NORWEST FUNDS /ME/, 497, 1997-12-03

NORWEST FUNDS /ME/
497, 1997-12-03

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[LOGO] NORWEST
ADVANTAGE FUNDS
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PROSPECTUS

OCTOBER 1, 1997, AS AMENDED DECEMBER 1, 1997

This Prospectus offers shares of thirty-two separate portfolios (each a "Fund"
and collectively the "Funds") of Norwest Advantage Funds (the "Trust"), which is
a registered, open-end, management investment company, as follows: (1) five
MONEY MARKET FUNDS - Shares of Cash Investment Fund and Investor Shares of Ready
Cash Investment Fund, Shares of U.S. Government Fund, and Treasury Fund and
Institutional and Investor Shares of Municipal Money Market Fund (the "Money
Market Funds"); (2) I Shares of six FIXED INCOME FUNDS - Stable Income Fund,
Limited Term Government Income Fund, Intermediate Government Income Fund,
Diversified Bond Fund, Income Fund and Total Return Bond Fund (the "Fixed Income
Funds"); (3) I Shares of five TAX-FREE FIXED INCOME FUNDS - Limited Term
Tax-Free Fund, Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota
Intermediate Tax-Free Fund and Minnesota Tax-Free Fund (the "Tax-Free Fixed
Income Funds"); (4) I Shares of four BALANCED FUNDS - Strategic Income Fund
(FORMERLY CONSERVATIVE BALANCED FUND), Moderate Balanced Fund, Growth Balanced
Fund and Aggressive Balanced-Equity Fund (the "Balanced Funds"); and (5) I
Shares of twelve EQUITY FUNDS - Index Fund, Income Equity Fund, ValuGrowth Stock
Fund, Diversified Equity Fund, Growth Equity Fund, Large Company Growth Fund,
Diversified Small Cap Fund, Small Company Stock Fund, Small Company Growth Fund,
Small Cap Opportunities Fund, Contrarian Stock Fund and International Fund (the
"Equity Funds"). The Institutional Shares, Investor Shares, shares of Cash
Investment Fund, U.S. Government Fund and Treasury Fund (which offer a single
class of shares) and I Shares offered in this Prospectus are collectively
referred to as "Shares."

CASH INVESTMENT FUND, DIVERSIFIED BOND FUND, STRATEGIC INCOME FUND, MODERATE
BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE BALANCED-EQUITY FUND,
DIVERSIFIED EQUITY FUND, GROWTH EQUITY FUND, DIVERSIFIED SMALL CAP FUND AND
INTERNATIONAL FUND each seeks to achieve its investment objective by investing
in various portfolios of other registered open-end, management investment
companies, each of which invests using a different investment style. (See
"Summary" and "Other Information - Core and Gateway Structure.")

Each other Fund seeks to achieve its investment objective by investing directly
in portfolio securities.

Shares of Colorado Tax-Free Fund, Minnesota Intermediate Tax-Free Fund and
Minnesota Tax-Free Fund are offered solely to residents of Colorado and
Minnesota, respectively.

This Prospectus sets forth concisely the information concerning the Trust and
the Funds that a prospective investor should know before investing. The Trust
has filed with the Securities and Exchange Commission (the "SEC") a Statement of
Additional Information ("SAI") with respect to each Fund dated October 1, 1997,
as may be further amended from time to time. The SAI is available for reference
on the SEC's Web Site (http://www.sec.gov) and contains more detailed
information about the Trust and each of the Funds. The SAI is incorporated into
this Prospectus by reference. An investor may obtain a copy of the SAI without
charge by contacting the Trust's distributor, Forum Financial Services, Inc., at
Two Portland Square, Portland, Maine 04101 or by calling (207) 879-0001.
Investors should read this Prospectus and retain it for future reference.

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

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

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

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PAGE
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1. SUMMARY.................................................................... 3

2. FINANCIAL HIGHLIGHTS....................................................... 16

3. INVESTMENT OBJECTIVES AND POLICIES......................................... 24
Money Market Funds......................................................... 24
Fixed Income Funds......................................................... 28
Tax-Free Fixed Income Funds................................................ 34
Balanced Funds............................................................. 40
Equity Funds............................................................... 45
Core Portfolio Descriptions................................................ 55

4. ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS..................... 60
General Information........................................................ 60
Common Policies of the Funds............................................... 62

5. MANAGEMENT OF THE FUNDS.................................................... 66
Investment Advisory Services............................................... 66
Management, Administration and Distribution Services....................... 75
Shareholder Servicing and Custody.......................................... 76
Expenses of the Funds...................................................... 76

6. PURCHASES AND REDEMPTIONS OF SHARES........................................ 78
General Purchase Information............................................... 78
Purchase Procedures........................................................ 79
General Redemption Information............................................. 80
Redemption Procedures...................................................... 81
Exchanges.................................................................. 82
Shareholder Services....................................................... 83

7. DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS................................... 84
Dividends.................................................................. 84
Tax Matters................................................................ 85

8. OTHER INFORMATION.......................................................... 87
Banking Law Matters........................................................ 87
Determination of Net Asset Value........................................... 87
Performance Information.................................................... 88
The Trust and Its Shares................................................... 89
Core and Gateway Structure................................................. 90
APPENDIX A................................................................. A-1
Investments, Investment Strategies and Risk Considerations
</TABLE>

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1. SUMMARY

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

WHO SHOULD INVEST

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

THE FUNDS

Shares of thirty-two Funds are offered by this Prospectus: (1) five MONEY MARKET
FUNDS - shares of Cash Investment Fund, Investor Shares of Ready Cash Investment
Fund, Shares of U.S. Government Fund, and Treasury Fund and Institutional and
Investor Shares of Municipal Money Market Fund; (2) I Shares of six FIXED INCOME
FUNDS - Stable Income Fund, Limited Term Government Income Fund, Intermediate
Government Income Fund, Diversified Bond Fund, Income Fund and Total Return Bond
Fund; (3) I Shares of five TAX-FREE FIXED INCOME FUNDS - Limited Term Tax-Free
Fund, Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota Intermediate
Tax-Free Fund and Minnesota Tax-Free Fund; (4) I Shares of four BALANCED FUNDS -
Strategic Income Fund, Moderate Balanced Fund, Growth Balanced Fund and
Aggressive Balanced-Equity Fund; and (5) I Shares of twelve EQUITY FUNDS - Index
Fund, Income Equity Fund, ValuGrowth Stock Fund, Diversified Equity Fund, Growth
Equity Fund, Large Company Growth Fund, Small Company Stock Fund, Small Company
Growth Fund, Diversified Small Cap Fund, Small Cap Opportunities Fund,
Contrarian Stock Fund and International Fund. Only the Shares indicated are
offered by this Prospectus. Other classes of shares of a Fund that currently
offers other classes of shares are offered by separate prospectuses that may be
obtained by contacting the Trust. Shares of each class of each Fund have
identical interests in the investment portfolio of the Fund and, with certain
exceptions, have the same rights. (See "Other Information - The Trust and Its
Shares.")

MONEY MARKET FUNDS

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

FIXED INCOME FUNDS

STABLE INCOME FUND seeks to maintain safety of principal and provide low
volatility total return by investing primarily in investment grade short-term
obligations. LIMITED TERM GOVERNMENT INCOME FUND seeks to provide income and
safety of principal by investing primarily in U.S. Government Securities.
INTERMEDIATE GOVERNMENT INCOME FUND seeks to provide income and safety of
principal by investing primarily in U.S. Government Securities. The Fund seeks
to moderate its volatility by using a conservative approach in

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structuring the maturities of its investment portfolio. DIVERSIFIED BOND FUND
seeks to provide total return by diversifying its investments among different
fixed-income investment styles. INCOME FUND seeks to provide total return
consistent with current income. This objective is pursued by investing in a
portfolio of fixed income securities issued by domestic and foreign issuers.
TOTAL RETURN BOND FUND seeks total return. This objective is pursued by
investing in a broad range of fixed income instruments in order to create a
strategically diversified portfolio of high-quality fixed income investments.

TAX-FREE FIXED INCOME FUNDS

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

BALANCED FUNDS

STRATEGIC INCOME FUND seeks a combination of current income and capital
appreciation by diversifying investment of the Fund's assets among stocks, bonds
and other fixed income instruments through investment in several equity and
fixed income investment styles. Of the Balanced Funds, Strategic Income Fund
most emphasizes safety of principal through limited exposure to equity
securities. MODERATE BALANCED FUND seeks a combination of current income and
capital appreciation by diversifying investment of the Fund's assets among
stocks, bonds and other fixed income investments through investment in several
equity and fixed income investment styles. GROWTH BALANCED FUND seeks a
combination of current income and capital appreciation by diversifying
investment of the Fund's assets between stocks and bonds through investment in
several equity and fixed income investment styles. AGGRESSIVE BALANCED-EQUITY
FUND seeks to provide a combination of current income and capital appreciation
by diversifying investment of the Fund's assets between stocks and bonds. The
Fund has the largest equity component of the Balanced Funds and may be
considered a non-traditional balanced fund because it may at times invest less
than 25% of its assets in debt securities.

EQUITY FUNDS

INDEX FUND seeks to duplicate the return of the Standard & Poor's 500 Composite
Stock Price Index. INCOME EQUITY FUND seeks to provide long-term capital
appreciation consistent with above-average dividend income. VALUGROWTH STOCK
FUND seeks to provide long-term capital appreciation. The Fund invests primarily
in medium and large capitalization companies that, in the view of the Fund's
investment adviser, possess above average growth prospects and appear to be
undervalued. DIVERSIFIED EQUITY FUND seeks long-term capital appreciation while
moderating annual return volatility by diversifying its investments among five
different equity investment styles. GROWTH EQUITY FUND seeks a high level of
long-term capital appreciation while moderating annual return volatility by
diversifying its investments among three different equity investment styles.
Growth Equity Fund assumes a higher level of risk than Diversified Equity Fund
in order

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to seek increased returns. LARGE COMPANY GROWTH FUND seeks long-term capital
appreciation by investing in large, high-quality domestic companies that the
investment adviser believes have superior growth potential. DIVERSIFIED SMALL
CAP FUND seeks to provide long-term capital appreciation while moderating annual
return volatility by diversifying its investments across different small
capitalization equity investment styles. SMALL COMPANY STOCK FUND seeks
long-term capital appreciation. This objective is pursued by investing primarily
in the common stock of small and medium size domestic companies that have a
market capitalization well below that of the average company in the Standard &
Poor's 500 Composite Stock Price Index. SMALL COMPANY GROWTH FUND seeks to
provide long-term capital appreciation by investing in smaller domestic
companies. This objective is pursued by investing primarily in the common stock
of small and medium size domestic companies that are either growing rapidly or
completing a period of significant change. THIS FUND CURRENTLY IS NOT OPEN TO
NEW INVESTORS. SMALL CAP OPPORTUNITIES FUND seeks capital appreciation. Current
income will be incidental to the objective of capital appreciation. CONTRARIAN
STOCK FUND seeks capital appreciation. This objective is pursued by investing
primarily in common stocks for which the Fund's investment adviser believes
there is significant potential for price appreciation. INTERNATIONAL FUND seeks
long-term capital appreciation. This objective is pursued by investing, directly
or indirectly, in high quality companies based outside the United States.

FUND STRUCTURES

READY CASH INVESTMENT FUND, STABLE INCOME FUND, TOTAL RETURN BOND FUND, INDEX
FUND, INCOME EQUITY FUND, LARGE COMPANY GROWTH FUND, SMALL COMPANY STOCK FUND,
SMALL COMPANY GROWTH FUND and SMALL CAP OPPORTUNITIES FUND each seek to achieve
its investment objective by investing all of its investable assets in a separate
portfolio (each a "Core Portfolio") of a registered, open-end, management
investment company (each a "Core Trust") that has the same investment objective
and substantially similar investment policies. Accordingly, the investment
experience of each of these Funds will correspond directly with the investment
experience of its corresponding Core Portfolio. (See "Other Information - Core
and Gateway Structure.") The Funds and the Core Portfolios in which they invest.

<TABLE>
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FUND CORE PORTFOLIO
- ---------------------------------- ------------------------------------------------
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Ready Cash Investment Fund Prime Money Market Portfolio
Stable Income Fund Stable Income Portfolio
Total Return Bond Fund Total Return Bond Portfolio
(until January 9, 1998)
Strategic Value Bond Portfolio
(after January 9, 1998)
Index Fund Index Portfolio
Income Equity Fund Income Equity Portfolio
Large Company Growth Fund Large Company Growth Portfolio
Small Company Stock Fund Small Company Stock Portfolio
Small Company Growth Fund Small Company Growth Portfolio
Small Cap Opportunities Fund Schroder U.S. Smaller Companies Portfolio
</TABLE>

CASH INVESTMENT FUND, DIVERSIFIED BOND FUND, STRATEGIC INCOME FUND, MODERATE
BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE BALANCED-EQUITY FUND,
DIVERSIFIED EQUITY FUND, DIVERSIFIED SMALL CAP FUND, GROWTH EQUITY FUND and
INTERNATIONAL FUND each seeks to achieve its investment objective by investing
some or all of its investable assets in various portfolios (each a "Core
Portfolio") of other, open-end,

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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:

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FUND CORE PORTFOLIOS
- ----------------------------------------- ------------------------------------------------
<S> <C>
Cash Investment Fund Money Market Portfolio
Prime Money Market Portfolio
Diversified Bond Fund Positive Return Bond Portfolio
Strategic Value Bond Portfolio
Managed Fixed Income Portfolio
Strategic Income Fund Money Market Portfolio
Stable Income Portfolio
Positive Return Bond Portfolio
Strategic Value Bond Portfolio
Managed Fixed Income Portfolio
Each of the ten Core Portfolios in which
Diversified Equity Fund invests
Moderate Balanced Fund Stable Income Portfolio
Positive Return Bond Portfolio
Strategic Value Bond Portfolio
Managed Fixed Income Portfolio
Each of the ten Core Portfolios in which
Diversified Equity Fund invests
Growth Balanced Fund Positive Return Bond Portfolio
Strategic Value Bond Portfolio
Managed Fixed Income Portfolio
Each of the ten Core Portfolios in which
Diversified Equity Fund Invests
Aggressive Balanced-Equity Fund Positive Return Bond Portfolio
Strategic Value Bond Portfolio
Managed Fixed Income Portfolio
Each of the ten Core Portfolios in which
Diversified Equity Fund Invests
Diversified Equity Fund Index Portfolio
Income Equity Portfolio
Large Company Growth Portfolio
Disciplined Growth Portfolio
Small Company Stock Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
Small Cap Value Portfolio
International Portfolio
Schroder EM Core Portfolio
Diversified Small Cap Fund Small Cap Index Portfolio
Small Company Stock Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
Small Cap Value Portfolio
</TABLE>

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<TABLE>
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FUND CORE PORTFOLIOS
- ----------------------------------------- ------------------------------------------------
Growth Equity Fund Large Company Growth Portfolio
Small Company Stock Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
Small Cap Value Portfolio
International Portfolio
Schroder EM Core Portfolio
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International Fund International Portfolio
Schroder EM Core Portfolio
</TABLE>

The percentage of each of these Fund's (except Cash Investment Fund's) assets
invested in each Core Portfolio may be changed at any time in response to market
or other conditions. Allocations are made within specified ranges as described
under "Investment Objectives and Policies" for each Fund. Upon approval by the
Board of Trustees of the Trust and notification of shareholders, each Fund may
invest in additional or fewer Core Portfolios or invest directly in portfolio
securities.

U.S. GOVERNMENT FUND, TREASURY FUND, MUNICIPAL MONEY MARKET FUND, LIMITED TERM
GOVERNMENT INCOME FUND, INTERMEDIATE GOVERNMENT INCOME FUND, INCOME FUND,
LIMITED TERM TAX-FREE FUND, TAX-FREE INCOME FUND, COLORADO TAX-FREE FUND,
MINNESOTA INTERMEDIATE TAX-FREE FUND, MINNESOTA TAX-FREE FUND, VALUGROWTH STOCK
FUND and CONTRARIAN STOCK FUND each seeks to achieve its investment objective by
investing directly in portfolio securities.

MANAGEMENT OF THE FUNDS

ADVISORY SERVICES

NORWEST INVESTMENT MANAGEMENT, INC. ("Norwest"), a subsidiary of Norwest Bank
Minnesota, N.A. ("Norwest Bank"), is each Fund's and each Core Portfolio's
(other than Schroder U.S. Smaller Companies Portfolio, International Portfolio
and Schroder EM Core Portfolio) investment adviser. Norwest provides investment
advice to various institutions, pension plans and other accounts and, as of June
30, 1997 managed over $22 billion in assets. (See "Management of the Funds -
Investment Advisory Services.") Norwest Bank serves as transfer agent, dividend
disbursing agent and custodian of the Trust, serves as the custodian of each
Core Portfolio (other than Schroder U.S. Smaller Companies Portfolio and
Schroder EM Core Portfolio) and provides administrative services to Small Cap
Opportunities Fund and International Fund. (See "Management of the Funds -
Shareholder Servicing and Custody" and "- Management, Administration and
Distribution Services.")

Each Fund that invests in one or more Core Portfolios incurs investment advisory
fees indirectly through the investment advisory fees paid by the Core
Portfolios; Norwest is paid an investment advisory fee directly by the other
Funds. In addition, Diversified Bond Fund, Strategic Income Fund, Moderate
Balanced Fund, Growth Balanced Fund, Aggressive Balanced-Equity Fund,
Diversified Equity Fund, Growth Equity Fund, Diversified Small Cap Fund and
International Fund each pay Norwest an asset allocation fee for Norwest's
services with respect to the allocation of the Fund's assets to and among the
various Core Portfolios ("Asset Allocation Services"). Cash Investment Fund does
not vary the percentages of its assets invested in the Core Portfolios in which
it invests and, accordingly, pays no asset allocation Fee.

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

GALLIARD CAPITAL MANAGEMENT, INC. ("Galliard"), an investment advisory
subsidiary of Norwest Bank, is the investment subadviser of Stable Income
Portfolio, Strategic Value Bond Portfolio and Managed Fixed Income Portfolio.
Galliard provides investment advisory services to bank and thrift institutions,
pension and profit sharing plans, trusts and charitable organizations and
corporate and other business entities.

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

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. ("Schroder") is the investment
adviser of Schroder U.S. Smaller Companies Portfolio, International Portfolio
and Schroder EM Core Portfolio. Schroder specializes in providing international
investment advice to various clients.

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

UNITED CAPITAL MANAGEMENT ("UCM"), a part of Norwest Bank Colorado, N.A., is the
investment subadviser of Total Return Bond Portfolio and Contrarian Stock Fund.
UCM provides specialized investment advisory services to various institutional
pension accounts.

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

FUND MANAGEMENT AND ADMINISTRATION

The business of the Trust is managed under the direction of the Board of
Trustees (the "Board"). The manager of the Trust and distributor of its shares
is Forum Financial Services, Inc. ("Forum"), a registered broker-dealer and
member of the National Association of Securities Dealers, Inc. Forum
Administrative Services, LLC ("FAS") provides administrative services for the
Funds and also serves as administrator of each Core Portfolio, except Schroder
U.S. Smaller Companies Portfolio and Schroder EM Core Portfolio, for which Forum
serves as subadministrator. Schroder Fund Advisors Inc. serves as the
administrator of Schroder U.S. Smaller Companies Portfolio and Schroder EM Core
Portfolio. (See "Management - Management, Administration and Distribution
Services.")

PURCHASE AND REDEMPTION OF SHARES

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

EXCHANGES

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

DIVIDENDS AND DISTRIBUTIONS

Dividends of net investment income are declared and paid as follows:

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Declared daily and paid Each Money Market Fund, Limited Term Government In-
monthly: come Fund, Income Fund, Total Return Bond Fund and
each Tax-Exempt Fixed Income Fund.
</TABLE>

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<TABLE>
<S> <C>
Declared and paid monthly: Stable Income Fund, Intermediate Government Income
Fund and Diversified Bond Fund.

Declared and paid quarterly: Income Equity Fund, ValuGrowth Stock Fund, Small
Company Stock Fund and Contrarian Stock Fund.

Declared and paid annually: Strategic Income Fund, Moderate Balanced Fund,
Growth Balanced Fund, Aggressive Balanced-Equity
Fund, Index Fund, Diversified Equity Fund, Growth
Equity Fund, Large Company Growth Fund, Small
Company Growth Fund, Diversified Small Cap Fund,
Small Cap Opportunities Fund and International Fund.
</TABLE>

Each Fund's net capital gain, if any, is distributed at least annually. (See
"Dividends and Tax Matters.")

CERTAIN RISK FACTORS

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

An investment in any Fund involves certain risks, depending on the types of
investments made and the types of investment techniques employed. All
investments made by the Funds entail some risk. There can be no assurance that
any MONEY MARKET FUND or Core Portfolio in which they invest will maintain a
stable net asset value of $1.00 per share and the amount of income earned by
each Money Market Fund will tend to vary with changes in prevailing interest
rates. Certain investments and investment techniques, however, entail additional
risks, such as the potential use of leverage by certain Funds through
borrowings, securities lending, investments in foreign issuers and other
investment techniques. (See "Appendix A - Investments, Investment Strategies and
Risk Considerations.") The portfolio turnover rate for certain Funds may from
time to time be high, resulting in increased brokerage costs or short-term
capital gains or losses. (See "Additional Investment Policies and Risk
Considerations - Common Policies of the Funds - Portfolio Transactions.")

Normally, the values of the FIXED INCOME FUNDS' and the TAX-EXEMPT FIXED INCOME
FUNDS' investments vary inversely with changes in interest rates. The securities
in which the Fixed Income Funds and Tax-Exempt Fixed Income Funds invest are
subject to "credit risk" relating to the financial condition of the issuers of
the securities. Each Fund (other than Diversified Bond Fund, Income Fund, Total
Return Bond Fund, Minnesota Intermediate Tax-Free Fund, Minnesota Tax-Free Fund,
and Strategic Value Bond Portfolio), however, invests primarily in investment
grade securities (those rated in the top four grades by a nationally recognized
statistical rating organization ("NRSRO") such as Standard & Poor's).
DIVERSIFIED BOND FUND, INCOME FUND, TOTAL RETURN BOND FUND (after January 9,
1998), MINNESOTA INTERMEDIATE TAX-FREE FUND and MINNESOTA TAX-FREE FUND (and any
Fund that invests in Strategic Value Bond Portfolio) may invest in
non-investment grade securities, which may entail additional risks. (See
"Investment Objectives and Policies - Fixed Income Funds - Income 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

9
<PAGE>
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 STRATEGIC INCOME FUND, MODERATE BALANCED
FUND, GROWTH BALANCED FUND, AGGRESSIVE BALANCED-EQUITY FUND, DIVERSIFIED EQUITY
FUND and GROWTH EQUITY FUND, which invest a portion of their assets in these
securities, entails certain risks in addition to those normally associated with
investments in equity securities. These risks include lower trading volumes and,
therefore, the potential for greater stock price volatility. For a description
of investment considerations and risks involved in investing in small company
securities, see "Investment Objectives and Policies - Equity Funds - Small
Company Investment Considerations and Risk Factors.") SMALL COMPANY STOCK FUND,
SMALL COMPANY GROWTH FUND, DIVERSIFIED SMALL CAP FUND and SMALL CAP
OPPORTUNITIES FUND are designed for the investment of that portion of an
investor's funds that can appropriately bear the special risks associated with
an investment in smaller market capitalization companies.

The policy of investing in foreign issuers employed by INTERNATIONAL FUND and by
STRATEGIC INCOME FUND, MODERATE BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE
BALANCED-EQUITY FUND, DIVERSIFIED EQUITY FUND and GROWTH EQUITY FUND, which
invest a portion of their assets in these securities, entails certain risks in
addition to those normally associated with investments in equity securities.
These risks include the risks of foreign political and economic instability,
adverse movements in foreign exchange rates, the imposition or tightening of
exchange controls or other limitations on repatriation of foreign capital, and
changes in foreign governmental attitudes towards private investment, possibly
leading to nationalization, increased taxation or confiscation of foreign
investors' assets. (See "Investment Objectives and Policies - Equity Funds -
International Fund - Foreign Investment Considerations and Risk Factors.")
INTERNATIONAL FUND is designed for the investment of that portion of an
investor's funds that can appropriately bear the special risks associated with
an investment in foreign companies.

By pooling their assets in one or more Core Portfolios with other institutional
investors, CASH INVESTMENT FUND, READY CASH INVESTMENT FUND, STABLE INCOME FUND,
DIVERSIFIED BOND FUND, TOTAL RETURN BOND FUND, STRATEGIC INCOME FUND, MODERATE
BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE BALANCED-EQUITY FUND, INDEX
FUND, INCOME EQUITY FUND, DIVERSIFIED EQUITY FUND, GROWTH EQUITY FUND, LARGE
COMPANY GROWTH FUND, SMALL COMPANY STOCK FUND, SMALL COMPANY STOCK FUND,
DIVERSIFIED SMALL CAP FUND, SMALL CAP OPPORTUNITIES FUND and INTERNATIONAL FUND
each may be able to achieve certain efficiencies and economies of scale that
they could not achieve by investing directly in securities. Nonetheless, these
investments could have adverse effects on the Funds which investors should
consider. (See "Other Information - Core and Gateway Structure - Certain Risks
of Investing in Core Portfolios.") Investment decisions are made by the
portfolio managers of each Core Portfolio independently. Therefore the portfolio
manager of one Core Portfolio in which a Fund invests may purchase shares of the
same issuer whose shares are being sold by the portfolio manager of another Core
Portfolio in which the Fund invests. This could result in an indirect expense to
the Fund without accomplishing any investment purpose. (See "Other Information -
Core and Gateway Structure.")

10
<PAGE>
EXPENSES OF INVESTING IN THE FUNDS

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

ANNUAL FUND OPERATING EXPENSES(1)

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

<TABLE>
<CAPTION>
The Fund Core Portfolio(s)
--------------------------- ---------------------------
Investment Investment Total
Advisory Other Advisory Other Operating
Fees(2) Expenses Fees(2) Expenses Expenses
------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
MONEY MARKET FUNDS
Cash Investment Fund N/A 0.22% 0.22% 0.04% 0.48%(3)
Ready Cash Investment Fund
(Investor Shares) N/A 0.41% 0.34% 0.07% 0.82%(3)
U.S. Government Fund 0.14% 0.36% N/A N/A 0.50%
Treasury Fund 0.16% 0.30% N/A N/A 0.46%
Municipal Money Market Fund
Institutional Shares 0.34% 0.11% N/A N/A 0.45%
Investor Shares 0.34% 0.31% N/A N/A 0.65%

FIXED INCOME FUNDS (I SHARES)
Stable Income Fund N/A 0.28% 0.30% 0.07% 0.65%
Limited Term Government Income Fund 0.33% 0.35% N/A N/A 0.68%
Intermediate Government Income Fund 0.33% 0.35% N/A N/A 0.68%
Diversified Bond Fund 0.00% 0.27% 0.38% 0.05% 0.70%(3)
Income Fund 0.50% 0.25% N/A N/A 0.75%
Total Return Bond Fund N/A 0.20% 0.50% 0.05% 0.75%(3)

TAX-FREE FIXED INCOME FUNDS (I SHARES)
Limited Term Tax-Free Fund 0.36% 0.29% N/A N/A 0.65%
Tax-Free Income Fund 0.44% 0.16% N/A N/A 0.60%
Colorado Tax-Free Fund 0.36% 0.24% N/A N/A 0.60%
Minnesota Intermediate Tax-Free Fund 0.30% 0.30% N/A N/A 0.60%
Minnesota Tax-Free Fund 0.33% 0.27% N/A N/A 0.60%

BALANCED FUNDS (I SHARES)
Strategic Income Fund 0.10% 0.28% 0.36% 0.06% 0.80%(3)
Moderate Balanced Fund 0.14% 0.27% 0.41% 0.06% 0.88%(3)
Growth Balanced Fund 0.14% 0.27% 0.46% 0.06% 0.93%(3)
Aggressive Balanced-Equity Fund 0.18% 0.28% 0.48% 0.06% 1.00%
</TABLE>

11
<PAGE>
<TABLE>
<CAPTION>
The Fund Core Portfolio(s)
--------------------------- ---------------------------
Investment Investment Total
Advisory Other Advisory Other Operating
EQUITY FUNDS (I SHARES) Fees(2) Expenses Fees(2) Expenses Expenses
------------- ------------ ------------- ------------ -------------
Index Fund N/A 0.07% 0.15% 0.03% 0.25%
<S> <C> <C> <C> <C> <C>
Income Equity Fund N/A 0.31% 0.50% 0.04% 0.85%
ValuGrowth Stock Fund 0.80% 0.20% N/A N/A 1.00%
Diversified Equity Fund 0.17% 0.27% 0.50% 0.06% 1.00%(3)
Growth Equity Fund 0.22% 0.24% 0.69% 0.10% 1.25%(3)
Large Company Growth Fund N/A 0.33% 0.65% 0.02% 1.00%
Small Company Stock Fund N/A 0.26% 0.90% 0.04% 1.20%(3)
Small Company Growth Fund N/A 0.31% 0.90% 0.04% 1.25%
Diversified Small Cap Fund 0.25% 0.25% 0.65% 0.05% 1.20%
Small Cap Opportunities Fund 0.25% 0.21% 0.60% 0.19% 1.25%
Contrarian Stock Fund 0.39% 0.81% N/A N/A 1.20%
International Fund 0.38% 0.39% 0.48% 0.25% 1.50%
</TABLE>

(1) For a further description of the various expenses associated with investing
in the Funds, see "Management." Expenses associated with other classes of a
Fund differ from those listed in the table. The table is based on expenses
incurred during the Funds' most recent fiscal year ended May 31, 1997,
restated to reflect current fees; the expenses and any waivers and
reimbursements for Limited Term Government Income Fund, Minnesota
Intermediate Tax-Free Fund, Aggressive Balanced-Equity Fund and Diversified
Small Cap Fund are based on estimated expenses for those Funds' first fiscal
year of operations ending May 31, 1998. To the extent a Fund invests all or
a portion of its assets in various Core Portfolio(s) (each of which bears
expenses as noted under "Core Portfolios - Investment Advisory Fees" and
"Core Portfolio(s) - Other Expenses"), the Fund indirectly bears its pro
rata portion of the expenses of each Core Portfolio in which it invests.

(2) For Diversified Bond Fund, each of the four Balanced Funds, Diversified
Equity Fund, Growth Equity Fund, Diversified Small Cap Fund and
International Fund, "Investment Advisory Fees" reflects the Asset Allocation
Fee. In addition, for Small Cap Opportunities Fund and International Fund,
"Investment Advisory Fees" reflects the administrative services fee payable
to Norwest. For all Funds that invest in a Core Portfolio, "Core
Portfolio(s) - Investment Advisory Fees" reflects the investment advisory
fees incurred by the Core Portfolio(s) in which the Fund invests. Absent
waivers, "Investment Advisory Fees" for Municipal Money Market Fund -
Institutional Shares, Municipal Money Market Fund - Investor Shares, Limited
Term Tax-Free Fund, Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota
Intermediate Tax-Free Fund, Minnesota Tax-Free Fund and Contrarian Stock
Fund would be 0.35%, 0.35%, 0.50%, 0.50%, 0.50%, 0.50%, 0.50% and 0.80%, and
for Diversified Bond Fund, each of the four Balanced Funds, Diversified
Equity Fund, Growth Equity Fund and Diversified Small Cap Fund would be
0.25%. The investment advisory fees set forth under "Core Portfolio(s) -
Investment Advisory Fees" paid by Diversified Bond Fund, each of the four
Balanced Funds, Diversified Equity Fund, Growth Equity Fund and Diversified
Small Cap Fund will vary based on the percentage of the Fund's assets
invested in each Core Portfolio.

