at different intervals, such as annually, quartile or
daily), (v) information relating to inflation and its effects on the dollar; for
example, after ten years the purchasing power of $25,000 would shrink to
$16,621, $14,968, $13,465 and $12,100, respectively, if the annual rates of
inflation were 4%, 5%, 6% and 7%, respectively, (vi) information regarding the
effects of automatic investment and systematic withdrawal plans, including the
principal of dollar cost averaging, (vii) descriptions of the Funds' portfolio
managers and the portfolio management staff of the Investment Advisers or
summaries of the views of the portfolio managers with respect to the financial
markets, (viii) the results of a hypothetical investment in a Fund over a given
number of years, including the amount that the investment would be at the end of
the period, (ix) the effects of earning Federally and, if applicable, state
tax-exempt income from a Fund or investing in a tax-deferred account, such as an
individual retirement account or Section 401(k) pension plan and (x) the net
asset value, net assets or number of shareholders of a Fund as of one or more
dates.

As an example of compounding, $1,000 compounded annually at 9.00% will grow to
$1,090 at the end of the first year (an increase in $90) and $1,118 at the end
of the second year (an increase in $98). The extra $8 that was earned on the
$90 interest from the first year is the compound interest. One thousand dollars
compounded annually at 9.00% will grow to $2,367 at the end of ten years and
$5,604 at the end of 20 years. Other examples of compounding are as follows: at
7% and 12% annually, $1,000 will grow to $1,967 and $3,106, respectively, at the
end of ten years and $3,870 and $9,646, respectively, at the end of twenty
years. These examples are 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:

<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.

5. MANAGEMENT

Those officers, as well as certain other officers and Trustees of the Trust, may
be directors, officers or employees of (and persons providing services to the
Trust may include) Forum, its affiliates or certain non-banking affiliates of
Norwest.

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.

John Y. Keffer, Chairman and President,* Age 54.

45
<PAGE>

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.

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

<PAGE>

- 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 54.

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 48.

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.

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

<PAGE>

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, 1996, which was the fiscal year end of all of the
Trust's portfolios.

Total Compensation From
Total Compensation the Trust and Norwest
From the Trust Select Funds
------------------ -----------------------

Mr. Brown $28,974 $29,000
Mr. 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,
1996 total expenses of the Trustees (other than Mr. Keffer) was $30,408 and
total expenses of the trustees of Norwest Select Funds was $27.

As of October 1, 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."

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.

<PAGE>

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" above.

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).

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

<PAGE>

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.

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.

<PAGE>

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.
<PAGE>

(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."
below. 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 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 (i) by the Board or by a vote of a majority
of the outstanding voting securities of the Fund to the Adviser or (ii) 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

<PAGE>

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, 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 Tax-Free Fund, Conservative
Balanced Fund, Moderate Balanced Fund, Growth Balanced 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, 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 (i) by the applicable Trust Board or by vote of a majority of the
outstanding voting interests of the Portfolio, and, in either case, (ii) 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 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 (i) by the Board or by
vote of a majority of the outstanding voting securities of the applicable Fund,
and, in either case, (ii) 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.

<PAGE>

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.

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

<PAGE>

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 (i) by the Board or by
vote of a majority of the outstanding voting securities of the Fund, and, in
either case, (ii) 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, Conservative Balanced
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. [As of October 1, 1997, for its services under
the Sub-Investment Advisory Agreement, Norwest pays Galliard a fee based on each
Fund's average daily net assets at an annual rate of _____%.]

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).

<PAGE>

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, Conservative Balanced 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.[ As of October 1, 1997,
for its services under the Sub-Investment Advisory Agreement, Norwest pays
Peregrine a fee based on each Fund's average daily net assets at an annual rate
of ____%.]

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 (i) by the Board or by
vote of a majority of the outstanding voting securities of the Funds, and, in
either case, (ii) 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 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.

<PAGE>

UNITED CAPITAL MANAGEMENT

To assist Norwest in carrying out its obligations under the Investment Advisory
Agreement with Diversified Bond Fund, Total Return Bond Fund, Conservative
Balanced 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.[ As of October 1, 1997, for its services under the Sub-Investment
Advisory Agreement, Norwest pays UCM a fee based on each Fund's average daily
net assets at an annual rate of _____%.]

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 (i) by the Board or by
vote of a majority of the outstanding voting securities of the Funds, and, in
either case, (ii) 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
Subadvisory Agreement. The Investment Subadvisory Agreements provides that UCM
may render services to others.

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 (i) oversees (A) the
preparation and maintenance by the Advisers and the Trust's administrator,
custodian, transfer agent, dividend disbursing agent and fund accountant (or if
appropriate, prepares and maintains) in such form, for such periods and in such
locations as may be required

<PAGE>

by applicable law, of all documents and records relating to the operation of the
Trust required to be prepared or maintained by the Trust or its agents pursuant
to applicable law; (B) the reconciliation of account information and balances
among the Advisers and the Trust's custodian, transfer agent, dividend
disbursing agent and fund accountant; (C) the transmission of purchase and
redemption orders for Shares; (D) the notification of the Advisers of available
funds for investment; and (E) the performance of fund accounting, including the
calculation of the net asset value per Share; (ii) oversees the Trust's receipt
of the services of persons competent to perform such supervisory, administrative
and clerical functions as are necessary to provide effective operation of the
Trust; (iii) oversees the performance of administrative and professional
services rendered to the Trust by others, including its administrator,
custodian, transfer agent, dividend disbursing agent and fund accountant, as
well as accounting, auditing, legal and other services performed for the Trust;
(iv) provides the Trust with adequate general office space and facilities and
provides, at the Trust's request and expense, persons suitable to the Board to
serve as officers of the Trust; (v) oversees the preparation and the printing of
the periodic updating of the Trust's registration statement, Prospectuses and
SAIs, the Trust's tax returns, and reports to its shareholders, the SEC and
state and other securities administrators; (vi) oversees the preparation of
proxy and information statements and any other communications to shareholders;
(vii) with the cooperation of the Trust's counsel, Investment Advisers and other
relevant parties, oversees the preparation and dissemination of materials for
meetings of the Board; (viii) oversees the preparation, filing and maintenance
of the Trust's governing documents, including the Trust Instrument, Bylaws and
minutes of meetings of Trustees, Board committees and shareholders; (ix)
oversees registration and sale of Fund shares, to ensure that such shares are
properly and duly registered with the SEC and applicable state and other
securities commissions; (x) oversees the calculation of performance data for
dissemination to information services covering the investment company industry,
sales literature of the Trust and other appropriate purposes; (xi) 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; (xii) reviews and negotiates
on behalf of the Trust normal course of business contracts and agreements;
(xiii) maintains and reviews periodically the Trust's fidelity bond and errors
and omission insurance coverage; and (xiv) advises the Trust and the Board on
matters concerning the Trust and its affairs.

The Management Agreement terminates automatically if assigned and may be
terminated without penalty with respect to any Fund by vote of that Fund's
shareholders or by either party on not more than 60 days' nor less than 30 days'
written notice. The Management Agreement also provides that neither Forum nor
its personnel shall be liable for any error of judgment or mistake of law or for
any act or omission in the administration or management of the Trust, except for
willful misfeasance, bad faith or gross negligence in the performance of Forum's
or their duties or by reason of reckless disregard of their obligations and
duties under the Management Agreement.

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 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 (i) 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; (ii) assists in the preparation and
the printing and the periodic updating of the Trust's registration statement,
Prospectuses and SAIs, the Trust's tax returns, and reports to its shareholders,
the SEC and state and other securities administrators; (iii) assists in the
preparation of proxy and information statements and any other communications to
shareholders; (iv) assists the Advisers in monitoring Fund holdings for
compliance with Prospectus and SAI investment restrictions and assist in
preparation of periodic compliance reports; (v) with the cooperation of the
Trust's counsel, 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; (vi) is responsible for preparing, filing
and maintaining the Trust's governing documents, including the Trust Instrument,
Bylaws and minutes of meetings of Trustees, Board committees and shareholders;
(vii) is responsible

<PAGE>

for maintaining the Trust's existence and good standing under state law; (viii)
monitors sales of shares and ensures that such shares are properly and duly
registered with the SEC and applicable state and other securities commissions;
(ix) is responsible for the calculation of performance data for dissemination to
information services covering the investment company industry, sales literature
of the Trust and other appropriate purposes; and (x) 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.

[The Administration Agreement became effective on June 1, 1997.]

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.

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

<PAGE>

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.

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

<PAGE>

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 (i) by the Board or by a vote of the
Fund's shareholders or, with respect to each class of a Fund for which there is
an effective plan of distribution adopted pursuant to Rule 12b-1, a majority of
12b-1 Trustees, on 60 days' written notice to Forum or (ii) by Forum on 60 days'
written notice to the Trust.

Under the Distribution Services Agreement related to the 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.

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: (i) the 12b-1 Trustees acting in good
faith have determined that termination is in the best interest of the Trust and
the shareholders of the Fund; (ii) the Trust does not alter the terms of the
CDSC applicable to the B Shares of the Fund outstanding at the time of the
termination; (iii) the Trust does not pay any portion of the asset based sales
charge or service fees to an entity other than the distributor or its assignee
(unless the distributor at the time of the termination was in material breach
under the Distribution Agreement in respect of the Fund); and (iv) the Fund does
not adopt a distribution plan relating to a class of shares of the Fund that has
a sales load structure substantially similar (as defined in the Plan) to that of
the B shares.

<PAGE>

In the event of a termination of the Plan that does not satisfy clauses (ii),
(iii) and (iv) of the definition of a Complete Termination above, Ready Cash
Investment Fund, ValuGrowth Stock Fund, Small Company Stock Fund, Contrarian
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: (i) 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; (ii) assisting shareholders in initiating and changing
account designations and addresses; (iii) providing necessary personnel and
facilities to establish and maintain shareholder accounts and records, (iv)
assisting in processing purchase and redemption transactions and receiving wired
funds; (v) transmitting and receiving funds in connection with customer orders
to purchase or redeem shares; (vi) verifying shareholder signatures in
connection with changes in the registration of shareholder accounts; (vii)
furnishing periodic statements and confirmations of purchases and redemptions;
(viii) transmitting proxy statements, annual reports, prospectuses and other
communications from the Trust to its shareholders; (ix) receiving, tabulating
and transmitting to the Trust proxies executed by shareholders with respect to
meetings of shareholders of the Trust; and (x) 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

<PAGE>

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: (i) 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 (ii) Funds requiring international custody -
$1,000/month, (iii) Funds with more than 30 international positions -
$1,000/month, (iv) Tax free money market Funds - $1,000/month, (v) Funds with
more than 25% of net assets invested in asset backed securities - $1,000/month,
Funds with more than 50% of net assets invested in asset backed securities -
$2,000/month, (vii) Funds with more than 100 security positions - $1,000/month
and (viii) 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 (i) 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

<PAGE>

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:
(i) interest charges, taxes, brokerage fees and commissions; (ii) certain
insurance premiums; (iii) fees, interest charges and expenses of the Trust's
custodian, transfer agent and dividend disbursing agent; (iv) telecommunications
expenses; (v) auditing, legal and compliance expenses; (vi) costs of the Trust's
formation and maintaining its existence; (vii) costs of preparing and printing
the Trust's prospectuses, statements of additional information, account
application forms and shareholder reports and delivering them to existing and
prospective shareholders; (viii) costs of maintaining books of original entry
for portfolio and fund accounting and other required books and accounts and of
calculating the net asset value of shares of the Trust; (ix) costs of
reproduction, stationery and supplies; (x) compensation of the Trust's trustees,
officers and employees and costs of other personnel performing services for the
Trust who are not officers of Norwest, Forum or affiliated persons of Norwest or
Forum; (xi) costs of corporate meetings; (xii) registration fees and related
expenses for registration with the SEC and the securities regulatory authorities
of other countries in which the Trust's shares are sold; (xiii) state securities
law registration fees and related expenses; (xiv) fees and out-of-pocket
expenses payable to Forum Financial Services, Inc. under any distribution,
management or similar agreement; (xv) and all other fees and expenses paid by
the Trust pursuant to any distribution or shareholder service plan adopted
pursuant to Rule 12b-1 under the Act.

6. 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

<PAGE>

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 (i) at least as favorable as commissions
contemporaneously charged by the affiliate on comparable transactions for its
most favored unaffiliated customers and (ii) at least as favorable as those
which would be charged on comparable transactions by other qualified brokers
having comparable execution capability. The Board, including a majority of the
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.

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

<PAGE>

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.

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 (i) to the Fund or Portfolio or
(ii) 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 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

<PAGE>

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 (i) received
the greatest amount of brokerage commissions during the Fund's last fiscal year,
(ii) engaged in the largest amount of principal transactions for portfolio
transactions of the Fund during the Fund's last fiscal year or (iii) sold the
largest amount of the Fund's shares during the Fund's last fiscal year.
Following is a list of the regular brokers and dealers of the Funds whose
securities (or the securities of the parent company) were acquired during the
past fiscal year and the aggregate value of the Funds' holdings of those
securities as of May 31, 1996.

Regular Broker Value of
Or Dealer Securities Held
-------------- ---------------
CASH INVESTMENT FUND Bear, Stearns & Company $75,000,000
CS First Boston $15,000,000
Merrill Lynch & Co. $47,497,784
Morgan Stanley $345,781,386

READY CASH INVESTMENT FUND Bear, Stearns & Company $50,000,000
CS First Boston $10,000,000
Merrill Lynch & Co. $37,499,817
Morgan Stanley $55,000,000

U.S. GOVERNMENT FUND Bank of America Securities 345,781,386

TREASURY FUND None 0

MUNICIPAL MONEY MARKET FUND None 0

STABLE INCOME FUND Lehman Brothers Holdings 1,043,889

INTERMEDIATE GOVERNMENT FUND None 0

DIVERSIFIED BOND FUND Lehman Brothers Holdings 1,092,216
Paine Webber Group, Inc. 991,450
Dean 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

CONSERVATIVE BALANCED FUND Charles Schwab Corporation 187,544
Dean Witter 293,598
Paine Webber Group, Inc. 495,725
Salomon Brothers Inc. 497,433

<PAGE>

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

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 continue for Federal tax
purposes, less than 30% of the annual gross income of the Fund must be desired
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.

<PAGE>

7. 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 November 30, 1996. The maximum sales charges
as of November 30, 1996 was 4.5% for each Equity Fund and 3.75% 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 4.5% would equal
0.045).