(3) Norwest and Forum have agreed to waive their respective fees or reimburse
expenses in order to maintain Cash Investment Fund's total combined
operating expenses through May 31, 1999 at 0.48%. Norwest and Forum have
agreed to waive their respective fees or reimburse expenses in order to
maintain Ready Cash Investment Fund's, Total Return Bond Fund's and Small
Company Stock Fund's total operating expenses through May 31, 1998 at or
below the following amounts: Ready Cash Investment Fund, 0.82%; Total Return
Bond Fund, 0.75% and Small Company Stock Fund, 1.20%.

12
<PAGE>
Norwest and Forum have agreed to waive their respective fees through May 31,
1999 in order to ensure that the fees borne by each of Diversified Bond
Fund, Strategic Income Fund, Moderate Balanced Fund, Growth Balanced Fund,
Diversified Equity Fund and Growth Equity Fund for investment advisory,
administrative and management services would not exceed, in the aggregate,
0.45%, 0.55%, 0.63%, 0.68%, 0.75% and 1.00%, respectively.

(4) Absent expense reimbursements and fee waivers the expenses of Cash
Investment Fund, Ready Cash Investment Fund, U.S. Government Fund, Treasury
Fund, Municipal Money Market Fund - Institutional Shares, Municipal Money
Market Fund - Investor Shares, Stable Income Fund, Limited Term Government
Income Fund, Intermediate Government Income Fund, Diversified Bond Fund,
Income Fund, Total Return Bond Fund, Limited Term Tax-Free Fund, Tax-Free
Income Fund, Colorado Tax-Free Fund, Minnesota Intermediate Tax-Free Fund,
Minnesota Tax-Free Fund, Strategic Income Fund, Moderate Balanced Fund,
Growth Balanced Fund, Aggressive Balanced-Equity Fund, Index Fund, Income
Equity Fund, ValuGrowth Stock Fund, Diversified Equity Fund, Growth Equity
Fund, Large Company Growth Fund, Small Company Stock Fund, Small Company
Growth Fund, Diversified Small Cap Fund, Small Cap Opportunities Fund,
Contrarian Stock Fund and International Fund would be: "Other Expenses,"
0.26%, 0.42%, 0.38%, 0.39%, 0.25%, 0.53%, 0.36%, 0.52%, 0.39%, 0.34%, 0.43%,
0.35%, 0.55%, 0.43%, 0.52%, 0.42%, 0.55%, 0.34%, 0.32%, 0.32%, 0.80%, 0.32%,
0.32%, 0.42%, 0.27%, 0.24%, 0.34%, 0.35%, 0.32%, 0.80%, 0.64%, 1.07% and
0.64%, respectively; and "Total Operating Expenses," 0.57%, 0.83%, 0.52%,
0.55%, 0.59%, 0.87%, 0.78%, 0.85%, 0.72%, 1.08%, 0.93%, 0.95%, 1.05%, 0.93%,
1.02%, 0.92%, 1.05%, 1.07%, 1.10%, 1.14%, 1.64%, 0.55%, 0.90%, 1.22%, 1.18%,
1.40%, 1.06%, 1.35%, 1.30%, 2.79%, 1.44%, 1.87% and 1.63%, respectively.
Absent expense reimbursements and fee waivers, "Core Portfolio(s) - Other
Expenses" of Cash Investment Fund, Ready Cash Investment Fund, Stable Income
Fund, Diversified Bond Fund, Total Return Bond Fund, Strategic Income Fund,
Moderate Balanced Fund, Growth Balanced Fund, Aggressive Balanced-Equity
Fund, Index Fund, Income Equity Fund, Diversified Equity Fund, Growth Equity
Fund, Large Company Growth Fund, Small Company Stock Fund, Small Company
Growth Fund, Diversified Small Cap Fund, Small Cap Opportunities Fund and
International Fund would be 0.07%, 0.07%, 0.12%, 0.10%, 0.09%, 0.10%, 0.10%,
0.10%, 0.38%, 0.08%, 0.07%, 0.07%, 0.10%, 0.07%, 0.10%, 0.08%, 1.10%, 0.19%,
and 0.26%, respectively. Except as otherwise noted, expense reimbursements
and fee waivers are voluntary and may be reduced or eliminated at any time.

EXAMPLE

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

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

13
<PAGE>
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FIXED INCOME FUNDS (I SHARES)
Stable Income Fund 7 21 36 81
Limited Term Government Income Fund 7 22 38 85
Intermediate Government Income Fund 7 22 38 85
Diversified Bond Fund 7 22 39 87
Income Fund 8 24 42 93
Total Return Bond Fund 8 24 42 93
TAX-FREE FIXED INCOME FUNDS (I SHARES)
Limited Term Tax-Free Fund 7 21 36 81
Tax-Free Income Fund 6 19 33 75
Colorado Tax-Free Fund 6 19 33 75
Minnesota Intermediate Tax-Free Fund 6 19 33 75
Minnesota Tax-Free Fund 6 19 33 75
BALANCED FUNDS (I SHARES)
Strategic Income Fund 8 26 44 99
Moderate Balanced Fund 9 28 49 108
Growth Balanced Fund 9 30 51 114
Aggressive Balanced-Equity Fund 10 32 55 122
EQUITY FUNDS (I SHARES)
Index Fund 3 8 14 32
Income Equity Fund 9 27 47 105
ValuGrowth Stock Fund 10 32 55 122
Diversified Equity Fund 10 32 55 122
Growth Equity Fund 13 40 69 151
Large Company Growth Fund 10 32 55 122
Small Company Stock Fund 12 38 66 145
Small Company Growth Fund 13 40 69 151
Diversified Small Cap Fund 12 38 66 145
Small Cap Opportunities Fund 13 40 69 151
Contrarian Stock Fund 12 38 66 145
International Fund 15 47 82 179
</TABLE>

14
<PAGE>
[This page has been intentionally left blank.]

15
<PAGE>
2. FINANCIAL HIGHLIGHTS

The following tables provide financial highlights for the Funds. This
information represents selected data for a single outstanding Share of each Fund
for the period shown. As of October 1, 1997, Limited Term Government Income
Fund, Minnesota Intermediate Tax-Free Fund, Aggressive Balanced-Equity Fund and
Diversified Small Cap Fund had not commenced operations. Information for the
periods ended May 31, 1994, and thereafter, was audited by KPMG Peat Marwick
LLP, independent auditors. Information for prior periods was audited by other
independent auditors. Each

<TABLE>
<CAPTION>
Beginning Net Realized Dividends Distributions
Net Asset Net and Unrealized from Net from Net
Value Per Investment Gain (Loss) on Investment Investment Capital
MONEY MARKET FUNDS Share Income Investments Income Income Contribution
--------- ---------- -------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
CASH INVESTMENT FUND
- ------------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 $1.00 $0.051 -- $(0.051) -- --
June 1, 1995 to May 31, 1996 1.00 0.054 -- (0.054) -- --
June 1, 1994 to May 31, 1995 1.00 0.049 -- (0.049) -- --
June 1, 1993 to May 31, 1994 1.00 0.031 -- (0.031) -- --
June 1, 1992 to May 31, 1993 1.00 0.033 -- (0.033) -- --
December 1, 1991 to May 31, 1992 1.00 0.021 -- (0.021) -- --
December 1, 1990 to November 30,
1991 1.00 0.061 -- (0.061) -- --
December 1, 1989 to November 30,
1990 1.00 0.079 -- (0.079) -- --
December 1, 1988 to November 30,
1989 1.00 0.088 -- (0.088) -- --
December 1, 1987 to November 30,
1988 1.00 0.071 -- (0.071) -- --
October 14, 1987 to November 30,
1987 1.00 0.009 -- (0.009) -- --
READY CASH INVESTMENT FUND -
INVESTOR SHARES
- ------------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 1.00 0.047 -- (0.047) -- --
June 1, 1995 to May 31, 1996 1.00 0.051 -- (0.051) -- --
June 1, 1994 to May 31, 1995 1.00 0.045 -- (0.045) -- --
June 1, 1993 to May 31, 1994 1.00 0.027 -- (0.027) -- --
June 1, 1992 to May 31, 1993 1.00 0.030 -- (0.030) -- --
December 1, 1991 to May 31, 1992 1.00 0.020 -- (0.020) -- --
December 1, 1990 to November 30,
1991 1.00 0.058 -- (0.058) -- --
December 1, 1989 to November 30,
1990 1.00 0.076 -- (0.076) -- --
December 1, 1988 to November 30,
1989 1.00 0.085 -- (0.085) -- --
January 20, 1988 to November 30,
1988 1.00 0.059 -- (0.059) -- --
U.S. GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 1.00 0.049 -- (0.049) -- --
June 1, 1995 to May 31, 1996 1.00 0.052 -- (0.052) -- --
June 1, 1994 to May 31, 1995 1.00 0.047 -- (0.047) -- --
June 1, 1993 to May 31, 1994 1.00 0.030 -- (0.030) -- --
June 1, 1992 to May 31, 1993 1.00 0.030 -- (0.030) -- --
December 1, 1991 to May 31, 1992 1.00 0.020 -- (0.020) -- --
December 1, 1990 to November 30,
1991 1.00 0.058 -- (0.058) -- --
December 1, 1989 to November 30,
1990 1.00 0.077 -- (0.077) -- --
December 1, 1988 to November 30,
1989 1.00 0.085 -- (0.085) -- --
December 1, 1987 to November 30,
1988 1.00 0.069 -- (0.069) -- --
November 16, 1987 to November 30,
1987 1.00 0.003 -- (0.003) -- --
TREASURY FUND
- ------------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 1.00 0.047 -- (0.047) -- --
June 1, 1995 to May 31, 1996 1.00 0.050 -- (0.050) -- --
June 1, 1994 to May 31, 1995 1.00 0.046 -- (0.046) -- --
June 1, 1993 to May 31, 1994 1.00 0.028 -- (0.028) -- --
June 1, 1992 to May 31, 1993 1.00 0.029 -- (0.029) -- --
December 1, 1991 to May 31, 1992 1.00 0.020 -- (0.020) -- --
December 3, 1990 to November 30,
1991 1.00 0.058 -- (0.058) -- --
MUNICIPAL MONEY MARKET FUND(A)
- ------------------------------------------------------------------------------------------------------------------------
INVESTOR SHARES
June 1, 1996 to May 31, 1997 1.00 0.030 -- (0.030) -- --
June 1, 1995 to May 31, 1996 1.00 0.033 -- (0.033) -- --
June 1, 1994 to May 31, 1995 1.00 0.031 $(0.004) (0.031) -- $0.004
June 1, 1993 to May 31, 1994 1.00 0.021 -- (0.021) -- --
June 1, 1992 to May 31, 1993 1.00 0.021 -- (0.021) -- --
December 1, 1991 to May 31, 1992 1.00 0.014 -- (0.014) -- --
December 1, 1990 to November 30,
1991 1.00 0.042 -- (0.042) -- --
December 1, 1989 to November 30,
1990 1.00 0.053 -- (0.053) -- --
December 1, 1988 to November 30,
1989 1.00 0.058 -- (0.058) -- --
January 7, 1988 to November 30,
1988(a) 1.00 0.042 -- (0.042) -- --
INSTITUTIONAL SHARES
June 1, 1996 to May 31, 1997 1.00 0.032 -- (0.032) -- --
June 1, 1995 to May 31, 1996 1.00 0.035 -- (0.035) -- --
June 1, 1994 to May 31, 1995 1.00 0.033 (0.004) (0.033) -- 0.004
August 3, 1993 to May 31, 1994(a) 1.00 0.019 -- (0.019) -- --
</TABLE>

(a) Municipal Money Market Fund commenced operations on January 7, 1988. The
Fund's original class of shares subsequently became Investor Shares. The
Fund commenced the offer of Institutional Shares on August 3, 1993.
(b) The ratio of Gross Expenses to Average Net Assets does not reflect fee
waivers or expense reimbursements.
(c) Annualized.
(d) Total return for 1995 includes the effect of a capital contribution from
Norwest Bank. Without the capital contribution, total return would have been
7.51% for Investor Shares and 7.79% for Institutional Shares.

16
<PAGE>

Fund's financial statements for the fiscal year ended May 31, 1997, and
independent auditors' report thereon, are contained in the Fund's Annual Report.
These financial statements are incorporated by reference into the SAI. Further
information about each Fund's performance is contained in the Fund's Annual
Report, which may be obtained from the Trust without charge.

<TABLE>
<CAPTION>
Ratio to Average Net Assets Net Assets
Ending ------------------------------------- at End of
Net Asset Net Period
Value Per Investment Net Gross Total (000's
Share Income Expenses Expenses(b) Return Omitted)
--------- ----------- --------- ----------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
CASH INVESTMENT FUND
- --------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 $1.00 5.07% 0.48% 0.49% 5.21% $ 2,147,894
June 1, 1995 to May 31, 1996 1.00 5.36% 0.48% 0.49% 5.50% 1,739,549
June 1, 1994 to May 31, 1995 1.00 4.87% 0.48% 0.50% 4.96% 1,464,304
June 1, 1993 to May 31, 1994 1.00 3.11% 0.49% 0.49% 3.16% 1,381,402
June 1, 1992 to May 31, 1993 1.00 3.29% 0.50% 0.51% 3.36% 1,944,948
December 1, 1991 to May 31, 1992 1.00 4.23%(c) 0.50%(c) 0.56%(c) 4.29%(c) 1,292,196
December 1, 1990 to November 30,
1991 1.00 6.11% 0.51% 0.54% 6.31% 1,004,979
December 1, 1989 to November 30,
1990 1.00 7.92% 0.45% 0.57% 8.22% 747,744
December 1, 1988 to November 30,
1989 1.00 8.81% 0.45% 0.64% 9.22% 662,698
December 1, 1987 to November 30,
1988 1.00 7.00% 0.43% 0.74% 7.32% 316,349
October 14, 1987 to November 30,
1987 1.00 7.16%(c) 0.45%(c) 1.09%(c) 7.40%(c) 53,951
READY CASH INVESTMENT FUND -
INVESTOR SHARES
- --------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 1.00 4.75% 0.82% 0.83% 4.87% 576,011
June 1, 1995 to May 31, 1996 1.00 5.02% 0.82% 0.87% 5.17% 473,879
June 1, 1994 to May 31, 1995 1.00 4.64% 0.82% 0.91% 4.62% 268,603
June 1, 1993 to May 31, 1994 1.00 2.70% 0.82% 0.92% 2.74% 164,138
June 1, 1992 to May 31, 1993 1.00 3.04% 0.82% 0.94% 3.08% 162,585
December 1, 1991 to May 31, 1992 1.00 4.01%(c) 0.82%(c) 0.93%(c) 4.05%(c) 176,378
December 1, 1990 to November 30,
1991 1.00 5.81% 0.82% 0.96% 5.98% 183,775
December 1, 1989 to November 30,
1990 1.00 7.56% 0.82% 0.97% 7.83% 166,911
December 1, 1988 to November 30,
1989 1.00 8.51% 0.81% 0.99% 8.86% 144,117
January 20, 1988 to November 30,
1988 1.00 7.11%(c) 0.77%(c) 1.13%(c) 6.97%(c) 46,736
U.S. GOVERNMENT FUND
- --------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 1.00 4.91% 0.49% 0.49% 5.04% 1,912,574
June 1, 1995 to May 31, 1996 1.00 5.13% 0.50% 0.51% 5.27% 1,649,721
June 1, 1994 to May 31, 1995 1.00 4.68% 0.50% 0.52% 4.81% 1,159,421
June 1, 1993 to May 31, 1994 1.00 3.02% 0.47% 0.53% 3.07% 1,091,141
June 1, 1992 to May 31, 1993 1.00 3.00% 0.45% 0.57% 3.06% 903,274
December 1, 1991 to May 31, 1992 1.00 3.99%(c) 0.45%(c) 0.61%(c) 4.07%(c) 623,685
December 1, 1990 to November 30,
1991 1.00 5.84% 0.45% 0.60% 6.00% 469,487
December 1, 1989 to November 30,
1990 1.00 7.66% 0.45% 0.61% 7.94% 500,794
December 1, 1988 to November 30,
1989 1.00 8.51% 0.45% 0.65% 8.87% 394,137
December 1, 1987 to November 30,
1988 1.00 6.87% 0.42% 0.73% 7.13% 254,104
November 16, 1987 to November 30,
1987 1.00 6.89%(c) 0.00%(c) 2.94%(c) 7.35%(c) 4,343
TREASURY FUND
- --------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 1.00 4.74% 0.46% 0.53% 4.87% 1,003,697
June 1, 1995 to May 31, 1996 1.00 4.91% 0.46% 0.56% 5.04% 802,270
June 1, 1994 to May 31, 1995 1.00 4.62% 0.46% 0.57% 4.65% 661,098
June 1, 1993 to May 31, 1994 1.00 2.81% 0.46% 0.58% 2.83% 526,483
June 1, 1992 to May 31, 1993 1.00 2.93% 0.47% 0.58% 2.98% 384,751
December 1, 1991 to May 31, 1992 1.00 4.01%(c) 0.47%(c) 0.59%(c) 4.07%(c) 374,492
December 3, 1990 to November 30,
1991 1.00 5.62%(c) 0.31%(c) 0.66%(c) 6.02%(c) 354,200
MUNICIPAL MONEY MARKET FUND(A)
- --------------------------------------------------------------------------------------------------------------
INVESTOR SHARES
June 1, 1996 to May 31, 1997 1.00 3.01% 0.65% 0.87% 3.08% 54,616
June 1, 1995 to May 31, 1996 1.00 3.25% 0.65% 0.88% 3.31% 57,021
June 1, 1994 to May 31, 1995 1.00 3.10% 0.65% 0.93% 3.13%(d) 47,424
June 1, 1993 to May 31, 1994 1.00 2.03% 0.65% 0.99% 2.09% 33,554
June 1, 1992 to May 31, 1993 1.00 2.13% 0.65% 0.97% 2.18% 75,521
December 1, 1991 to May 31, 1992 1.00 2.81%(c) 0.63%(c) 0.96%(c) 2.89%(c) 82,678
December 1, 1990 to November 30,
1991 1.00 4.10% 0.64% 1.08% 4.26% 66,327
December 1, 1989 to November 30,
1990 1.00 5.34% 0.64% 1.16% 5.48% 29,801
December 1, 1988 to November 30,
1989 1.00 5.78% 0.62% 1.15% 5.94% 18,639
January 7, 1988 to November 30,
1988(a) 1.00 4.64%(c) 0.60%(c) 1.20%(c) 4.76%(c) 8,963
INSTITUTIONAL SHARES
June 1, 1996 to May 31, 1997 1.00 3.21% 0.45% 0.70% 3.28% 635,655
June 1, 1995 to May 31, 1996 1.00 3.41% 0.45% 0.72% 3.52% 592,436
June 1, 1994 to May 31, 1995 1.00 3.37% 0.45% 0.74% 3.33%(d) 278,953
August 3, 1993 to May 31, 1994(a) 1.00 2.33%(c) 0.45%(c) 0.77%(c) 2.34%(c) 190,356
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
Beginning Net Realized Dividends Ending
Net Asset Net and Unrealized from Net Distributions Net Asset
FIXED INCOME Value Per Investment Gain (Loss) on Investment from Net ValuePer
FUNDS -- I SHARES Share Income Investments Income Realized Gain Share
--------- ---------- -------------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
STABLE INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 $10.20 $0.58 $ 0.04 $(0.58) -- $10.24
November 1, 1995 to May 31, 1996 10.72 0.28 0.03 (0.77) $(0.06) 10.20
November 11, 1994 to October 31,
1995 10.00 0.50 0.22 -- -- 10.72
INTERMEDIATE GOVERNMENT INCOME
FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 10.89 0.72 (0.04) (0.73) -- 10.84
November 1, 1995 to May 31, 1996 12.40 0.40 0.53 (1.32) (1.12) 10.89
November 11, 1994 to October 31,
1995(c) 11.11 0.93 0.36 -- -- 12.40
DIVERSIFIED BOND FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 26.03 1.59 0.01 (1.69) (0.34) 25.60
November 1, 1995 to May 31, 1996 27.92 1.07 (0.99) (1.67) (0.30) 26.03
November 11, 1994 to October 31,
1995 25.08 1.65 1.19 -- -- 27.92
INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 9.26 0.62 0.01 (0.62) -- 9.27
June 1, 1995 to May 31, 1996 9.62 0.61 (0.36) (0.61) -- 9.26
June 1, 1994 to May 31, 1995 9.51 0.65 0.11 (0.65) -- 9.62
August 2, 1993 to May 31, 1994 10.68 0.58 (0.91) (0.58) (0.26) 9.51
TOTAL RETURN BOND FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 9.40 0.60 0.04 (0.60) (0.03) 9.41
June 1, 1995 to May 31, 1996 9.73 0.64 (0.31) (0.64) (0.02) 9.40
June 1, 1994 to May 31, 1995 9.54 0.67 0.19 (0.67) -- 9.73
December 31, 1993 to May 31, 1994 10.00 0.27 (0.46) (0.27) -- 9.54

TAX-FREE FIXED
INCOME FUNDS -- I SHARES

LIMITED TAX-FREE FUND
- ---------------------------------------------------------------------------------------------------------------------
October 1, 1996 to May 31, 1997 $10.00 $0.31 $ 0.39 $(0.31) -- $10.39
TAX-FREE INCOME FUND - I SHARES
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 9.78 0.54 0.28 (0.54) -- 10.06
June 1, 1995 to May 31, 1996 9.82 0.55 (0.04) (0.55) -- 9.78
June 1, 1994 to May 31, 1995 9.60 0.55 0.22 (0.55) -- 9.82
August 2, 1993 to May 31, 1994 10.14 0.47 (0.47) (0.47) $(0.07) 9.60
COLORADO TAX-FREE FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 9.89 0.54 0.33 (0.54) -- 10.22
June 1, 1995 to May 31, 1996 9.90 0.53 (0.01) (0.53) -- 9.89
June 1, 1994 to May 31, 1995 9.69 0.48 0.21 (0.48) -- 9.90
August 23, 1993 to May 31, 1994 10.22 0.39 (0.52) (0.39) (0.01) 9.69
MINNESOTA FAX-FREE FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 10.30 0.54 0.27 (0.54) -- 10.57
June 1, 1995 to May 31, 1996 10.45 0.56 (0.15) (0.56) -- 10.30
June 1, 1994 to May 31, 1995 10.16 0.53 0.29 (0.53) -- 10.45
August 2, 1993 to May 31, 1994 10.74 0.43 (0.39) (0.43) (0.19) 10.16
</TABLE>

(a) The ratio of Gross Expenses to Average Net Assets does not reflect fee
waivers or expense reimbursements.
(b) Annualized.
(c) Adjusted for a five to one stock split.

18
<PAGE>

<TABLE>
<CAPTION>
Ratio to Average Net Assets
-------------------------------------
Net Portfolio Net Assets at
Investment Net Gross Total Turnover End of Period
Income Expenses Expenses(a) Return Rate (000's Omitted)
----------- --------- ----------- ------ -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
STABLE INCOME FUND
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 5.73% 0.65% 0.79% 6.24% 41.30% $111,030
November 1, 1995 to May 31, 1996 5.74%(b) 0.65%(b) 0.92%(b) 2.97% 109.95% 83,404
November 11, 1994 to October 31,
1995 5.91%(b) 0.65%(b) 0.98%(b) 7.20% 115.85% 48,087
INTERMEDIATE GOVERNMENT INCOME FUND
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 6.57% 0.68% 0.72% 6.36% 183.05% 371,278
November 1, 1995 to May 31, 1996 6.71%(b) 0.71%(b) 1.17%(b) 0.60% 74.64% 399,324
November 11, 1994 to October 31,
1995(c) 7.79%(b) 0.68%(b) 0.93%(b) 11.58% 240.90% 50,213
DIVERSIFIED BOND FUND
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 6.19% 0.70% 0.77% 6.23% 57.19% 162,310
November 1, 1995 to May 31, 1996 6.78%(b) 0.70%(b) 0.77%(b) 0.22% 118.92% 167,159
November 11, 1994 to October 31,
1995 5.87%(b) 0.67%(b) 0.82%(b) 11.32% 58.90% 171,453
INCOME FUND
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 6.59% 0.75% 1.02% 6.90% 231.00% 258,207
June 1, 1995 to May 31, 1996 6.30% 0.75% 1.06% 2.58% 270.17% 271,157
June 1, 1994 to May 31, 1995 7.02% 0.75% 1.06% 8.49% 98.83% 109,994
August 2, 1993 to May 31, 1994 6.75%(b) 0.61%(b) 1.09%(b) (4.04%)(b) 26.67% 93,665
TOTAL RETURN BOND FUND
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 6.36% 0.75% 1.05% 6.95% 55.07% 125,437
June 1, 1995 to May 31, 1996 6.57% 0.75% 1.07% 3.41% 77.49% 120,767
June 1, 1994 to May 31, 1995 7.04% 0.71% 1.17% 9.43% 35.19% 96,199
December 31, 1993 to May 31, 1994 6.81%(b) 0.46%(b) 2.10%(b) (4.62%)(b) 37.50% 11,694

TAX-FREE FIXED
INCOME FUNDS -- I SHARES

LIMITED TAX-FREE FUND
- ----------------------------------------------------------------------------------------------------------------
October 1, 1996 to May 31, 1997 4.45%(b) 0.65%(b) 1.27%(b) 6.99% 16.39% $ 40,990
TAX-FREE INCOME FUND - I SHARES
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 5.40% 0.50% 1.03% 8.54% 152.33% 259,861
June 1, 1995 to May 31, 1996 5.57% 0.32% 1.06% 5.29% 126.20% 276,159
June 1, 1994 to May 31, 1995 5.84% 0.60% 1.05% 8.42% 130.90% 94,454
August 2, 1993 to May 31, 1994 5.71%(b) 0.60%(b) 1.10%(b) (0.21%)(b) 116.54% 102,084
COLORADO TAX-FREE FUND
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 5.35% 0.45% 1.13% 9.00% 129.26% 25,917
June 1, 1995 to May 31, 1996 5.30% 0.30% 1.13% 5.35% 171.41% 24,074
June 1, 1994 to May 31, 1995 5.08% 0.30% 1.16% 7.47% 47.88% 24,539
August 23, 1993 to May 31, 1994 5.03%(b) 0.11%(b) 1.21%(b) 0.90%(b) 40.92% 15,153
MINNESOTA FAX-FREE FUND
- ----------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 5.12% 0.60% 1.23% 7.98% 96.68% 11,135
June 1, 1995 to May 31, 1996 5.24% 0.51% 1.30% 3.97% 77.10% 3,988
June 1, 1994 to May 31, 1995 5.29% 0.48% 1.58% 8.44% 139.33% 1,799
August 2, 1993 to May 31, 1994 4.90%(b) 0.61%(b) 1.54%(b) 0.29%(b) 84.23% 872
</TABLE>

19
<PAGE>

<TABLE>
<CAPTION>
Beginning Net Realized Dividends Ending
Net Asset Net and Unrealized from Net Distributions Net Asset
BALANCED FUNDS -- Value Per Investment Gain (Loss) on Investment from Net Value Per
I SHARES Share Income Investments Income Realized Gain Share
--------- ---------- -------------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
STRATEGIC INCOME FUND(E)
- ------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 $18.12 $0.97 $0.71 $(.095) $(0.38) $18.47
November 1, 1995 to May 31, 1996 18.21 0.48 0.42 (0.76) (0.23) 18.12
November 11, 1994 to October 31,
1995 16.19 0.75 1.27 -- -- 18.21
MODERATE BALANCED FUND
- ------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 20.27 0.77 1.60 (0.76) (0.29) 21.59
November 1, 1995 to May 31, 1996 19.84 0.46 0.89 (0.66) (0.26) 20.27
November 11, 1994 to October 31,
1995 17.25 0.65 1.94 -- -- 19.84
GROWTH BALANCED FUND
- ------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 22.83 0.62 2.86 (0.63) (0.91) 24.77
November 1, 1995 to May 31, 1996 21.25 0.31 1.95 (0.51) (0.17) 22.83
November 11, 1994 to October 31,
1995 17.95 0.47 2.83 -- -- 21.25
</TABLE>

(a) The ratio of Gross Expenses to Average Net Assets does not reflect fee
waivers or expense reimbursements.
(b) Represents the average commission per share paid to brokers on the purchase
or sale of portfolio securities. Prior to 1996, this data was not reported
in mutual fund financial statements.
(c) Annualized.
(d) Includes expenses allocated from the Core Portfolios in which the Fund was
invested: Index Portfolio, Small Company Portfolio and International
Portfolio II of Core Trust (Delaware).
(e) Prior to October 1, 1997, Strategic Income Fund was named Conservative
Balanced Fund.

20
<PAGE>
<TABLE>
<CAPTION>
Ratio to Average Net Assets
------------------------------------------
Net Portfolio Average
Investment Net Gross Total Turnover Commission
Income(d) Expenses(d) Expenses(a)(d) Return Rate Rate(b)
----------- ------------ ------------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
STRATEGIC INCOME FUND(E)
- -------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 4.38% 0.81% 0.98% 9.58% 72.03% $0.0720
November 1, 1995 to May 31, 1996 4.65%(c) 0.82%(c) 0.97%(c) 5.14% 56.47% 0.0648
November 11, 1994 to October 31,
1995 4.67%(c) 0.82%(c) 1.03%(c) 12.48% 65.53% N/A
MODERATE BALANCED FUND
- -------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 3.70% 0.88% 1.04% 12.04% 45.33% 0.0684
November 1, 1995 to May 31, 1996 3.95%(c) 0.90%(c) 1.04%(c) 7.03% 52.71% 0.0658
November 11, 1994 to October 31,
1995 3.76%(c) 0.92%(c) 1.11%(c) 15.01% 62.08% N/A
GROWTH BALANCED FUND
- -------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 2.47% 0.94% 1.16% 15.81% 24.33% 0.0676
November 1, 1995 to May 31, 1996 2.66%(c) 0.98%(c) 1.16%(c) 10.87% 38.78% 0.0696
November 11, 1994 to October 31,
1995 2.63%(c) 0.99%(c) 1.23%(c) 18.38% 41.04% N/A

Net Assets at
End of Period
(000's Omitted)
---------------
<S> <C>
STRATEGIC INCOME FUND(E)
- --------------------------------------------------------------------
June 1, 1996 to May 31, 1997 $128,777
November 1, 1995 to May 31, 1996 146,950
November 11, 1994 to October 31,
1995 136,710
MODERATE BALANCED FUND
- ------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 418,680
November 1, 1995 to May 31, 1996 398,005
November 11, 1994 to October 31,
1995 373,998
GROWTH BALANCED FUND
- ----------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 503,382
November 1, 1995 to May 31, 1996 484,641
November 11, 1994 to October 31,
1995 374,892
</TABLE>

21
<PAGE>

<TABLE>
<CAPTION>
Beginning Net Net Realized Dividends Ending Net
Net Asset Investment and Unrealized from Net Distributions Asset
EQUITY FUNDS -- Value Per Income Gain (Loss) on Investment from Net ValuePer
I SHARES Share (Loss) Investments Income Realized Gain Share
--------- ---------- -------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
INDEX FUND
- ----------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 $31.49 $ 0.49 $ 8.50 $(0.48) $(0.51) $39.49
November 1, 1995 to May 31, 1996 27.67 0.36 4.08 (0.43) (0.19) 31.49
November 11, 1994 to October 31,
1995 21.80 0.45 5.42 -- -- 27.67
INCOME EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 27.56 0.56 5.55 (0.51) -- 33.16
November 1, 1995 to May 31, 1996 24.02 0.29 4.02 (0.69) (0.08) 27.56
November 11, 1994 to October 31,
1995 18.90 0.46 4.66 -- -- 24.02
VALUGROWTH STOCK FUND
- ----------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 22.61 0.16 4.80 (0.13) (2.41) 25.03
June 1, 1995 to May 31, 1996 18.80 0.14 3.91 (0.12) (0.12) 22.61
June 1, 1994 to May 31, 1995 17.16 0.18 1.64 (0.18) -- 18.80
August 2, 1993 to May 31, 1994 16.91 0.13 0.46 (0.12) (0.22) 17.16
DIVERSIFIED EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 30.55 0.25 6.05 (0.16) (0.19) 36.50
November 1, 1995 to May 31, 1996 27.53 0.16 4.25 (0.42) (0.97) 30.55
November 11, 1994 to October 31,
1995 22.21 0.22 5.10 -- -- 27.53
GROWTH EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 29.08 (0.02) 4.05 (0.04) (0.59) 32.48
November 1, 1995 to May 31, 1996 26.97 -- 4.09 (0.12) (1.86) 29.08
November 11, 1994 to October 31,
1995 22.28 (0.02) 4.71 -- -- 26.97
LARGE COMPANY GROWTH FUND
- ----------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 26.97 (0.03) 5.91 -- (0.22) 32.63
November 1, 1995 to May 31, 1996 23.59 (0.04) 3.64 -- (0.22) 26.97
November 11, 1994 to October 31,
1995 18.50 (0.05) 5.14 -- -- 23.59
SMALL COMPANY STOCK FUND
- ----------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 13.96 (0.04) 0.87 -- (0.91) 13.88
June 1, 1995 to May 31, 1996 10.59 0.01 3.93 (0.03) (0.54) 13.96
June 1, 1994 to May 31, 1995 9.80 0.12 0.87 (0.12) (0.08) 10.59
December 31, 1993 to May 31, 1994 10.00 0.08 (0.20) (0.08) -- 9.80
SMALL COMPANY GROWTH FUND
- ----------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 33.00 (0.18) 1.83 -- (3.57) 31.08
November 1, 1995 to May 31, 1996 29.99 (0.07) 5.94 -- (2.86) 33.00
November 11, 1994 to October 31,
1995 21.88 (0.11) 8.22 -- -- 29.99
SMALL CAP OPPORTUNITIES FUND
- ----------------------------------------------------------------------------------------------------------------------
August 15, 1996 to May 31, 1997 16.26 (0.01) 3.60 -- (0.01) 19.84
CONTRARIAN STOCK FUND
- ----------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 10.82 0.09 1.03 (0.08) (1.16) 10.25
June 1, 1995 to May 31, 1996 10.90 0.10 1.01 (0.10) (1.09) 10.82
June 31, 1994 to May 31, 1995 9.71 0.11 1.19 (0.11) (0.03) 10.90
December 31, 1993 to May 31, 1994 10.00 0.07 (0.29) (0.07) -- 9.71
INTERNATIONAL FUND
- ----------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 19.84 0.09 1.94 (0.20) -- 21.67
November 1, 1995 to May 31, 1996 17.99 0.14 2.04 (0.33) -- 19.84
November 11, 1994 to October 31,
1995 17.28 0.09 0.62 -- -- 17.99
</TABLE>

(a) The ratio of Gross Expense to Average Net Assets does not reflect fee
waivers and expense reimbursements.
(b) Represents the average commission per share paid to brokers on the purchase
or sale of portfolio securities. Prior to 1996, this data was not reported
in mutual fund financial statements.
(c) Annualized.
(d) Includes expenses allocated from the Core Portfolios in which the Fund was
invested: Index Portfolio, Small Company Portfolio, International Portfolio
and International Portfolio II of Core Trust (Delaware), and Schroder U.S.
Smaller Companies Portfolio of Schroder Capital Funds.
(e) Represents the Portfolio Turnover Rate and Average Commission Rate of the
Fund's corresponding Core Portfolio.

22
<PAGE>
<TABLE>
<CAPTION>
Ratio to Average Net Assets
-------------------------------------------
Net Portfolio Average
Investment Gross Total Turnover Commission
Income Net Expenses Expenses(a) Return Rate Rate (b)
------------ ------------ ------------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
INDEX FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 2.10% 0.25% 0.56% 29.02% 24.17% $0.0417
November 1, 1995 to May 31, 1996 2.25%(c) 0.31%(c) 0.57%(c) 16.27% 9.12% 0.0517
November 11, 1994 to October 31,
1995 2.12%(c) 0.50%(c) 0.64%(c) 26.93% 14.48% N/A
INCOME EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 1.97% 0.85% 0.90% 22.40% 4.76% 0.0792
November 1, 1995 to May 31, 1996 2.72%(c) 0.86%(c) 1.13%(c) 18.14% 0.69% 0.0942
November 11, 1994 to October 31,
1995 2.51%(c) 0.85%(c) 1.12%(c) 27.09% 7.03% N/A
VALUGROWTH STOCK FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 0.67% 1.01% 1.33% 23.30% 75.50% 0.0781
June 1, 1995 to May 31, 1996 0.62% 1.20% 1.32% 21.72% 105.43% 0.0603
June 1, 1994 to May 31, 1995 1.02% 1.20% 1.33% 10.67% 63.82% N/A
August 2, 1993 to May 31, 1994 0.92%(c) 1.20%(c) 1.39%(c) 2.99%(c) 86.07% N/A
DIVERSIFIED EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 0.79%(d) 1.02%(d) 1.31%(d) 20.76% 48.08% 0.0626
November 1, 1995 to May 31, 1996 1.00%(c)(d) 1.06%(c)(d) 1.30%(c)(d) 16.38% 5.76% 0.0671
November 11, 1994 to October 31,
1995 1.01%(c)(d) 1.09%(c)(d) 1.37%(c)(d) 23.95% 10.33% N/A
GROWTH EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 (0.09%)(d) 1.30%(d) 1.84%(d) 14.11% 9.06% 0.0565
November 1, 1995 to May 31, 1996 0.01%(c)(d) 1.35%(c)(d) 1.85%(c)(d) 15.83% 7.39% 0.0617
November 11, 1994 to October 31,
1995 (0.11%)(c)(d) 1.38%(c)(d) 1.92%(c)(d) 21.10% 8.90% N/A
LARGE COMPANY GROWTH FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 (0.18%) 0.99% 1.09% 21.93% 24.37% 0.0564
November 1, 1995 to May 31, 1996 (0.30%)(c) 1.00%(c) 1.13%(c) 15.40% 16.93% 0.0616
November 11, 1994 to October 31,
1995 (0.23%)(c) 1.00%(c) 1.20%(c) 27.51% 31.60% N/A
SMALL COMPANY STOCK FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 (0.38%) 1.19% 1.56% 6.30% 210.19% 0.0774
June 1, 1995 to May 31, 1996 0.05% 1.21% 1.60% 38.30% 134.53% 0.0555
June 1, 1994 to May 31, 1995 1.14% 0.52% 1.82% 10.13% 68.09% N/A
December 31, 1993 to May 31, 1994 2.03%(c) 0.20%(c) 4.33%(c) (2.93)%(c) 14.98% N/A
SMALL COMPANY GROWTH FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 (0.71%) 1.24% 1.29% 5.65% 124.03% 0.0565
November 1, 1995 to May 31, 1996 (0.41%)(c) 1.25%(c) 1.29%(c) 21.43% 62.06% 0.0583
November 11, 1994 to October 31,
1995 (0.47%)(c) 1.25%(c) 1.35%(c) 37.07% 106.55% N/A
SMALL CAP OPPORTUNITIES FUND
- ---------------------------------------------------------------------------------------------------------------------
August 15, 1996 to May 31, 1997 (0.16%)(c)(d) 1.25%(c)(d) 1.89%(c)(d) 11.42% 34.45%(e) 0.0584(e)
CONTRARIAN STOCK FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 0.81% 1.19% 1.72% 13.02% 13.36% 0.0472
June 1, 1995 to May 31, 1996 0.87% 1.20% 1.45% 10.90% 28.21% 0.0467
June 31, 1994 to May 31, 1995 0.91% 1.12% 1.57% 13.52% 30.32% N/A
December 31, 1993 to May 31, 1994 1.82%(c) 0.62%(c) 3.52%(c) (5.35)%(c) 2.67% N/A
INTERNATIONAL FUND
- ---------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 0.40%(d) 1.43%(d) 1.44%(d) 10.27% 48.23%(e) 0.0202(e)
November 1, 1995 to May 31, 1996 0.60%(c)(d) 1.50%(c)(d) 1.52%(c)(d) 12.31% 14.12%(e) 0.0325(e)
November 11, 1994 to October 31,
1995 0.54%(c)(d) 1.50%(c)(d) 1.66%(c)(d) 4.11% 29.41%(e) N/A

Net Assets at
End of Period
(000's Omitted)
---------------
<S> <C>
INDEX FUND
- --------------------------------------------------------------------
June 1, 1996 to May 31, 1997 $ 513,134
November 1, 1995 to May 31, 1996 249,644
November 11, 1994 to October 31,
1995 186,197
INCOME EQUITY FUND
- ------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 425,197
November 1, 1995 to May 31, 1996 230,831
November 11, 1994 to October 31,
1995 49,000
VALUGROWTH STOCK FUND
- ----------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 180,204
June 1, 1995 to May 31, 1996 156,553
June 1, 1994 to May 31, 1995 136,589
August 2, 1993 to May 31, 1994 113,061
DIVERSIFIED EQUITY FUND
- --------------------------------------------------------------------------------------------------------------------
June 1, 1996 to May 31, 1997 1,212,565
November 1, 1995 to May 31, 1996 907,223
November 11, 1994 to October 31,
1995 711,111
GROWTH EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------

June 1, 1996 to May 31, 1997 895,420
November 1, 1995 to May 31, 1996 735,728
November 11, 1994 to October 31,
1995 564,004
LARGE COMPANY GROWTH FUND
- ---------------------------------------------------------------------------------------------------------------------

June 1, 1996 to May 31, 1997 131,768
November 1, 1995 to May 31, 1996 82,114
November 11, 1994 to October 31,
1995 63,567
SMALL COMPANY STOCK FUND
- ---------------------------------------------------------------------------------------------------------------------

June 1, 1996 to May 31, 1997 161,995
June 1, 1995 to May 31, 1996 125,986
June 1, 1994 to May 31, 1995 54,240
December 31, 1993 to May 31, 1994 9,251
SMALL COMPANY GROWTH FUND
- ---------------------------------------------------------------------------------------------------------------------

June 1, 1996 to May 31, 1997 447,580
November 1, 1995 to May 31, 1996 378,546
November 11, 1994 to October 31,
1995 278,058
SMALL CAP OPPORTUNITIES FUND
- ---------------------------------------------------------------------------------------------------------------------

August 15, 1996 to May 31, 1997 77,174
CONTRARIAN STOCK FUND
- ---------------------------------------------------------------------------------------------------------------------

June 1, 1996 to May 31, 1997 8,260
June 1, 1995 to May 31, 1996 36,020
June 31, 1994 to May 31, 1995 45,832
December 31, 1993 to May 31, 1994 4,548
INTERNATIONAL FUND
- ---------------------------------------------------------------------------------------------------------------------

June 1, 1996 to May 31, 1997 228,552
November 1, 1995 to May 31, 1996 143,643
November 11, 1994 to October 31,
1995 91,401
</TABLE>

23
<PAGE>
3. INVESTMENT OBJECTIVES AND POLICIES

The thirty-two Funds offered through this Prospectus each have distinct
investment objectives and policies. There can be no assurance that any Fund or
Core Portfolio will achieve its investment objective or that any Money Market
Fund will maintain a stable net asset value.

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

MONEY MARKET FUNDS

For a general description of the limits imposed on the investments of the Money
Market Funds, see "Additional Investment Policies and Risk Considerations -
General Information - General Money Market Fund Guidelines."

CASH INVESTMENT FUND, READY CASH INVESTMENT FUND

INVESTMENT OBJECTIVES. The investment objective of each of Cash Investment Fund
and Ready Cash Investment Fund is to provide high current income to the extent
consistent with the preservation of capital and the maintenance of liquidity.

CASH INVESTMENT FUND currently pursues its investment objective by investing
equally in two Core Portfolios - Money Market Portfolio and Prime Money Market
Portfolio.

READY CASH INVESTMENT FUND currently pursues its investment objective by
investing all of its investable assets in Prime Money Market Portfolio. Cash
Investment Fund, Ready Cash Investment Fund, Money Market Portfolio and Prime
Money Market Portfolio each have the same investment objective and investment
policies, except that Ready Cash Investment Fund and Prime Money Market
Portfolio seek to maintain a rating from at least one NRSRO. Accordingly, Prime
Money Market Portfolio is limited in the type and amount of permissible
securities which it may purchase. Each Core Portfolio invests in a broad
spectrum of high quality money market instruments of United States and foreign
issuers.

Although the following discusses the investment policies of Money Market
Portfolio and Prime Money Market Portfolio, it applies equally to the Funds. It
is anticipated that the percentage of Cash Investment Fund's assets invested in
each Core Portfolio will not change.

INVESTMENT POLICIES. The Portfolios may invest in obligations of financial
institutions. These include negotiable certificates of deposit, bank notes,
bankers' acceptances and time deposits of U.S. banks (including savings banks
and savings associations), foreign branches of U.S. banks, foreign banks and
their non-U.S. branches (Eurodollars), U.S. branches and agencies of foreign
banks (Yankee dollars), and wholly-owned banking-related subsidiaries of foreign
banks. The Portfolios limit their investments in obligations of financial
institutions (including their branches, agencies and subsidiaries) to
institutions which at the time of investment have total assets in excess of one
billion dollars, or the equivalent in other currencies.

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

24
<PAGE>
Although the Portfolios invest in dollar-denominated obligations, the foreign
securities in which the Portfolios invest also involve certain risks. (See
"Investment Policies - Equity Funds - International Fund - Foreign Investment
Considerations and Risk Factors.") The Portfolios may invest without limit in
the types of securities eligible for purchase by U.S. Government Fund, as well
as in the types of securities eligible for purchase by Municipal Money Market
Fund. (See "Investment Objectives and Policies - Money Market Funds - U.S.
Government Fund" and "- Municipal Money Market Fund.") The Portfolios may invest
in corporate debt securities, including commercial paper and privately issued
instruments, (see "Appendix A - Corporate Debt Securities and Commercial
Paper,") and may invest in participation interests, (see "Appendix A
- -Participation Interests.") A Portfolio will not invest more than 10% of its
total assets in participation interests in which the Portfolio does not have
demand rights.

U.S. GOVERNMENT FUND

INVESTMENT OBJECTIVE. The investment objective of U.S. Government Fund is to
provide high current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.

INVESTMENT POLICIES. U.S. Government Fund invests primarily in obligations
issued or guaranteed as to principal and interest by the United States
Government or by any of its agencies and instrumentalities ("U.S. Government
Securities"). The Fund may also invest in repurchase agreements and certain
zero-coupon securities secured by U.S. Government Securities. Under normal
circumstances, however, the Fund will invest at least 65% of its total assets in
U.S. Government Securities.

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

The Fund may invest in separately traded principal and interest components of
securities issued or guaranteed by the U.S. Treasury under the Treasury's
Separate Trading of Registered Interest and Principal of Securities ("STRIPS")
program. In addition, the Fund may invest in other types of related zero-coupon
securities. For instance, a number of banks and brokerage firms separate the
principal and interest portions of U.S. Treasury securities and sell them
separately in the form of receipts or certificates representing undivided
interests in these instruments. These instruments are generally held by a bank
in a custodial or trust account on behalf of the owners of the securities and
are known by various names, including Treasury Receipts ("TRs"), Treasury
Investment Growth Receipts ("TIGRs") and Certificates of Accrual on Treasury
Securities ("CATS"). The Fund will not invest more than 35% of its total assets
in zero-coupon securities other than those issued through the STRIPS program.
(See "Appendix A - U.S. Government Securities - Zero Coupon Securities.")

TREASURY FUND

INVESTMENT OBJECTIVE. The investment objective of Treasury Fund is to provide
high current income to the extent consistent with the preservation of capital
and the maintenance of liquidity.

25
<PAGE>
INVESTMENT POLICIES. Treasury Fund invests solely in obligations that are issued
or guaranteed by the U.S. Treasury, such as U.S. Treasury bills, bonds and notes
("U.S. Treasury Securities"). This may include separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury.
(See "Appendix A - U.S. Government Securities.")

MUNICIPAL MONEY MARKET FUND

INVESTMENT OBJECTIVE. The investment objective of Municipal Money Market Fund is
to provide high current income exempt from federal income taxes to the extent
consistent with the preservation of capital and the maintenance of liquidity. As
part of its objective, during periods of normal market conditions, the Fund will
have at least 80% of its net assets invested in federally tax-exempt instruments
the income from which may be subject to the federal alternative minimum tax
("AMT"). (See "Dividends and Tax Matters - Tax Matters.")

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

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

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

For a description of particular types of municipal securities, such municipal
bonds, notes and leases and participation interests, in which the Fund invests,
(see "Appendix A - Municipal Securities.")

THE SHORT-TERM MUNICIPAL SECURITIES MARKET. Yields on municipal securities are
dependent on a variety of factors, including the general conditions of the
municipal security markets and the fixed income markets in general, the size of
a particular offering, the maturity of the obligation and the rating of the
issue. The achievement of the Fund's investment objective is dependent in part
on the continuing ability of the issuers of municipal securities in which the
Fund invests to meet their obligations for the payment of principal and interest
when due. Under current federal tax law, interest on certain municipal
securities issued after August 7, 1986 to finance "private activities" ("private
activity securities") is a "tax preference item" for purposes of the AMT
applicable to certain individuals and corporations even though such interest
will continue to be fully tax-exempt for regular federal income tax purposes.
The Fund may purchase private activity securities, the interest on which may
constitute a "tax preference item" for purposes of the AMT.

Although the Fund invests primarily in municipal securities, it is anticipated
that a substantial amount of the securities held by the Fund will be supported
by credit and liquidity enhancements, such as letters of credit (which are not
covered by federal deposit insurance) or put or demand features, of third party
financial

26
<PAGE>
institutions, generally domestic and foreign banks. Accordingly, the credit
quality and liquidity of the Fund will be dependent in part upon the credit
quality of the banks supporting the Fund's investments. This will result in
exposure to risks pertaining to the banking industry, including the foreign
banking industry. (See "Investment Objectives and Policies - Money Market Funds
- - Cash Investment Fund and Ready Cash Investment Fund.") Brokerage firms and
insurance companies also provide certain liquidity and credit support. The
Fund's policy is to purchase municipal securities with third party credit or
liquidity support only after Norwest has considered the creditworthiness of the
financial institution providing the support and believes that the security
presents minimal credit risk.

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

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

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

TAXABLE INVESTMENTS. Although the Fund will attempt to invest 100% of its assets
in municipal securities, the Fund may invest up to 20% of the value of its net
assets in cash and cash equivalents the interest income on which is subject to
federal taxation. In addition, when business or financial conditions warrant or
when an adequate supply of appropriate municipal securities is not available,
the Fund may assume a temporary

27
<PAGE>
defensive position and invest without limit in cash or cash equivalents the
interest income on which is subject to federal income taxation, which include:
(1) short-term U.S. Government Securities; (2) certificates of deposit, Bankers'
acceptances and interest-bearing savings deposits; (3) commercial paper; (4)
repurchase agreements covering any of the preceding securities; and (5) to the
extent permitted by the Investment Company Act of 1940, money market mutual
funds.

FIXED INCOME FUNDS

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

STABLE INCOME FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to maintain safety
of principal while providing low-volatility total return. The Fund currently
pursues its investment objective by investing all of its investable assets in
Stable Income Portfolio, which has the same investment objective and
substantially identical investment policies as the Fund. Therefore, although the
following discusses the investment policies of that Portfolio, it applies
equally to the Fund.

INVESTMENT POLICIES. The Portfolio seeks to maintain safety of principal while
providing low volatility total return by investing primarily in investment grade
short-term obligations. The Portfolio invests in a diversified portfolio of
fixed and variable rate U.S. dollar denominated fixed income securities of a
broad spectrum of United States and foreign issuers, including U.S. Government
Securities and the debt securities of financial institutions, corporations, and
others.

The securities in which the Portfolio invests include mortgage-backed and other
asset-backed securities, although the Portfolio limits these investments to not
more than 60 percent and 25 percent, respectively, of its total assets. In
addition, the Portfolio limits its holdings of mortgage-backed securities that
are not U.S. Government Securities to 25 percent of its total assets. The
Portfolio may invest any amount of its assets in U.S. Government Securities, but
under normal circumstances less than 50 percent of the Portfolio's total assets
are so invested. The Portfolio may invest in securities that are restricted as
to disposition under the federal securities laws (sometimes referred to as
"private placements" or "restricted securities"). In addition, the Portfolio may
not invest more than 25 percent of its total assets in the securities issued or
guaranteed by any single agency or instrumentality of the U.S. Government,
except the U.S. Treasury, and may not invest more than 10 percent of its total
assets in the securities of any other issuer.

The Portfolio only purchases those securities that are rated, at the time of
purchase, within the three highest long-term or two highest short-term rating
categories assigned by an NRSRO, such as Moody's Investors Service, Standard &
Poor's or Fitch Investors Service, L.P., or which are unrated and determined by
Norwest to be of comparable quality. (See "Additional Investment Policies and
Risk Considerations - Common Policies of the Funds - Rating Matters.")

In order to manage its exposure to different types of investments, the Portfolio
may enter into interest rate and mortgage swap agreements and may purchase and
sell interest rate caps, floors and collars. The Portfolio may also engage in
certain strategies involving options (both exchange-traded and over-the-counter)
to attempt to enhance the Portfolio's income and may attempt to reduce the
overall risk of its

28
<PAGE>
investments or limit the uncertainty in the level of future foreign exchange
rates ("hedge") by using options and futures contracts and foreign currency
forward contracts. The Portfolio's ability to use these strategies may be
limited by market considerations, regulatory limits and tax considerations. The
Portfolio may write covered call and put options, buy put and call options, buy
and sell interest rate and foreign currency futures contracts and buy options
and write covered options on those futures contracts. An option is covered if,
so long as the Portfolio is obligated under the option, it owns an offsetting
position in the underlying security or futures contract or maintains a
segregated account of liquid debt instruments with a value at all times
sufficient to cover the Portfolio's obligations under the option.

LIMITED TERM GOVERNMENT INCOME FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide income
and safety of principal by investing primarily in U.S. Government Securities.

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

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

The Fund will only purchase securities that are rated, at the time of purchase,
within the two highest rating categories assigned by an NRSRO, such as Moody's
Investors Service, Standard & Poor's or Fitch Investors Service, L.P., or which
are unrated and determined by Norwest to be of comparable quality. (See
"Additional Investment Policies and Risk Considerations - Common Policies of the
Funds - Rating Matters.")

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

29
<PAGE>
it owns an offsetting position in the underlying security or futures contract or
maintains a segregated account of liquid debt instruments with a value at all
times sufficient to cover the Fund's obligations under the option.

INTERMEDIATE GOVERNMENT INCOME FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide income
and safety of principal by investing primarily in U.S. Government Securities.

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

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

The Fund will only purchase securities that are rated, at the time of purchase,
within the two highest rating categories assigned by an NRSRO, such as Moody's
Investors Service, Standard & Poor's or Fitch Investors Services, L.P., or which
are unrated and determined by Norwest to be of comparable quality. (See
"Additional Investment Policies and Risk Considerations - Common Policies of the
Funds - Rating Matters.")

The Fund primarily will invest in debt obligations with maturities (or average
life in the case of mortgage-backed and similar securities) ranging from
short-term (including overnight) to 15 years. Under normal circumstances, the
Fund's portfolio of securities will have an average dollar-weighted maturity of
between 3 and 10 years. Under normal circumstances, the Fund's portfolio of
securities will have a duration of between 70 percent and 130 percent of the
duration of a 5-year Treasury Note. Duration is a measure of a debt security's
average life that reflects the present value of the security's cash flow and,
accordingly, is a measure of price sensitivity to interest rate changes
("duration risk"). Because earlier payments on a debt security have a higher
present value, duration of a security, except a zero-coupon security, will be
less than the security's stated maturity.

30
<PAGE>
it owns an offsetting position in the underlying security or futures contract or
maintains a segregated account of liquid debt instruments with a value at all
times sufficient to cover the Fund's obligations under the option.

DIVERSIFIED BOND FUND

INVESTMENT OBJECTIVE. The Fund's investment objective is to provide total return
by diversifying its investments among different fixed-income investment styles.
The Fund invests in various Core Portfolios, each of which invests using a
different investment style.

INVESTMENT POLICIES. The Fund follows a "multi-style" approach designed to
reduce the price and return volatility of the Fund and to provide more
consistent returns. The Fund's portfolio combines three different fixed income
investment styles - Managed Fixed Income style, Strategic Value Bond style, and
Positive Return style.

DIVERSIFIED BOND FUND ALLOCATION

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

<TABLE>
<CAPTION>
CURRENT RANGE OF
ALLOCATION INVESTMENT
------------- ------------------
<S> <C> <C>
Managed Fixed Income Portfolio 50.0% 45% - 55%
Strategic Value Bond Portfolio 16.7% 11.7% - 21.7%
Positive Return Portfolio 33.3% 30% - 37%
---
TOTAL FUND ASSETS 100%
</TABLE>

As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest periodically effects transactions for
the Fund to reestablish its allocations.

Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities. When Norwest
believes that a change in the current allocation percentages is desirable, it
will sell and purchase securities to effect the change.

Investors should refer to the descriptions below under "Investment Objectives
and Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each investment style.

INCOME FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide total
return consistent with current income. The Fund pursues this objective by
investing in a portfolio of fixed income securities issued by domestic and
foreign issuers.

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

31
<PAGE>
The Fund may invest any amount of its assets, and normally will invest at least
30% of its total assets, in U.S. Government Securities. The fixed income
securities in which the Fund invests also include mortgage-backed and other
asset-backed securities, although the Fund limits these investments to not more
than 50%
and 25%, respectively, of its total assets. The Fund may invest up to 50% of its
total assets in corporate securities, such as bonds, debentures and notes and
fixed income securities that can be converted into or exchanged for common
stocks ("convertible securities") and may invest in zero coupon securities and
enter into "dollar roll" transactions. The Fund may invest in securities that
are restricted as to disposition under the federal securities laws (sometimes
referred to as "private placements" or "restricted securities").

The Fund will invest primarily in securities with maturities (or average life in
the case of mortgage-backed and similar securities) ranging from short-term
(including overnight) to 40 years, and it is anticipated that the Fund's
portfolio of securities will have an average dollar-weighted maturity of between
3 and 15 years. The Fund's portfolio of securities will normally have a duration
of between 70% and 130% of the duration of the Lipper Corporate A-Rated Debt
Average. Duration is a measure of a debt security's average life that reflects
the present value of the security's cash flow and, accordingly, is a measure of
price sensitivity to interest rate changes ("duration risk"). Because earlier
payments on a debt security have a higher present value, duration of a security,
except a zero-coupon security, will be less than the security's stated maturity.

The Fund may invest in debt securities registered and sold in the United States
by foreign issuers (Yankee Bonds) and debt securities sold outside the United
States by foreign or U.S. issuers (Euro-bonds). The Fund intends to restrict its
purchases of debt securities to issues denominated and payable in United States
dollars. For a description of the risks involved in investments in foreign
securities, see "Investment Objectives and Policies - Core Portfolio
Descriptions - International Portfolio."

Normally, at least 80% of the Fund's assets will be invested in securities that
are rated (or unrated and determined by Norwest to be of comparable quality)
within the top four grades by an NRSRO at the time of purchase. For example, for
bonds, these grades are "Aaa", "Aa", "A" and "Baa" in the case of Moody's
Investors Service ("Moody's") and "AAA", "AA", "A" and "BBB" in the case of
Standard & Poor's ("S&P") and Fitch Investors Service, L.P. ("Fitch"). These
securities are generally considered to be investment grade securities, although
Moody's indicates that securities rated "Baa" have speculative characteristics.
A description of the rating categories of certain NRSROs is contained in the SAI
of the Fund.

NON-INVESTMENT GRADE SECURITIES. The Fund may invest up to 20% of its total
assets in securities rated in the fifth highest rating category by an NRSRO
("Ba" by Moody's or "BB" by S&P or Fitch), or which are unrated and judged by
Norwest to be of comparable quality. Such securities (commonly referred to as
"junk bonds") are not considered to be investment grade and have speculative or
predominantly speculative characteristics. Non-investment grade, high risk
securities provide poor protection for payment of principal and interest but may
have greater potential for capital appreciation than do higher quality
securities. These lower rated securities involve greater risk of default or
price changes due to changes in the issuers' creditworthiness than do higher
quality securities. The market for these securities may be thinner and less
active than that for higher quality securities, which may affect the price at
which the lower rated securities can be sold. In addition, the market prices of
lower rated securities may fluctuate more than the market prices of higher
quality securities and may decline significantly in periods of general economic
difficulty or rising interest rates. During the Fund's most recent fiscal year
ended May 31, 1997, it did not invest in non-investment grade securities.

TOTAL RETURN BOND FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to seek total
return. The Fund currently pursues its investment objective by investing all of
its investable assets in Total Return Bond Portfolio (and effective on or about
January 9, 1998 Strategic Value Bond Portfolio), each of which has substantially
the same investment objective and investment policies as the Fund. Therefore,
although the following discusses the investment policies of those Portfolios, it
applies equally to the Fund.

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INVESTMENT POLICIES (UNTIL JANUARY 9, 1998). Total Return Bond 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 Service, L.P., or
which are unrated and determined by Norwest to be of comparable quality.
Securities rated in these categories are generally considered to be investment
grade securities, although Moody's indicates that securities rated Baa (the
fourth highest category) have speculative characteristics. A description of the
rating categories of various NRSROs is contained in the SAI of the Portfolio.

INVESTMENT POLICIES (AFTER JANUARY 9, 1998). Strategic Value Bond Portfolio
invests in a broad range of fixed income instruments including corporate bonds,
asset-backed securities, mortgage-related securities, U.S. Government
Securities, preferred stock, convertible bonds and foreign bonds in order to
create a strategically diversified portfolio of high-quality fixed income
investments.