Net Asset Offering
Value per Share Price
--------------- --------
Stable Income Fund $10.27 $10.42
Intermediate Government Income Fund $11.17 $11.59
Income Fund $ 9.59 $ 9.95
Total Return Bond Fund $ 9.66 $10.02
Tax-Free Income Fund $10.13 $10.51
Colorado Tax-Free Fund $10.25 $10.63
Minnesota Tax-Free Fund $10.69 $11.09
Income Equity Fund $30.60 $31.98
ValuGrowth Stock Fund $25.35 $26.49
Diversified Equity Fund $33.32 $34.82
Growth Equity Fund $30.32 $31.68
Small Company Stock Fund $13.94 $14.57
Small Cap Opportunities Fund $17.80 $18.60
Contrarian Stock Fund $10.46 $10.93
International Fund $20.16 $21.07

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

<PAGE>

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.

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.

<PAGE>

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 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

<PAGE>

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.

<PAGE>
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 (i) redemptions of shares acquired through the reinvestment
of dividends and distributions, (ii) involuntary redemptions by a Fund of
shareholder accounts with low account balances, (iii) redemptions of shares
following the death or disability of a shareholder if the Fund is notified
within one year of the shareholder's death or disability, (iv) redemptions to
effect a distribution (other than a lump sum distribution) from an IRA, Keogh
plan or Section 403(b) custodial account or from a qualified retirement plan.
For these purposes, the term disability shall have the meaning ascribed thereto
in Section 72(m)(7) of the Code. Under that provision, a person is considered
disabled if the person is unable to engage in any substantial activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or to be of long-continued and indefinite duration.
Appropriate documentation satisfactory to the Fund is required to substantiate
any shareholder death or disability.

CONVERSION OF B SHARES 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 (i) 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 (ii) 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.

8. TAXATION

Each Fund intends for each taxable year to qualify for tax treatment as a
"regulated investment company" under the Code. Such qualification does not, of
course, involve governmental supervision of management or investment practices
or policies. Investors should consult their own counsel for a complete
understanding of the requirements each Fund must meet to qualify for such
treatment, and of the application of state and local tax laws to his or her
particular situation.

Since each Money Market Fund and Fixed Income Fund expects to derive
substantially all of its gross income (exclusive of capital gains) from sources
other than dividends, it is expected that none of 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 at the end of each taxable year
will be "marked to market" and treated for Federal income tax purposes as though
sold for fair market value on the last business day of such taxable year. Gain
or loss realized by a Fund on section 1256 contracts generally will be

<PAGE>

considered 60% long-term and 40% short-term capital gain or loss. Each Fund can
elect to exempt its section 1256 contracts which are part of a "mixed straddle"
(as described below) from the application of section 1256.

With respect to over-the-counter put and call options, gain or loss realized by
a Fund upon the lapse or sale of such options held by such Fund will be either
long-term or short-term capital gain or loss depending upon the Fund's holding
period with respect to such option. However, gain or loss realized upon the
lapse or closing out of such options that are written by a Fund will be treated
as short-term capital gain or loss. In general, if a Fund exercises an option,
or an option that a Fund has written is exercised, gain or loss on the option
will not be separately recognized but the premium received or paid will be
included in the calculation of gain or loss upon disposition of the property
underlying the option.

Any option, futures contract, or other position entered into or held by a Fund
in conjunction with any other position held by such Fund may constitute a
"straddle" for Federal income tax purposes. A straddle of which at least one,
but not all, the positions are section 1256 contracts may constitute a "mixed
straddle". In general, straddles are subject to certain rules that may affect
the character and timing of a Fund's gains and losses with respect to straddle
positions by requiring, among other things, that: (i) loss realized on
disposition of one position of a straddle not be recognized to the extent that a
Fund has unrealized gains with respect to the other position in such straddle;
(ii) a Fund's holding period in straddle positions be suspended while the
straddle exists (possibly resulting in gain being treated as short-term capital
gain rather than long-term capital gain); (iii) losses recognized with respect
to certain straddle positions which are part of a mixed straddle and which are
non-section 1256 positions be treated as 60% long-term and 40% short-term
capital loss; (iv) losses recognized with respect to certain straddle positions
which would otherwise constitute short-term capital losses be treated as
long-term capital losses; and (v) the deduction of interest and carrying charges
attributable to certain straddle positions may be deferred. Various elections
are available to a Fund which may mitigate the effects of the straddle rules,
particularly with respect to mixed straddles. In general, the straddle rules
described above do not apply to any straddles held by a Fund all of the
offsetting positions of which consist of section 1256 contracts.

A Fund's investments in zero coupon securities will be subject to special
provisions of the Code which may cause the Fund to recognize income without
receiving cash necessary to pay dividends or make distributions in amounts
necessary to satisfy the distribution requirements for avoiding federal income
and excise taxes. In order to satisfy those distribution requirements the Fund
may be forced to sell other portfolio securities.

Each shareholder of Small Cap Opportunities Fund and International Fund should
include in the shareholder's report of gross income in his Federal income tax
return cash dividends received by the shareholder from the Fund. International
Fund shareholders should also include the amount which the Fund advises the
shareholder is the shareholder's pro rata portion, if any, of foreign income
taxes paid with respect to, or withheld from, dividends and interest paid to
International Portfolio from its foreign investments. Each shareholder then
would be entitled, subject to certain limitations, to take a foreign tax credit
against the shareholders' Federal income tax liability for the amount of such
foreign taxes or else to deduct such foreign taxes as an itemized deduction from
gross income.

9. 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

<PAGE>

maturity greater than 397 days or subject to a repurchase agreement having a
duration of greater than 397 days, will limit portfolio investments, including
repurchase agreements, to those U.S. dollar-denominated instruments that the
Board has determined present minimal credit risks and will comply with certain
reporting and recordkeeping procedures. The Trust has also established
procedures to ensure that portfolio securities meet the Funds' high quality
criteria.

COUNSEL AND AUDITORS

Legal matters in connection with the issuance of shares of beneficial interest
of the Trust are passed upon by the law firm of Seward & Kissel, One Battery
Park Plaza, New York, NY 10004.

KPMG Peat Marwick LLP, 99 High Street, Boston, MA 02110, independent auditors,
served as the independent auditors for the Trust for the fiscal years ended May
31, 1996, 1995 and 1994, as well as for the fiscal year ended October 31, 1995
for those Funds that had that fiscal year end. 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 twenty eight 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 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 (i) a court refuses
to apply Delaware law, (ii) no contractual limitation of liability is in effect,
and (iii) the Trust itself is unable to meet its obligations. In light of
Delaware law, the nature of the Trust's business, and the nature of its assets,
the Board believes that the risk of personal liability to a Trust shareholder is
extremely remote.

In order to 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.

<PAGE>

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 May 1, 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.

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.

<PAGE>

APPENDIX A - DESCRIPTION OF SECURITIES RATINGS

MUNICIPAL AND CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)

MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")

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

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

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

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

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

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

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

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

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

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

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, INC. ("FITCH")

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

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

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

Moody's rates preferred stock as follows:

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

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

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

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

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

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

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

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

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

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

STANDARD & POOR'S CORPORATION

S&P rates preferred stock as follows:

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

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

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

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, INC. Moody's highest rating for short-term municipal
loans is MIG-1/VMIG-1. A rating of MIG-1/VMIG-1 denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broadbased access to the market for refinancing. Loans bearing
the MIG-2/VMIG-2 designation are of high quality. Margins of protection are
ample although not so large as in the MIG-1/VMIG-1 group. A rating of MIG
3/VMIG 3 denotes favorable quality. All security elements are accounted for but
there is lacking the undeniable strength of the preceding grades. Liquidity and
cash flow protection may be narrow and market access for refinancing is likely
to be less well established. A rating of MIG 4/VMIG 4 denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.

STANDARD & POOR'S RATING GROUP. S&P's highest rating for short-term municipal
loans is SP-1. S&P states that short-term municipal securities bearing the SP-1
designation have very strong or strong capacity to pay principal and interest.
Those issues rated SP-1 which are determined to possess overwhelming safety
characteristics will be given a plus (+) designation. Issues rated SP-2 have
satisfactory capacity to pay principal and interest. Issues rated SP-3 have
speculative capacity to pay principal and interest.

FITCH INVESTORS SERVICE, INC. Fitch's short-term ratings apply to debt
obligations that are payable on demand or have original maturities of generally
up to three years, including commercial paper, certificates of deposit,
medium-term notes, and municipal and investment notes.

Short-term issues rated F-1+ are regarded as having the strongest degree of
assurance for timely payment. Issues assigned a rating of F-1 reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
Issues assigned a rating of F-2 have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for issues assigned
F-1+ or F-1.

A-5

<PAGE>

OTHER MUNICIPAL SECURITIES AND COMMERCIAL PAPER

MOODY'S INVESTORS SERVICE, INC.

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

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

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

STANDARD AND POOR'S CORPORATION

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

FITCH INVESTORS SERVICE, INC.

Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.

F-1+. Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.

F-1. Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.

A-6

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.

Advisory Fee Advisory Fee Advisory Fee
Payable Waived Retained
------------ ------------ ------------
CASH INVESTMENT FUND
Year Ended May 31, 1997
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
Year Ended May 31, 1997
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
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
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
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
Year Ended May 31, 1996 106,127 0 106,127
Year End October 31, 1995 114,429 0 114,429

INTERMEDIATE GOVERNMENT INCOME FUND
Year Ended May 31, 1997
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
Year Ended May 31, 1996 344,777 0 344,777
Year End October 31, 1995 607,061 0 607,061

B-1

<PAGE>

Advisory Fee Advisory Fee Advisory Fee
Payable Waived Retained
------------ ------------ ------------
INCOME FUND
Year Ended May 31, 1997
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
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
Year Ended May 31, 1996 N/A N/A N/A

TAX-FREE INCOME FUND
Year Ended May 31, 1997
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
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
Year Ended May 31, 1996 154,733 154,733 0
Year Ended May 31, 1995 67,504 67,504 0

CONSERVATIVE BALANCED FUND
Year Ended May 31, 1997
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
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
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
Year Ended May 31, 1996 227,790 0 227,790
Year End October 31, 1995 187,584 0 187,584

B-2
<PAGE>

Advisory Fee Advisory Fee Advisory Fee
Payable Waived Retained
------------ ------------ ------------
INDEX FUND
Year Ended May 31, 1997
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
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
Year Ended May 31, 1996 3,038,858 0 3,038,858
Year End October 31, 1995 3,737,147 0 3,737,147

GROWTH EQUITY FUND
Year Ended May 31, 1997
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
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
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
Year Ended May 31, 1996 1,653,578 0 1,653,578
Year End October 31, 1995 1,984,348 0 1,984,348

CONTRARIAN STOCK FUND
Year Ended May 31, 1997
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
Year Ended May 31, 1996 316,701 0 316,701
Year End October 31, 1995 367,007 0 367,007

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

B-3

<PAGE>

TABLE 2 - MANAGEMENT FEES

The following table shows the dollar amount of fees payable to (i) Forum for its
management services with respect to each Fund (or class thereof for those
periods when multiple classes were outstanding), (ii) Norwest for its
administrative services with respect to International Fund and (iii) Forum with
respect to its administrative securities with respect to International
Portfolio. Also shown are the amount of fees that were waived by Forum and
Norwest, if any, and the actual fees received by Forum and Norwest. The data is
for the past three fiscal years or shorter period if the Fund has been in
operation for a shorter period.

(I) MANAGEMENT FEES TO FORUM

Management Management Management
Fee Fee Fee
Payable Waived Retained
---------- ---------- ----------
CASH INVESTMENT FUND
Year Ended May 31, 1997
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
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
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
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
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
Year Ended May 31, 1996 273 273 0
Year Ended May 31, 1995 417 331 86

MUNICIPAL MONEY MARKET FUND
Investor Shares
Year Ended May 31, 1997
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
Year Ended May 31, 1996 990,763 814,669 176,094
Year Ended May 31, 1995 481,393 393,600 87,793

B-4

<PAGE>

Management Management Management
Fee Fee Fee
Payable Waived Retained
---------- ---------- ----------
STABLE INCOME FUND
A Shares
Year Ended May 31, 1997
Year Ended May 31, 1996 623 623 0
B Shares
Year Ended May 31, 1997
Year Ended May 31, 1996 33 33 0
I Shares
Year Ended May 31, 1997
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
Year Ended May 31, 1996 666 666 0
B Shares
Year Ended May 31, 1997
Year Ended May 31, 1996 412 412 0
I Shares
Year Ended May 31, 1997
Year Ended May 31, 1996 41,991 41,991 0
Year End October 31, 1995 48,716 48,716 0

DIVERSIFIED BOND FUND
I Shares
Year Ended May 31, 1996 98,508 69,269 29,239
Year Ended October 31, 1995 173,446 147,461 25,985

INCOME FUND
A Shares
Year Ended May 31, 1997
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
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
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
Year Ended May 31, 1996 2,416 2,416 0
Year Ended May 31, 1995 674 674 0

B-5

<PAGE>

Management Management Management
Fee Fee Fee
Payable Waived Retained
---------- ---------- ----------
B Shares
Year Ended May 31, 1997
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
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
Year Ended May 31, 1996 N/A N/A N/A
B Shares
Year Ended May 31, 1997
Year Ended May 31, 1996 N/A N/A N/A
I Shares
Year Ended May 31, 1997
Year Ended May 31, 1996 N/A N/A N/A

TAX-FREE INCOME FUND
A Shares
Year Ended May 31, 1997
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
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
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
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
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
Year Ended May 31, 1996 49,153 41,507 7,646
Year Ended May 31, 1995 37,392 31,974 5,418

B-6

<PAGE>

Management Management Management
Fee Fee Fee
Payable Waived Retained
---------- ---------- ----------
MINNESOTA TAX-FREE FUND
A Shares
Year Ended May 31, 1997
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
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
Year Ended May 31, 1996 4,098 2,630 1,468
Year Ended May 31, 1995 1,781 1,622 159

CONSERVATIVE BALANCED FUND
Year Ended May 31, 1997
Year Ended May 31, 1996 83,673 69,584 14,089
Year Ended October 31, 1995 121,634 121,634 0

MODERATE BALANCED FUND
Year Ended May 31, 1997
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
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
Year Ended May 31, 1996 1,196 1,196 0
B Shares
Year Ended May 31, 1997
Year Ended May 31, 1996 670 670 0
I Shares
Year Ended May 31, 1997
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
Year Ended May 31, 1996 128,916 93,961 34,955
Year Ended October 31, 1995 141,917 141,917 0

Management Management Management
Fee Fee Fee
Payable Waived Retained
---------- ---------- ----------