In making investment decisions, the investment adviser focuses on relative value
as opposed to the prediction of the direction of interest rates. In general,
particular emphasis is placed on higher current income instruments such as
corporate bonds and mortgage/asset-backed securities in order to enhance
returns. The investment adviser believes that this exposure enhances performance
in varying economic and interest rate cycles while avoiding excessive risk
concentrations. The investment adviser's investment process involves rigorous
evaluation of each security. This includes identifying and valuing cash flows,
embedded options, credit quality, structure, liquidity, marketability, current
versus historical trading relationships, supply and demand for the instrument
and expected returns in varying economic/interest rate environments. This
process seeks to identify securities which represent the best relative economic
value. The results of the investment process are then evaluated against the
Portfolio's objective and the Portfolio purchases those securities which will
enhance its positioning. The Portfolio will be repositioned based on market
changes and shifts in relative value of the instruments held by the Portfolio.

The Portfolio's investments are subject to the various risks of investing in
fixed-income securities. To limit the Portfolio's "credit risk," in general, 65%
of the Portfolio's assets will be invested in fixed-income securities rated in
one of the three highest rating categories by at least one NRSRO, such as
Moody's

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<PAGE>
Investors Service, Standard & Poor's, Fitch Investors Service, L.P. or Duff &
Phelps Credit Rating Co., or which are unrated and determined by the investment
adviser to be of comparable quality. In addition, the Portfolio will limit its
investment in securities with a less than an investment grade rating to 20% of
the Portfolio's assets. While the average quality of the Portfolio will vary
over an economic cycle, the weighted average rating of the Portfolio's
investments will be "A" or better. A description of the rating categories of
various NRSRO's is contained in Appendix B. Investment grade instruments include
those that are rated in one of four highest long-term rating categories by an
NRSRO or are unrated and determined by the Advisers to be of comparable quality.

The average maturity of the Portfolio will vary between five and fifteen years.
In the case of mortgage-related, asset-backed and similar securities, the
Portfolio uses the security's average life in calculating the Portfolio's
average maturity. The Portfolio's effective duration normally will vary between
three and eight years.

One of the primary tenets of the Fund is strategic diversification. Toward that
end, the Fund will not invest more than: (1) 75% in corporate bonds, (2) 25% in
one industry of the corporate market, (3) 50% in asset-backed securities, or (4)
60% in mortgage-related securities. U.S. Government Securities may be held in
any amount without restriction. With respect to corporate bonds, generally no
more than 5% will be held in one issuer.

The Portfolio may enter into derivative transactions to receive favorable
financing or diversify portfolio risk. 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 invest in interests of other investment companies,
which also may be restricted securities. See "Investment Policies - Derivative
Investments" and "Appendix A - Glossary of Investment Terms - Futures, Options
and Other Derivatives."

NON-INVESTMENT GRADE SECURITIES. The Portfolio may invest up to 20% of its total
assets in securities rated in the fifth highest rating category by an NRSRO
("Ba" by Moody's or "BB" by S&P or Fitch), or which are unrated and judged by
Norwest to be of comparable quality. Such securities (commonly referred to as
"junk bonds") are not considered to be investment grade and have speculative or
predominantly speculative characteristics. Non-investment grade, high risk
securities provide poor protection for payment of principal and interest but may
have greater potential for capital appreciation than do higher quality
securities. These lower rated securities involve greater risk of default or
price changes due to changes in the issuers' creditworthiness than do higher
quality securities. The market for these securities may be thinner and less
active than that for higher quality securities, which may affect the price at
which the lower rated securities can be sold. In addition, the market prices of
lower rated securities may fluctuate more than the market prices of higher
quality securities and may decline significantly in periods of general economic
difficulty or rising interest rates.

TAX-FREE FIXED INCOME FUNDS

For a detailed description of fixed income investments, including municipal
securities and related investments in which the Tax-Free Fixed Income Funds
invest, (see "Appendix A" and "Additional Investment Policies and Risk
Considerations - Common Policies of the Funds - Fixed Income Investments and
Their Characteristics.") Under certain circumstances the Tax-Free Fixed Income
Funds may invest in taxable investments. (See "Taxable Investments.")

LIMITED TERM TAX-FREE FUND

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

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

The average dollar-weighted maturity of the Fund's assets normally will be
between 1 and 5 years. In general, the longer the maturity of a municipal
security, the higher the rate of interest it pays. However, a shorter maturity
is generally associated with a lower level of volatility in the market value of
a security. As the Fund's objective is to provide current income, the Fund
invests in municipal securities with an emphasis on income. The average maturity
of the Fund's portfolio will vary depending on anticipated market conditions.

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

TAX-FREE INCOME 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.

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

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

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

COLORADO TAX-FREE FUND

INVESTMENT OBJECTIVE. The investment objective of Colorado Tax-Free Fund is to
seek to provide shareholders with a high level of current income exempt from
both federal and Colorado state income taxes (including the alternative minimum
tax) consistent with the preservation of capital. Shares of the Fund are offered
only to residents of the State of Colorado.

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

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

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

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<PAGE>
MINNESOTA INTERMEDIATE TAX-FREE FUND
MINNESOTA TAX-FREE FUND

INVESTMENT OBJECTIVE. The investment objective of each Fund is to provide
shareholders with a high level of current income exempt from both federal and
Minnesota state income taxes (including the alternative minimum tax) without
assuming undue risk. Shares of the Funds are offered only to residents of the
State of Minnesota.

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

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

The average dollar-weighted maturity of the MINNESOTA INTERMEDIATE TAX-FREE
FUND'S assets normally will be between 5 and 10 years. The average maturity of
the Fund's portfolio will vary depending on anticipated market conditions. There
are no restrictions on MINNESOTA TAX-FREE FUND'S average portfolio maturity, but
the average dollar-weighted maturity is currently expected to be greater than 10
years. Average portfolio maturity may reach or exceed 20 years in the future.
Depending on market conditions, however, the average dollar-weighted maturity
could be higher or lower.

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

Normally, at least 75% of the Funds' assets will be invested in municipal
securities that are rated (or unrated and determined by Norwest to be of a
comparable quality) within the top four grades by an NRSRO at the time of
purchase. For example, for municipal bonds, these grades are "Aaa", "Aa", "A"
and "Baa" in the case of Moody's Investors Service ("Moody's") and "AAA", "AA",
"A" and "BBB" in the case of Standard & Poor's ("S&P") and Fitch Investors
Service, L.P. ("Fitch"). These securities are generally considered to be
investment grade securities, although Moody's indicates that municipal
securities rated "Baa" have speculative characteristics. A description of the
rating categories of certain NRSROs is contained in the SAI of the Funds.

NON-INVESTMENT GRADE SECURITIES. The Funds may invest up to 25% of its total
assets in municipal bonds rated in the fifth highest rating category by an NRSRO
("Ba" by Moody's or "BB" by S&P or Fitch), or which are unrated and judged by
Norwest to be of comparable quality. Such securities (commonly referred to as
"junk bonds") are not considered to be investment grade and have speculative or
predominantly speculative characteristics. Non-investment grade, high risk
securities provide poor protection for payment

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of principal and interest but may have greater potential for capital
appreciation than do higher quality securities. These lower rated securities
involve greater risk of default or price changes due to changes in the issuers'
creditworthiness than do higher quality securities. The market for these
securities may be thinner and less active than that for higher quality
securities, which may affect the price at which the lower rated securities can
be sold. In addition, the market prices of lower rated securities may fluctuate
more than the market prices of higher quality securities and may decline
significantly in periods of general economic difficulty or rising interest
rates.

During its most recent fiscal year ended May 31, 1997, the Minnesota Tax-Free
Fund had 88.8% of its average annual assets in municipal securities rated by
Moody's or S&P and 11.2% of its average annual assets in unrated investments,
including cash and short-term cash equivalents which are typically unrated.
During that year, the Fund had the following percentages of its average annual
net assets invested in rated securities: "Aaa"/"AAA"-36.3%, "Aa"/"AA"-38.4%,
"A"/"A"-9.8%, "Baa"/"BBB"-4.3% and "Ba"/"BB" and below-0%. For this purpose,
securities with different NRSRO ratings were assigned the higher rating. This
information reflects the average composition of the Fund's assets for the Fund's
last fiscal year and is not necessarily representative of the Fund as of the
current fiscal year or any other time.

TAXABLE INVESTMENTS

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

INVESTMENT CONSIDERATIONS AND RISK FACTORS

GEOGRAPHIC CONCENTRATION. Because COLORADO TAX-FREE FUND, MINNESOTA INTERMEDIATE
TAX-FREE FUND and MINNESOTA TAX-FREE FUND invest principally in municipal
securities issued by issuers within a particular state and the state's political
subdivisions, those Funds are more susceptible to factors adversely affecting
issuers of those municipal securities than would be a more geographically
diverse municipal securities portfolio. In addition, to the extent they may
concentrate their investments in a particular jurisdiction, LIMITED TERM
TAX-FREE FUND and TAX-FREE INCOME FUND will be subject to similar risks. These
risks arise from the financial condition of the state and its political
subdivisions. To the extent state or local governmental entities are unable to
meet their financial obligations, the income derived by a Fund, its ability to
preserve or realize appreciation of its portfolio assets or its liquidity could
be impaired.

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

38
<PAGE>
on private activity securities will depend on the economic condition of the
facility or specific revenue source from whose revenues the payments will be
made, which in turn could be affected by economic, political or demographic
conditions in the state.

In 1992, the Colorado constitution was amended to restrict the ability of the
state and local governments to increase taxes, revenues, debt and spending. In
particular, prior voter approval is now required to impose any new tax or tax
rate increase or to issue any multiple-fiscal year debt and revenues collected
in excess of certain limits must be refunded unless voters authorize their
retention. The future impact on the financial operations and obligations of the
state and local governments cannot be determined at this time. Norwest will
continue to monitor the situation closely and will, if necessary, seek the
advice of counsel concerning its effect on instruments being considered for
purchase by the Colorado Tax-Free Fund. A further discussion of potential risks
of investment in Colorado municipal securities is contained in the SAI of the
Fund.

RELATED ISSUERS. Some municipal securities are related in such a way that an
economic, business or political development affecting one municipal security
would have a similar effect on another municipal security. For example, the
repayment of different obligations may depend on similar types of projects.
Except as otherwise noted, no Fund will invest more than 25% of its total assets
in securities that are so related or invest more than 25% of its total assets in
a single type of revenue bond (E.G., electric revenue, housing revenue, etc.).
Similarly, under normal circumstances, Limited Term Tax-Free Fund and Tax-Free
Income Fund will invest more than 25% of their total assets in issuers located
in the same state.

DIVERSIFICATION MATTERS. Each of COLORADO TAX-FREE FUND, MINNESOTA INTERMEDIATE
TAX-FREE FUND and MINNESOTA TAX-FREE FUND is non-diversified, which means that
they each have greater latitude than a diversified fund with respect to the
investment of their assets in the securities of relatively few municipal
issuers. As non-diversified portfolios, these Funds may present greater risks
than a diversified fund. However, each Fund intends to comply with applicable
diversification requirements of the Internal Revenue Code. These requirements
provide that, as of the last day of each fiscal quarter: (1) with respect to 50%
of its assets, a Fund may not: (a) own the securities of a single issuer, other
than a U.S. Government security, with a value of more than 5% of the Fund's
total assets; or (b) own more than 10% of the outstanding voting securities of a
single issuer and (2) a Fund may not own the securities of a single issuer,
other than a U.S. Government security, with a value of more than 25% of the
Fund's total assets.

Except for investment in U.S. Government Securities, no more than 25% of the
total assets of Colorado Tax-Free Fund, no more than 10% of the total assets of
Minnesota Intermediate Tax-Free Fund and no more than 20% of the total assets of
Minnesota Tax-Free Fund, may be invested in securities of any one issuer. These
limitations do not apply to securities of an issuer payable solely from the
proceeds of escrowed U.S. Government Securities.

TAX-FREE INCOME FUND and LIMITED TERM TAX-FREE FUND are diversified and,
therefore, as a fundamental policy, with respect to 75% of their assets, may not
purchase a security (other than a U.S. Government Security) if, as a result,
more than 5% of the Fund's total assets would be invested in the securities of a
single issuer. When the assets and revenues of an issuing agency, authority,
instrumentality or other political subdivision are separate from those of the
government creating the issuing entity and a security is backed only by the
assets and revenues of the entity, the entity will be deemed to be the sole
issuer of the security. Similarly, in the case of a security issued by or on
behalf of public authorities to finance various privately operated facilities,
such as an industrial development bond, that is backed only by the assets and
revenues of the non-governmental user, the non-governmental user will be viewed
as the sole issuer of the bond. For more information concerning diversification
matters (see "Additional Investment Policies and Risk Considerations - Common
Policies of the Funds - Diversification and Concentration.")

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BALANCED FUNDS

Each of the four Balanced Funds invests in a balanced portfolio of fixed income
and equity securities. Strategic Income Fund has the smallest equity securities
component of the four Funds and is the most conservative of the Balanced Funds.
Aggressive Balanced-Equity Fund has the largest equity securities component of
the four Funds and is the most aggressive of the Balanced Funds. This Fund may
be considered to be a non-traditional balanced fund because it may at times
invest less than 25% of its assets in debt securities.

The equity portion of each Balanced Fund's portfolio uses the ten different
equity investment styles of Diversified Equity Fund. The blending of multiple
equity investment styles is intended to reduce the risk associated with the use
of a single style, which may move in and out of favor during the course of a
market cycle. The fixed income portion of each Balanced Fund's portfolio uses
from three to five different fixed income investment styles. The blending of
multiple fixed income investment styles is intended to reduce the price and
return volatility of, and provide more consistent returns within, the fixed
income portion of the Funds.

As the securities markets change, Norwest may attempt to enhance the returns of
a Balanced Fund by changing the percentage of Fund assets invested in fixed
income and equity securities. Absent unstable market conditions, Norwest does
not anticipate making a substantial number of percentage changes. When Norwest
believes that a change in the current allocation percentages is desirable, it
will sell and purchase securities to effect the change. When Norwest believes
that a change will be temporary (generally, 3 years or less), it may choose to
effect the change by using futures contract strategies as described below under
"Temporary Allocations."

STRATEGIC INCOME FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide a
combination of current income and capital appreciation by diversifying
investment of its assets among stocks, bonds and other fixed income investments.
The Fund emphasizes safety of principal through limited exposure to equity
securities and has the smallest equity securities position of the Balanced
Funds. The Fund invests in various Core Portfolios, each of which invests using
a different investment style.

INVESTMENT POLICIES. The Fund is designed for investors seeking to invest in
fixed income securities with limited exposure to equity securities. The fixed
income portion of the Fund's portfolio uses the three investment styles used by
Diversified Bond Fund - Managed Fixed Income style, Strategic Value Bond style
and Positive Return style - as well as Stable Income style and Money Market
style, in order to reduce the risk of relying on a single fixed income
investment style. The equity portion of the Fund's portfolio uses the investment
style of Diversified Equity Fund, which is based on a multi-style approach
designed to minimize the volatility and risk of investing in equity securities.

40
<PAGE>
STRATEGIC INCOME FUND ALLOCATION

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

<TABLE>
<CAPTION>
INVESTMENT STYLE CURRENT ALLOCATION RANGE OF INVESTMENT
- -------------------------------------------- ------------------------------- -----------------------
<S> <C> <C> <C> <C>
Diversified Bond Fund style 55% 45% - 65%
Positive Return Bond Portfolio 18.3% 16.04% - 20.63%
Strategic Value Bond Portfolio 9% 8.02% - 10.31%
Managed Fixed Income Portfolio 27.5% 24.06% - 30.94%
Stable Income Portfolio 15% 15%
Money Market Portfolio 10% 10%
Diversified Equity Fund style 20% 10% - 30%
Index Portfolio 5% 2.5% - 7.5%
Income Equity Portfolio 5% 2.5% - 7.5%
Large Company style 5% 2.5% - 7.5%
Large Company Growth Portfolio 4% 2% - 6%
Disciplined Growth Portfolio 1% 0.5% - 1.5%
Small Company style 2.0% 1% - 3%
Small Company Growth Portfolio 0.6% 0.3% - 0.9%
Small Company Value Portfolio 0.6% 0.3% - 0.9%
Small Company Stock Portfolio 0.5% 0.25% - 0.75%
Small Cap Value Portfolio 0.3% 0.15% - 4.5%
International style 3.0% 1.5% - 4.5%
International Portfolio 2.85% 1.2% - 4.5%
Schroder EM Core Portfolio 0.15% 0% - 0.9%
---------
TOTAL FUND ASSETS 100%
</TABLE>

Investors should refer to "Investment Objectives and Policies - Equity Funds -
Diversified Equity Fund" and the descriptions below under "Investment Objectives
and Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each investment style.

MODERATE BALANCED FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide a
combination of current income and capital appreciation by diversifying
investment of the Fund's assets among stocks, bonds and other fixed income
investments. The Fund provides a portfolio more evenly-balanced between fixed
income and equity securities than the other Balanced Funds. The Fund invests in
various Core Portfolios, each of which invests using a different investment
style.

INVESTMENT POLICIES. The Fund is designed for investors seeking roughly
equivalent exposures to fixed income securities and equity securities. The fixed
income portion of the Fund's portfolio uses the three

41
<PAGE>
investment styles used by Diversified Bond Fund - Managed Fixed Income style,
Strategic Value Bond style and Positive Return style - and Stable Income style,
in order to reduce the risk of relying on a single fixed income investment
style. The equity portion of the Fund's portfolio uses the investment style of
Diversified Equity Fund, which is based on a multi-style approach designed to
minimize the volatility and risk of investing in equity securities.

MODERATE BALANCED FUND ALLOCATION

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

<TABLE>
<CAPTION>
INVESTMENT STYLE CURRENT ALLOCATION RANGE OF INVESTMENT
- --------------------------------------------- ------------------------------- -----------------------
<S> <C> <C> <C> <C>
Diversified Bond Fund style 45% 30% - 60%
Positive Return Bond Portfolio 15% 10% - 20%
Strategic Value Bond Portfolio 7.5% 5% - 10%
Managed Fixed Income Portfolio 22.5% 15% - 30%
Stable Income Portfolio 15% 15%
Diversified Equity Fund style 40% 25% - 55%
Index Portfolio 10% 6.3% - 13.8%
Income Equity Portfolio 10% 6.3% - 13.8%
Large Company style 10% 6.3% - 13.8%
Large Company Growth Portfolio 8% 5.0% - 11.0%
Disciplined Growth Portfolio 2% 1.25% - 2.75%
Small Company style 4% 2.5% - 5.5%
Small Company Growth Portfolio 1.2% 0.75% - 1.65%
Small Company Value Portfolio 1.2% 0.75% - 1.65%
Small Company Stock Portfolio 1.0% 0.63% - 1.38%
Small Cap Value Portfolio 0.6% 0.38% - 0.83%
International style 6% 3.75% - 8.25%
International Portfolio 5.7% 3.0% - 8.25%
Schroder EM Core Portfolio 0.3% 0% - 1.65%
---------
TOTAL FUND ASSETS 100%
</TABLE>

GROWTH BALANCED FUND

42
<PAGE>
INVESTMENT POLICIES. The Fund is designed for investors seeking long-term
capital appreciation in the equity securities market in a balanced fund. The
fixed income portion of the Fund's portfolio uses the three investment styles
used by Diversified Bond Fund - Managed Fixed Income style, Strategic Value Bond
style and Positive Return style - in order to reduce the risk of relying on a
single fixed income investment style. The equity portion of the Fund's portfolio
uses the investment style of Diversified Equity Fund, which is based on a
multi-style approach designed to minimize the volatility and risk of investing
in equity securities.

GROWTH BALANCED FUND ALLOCATION

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

<TABLE>
<CAPTION>
INVESTMENT STYLE CURRENT ALLOCATION RANGE OF INVESTMENT
- ---------------------------------------------- ------------------------------- ---------------------
<S> <C> <C> <C> <C>
Diversified Equity Fund style 65% 45% - 85%
Index Portfolio 16.25% 11.25% - 21.25%
Income Equity Portfolio 16.25% 11.25% - 21.25%
Large Company style 16.25% 11.25% - 21.25%
Large Company Growth Portfolio 13.0% 9.0% - 17.0%
Disciplined Growth Portfolio 3.25% 2.25% - 4.25%
Small Company style 6.5% 4.5% - 8.5%
Small Company Growth Portfolio 1.95% 1.37% - 2.54%
Small Company Value Portfolio 1.95% 1.37% - 2.54%
Small Company Stock Portfolio 1.63% 1.14% - 2.12%
Small Cap Value Portfolio 0.97% 0.68% - 1.26%
International style 9.75% 6.75% - 12.75%
International Portfolio 9.26% 5.4% - 12.75%
Schroder EM Core Portfolio 0.49% 0% - 2.55%
Diversified Bond Fund style 35% 15% - 55%
Managed Fixed Income Portfolio 17.5% 7.5% - 27.5%
Strategic Value Bond Portfolio 5.83% 2.5% - 9.17%
Positive Return Bond Portfolio 11.67% 5% - 18.53%
---------
TOTAL FUND ASSETS 100%
</TABLE>

AGGRESSIVE BALANCED-EQUITY FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide a
combination of current income and capital appreciation by diversifying
investment of the Fund's assets between stocks and bonds. The Fund has the
largest equity securities position of the Balanced Funds. The Fund invests in
various Core Portfolios, each of which invests using a different investment
style.

43
<PAGE>
INVESTMENT POLICIES. The Fund is designed for investors seeking long-term
capital appreciation in the equity securities market in a balanced fund. The
fixed income portion of the Fund's portfolio uses the three investment styles
used by Diversified Bond Fund - Managed Fixed Income style, Strategic Value Bond
style and Positive Return style - in order to reduce the risk of relying on a
single fixed income investment style. The equity portion of the Fund's portfolio
uses the investment style of Diversified Equity Fund, which is based on a
multi-style approach designed to minimize the volatility and risk of investing
in equity securities.

AGGRESSIVE BALANCED-EQUITY FUND ALLOCATION

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

<TABLE>
<CAPTION>
INVESTMENT STYLE CURRENT ALLOCATION RANGE OF INVESTMENT
- ---------------------------------------------- ------------------------------- ---------------------
<S> <C> <C> <C> <C>
Diversified Equity Fund style 80% 60% - 100%
Index Portfolio 20% 15% - 25%
Income Equity Portfolio 20% 15% - 25%
Large Company style 20% 15% - 25%
Large Company Growth Portfolio 16% 12% - 20%
Disciplined Growth Portfolio 4% 3% - 5%
Small Company style 8% 6% - 10%
Small Company Growth Portfolio 2.4% 1.8% - 3%
Small Company Value Portfolio 2.4% 1.8% - 3%
Small Company Stock Portfolio 2.0% 1.5% - 2.5%
Small Cap Value Portfolio 1.2% 0.9% - 1.5%
International style 12% 9% - 15%
International Portfolio 11.4% 7.2% - 15%
Schroder EM Core Portfolio 0.6% 0% - 3%
Diversified Bond Fund style 20.0% 0% - 40%
Managed Fixed Income Portfolio 10.0% 0% - 20%
Strategic Value Bond Portfolio 3.33% 0% - 6.67%
Positive Return Bond Portfolio 6.67% 0% - 13.33%
---------
TOTAL FUND ASSETS 100%
</TABLE>

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

44
<PAGE>
reallocation without incurring securities transaction costs by using futures
contracts rather than selling and purchasing securities. Under this strategy, to
the extent of the percentage asset allocation change, a Fund would not be
invested in nor subject to the risks related to the types of individual
securities purchased in accordance with the various investment styles used by
the Fund. Rather, the Fund would be invested in and subject to the risks related
to futures contracts. For a description of futures contracts and their risks,
(see "Appendix A - Futures Contracts and Options.")

EQUITY FUNDS

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

Each Equity Fund, other than Index Fund and Small Cap Opportunities Fund, may
invest in foreign issuers. These investments may involve certain risks. (See
"Investment Objectives and Policies - Equity Funds - International Fund -
Foreign Investment Considerations and Risk Factors.") Each Fund other than Index
Fund may invest in the securities of smaller companies. Small Company Stock
Fund, Small Company Growth Fund and Diversified Small Cap Fund invest primarily
in these securities, which entails special risks. (See "Small Company Investment
Considerations and Risk Factors" below.)

INDEX FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to duplicate the
return of the Standard & Poor's 500 Composite Stock Price Index. The Fund
currently pursues its investment objective by investing all of its investable
assets in Index Portfolio, which has the same investment objective and
substantially identical investment policies as the Fund. Therefore, although the
following discusses the investment policies of that Portfolio, it applies
equally to the Fund.

INVESTMENT POLICIES. The Portfolio is designed to duplicate the return of the
Standard & Poor's 500 Composite Stock Index (the "Index") with minimum tracking
error, while also minimizing transaction costs. Under normal circumstances, the
Portfolio will hold stocks representing 100 percent or more of the
capitalization-weighted market values of the Index. Portfolio transactions for
the Portfolio generally are executed only to duplicate the composition of the
Index, to invest cash received from portfolio security dividends or investments
in the Portfolio, and to raise cash to fund redemptions. The Portfolio may hold
cash or cash equivalents for the purpose of facilitating payment of the
Portfolio's expenses or redemptions. For these and other reasons, the
Portfolio's performance can be expected to approximate but not be equal to that
of the Index.

The Portfolio may utilize index futures contracts to a limited extent. Index
futures contracts are bilateral agreements pursuant to which two parties agree
to take or make delivery of an amount of cash equal to a specified dollar amount
times the difference between the index value at the close of trading of the
contract and the price at which the futures contract is originally struck. As no
physical delivery of securities comprising the Index is made, a purchaser of
index futures contracts may participate in the performance of the securities
contained in the index without the required capital commitment. Index futures
contracts may be used for several reasons: to simulate full investment in the
underlying index while retaining a cash balance for fund management purposes, to
facilitate trading or to reduce transaction costs. The Portfolio does not invest
in futures contracts for speculative reasons or to leverage the Portfolio.

The Index tracks the total return performance of 500 common stocks which are
chosen for inclusion in the Index by Standard & Poor's ("S&P") on a statistical
basis. The inclusion of a stock in the Index in no way implies that S&P believes
the stock to be an attractive investment. The 500 securities, most of which
trade

45
<PAGE>
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 sponsored, endorsed, sold or promoted by
S&P, nor does S&P make any representation or warranty, implied or express, to
the purchasers of the Portfolio or the Fund or any member of the public
regarding the advisability of investing in index funds or the ability of the
Index to track general stock market performance. S&P does not guarantee the
accuracy and/or the completeness of the Index or any data included therein. S&P
makes no warranty, express or implied, as to the results to be obtained by the
Portfolio or the Fund, by the owners of the Portfolio or the Fund, or by any
other person or any entity from the use of the Index or any data included
therein. S&P makes no express or implied warranties and hereby expressly
disclaims all such warranties of merchantability or fitness for a particular
purpose for use with respect to the Index or any data included therein.

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

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

INCOME EQUITY FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide
long-term capital appreciation consistent with above-average dividend income.
The Fund currently pursues its investment objective by investing all of its
investable assets in Income Equity Portfolio, which has the same investment
objective and substantially identical investment policies as the Fund.
Therefore, although the following discusses the investment policies of that
Portfolio, it applies equally to the Fund.

INVESTMENT POLICIES. Income Equity Portfolio expects to invest primarily in the
common stock of large, high-quality domestic companies that have above-average
return potential based on current market valuations. Primary emphasis is placed
on investing in securities of companies with above-average dividend income. In
selecting securities for the Portfolio, Norwest uses various valuation measures,
including above-average dividend yields and below industry average price to
earnings, price to book and price to sales ratios. The Portfolio considers large
companies are those companies whose market capitalization is greater than the
median of the Russell 1000 Index. The Portfolio also may invest in preferred
stock and securities convertible into common stock and may purchase American
Depository Receipts, European Depository Receipts and other similar securities
of foreign issuers. Under normal circumstances, Income Equity Portfolio will not
invest more than 10% of its total assets in the securities of a single issuer.

VALUGROWTH STOCK FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide
long-term capital appreciation.

46
<PAGE>
INVESTMENT POLICIES. The Fund invests primarily in medium- and
large-capitalization companies that, in the view of Norwest, possess above
average growth characteristics and appear to be undervalued. Medium companies
are those companies whose market capitalization is in the range of $500 million
to $8 billion. Large companies are those companies whose market capitalization
is greater than the median of the Russell 1000 Index.

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

The Fund also may invest in selected companies that Norwest regards as "special
situations." Special situation companies often have the potential for
significant future earnings growth but have not performed well in the recent
past. These situations may include management turnarounds, corporate or asset
restructurings, or significantly undervalued assets. These investments are the
exception, not the rule, and must satisfy Norwest's valuation parameters. In
addition, the Fund may invest up to 20% of its assets in securities of foreign
issuers, American Depository Receipts, European Depository Receipts and other
similar securities of foreign issuers.

DIVERSIFIED EQUITY FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide
long-term capital appreciation while moderating annual return volatility by
diversifying its investments in accordance with different equity investment
styles. The Fund invests in various Core Portfolios, each of which invests using
a different investment style.

INVESTMENT POLICIES. The Fund follows a "multi-style" approach designed to
minimize the volatility and risk of investing in equity securities. The Fund's
portfolio combines five different equity investment styles - index style, an
income equity style, a large company style, a small company style and an
international style. The Fund allocates the assets dedicated to large company
investments to two Core Portfolios, the assets allocated to small company
investments to four Core Portfolios and the assets dedicated to international
investments to two Core Portfolios. The Fund utilizes different equity
investment styles in order to reduce the risk of price and return volatility
associated with reliance on a single investment style. Because Diversified
Equity Fund blends five equity investment styles, it is anticipated that its
price and return volatility will be less than that of Growth Equity Fund, which
blends three equity investment styles.

47
<PAGE>
DIVERSIFIED EQUITY FUND ALLOCATION

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

<TABLE>
<CAPTION>
CURRENT ALLOCATION RANGE OF INVESTMENT
------------------------ -------------------
<S> <C> <C> <C>
Index Portfolio 25% 23.5% - 26.5%
Income Equity Portfolio 25% 23.5% - 26.5%
Large Company style 25% 23.5% - 26.5%
Large Company Growth Portfolio 20% 18.5% - 21.5%
Disciplined Growth Portfolio 5% 3.5% - 6.5%
Small Company style 10% 8.5% - 11.5%
Small Company Growth Portfolio 3% 1.5% - 4.5%
Small Company Value Portfolio 3% 1.5% - 4.5%
Small Company Stock Portfolio 2.5% 1% - 4%
Small Cap Value Portfolio 1.5% 0% - 3%
International Style 15% 13.5% - 16.5%
International Portfolio 14.25% 10.8% - 16.5%
Schroder EM Core Portfolio 0.75% 0% - 3.3%
-----------
TOTAL FUND ASSETS 100%
</TABLE>

As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest daily effects transactions for the
Fund to reestablish its allocations.

Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities. When Norwest
believes that a change in the allocation percentages is desirable, it will sell
and purchase securities to effect the change.

Investors should refer to the descriptions under "Investment Objectives and
Policies - Core Portfolio Descriptions" for a discussion of the investment
objectives, policies and risks involved in the investments and investment
techniques of each investment style.

GROWTH EQUITY FUND

INVESTMENT OBJECTIVE. Growth Equity Fund's investment objective is to provide a
high level of long-term capital appreciation while moderating annual return
volatility by diversifying its investments in accordance with different equity
investment styles. The Fund currently invests in various Core Portfolios, each
of which invests using a different investment style.

INVESTMENT POLICIES. The Fund follows a "multi-style" approach designed to
reduce the volatility and risk of investing in equity securities. The Fund's
portfolio combines three different equity styles - a large company growth style,
a small company style and an international style. The Fund allocates the assets
dedicated to small company investments to four Core Portfolios and the assets
dedicated to international investments to two Core Portfolios. The Fund utilizes
different equity styles in order to reduce the risk of price and return
volatility associated with reliance on a single style. It is anticipated that
the Fund's price and return volatility will be somewhat greater than those of
Diversified Equity Fund, which blends five equity styles.

48
<PAGE>
GROWTH EQUITY FUND ALLOCATION

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

<TABLE>
<CAPTION>
CURRENT ALLOCATION RANGE OF INVESTMENT
-------------------- -------------------
<S> <C> <C>
Large Company Growth Portfolio............. 35% 33% - 37%
Small Company Style........................ 35% 33% - 37%
Small Company Growth Portfolio........... 10.5% 8.5% - 12.5%
Small Company Value Portfolio............ 10.5% 8.5% - 12.5%
Small Company Stock Portfolio............ 8.75% 6.75% - 10.75%
Small Cap Value Portfolio................ 5.25% 3.25% - 7.25%
International Style........................ 30% 28% - 32%
International Portfolio.................. 28.5% 22.4% - 32.0%
Schroder EM Core Portfolio............... 1.5% 0% - 6.4%
-----------
TOTAL FUND ASSETS.......................... 100%
</TABLE>

As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest daily effects transactions for the
Fund to reestablish its allocations.

Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities. When Norwest
believes that a change in the allocation percentages is desirable, it will sell
and purchase securities to effect the change.

LARGE COMPANY GROWTH FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide
long-term capital appreciation by investing primarily in large, high-quality
domestic companies that the investment adviser believes have superior growth
potential. The Fund currently pursues its investment objective by investing all
of its investable assets in Large Company Growth Portfolio, which has the same
investment objective and substantially identical investment policies as the
Fund. Therefore, although the following discusses the investment policies of
that Portfolio, it applies equally to the Fund.

INVESTMENT POLICIES. The Portfolio invests primarily in the common stock of
large, high-quality domestic companies that have superior growth potential.
Large companies are those companies whose market capitalization is greater than
the median of the Russell 1000 Index. Market capitalization refers to the total
market value of a company's outstanding shares of common stock. In selecting
securities for the Portfolio, Norwest seeks issuers whose stock is attractively
valued and whose fundamental characteristics both are significantly better than
the market average and which support internal earnings growth capability. The
Portfolio's assets may be invested in the securities of companies whose growth
potential is, in Norwest's opinion, generally unrecognized or misperceived by
the market. In addition, the Portfolio may invest up to 20 percent of its total
assets in American Depository Receipts, European Depository Receipts and other
similar securities of foreign issuers and may attempt to reduce the overall risk
of its foreign investments by

49
<PAGE>
using foreign currency forward contracts. (See "Investment Objectives and
Policies - Equity Portfolios - International Fund - Foreign Investment Risks and
Considerations.") Under normal circumstances, the Portfolio will not invest more
than 10 percent of its total assets in the securities of a single issuer. The
Portfolio does not currently invest in preferred stock or securities convertible
into common stock but reserves the right to do so in the future.

SMALL COMPANY INVESTMENT CONSIDERATIONS AND RISK FACTORS.

ADDITIONAL INVESTMENT CONSIDERATIONS AND RISK FACTORS. While all investments
have risks, investments in smaller capitalization companies carry greater risk
than investments in larger capitalization companies. Smaller capitalization
companies generally experience higher growth rates and higher failure rates than
do larger capitalization companies; and the trading volume of smaller
capitalization companies' securities is normally lower than that of larger
capitalization companies and, consequently, generally has a disproportionate
effect on market price (tending to make prices rise more in response to buying
demand and fall more in response to selling pressure).

Investments in small, unseasoned issuers generally carry greater risk than is
customarily associated with larger, more seasoned companies. Such issuers often
have products and management personnel that have not been tested by time or the
marketplace and their financial resources may not be as substantial as those of
more established companies. Their securities (which a Portfolio may purchase
when they are offered to the public for the first time) may have a limited
trading market which can adversely affect their sale by the Portfolio and can
result in such securities being priced lower than otherwise might be the case.
If other institutional investors engage in trading this type of security, the
Portfolio may be forced to dispose of its holdings at prices lower than might
otherwise be obtained.

DIVERSIFIED SMALL CAP FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide long
term capital appreciation while moderating annual return volatility by
diversifying its investments across different small capitalization equity
investment styles.

INVESTMENT POLICIES. The Fund follows a "multi-style" approach designed to
minimize the volatility and risk of investing in small capitalization equity
securities. The Fund invests in various different small capitalization equity
styles. The Fund uses different equity investment styles in order to reduce the
risk of price and return volatility associated with reliance on a single
investment style.

DIVERSIFIED SMALL CAP FUND ALLOCATION

Set forth below are the ranges of investments by the Fund in each Core
Portfolio and projected allocation among the Core Portfolios when the Fund
achieves total assets of $15 million. Until that time, the Fund's assets
will be allocated among the four Core Portfolios listed under "Small Company
style", below.

<TABLE>
<CAPTION>
CURRENT ALLOCATION RANGE OF INVESTMENT
------------------------ -------------------
<S> <C> <C> <C>
Small Cap Index Portfolio 40% 38% - 42%
Small Company style 60% 58% - 62%
Small Company Stock Portfolio 15% 13% - 17%
Small Company Growth Portfolio 18% 16% - 20%
Small Company Value Portfolio 18% 16% - 20%
Small Cap Value Portfolio 9% 7% - 11%
-----------
Total Fund Assets 100%
</TABLE>

As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest daily effects transactions for the
Fund to reestablish its allocations.

50
<PAGE>
Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities. When Norwest
believes that a change in the allocation percentages is desirable, it will sell
and purchase securities to effect the change.

SMALL COMPANY STOCK FUND

INVESTMENT OBJECTIVE. The Fund's investment objective is long-term capital
appreciation. The Fund currently pursues its investment objective by investing
all of its investable assets in Small Company Stock Portfolio, which has the
same investment objective and substantially identical investment policies as the
Fund. Therefore, although the following discusses the investment policies of
that Portfolio, it applies equally to the Fund.

INVESTMENT POLICIES. Small Company Stock Portfolio invests primarily in the
common stock of small- and medium-size domestic companies that have a market
capitalization well below that of the average company in the Standard & Poor's
500 Composite Stock Price Index. Small companies are those companies whose
market capitalization is less than the largest stock in the Russell 2000 Index.
Medium companies are those companies whose market capitalization is in the range
of $500 million to $8 billion.

In selecting securities for the Portfolio, Norwest seek securities with
significant price appreciation potential, and attempts to identify companies
that show above-average growth, as compared to long-term overall market growth.
The companies in which the Portfolio invests may be in a relatively early stage
of development or may produce goods and services that have favorable prospects
for growth due to increasing demand or developing markets. Frequently, such
companies have a small management group and single product or product line
expertise, which, in the view of Norwest, may result in an enhanced
entrepreneurial spirit and greater focus, thereby allowing such companies to be
successful. The Advisers believe that such companies may develop into
significant business enterprises and that an investment in such companies offers
a greater opportunity for capital appreciation than an investment in larger,
more established entities.

Securities owned by the Portfolio that are traded in the over-the-counter market
or on a regional securities exchange may not be traded every day or in the
volume typical of securities trading on a national securities exchange. As a
result, disposition by the Portfolio of a portfolio security, to meet redemption
requests by shareholders or otherwise, may require the Portfolio to sell these
securities at a discount from market prices, to sell during periods when
disposition is not desirable, or to make many small sales over a lengthy period
of time.

Small Company Stock Portfolio also may invest up to 20% of its assets in
American Depository Receipts, European Depository Receipts and other similar
securities of foreign issuers.

For a description of the investment considerations and risks involved in
investing in small company securities, see "Investment Objectives and Policies -
Equity Funds - Small Company Investment Considerations and Risk Factors."

SMALL COMPANY GROWTH FUND

INVESTMENT OBJECTIVE. The Fund's investment objective is to provide long-term
capital appreciation by investing in smaller domestic companies. This objective
is pursued by investing primarily in small and medium-sized domestic companies
that are either growing rapidly or completing a period of significant change.
The Fund currently pursues its investment objective by investing all of its
investable assets in Small

51
<PAGE>
Company Growth Portfolio, which has the same investment objective and
substantially identical investment policies as the Fund. Therefore, although the
following discusses the investment policies of that Portfolio, it applies
equally to the Fund.

INVESTMENT POLICIES. Small Company Growth Portfolio invests primarily in the
common stock of smaller domestic companies. Small companies are those companies
whose market capitalization is less than the largest stock in the Russell 2,000
Index. The Portfolio considers smaller companies to be those with market
capitalizations less than $1 billion at the time of the Portfolio's purchase.

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

SMALL CAP OPPORTUNITIES FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is capital
appreciation. Current income will be incidental to the objective of capital
appreciation. The Fund currently pursues its investment objective by investing
all of its investable assets in Schroder U.S. Smaller Companies Portfolio, which
has the same investment objective and substantially identical investment
policies as the Fund. Therefore, although the following discusses the investment
policies of that Portfolio, it applies equally to the Fund.

INVESTMENT POLICIES. Schroder U.S. Smaller Companies Portfolio seeks to achieve
its investment objective by investing primarily in equity securities of
companies domiciled in the United States that, at the time of purchase, have
market capitalizations of $1.5 billion or less.

In its investment approach, Schroder attempts to identify securities of
companies which it believes can generate above average earnings growth, selling
at favorable prices in relation to book values and earnings. 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

52
<PAGE>
default. High yield/high risk securities are predominantly speculative with
respect to the capacity to pay interest and repay principal and generally
involve a greater volatility of price than securities in higher rated
categories. The Portfolio is not obligated to dispose of securities due to
changes by the rating agencies. (See "Additional Investment Policies and Risk
Considerations - Debt Securities.") (See the SAI for information about the risks
associated with investing in junk bonds.)

For a description of the investment considerations and risks involved in
investing in small company securities, see "Investment Objectives and Policies
- -- Equity Funds -- Small Company Investment Considerations and Risk Factors."

OPTIONS AND FUTURES TRANSACTIONS. While the Portfolio does not presently intend
to do so, it may write covered call options and purchase certain put and call
options, stock index futures, and options on stock index futures and
broadly-based stock indices, all of which are referred to as "Hedging
Instruments." In general, the Portfolio may use Hedging Instruments: (1) to
attempt to protect against declines in the market value of the Portfolio's
securities and thus protect the Fund's net asset value per share against
downward market trends; or (2) to establish a position in the equities markets
as a temporary substitute for purchasing particular equity securities. The
Portfolio will not use Hedging Instruments for speculation. The Hedging
Instruments which the Portfolio is authorized to use have certain risks
associated with them. Principal among such risks are: (1) the possible failure
of such instruments as hedging techniques in cases where the price movements of
the securities underlying the options or futures do not follow the price
movements of the portfolio securities subject to the hedge; (2) potentially
unlimited loss associated with futures transactions and the possible lack of a
liquid secondary market for closing out a futures position; and (3) possible
losses resulting from the inability of the Portfolio's investment adviser to
correctly predict the direction of stock prices, interest rates and other
economic factors. The Hedging Instruments the Portfolio may use and the risks
associated with them are described in greater detail in the SAI.

CONTRARIAN STOCK FUND

INVESTMENT OBJECTIVE. The investment objective of the Fund is to seek capital
appreciation by investing primarily in common stocks for which Norwest believes
there is significant potential for price appreciation.

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

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

The Fund may invest up to 20% of its assets in securities of foreign issuers and
in sponsored and unsponsored American Depository Receipts. For a description of
the investment considerations and risk factors of investing in foreign
securities, (see "Investment Objectives and Policies - Equity Funds -
International Fund - Foreign Investment Considerations and Risk Factors.") The
Fund may also invest in convertible securities, including convertible debt and
convertible preferred stock, that may be rated in any category by an NRSRO or
may be unrated.

The Fund also may invest in corporate debt obligations and U.S. Government
Securities. These instruments may have fixed, floating or variable rates of
interest. These debt securities must be rated in one of the three

53
<PAGE>
highest rating categories by an NRSRO or, if unrated by any NRSRO, judged by
Norwest to be of comparable quality. (See "Additional Investment Policies and
Risk Considerations - Fixed Income Investments and Their Characteristics.")

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

INTERNATIONAL FUND

The Fund is designed for investors who desire to achieve international
diversification of their investments by participating in foreign securities
markets. Because international investments generally involve risks in addition
to those risks associated with investments in the United States, the Fund should
be considered only as a vehicle for international diversification and not as a
complete investment program.

INVESTMENT OBJECTIVE. The investment objective of the Fund is to provide
long-term capital appreciation by investing directly or indirectly in high
quality companies based outside the United States. The Fund currently pursues
its investment objective by investing in two Core Portfolios, International
Portfolio and Schroder EM Core Portfolio, each of which invests using a
different investment style.

INVESTMENT POLICIES. The Fund follows a "multi-style" approach designed to
minimize the volatility and risk of investing in international equity
securities. The Fund's investment portfolio combines two different investment
styles - an international equity investment style and an international emerging
markets equity investment style.

INTERNATIONAL FUND ALLOCATION

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

<TABLE>
<CAPTION>
CURRENT
ALLOCATION RANGE OF INVESTMENT
----------- -------------------
<S> <C> <C>
International Portfolio 95% 80% - 100%
Schroder EM Core Portfolio 5% 0% - 20%
-----------
TOTAL FUND ASSETS 100%
</TABLE>

As market values of the Fund's assets change, the percentage of Fund assets
invested in each Core Portfolio may temporarily deviate from the current
allocations. In response thereto, Norwest daily effects transactions for the
Fund to reestablish its allocations.

Consistent with the Fund's investment objective and policies and under the
general supervision of the Board, Norwest may make changes in the foregoing
percentage allocations at any time Norwest deems appropriate, including in
response to market and other conditions. In addition, upon approval of the Board
and notification of shareholders, the Fund may invest in additional or fewer
Core Portfolios or invest directly in portfolio securities. When Norwest
believes that a change in the allocation percentages is desirable, it will sell
and purchase securities to effect the change.

54
<PAGE>
CORE PORTFOLIO DESCRIPTIONS

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

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

Under normal circumstances, at least 50 percent of the net assets of the
Portfolio will be invested in U.S. Government Securities, including Treasury
securities. All securities will be, at the time of purchase: (1) rated in one of
the two highest long-term rating categories assigned by a NRSRO such as Moody's
Investors Service, Standard & Poor's and Fitch Investors Service, L.P.; or (2)
unrated and determined by the Advisers to be of comparable quality. No more than
25 percent of those securities may be in the second highest rating category.
Investments may include zero-coupon securities, securities with variable or
floating rates of interest and asset-backed securities, but only 25 percent of
the net assets allocated to this investment style may be invested in each of
these types of securities. The Portfolio may not invest in convertible
securities, mortgage pass-through securities or private placement securities.
Within these constraints, the Advisers purchase securities that they believe
have above-average yields.

STABLE INCOME PORTFOLIO. (See "Investment Objectives and Policies - Fixed Income
Funds - Stable Income Fund.")

MANAGED FIXED INCOME PORTFOLIO. Managed Fixed Income Portfolio seeks consistent
fixed income returns by investing primarily in investment grade
intermediate-term obligations. The Portfolio invests in a diversified portfolio
of fixed and variable rate U.S. dollar denominated, fixed income securities of a
broad spectrum of United States and foreign issuers, including U.S. Government
Securities and the debt securities of financial institutions, corporations, and
others. The Advisers emphasize the use of intermediate maturity securities to
lessen duration risk (as described below), while employing low risk yield
enhancement techniques to enhance return over a complete economic or interest
rate cycle. Intermediate-term obligations comprise securities with maturities of
between 2 and 20 years.

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

The Portfolio may invest up to 10 percent of its total assets invested in this
style in participations purchased from financial institutions in loans or
securities in which the Portfolio may invest directly. The Portfolio may also
invest up to 10 percent of its total assets in each of: (1) obligations issued
or guaranteed by the governments of countries which Norwest believes do not
present undue risk or by those countries' political

55
<PAGE>
subdivisions, agencies or instrumentalities; (2) obligations of supranational
organizations; and (3) obligations of the states, territories or possessions of
the United States and their subdivisions, authorities and corporations
("municipal securities").

The Portfolio only purchases securities that are rated, at the time of purchase,
within the four highest long-term or two highest short-term rating categories
assigned by an NRSRO, such as Moody's Investors Service, Standard & Poor's or
Fitch Investors Service, L.P., or which are unrated and determined by Norwest to
be of comparable quality. (See "Additional Investment Policies and Risk
Considerations - Rating Matters.")

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

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

STRATEGIC VALUE BOND PORTFOLIO. (See "Investment Objective and Policies - Fixed
Income Funds - Total Return Bond Fund - Investment Policies (after January 9,
1998)").

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.")

DISCIPLINED GROWTH PORTFOLIO. Disciplined Growth Portfolio seeks capital
appreciation by investing in common stocks of larger companies. Disciplined
Growth Portfolio seeks greater long-term returns by investing primarily in the
common stock of companies that, in the view of the investment adviser, possess
above average potential for growth. The average market capitalization of the
companies in which the Portfolio invests will be greater than $5 billion.

The Portfolio seeks to identify growth companies that will report a level of
corporate earnings that exceed the level expected by investors. In seeking these
companies, the investment adviser uses both quantitative and fundamental
analysis. Among the factors that the investment adviser considers are changes of
earnings estimates by investment analysts, the recent trend of company earnings
reports, and an analysis of the fundamental business outlook for the company.
The investment adviser uses a variety of valuation measures to determine whether
the share price already reflects any positive fundamentals identified by the
investment

56
<PAGE>
adviser. In addition to approximately equal weighting of portfolio securities,
the investment adviser attempts to constrain the variability of the investment
returns by employing risk control screens for price volatility, financial
quality and valuation.

SMALL COMPANY STOCK PORTFOLIO. (See "Investment Objectives and Policies - Equity
Funds - Small Company Stock Fund.")

SMALL COMPANY GROWTH PORTFOLIO. (See "Investment Objectives and Policies -
Equity Funds - Small Company Growth Fund.")

SMALL COMPANY VALUE PORTFOLIO. Small Company Value Portfolio seeks to provide
long-term capital appreciation by investing primarily in smaller companies. The
Portfolio invests primarily in the common stock of companies that have a market
capitalization well below that of the average company in the Standard & Poor's
500 Composite Stock Price Index. Smaller companies are those companies whose
market capitalization is less than the largest stock in the Russell 2000 Index.

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

SMALL CAP VALUE PORTFOLIO. Small Cap Value Portfolio seeks capital appreciation
by investing in common stocks of smaller companies. Small Cap Value Portfolio
seeks higher growth rates and greater long-term returns by investing primarily
in the common stock of smaller companies that, in the view of the investment
adviser, are undervalued. Under normal circumstances, the Portfolio will invest
substantially all of its assets, but not less than 65% of its net assets, in
securities of companies with a market capitalization which reflects the market
capitalization of companies included in the Russell 2000 Index.

The Portfolio invests in those smaller companies that the investment adviser
believes to be undervalued and which will report a level of corporate earnings
exceeding the level expected by investors. The determination of value is based
upon both the price to earnings ratio of the company and a comparison of the
public market value of the company to a proprietary model that values the
company in the private market. In seeking companies that will report a level of
earnings exceeding that expected by investors, the investment adviser uses both
quantitative and fundamental analysis. Among the factors that the investment
adviser considers are changes of earnings estimates by investment analysts, the
recent trend of company earnings reports, and the fundamental business outlook
for the company.

SMALL CAP INDEX PORTFOLIO. Small Cap Index Portfolio seeks to replicate the
return of the Standard & Poor's Small Cap 600 Composite Stock Price Index (the
"Index"). The Portfolio is designed to replicate the return of the Index with
minimum tracking error, while also minimizing transaction costs. Under normal
circumstances, the Portfolio will hold stocks representing 100% of the
capitalization-weighted market values of the Index. Portfolio transactions for
the Portfolio generally are executed only to duplicate the composition of the
Index, to invest cash received from portfolio security dividends or investments
in the Portfolio, and to raise cash to fund redemptions. The Portfolio may hold
cash or cash equivalents for the purpose of

57
<PAGE>
facilitating payment of the Portfolio's expenses or redemptions. Cash positions
may be invested in short-term money market instruments, hedged with S&P 500
Index futures. For these and other reasons, the Portfolio's performance can be
expected to approximate but not be equal to that of the Index.

Small Cap Index Portfolio may utilize index futures contracts to a limited
extent. Index futures contracts are bilateral agreements pursuant to which two
parties agree to take or make delivery of an amount of cash equal to a specified
dollar amount times the difference between the index value at the close of
trading of the contract and the price at which the futures contract is
originally struck. As no physical delivery of securities comprising the Index is
made, a purchaser of index futures contracts may participate in the performance
of the securities contained in the index without the required capital
commitment. Index futures contracts may be used for several reasons: to simulate
full investment in the underlying index while retaining a cash balance for
portfolio management purposes; to facilitate trading; or to reduce transaction
costs. The Portfolio does not invest in futures contracts for speculative
reasons or to leverage the Portfolio. (See "Investment Objectives and Policies -
Equity Funds - Index Fund - Index Futures Contracts".)

The Index tracks the total return performance of 600 common stocks which are
chosen for inclusion in the Index by Standard & Poor's Corporation ("S&P") on a
statistical basis. The inclusion of a stock in the Index in no way implies that
S&P believes the stock to be an attractive investment. The 600 securities, most
of which trade on the New York Stock Exchange, represent 4% of the total market
value of all U.S. common stocks. The Index is comprised of industrial, utility,
financial and transportation companies and is a market-value weighted index,
with each stock's weight in the Index proportionate to its market value.

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

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

INTERNATIONAL PORTFOLIO. The investment objective of International Portfolio is
to provide long-term capital appreciation by investing directly or indirectly in
high quality companies based outside the United States. The Portfolio selects
its investments on the basis of their potential for capital appreciation without
regard to current income. International Portfolio also may invest in the
securities of domestic closed-end investment companies investing primarily in
foreign securities and may invest in debt obligations of foreign governments or
their political subdivisions, agencies or instrumentalities, of supranational
organizations and of foreign corporations. International Portfolio's investments
will be diversified among securities of issuers in 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,

58
<PAGE>
including forward contracts to purchase or sell foreign currencies, in
anticipation of its currency requirements and to protect against possible
adverse movements in foreign exchange rates. Although such contracts may reduce
the risk of loss to International Portfolio from adverse movements in currency
values, the contracts also limit possible gains from favorable movements.

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

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

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

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

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

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

SCHRODER EM CORE PORTFOLIO. The investment objective of Schroder EM Core
Portfolio is to seek to achieve long-term capital appreciation through direct or
indirect investment in equity and debt securities of issuers domiciled or doing
business in emerging market countries in regions such as Southeast Asia, Latin
America, and Eastern and Southern Europe. Current income is incidental to the
Portfolio's objective.

The Portfolio may invest, under normal market conditions, up to 65% of its total
assets in emerging market equity and debt securities, including common stocks;
convertible preferred stocks; stock rights and warrants; convertible debt
securities; and non-convertible debt securities. (Investments in stock rights
and warrants will not be considered for purposes of determining compliance with
this policy.) The Portfolio may invest up to 35% of its total assets in
high-risk debt securities that are unrated or rated below investment grade. The
Portfolio may be able to invest in certain emerging markets solely or primarily
through governmentally authorized investment companies or vehicles. When
investing through investment companies, the Portfolio may pay substantial
premiums above such investment companies' net asset value per share. The
Portfolio does not intend to invest in other investment companies unless, in the
judgment of Schroder, the potential benefits of such investment justify the
payments of any applicable premiums or sales charges.

In recent years, many emerging market countries have begun programs of economic
reform: removing import tariffs, dismantling trade barriers, deregulating
foreign investment, privatizing state-owned industries, permitting the value of
their currencies to float against the dollar and other major currencies, and
generally reducing the level of state intervention in industry and commerce.
Important intra-regional economic integration also holds the promise of greater
trade and growth. At the same time, significant progress has been made in
restructuring the heavy external debt burden that certain emerging market
countries accumulated during the 1970s and 1980s. While there is no assurance
that these trends will continue, Schroder will seek out attractive investment
opportunities in these countries.

"Emerging market" countries are all those not included in the Morgan Stanley
Capital International World Index ("MSCI World") of major world economies. If,
however, the investment adviser determines that the economy of a MSCI
World-listed country is an emerging market economy, Schroder may include such
country in the emerging market category. The Portfolio will not necessarily seek
to diversify investments on a geographic basis and may invest more than 25% of
its total assets in issuers located in any one country.

Schroder EM Core Portfolio may invest a portion of its assets in Brady Bonds,
which are securities created through the exchange of existing commercial bank
loans to sovereign entities for new obligations in connection with debt
restructuring.

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

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which the holders of more than 50% of the outstanding shares are present or
represented, or more than 50% of the outstanding shares. Except as otherwise
indicated, investment policies of the Funds are not deemed to be fundamental and
may be changed by the Board without shareholder approval. Likewise, non-
fundamental investment policies of the Core Portfolios may be changed by the
respective Core Trust's board of trustees ("Core Board") without shareholder
approval.

Unless otherwise indicated below, the discussion below of the investment
policies of a Fund investing in a single Core Portfolio also refers to the
investment policies of that Core Portfolio. A further description of the Funds'
investment policies, including additional fundamental policies, is contained in
the SAIs.

As used herein, the term U.S. Government Securities means obligations issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities. These policies relate to each Fund and, unless otherwise
noted, not to a portion of a Fund invested in a particular investment style.

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

GENERAL MONEY MARKET FUND GUIDELINES

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

Except to the limited extent permitted by Rule 2a-7 and except for U.S.
Government Securities, each Fund will not invest more than 5% of its total
assets in the securities of any one issuer. Also, a Fund may not purchase a
security if the value of all securities held by the Fund and issued or
guaranteed by the same issuer (including letters of credit in support of a
security) would exceed 10% of the Fund's total assets. Those requirements apply
with respect to only 75% of the total assets of Municipal Money Market Fund. In
addition, to ensure adequate liquidity, no Fund may invest more than 10% of its
net assets in illiquid securities, including repurchase agreements maturing in
more than seven days.

As used herein, high quality instruments include those that: (1) are rated (or,
if unrated, are issued by an issuer with comparable outstanding short-term debt
that is rated) in one of the two highest rating categories by two nationally
recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has
issued a rating, by that NRSRO; or (2) are otherwise unrated and determined by
Norwest, pursuant to guidelines 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.

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<PAGE>
rate changes on the market value of that security. In addition, changes in the
ability of an issuer to make payments of interest and principal and in the
market's perception of an issuer's creditworthiness will also affect the market
value of the debt securities of that issuer. Obligations of issuers of debt
securities, including municipal securities, are also subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. The possibility exists, therefore, that, as a result of bankruptcy,
litigation or other conditions, the ability of any issuer to pay, when due, the
principal of and interest on its debt securities may be materially affected.

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

COMMON POLICIES OF THE FUNDS

BORROWING

As a fundamental policy, each Money Market Fund, Income Fund, Total Return Bond
Fund, each Tax-Free Fixed Income Fund, ValuGrowth Stock Fund, Small Company
Stock Fund, Small Cap Opportunities Fund and Contrarian Stock Fund may borrow
money from banks or by entering into reverse repurchase agreements and will
limit borrowings to amounts not in excess of 33 1/3% of the value of the Fund's
total assets. As a fundamental policy, Stable Income Fund, Intermediate
Government Income Fund, Limited Term Government Income Fund, Diversified Bond
Fund, the Balanced Funds, Index Fund, Income Equity Fund, Diversified Equity
Fund, Growth Equity Fund, Large Company Growth Fund, Small Company Growth Fund,
Diversified Small Cap Fund and International Fund may borrow money for temporary
or emergency purposes, including the meeting of redemption requests, but not in
excess of 33 1/3% of the value of a Fund's net assets. For each Fund and the
Core Portfolios, borrowing for other than temporary or emergency purposes or
meeting redemption requests may not exceed 5% of the value of each Fund's assets
except in the case of Intermediate Government Income Fund, Diversified Bond Fund
and, with respect to their assets invested in Managed Fixed Income Portfolio,
the Balanced Funds. Each Fund may enter into reverse repurchase agreements. When
a Fund establishes a segregated account to limit the amount of leveraging of the
Fund with respect to certain investment techniques, such as reverse repurchase
agreements, the Fund does not treat those techniques as involving borrowings
(although they may have characteristics and risks similar to borrowings and
result in the Fund's assets being leveraged). (See "Appendix A - Borrowing and
Techniques Involving Leverage.")

REPURCHASE AGREEMENTS AND LENDING OF PORTFOLIO SECURITIES

Each Fund (except for Treasury Fund) may enter into repurchase agreements and
may lend securities from its portfolio to brokers, dealers and other financial
institutions. These investments may entail certain risks not associated with
direct investments in securities. For instance, in the event that bankruptcy or
similar 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

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the repurchase price or value of securities loaned, plus accrued interest. The
Funds may pay fees to arrange securities loans and each Fund will limit
securities lending to not more than 33 1/3% (25% in the case of Small Cap
Opportunities Fund) of the value of its total assets.

DIVERSIFICATION AND CONCENTRATION

Each Fund (other than Colorado Tax-Free Fund, Minnesota Intermediate Tax-Free
Fund and Minnesota Tax-Free Fund) is diversified as that term is defined in the
Investment Company Act of 1940 (the "1940 Act"). As a fundamental policy, with
respect to 75% of its assets, a diversified fund may not purchase a security
(other than a U.S. Government Security or shares of investment companies) if, as
a result: (1) more than 5% of the Fund's total assets would be invested in the
securities of a single issuer; or (2) the Fund would own more than 10% of the
outstanding voting securities of any single issuer. Except for Cash investment
Fund and Ready Cash Investment Fund, each Fund is prohibited from concentrating
its assets in the securities of issuers in any industry. As a fundamental
policy, no Fund (other than Cash Investment Fund and Ready Cash Investment Fund,
may purchase securities if, immediately after the purchase, more than 25% of the
value of the Fund's total assets would be invested in the securities of issuers
conducting their principal business activities in the same industry. This limit
does not apply to investments in U.S. Government Securities, foreign government
securities or repurchase agreements covering U.S. Government Securities. Each
Fund reserves the right to invest up to 100% of its investable assets in one or
more investment companies such as the Core Portfolios.

ILLIQUID SECURITIES

Each of the Funds limits its purchase of illiquid securities. No Fund may
knowingly acquire securities or invest in repurchase agreements with respect to
any securities if, as a result, more than 15 percent (10 percent in the case of
the Money Market Funds) of the Fund's net assets taken at current value would be
invested in securities which are not readily marketable. Illiquid securities are
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount at which the Fund has valued the
securities and include, among other things, repurchase agreements not entitling
the holder to payment within seven days and restricted securities (other than
those determined to be liquid pursuant to guidelines established by the Board or
Core Board). Under the supervision of the Board or Core Board, the Advisers
determine and monitor the liquidity of the portfolio securities.