VALUGROWTH STOCK FUND
A Shares
Year Ended May 31, 1997

B-7

<PAGE>

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
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
Year Ended May 31, 1996 297,630 147,086 150,544
Year Ended May 31, 1995 253,243 148,800 104,443

DIVERSIFIED EQUITY FUND
A Shares
Year Ended May 31, 1997
Year Ended May 31, 1996 99 99 0
B Shares
Year Ended May 31, 1997
Year Ended May 31, 1996 96 96 0
I Shares
Year Ended May 31, 1997
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
Year Ended May 31, 1996 100 100 0
B Shares
Year Ended May 31, 1997
Year Ended May 31, 1996 25 25 0
I Shares
Year Ended May 31, 1997
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
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
Year Ended May 31, 1996 5,800 5,800 0
Year Ended May 31, 1995 1,655 1,515 140

B-8

<PAGE>

Management Management Management
Fee Fee Fee
Payable Waived Retained
---------- ---------- ----------
B Shares
Year Ended May 31, 1997
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
Year Ended May 31, 1996 171,614 15,664 155,950
Year Ended May 31, 1995 61,876 14,997 46,878

SMALL COMPANY GROWTH FUND
Year Ended May 31, 1997
Year Ended May 31, 1996 183,731 76,278 107,453
Year Ended October 31, 1995 220,483 177,287 43,196

CONTRARIAN STOCK FUND
A Shares
Year Ended May 31, 1997
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
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
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
Year Ended May 31, 1996 345 345 0
B Shares
Year Ended May 31, 1997
Year Ended May 31, 1996 395 395 0
I Shares
Year Ended May 31, 1997
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
Year Ended May 31, 1996 175,887 0 175,887
Year Ended October 31, 1995 205,150 0 205,150

B-9

<PAGE>

(III) ADMINISTRATIVE FEES TO FORUM

INTERNATIONAL PORTFOLIO
Year Ended May 31, 1997
Year Ended May 31, 1996 105,567 11,873 93,694
Year Ended October 31, 1995 122,669 70,043 52,626

B-10

<PAGE>

TABLE 3 - DISTRIBUTION FEES

The following table shows the dollar amount of fees payable to Forum for its
distribution services with respect to each Fund (or class thereof), the amount
of fee that was waived by Forum, if any, and the actual fee received by Forum.
All maintenance fees were waived by Forum during the fiscal years ended May 31,
1995 and 1996. The data is for the past three fiscal years or shorter period if
the Fund has been in operation for a shorter period. Only Exchange Shares and B
Shares incur distribution fees.

Distribution Distribution Distribution
Fee Fee Fee
Payable Waived Retained
------------ ------------ ------------
READY CASH INVESTMENT FUND

Exchange Shares
Year Ended May 31, 1997
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
Year Ended May 31, 1996 245 245 0

INTERMEDIATE GOVERNMENT INCOME FUND
B Shares
Year Ended May 31, 1997
Year Ended May 31, 1996 2,646 2,646 0

INCOME FUND
B Shares
Year Ended May 31, 1997
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
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
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
Year Ended May 31, 1996 43,374 207 43,167
Year Ended May 31, 1995 47,144 11,786 35,358

B-11

<PAGE>

Distribution Distribution Distribution
Fee Fee Fee
Payable Waived Retained
------------ ------------ ------------
MINNESOTA TAX-FREE FUND

B Shares
Year Ended May 31, 1997
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
Year Ended May 31, 1996 5,031 0 5,031

VALUGROWTH STOCK FUND
B Shares
Year Ended May 31, 1997
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
Year Ended May 31, 1996 719 719 0

GROWTH EQUITY FUND
B Shares
Year Ended May 31, 1997
Year Ended May 31, 1996 187 187 0

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

CONTRARIAN STOCK FUND
B Shares
Year Ended May 31, 1997
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
Year Ended May 31, 1996 2,959 2,930 29

B-12

<PAGE>

TABLE 4 - SALES CHARGES

The following table shows (i) the dollar amount of sales charges payable to
Forum with respect to sales of A Shares (or of the respective Funds prior to the
offering of multiple classes of shares), (ii) the amount of sales charge
retained by Forum and not reallowed to other persons, and (iii) the amount of
contingent deferred sales charge ("CDSL") paid to Forum. The data is for the
past three fiscal years or shorter period if the Fund has been in operation for
a shorter period.

Sales Retained CDSL
Charges Amount Paid
------- -------- ----
STABLE INCOME FUND

A Shares
Year Ended May 31, 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

B-13

<PAGE>

Sales Retained CDSL
Charges Amount Paid
------- -------- ----
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

B-14

<PAGE>

Sales Retained CDSL
Charges Amount Paid
------- -------- ----
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 -- -- --

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

B-15

<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.

Fee Fee Fee
Payable Waived Retained
------- ------ --------
CASH INVESTMENT FUND
Year Ended May 31, 1997
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
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
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
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
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
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
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
Year Ended May 31, 1996 29,500 5,561 23,939
Year Ended October 31, 1995 46,700 0 36,700

INCOME FUND
Year Ended May 31, 1997
Year Ended May 31, 1996 79,500 0 79,500
Year Ended May 31, 1995 64,000 0 64,000

B-16

<PAGE>

Fee Fee Fee
Payable Waived Retained
------- ------ --------

TOTAL RETURN BOND FUND
Year Ended May 31, 1997
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
Year Ended May 31, 1996 N/A N/A N/A

TAX-FREE INCOME FUND
Year Ended May 31, 1997
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
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
Year Ended May 31, 1996 56,000 0 56,000
Year Ended May 31, 1995 55,300 0 55,300

CONSERVATIVE BALANCED FUND
Year Ended May 31, 1997
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
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
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
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
Year Ended May 31, 1996 57,500 0 57,500
Year Ended May 31, 1995 48,500 0 48,500

B-17

<PAGE>

Fee Fee Fee
Payable Waived Retained
------- ------ --------
INDEX FUND
Year Ended May 31, 1997
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
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
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
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
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
Year Ended May 31, 1996 30,000 5,759 24,241
Year Ended October 31, 1995 36,700 0 36,700

CONTRARIAN STOCK FUND
Year Ended May 31, 1997
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
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
Year Ended May 31, 1996 50,500 8,500 42,000
Year Ended October 31, 1995 77,967 8,567 69,400

B-18

<PAGE>

TABLE 6 - COMMISSIONS

The following table shows the aggregate brokerage commissions with respect to
each Fund that incurred brokerage costs. The data is for the past three fiscal
years or shorter period if the Fund has been in operation for a shorter period.

AGGREGATE
COMMISSIONS PAID

DIVERSIFIED BOND FUND
Year Ended May 31, 1997
Year Ended May 31, 1996 5,261
Year Ended October 31, 1995 1,750

CONSERVATIVE BALANCED FUND
Year Ended May 31, 1997
Year Ended May 31, 1996 8,406
Year Ended October 31, 1995 9,298

MODERATE BALANCED FUND
Year Ended May 31, 1997
Year Ended May 31, 1996 54,332
Year Ended October 31, 1995 57,931

GROWTH BALANCED FUND
Year Ended May 31, 1997
Year Ended May 31, 1996 69,732
Year Ended October 31, 1995 66,361

INCOME EQUITY FUND
Year Ended May 31, 1997
Year Ended May 31, 1996 52,904
Year Ended October 31, 1995 25,321

INDEX FUND
Year Ended May 31, 1997
Year Ended May 31, 1996 121,170
Year Ended October 31, 1995 107,321

VALUGROWTH STOCK FUND
Year Ended May 31, 1997
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
Year Ended May 31, 1996 175,648
Year Ended October 31, 1995 180,093

AGGREGATE
COMMISSIONS PAID

GROWTH EQUITY FUND
Year Ended May 31, 1997

B-19

<PAGE>

Year Ended May 31, 1996 127,666
Year Ended October 31, 1995 115,993

LARGE COMPANY GROWTH FUND
Year Ended May 31, 1997
Year Ended May 31, 1996 42,229
Year Ended October 31, 1995 60,264

SMALL COMPANY STOCK FUND
Year Ended May 31, 1997
Year Ended May 31, 1996 208,021
Year Ended May 31, 1995 67,471

SMALL COMPANY GROWTH FUND
Year Ended May 31, 1997
Year Ended May 31, 1996 785,875
Year Ended October 31, 1995 600,341

CONTRARIAN STOCK FUND
Year Ended May 31, 1997
Year Ended May 31, 1996 52,162
Year Ended May 31, 1995 43,397

INTERNATIONAL FUND*
Year Ended May 31, 1997
Year Ended May 31, 1996 188,849
Year Ended October 31, 1995 348,358

* Reflects commission paid by International Portfolio; International Fund
paid no commissions directly during either year.

B-20

<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.]

SHARE % OF % OF
NAME AND ADDRESS BALANCE CLASS FUND
---------------- ------- ----- ----
<S> <C> <C> <C> <C>
CASH INVESTMENT FUND Norwest Bank Minnesota NA
Collective Trust Funds
Clearing Account
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

Norwest Investment
Services c/o Greg
Wraalstad 608 2nd
Avenue South 8th Floor
MS 0162 Minneapolis
MN 55479-0162

READY CASH INVESTMENT FUND
Investor Shares BHC Securities, Inc.
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

Norwest Investment Services
c/o Greg Warrlstad
608 2nd Avenue South
8th Floor, MS 0162
Minneapolis MN 55479-0162

Institutional Shares Norwest Bank MinnesotaNA
AMS
VP4600301
Attn: Cash Sweep Processing
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

Norwest Bank Minnesota NA
AMS
VP460500022
Attn: Cash Sweep
Processing
733 Marquette Avenue
4th Floor Minneapolis,
MN 55479-0050

Norwest Bank Minnesota
NA AMS
VP4500030
Attn: Cash Sweep Processing
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

</TABLE>

B-21

<PAGE>

<S> <C> <C> <C> <C>
Alpine & Co
Non Discretionary
1740 Broadway MS 8751
Denver, CO 80274

Exchange Shares Stephen P. Arkulary
and Helen M. Doane
Jt. Ten 711266
595 W. Wabasha Street
Duluth MN 55803

Norwest Bank Minnesota
Cust. for IRA Account of
Dennis M. Dougherty
RD 1, Box 1444
East Stroudsburg PA 18301

BHC Securities Inc.
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

U.S. GOVERNMENT FUND Alpine & Co
Non-Discretionary
1740 Broadway MS 8751
Denver, CO 80274

Norwest Bank Minnesota NA
AMS
Collective Trust Funds
Clearing Account
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

Norwest Investment Services
c/o Greg Wraalstad
608 2nd Avenue South
8th Floor -- MS 0162
Minneapolis MN 55479-0162

TREASURY FUND Alpine & Co.
Discretionary
1740 Broadway MS 8751
Denver, CO 80274

Norwest Bank Minnesota NA
AMS
Collective Trust Funds
Clearing Account
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

Norwest Bank Colorado Springs
Attn: Jan Peto

</TABLE>

B-22

<PAGE>

<S> <C> <C> <C> <C>
P.O. Box 400
Colorado Springs, CO 80901

Norwest Investment Services
c/o Greg Wraalstad
608 2nd Avenue South
8th Floor -- MS 0162
Minneapolis MN 55479-0162

MUNICIPAL MONEY MARKET
FUND

Investor Shares BHC Securities, Inc.
Attn: Cash Sweeps
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

Norwest Investment Services
c/o Greg Wraalstad
608 2nd Avenue South
8th Floor MS - 0162

Institutional Shares Norwest Bank Minnesota NA
AMS
Collective Trust Funds
Clearing Account
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

Norwest Bank Minnesota NA
VP4620002
Attn: Cash Sweep Processing
733 Marquette Avenue 4th Floor
Minneapolis, MN 55479-0050

Finaba
Non Discretionary Cash Account
Attn: Jon Rutter
1314 Avenue K
Lubbock TX 79401

Norwest Investment Services
c/o Greg Wraalstad
608 2nd Avenue South
8th Floor MS - 0162
Minneapolis MN 55479-0162

</TABLE>

B-23

<PAGE>

<S> <C> <C> <C> <C>
STABLE INCOME FUND
A Shares Ramsey Foundation
8100 34th Avenue South
PO Box 1309
Minneapolis, MN 55440-1309

St. Paul Ramsey Medical Center
6th Floor
8100 34th Ave South
PO Box 1309
Minneapolis, MN 55440-1309

Von Maur Investment Co
6565 Brady St.
Davenport, IA 52806

Aspen Medical Group, PA
1021 Bandana Blvd. E,
Suite 200
St. Paul, MN 55108

Analysts International
Corporation
7615 Metro Blvd.
Minneapolis, MN 55439

B Shares Fred P. Mattson
and Berry J. Matton
P.O. Box 248
Elmwood, WI 54740-0248

BHC Securities, Inc.
FBO 52443692
One Commerce Square
2005 Market St. STE 1200
Philadelphia, PA 19103

BHC Securities, Inc.
FBO 52509602
One Commerce Square
2005 Market St. STE 1200
Philadelphia, PA 19103

Norwest Investment
Services, Inc.
FBO 800059291
Northstar Building
East - 8th Fl.
618 Second Avenue -South
Minneapolis MN 55479-0162

Janet R. Anderson
TOD
1874 Summit Avenue
St. Paul MN 55105

</TABLE>

B-24
<PAGE>

<S> <C> <C> <C> <C>
Charles Anjad-Ali
1305 Dayton Avenue
St. Paul MN 55104

INTERMEDIATE
GOVERNMENT INCOME FUND
A Shares BHC Securities, Inc.
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

Ibrahim M. Almadani
and Salwa A.Aboulghaffar
c/o Bernie Harkel
10010 Regency Circle
Omaha NE 68114

INCOME FUND
A Shares BHC Securities, Inc.
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

TOTAL RETURN BOND FUND
A Shares BHC Securities, Inc.
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

Norwest Wealthbuilder
Reinvest Account
733 Marquette Avenue
Minneapolis, MN 55479-0050

I Shares Dentru & Co
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver CO 80274

Seret & Co.
Discretionary Reinvest
1700 Broadway MS 0076
Denver, CO 80274

LIMITED TERM TAX-FREE
FUNDS

Investor Shares Victoria & Co.
Non-Discretionary
Reinvest
Trust Operations
One O'Connor Plaza
Victoria TX 77901

Victoria & Co. Special

</TABLE>

B-25

<PAGE>

<S> <C> <C> <C> <C>
Common Trust Fund
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 BHC Securities, Inc.
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

I Shares Dentru & Co
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver CO 80274

FINABA
Discretionary Cash Acct.
1314 Avenue K
Lubbock, TX 79401

Norwest Tax Exempt Bond Fund
P.O. Box 1450 NW 8477
Minneapolis, MN 55480-8477

COLORADO TAX-FREE FUND
A Shares BHC Securities, Inc.
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

Walter Stonehocker and
Roswitha Stonehocker
15600 Holly
Brighton, CO 80601

B Shares Ronald T. Stecker and
Dorothy E. Stecker
Jt Ten
27 Eagle Drive
Littleton CO 80123

I Shares Dentru & Co
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver CO 80274

MINNESOTA TAX-FREE
FUND

A Shares BHC Securities, Inc.

</TABLE>

B-26

<PAGE>

<S> <C> <C> <C> <C>
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

I Shares Norwest Bank Minnesota, NA
Agnt Madri Inc. Agency
U/A/DT 5/14/96
733 Marquette Avenue MS-0036
Minneapolis, MN 55479-0036

INCOME EQUITY FUND

A Shares BHC Securities, Inc.
Trade House Acct.
One Commerce Square
2005 Market St.
Philadelphia, PA 19103-3212

VALUGROWTH STOCK FUND

A Shares BHC Securities, Inc.
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

Norwest Wealthbuilder
Reinvest Account
733 Marquette Avenue
Minneapolis MN 55479-0040

DIVERSIFIED EQUITY
FUND

A Shares BHC Securities, Inc.
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212
GROWTH EQUITY FUND

A Shares BHC Securities, Inc.
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

Norwest Wealthbuilder
Reinvest Account
733 Marquette Avenue
Minneapolis MN 55479-0040

SMALL COMPANY STOCK
FUND

A Shares Norwest Wealthbuilder
Reinvest Account
733 Marquette Avenue
Minneapolis, MN 55479-0040

</TABLE>

B-27

<PAGE>

<S> <C> <C> <C> <C>
BHC Securities, Inc.
One Commerce Square
2005 Market Street
Suite 1200
Philadelphia PA 19103

B Shares BHC Securities, Inc.
FAO 52711393
One Commerce Square
2005 Market Street
Philadelphia PA 19103-3212

I Shares Dentru & Co
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver CO 80274

Norwest Bank Minnesota
Cust Norwest
Foundation - NIM
A/C 12928201
PO Box 1450 NW 0477
Minneapolis MN 55480-8477

SMALL CAP
OPPORTUNITIES FUND

A Shares Richard M. Leach
and Peter W. Nash
Trst The Edward
Sturgis Trust
U/A DTD 3/10/72
2 Portland Square
Portland ME 04101

BHC Securities, Inc.
Trade House Act
Attn: Mutual Fd Dept.
One Commerce Square
2505 Market Street
Philadelphia PA 19103

Norwest Investment
Services, Inc.
FBO 7022167001
Northstar Building
East - 8th Fl.
608 Second Avenue South
Minneapolis MN 55479-0162

Norwest Investment
Services, Inc.
FBO 101482111
Northstar Building
East - 8th Fl.
608 Second Avenue South
Minneapolis MN 55479-0162

B Shares Tom S. Haupin
1667 Oriole Drive
Galesburg IL 61401

</TABLE>

B-28

<PAGE>

<S> <C> <C> <C> <C>
Norwest Investment
Services, Inc.
FBO 701984451
Northstar Building
East - 8th Fl.
608 Second Avenue South
Minneapolis MN 55479-0162

Norwest Investment
Services, Inc.
FBO 701942871
Northstar Building
East - 8th Fl.
608 Second Avenue South
Minneapolis MN 55479-0162

BHC Securities, Inc.
FAO 51729488
Attn: Mutual Funds Dept.
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia PA 19103

CONTRARIAN STOCK FUND
A Shares BHC Securities, Inc.
One Commerce Square
2005 Market Street Suite 1200
Philadelphia PA 19103

Richard and Ramute Bell
Richard & Ramute Bell Consvtrs
Consv Jody Kay Bell
726367
Norfolk NE 68701

Marcia Mattson
2039 Virginia Lane
Grafton WI 53024

B Shares Lynda J. Best
3270 Jay Avenue
Bravton IA 50042

Norwest Investment
Services, Inc.
FBO 702022391
Northstar Building
East - 8th Fl.
608 Second Avenue South
Minneapolis MN 55479-0162

I Shares Dentru & Co
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver CO 80274

</TABLE>

B-29

<PAGE>

<S> <C> <C> <C> <C>
Seret & Co.
Discretionary Reinvest
1740 Broadway MS 8751
Denver, CO 80274

INTERNATIONAL FUND

A Shares Norwest Wealthbuilder
Reinvest Account
733 Marquette Avenue
Minneapolis, MN 55479-0040

BHC Securities, Inc.
One Commerce Square
2005 Market Street
Suite 1200
Philadelphia PA 19103

B Shares BHC Securities, Inc.
FAO 43268824
One Commerce Square
2005 Market Street
Suite 1200
Philadelphia PA 19103

David A. Struvk
1941 Crestview Circle
Ewcelsior MN 55331

</TABLE>

B-30
<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%.

Effective Tax-Equivalent Tax-Equivalent
Yield Yield Yield Effective Yield
----- --------- -------------- ---------------
<S> <C> <C> <C> <C>
CASH INVESTMENT FUND % % N/A N/A

READY CASH INVESTMENT FUND
Investor Shares % % N/A N/A
Institutional Shares % % N/A N/A
Exchange Shares % % N/A N/A

U.S. GOVERNMENT FUND N/A N/A

TREASURY FUND N/A N/A

MUNICIPAL MONEY MARKET FUND
Investor Shares
Institutional Shares

</TABLE>

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.

Tax Equivalent
Yield Yield
----- --------------
STABLE INCOME FUND
A Shares % N/A
B Shares % N/A
I Shares % N/A

INTERMEDIATE GOVERNMENT INCOME FUND
A Shares % N/A
B Shares % N/A
I Shares % N/A

DIVERSIFIED BOND FUND
A Shares N/A N/A
B Shares N/A N/A
I Shares % N/A

C-1

<PAGE>

Tax Equivalent
Yield Yield
----- --------------
INCOME FUND
A Shares % N/A
B Shares % N/A
I Shares % N/A

TOTAL RETURN BOND FUND
A Shares % N/A
B Shares % N/A
I Shares % N/A

LIMITED TERM TAX-FREE FUND
A Shares N/A N/A
B Shares N/A N/A
I Shares N/A N/A

TAX-FREE INCOME FUND
A Shares % %
B Shares % %
I Shares % %

COLORADO TAX-FREE FUND
A Shares % %
B Shares % %
I Shares % %

MINNESOTA TAX-FREE FUND
A Shares % %
B Shares % %
I Shares % %

CONSERVATIVE BALANCED 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 N/A N/A

C-2

<PAGE>

Tax Equivalent
Yield Yield
----- --------------
VALUGROWTH STOCK FUND
A Shares N/A N/A
B Shares N/A N/A
I Shares N/A N/A

INCOME EQUITY FUND
A Shares N/A N/A
B Shares N/A N/A
I Shares N/A N/A

LARGE COMPANY GROWTH FUND
I Shares N/A N/A

SMALL COMPANY STOCK FUND
A Shares N/A N/A
B Shares N/A N/A
I Shares N/A N/A

SMALL COMPANY GROWTH FUND
I Shares N/A N/A

CONTRARIAN STOCK FUND
A Shares N/A N/A
B Shares N/A N/A
I Shares N/A N/A

INTERNATIONAL FUND
A Shares N/A N/A
B Shares N/A N/A
I Shares N/A N/A

SMALL CAP OPPORTUNITIES FUND
A Shares N/A N/A
B Shares N/A N/A
I Shares N/A N/A

TABLE 3 - TOTAL RETURNS

The average annual total return of each class of each Fixed Income and Equity
Fund for the periods ended May 31, 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."

Since
One Year Five Years Ten Years Inception
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
STABLE INCOME FUND
A Shares % N/A N/A %
B Shares N/A N/A N/A %
I Shares % N/A N/A %

</TABLE>

C-3

<PAGE>

Since
One Year Five Years Ten Years Inception
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
INTERMEDIATE GOVERNMENT INCOME FUND*
A Shares % % % N/A
B Shares % N/A N/A %
I Shares % % % N/A

DIVERSIFIED BOND FUND*
A Shares N/A N/A N/A N/A
B Shares N/A N/A N/A N/A
I Shares % % % N/A

INCOME FUND
A Shares % % N/A %
B Shares % N/A N/A %
I Shares % % N/A %

TOTAL RETURN BOND FUND
A Shares % N/A N/A %
B Shares % N/A N/A %
I Shares % N/A N/A %

LIMITED TERM TAX-FREE FUND
A Shares N/A N/A N/A N/A
B Shares N/A N/A N/A N/A
I Shares N/A N/A N/A %

TAX-FREE INCOME FUND
A Shares % % N/A %
B Shares % N/A N/A %
I Shares % % N/A %

COLORADO TAX-FREE FUND
A Shares % N/A N/A %
B Shares % N/A N/A %
I Shares % N/A N/A %

MINNESOTA TAX-FREE FUND
A Shares % % N/A %
B Shares % N/A N/A %
I Shares % % N/A %

CONSERVATIVE BALANCED FUND
I Shares % % N/A %

MODERATE BALANCED FUND
I Shares % % N/A %

GROWTH BALANCED FUND
I Shares % % N/A %

INCOME EQUITY FUND*
A Shares % % N/A %
B Shares N/A N/A N/A %
I Shares % % N/A %
Since

</TABLE>

C-4

<PAGE>

Since
One Year Five Years Ten Years Inception
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
INDEX FUND*
A Shares N/A N/A N/A N/A
B Shares N/A N/A N/A N/A
I Shares % % N/A %

VALUGROWTH STOCK FUND
A Shares % % N/A %
B Shares % N/A N/A %
I Shares % % N/A %

DIVERSIFIED EQUITY FUND*
A Shares % % N/A %
B Shares N/A N/A N/A N/A
I Shares % % N/A %

GROWTH EQUITY FUND*
A Shares % % N/A %
B Shares N/A N/A N/A %
I Shares % % N/A %

LARGE COMPANY GROWTH FUND*
A Shares N/A N/A N/A N/A
B Shares N/A N/A N/A N/A
I Shares % % % N/A

SMALL COMPANY STOCK FUND
A Shares % N/A N/A %
B Shares % N/A N/A %
I Shares 22.12% N/A N/A %

SMALL COMPANY GROWTH FUND*
I Shares % % % N/A

CONTRARIAN STOCK FUND
A Shares % N/A N/A %
B Shares % N/A N/A %
I Shares % N/A N/A %

INTERNATIONAL FUND*
A Shares % N/A N/A %
B Shares % N/A N/A %
I Shares % N/A N/A %

SMALL CAP OPPORTUNITIES FUND
A Shares % N/A N/A %
B Shares N/A N/A N/A %
I Shares % N/A N/A %
</TABLE>

C-5
<PAGE>

PART C
OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) FINANCIAL STATEMENTS.

Not Applicable to this filing.

FINANCIAL HIGHLIGHTS.

Not Applicable to this filing.

(b) EXHIBITS.

NOTE: * INDICATES THAT THE EXHIBIT IS INCORPORATED HEREIN BY REFERENCE. ALL
REFERENCES TO A POST-EFFECTIVE AMENDMENT ("PEA") OR PRE-EFFECTIVE AMENDMENT
("PreEA") ARE TO PEAS AND PREEAS TO REGISTRANT'S REGISTRATION STATEMENT ON FORM
N-1A, FILE NO. 33-9645.

(1)* Trust Instrument of Registrant as now in effect (filed as Exhibit 1 to
PEA No. 35).

(2)* By-Laws of Registrant as now in effect (filed as Exhibit 2 to PEA No.
35).

(3) Not Applicable.

(4)* Specimen Certificate for shares of beneficial interest of each class of
each portfolio of Registrant. Except for the names of the classes of
shares and CUSIP numbers. the certificate of each class of each
portfolio of Registrant is substantially the same as the specimen
certificate, and therefore, is omitted pursuant to Rule 483(d)(2) under
the 1933 Act (filed as Exhibit 4 to PEA No. 35).

(5) (a) Form of Investment Advisory Agreement between Registrant and
Norwest Investment Mangement, Inc. relating to Cash Investment
Fund, Ready Cash Investment Fund, U.S. Government Fund, Treasury
Fund, Municipal Money Market Fund, Stable Income Fund, Short
Maturity Government Bond 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, Conservative Balanced Fund, Moderate Balanced
Fund, Growth Balanced Fund, Aggressive Balanced Fund, Index Fund,
Income Equity Fund, ValuGrowth-SM- Stock Fund, Diversified Equity
Fund, Growth Equity Fund, Large Company Growth Fund, Small
Company Stock Fund, Small Company Growth Fund, Diversified Small
Cap Fund, Small Cap Opportunities Fund, Contrarian Stock Fund,
International Fund, Norwest WealthBuilder II High Growth
Portfolio,

<PAGE>

Norwest WealthBuilder II Growth Portfolio, Norwest WealthBuilder II
Growth and Income Balanced Portfolio, Performa Smith Disciplined
Growth Fund, Performa Smith Small Cap Value Fund, Performa Large Cap
Value Fund, Performa Galliard Strategic Value Bond Fund and Performa
Schroder Global Growth Fund. Except for the names of each series of
the Registrant, the Investment Advisory Agreement of each series of
Registrant is substantially the same as the Investment Advisory
Agreement, and therefore, is omitted pursuant to Rule 483(d)(2) under
the 1933 Act Except for the names of each series of the Registrant,
the Investment Advisory Agreement of each series of Registrant is
substantially the same as the Investment Advisory Agreement, and
therefore, is omitted pursuant to Rule 483(d)(2) under the 1933 Act
(filed herewith).

(b)* Investment Sub-Advisory Agreement between Registrant and Crestone
Capital Management, Inc. relating to Small Company Stock Fund
(filed as Exhibit 5(b) to PEA No. 35).

(c)* Investment Sub-Advisory Agreement between Registrant and Schroder
Capital Management International Inc. relating to the Diversified
Equity Fund, Growth Equity Fund, International Fund, Conservative
Balanced Fund, Moderate Balanced Fund and Growth Balanced Fund
(filed as Exhibit 5(c) to PEA No. 35).

(d)* Advisory Agreement between Registrant and Norwest Bank Minnesota,
N.A., relating to Cash Investment Fund, Treasury Fund, U.S.
Government Fund, Ready Cash Investment Fund, Municipal Money
Market Fund, Minnesota Tax-Free Fund, Colorado Tax-Free Fund,
Government Income Fund, Income Fund, Tax-Free Income Fund,
Adjustable U.S. Government Reserve Fund, ValuGrowth Stock Fund,
and Income Stock Fund (filed as Exhibit 5(d) to PEA No. 35).