FIXED INCOME INVESTMENTS AND THEIR CHARACTERISTICS

Although each Fund (other than Minnesota Intermediate Tax-Free Fund, Minnesota
Tax-Free Fund and Small Cap Opportunities Fund) only invests in investment grade
fixed income securities, including money market instruments, an investment in a
Fund is subject to risk even if all fixed income securities in the Fund's
portfolio are paid in full at maturity. The Fixed Income Funds and, with respect
to their assets invested in fixed income investment styles, the Balanced Funds,
will invest in securities rated in the categories specified by their investment
policies. All fixed income securities, including U.S. Government Securities, can
change in value when there is a change in interest rates or the issuers actual
or perceived creditworthiness or ability to meet its obligations.

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

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may restrict the ability of any issuer to pay, when due, the principal of and
interest on its debt securities. The possibility exists that the ability of any
issuer to pay, when due, the principal of and interest on its debt securities
may become impaired.

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

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

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

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provide an offsetting increase in principal. There can be no assurance that an
Adviser will be able to limit the effects of principal fluctuations and,
accordingly, a Fund may incur losses on those securities even if held to
maturity without issuer default.

RATING MATTERS

The Funds' investments are subject to credit risk relating to the financial
condition of the issuers of the securities that each Fund holds. To limit credit
risk, each Fund (other than Minnesota Intermediate Tax-Free Fund, Minnesota
Tax-Free Fund, Diversified Bond Fund, Income Fund and Strategic Value Bond Fund)
Small Cap Opportunities Fund) will generally buy debt securities that are rated
in the top four long-term rating categories by an NRSRO or in the top two
short-term rating categories by an NRSRO, although certain Funds have greater
restrictions. Accordingly, the lowest permissible long-term investment grades
for corporate bonds, including convertible bonds, are "Baa" in the case of
Moody's Investor Service ("Moody's") and "BBB" in the case of Standard & Poor's
("S&P") and Fitch Investors Services, L.P. ("Fitch"); the lowest permissible
long-term investment grades for preferred stock are "Baa" in the case of Moody's
and "BBB" in the case of S&P and Fitch; and the lowest permissible short-term
investment grades for short-term debt, including commercial paper, are Prime-2
(P-2) in the case of Moody's, "A-2" in the case of S&P and "F-2" in the case of
Fitch.

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

TEMPORARY DEFENSIVE POSITION

When business or financial conditions warrant, each Fund may assume a temporary
defensive position and invest without limit in cash or prime quality cash
equivalents, including: (1) short-term U.S. Government Securities; (2)
certificates of deposit, bankers acceptances and interest-bearing savings
deposits of commercial banks doing business in the United States (United States
banks in the case of Small Cap Opportunities Fund); (3) commercial paper; (4)
repurchase agreements; and (5) shares of money market funds registered under the
1940 Act within the limits specified therein. During periods when and to the
extent that a Fund has assumed a temporary defensive position, it may not be
pursuing its investment objective. Prime quality instruments are those that are
rated in one of the two highest short-term rating categories by an NRSRO or, if
not rated, determined by the investment adviser to be of comparable quality.
Apart from temporary defensive purposes, a Fund may at any time invest a portion
of its assets in cash and cash equivalents as described above (in United States
banks in the case of Small Cap Opportunities Fund). Except during periods when
the Fund assumes a temporary defensive position, each Equity Fund and Aggressive
Balanced - Equity Fund will have at least 65% of its total assets invested in
common stock and International Fund will have at least 65% of its net assets
invested in securities of companies domiciled outside the United States.
International Portfolio and Schroder EM Core Portfolio and may hold cash and
bank instruments denominated in any major foreign currency.

When a Tax-Exempt Fixed Income Fund assumes a temporary defensive position, it
is likely that its shareholders will be subject to federal and applicable state
income taxes on a greater portion of their income dividends received from the
Fund.

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PORTFOLIO TRANSACTIONS

The Advisers monitor the creditworthiness of counterparties to the Funds'
transactions and intends to enter into a transaction only when it believes that
the counterparty presents minimal credit risks and the benefits from the
transaction justify the attendant risks.

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

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

Subject to the Funds' policy of obtaining the best price consistent with quality
of execution of transactions, each investment adviser may employ broker-dealer
affiliates of the investment adviser (collectively "Affiliated Brokers") to
effect brokerage transactions for the Funds. The Fund's payment of commissions
to Affiliated Brokers is subject to procedures adopted by the Board or the Core
Boards, to provide that the commissions will not exceed the usual and customary
broker's commissions charged by unaffiliated brokers. No specific portion of a
Fund's brokerage will be directed to Affiliated Brokers and in no event will a
broker affiliated with the investment adviser directing the transaction receive
brokerage transactions in recognition of research services provided to the
adviser. The investment advisers may effect transactions for the Funds (or the
Portfolios) through brokers who sell Fund shares. The Funds have no obligation
to deal with any specific broker or dealer in the execution of portfolio
transactions.

The frequency of portfolio transactions of a Fund (the portfolio turnover rate)
will vary from year to year depending on many factors. From time to time a Fixed
Income Fund or Tax-Exempt Fixed Income Fund may engage in active short-term
trading to take advantage of price movements affecting individual issues, groups
of issues or markets. The Funds' portfolio turnover is reported under "Financial
Highlights." Norwest anticipates that the annual portfolio turnover rate of
Limited Term Government Income Fund, Minnesota Intermediate Tax-Free Fund, and
Diversified Small Cap Fund will be less than 100% in their first year of
operations. An annual portfolio turnover rate of 100% would occur if all of the
securities in a Fund were replaced once in a period of one year. Higher
portfolio turnover rates may result in increased brokerage costs to a Fund or a
Portfolio and a possible increase in short-term capital gains or losses.

5. MANAGEMENT OF THE FUNDS

The business of the Trust is managed under the direction of the Board of
Trustees, and the business of each Core Portfolio is managed under the direction
of that investment company's Core Board. The Board formulates the general
policies of the Funds and meets periodically to review the results of the Funds,
monitor investment activities and practices and discuss other matters affecting
the Funds and the Trust. The Board consists of eight persons.

INVESTMENT ADVISORY SERVICES

NORWEST INVESTMENT MANAGEMENT. Subject to the general supervision of the Board,
Norwest Investment Management, Inc. makes investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program
or oversees the investment decisions of the investment subadvisers, as
applicable. Norwest provides its investment advisory services indirectly to each
Fund that operates in a Core and Gateway Structure (other than Schroder U.S.
Smaller Companies Portfolio, Schroder EM Core Portfolio and International
Portfolio) through its investment advisory services of the Core

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Portfolios. In addition, subject to the general supervision of the Board,
Norwest continuously reviews and determines the allocation of the assets of
Diversified Bond Fund, Strategic Income Fund, Moderate Balanced Fund, Growth
Balanced Fund, Aggressive Balanced-Equity Fund, Diversified Equity Fund, Growth
Equity Fund, Diversified Small Cap Fund and International Fund among the various
investment styles and Core Portfolios in which those Funds invest. Norwest,
which is located at Norwest Center, Sixth Street and Marquette, Minneapolis,
Minnesota 55479, is an indirect subsidiary of Norwest Corporation, a multi-bank
holding company that was incorporated under the laws of Delaware in 1929. As of
June 30, 1997, Norwest Corporation had assets of $83.6 billion, which made it
the 11th largest bank holding company in the United States. As of June 30, 1997,
Norwest and its affiliates managed assets with a value of approximately $52.9
billion.

SMALL CAP OPPORTUNITIES FUND AND INTERNATIONAL FUND. Subject to the general
supervision of the Core Boards, Schroder Capital Management International Inc.
makes investment decisions for Schroder U.S. Smaller Companies Portfolio,
International Portfolio and Schroder EM Core Portfolio and continuously reviews,
supervises and administers those Portfolio's investment programs.

INVESTMENT SUBADVISERS. To assist Norwest in carrying out its obligations,
certain of the Core Portfolios and Norwest, and Contrarian Stock Fund and
Norwest, have retained the services of the Subadvisers as follows:

<TABLE>
<CAPTION>
INVESTMENT
SUBADVISER
FUND CORE PORTFOLIO(S) OF CORE PORTFOLIO
- --------------------------------------------- --------------------------------------------- --------------------
<S> <C> <C>
Stable Income Fund Stable Income Portfolio Galliard
Diversified Bond Fund Positive Return Bond Portfolio Peregrine
Strategic Value Bond Portfolio Galliard
Managed Fixed Income Portfolio Galliard
Total Return Bond Fund Total Return Bond Portfolio
(until January 9, 1998) UCM
Strategic Value Bond Portfolio
(after January 9, 1998) Galliard
Strategic Income Fund Stable Income Portfolio Galliard
Positive Return Bond Portfolio Peregrine
Strategic Value Bond Portfolio Galliard
Managed Fixed Income Portfolio Galliard
Large Company Growth Portfolio Peregrine
Disciplined Growth Portfolio Smith
Small Company Stock Portfolio Crestone
Small Company Growth Portfolio Peregrine
Small Company Value Portfolio Peregrine
Small Cap Value Portfolio Smith
Moderate Balanced Fund Stable Income Portfolio Galliard
Positive Return Bond Portfolio Peregrine
Strategic Value Bond Portfolio Galliard
Managed Fixed Income Portfolio Galliard
Large Company Growth Portfolio Peregrine
Disciplined Growth Portfolio Smith
Small Company Stock Portfolio Crestone
Small Company Growth Portfolio Peregrine
Small Company Value Portfolio Peregrine
Small Cap Value Portfolio Smith
</TABLE>

67
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT
SUBADVISER
FUND CORE PORTFOLIO(S) OF CORE PORTFOLIO
- --------------------------------------------- --------------------------------------------- --------------------
Growth Balanced Fund Positive Return Bond Portfolio Peregrine
<S> <C> <C>
Strategic Value Bond Portfolio Galliard
Managed Fixed Income Portfolio Galliard
Large Company Growth Portfolio Peregrine
Disciplined Growth Portfolio Smith
Small Company Stock Portfolio Crestone
Small Company Growth Portfolio Peregrine
Small Company Value Portfolio Peregrine
Small Cap Value Portfolio Smith
Aggressive Balanced-Equity Fund Positive Return Bond Portfolio Peregrine
Strategic Value Bond Portfolio Galliard
Managed Fixed Income Portfolio Galliard
Large Company Growth Portfolio Peregrine
Disciplined Growth Portfolio Smith
Small Company Stock Portfolio Crestone
Small Company Growth Portfolio Peregrine
Small Company Value Portfolio Peregrine
Small Cap Value Portfolio Smith
Diversified Equity Fund Large Company Growth Portfolio Peregrine
Disciplined Growth Portfolio Smith
Small Company Stock Portfolio Crestone
Small Company Growth Portfolio Peregrine
Small Company Value Portfolio Peregrine
Small Cap Value Portfolio Smith
Large Company Growth Fund Large Company Growth Portfolio Peregrine
Small Company Stock Fund Small Company Stock Portfolio Crestone
Small Company Growth Fund Small Company Growth Portfolio Peregrine
Diversified Small Cap Fund Small Company Stock Portfolio Crestone
Small Company Growth Portfolio Peregrine
Small Company Value Portfolio Peregrine
Small Cap Value Portfolio Smith
Contrarian Stock Fund N/A UCM
</TABLE>

Galliard, UCM, Peregrine, Crestone and Smith make investment decisions for the
Fund or Core Portfolios to which they act as investment subadviser and
continuously review, supervise and administer those Funds' or Core Portfolios'
investment programs with respect to that portion, if any, of the Fund's or
Portfolio's assets that Norwest believes should be managed by the Subadviser.
Currently, each Subadviser manages all of the assets of each Fund and Core
Portfolio that it subadvises. Norwest supervises the performance of each
Subadviser, including their adherence to the Funds' and Portfolios' investment
objectives and policies.

CRESTONE CAPITAL MANAGEMENT, INC. Crestone, which is located at 7720 East
Belleview Avenue, Suite 220, Englewood Colorado 80111, is an investment adviser
subsidiary of Norwest Bank. Crestone provides investment advice regarding
companies with small market capitalization to various clients, including
institutional investors. As of June 30, 1997, Crestone managed assets with a
value of approximately $534 million.

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

68
<PAGE>
advisory services to bank and thrift institutions, pension and profit sharing
plans, trusts and charitable organizations and corporate and other business
entities. As of June 30, 1997 Galliard managed approximately $3.1 billion in
assets.

PEREGRINE CAPITAL MANAGEMENT, INC. Peregrine, which is located at LaSalle Plaza,
800 LaSalle Avenue, Suite 1850, Minneapolis, Minnesota 55402, is an investment
adviser subsidiary of Norwest Bank. Peregrine provides investment advisory
services to corporate and public pension plans, profit sharing plans, savings-
investment plans and 401(k) plans. As of June 30, 1997 Peregrine managed
approximately $5.0 billion in assets.

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL, INC. Schroder, whose principal
business address is 787 Seventh Avenue, New York, New York 10019, is a wholly
owned U.S. subsidiary of Schroders Incorporated (doing business in New York
State as Schroders Holdings), the wholly owned U.S. holding company subsidiary
of Schroders plc. Schroders plc is the holding company parent of a large
worldwide group of banks and financial services companies (referred to as the
"Schroder Group"), with associated companies and branch and representative
offices located in eighteen countries worldwide. The Schroder Group specializes
in providing investment management services and as of June 30, 1997 had assets
under management in excess of $175 billion.

SMITH ASSET MANAGEMENT GROUP, L.P. Smith Group, whose principal business address
is 500 Crescent Court, Suite 250, Dallas, Texas 75201 is a registered investment
adviser. Smith Group provides investment management services to company
retirement plans, foundations, endowments, trust companies, and high net worth
individuals using a disciplined equity style. As of June 13, 1997, the Smith
Group managed over $200 million in assets.

UNITED CAPITAL MANAGEMENT. UCM, which is located at 1700 Lincoln Street, Suite
3301, Denver, Colorado 80274, is a division of Norwest Bank Colorado, N.A., a
subsidiary of Norwest Corporation. UCM provides specialized investment advisory
services to various institutional pension accounts. As of June 30, 1997 UCM
managed over $2 billion in assets.

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

CASH INVESTMENT FUND/READY CASH INVESTMENT FUND/MONEY MARKET PORTFOLIO/PRIME
MONEY MARKET PORTFOLIO - David D. Sylvester and Laurie R. White. Mr.
Sylvester has been associated with Norwest since 1979, and as a Vice
President and Senior Portfolio Manager since 1985. He has over 20 years'
experience in managing securities portfolios. Ms. White has been a Vice
President and Senior Portfolio Manager of Norwest since 1991; from 1989 to
1991, she was a Portfolio Manager at Richfield Bank and Trust. Ms. White
began serving as a portfolio manager of Cash Investment Fund and Ready Cash
Investment Fund in 1991.

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

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

69
<PAGE>
MUNICIPAL MONEY MARKET FUND - David D. Sylvester. For a description of Mr.
Sylvester, see "Cash Investment Fund/Ready Cash Investment Fund."

STABLE INCOME FUND/STABLE INCOME PORTFOLIO - Karl P. Tourville. Mr.
Tourville has been a principal of Galliard since 1995. He has been
associated with Norwest and its affiliates since 1986, most recently as Vice
President and Senior Portfolio Manager of Norwest Bank.

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

DIVERSIFIED BOND FUND - The day-to-day management of the Fund, with respect
to the portion of the Fund's assets that is invested in a particular Core
Portfolio, is performed by the portfolio managers listed for the Core
Portfolio.

INCOME FUND - Ms. Marjorie H. Grace, CFA. For a description of Ms. Grace,
see "Intermediate Government Income Fund." Ms. Grace has served as a
portfolio manager for the Fund since May 1995.

TOTAL RETURN BOND FUND/TOTAL RETURN BOND PORTFOLIO - Mr. David B. Kinney.
Mr. Kinney is a Vice President of UCM. He has been associated with Norwest
and its affiliates since 1981. After December 31, 1997, Richard Merriam. For
a description of Mr. Merriam, see "Strategic Value Bond Portfolio."

LIMITED TERM TAX-FREE FUND - Mr. William T. Jackson, CFA. Mr. Jackson has
been a Vice President of Norwest since 1993. Prior thereto, Mr. Jackson was
a Senior Vice President and Institutional Sales Manager with Norwest
Investment Services from 1992-1993; a Vice President and Municipal Bond
Trading Manager from 1991-1992; and a Vice President and Municipal Bond
Trader with Kemper Securities, Inc., from 1984-1991.

TAX-FREE INCOME FUND - Mr. William T. Jackson, CFA. For a description of Mr.
Jackson, see "Limited Term Tax-Free Fund." Mr. Jackson has served as
portfolio manager of the Fund since 1993.

COLORADO TAX-FREE FUND - Mr. William T. Jackson, CFA. For a description of
Mr. Jackson, see "Limited Tax-Free Income Fund." Mr. Jackson has served as
portfolio manager of the Fund since July 1995.

MINNESOTA INTERMEDIATE TAX-FREE FUND AND MINNESOTA TAX-FREE FUND - Ms.
Patricia D. Hovanetz, CFA. Ms. Hovanetz, a Vice President of Norwest, has
been associated with Norwest for more than 25 years in various capacities
related to municipal bond investments. Ms. Hovanetz has been a municipal
bond fund portfolio manager since 1988 and has served as portfolio manager
of the Fund since 1991.

STRATEGIC INCOME FUND, MODERATE BALANCED FUND, GROWTH BALANCED FUND AND
AGGRESSIVE BALANCED-EQUITY FUND - The day-to-day management of each Fund,
with respect to the portion of the Fund's assets that is invested in a
particular Core Portfolio, is performed by the portfolio managers listed for
the Core Portfolio.

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

INCOME EQUITY FUND /INCOME EQUITY PORTFOLIO - David L. Roberts, CFA. 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.

70
<PAGE>
VALUGROWTH STOCK FUND - Mr. David S. Lunt, CFA. Mr. Lunt is a Vice President
of Norwest and has been associated with Norwest and its affiliates since
1992. Prior thereto he was a portfolio manager for FirsTier Bank and a
securities analyst for Woodmen Accident and Life Company. Mr. Lunt began
serving as portfolio manager of ValuGrowth Stock Fund in February, 1996.

DIVERSIFIED EQUITY FUND AND GROWTH EQUITY FUND - The day-to-day management
of each Fund, with respect to the portion of the Fund's assets that is
invested in a particular Core Portfolio, is performed by the portfolio
managers listed for the Core Portfolio.

LARGE COMPANY GROWTH FUND /LARGE COMPANY GROWTH PORTFOLIO - John S. Dale,
CFA. Mr. Dale is a Senior Vice President of Peregrine. Mr. Dale has held
various investment management positions with Norwest, Peregrine and their
affiliates since 1968.

DIVERSIFIED SMALL CAP FUND - The day-to-day management of the Fund, with
respect to the portion of the Fund's assets that is invested in a particular
Core Portfolio, is performed by the portfolio managers listed for the Core
Portfolio.

SMALL COMPANY STOCK FUND /SMALL COMPANY STOCK PORTFOLIO - Kirk McCown, CFA.
Mr. McCown is founder, President and a Director of Crestone, which was
incorporated in 1990.

SMALL COMPANY GROWTH FUND/SMALL COMPANY GROWTH PORTFOLIO - Robert B. Mersky,
CFA and Paul E. von Kuster, CFA. Mr. Mersky is the President of Peregrine
Capital Management, Inc. Mr. Mersky has held various investment management
positions with Norwest, Peregrine and their affiliates since 1977. From 1980
to 1984 he was head of investments for Norwest Bank. Mr. von Kuster is a
Senior Vice President of Peregrine. Mr. von Kuster has held various
investment management positions with Peregrine, Norwest and their affiliates
since 1972.

SMALL CAP OPPORTUNITIES FUND/SCHRODER U.S. SMALLER COMPANIES PORTFOLIO - Ms.
Fariba Talebi. Ms. Talebi is a Group Vice President of Schroder, with the
assistance of a small cap investment team is primarily responsible for the
day-to-day management of the Portfolio's investments. Ms. Talebi has been
employed by Schroder in the investment research and portfolio management
areas since 1987.

CONTRARIAN STOCK FUND - Mr. W. Lon Schreur, CFA. Mr. Schreur is the
President of UCM, a position he has held for sixteen years.

INTERNATIONAL FUND - The day-to-day management of the Fund, with respect to
the portion of the Fund's assets that is invested in a particular Core
Portfolio, is performed by the portfolio managers listed for the Core
Portfolio.

POSITIVE RETURN BOND PORTFOLIO - William D. Giese, CFA. Mr. Giese is a
Senior Vice President of Peregrine. Mr. Giese has been a portfolio manager
of Peregrine over ten years and has over 20 years experience in fixed income
securities management.

STRATEGIC VALUE BOND PORTFOLIO - The investment management team of Richard
Merriam, John Huber and David Yim at Galliard Capital Management. Mr.
Merriam, CFA, has been a Principal in the firm since 1995 and is responsible
for Galliard's investment process and strategy. Prior to joining Galliard,
Mr. Merriam was Chief Investment Officer of Insight Investment Management.
Prior thereto, he served as a Senior Vice President at Washington Square
Capital where he oversaw management of nearly $5.0 billion in assets. He
obtained a B.A. from the University of Michigan and an M.B.A. from the
University of Minnesota. Mr. Huber has been a Portfolio Manager and Director
of Trading at Galliard since 1995 and has been actively involved in the
management of the Norwest Advantage Stable Income Fund and the Norwest
Advantage Diversified Bond Fund. He has over seven years' investment
management experience and has obtained a B.A. from the University of Iowa
and an M.B.A. from the University of Minnesota. Mr. Yim has been a Portfolio
Manager and Director of Investment Research since 1995.

71
<PAGE>
Prior to joining Galliard, he worked for American Express Financial Advisors
for 6 years, most recently as a Research Analyst focusing on the Insurance
and Finance Industries. He obtained a B.A. from Middlebury College and an
M.B.A. from the University of Minnesota.

MANAGED FIXED INCOME PORTFOLIO - Richard Merriam. Mr. Merriam has been a
principal of Galliard since 1995. Prior thereto, he was the Chief Investment
Officer of Insight Investment Management and prior thereto was associated
with Washington Square Capital.

DISCIPLINED GROWTH PORTFOLIO - Stephen S. Smith, CFA. Mr. Smith is the Chief
Investment Officer for Smith Group and is a principal in the firm. He has
held this position since November, 1995. Prior thereto, Mr. Smith served as
senior portfolio manager with NationsBank where he managed approximately $1
billion of client assets. At NationsBank, Mr. Smith held a variety of
management positions including manager of the institutional asset management
group, manager of the disciplined equity style and member of the Investment
Policy Committee. At NationsBank he also served as sub-adviser for a
portfolio of AIM Management Company's Summit Fund. His educational
background includes a B.S. in Industrial Engineering and an M.B.A., both
received from the University of Alabama. He was awarded the Chartered
Financial Analyst (CFA) designation in 1981.

SMALL CAP INDEX PORTFOLIO - David D. Sylvester and Laurie R. White. For a
description of Mr. Sylvester and Ms. White, see "Cash Investment Fund/Ready
Cash Investment Fund."

SMALL COMPANY VALUE PORTFOLIO - Tasso H. Coin, Jr. Mr. Coin has been a
Senior Vice President of Peregrine since 1995. From 1992 to 1995 he was a
research officer at Lord Asset Management, an investment adviser and prior
thereto was associated with Morgan Stanley Asset Management.

SMALL CAP VALUE PORTFOLIO - Stephen S. Smith, CFA. Mr. Smith is the Chief
Investment Officer for Smith Group and is a principal in the firm. He has
held this position since November, 1995. Prior thereto, Mr. Smith served as
senior portfolio manger with NationsBank where he managed approximately $1
billion of client assets. At NationsBank, Mr. Smith held a variety of
management positions including manager of the institutional asset management
group, manager of the disciplined equity style used in a mutual fund and
member of the Investment Policy Committee. At NationsBank he also served as
sub-adviser for an identified segment in the disciplined equity style for an
unaffiliated mutual fund.

INTERNATIONAL PORTFOLIO - Michael Perelstein, a Senior Vice President of
Schroder, with the assistance of an SCMI investment committee, are primarily
responsible for the day-to-day management of the Portfolio's investment
portfolio. Mr. Perelstein has been a Senior Vice President of Schroder since
January 2, 1997. Prior thereto, Mr. Perelstein was a Managing Director at
MacKay Shields. Mr. Perelstein has more than twelve years of international
and global investment experience. Since January 1997, Mr. Perelstein has
served as portfolio manager of International Portfolio.

SCHRODER EM CORE PORTFOLIO - John A. Troiano, a Vice President of Schroder
Capital Funds (Delaware) and Schroder Core, assisted by the management team
of Heather Crighton and Mark Bridgeman, are responsible for the day-to-day
management of the investment portfolio. Mr. Troiano, Chief Executive Officer
of Schroder since April 1, 1997, has been a Managing Director of Schroder
since October 1995 and has been employed by various Schroder Group companies
in the investment research and portfolio management areas since 1981. Ms.
Crighton is a Vice President of Schroder and has been employed by various
Schroder Group companies in the investment research and portfolio management
areas since 1992. Mr. Bridgeman, also a Vice President of Schroder has been
employed by various Schroder Group companies in the investment research and
portfolio management areas since 1990.

ADVISORY FEES. For their services, Norwest and Schroder receive investment
advisory fees from the Funds (or to the extent a Fund invests in a single Core
Portfolio, from that Core Portfolio) at the following annual rates of the Fund's
or Portfolio's average daily net assets.

72
<PAGE>

<TABLE>
<CAPTION>
FUND INVESTMENT ADVISORY FEE
- ---------------------------------------------------------------------- ------------------------------------------
<S> <C>
Cash Investment Fund
(Prime Money Market Portfolio) 0.40% (first $300 million of assets)
0.36% (next $400 million of assets)
0.32% (remaining assets)
(Money Market Portfolio) 0.20% (first $300 million of assets)
0.16% (next $400 million of assets)
0.12% (remaining assets)

Ready Cash Investment Fund
(Prime Money Market Portfolio) 0.40% (first $300 million of assets)
0.36% (next $400 million of assets)
0.32% (remaining assets)

U.S. Government Fund and Treasury Fund 0.20% (first $300 million of assets)
0.16% (next $400 million of assets)
0.12% (remaining assets)

Municipal Money Market Fund 0.35% (first $500 million of assets)
0.325% (next $500 million of assets)
0.30% (remaining assets)
Stable Income Fund (Stable Income Portfolio) 0.30%
Limited Term Government Income Fund 0.33%
Intermediate Government Income Fund 0.33%
Income Fund 0.50%
Total Return Bond Fund
(Total Return Bond Portfolio - until January 9, 1998) 0.35%
(Strategic Value Bond Portfolio - after January 9, 1998) 0.50%
Limited Term Tax-Free Fund 0.50%
Tax-Free Income Fund 0.50%
Colorado Tax-Free Fund, Minnesota Intermediate Tax-Free
Fund and Minnesota Tax-Free Fund 0.50% (first $300 million of assets)
0.46% (next $400 million of assets)
0.42% (remaining assets)
Index Fund (Index Portfolio) 0.15%
Income Equity Fund (Income Equity Portfolio) 0.50%
ValuGrowth Stock Fund 0.80% (first $300 million of assets)
0.76% (next $400 million of assets
0.72% (remaining assets)

Large Company Growth Fund
(Large Company Growth Portfolio) 0.65%
Small Company Stock Fund
(Small Company Stock Portfolio) 0.90%
Small Company Growth Fund
(Small Company Growth Portfolio) 0.90%
Small Cap Opportunities Fund
(Schroder U.S. Smaller Companies Portfolio) 0.60%
Contrarian Stock Fund 0.80% (first $300 million of assets)
0.76% (next $400 million of assets)
0.72% (remaining assets)
</TABLE>

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<PAGE>
With respect to Diversified Bond Fund, Strategic Income Fund, Moderate Balanced
Fund, Growth Balanced Fund, Aggressive Balanced-Equity Fund, Diversified Equity
Fund, Growth Equity Fund, Diversified Small Cap Fund and International Fund,
Norwest is entitled to receive investment advisory fees for its Asset Allocation
Services at an annual rate of 0.25% of each Fund's average daily net assets. The
advisory fee for Asset Allocation Services is payable by International Fund
commencing December 1, 1997 (after the effectiveness of an amendment to the
Fund's registration statement). In addition, each Fund bears an investment
advisory fee at a blended rate based on the investment advisory fee of the Core
Portfolios in which the Fund invests. Norwest and Schroder receive investment
advisory fees from the Core Portfolios at the following annual rates of the
Portfolios' average daily net assets. The total fee payable by a Fund through
its investments in Core Portfolios will vary based on the percentage of its
assets invested in each Core Portfolio.

<TABLE>
<CAPTION>
FUND OR CORE PORTFOLIO INVESTMENT ADVISORY FEE
- ------------------------------------------------------------------------ ----------------------------------------

<S> <C>
Money Market Portfolio 0.20% (first $300 million of assets)
0.16% (next $400 million of assets)
0.12% (remaining assets)
Stable Income Portfolio 0.30%
Positive Return Bond Portfolio 0.35%
Strategic Value Bond Portfolio 0.50%
Managed Fixed Income Portfolio 0.35%
Index Portfolio 0.15%
Income Equity Portfolio 0.50%
Large Company Growth Portfolio 0.65%
Discplined Growth Portfolio 0.90%
Small Cap Index Portfolio 0.25%
Small Company Stock Portfolio 0.90%
Small Company Growth Portfolio 0.90%
Small Company Value Portfolio 0.90%
Small Cap Value Portfolio 0.95%
International Portfolio 0.45%
Schroder EM Core Portfolio 1.00%
</TABLE>

Norwest (and not the Funds or Core Portfolios) pays each Subadviser a fee for
their investment subadvisory services. This compensation does not increase the
amount paid by the Funds or Core Portfolios to Norwest for investment advisory
services.