(e) Form of Investment Sub-Advisory Agreement between Registrant and
Galliard Capital Management International Inc. relating to the
Stable Income Fund (filed herewith).

(f) Form of Investment Sub-Advisory Agreement between Registrant and
Peregrine Capital Management International Inc. relating to the
Small Company Growth Fund and Large Company Growth Fund (filed
herewith).

(g) Form of Investment Sub-Advisory Agreement between Registrant and
United Capital Management relating to Total Return Bond Fund and
Contrarian Stock Fund (filed herewith).

(6)* Distribution Agreement between Registrant and Forum Financial Services,
Inc. relating to each portfolio of Registrant (filed as Exhibit 6 to PEA
No. 35).

(7) Not Applicable.

<PAGE>

(8) (a)* Custodian Agreement between Registrant and Norwest Bank
Minnesota, N.A. dated August 1, 1993 as amended November 11, 1994
(filed as Exhibit 8(a) to PEA No. 35).

(b)* Transfer Agency Agreement to be between Registrant and Norwest
Bank Minnesota, N.A. (filed as Exhibit 8(b) to PEA No. 35).

(9) (a)* Management Agreement between Registrant and Forum Financial
Services, Inc. relating to each portfolio of Registrant (filed
as Exhibit 9(a) to PEA No. 35).

(b)* Fund Accounting Agreement between Registrant and Forum Financial
Corp. (filed as Exhibit 9(b) to PEA No. 35).

(c)* Administration Services Agreement between Registrant and Norwest
Bank Minnesota, N.A. relating to International Fund (filed as
Exhibit 9(c) to PEA No. 35).

(10) (a)* Opinion of Seward & Kissel (filed on December 31, 1986 as
Exhibit 10(a) of PreEA 2).

(b)* Opinion of Seward & Kissel (filed as Exhibit 10(b) to PEA No.
35).

(11) (a) Not applicable.

(11) (b) Not applicable.

(12) Not Applicable.

(13)* Investment representation letter of John Y. Keffer as initial purchaser
of shares of stock of Registrant (filed on December 31, 1986 as Exhibit
13 of PreEA 2).

(14)* Individual Retirement Account materials (filed on April 22, 1994 as
Exhibit 14 to PEA 24).

(15)* Rule 12b-1 Plan adopted by Registrant with respect to the Income Fund,
Tax-Free Income Fund, Minnesota Tax-Free Fund, ValuGrowth Stock Fund,
Adjustable U.S. Government Reserve Fund, Colorado Tax-Free Fund, Income
Stock Fund, Arizona Tax-Free Fund, Contrarian Stock Fund, Small Company
Stock Fund, Government Income Fund, Total Return Bond Fund, Stable
Income Fund, Income Equity Fund, Diversified Equity Fund, Intermediate
U.S. Government Fund, Growth Equity Fund and Exchange Shares of Ready
Cash Investment Fund (filed as Exhibit 15 to PEA No. 35).

(16) Schedule for Computation of each Performance Quotation provided in the
Registration Statement in response to Item 22 (filed on June 2, 1997 as
Exhibit 16 to PEA 42.)

<PAGE>

(17) Not Applicable.

(18)* Multiclass (Rule 18f-3) Plan adopted by Registrant (filed as Exhibit 18
to PEA No. 35).

Other Exhibits

(A)* Power of Attorney of James C. Harris, Trustee of Registrant (filed as
Other Exhibit A to PEA No. 35).

(B)* Power of Attorney of Richard M. Leach, Trustee of Registrant (filed as
Other Exhibit B to PEA No. 35).

(C)* Power of Attorney of Robert C. Brown, Trustee of Registrant (filed as
Other Exhibit C to PEA No. 35).

(D)* Power of Attorney of Donald H. Burkhardt, Trustee of Registrant (filed
as Other Exhibit D to PEA No. 35).

(E)* Power of Attorney of John Y. Keffer, Trustee of Registrant (filed as
Other Exhibit E to PEA No. 35).

(F)* Power of Attorney of Donald C. Willeke, Trustee of Registrant (filed as
Other Exhibit F to PEA No. 35).

(G)* Power of Attorney of Timothy J. Penny, Trustee of Registrant (filed as
Other Exhibit G to PEA No. 35).

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

None.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF MAY 1, 1997.

Number of
Title of Class of Unit of Beneficial Interest Record Holders

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

Cash Investment Fund 49
U.S. Government Fund 34
Treasury Fund 25
Municipal Money Market Fund
Investor Shares 20
Institutional Shares 13
Ready Cash Investment Fund
Investor Shares 160
Institutional Shares 14

<PAGE>

Exchange Class 14
Income Fund
A Shares 248
B Shares 245
I Shares 846
Total Return Bond Fund
A Shares 73
B Shares 205
I Shares 275
Colorado Tax-Free Fund
A Shares 413
B Shares 181
I Shares 6
Minnesota Tax-Free Fund
A Shares 443
B Shares 362
I Shares 103
Tax-Free Income Fund
A Shares 592
B Shares 231
I Shares 285
ValuGrowth Stock Fund
A Shares 1,178
B Shares 637
I Shares 1,087
Small Cap Opportunities Fund
A Shares 41
B Shares 23
I Shares 17
Contrarian Stock Fund
A Shares 5
B Shares 4
I Shares 88
Small Company Stock Fund
A Shares 569
B Shares 634
I Shares 1,832
Diversified Equity Fund
A Shares 1,148
B Shares 2,320
I Shares 14
Growth Equity Fund
A Shares 609
B Shares 915
I Shares 12

<PAGE>

Large Company Growth Fund
I Shares 13
Small Company Growth Fund
I Shares 11
International Fund
A Shares 171
B Shares 197
I Shares 18

Income Equity Fund
A Shares 1,996
B Shares 2,616
I Shares 20
Index Fund
I Shares 13
Conservative Balanced Fund
I Shares 11
Moderate Balanced Fund
I Shares 13
Growth Balanced Fund
I Shares 13
Intermediate Government Income Fund
A Shares 475
B Shares 476
I Shares 18
Diversified Bond Fund
I Shares 14
Stable Income Fund
A Shares 71
B Shares 51
I Shares 15

ITEM 27. INDEMNIFICATION.

The general effect of Section 10.02 of Registrant's Trust Instrument is to
indemnify existing or former trustees and officers of the Trust to the fullest
extent permitted by law against liability and expenses. There is no
indemnification if, among other things, any such person is adjudicated liable to
Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. This description is modified in its entirety by the provisions of
Section 10.02 of Registrant's Trust Instrument contained in this Registration
Statement as Exhibit 1 and incorporated herein by reference.

Registrant's Investment Advisory Agreements, Investment Subadvisory Agreements,
Management and Distribution Agreements and Distribution Services Agreements
provide that

<PAGE>

Registrant's investment advisers and principal underwriter are protected against
liability to the extent permitted by Section 17(i) of the Investment Company Act
of 1940. Similar provisions are contained in the Management Agreement and
Transfer Agency and Fund Accounting Agreement. Registrant's principal
underwriter is also provided with indemnification against various liabilities
and expenses under the Management and Distribution Agreements and Distribution
Services Agreements between Registrant and the principal underwriter; provided,
however, that in no event shall the indemnification provision be construed as to
protect the principal underwriter against any liability to Registrant or its
security holders to which the principal underwriter would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under those agreements. Registrant's transfer agent and
fund accountant and certain related individuals are also provided with
indemnification against various liabilities and expenses under the Transfer
Agency and Fund Accounting Agreements between Registrant and the transfer agent
and fund accountant; provided, however, that in no event shall the transfer
agent, fund accountant or such persons be indemnified against any liability or
expense that is the direct result of willful misfeasance, bad faith or gross
negligence by the transfer agent or such persons.

The preceding paragraph is modified in its entirety by the provisions of the
Investment Advisory Agreements, Investment SubAdvisory Agreements, Management
and Distribution Agreements, Distribution Services Agreements, Management
Agreements, Transfer Agency Agreement and Fund Accounting Agreement of
Registrant filed as Exhibits 5, 6, and 9 to Registrant's Registration Statement
and incorporated herein by reference.

Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such trustee, officer
or controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

NORWEST INVESTMENT MANAGEMENT, INC.

The description of Norwest Investment Management, Inc., under the caption
"Management-Advisor" or Management of the Funds-Norwest Investment Management"
in each Prospectus and under the caption "Management-Adviser" or "Management
- -Investment Advisory Services-

<PAGE>

Norwest Investment Management" in each Statement of Additional Information
constituting Parts A and B, respectively, of this Registration Statement are
incorporated by reference herein.

The following are the directors and principal executive officers of NIM,
including their business connections which are of a substantial nature. The
address of Norwest Corporation, the parent of Norwest Bank Minnesota, N.A.
("Norwest Bank"), which is the parent of NIM, is Norwest Center, Sixth Street
and Marquette Avenue, Minneapolis, MN 55479. Unless otherwise indicated below,
the principal business address of any company with which the directors and
principal executive officers are connected is also Sixth Street and Marquette
Avenue, Minneapolis, MN 55479.

James R. Campbell, Director, President and Chief Executive Officer, has
held this position for the last two years. Mr. Campbell is also
Executive Vice President of Norwest Corporation, Director and Chairman
of Norwest Investment Advisors, Inc., and a Director of Flore
Properties, Inc., Centennial Investment Corporation and Peregrine
Capital Management, Inc., which is located at LaSalle Plaza, 800 LaSalle
Avenue, Suite 1850, Minneapolis, Minnesota 55402-2056. Mr. Campbell is
also a Director of a number of non-profit organizations located in
Minneapolis, Minnesota. Within the last two years Mr. Campbell was a
Director of Norwest Insurance, Inc. and Norwest Equipment Finance, Inc.

Michael A. Graf, Controller and Cashier, also serves as Senior Vice
President and Controller of Norwest Corporation.

P. Jay Kiedrowski, Executive Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates since August 1987. Mr. Kiedrowski is also a Director and
Chairman of the Board of Norwest Investment Management, Inc. and
President of Norwest Investment Management, a part of Norwest.

Scott A. Kisting, Director and Executive Vice President, is also a
Director of Norwest Insurance, Inc., IntraWest Insurance Company and
Fidelity National Life Insurance Company.

William H. Queenan, Director, is also Executive Vice President of
Norwest Corporation.

John T. Thornton, Director, is also Executive Vice President and Chief
Financial Officer of Norwest Corporation. Mr. Thornton is also a
Director of Northern Prairie Indemnity, Limited, Grand Cayman, Cayman
Islands, British West Indies, a Director of Norwest Capital Markets,
Inc. Mr. Thornton is also a Director of Norwest Growth Fund, Inc.,
Norwest Venture Capital Management, Inc. and Norwest Equity Capital,
Inc., and Director, President and Treasurer of Norwest Investors, Inc.,
and Director, President and CEO of Norwest Limited, Inc., all located at
2800 Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, MN
54402. Mr. Thornton is also Director and President of Superior Guaranty
Insurance Company and Norwest Holding Company, and a Director of
Bettendorf Asset Management, Inc. Mr. Thornton is also a Director of
Eau Claire Asset

<PAGE>

Management, Inc., Green Bay Asset Management, Inc., Iowa Asset
Management, Inc., LaCrosse Asset Management, Inc., South Bend Asset
Management, Inc., South Dakota Asset Management, Inc., Waupun Asset
Management, Inc., all located at 100 West Commons Blvd., Suite 303, New
Castle, DE 19720.

Richard C. Westergaard, Executive Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates during the last two years. Mr.Westergaard is also a Director
of Norwest Business Credit, Inc., Norwest Credit, Inc., First Interstate
Equipment Finance, Inc. and R.D. Leasing, Inc. and a Director of Norwest
Equipment Finance, Inc. and Commonwealth Leasing Corporation, located at
Investors Building, 733 Marquette, Suite 300, Minneapolis, MN
55479-2048.

Charles D. White, Senior Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates during the last two years. Mr. White is also Treasurer and
Chief Financial Officer of Norwest Limited, Inc. Mr. White is also a
Director of Bettendorf Asset Management, Inc., Eau Claire Asset
Management, Inc., Green Bay Asset Management, Inc., IntraWest Asset
Management, Inc., Iowa Asset Management, Inc., LaCrosse Asset
Management, Inc., South Bend Asset Management, Inc., South Dakota Asset
Management, Inc., and Waupun Asset Management, Inc., located at 100 West
Commons Boulevard, Suite 303, New Castle, DE 19720.

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC.

The description of Schroder Capital Management International Inc. ("Schroder")
under the caption "Management of the Funds - Investment Advisory Services -
Schroder Capital Management International Inc." in the Prospectus and
"Management-Investment Advisory Services" in the Statement of Additional
Information relating to International Fund, Diversified Equity Fund, Growth
Equity Fund, Conservative Balanced Fund, Moderate Balanced Fund and Growth
Balanced Fund, constituting certain of Parts A and B, respectively, of the
Registration Statement, are incorporated by reference herein.

The following are the directors and principal officers of Schroder, including
their business connections of a substantial nature. The address of each company
listed, unless otherwise noted, is 33 Gutter Lane, London EC2V 8AS, United
Kingdom. Schroder Capital Management International Limited ("Schroder Ltd.") is
a United Kingdom affiliate of Schroder which provides investment management
services international clients located principally in the United States.

David M. Salisbury. Chief Executive Officer, Director and Chairman of
SCMI; Joint Chief Executive and Director of Schroder Ltd.

Richard R. Foulkes. Deputy Chairman/Executive Vice President of SCMI.

John A. Troiano. Managing Director and Senior Vice President of SCMI.
Mr. Troiano is also a Director of Schroder Ltd.

<PAGE>

David Gibson. Senior Vice President and Director of SCMI. Director of
Schroder Capital Management.

John S. Ager. Senior Vice President and Director of SCMI.

Sharon L. Haugh. Senior Vice President and Director of SCMI, Director
and Chairman of Schroder Advisors Inc.

Gavin D.L. Ralston. Senior Vice President and Managing Director of SCMI.

Mark J. Smith. Senior Vice President and Director of SCMI.

Robert G. Davy. Senior Vice President. Mr. Davy is also a Director of
Schroder Ltd. and an officer of open end investment companies for which
SCMI and/or its affiliates provide investment services.

Jane P. Lucas. Senior Vice President and Director of SCMI; Director of
Schroder Advisors Inc.; Director of Schroder Capital Management.

C. John Govett. Director of SCMI; Group Managing Director of Schroder
Ltd. And Director of Schroders plc.

Phillipa J. Gould. Senior Vice President and Director of SCMI.

Louise Croset. First Vice President and Director of SCMI.

Abdallah Nauphal, Group Vice President and Director of SCMI.

CRESTONE CAPITAL MANAGEMENT, INC.

The description of Crestone Capital Management, Inc. ("Crestone") under the
caption "Management - SubAdviser" in the Prospectus and "Management- Adviser -
SubAdviser - Small Company Stock Fund" in the Statement of Additional
Information relating to the Small Company Stock Fund, constituting certain of
Parts A and B, respectively, of the Registration Statement, are incorporated by
reference herein.

The following are the directors and principal executive officers of Crestone,
including their business connections which are of a substantial nature. The
address of Crestone is 7720 East Belleview Avenue, Suite 220, Englewood Colorado
80111 and, unless otherwise indicated below, that address is the principal
business address of any company with which the directors and principal executive
officers are connected.

<PAGE>

Kirk McCown, President and Director.

Mark Steven Sunderhuse, Senior Vice President and Director.

P. Jay Kiedrowski, Director. Mr. Kiedrowski is also President and
Chairman of the Board of Norwest and an Executive Vice President of
Norwest Bank. His address is Sixth and Marquette Avenue, Minneapolis,
Minnesota 55479.

Steven P. Gianoli, Director. Mr. Gianoli is a Vice President of Norwest
and Norwest Bank. His address is Sixth and Marquette Avenue,
Minneapolis, Minnesota 55479.

Susan Koonsman, Director. Ms. Koonsman is President of Norwest
Investments & Trust. Her address is 1740 Broadway, Denver, Colorado
80274.

PEREGRINE CAPITAL MANAGEMENT, INC.

The description of Peregrine Capital Management, Inc. ("Peregrine") under the
caption "Management - SubAdviser" in the Prospectus and "Management- Adviser -
SubAdviser - Diversified Bond Fund, Conservative Balanced Fund, Moderate
Balanced Fund, Growth Balanced Fund, Diversified Equity Fund, Growth Equity
Fund, Large Company Growth Fund and Small Company Growth Fund in the Statement
of Additional Information relating to Diversified Bond Fund, Conservative
Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund, Diversified Equity
Fund, Growth Equity Fund, Large Company Growth Fund and Small Company Growth
Fund, constituting certain of Parts A and B, respectively, of the Registration
Statement, are incorporated by reference herein.

The following are the directors and principal executive officers of Peregrine,
including their business connections which are of a substantial nature. The
address of Peregrine is LaSalle Plaza, 800 LaSalle Avenue, Suite 1850,
Minneapolis, Minnesota 55402 and, unless otherwise indicated below, that address
is the principal business address of any company with which the directors and
principal executive officers are connected.

James R. Campbell, Director. Mr. Campbell is President, Chief Executive
Odfficer and a Director of Norwest Bank. His address is Sixth and
Marquette Avenue, Minneapolis, Minnesota 55479-0116

Patricia D. Burns, Senior Vice President.

Tasso H. Coin, Senior Vice President.

John S. Dale, Senior Vice President.

Julie M. Gerend, Senior Vice President. Prior to September, 1995, Ms.
Gerend was Manager, Account Executive at Fidelity Institutional
Retirement Services, Co.

William D. Diese, Senior Vice President.

<PAGE>

Daniel J. Hagen, Vice President. Prior to May, 1996, Mr. Hagen was
Managing Director of Piper Jaffray, Inc.

Ronald G. Hoffman, Senior Vice President and Secretary.

Frank T. Matthews, Vice President.

Jeannine McCormick, Senior Vice President.

Barbara K. McFadden, Senior Vice President.

Robert B. Mersky, Chairman, President and Chief Executive Officer.

Gary E. Nussbaum, Senior Vice President.

James P. Ross, Vice President. Prior to November, 1996, Mr. Ross was
Vice President of Norwest Bank.

Jonathan L. Scharlau, Assistant Vice President.

Jay H. Strohmaier, Senior Vice President. Prior to September, 1996, Mr.
Strohmaier was Senior Vice President/Managed Accounts for Voyageur Asset
Management.

Paul E. von Kuster, Senior Vice President.

Janelle M. Walter, Assistant Vice President.

Paul R. Wurm, Senior Vice President.

J. Daniel Vandermark, Vice President. His address is Sixth and
Marquette Avenue, Minneapolis, Minnesota 55479-1013

GALLIARD CAPITAL MANAGEMENT, INC.

The description of Galliard Capital Management, Inc. ("Galliard") under the
caption "Management - SubAdviser" in the Prospectus and "Management- Adviser -
SubAdviser - Stable Income Fund, Diversified Bond Fund, Conservative Balanced
Fund, Moderate Balanced Fund and Growth Balanced Fund" in the Statement of
Additional Information relating to the Stable Income Fund, Diversified Bond
Fund, Conservative Balanced Fund, Moderate Balanced Fund and Growth Balanced
Fund", constituting certain of Parts A and B, respectively, of the Registration
Statement, are incorporated by reference herein.

The following are the directors and principal executive officers of Galliard,
including their business connections which are of a substantial nature. The
address of Galliard is LaSalle Plaza, Suite 2060, 800 LaSalle Avenue,
Minneapolis, Minnesota 55479 and, unless otherwise indicated

<PAGE>

below, that address is the principal business address of any company with which
the directors and principal executive officers are connected.

Peter Jay Kiedrowski, Chairman. Mr. Kiedrowski is President and Chief
Executive Officer of NIM; Chairman of Crestone and Executive Vice
President of Norwest Bank.

Richard Merriam, Principal. Mr. Merriam is Chief Investment Officer of
Insight Investment Management.

John Caswell, Principal. Mr. Caswell is Chief Investment Officer of
Norwest Bank, N.A.

Karl Tourville, Principal. Mr. Tourville is Vice President/Head of
Fixed Income of Norwest Bank.

Laura Gideon, Senior Vice President of Marketing. Ms. Gideon is Vice
President of Marketing for American Express.

Leela Scattum, Vice President of Operations. Ms. Scattum is a Fund
Accountant for Norwest Bank.

UNITED CAPITAL MANAGEMENT

The description of United Capital Management ("UCM") under the caption
"Management - SubAdviser" in the Prospectus and "Management- Adviser -
SubAdviser - Diversified Bond Fund, Total return Bond Fund, Conservative
Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund and Contrarian Stock
Fund" in the Statement of Additional Information relating to the, Diversified
Bond Fund, Total Return Bond Fund, Conservative Balanced Fund, Moderate Balanced
Fund, Growth Balanced Fund and Contrarian Stock Fund" constituting certain of
Parts A and B, respectively, of the Registration Statement, are incorporated by
reference herein.

The following are the directors and principal executive officers of UCM,
including their business connections which are of a substantial nature. The
address of UCM is 1700 Lincoln Street, Suite 3301, Denver, Colorado 80274 and,
unless otherwise indicated below, that address is the principal business address
of any company with which the directors and principal executive officers are
connected.

W. Lon Schreur, President. Mr. Schreur is Senior Vice President of
Norwest Bank Colorado, N.A..

John T. Groton, Vice President. Mr. Groton is Vice President of Norwest
Bank Colorado, N.A.

David B. Kinney, Vice President. Mr. Kinney is Vice President of
Norwest Bank Colorado, N.A.

<PAGE>

James C. Peery, Senior Vice President. Mr. Peery is Vice President of
Norwest Bank Colorado, N.A.

Leona F. Bennett, Vice President. Ms. Bennett is Vice President of
Norwest Bank Colorado, N.A.

Denise B. Johnson, Vice President. Mr. Johnson is Vice President of
Norwest Bank Colorado, N.A.

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) Forum Financial Services, Inc., Registrant's underwriter, serves as
underwriter to Core Trust (Delaware), The CRM Funds, The Cutler Trust,
Forum Funds, The Highland Family of Funds, Monarch Funds, Norwest Funds,
Norwest Select Funds, Sound Shore Fund, Inc. and Trans Adviser Funds,
Inc.

(b) John Y. Keffer, President and Secretary of Forum Financial Services,
Inc., is the Chairman and President of Registrant. David R. Keffer,
Vice President and Treasurer of Forum Financial Services, Inc., is the
Vice President, Assistant Treasurer and Assistant Secretary of
Registrant. Their business address is Two Portland Square, Portland,
Maine.

ITEM 30. LOCATION OF BOOKS AND RECORDS.

The majority of accounts, books and other documents required to be maintained by
31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained at the offices of Forum Financial Services, Inc. at Two Portland
Square, Portland, Maine 04101, at Forum Financial Corp., Two Portland Square,
Portland, Maine 04101 and Forum Administrative Services, Limited Liability
Company, Two Portland Square, Portland, Maine 04101. The records required to be
maintained under Rule 31a-1(b)(1) with respect to journals of receipts and
deliveries of securities and receipts and disbursements of cash are maintained
at the offices of Registrant's custodian. The records required to be maintained
under Rule 31a-1(b)(5), (6) and (9) are maintained at the offices of
Registrant's investment advisers as indicated in the various prospectuses
constituting Part A of this Registration Statement.

Additional records are maintained at the offices of Norwest Bank Minnesota,
N.A., 733 Marquette Avenue, Minneapolis, MN 55479-0040, Registrant's investment
adviser, custodian and transfer agent.

ITEM 31. MANAGEMENT SERVICES.

Not Applicable.

ITEM 32. UNDERTAKINGS.

<PAGE>

(i) Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the latter of the effective date of Registrant's Securities
Act of 1933 Registration Statement relating to the prospectuses offering
those shares or the commencement of public shares of the respective
shares; and,

(ii) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to
shareholders relating to the portfolio or class thereof to which the
prospectus relates upon request and without charge.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Portland, and State of Maine on the 11th day of
July, 1997.

NORWEST FUNDS

/s/ John Y. Keffer
-------------------
John Y. Keffer

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement amendment has been signed below by the following persons on the 11th
day of July, 1997.

Signatures Title
---------- -----

(a) Principal Executive Officer

/s/ John Y. Keffer Chairman and President
------------------
John Y. Keffer

(b) Principal Financial and Accounting Officer

/s/ Robert B. Campbell Treasurer
----------------------
Robert B. Campbell

Robert C. Brown Trustee
Donald H. Burkhardt Trustee
James C. Harris Trustee
Richard M. Leach Trustee
Donald C. Willeke Trustee
Timothy J. Penny Trustee
John S. McCune Trustee

By: /s/ John Y. Keffer
-------------------
John Y. Keffer
Attorney in Fact
<PAGE>
SIGNATURES

On behalf of Core Trust (Delaware), being duly authorized, I have duly caused
this amendment to the Registration Statement of Norwest Funds to be signed in
the City of Portland, State of Maine on the 11th day of July, 1997.

CORE TRUST (DELAWARE)

By: /s/ John Y. Keffer
------------------
John Y. Keffer
President

This amendment to the Registration Statement of Norwest Funds has been signed
below by the following persons in the capacities indicated on the 11th day of
July, 1997.

Signatures Title
---------- -----

(a) Principal Executive Officer

/s/ John Y. Keffer Chairman and President
---------------------------
John Y. Keffer

(b) Principal Financial and Accounting Officer

/s/ Richard C. Butt Treasurer,Principal Financial
------------------- and Accounting Officer
Richard C. Butt

/s/ John Y. Keffer Chairman
------------------
John Y. Keffer

J. Michael Parish Trustee
James C. Cheng Trustee
Costas Azariadis Trustee

By: /s/ John Y. Keffer
------------------
John Y. Keffer
Attorney in Fact
<PAGE>

SIGNATURES

On behalf of Schroder Capital Funds, being duly authorized, I have duly caused
this amendment to the Registration Statement of Norwest Funds to be signed in
the City of New York, State of New York on the 2nd day of July, 1997.

SCHRODER CAPITAL FUNDS

By:/s/ Catherine A. Mazza
----------------------
Catherine A. Mazza

This amendment to the Registration Statement of Norwest Funds has been signed
below by the following persons in the capacities indicated on the 2nd day of
July, 1997.

Signatures Title

(a) Principal Executive Officer

MARK J. SMITH

By:/s/ Thomas G. Sheehan President
------------------------
Thomas G. Sheehan, Attorney-in-Fact and Trustee

(b) Principal Financial and
Accounting Officer

ROBERT JACKOWITZ Treasurer

By:/s/ Thomas G. Sheehan
---------------------
Thomas G. Sheehan, Attorney-in-Fact

PETER E. GUERNSEY Trustee
JOHN I. HOWELL Trustee
HERMANN C. SCHWAB Trustee

By: /s/ Thomas G. Sheehan
---------------------
Thomas G. Sheehan
Attorney-in-Fact
<PAGE>

INDEX TO EXHIBITS

Sequential
Exhibit Page Number
- ------- -----------

5(a) Form of Investment Advisory Agreement between
Registrant and Norwest Investment Mangement, Inc.

5(e) Form of Investment Sub-Advisory Agreement between
Registrant and Galliard Capital Management International Inc.

5(f) Form of Investment Sub-Advisory Agreement between
Registrant and Peregrine Capital Management International Inc.

5(g) Form of Investment Sub-Advisory Agreement between
Registrant and United Capital Management

<PAGE>

EXHIBIT 5(A)

-2-
<PAGE>

NORWEST FUNDS-REGISTERED TRADEMARK-
INVESTMENT ADVISORY AGREEMENT

June 1, 1997

AGREEMENT made as of this 1st day of June, 1997, between Norwest Funds (the
"Trust"), a business trust organized under the laws of the State of Delaware
with its principal place of business at Two Portland Square, Portland, Maine
04101 and Norwest Investment Management, Inc. (the "Adviser"), a corporation
organized under the laws of the State of Minnesota with its principal place of
business at Sixth Street and Marquette, Minneapolis, Minnesota 55479.

WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended, (the "Act") as an open-end management investment company and is
authorized to issue interests (as defined in the Trust's Trust Instrument), in
separate series;

WHEREAS, the Trust desires that the Adviser perform investment advisory
services for each series of the Trust as listed in Appendix A hereto (each a
"Fund" and collectively the "Funds"), and the Adviser is willing to provide
those services on the terms and conditions set forth in this Agreement;

NOW THEREFORE, the Trust and the Adviser agree as follows:

SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS

The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in its Trust Instrument, By-Laws and Registration Statement filed with
the Securities and Exchange Commission (the "Commission") under the Act and the
Securities Act of 1933 (the "Securities Act"), including any representations
made in the prospectus and statement of additional information relating to the
Funds contained therein and as may be supplemented from time to time, all in
such manner and to such extent as may from time to time be authorized by the
Trust's Board of Trustees (the "Board"). The Trust is currently authorized to
issue twenty-eight series of shares, and the Board is authorized to issue any
unissued shares in any number of additional classes or series. The Trust has
delivered copies of the documents listed in this Section 1 and will from time to
time furnish Adviser with any amendments thereof.