Each Fund investing its assets in one or more Core Portfolios may withdraw its
investments from its corresponding Core Portfolio(s) at any time if the Board
determines that it is in the best interests of the Fund to do so. (See "Other
Information - Core and Gateway Structure.") Accordingly, each of these Funds has
retained Norwest as its investment adviser. Similarly, in the event that a Fund
withdraws its investment from a Core Portfolio, to the extent the Fund invested
in a Core Portfolio advised by Schroder or a Subadviser, the Fund has retained
Schroder and that Subadviser as an investment subadviser (except that Total
Return Bond Fund has not retained Galliard). Under these "dormant" investment
advisory arrangements, none of Norwest, Schroder or any Subadviser receives any
advisory fees with respect to a Fund as long as the Fund remains completely
invested in its respective Core Portfolio(s) or any other investment companies.
In the event that Stable Income Fund, Total Return Bond Fund, Index Fund, Income
Equity Fund, Large Company Growth Fund, Small Company Stock Fund, Small Company
Growth Fund or Small Cap Opportunities Fund were to withdraw there assets from
their respective Core Portfolio, Norwest would receive an investment advisory
fee at an annual rate of 0.30%, 0.35%, 0.15%, 0.50%, 0.65%, 0.90%, 0.90% and
0.925% of the Funds' average daily net assets, respectively. Similarly, to the
extent Diversified Bond Fund,

74
<PAGE>
Strategic Income Fund, Moderate Balanced Fund, Growth Balanced Fund, Aggressive
Balanced-Equity Fund, Diversified Equity Fund, Growth Equity Fund, Diversified
Small Cap Fund or International Fund were to withdraw any or all of their assets
from their respective Core Portfolios, Norwest would receive an investment
advisory fee on the withdrawn assets at an annual rate of 0.35%, 0.48%, 0.53%,
0.58%, 0.63%, 0.65%, 0.90%, 0.90% and 0.85% of the Funds' average daily net
assets, respectively. To the extent Cash Investment Fund was to withdraw any or
all of its assets from its respective Core Portfolios, Norwest would receive an
investment advisory fee at the annual rate equal to that paid by Money Market
Portfolio. To the extent Ready Cash Investment Fund was to withdraw any or all
of its assets from its respective Core Portfolio, Norwest would receive an
investment advisory fee at the rate equal to that paid by Prime Money Market
Portfolio. Pursuant to the Funds' dormant investment subadvisory agreement,
Norwest (and not the Funds) would pay Schroder and each Subadviser, as
applicable, a fee for its investment subadvisory services.

MANAGEMENT, ADMINISTRATION AND DISTRIBUTION SERVICES

As manager Forum supervises the overall management of the Trust (including the
Trust's receipt of services for which the Trust is obligated to pay) other than
investment advisory services. In this capacity Forum provides the Trust with
general office facilities, provides persons satisfactory to the Board to serve
as officers of the Trust and oversees the performance of administrative and
professional services rendered to the Funds by others. FAS is responsible for
performing certain administrative services necessary for the Trust's operations
with respect to each Fund including, but not limited to: (1) preparing and
printing updates of the Trust's registration statement and prospectuses, to its
shareholders, the SEC and state securities administrators; (2) preparing proxy
and information statements and any other communications to shareholders; (3)
monitoring the sale of shares and ensuring that such shares are properly and
duly registered with the SEC and applicable state securities administrators; and
(4) supervising the declaration of dividends and distributions to shareholders.

As of December 1, 1997, Forum and FAS provided management and administrative
services to registered investment companies and collective investment funds with
assets of approximately $28 billion. Forum is a member of the National
Association of Securities Dealers, Inc. For their services, Forum and FAS each
receives a fee with respect to U.S. Government Fund, Treasury Fund,
Institutional Shares of Municipal Money Market Fund, Limited Term Government
Income Fund, Intermediate Government Income Fund, Income Fund, each Tax-Free
Fixed Income Fund, ValuGrowth Stock Fund, Contrarian Stock Fund and
International Fund at an annual rate of 0.05% of the Fund's (of class') average
daily net assets, with respect to Investor Shares of Municipal Money Market Fund
at an annual rate of 0.10% of the class' average daily net assets, with respect
to Investor Shares of Ready Cash Investment Fund at an annual rate of 0.075% of
the class' average daily net asset, and with respect to each other Fund at an
annual rate of 0.025% of the Fund's average daily net assets.

FAS also serves as an administrator of each Core Portfolio (except Schroder U.S.
Smaller Companies Portfolio and Schroder EM Core Portfolio) and provides
services to the Core Portfolios that are similar to those provided to the Funds
by Forum and FAS. For its services FAS receives a fee with respect to each Core
Portfolio (other than Schroder U.S. Smaller Companies Portfolio and Schroder EM
Core Portfolio) at an annual rate of 0.05% of the Portfolio's average daily net
assets (0.15% in the case of International Portfolio). Schroder Advisors Inc.
("Schroder Advisors") serves as the administrator of Schroder U.S. Smaller
Companies Portfolio and Schroder EM Core Portfolio and FAS serves as the
subadministrator of those Portfolios. Schroder Advisors and FAS provide certain
management and administrative services necessary for the Portfolios' operations,
other than the administrative services provided to the Portfolios by Schroder.
For their services, Schroder Advisors receives no fee from Schroder U.S. Smaller
Companies Portfolio and 0.075% from Schroder EM Core Portfolio and FAS receives
a fee at an annual rate of 0.10% of each Portfolio's average daily net assets.

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<PAGE>
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, LLC ("Forum
Accounting") provides portfolio accounting services to each Fund and to each
Core Portfolio. Forum, FAS, and Forum Accounting are members of the Forum
Financial Group of companies which together provide a full range of services to
the investment company and financial services industry. As of October 1, 1997,
Forum, FAS and Forum Accounting were controlled by John Y. Keffer, President and
Chairman of the Trust.

Forum also acts as the distributor of the Shares but receives no fees for these
services. From its own resources, Forum may pay fees to broker-dealers or other
persons for distribution or other services related to the Funds. None of the
Funds has adopted a plan of distribution applicable to the Shares.

SHAREHOLDER SERVICING AND CUSTODY

Norwest Bank serves as transfer agent and dividend disbursing agent for the
Trust (in this capacity, the "Transfer Agent"). The Transfer Agent maintains an
account for each shareholder of the Trust (unless such accounts are maintained
by sub-transfer agents or processing agents), performs other transfer agency
functions and acts as dividend disbursing agent for the Trust. The Transfer
Agent is permitted to subcontract any or all of its functions with respect to
all or any portion of the Trust's shareholders to one or more qualified
sub-transfer agents or processing agents, which may be affiliates of the
Transfer Agent. Sub-transfer agents and processing agents may be "Processing
Organizations" as described under "How to Buy Shares - Purchase Procedures." The
Transfer Agent is permitted to compensate those agents for their services;
however, that compensation may not increase the aggregate amount of payments by
the Trust to the Transfer Agent. For its services, the Transfer Agent receives a
fee with respect to each Fund at an annual rate of 0.25% of each Fund's average
daily net assets attributable to each class of the Fund (0.20% in the case of
Cash Investment Fund and 0.10% in the case of Municipal Money Market Fund -
Institutional Shares).

Norwest Bank also serves as each Fund's and each Core Portfolio's (other than
Schroder U.S. Smaller Companies Portfolio and Schroder EM Core Portfolio)
custodian and may appoint subcustodians for the foreign securities and other
assets held in foreign countries. For its custodial services, Norwest Bank
receives a fee with respect to each Fund and each Core Portfolio at an annual
rate of 0.02% of the first $100 million of the Fund's or Core Portfolio's
average daily net assets, 0.015% of the next $100 million of the Fund's or Core
Portfolio's average daily net assets and 0.01% of the Fund's or Core Portfolio's
remaining average daily net assets. No fee is directly payable by a Fund to the
extent the Fund is invested in a Core Portfolio. With respect to International
Portfolio, Norwest receives a fee at an annual rate of 0.075% of the Portfolio's
average daily net assets. The Chase Manhattan Bank, N.A. serves as custodian of
Schroder U.S. Smaller Companies Portfolio and Schroder EM Core Portfolio and is
paid a fee for its services.

EXPENSES OF THE FUNDS

Subject to the obligation of Norwest to reimburse the Trust for certain expenses
of the Funds, the Trust has confirmed its obligation to pay all the Trust's
expenses. The Funds' expenses include Trust expenses attributable to the Funds,
which are allocated to each Fund, and expenses not specifically attributable to
the Funds, which are allocated among the Funds and all other funds of the Trust
in proportion to their average net assets. Each service provider to a Fund may
elect to waive (or continue to waive) all or a portion of their

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<PAGE>
fees, which are accrued daily and paid monthly. Any such waivers will have the
effect of increasing a Fund's performance for the period during which the waiver
is in effect. Fee waivers are voluntary and may be reduced or eliminated at any
time.

Each Fund bears all costs of its operations. The costs borne by the Funds
include a pro rata portion of the following: legal and accounting expenses;
Trustees' fees and expenses; insurance premiums, custodian and transfer agent
fees and expenses; brokerage fees and expenses; expenses of registering and
qualifying the Fund's shares for sale with the SEC and with various state
securities commissions; expenses of obtaining quotations on fund securities and
pricing of the Fund's shares; a portion of the expenses of maintaining the
Fund's legal existence and of shareholders' meetings; and expenses of
preparation and distribution to existing shareholders of reports, proxies and
prospectuses. Trust expenses directly attributed to the Fund are charged to the
Fund; other expenses are allocated proportionately among all the series of the
Trust in relation to the net assets of each series.

Norwest has agreed to waive its investment advisory fee for Money Market
Portfolio through May 31, 1999 to the extent that the fee exceeds an annual rate
of 0.10% of the Portfolio's average daily net assets. In addition, Norwest and
Forum have agreed to waive their respective fees or reimburse expenses in order
to maintain Cash Investment Fund's total combined operating expenses through May
31, 1999 at the same level as the Fund's total operating expenses prior to May
31, 1997 (0.48%). Any reduction or elimination of the Waiver, however, would
require Board approval (and notice to shareholders), which would be given only
if the Board determined that the amount of the fees to be paid to Norwest or
Forum after the reduction or elimination would be fair and reasonable.

Norwest and Forum have agreed to waive their respective fees or reimburse
expenses in order to maintain each of Ready Cash Investment Fund's, Total Return
Bond Fund's and Small Company Stock Fund's total combined operating expenses
through May 31, 1998 at the same levels as the respective Fund's total operating
expenses prior to May 31, 1997 (0.82% in the case of Ready Cash Investment Fund
Investor Shares, 0.75% in the case of Total Return Bond Fund and 1.20% in the
case of Small Company Stock Fund). After May 31, 1998, any proposed reduction in
the amount of those waivers and reimbursements would be reviewed by the Board.

Norwest and Forum have agreed to waive their respective fees through May 31,
1999 in order to ensure that the fees borne by each of Diversified Bond Fund,
Strategic Income Fund, Moderate Balanced Fund, Growth Balanced Fund, Diversified
Equity Fund and Growth Equity Fund for investment advisory, administrative and
management services would not exceed in the aggregate 0.45%, 0.55%, 0.63%,
0.68%, 0.75% and 1.00%, respectively (the "Waiver"). After May 31, 1999, each
fund's aggregate payment for those services could increase if the Waiver was
reduced or eliminated. Any reduction or elimination of the Waiver, however,
would require Board approval (and notice to shareholders), which would be given
only if the Board determined that the amount of the fees to be paid to Norwest
or Forum after the reduction or elimination would be fair and reasonable.

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

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

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<PAGE>
6. PURCHASES AND REDEMPTIONS OF SHARES

I Shares are offered to fiduciary, agency and custodial clients of bank trust
departments, trust companies and their affiliates. Institutional Shares and the
single class of shares offered by each of Cash Investment Fund, U.S. Government
Fund and Treasury Fund are designed primarily for institutional clients.
Investor Shares are offered to retail customers. Shares are continuously sold
and redeemed at a price equal to their net asset value next-determined after
acceptance of an order, or receipt of a redemption request, on every weekday
except customary national holidays (New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas) and Good Friday ("Fund Business Day").

GENERAL PURCHASE INFORMATION

Investments in the Funds may be made either through certain financial
institutions or by an investor directly. An investor who invests in a Fund
directly will be the shareholder of record. All transactions in the Funds'
shares are effected through the Transfer Agent, which accepts orders for
redemptions and for subsequent purchases only from shareholders of record and
new investors. Shareholders of record will receive from the Trust periodic
statements listing all account activity during the statement period. You must
pay for your shares in U.S. dollars by check or money order (drawn on a U.S.
bank), by bank or federal funds wire transfer, or by electronic bank transfer;
cash cannot be accepted.

When you sign your application for a new Fund account, you are certifying that
your Social Security or other taxpayer ID number is correct and that you are not
subject to backup withholding. If you violate certain federal income tax
provisions, the Internal Revenue Service can require the Funds to withhold 31%
of your distributions and redemptions.

Shares of each Fund are offered without a sales charge and may be redeemed
without charge. The minimum investment in Investor Shares and I Shares is
$1,000; the minimum subsequent investment in Investor Shares and I Shares is
$100. The minimum investment amount in Institutional Shares and for Shares of
Cash Investment Fund, U.S. Government Fund and Treasury Fund is $100,000 and
there is no minimum subsequent investment for those shares. The minimum
investment in Investor Shares and I Shares is $1,000; the minimum subsequent
investment in Investor Shares and I Shares is $100. Investor Shares and I Shares
is $1,000; the minimum subsequent investment in Investor Shares and I Shares is
$100. Shareholders who elect to purchase Investor Shares or I Shares through
electronic share purchase privileges such as the Automatic Investment Plan or
the Directed Dividend Option are not subject to the initial investment minimums.
(See "Purchases and Redemptions of Shares - Shareholder Services - Automatic
Investment Plan" and "Dividends, Distributions and Tax Matters.")

Shares of the Funds become entitled to receive dividends on the next Fund
Business Day after a purchase or order for the Shares is accepted, except that
Shares of the Money Market Funds become entitled to receive dividends on the
Fund Business Day that a purchase order is accepted. With respect to the Money
Market
Funds, an investor's order will not be accepted or invested by a Fund during the
period before the Fund's receipt of immediately available funds. For the Money
Market Funds, purchase and redemption orders will be accepted on Fund Business
Days only until the times indicated below.

<TABLE>
<CAPTION>
Order Must Be Payment Must Be
Money Market Fund Received By Received By
- ---------------------------------------------------------- -------------- ----------------
<S> <C> <C>
Cash Investment Fund 3:00 p.m. 4:00 p.m.
Ready Cash Investment Fund 3:00 p.m. 4:00 p.m.
U.S. Government Fund 2:00 p.m. 4:00 p.m.
Treasury Fund 1:00 p.m. 4:00 p.m.
Municipal Money Market Fund 12:00 p.m. 4:00 p.m.
</TABLE>

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<PAGE>
All times referenced in the above table are Eastern Time. The Trust reserves the
right to close early and advance the time by which the Money Market Funds must
receive purchase or redemption orders and payments on days that the New York
Stock Exchange or Minneapolis Federal Reserve Bank closes early, the Public
Securities Association recommends that the government securities markets close
early or due to other circumstances which may affect a Fund's trading hours.

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

PURCHASE PROCEDURES

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

Norwest Funds
[Name of Fund]
Norwest Bank Minnesota, N.A.
Transfer Agent
733 Marquette Avenue
Minneapolis, MN 55479-0040

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

BY MAIL. Investors may send a check or money order (cash cannot be accepted)
along with a completed account application form to the Trust at the address
listed above. Checks and money orders are accepted at full value subject to
collection. Payment by a check drawn on any member of the Federal Reserve System
can normally be converted into federal funds within two business days after
receipt of the check. Checks drawn on some non-member banks may take longer. If
a check does not clear, the purchase order will be canceled and the investor
will be liable for any losses or fees incurred by the Trust, the Transfer Agent
or FFSI.

For individual or Uniform Gift to Minors Act accounts, the check or money order
used to purchase shares of a Fund must be made payable to "Norwest Funds" or to
one or more owners of that account and endorsed to Norwest Funds. No other
method of payment by check will be accepted. For corporation, partnership,
trust, 401(k) plan or other non-individual type accounts, the check used to
purchase shares of a Fund must be made payable on its face to "Norwest Funds."
No other method of payment by check will be accepted.

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

Norwest Bank Minnesota, N.A.
A091 000 019
For Credit to: Norwest Funds 0844-131
Re: [Name of Fund][Name of Shares if applicable]
Account No.:
Account Name:

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

THROUGH FINANCIAL INSTITUTIONS. Shares may be purchased and redeemed through
certain broker-dealers, banks and other financial institutions ("Processing
Organizations"). The Transfer Agent, FFSI or their affiliates may be Processing
Organizations. Financial institutions, including Processing Organizations, may
charge their customers a fee for their services and are responsible for promptly
transmitting purchase, redemption and other requests to the Funds.

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

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

SUBSEQUENT PURCHASES OF SHARES

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

GENERAL REDEMPTION INFORMATION

Fund shares may be redeemed at their net asset value on any Fund Business Day.
There is no minimum period of investment and no restriction on the frequency of
redemptions.

Fund shares are redeemed as of the next determination of the Fund's net asset
value following acceptance by the Transfer Agent of the redemption order in
proper form (and any supporting documentation which the Transfer Agent may
require). Redeemed shares are not entitled to receive dividends after the day on
which the redemption is effective, except that Shares of the Money Market Funds
are not entitled to receive dividends on the day on with the redemption is
effective. For the Money Market Funds, redemption orders are accepted up to the
times indicated under "Purchases and Redemptions of Shares - General Purchase
Information." The Trust reserves the right to close early and to advance the
times by which the Money Market Funds must receive purchase or redemption
orders. (See "Purchase and Redemption of Shares - General Purchase
Information.")

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

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<PAGE>
than seven days after the tender of the shares to the Fund except when the New
York Stock Exchange is closed (or when trading thereon is restricted) for any
reason other than its customary weekend or holiday closings, for any period
during which an emergency exists as a result of which disposal by the Fund of
its portfolio securities or determination by the Fund of the value of its net
assets is not reasonably practicable and for such other periods as the SEC may
permit.

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

Signature guarantees may be provided by any bank, broker-dealer, national
securities exchange, credit union, savings association or other eligible
institution that is authorized to guarantee signatures and is acceptable to the
Transfer Agent. Whenever a signature guarantee is required, the signature of
each person required to sign for the account must be guaranteed. Shareholders
who want telephone redemption or exchange privileges must elect those
privileges. The Trust and Transfer Agent will employ reasonable procedures in
order to verify that telephone requests are genuine, including recording
telephone instructions and causing written confirmations of the resulting
transactions to be sent to shareholders. If the Trust and Transfer Agent did not
employ such procedures, they could be liable for losses due to unauthorized or
fraudulent telephone instructions. Shareholders should verify the accuracy of
telephone instructions immediately upon receipt of confirmation statements.
During times of drastic economic or market changes, telephone redemption and
exchange privileges may be difficult to implement. In the event that a
shareholder is unable to reach the Transfer Agent by telephone, requests may be
mailed or hand-delivered to the Transfer Agent.

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

REDEMPTION PROCEDURES

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

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

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

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

EXCHANGES

Shareholders of I Shares and Institutional Shares and shareholders of U.S.
Government Fund and Treasury Fund may exchange their Shares for I Shares, for
Institutional and for Shares of U.S. Government Fund and Treasury Fund.
Shareholders of Investor Shares may exchange their Shares for Investor Shares of
the other Fund and A class shares of certain other funds of the Trust. The Trust
may in the future create additional classes of funds the shares of which will be
exchangeable with the Shares of the Funds. A current list of the funds of the
Trust that offer shares exchangeable with the Shares of the Funds can be
obtained through Forum by contacting the Transfer Agent.

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

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

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

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

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

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<PAGE>
SHAREHOLDER SERVICES

AUTOMATIC INVESTMENT PLAN

Under the Automatic Investment Plan which is available to shareholders that
invest in I Shares of each Fund and to shareholders of Investor Shares of Ready
Cash Investment Fund and Municipal Money Market Fund, shareholders may authorize
monthly amounts of $50 or more to be withdrawn automatically from the
shareholder's designated bank account (other than passbook savings) and sent to
the Transfer Agent for investment in a Fund. Shareholders wishing to use this
plan must complete an application which may be obtained by writing or calling
the Transfer Agent. The Trust may modify or terminate the Automatic Investment
Plan with respect to any shareholder in the event that the Trust is unable to
settle any transaction with the shareholder's bank. If the Automatic Investment
Plan is terminated before the shareholders account totals $1,000, the Trust
reserves the right to close the account in accordance with the procedures
described under "General Redemption Information."

RETIREMENT ACCOUNTS

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

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

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

AUTOMATIC WITHDRAWAL PLAN

A shareholder of a Fund, other than a shareholder of Cash Investment Fund, U.S.
Government Fund, Treasury Fund and Institutional Shares of Municipal Money
Market Fund, whose shares in a single account total $1,000 or more may establish
a withdrawal plan to provide for the preauthorized payment from the
shareholder's account of $250 or more on a monthly, quarterly, semi-annual or
annual basis. A shareholder of Cash Investment Fund, U.S. Government Fund,
Treasury Fund or Institutional Shares of Municipal Money Market Fund whose
shares in a single account total $10,000 or more may establish a withdrawal plan
to provide for the preauthorized payment from the shareholder's account of $250
or more on a monthly, quarterly, semi-annual or annual basis. Under the
withdrawal plan, sufficient shares in the shareholder's account are redeemed to
provide the amount of the periodic payment and any taxable gain or loss is
recognized by the shareholder upon redemption of the shares. Shareholders
wishing to utilize the withdrawal plan may do so by completing an application
which may be obtained by writing or calling the Transfer Agent. The Trust may
suspend a shareholder's withdrawal plan without notice if the account contains
insufficient funds to effect a withdrawal or if the account balance is less than
the required minimum amounts at any time.

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<PAGE>
CHECKWRITING

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

REOPENING ACCOUNTS

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

7. DIVIDENDS, DISTRIBUTIONS AND
TAX MATTERS

DIVIDENDS

Dividends of net investment income are declared and paid as follows:

<TABLE>
<S> <C>
Declared daily and paid Each Money Market Fund, Limited Term Government In-
monthly: come Fund, Income Fund, Total Return Bond Fund and
each Tax-Exempt Fixed Income Fund.

Declared and paid monthly: Stable Income Fund, Intermediate Government Income
Fund and Diversified Bond Fund.

Declared and paid quarterly: Income Equity Fund, ValuGrowth Stock Fund, Small
Company Stock Fund and Contrarian Stock Fund.

Each Fund's net capital gain, if any, is distributed at least annually. (See
"Dividends and Tax Matters.")

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

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

TAX MATTERS

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

Dividends paid by a Fund out of its net investment income (including net
short-term capital gain) are taxable to shareholders of the Fund as ordinary
income. Two different tax rates apply to net capital gain - that is, the excess
of gains from capital assets held for more than one year over net losses from
capital assets held for not more than one year. One rate (generally 28%) applies
to net gain on capital assets held for more than one year but not more than 18
months ("mid-term gain"), and a second rate (generally 20%) applies to the
balance of net capital gain ("adjusted net capital gain"). Distributions of
mid-term gain and adjusted net capital gain will be taxable to shareholders as
such, regardless of how long a shareholder has held shares in the Fund. If a
shareholder holds Shares for six months or less and during that period receives
a distribution of net capital gain, any loss realized on the sale of the Shares
during that six-month period would be a long-term capital loss to the extent of
the distribution. Dividends (other than those of Funds that declare dividends
daily) and distributions reduce the net asset value of the Fund paying the
dividend or distribution by the amount of the dividend or distribution.
Furthermore, these dividends or a distribution made shortly after the purchase
of Shares by a shareholder, although in effect a return of capital to that
particular shareholder, will be taxable to the shareholder.

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

CORE PORTFOLIOS

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

FUNDS INVESTING IN FOREIGN SECURITIES

Investment income received by a Fund from sources within foreign countries may
be subject to foreign income or other taxes. International Fund intends to
elect, if eligible to do so, to permit its shareholders to take a credit (or a
deduction) for foreign income and other taxes paid by International Portfolio
and

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Schroder EM Core Portfolio. Shareholders of that Fund will be notified of their
share of those foreign taxes and will be required to treat the amount of such
foreign taxes as additional income. In that event, the shareholder may be
entitled to claim a credit or deduction for those taxes.

TAX-EXEMPT DISTRIBUTIONS

Dividends paid by Municipal Money Market Fund or by a Tax-Exempt Fixed Income
Fund out of tax-exempt interest income earned by the Fund ("exempt-interest
dividends") generally will not be subject to federal income tax in the hands of
the Fund's shareholders. Persons who are substantial users or related persons
thereof of facilities financed by private activity securities held by a Fund,
however, may be subject to federal income tax on their pro rata share of the
interest income from those securities and should consult their tax advisers
before purchasing Shares. Interest on certain private activity securities is
treated as an item of tax preference for purposes of the AMT imposed on
individuals and corporations. In addition, exempt-interest dividends are
included in the "adjusted current earnings" of corporations for AMT purposes. If
a shareholder holds Shares for six months or less and during that period
receives an exempt-interest dividend, any loss realized on the sale of the
Shares during that six-month period would be disallowed to the extent of the
exempt-interest dividend.

Interest on indebtedness incurred by shareholders to purchase or carry shares of
a Fund generally is not deductible for federal income tax purposes. Under rules
for determining when borrowed funds are used for purchasing or carrying
particular assets, Shares of a Fund may be considered to have been purchased or
carried with borrowed funds even though those funds are not directly linked to
the Shares. Substantially all of the dividends paid by Municipal Money Market
Fund and by each Tax-Exempt Fixed Income Fund are anticipated to be exempt from
federal income taxes.

Shortly after the close of each calendar year, a statement is sent to each
shareholder of Municipal Money Market Fund and Tax-Exempt Fixed Income Fund
advising the shareholder of the portion of the Fund's dividends that is derived
from obligations of issuers in the various states and the portion of the Fund's
dividends that is exempt from federal income taxes. These portions are
determined for a Fund's entire year and, thus, are annual averages, rather than
day-by-day determinations for each shareholder.

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

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

MINNESOTA INTERMEDIATE TAX-FREE FUND AND MINNESOTA TAX-FREE FUND. It is
anticipated that substantially all of the dividends paid by the Fund to
individuals will be exempt from Minnesota personal income tax. Interest earned
on Minnesota municipal securities is generally excluded from gross income for
Minnesota

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state income tax purposes, while interest earned on securities issued by
municipal issuers from other states is not excluded. At least 95% of the
exempt-interest dividends paid by the Fund must be derived from Minnesota
municipal securities in order for any portion of the exempt-interest dividends
paid by the Fund to be exempt from the Minnesota personal income tax.
Exempt-interest dividends paid by the Fund to shareholders that are corporations
are subject to Minnesota franchise tax.

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

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

MISCELLANEOUS

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

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

8. OTHER INFORMATION

BANKING LAW MATTERS

Federal banking rules generally permit a bank or bank affiliate to act as
investment adviser, transfer agent, or custodian to an investment company and to
purchase shares of the investment company as agent for and upon the order of a
customer and, in connection therewith, to retain a sales charge or similar
payment. Forum believes that Norwest and any bank or other bank affiliate also
may perform Processing Organization or similar services for the Trust and its
shareholders without violating applicable federal banking rules. If a bank or
bank affiliate were prohibited in the future from so acting, changes in the
operation of the Trust could occur and a shareholder serviced by the bank or
bank affiliate may no longer be able to avail itself of those services. It is
not expected that shareholders would suffer any adverse financial consequences
as a result of any of these occurrences.

DETERMINATION OF NET ASSET VALUE

The net asset value per share of each class of each Fund, except the Money
Market Funds, is determined as of 4:00 p.m., Eastern Time, on each Fund Business
Day by dividing the value of the Fund's net assets (I.E., the value of its
securities and other assets less its liabilities) by the number of shares
outstanding at the time the determination is made. The net asset value per share
of each class of Cash Investment Fund, U.S. Government Fund, Treasury Fund and
Municipal Money Market Fund is determined as of 3:00 p.m.,

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2:00 p.m., 1:00 p.m. and 12:00 p.m. Eastern Time, respectively, in the same
manner as indicated above. Securities owned by a Fund or Portfolio (other than a
Money Market Fund or Portfolio in which a Money Market Fund invests) for which
market quotations are readily available are valued at current market value or,
in their absence, at fair value as determined by the Board or the Core Board or
pursuant to procedures approved by the Board or the Core Board, as applicable.
The Funds only determine net asset value on Fund Business Days.

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

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

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

PERFORMANCE INFORMATION

A Fund's performance may be quoted in terms of yield or total return. All
performance information is based on historical results and is not intended to
indicate future performance. A Fund's yield is a way of showing the rate of
income the Fund earns on its investments as a percentage of the Fund's share
price. To calculate standardized yield for the Money Market Funds, a Fund takes
the income it earned from its investments for a 7-day period (net of expenses),
divides it by the average number of shares entitled to receive dividends, and
expresses the result as an annualized percentage rate based on the Fund's share
price at the end of the 7-day period. With respect to each of the other Funds,
to calculate standardized yield, a Fund takes the income it earned from its
investments for a 30-day period (net of expenses), divides it by the average
number of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on the Fund's share price at the end of the
30-day period. Municipal Money Market Fund and the Tax-Exempt Fixed Income Funds
may also quote tax-equivalent yields, which show the taxable yields a
shareholder would have to earn to equal the Fund's tax-free yield, after taxes.
A tax equivalent yield is calculated by dividing the Fund's tax-free yield by
one minus a stated federal, state or combined federal and state tax rate.

A Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and distributions are
reinvested. A cumulative total return reflects a Fund's performance over a
stated period of time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same cumulative total
return if the Fund's performance had been constant over the entire period.
Because average annual returns tend to smooth out variations in the Fund's
returns, shareholders should recognize that they are not the same as actual
year-by-year results. Published yield quotations are, and total return figures
may be, based on amounts invested in a Fund net of sales

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charges that may be paid by an investor. A computation of yield or total return
that does not take into account sales charges paid by an investor will be higher
than a similar computation that takes into account payment of sales charges.

The Funds' advertisements may reference ratings and rankings among similar
mutual funds by independent evaluators such as Morningstar, Inc., Lipper
Analytical Services, Inc. and IBC Financial Data, Inc. In addition, the
performance of a Fund may be compared to securities indices. These indices may
be comprised of a composite of various recognized securities indices to reflect
the investment policies of a Fund that invests its assets using different
investment styles. Indices are not used in the management of a Fund but rather
are standards by which an Adviser and shareholders may compare the performance
of a Fund to an unmanaged composite of securities with similar, but not
identical, characteristics as the Fund. This material is not to be considered
representative or indicative of future performance. All performance information
for a Fund is calculated on a class basis.

THE TRUST AND ITS SHARES

The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate portfolios or series (such as the Funds) and may
divide portfolios or series into classes of shares (such as I Shares); the costs
of doing so will be borne by the Trust. Currently the authorized shares of the
Trust are divided into thirty-nine separate series.

OTHER CLASSES OF SHARES

Cash Investment Fund, U.S. Government Fund, Treasury Fund, Norwest WealthBuilder
II Growth Portfolio, Norwest WealthBuilder II Growth and Income Portfolio,
Norwest WealthBuilder II Growth Balanced Portfolio and Income Fund, Performa
Disciplined Growth Fund, Performa Small Cap Value Fund, Performa Strategic Value
Bond Fund, Performa Global Growth Fund, Minnesota Intermediate Tax-Free Fund,
Aggressive Balanced-Equity Fund and Diversified Small Cap Fund currently issue
one class of shares. Ready Cash Investment Fund currently issues two classes of
shares - Investor Shares and Exchange Shares. Municipal Money Market Fund
currently issues two classes of shares - Institutional Shares and Investor
Shares. The other Funds issue three classes of shares, I Shares, A Shares and B
Shares. A Shares and B Shares are offered to retail investors. A Shares charge a
front-end sales charge and B Shares (and Exchange Shares) charge a contingent
deferred sales charge. Each class of a Fund will have a different expense ratio
and may have different sales charges (including distribution fees). Each class'
performance is affected by its expenses and sales charges. For more information
on any other class of shares of the Funds investors may contact the Transfer
Agent at (612) 667-8833 or (800) 338-1348 or the Funds' distributor. Investors
may also contact their Norwest sales representative to obtain information on the
other classes.