SECTION 2. INVESTMENT ADVISER; APPOINTMENT

The Trust hereby employs Adviser, subject to the direction and control of
the Board, to manage the investment and reinvestment of the assets in the Funds
and, without limiting the generality of the foregoing, to provide other services
specified in Section 3 hereof.

SECTION 3. DUTIES OF THE ADVISER

(a) The Adviser shall make decisions with respect to all purchases and
sales of securities and other investment assets in the Funds. Among other
things, the Adviser shall make all decisions with respect to the allocation of
the Funds' investments in various securities or other assets, in investment
styles and, if applicable, in other investment companies or pooled vehicles in
which a Fund may invest. To carry out such decisions, the Adviser is hereby
authorized, as agent and attorney-in-fact for the Trust, for the account of, at
the risk of and in the name of the Trust, to place orders and issue instructions
with respect to those transactions of the Funds. In all purchases, sales and
other transactions in securities for the Funds, the Adviser is authorized to
exercise full discretion and act for the Trust in the same manner and with the
same force and effect as the Trust might or could do with respect to such
purchases, sales or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of such purchases,
sales or other transactions.

-3-
<PAGE>

(b) The Adviser will report to the Board at each meeting thereof all
changes in the Funds since the prior report, and will also keep the Board
informed of important developments affecting the Trust, each Fund and the
Adviser, and on its own initiative, will furnish the Board from time to time
with such information as the Adviser may believe appropriate for this purpose,
whether concerning the individual companies whose securities are included in a
Fund's holdings, the industries in which they engage, or the economic, social or
political conditions prevailing in each country in which a Fund maintains
investments. The Adviser will also furnish the Board with such statistical and
analytical information with respect to securities in the Funds as the Adviser
may believe appropriate or as the Board reasonably may request. In making
purchases and sales of securities for the Funds, the Adviser will bear in mind
the policies set from time to time by the Board as well as the limitations
imposed by the Trust's Trust Instrument, By-Laws and Registration Statement
under the Act and the Securities Act, the limitations in the Act and in the
Internal Revenue Code of 1986, as amended, in respect of regulated investment
companies and the investment objectives, policies and restrictions of each Fund.

(c) The Adviser will from time to time employ or associate with such
persons as the Adviser believes to be particularly fitted to assist in the
execution of the Adviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Adviser. No obligation may be incurred on
the Trust's behalf in any such respect.

(d) The Adviser shall maintain records relating to portfolio transactions
and the placing and allocation of brokerage orders as are required to be
maintained by the Trust under the Act. The Adviser shall prepare and maintain,
or cause to be prepared and maintained, in such form, for such periods and in
such locations as may be required by applicable law, all documents and records
relating to the services provided by the Adviser pursuant to this Agreement
required to be prepared and maintained by the Trust pursuant to the rules and
regulations of any national, state, or local government entity with jurisdiction
over the Trust, including the Commission and the Internal Revenue Service. The
books and records pertaining to the Trust which are in possession of the Adviser
shall be the property of the Trust. The Trust, or the Trust's authorized
representatives, shall have access to such books and records at all times during
the Adviser's normal business hours. Upon the reasonable request of the Trust,
copies of any such books and records shall be provided promptly by the Adviser
to the Trust or the Trust's authorized representatives.

(e) With respect to a Fund, the Adviser shall have no duties or
obligations pursuant to this Agreement, including any obligation to reimburse
Fund expenses pursuant to Section 4 hereof, during any period during which the
Fund invests all (or substantially all) of its investment assets in a
registered, open-end management investment company, or separate series thereof,
in accordance with Section 12(d)(1)(E) under the Act.

SECTION 4. EXPENSES

(a) The Adviser shall be responsible for that portion of the net expenses
of the Fund (except interest, taxes, brokerage, fees and other expenses paid by
the fund in accordance with an effective plan pursuant to Rule 12b-1 under the
Act and organization expenses, all to the extent such exceptions are permitted
by applicable state law and regulation) incurred by the Fund during the Fund's
fiscal year or portion thereof that this Agreement is in effect which, as to the
Funds, in any such year exceeds the limits applicable to the Fund under the laws
or regulations of any state in which shares of the Fund are qualified for sale
(reduced pro rata for any portion of less than a year) and which is not assumed
by Forum Financial Services, Inc., the Trust's manager and distributor, or any
other person.

(b) The Trust hereby confirms that, subject to the foregoing, the Trust
shall be responsible and shall assume the obligation for payment of all the
Trust's other expenses, including: interest charges, taxes, brokerage fees and
commissions; certain insurance premiums; fees, interest charges and expenses of
the Trust's custodian, transfer agent and dividend disbursing agent;
telecommunications expenses; auditing, legal and compliance expenses; costs of
the Trust's formation and maintaining its existence; 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; 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 in the Trust; costs

-4-
<PAGE>

of reproduction, stationery and supplies; compensation of the Trust's trustees,
officers, employees and other personnel performing services for the Trust who
are not the Adviser's employees or employees of Forum Financial Services, Inc.
or affiliated persons of either; costs of corporate meetings; registration fees
and related expenses for registration with the Commission and the securities
regulatory authorities of other countries in which the Trust's shares are sold;
state securities law registration fees and related expenses; fees and out-of-
pocket expenses payable to Forum Financial Services, Inc. under any
distribution, management or similar agreement; 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.

SECTION 5. STANDARD OF CARE

The Trust shall expect of the Adviser, and the Adviser will give the Trust
the benefit of, the Adviser's best judgment and efforts in rendering its
services to the Trust, and as an inducement to the Adviser's undertaking these
services the Adviser shall not be liable hereunder for any mistake of judgment
or in any event whatsoever, except for lack of good faith, provided that nothing
herein shall be deemed to protect, or purport to protect, the Adviser against
any liability to the Trust or to the Trust's security holders to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of the Adviser's duties hereunder, or by
reason of the Adviser's reckless disregard of its obligations and duties
hereunder.

SECTION 6. COMPENSATION

In consideration of the foregoing, the Trust shall pay the Adviser, with
respect to each of the Funds, a fee at an annual rate as listed in Appendix A
hereto. Such fees shall be accrued by the Trust daily and shall be payable
monthly in arrears on the first day of each calendar month for services
performed hereunder during the prior calendar month. The Adviser's
reimbursement, if any, of a Fund's expenses as provided in Section 4 hereof,
shall be estimated and paid to the Trust monthly in arrears, at the same time as
the Trust's payment to the Adviser for such month. Payment of the advisory fee
will be reduced or postponed, if necessary, with any adjustments made after the
end of the year.

SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION

(a) This Agreement shall become effective with respect to a Fund
immediately upon approval by a majority of the outstanding voting securities of
that Fund.

(b) This Agreement shall remain in effect with respect to a Fund for a
period of one year from the date of its effectiveness and shall continue in
effect for successive twelve-month periods (computed from each anniversary date
of the approval) with respect to the Fund; provided that such continuance is
specifically approved at least annually (i) by the Board or by the vote of a
majority of the outstanding voting securities of the Fund, and, in either case,
(ii) by a majority of the Trust's trustees who are not parties to this Agreement
or interested persons of any such party (other than as trustees of the Trust);
provided further, however, that if this Agreement or the continuation of this
Agreement is not approved as to a Fund, the Adviser 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.

(c) This Agreement may be terminated with respect to a Fund at any time,
without the payment of any penalty, (i) by the Board or by a vote of a majority
of the outstanding voting securities of the Fund on 60 days' written notice to
the Adviser or (ii) by the Adviser on 60 days' written notice to the Trust.
This agreement shall terminate upon assignment.

SECTION 8. ACTIVITIES OF THE ADVISER

Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Adviser's right, or the
right of any of the Adviser's officers, directors or employees who may also be a
trustee, officer or employee of the Trust, or persons otherwise affiliated
persons of the Trust to engage in any other

-5-
<PAGE>

business or to devote time and attention to the management or other aspects of
any other business, whether of a similar or dissimilar nature, or to render
services of any kind to any other corporation, trust, firm, individual or
association.

SECTION 9. SUBADVISERS

At its own expense, the Adviser may carry out any of its obligations under
this agreement by employing, subject to your supervision, one or more persons
who are registered as investment advisers pursuant to the Investment Advisers
Act of 1940, as amended, or who are exempt from registration thereunder
("Subadvisers"). Each Subadviser's employment will be evidenced by a separate
written agreement approved by the Board and, if required, by the shareholders of
the Fund. The Adviser shall not be liable hereunder for any act or omission of
any Subadviser, except to exercise good faith in the employment of the
Subadviser and except with respect to matters as to which the Adviser assumes
responsibility in writing.

SECTION 10. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY

The Trustees of the Trust and the interest holders of the Fund shall not be
liable for any obligations of the Trust or of the Fund under this Agreement, and
the Adviser agrees that, in asserting any rights or claims under this Agreement,
it shall look only to the assets and property of the Trust or the Fund to which
the Adviser's rights or claims relate in settlement of such rights or claims,
and not to the Trustees of the Trust or the interest holders of the Fund.

SECTION 11. "NORWEST" NAME

If the Adviser ceases to act as investment adviser to the Trust or any Fund
whose name includes the word "Norwest," or if the Adviser requests in writing,
the Trust shall take prompt action to change the name of the Trust any such Fund
to a name that does not include the word "Norwest." The Adviser may from time
to time make available without charge to the Trust for the Trust's use any marks
or symbols owned by the adviser, including marks or symbols containing the word
"Norwest" or any variation thereof, as the Adviser deems appropriate. Upon the
Adviser's request in writing, the Trust shall cease to use any such mark or
symbol at any time. The Trust acknowledges that any rights in or to the word
"Norwest" and any such marks or symbols which may exist on the date of this
Agreement or arise hereafter are, and under any and all circumstances shall
continue to be, the sole property of the Adviser. The Adviser may permit other
parties, including other investment companies, to use the word "Norwest" in
their names without the consent of the Trust. The Trust shall not use the word
"Norwest" in conducting any business other than that of an investment company
registered under the Act without the permission of the Adviser.

SECTION 12. MISCELLANEOUS

(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto and, if required by the Act, by a vote of a majority of the
outstanding voting securities of any Fund thereby affected. No amendment to
this Agreement or the termination of this Agreement with respect to a Fund shall
effect this Agreement as it pertains to any other Fund, nor shall any such
amendment require the vote of any of the Fund's shareholders.

(b) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.

(d) The terms "vote of a majority of the outstanding voting securities,"
"interested person," "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the Act.

-6-
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.

NORWEST FUNDS

----------------------------
Donald H. Burkhardt
Trustee

NORWEST INVESTMENT MANAGEMENT, INC.

----------------------------
P. Jay Kiedrowski
Executive Vice President

-7-
<PAGE>

APPENDIX C

NORWEST FUNDS
INVESTMENT ADVISORY AGREEMENT

APPENDIX A

(a) INVESTMENT ADVISORY FEES

Fee as a % of the Annual
Funds of the Trust Average Daily Net Assets of the Fund
- ------------------ ------------------------------------
Cash Investment Fund,
Treasury Fund and
U.S. Government Fund 0.20% of the first $300 million of assets
0.16% for next $400 million of assets
0.12% of the remaining net assets

Ready Cash Investment Fund 0.40% of the first $300 million of assets
0.36% for next $400 million of assets
0.32% of the remaining net assets

Municipal Money Market Fund 0.35% of the first $500 million of assets
0.325% for next $500 million of assets
0.30% of the remaining net assets

Stable Income Fund 0.30%
Intermediate Government
Income Fund 0.33%
Diversified Bond Fund 0.35%
Income Fund 0.50%

Total Return Bond Fund 0.50%

Limited Term Tax-Free Fund, 0.50%
Minnesota Tax-Free Fund and
Colorado Tax-Free Fund 0.50% of the first $300 million of assets
0.46% of next $400 million of assets
0.42% of the remaining net assets
Tax-Free Income Fund 0.50%

Conservative Balanced Fund 0.45%
Moderate Balanced Fund 0.53%
Growth Balanced Fund 0.58%

Index Fund 0.15%
Income Equity Fund 0.50%
<PAGE>
Fee as a % of the Annual
Funds of the Trust Average Daily Net Assets of the Fund
- ------------------ ------------------------------------

ValuGrowth Stock Fund 0.80% of the first $300 million of assets
0.76% of the next $400 million of assets
0.72% of the remaining net assets

Diversified Equity Fund 0.65%
Growth Equity Fund 0.90%
Large Company Growth Fund 0.65%
Small Company Stock Fund 0.90%
Small Company Growth Fund 0.90%
Small Cap Opportunities Fund 0.925%
Contrarian Stock Fund 0.80% of the first $300 million of assets
0.76% of the next $400 million of assets
0.72% of the remaining net assets
International Fund 0.85%

(b) SECTION 12(d)(1)(E) ("MASTER-FEEDER") STRUCTURES

No fee shall be payable hereunder with respect to a Fund during any period in
which the Fund invests all (or substantially all) of its investment assets in a
registered, open-end, management investment company, or separate series thereof,
in accordance with and reliance upon Section 12(d)(1)(E) under the Act.

The fee payable hereunder with respect to a Fund shall be 0.25% (0.00% in the
case of Cash Investment Fund) of the annual average daily net assets of the Fund
during any period in which the Fund invests (i) some or all of its investment
assets in two or more registered, open-end management investment companies, or
separate series thereof, or (ii) some of its investment assets in a registered,
open-end management investment company, or separate series thereof, in each
case, in accordance with Section 12(d)(1)(H) under the Act, the rules thereunder
or an exemptive order issued by the Commission exempting the Fund from the
provisions of Section 12(d)(1)(A) under the Act (a "Fund of Funds structure").

In addition to the fee payable under the preceding paragraph, to the extent a
Fund invests in a Fund of Funds structure and invests a portion of the Fund's
assets directly in portfolio securities or other assets, the fee payable
hereunder with respect to that portion of the Fund's assets invested directly in
portfolio securities or other assets shall be the fee as stated in paragraph (a)
of this Appendix A.

<PAGE>

EXHIBIT 5(e)

-10-

<PAGE>

NORWEST FUNDS-Registered Trademark-
INVESTMENT SUBADVISORY AGREEMENT

June 1, 1997

AGREEMENT made as of this 1st day of June, 1997, among Norwest Funds (the
"Trust"), a business trust organized under the laws of the State of Delaware
with its principal place of business at Two Portland Square, Portland, Maine
04101, Norwest Investment Management, Inc. (the "Adviser"), a corporation
organized under the laws of the State of Minnesota with its principal place of
business at Sixth Street and Marquette, Minneapolis, Minnesota 55479, and
Galliard Capital Management, Inc. (the "Subadviser"), a corporation organized
under the laws of the State of Minnesota, with its principal place of business
at 800 LaSalle Avenue, Suite 2060, Minneaplis, Minnesota 55479.

WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act") as an open-end management investment company and is
authorized to issue its shares of beneficial interest, no par value, in separate
series and classes; and

WHEREAS, the Trust and the Adviser desire that the Subadviser perform
investment advisory services for each series of the Trust as listed in Appendix
A hereto (each a "Fund" and collectively the "Funds"), and the Subadviser is
willing to provide those services on the terms and conditions set forth in this
Agreement;

NOW THEREFORE, the Trust, the Adviser and the Subadviser agree as follows:

SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS

The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in its Trust Instrument, By-Laws and Registration Statement filed with
the Securities and Exchange Commission (the "Commission") under the Act and the
Securities Act of 1933 (the "Securities Act"), including any representations
made in the prospectus and statement of additional information relating to the
Fund contained therein and as may be supplemented from time to time, all in such
manner and to such extent as may from time to time be authorized by the Trust's
Board of Trustees (the "Board"). The Trust is currently authorized to issue
twenty-eight series of shares, and the Board is authorized to issue any unissued
shares in any number of additional classes or series. The Trust has delivered
copies of the documents listed in this Section 1 and will from time to time
furnish Subadviser with any amendments thereof.

SECTION 2. INVESTMENT ADVISER; APPOINTMENT

Subject to the direction and control of the Board, the Adviser manages the
investment and reinvestment of the assets of the Fund and provides for certain
management and services as

-11-

<PAGE>

specified in the Investment Advisory Agreement between the Trust and the Adviser
with respect to the Fund.

Subject to the direction and control of the Board, the Subadviser shall
manage the investment and reinvestment of the assets of the Fund and, without
limiting the generality of the foregoing, shall provide the management and other
services specified below, all in such manner and to such extent as may be
directed from time to time by the Adviser.

SECTION 3. DUTIES OF THE SUBADVISER

(a) The Subadviser shall make decisions with respect to all purchases and
sales of securities and other investment assets in the Fund. To carry out such
decisions, the Subadviser is hereby authorized, as agent and attorney-in-fact
for the Trust, for the account of, at the risk of and in the name of the Trust,
to place orders and issue instructions with respect to those transactions of the
Fund. In all purchases, sales and other transactions in securities for the
Fund, the Subadviser is authorized to exercise full discretion and act for the
Trust in the same manner and with the same force and effect as the Trust might
or could do with respect to such purchases, sales or other transactions, as well
as with respect to all other things necessary or incidental to the furtherance
or conduct of such purchases, sales or other transactions.

(b) The Subadviser will report to the Board at each meeting thereof all
changes in the Fund since the prior report, and will also keep the Board
informed of important developments affecting the Trust, the Fund and the
Subadviser, and on its own initiative, will furnish the Board from time to time
with such information as the Subadviser may believe appropriate for this
purpose, whether concerning the individual companies whose securities are
included in the Fund's holdings, the industries in which they engage, or the
economic, social or political conditions prevailing in each country in which the
Fund maintains investments. The Subadviser will also furnish the Board with
such statistical and analytical information with respect to securities in the
Fund as the Subadviser may believe appropriate or as the Board reasonably may
request. In making purchases and sales of securities for the Fund, the
Subadviser will bear in mind the policies set from time to time by the Board as
well as the limitations imposed by the Trust's Trust Instrument, By-Laws,
Registration Statement under the Act and the Securities Act, the limitations in
the Act and in the Internal Revenue Code of 1986, as amended in respect of
regulated investment companies and the investment objectives, policies and
restrictions of the Fund.

(c) The Subadviser may from time to time employ or associate with such
persons as the Subadviser believes to be particularly fitted to assist in the
execution of the Subadviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Subadviser. No obligation may be incurred on
the Trust's behalf in any such respect.

(d) The Subadviser shall maintain records relating to portfolio
transactions and the placing and allocation of brokerage orders as are required
to be maintained by the Trust under the Act. The Subadviser shall prepare and
maintain, or cause to be prepared and maintained, in such form, for such periods
and in such locations as may be required by applicable law, all documents and
records relating to the services provided by the Subadviser pursuant to this
Agreement

-12-

<PAGE>

required to be prepared and maintained by the Trust pursuant to the rules and
regulations of any national, state, or local government entity with jurisdiction
over the Trust, including the Securities and Exchange Commission and the
Internal Revenue Service. The books and records pertaining to the Trust which
are in possession of the Subadviser shall be the property of the Trust. The
Trust, or the Trust's authorized representatives, shall have access to such
books and records at all times during the Subadviser's normal business hours.
Upon the reasonable request of the Trust, copies of any such books and records
shall be provided promptly by the Subadviser to the Trust or the Trust's
authorized representatives.

SECTION 4. EXPENSES

Subject to any expenses reimbursement arrangements between the Adviser or
others and the Trust, the Trust shall be responsible and shall assume the
obligation for payment of all of the Trust's expenses.

SECTION 5. STANDARD OF CARE

The Trust shall expect of the Subadviser, and the Subadviser will give the
Trust the benefit of, the Subadviser's best judgment and efforts in rendering
its services to the Trust, and as an inducement to the Subadviser's undertaking
these services the Subadviser shall not be liable hereunder for any mistake of
judgment or in any event whatsoever, except for lack of good faith, provided
that nothing herein shall be deemed to protect, or purport to protect, the
Subadviser against any liability to the Trust or to the Trust's security holders
to which the Subadviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the
Subadviser's duties hereunder, or by reason of the Subadviser's reckless
disregard of its obligations and duties hereunder.

SECTION 6. COMPENSATION

In consideration of the foregoing, the Adviser and not the Trust shall pay
the Subadviser a fee as shall be determined from time to time in writing between
the Adviser and the Subadviser.

SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION

(a) This Agreement shall become effective on the date first above written.

(b) This Agreement shall remain in effect for a period of one year from
the date of its effectiveness and shall continue in effect for successive
one-year; provided that such continuance is specifically approved at least
annually (i) by the Board or by the vote of a majority of the outstanding voting
securities of the Fund, and, in either case, (ii) by a majority of the Trust's
trustees who are not parties to this Agreement or interested persons of any such
party (other than as trustees of the Trust); provided further, however, that if
this Agreement or the continuation of this Agreement is not approved, the
Subadviser may continue to render the services described herein in the manner
and to the extent permitted by the Act and the rules and regulations thereunder.

-13-

<PAGE>

(c) This Agreement may be terminated at any time, without the payment of
any penalty, (i) by the Board or by a vote of a majority of the outstanding
voting securities of the Fund on 60 days' written notice to the Subadviser or
(ii) by the Subadviser on 60 days' written notice to the Trust. This agreement
shall terminate upon assignment unless prior approval of the Board is obtained.

SECTION 8. ACTIVITIES OF THE SUBADVISER

Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Subadviser's right, or
the right of any of the Subadviser's officers, directors or employees who may
also be a trustee, officer or employee of the Trust, or persons otherwise
affiliated persons of the Trust to engage in any other business or to devote
time and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any kind to
any other corporation, trust, firm, individual or association.

SECTION 9. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY

The Trustees of the Trust and the shareholders of the Fund shall not be
liable for any obligations of the Trust or of the Fund under this Agreement, and
the Subadviser agrees that, in asserting any rights or claims under this
Agreement, it shall look only to the assets and property of the Trust or the
Fund to which the Subadviser's rights or claims relate in settlement of such
rights or claims, and not to the Trustees of the Trust or the shareholders of
the Fund.

SECTION 10. MISCELLANEOUS

(b) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.

-14-

<PAGE>

(d) The terms "vote of a majority of the outstanding voting securities",
"interested person", "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the Act.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.

NORWEST FUNDS

-------------------
By: John Y. Keffer
President

NORWEST INVESTMENT MANAGEMENT, INC.

----------------------
By: P. Jay Kiedrowski
President

GALLIARD CAPITAL MANAGEMENT, INC.

--------------------
[Name]
[Title]

-15-

<PAGE>

NORWEST FUNDS
INVESTMENT ADVISORY AGREEMENT

APPENDIX A

Stable Income Fund

<PAGE>

EXHIBIT 5(f)

-17-
<PAGE>

NORWEST FUNDS-Registered Trademark-
INVESTMENT SUBADVISORY AGREEMENT

June 1, 1997

AGREEMENT made as of this 1st day of June, 1997, among Norwest Funds (the
"Trust"), a business trust organized under the laws of the State of Delaware
with its principal place of business at Two Portland Square, Portland, Maine
04101, Norwest Investment Management, Inc. (the "Adviser"), a corporation
organized under the laws of the State of Minnesota with its principal place of
business at Sixth Street and Marquette, Minneapolis, Minnesota 55479, and
Peregrine Capital Management, Inc. (the "Subadviser"), a corporation organized
under the laws of the State of Minnesota with its principal place of business at
800 LaSalle Avenue, Minneapolis, Minnesota 55402.

NOW THEREFORE, the Trust, the Adviser and the Subadviser agree as follows:

SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS

The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in its Trust Instrument, By-Laws and Registration Statement filed with
the Securities and Exchange Commission (the "Commission") under the Act and the
Securities Act of 1933 (the "Securities Act"), including any representations
made in the prospectus and statement of additional information relating to the
Fund contained therein and as may be supplemented from time to time, all in such
manner and to such extent as may from time to time be authorized by the Trust's
Board of Trustees (the "Board"). The Trust is currently authorized to issue
twenty-eight series of shares, and the Board is authorized to issue any unissued
shares in any number of additional classes or series. The Trust has delivered
copies of the documents listed in this Section 1 and will from time to time
furnish Subadviser with any amendments thereof.

SECTION 2. INVESTMENT ADVISER; APPOINTMENT

Subject to the direction and control of the Board, the Adviser manages the
investment and reinvestment of the assets of the Fund and provides for certain
management and services as

-18-
<PAGE>

specified in the Investment Advisory Agreement between the Trust and the Adviser
with respect to the Fund.

SECTION 3. DUTIES OF THE SUBADVISER

-19-
<PAGE>

SECTION 4. EXPENSES

SECTION 5. STANDARD OF CARE

SECTION 6. COMPENSATION

In consideration of the foregoing, the Adviser and not the Trust shall pay
the Subadviser a fee as shall be determined from time to time in writing between
the Adviser and the Subadviser.

SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION

(a) This Agreement shall become effective on the date first above written.

-20-
<PAGE>

SECTION 8. ACTIVITIES OF THE SUBADVISER

SECTION 9. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY

SECTION 10. MISCELLANEOUS

(b) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.

-21-
<PAGE>

(d) The terms "vote of a majority of the outstanding voting securities",
"interested person", "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the Act.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.

NORWEST FUNDS

--------------------
By: Donald H. Burkhardt
Trustee

NORWEST INVESTMENT MANAGEMENT,
INC.

--------------------
By: P. Jay Kiedrowski
President

PEREGRINE CAPITAL MANAGEMENT

--------------------
By:
Title:

-22-
<PAGE>

APPENDIX C

NORWEST FUNDS
INVESTMENT ADVISORY AGREEMENT

APPENDIX A

Small Company Growth Fund
Large Company Growth Fund

<PAGE>

EXHIBIT 5(g)

-24-
<PAGE>

NORWEST FUNDS-Registered Trademark-
INVESTMENT SUBADVISORY AGREEMENT

June 1, 1997

AGREEMENT made as of this 1st day of June, 1997, among Norwest Funds (the
"Trust"), a business trust organized under the laws of the State of Delaware
with its principal place of business at Two Portland Square, Portland, Maine
04101, Norwest Investment Management, Inc. (the "Adviser"), a corporation
organized under the laws of the State of Minnesota with its principal place of
business at Sixth Street and Marquette, Minneapolis, Minnesota 55479, and United
Capital Management, a part of Norwest Bank Colorado, N.A. (the "Subadviser"), a
banking association organized under the laws of the United States of America
with its principal place of business at One Norwest Center, 1700 Lincoln Street,
Suite 3301 Denver, CO 80274.

NOW THEREFORE, the Trust, the Adviser and the Subadviser agree as follows:

SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS

The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in its Trust Instrument, By-Laws and Registration Statement filed with
the Securities and Exchange Commission (the "Commission") under the Act and the
Securities Act of 1933 (the "Securities Act"), including any representations
made in the prospectus and statement of additional information relating to the
Fund contained therein and as may be supplemented from time to time, all in such
manner and to such extent as may from time to time be authorized by the Trust's
Board of Trustees (the "Board"). The Trust is currently authorized to issue
twenty-eight series of shares, and the Board is authorized to issue any unissued
shares in any number of additional classes or series. The Trust has delivered
copies of the documents listed in this Section 1 and will from time to time
furnish Subadviser with any amendments thereof.

SECTION 2. INVESTMENT ADVISER; APPOINTMENT

Subject to the direction and control of the Board, the Adviser manages the
investment and reinvestment of the assets of the Fund and provides for certain
management and services as

-25-
<PAGE>

specified in the Investment Advisory Agreement between the Trust and the Adviser
with respect to the Fund.

SECTION 3. DUTIES OF THE SUBADVISER

-26-
<PAGE>

SECTION 4. EXPENSES

SECTION 5. STANDARD OF CARE

SECTION 6. COMPENSATION

In consideration of the foregoing, the Adviser and not the Trust shall pay
the Subadviser a fee as shall be determined from time to time in writing between
the Adviser and the Subadviser.

SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION

(a) This Agreement shall become effective on the date first above written.

-27-
<PAGE>

SECTION 8. ACTIVITIES OF THE SUBADVISER

SECTION 9. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY

SECTION 10. MISCELLANEOUS

(b) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.

-28-
<PAGE>

(d) The terms "vote of a majority of the outstanding voting securities",
"interested person", "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the Act.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.

NORWEST FUNDS

---------------------
By: Donald H. Burkhardt
Trustee

NORWEST INVESTMENT MANAGEMENT,
INC.

---------------------
By: P. Jay Kiedrowski
President

NORWEST BANK COLORADO, N.A.

---------------------
By:
Title:

-29-
<PAGE>

APPENDIX C
NORWEST FUNDS
INVESTMENT ADVISORY AGREEMENT

APPENDIX A

Total Return Bond Fund
Contrarian Stock Fund