SHAREHOLDER VOTING AND OTHER RIGHTS

Each share of each series of the Trust and each class of shares has equal
dividend, distribution, liquidation and voting rights, and fractional shares
have those rights proportionately, except that expenses related to the
distribution of the shares of each class (and certain other expenses such as
transfer agency and administration expenses) are borne solely by those shares
and each class votes separately with respect to the provisions of any
distribution plan which pertain to the class and other matters for which
separate class voting is appropriate under applicable law. Generally, shares
will be voted in the aggregate without reference to a particular series or
class, except if the matter affects only one series or class or voting by series
or class is required by law, in which case shares will be voted separately by
series or class, as appropriate. Delaware law does not require the Trust to hold
annual meetings of shareholders, and it is anticipated that shareholder meetings
will be held only when specifically required by federal or state law.
Shareholders have available certain procedures for the removal of Trustees.
There are no conversion or preemptive rights in connection with shares of the
Trust. All shares when issued in accordance with the terms of the offering will

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be fully paid and nonassessable. Shares are redeemable at net asset value, at
the option of the shareholders, subject to any contingent deferred sales charge
that may apply. A shareholder in a series is entitled to the shareholder's pro
rata share of all dividends and distributions arising from that series' assets
and, upon redeeming shares, will receive the portion of the series' net assets
represented by the redeemed shares.

Each Core Portfolio normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in a Core Portfolio will be entitled to
vote in proportion to its relative beneficial interest in the respective Core
Portfolio. When required by the 1940 Act and other applicable law, a Fund will
solicit proxies from its shareholders and will vote its interest in a Core
Portfolio in proportion to the votes cast by its shareholders.

As of September 2, 1997, Norwest Bank may be deemed to have controlled Stable
Income Fund, Limited Term Tax-Free Fund, Tax-Free Income Fund and Income Equity
Fund, and Norwest Bank Colorado, N.A. may be deemed to have controlled Total
Return Bond Fund, Colorado Tax-Free Fund and ValuGrowth Stock Fund, through
investment in the Funds by their consumers. From time to time, these
shareholders or other shareholders may own a large percentage of the Shares of a
Fund and, accordingly, may be able to greatly affect (if not determine) the
outcome of a shareholder vote.

CORE AND GATEWAY STRUCTURE

Ready Cash Investment Fund, Stable Income Fund, Total Return Bond Fund, Index
Fund, Income Equity Fund, Large Company Growth Fund, Small Company Stock Fund,
Small Company Growth Fund and Small Cap Opportunities Fund each seek to achieve
its investment objective by investing all of its investable assets in its
corresponding Core Portfolio, that has the same investment objective and
substantially identical investment policies as the Fund. Cash Investment Fund,
Diversified Bond Fund, Strategic Income Fund, Moderate Balanced Fund, Growth
Balanced Fund, Diversified Equity Fund, Growth Equity Fund and International
Fund each seek to achieve its investment objective by investing all or a part of
its assets in two or more Core Portfolios. Accordingly, each Core Portfolio
directly acquires portfolio securities and a Fund investing in the Core
Portfolio acquires an indirect interest in those securities. Schroder U.S.
Smaller Companies Portfolio and Schroder EM Core Portfolio are a separate series
of Schroder Capital Funds, a business trust organized under the laws of the
State of Delaware in 1995. Each other Core Portfolio is a separate series of
Core Trust (Delaware), a business trust organized under the laws of the State of
Delaware in 1994. Each Core Trust is registered under the 1940 Act as an
open-end, management, investment company. The assets of each Core Portfolio
belong only to, and the liabilities of each Core Portfolio are borne solely by,
that Core Portfolio and no other portfolio of a Core Trust.

THE CORE PORTFOLIOS. A Fund's investment in a Core Portfolio is in the form of a
non-transferable beneficial interest. All investors in a Core Portfolio will
invest on the same terms and conditions and will pay a proportionate share of
the Core Portfolio's expenses. As of October 1, 1997, two or more funds of the
Trust invested in each Core Portfolio (except Total Return Bond Portfolio and
Schroder U.S. Smaller Companies Portfolio). As of that date, one other mutual
fund invested in Schroder U.S. Smaller Companies Portfolio.

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

CERTAIN RISKS OF INVESTING IN CORE PORTFOLIOS. A Funds' investment in a Core
Portfolio may be affected by the actions of other large investors in that Core
Portfolio. For example, if International Portfolio had a large investor other
than International Fund that redeemed its interest International Portfolio's
remaining investors (including the Fund) might, as a result, experience higher
pro rata operating expenses, thereby

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producing lower returns. As there may be other investors in a Core Portfolio,
there can be no assurance that any issue that receives a majority of the votes
cast by a Fund's shareholders will receive a majority of votes cast by all
investors in a Core Portfolio; indeed, other investors hold a majority interest
in a Core Portfolio, could have voting control of the Core Portfolio.

The Board retains the right to withdraw each Fund's investment in a Core
Portfolio at any time, and the Fund could thereafter invest directly in
individual securities or could re-invest its assets in one or more other Core
Portfolios. A Fund might withdraw, for example, if there were other investors in
a Core Portfolio with power to, and who did by a vote of all investors
(including the Fund), change the investment objective or policies of the Core
Portfolio in a manner not acceptable to the Board. A withdrawal could result in
a distribution in kind of portfolio securities (as opposed to a cash
distribution) by the Core Portfolio. That distribution could result in a less
diversified portfolio of investments for the Fund and could affect adversely the
liquidity of the Fund's portfolio. If the Fund decided to convert those
securities to cash, it would incur brokerage fees or other transaction costs. If
the Fund withdrew its investment from a Core Portfolio, the Board would consider
what action might be taken, including the management of the Fund's assets
directly by the Advisers or the investment of the Fund's assets in another
pooled investment entity. The inability of the Fund to find a suitable
replacement investment, in the event the Board decided not to permit the
Advisers to manage the Fund's assets directly could have a significant impact on
shareholders of the Fund.

Investment decisions are made by the portfolio managers of each Core Portfolio
independently. Therefore the portfolio manager of one Core Portfolio in which a
Fund invests may purchase shares of the same issuer whose shares are being sold
by the portfolio manager of another Core Portfolio in which the Fund invests.
This could result in an indirect expense to the Fund without accomplishing any
investment purpose.

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

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APPENDIX A
INVESTMENTS, INVESTMENT STRATEGIES AND RISK CONSIDERATIONS

COMMON STOCKS, WARRANTS AND PREFERRED STOCK

COMMON STOCKS AND WARRANTS - BALANCED FUNDS, EQUITY FUNDS. PREFERRED STOCK -
BALANCED FUNDS, EQUITY FUNDS, TOTAL RETURN BOND FUND. Common stockholders are
the owners of the company issuing the stock and, accordingly, vote on various
corporate governance matters such as mergers. They are not creditors of the
company, but rather, upon liquidation of the company are entitled to their pro
rata share of the company's assets after creditors (including fixed income
security holders) and, if applicable, preferred stockholders are paid. Preferred
stock is a class of stock having a preference over common stock as to dividends
and, generally, as to the recovery of investment. A preferred stockholder is a
shareholder in the company and not a creditor of the company as is a holder of
the company's fixed income securities. Dividends paid to common and preferred
stockholders are distributions of the earnings of the company and not interest
payments, which are expenses of the company. Equity securities owned by a Fund
may be traded on a securities exchange or in the over-the-counter market and may
not be traded every day or in the volume typical of securities traded on a major
national securities exchange. As a result, disposition by a Fund of a portfolio
security to meet redemptions by shareholders or otherwise may require the Fund
to sell these securities at a discount from market prices, to sell during
periods when disposition is not desirable, or to make many small sales over an
extended period of time. The market value of all securities, including equity
securities, is based upon the market's perception of value and not necessarily
the book value of an issuer or other objective measure of a company's worth. A
Fund may invest in warrants, which are options to purchase an equity security at
a specified price (usually representing a premium over the applicable market
value of the underlying equity security at the time of the warrant's issuance)
and usually during a specified period of time. Unlike convertible securities and
preferred stocks, warrants do not pay a fixed dividend. Investments in warrants
involve certain risks, including the possible lack of a liquid market for the
resale of the warrants, potential price fluctuations as a result of speculation
or other factors and failure of the price of the underlying security to reach a
level at which the warrant can be prudently exercised (in which case the warrant
may expire without being exercised, resulting in the loss of the Fund's entire
investment therein).

CONVERTIBLE SECURITIES

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

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ADRS AND EDRS

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

U.S. GOVERNMENT SECURITIES

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

ZERO-COUPON SECURITIES

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

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

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CORPORATE DEBT SECURITIES AND COMMERCIAL PAPER

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

FINANCIAL INSTITUTION OBLIGATIONS

ALL FUNDS (EXCEPT TREASURY FUND). A Fund may invest in obligations of financial
institutions, including negotiable certificates of deposit, bankers' acceptances
and time deposits of U.S. banks (including savings banks and savings
associations), foreign branches of U.S. banks, foreign banks and their non-U.S.
branches (Eurodollars), U.S. branches and agencies of foreign banks (Yankee
dollars), and wholly-owned banking-related subsidiaries of foreign banks.

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

PARTICIPATION INTERESTS

CASH INVESTMENT FUND, READY CASH INVESTMENT FUND, DIVERSIFIED BOND FUND,
BALANCED FUNDS. A Fund may purchase participation interests in loans or
securities in which the Fund may invest directly that are owned by banks or
other financial institutions. A participation interest gives the Fund an
undivided interest in a loan or security in the proportion that the Fund's
interest bears to the total principal amount of the security. Participation
interests, which may have fixed, floating or variable rates, may carry a demand
feature backed by a letter of credit or guarantee of the bank or institution
permitting the holder to tender them back to the bank or other institution. For
certain participation interests the Fund will have the right to demand payment,
on not more than 7 days notice, for all or a part of the Fund's participation
interest. A Fund will only purchase participation interests from banks or other
financial institutions that Norwest deems to be creditworthy. A Fund will not
invest more than 10 percent of its total assets in participation interests in
which the Fund does not have demand rights.

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ILLIQUID SECURITIES AND RESTRICTED SECURITIES

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

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

BORROWING

ALL FUNDS. Borrowing involves special risk considerations. Interest costs on
borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on borrowed funds (or on the assets
that were retained rather than sold to meet the needs for which funds were
borrowed). Under adverse market conditions, a Fund might have to sell portfolio
securities to meet interest or principal payments at a time when investment
considerations would not favor such sales. No Fund, other than Intermediate
Government Income Fund, Diversified Bond Fund and, with respect to their assets
invested in Managed Fixed Income Portfolio, the Balanced Funds, may purchase
securities for investment while any borrowing equal to 5 percent or more of the
Fund's total assets is outstanding or borrow for purposes other than meeting
redemptions in an amount exceeding 5 percent of the value of the Fund's total
assets. A Fund's use of borrowed proceeds to make investments would subject the
Fund to the risks of leveraging. Reverse repurchase agreements, short sales not
against the box, dollar roll transactions and other similar investments that
involve a form of leverage have characteristics similar to borrowings but are
not considered borrowings if the Fund maintains a segregated account; the use of
these techniques in connection with a segregated account may result in a Fund's
assets being 100 percent leveraged. (See "Appendix A - Techniques Involving
Leverage.")

PURCHASING SECURITIES ON MARGIN

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

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Fund will be required to make margin payments (additional payments to the broker
to maintain the level of borrowing at permissible levels). A Fund's obligation
to satisfy margin calls may require the Fund to sell securities at an
inappropriate time.

TECHNIQUES INVOLVING LEVERAGE

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

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

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

In order to limit the risks involved in various transactions involving leverage,
the Trust's custodian will set aside and maintain in a segregated account cash
and securities in accordance with SEC guidelines. The account's value, which is
marked to market daily, will be at least equal to the Fund's commitments under
these transactions.

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

A Fund's use of repurchase agreements, securities lending, reverse repurchase
agreements and forward commitments (including "dollar roll" transactions)
entails certain risks not associated with direct investments in securities. For
instance, in the event that bankruptcy or similar proceedings were commenced

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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

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for the securities purchased and no interest on the security accrues to the
purchaser. At the time a Fund makes a commitment to purchase securities in this
manner, the Fund immediately assumes the risk of ownership, including price
fluctuation. Failure by the other party to deliver a security purchased by a
Fund may result in a loss or a missed opportunity to make an alternative
investment. The use of when-issued transactions and forward commitments enables
a Fund to hedge against anticipated changes in interest rates and prices. If
Norwest or Schroder were to forecast incorrectly the direction of interest rate
movements, however, a Fund might be required to complete these transactions when
the value of the security is lower than the price paid by the Fund. Except for
dollar-roll transactions, a Fund will not purchase securities on a when-issued
or forward commitment basis if, as a result, more than 15 percent (35 percent in
the case of Total Return Bond Fund) of the value of the Fund's total assets
would be committed to such transactions.

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

DOLLAR ROLL TRANSACTIONS - FIXED INCOME FUNDS AND BALANCED FUNDS. A Fund may
enter into "dollar roll" transactions wherein the Fund sells fixed income
securities, typically mortgage-backed securities, and makes a commitment to
purchase similar, but not identical, securities at a later date from the same
party. Like a forward commitment, during the roll period no payment is made for
the securities purchased and no interest or principal payments on the security
accrue to the purchaser, but the Fund assumes the risk of ownership. A Fund is
compensated for entering into dollar roll transactions by the difference between
the current sales price and the forward price for the future purchase, as well
as by the interest earned on the cash proceeds of the initial sale. Like other
when-issued securities or firm commitment agreements, dollar roll transactions
involve the risk that the market value of the securities sold by the Fund may
decline below the price at which a Fund is committed to purchase similar
securities. In the event the buyer of securities under a dollar roll transaction
becomes insolvent, the Funds use of the proceeds of the transaction may be
restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Funds obligation to repurchase the securities.
The Funds will engage in roll transactions for the purpose of acquiring
securities for its portfolio and not for investment leverage. Each Fund will
limit its obligations on dollar roll transactions to 35 percent of the Fund's
net assets.

SWAP AGREEMENTS

STABLE INCOME FUND, LIMITED TERM GOVERNMENT 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.

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Swap agreements may involve leverage and may be highly volatile; depending on
how they are used, they may have a considerable impact on the Funds performance.
(See "Appendix A - Techniques Involving Leverage.") Swap agreements involve
risks depending upon the counterparties' creditworthiness and ability to perform
as well as the Fund's ability to terminate its swap agreements or reduce its
exposure through offsetting transactions.

MUNICIPAL SECURITIES

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

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

The Fund may invest in tax-exempt industrial development bonds, which in most
cases are revenue bonds and generally do not have the pledge of the credit of
the municipality. The payment of the principal and interest on these bonds is
dependent solely on the ability of an initial or subsequent user of the
facilities financed by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as security for such
payment. The Fund will acquire private activity securities only if the interest
payments on the security are exempt from federal income taxation (other than the
Alternative Minimum Tax (AMT)).

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

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

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or contract unless money is appropriated for such purpose by the appropriate
legislative body on a yearly or other periodic basis. Generally, the Fund will
invest in municipal lease obligations through certificates of participation.

PARTICIPATION INTERESTS. The Funds may purchase participation interests in
municipal securities that are owned by banks or other financial institutions.
Participation interests usually carry a demand feature backed by a letter of
credit or guarantee of the bank or institution permitting the holder to tender
them back to the bank or other institution. Prior to purchasing any
participation interest, the Funds will obtain appropriate assurances that the
interest earned by the Funds from the obligations in which it holds
participation interests is exempt from federal and, in the case of Colorado
Tax-Free Fund and Minnesota Tax-Free Fund, applicable state income tax.

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

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

SHORT SALES

LIMITED TERM GOVERNMENT INCOME FUND AND INTERMEDIATE GOVERNMENT INCOME FUND.
Each Fund may make short sales of securities which it does not own or have the
right to acquire in anticipation of a decline in the market price for the
security. When the Fund makes a short sale, the proceeds it receives are
retained by the broker until the Fund replaces the borrowed security. In order
to deliver the security to the buyer, a Fund must arrange through a broker to
borrow the security and, in so doing, the Fund becomes obligated to replace the
security borrowed at its market price at the time of replacement, whatever that
price may be. Short sales create opportunities to increase a Fund's return but,
at the same time, involve special risk considerations and may be considered a
speculative technique. Since a Fund in effect profits from a decline in the
price of the securities sold short without the need to invest the full purchase
price of the securities on the date of the short sale, the Fund's net asset
value per share, will tend to increase more when the securities it has sold
short decrease in value, and to decrease more when the securities it has sold
short increase in value, than would otherwise be the case if it had not engaged
in such short sales. Short sales theoretically involve unlimited loss potential,
as the market price of securities sold short may continuously increase, although
a Fund may mitigate such losses by replacing the securities sold short before
the market price has increased significantly. Under adverse market conditions, a
Fund might have difficulty purchasing securities

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to meet its short sale delivery obligations and might have to sell portfolio
securities to raise the capital necessary to meet its short sale obligations at
a time when fundamental investment considerations would not favor those sales.
(See "Appendix A - Techniques Involving Leverage.")

MORTGAGE-BACKED SECURITIES

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

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

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

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

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

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

A-10
<PAGE>
YIELD CALCULATIONS. Yields on pass-through securities are typically quoted by
investment dealers based on the maturity of the underlying instruments and the
associated average life assumption. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgages. Conversely, in periods of rising rates, the rate of
prepayment tends to decrease, thereby lengthening the actual average life of the
pool. Actual prepayment experience may cause the yield to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting the yield of a
Fund.

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

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

PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. Mortgage-backed securities offered
by private issuers include pass-through securities comprised of pools of
conventional mortgage loans; mortgage-backed bonds which are considered to be
debt obligations of the institution issuing the bonds and which are
collateralized by mortgage loans; and collateralized mortgage obligations.
Mortgage-backed securities issued by non-governmental issuers may offer a higher
rate of interest than securities issued by government issuers because of the
absence of direct or indirect government guarantees of payment. Many
non-governmental issuers or servicers of mortgage-backed securities, however,
guarantee timely payment of interest and principal on such securities. Timely
payment of interest and principal may also be supported by various forms of
insurance, including individual loan, title, pool and hazard policies. There can
be no assurance that the private issuers or insurers will be able to meet their
obligations under the relevant guarantees and insurance policies.

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

A-11
<PAGE>
adjustment of the interest rate on the underlying mortgages and due to the
likelihood of increased prepayments of mortgages as interest rates decline.
Furthermore, during periods of declining interest rates, income to a Fund will
decrease as the coupon rate resets to reflect the decline in interest rates.
During periods of rising interest rates, changes in the coupon rates of the
mortgages underlying a Fund's ARMs may lag behind changes in market interest
rates. This may result in a slightly lower net value until the interest rate
resets to market rates. Thus, investors could suffer some principal loss if they
sold Fund shares before the interest rates on the underlying mortgages were
adjusted to reflect current market rates.

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

The final tranche of a CMO may be structured as an accrual bond (sometimes
referred to as a "Z-tranche"). Holders of accrual bonds receive no cash payments
for an extended period of time. During the time that earlier tranches are
outstanding, accrual bonds receive accrued interest which is a credit for
periodic interest payments that increases the face amount of the security at a
compounded rate, but is not paid to the bond holder. After all previous tranches
are retired, accrual bond holders start receiving cash payments that include
both principal and continuing interest. The market value of accrual bonds can
fluctuate widely and their average life depends on the other aspects of the CMO
offering. Interest on accrual bonds is taxable when accrued even though the
holders receive no accrual payment. The Funds distribute all of their net
investment income, and may have to sell portfolio securities to distribute
imputed income, which may occur at a time when an investment adviser would not
have chosen to sell such securities and which may result in a taxable gain or
loss.

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

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<PAGE>
ASSET-BACKED SECURITIES

LIMITED TERM GOVERNMENT INCOME FUND, INTERMEDIATE GOVERNMENT INCOME FUND,
DIVERSIFIED BOND FUND, INCOME FUND, TOTAL RETURN BOND FUND, AND BALANCED FUNDS.
Asset-backed securities represent direct or indirect participations in, or are
secured by and payable from, assets other than mortgage-backed assets such as
motor vehicle installment sales contracts, installment loan contracts, leases of
various types of real and personal property and receivables from revolving
credit (credit card) agreements. No Fund may invest more than 10 percent of its
net assets in asset-backed securities that are backed by a particular type of
credit, for instance, credit card receivables. Asset-backed securities,
including adjustable rate asset-backed securities, have yield characteristics
similar to those of mortgage-backed securities and, accordingly, are subject to
many of the same risks. Assets are securitized through the use of trusts and
special purpose corporations that issue securities that are often backed by a
pool of assets representing the obligations of a number of different parties.
Payments of principal and interest may be guaranteed up to certain amounts and
for a certain time period by a letter of credit issued by a financial
institution. Asset-backed securities do not always have the benefit of a
security interest in collateral comparable to the security interests associated
with mortgage-backed securities. As a result, the risk that recovery on
repossessed collateral might be unavailable or inadequate to support payments on
asset-backed securities is greater for asset-backed securities than for
mortgage-backed securities. In addition, because asset-backed securities are
relatively new, the market experience in these securities is limited and the
market's ability to sustain liquidity through all phases of an interest rate or
economic cycle has not been tested.

FOREIGN EXCHANGE CONTRACTS AND FOREIGN CURRENCY FORWARD CONTRACTS

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

A Fund may enter into foreign currency forward contracts or currency futures or
options contracts for the purchase or sale of foreign currency to "lock in" the
U.S. dollar price of the securities denominated in a foreign currency or the
U.S. dollar value of interest and dividends to be paid on such securities, or to
hedge against the possibility that the currency of a foreign country in which a
Fund has investments may suffer a decline against the U.S. dollar. Like foreign
exchange contracts and foreign currency forward contracts, these instruments are
often referred to as derivatives, which may be defined as financial instruments
whose performance is derived, at least in part, from the performance of another
asset (such as a security, currency or an index of securities. The Funds have no
present intention to enter into currency futures or options contracts but may do
so in the future. A forward currency contract is an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. This method of attempting to hedge the value of a Fund's
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. Although the
strategy of engaging in foreign currency transactions could reduce the risk of
loss due to a decline in the value of the hedged currency, it could also limit
the potential gain from an increase in the value of the currency. No Fund
intends to maintain a net exposure to such contracts where the fulfillment of
the Fund's obligations under such contracts would obligate the Fund to deliver
an amount of foreign currency in excess of the value of the Fund's portfolio

A-13
<PAGE>
securities or other assets denominated in that currency. A Fund will not enter
into these contracts for speculative purposes and will not enter into
non-hedging currency contracts. These contracts involve a risk of loss if
Norwest fails to predict currency values correctly.

FUTURES CONTRACTS AND OPTIONS

STABLE INCOME FUND, LIMITED TERM GOVERNMENT INCOME FUND, INTERMEDIATE GOVERNMENT
INCOME FUND, DIVERSIFIED BOND FUND, TOTAL RETURN BOND FUND, BALANCED FUNDS,
INDEX FUND, DIVERSIFIED EQUITY FUND AND SMALL CAP OPPORTUNITIES FUND. A Fund may
seek to enhance its return through the writing (selling) and purchasing of
exchange-traded and over-the-counter options on fixed income securities or
indices. A Fund may also to attempt to hedge against a decline in the value of
securities owned by it or an increase in the price of securities which it plans
to purchase through the use of those options and the purchase and sale of
interest rate futures contracts and options on those futures contracts. These
instruments are often referred to as "derivatives," which may be defined as
financial instruments whose performance is derived, at least in part, from the
performance of another asset (such as a security, currency or an index of
securities. A Fund may only write options that are covered. An option is covered
if, so long as the Fund is obligated under the option, it owns an offsetting
position in the underlying security or futures contract or maintains cash, U.S.
Government Securities or other liquid debt securities in a segregated account
with a value at all times sufficient to cover the Fund's obligation under the
option. Certain futures strategies employed by a Balanced Fund in making
temporary allocations may not be deemed to be for bona fide hedging purposes, as
defined by the Commodity Futures Trading Commission. A Fund may enter into these
futures contracts only if the aggregate of initial margin deposits for open
futures contract positions does not exceed 5 percent of the Fund's total assets.

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

Other risks include the inability of the Fund, as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise price and the possible loss of the entire premium paid for options
purchased by the Fund. In addition, the futures exchanges may limit the amount
of fluctuation permitted in certain futures contract prices during a single
trading day. A Fund may be forced, therefore, to liquidate or close out a
futures contract position at a disadvantageous price. There can be no assurance
that a liquid market will exist at a time when a Fund seeks to close out a
futures position or that a counterparty in an over-the-counter option
transaction will be able to perform its obligations. There are a limited number
of options on interest rate futures contracts and exchange traded options
contracts on fixed income securities. Accordingly, hedging transactions
involving these instruments may entail "cross-hedging." As an example, a Fund
may wish to hedge existing holdings of mortgage-backed securities, but no listed
options may exist on those securities. In that event, Norwest may attempt to
hedge the Fund's securities by the use of options with respect to similar fixed
income securities. The Fund may use various futures contracts that are
relatively new instruments without a significant trading history. As a result,
there can be no assurance that an active secondary market in those contracts
will develop or continue to exist.

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

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

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

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

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

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

PROSPECTUS

OCTOBER 1, 1997, AS AMENDED DECEMBER 1, 1997

THE PERFORMA FUNDS

PERFORMA STRATEGIC VALUE BOND FUND
PERFORMA DISCIPLINED GROWTH FUND
PERFORMA SMALL CAP VALUE FUND
PERFORMA GLOBAL GROWTH FUND

This Prospectus explains concisely what you should know before investing in
PERFORMA STRATEGIC VALUE BOND FUND, PERFORMA DISCIPLINED GROWTH FUND, PERFORMA
SMALL CAP VALUE FUND and PERFORMA GLOBAL GROWTH FUND (each a "Fund" and
collectively the "Funds"). Please read it carefully and keep it for future
reference. The Funds are each diversified portfolios of Norwest Advantage Funds
(the "Trust"), a registered, open-end, management investment company.

Each Fund seeks to achieve its investment objective by investing all of its
investable assets in a separate portfolio of another registered, open-end,
management investment company with the same investment objective (each a
"Portfolio" and collectively the "Portfolios"). See "Organization."

Investors should read this Prospectus carefully and retain it for future
reference. You can find more detailed information in the Statement of Additional
Information, dated October 1, 1997 (the "SAI"), which maybe amended from time to
time. For information on purchasing Shares of the Funds call toll free (888)
800-6748. For a free copy of the SAI or other information, call the Funds'
distributor at (207) 879-0001. The SAI has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated into this Prospectus by
reference.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE SYSTEM OR ANY OTHER GOVERNMENT
AGENCY, AND INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. SUMMARY...................................................................... 3

2. INVESTMENT OBJECTIVES........................................................ 6

3. HOW THE FUNDS PURSUE THEIR OBJECTIVES........................................ 6

4. HOW PERFORMANCE IS SHOWN..................................................... 16

5. ORGANIZATION................................................................. 16

6. HOW THE FUNDS ARE MANAGED.................................................... 18

7. ABOUT YOUR INVESTMENT........................................................ 24

8. THE FUNDS' DISTRIBUTIONS AND
CERTAIN TAX INFORMATION...................................................... 25
APPENDIX A................................................................... A-1
Glossary of Investment Terms
APPENDIX B................................................................... B-1
Explanation of Rating Categories
</TABLE>

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<PAGE>
1. SUMMARY

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

INVESTING IN THE FUNDS

You may purchase shares of the Funds through certain broker-dealers, banks and
other financial institutions. While no Fund is intended to provide a complete or
balanced investment program, each can serve as a component of your investment
program.

THE FUNDS

PERFORMA STRATEGIC VALUE BOND FUND seeks total return by investing primarily in
income producing securities. The Fund invests in a broad range of fixed income
instruments in order to create a strategically diversified portfolio of high
quality fixed income investments.

PERFORMA DISCIPLINED GROWTH FUND seeks capital appreciation by investing
primarily in common stocks of larger companies. The Fund invests in companies
that, in the view of the investment adviser, possess above average potential for
growth and which will report a level of corporate earnings that exceeds the
level expected by investors.

PERFORMA SMALL CAP VALUE FUND seeks capital appreciation by investing primarily
in common stocks of smaller companies. The Fund seeks higher growth rates and
greater long-term returns by investing in the stocks of smaller companies that,
in the view of the investment adviser, are undervalued and which will report a
level of corporate earnings that exceeds the level expected by investors.

PERFORMA GLOBAL GROWTH FUND seeks long-term growth of capital by investing
primarily in common stocks of established companies throughout the world,
including the United States. The Fund invests in companies located in developed,
newly industrialized and emerging markets that, in the view of the investment
adviser, have a sustainable competitive advantage and whose growth potential is
undervalued by investors.

STRUCTURE OF THE FUNDS

Each Fund seeks to achieve its investment objective by investing all of its
investable assets in a separate 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 Fund will correspond directly with the investment experience
of its respective Portfolio. See "Organization." The Portfolios in which the
Funds invest are:

<TABLE>
<CAPTION>
FUND CORRESPONDING PORTFOLIO
- ------------------------------------------- -----------------------------------------
<S> <C>
Performa Strategic Value Bond Fund Strategic Value Bond Portfolio
Performa Disciplined Growth Fund Disciplined Growth Portfolio
Performa Small Cap Value Fund Small Cap Value Portfolio
Performa Global Growth Fund Schroder Global Growth Portfolio
</TABLE>

MANAGEMENT OF THE FUNDS

NORWEST INVESTMENT MANAGEMENT, INC. ("Norwest"), a subsidiary of Norwest Bank
Minnesota, N.A. ("Norwest Bank"), is the investment adviser of each Core
Portfolio other than Schroder Global Growth Portfolio and each Fund. Norwest
provides investment advice to various institutions, pension plans and other
accounts and, as of August 31, 1997, managed over $22 billion in assets. Norwest
Bank serves as transfer agent, dividend disbursing agent and custodian of the
Funds, and serves as the custodian of each Core Portfolio other than Schroder
Global Growth Portfolio. See "How the Funds are Managed."

Each Fund incurs investment advisory fees indirectly through the investment
advisory fees paid by its corresponding Core Portfolio.

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<PAGE>
GALLIARD CAPITAL MANAGEMENT, INC. ("Galliard"), an investment advisory
subsidiary of Norwest Bank, is the investment subadviser of Strategic Value Bond
Portfolio. Galliard provides investment advisory services to bank and thrift
institutions, pension and profit sharing plans, trusts and charitable
organizations and corporate and other business entities.

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. ("Schroder"), a wholly owned U.S.
subsidiary of Schroders Incorporated, the wholly owned U.S. holding company
subsidiary of Schroders plc., is the investment adviser of Schroder Global
Growth Portfolio. As of June 30, 1997, Schroder had over $28 billion in assets
under management.

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

Norwest, Schroder, Galliard and Smith (or Norwest and a particular investment
subadviser) are sometimes referred to collectively as the "Advisers."

FUND ADMINISTRATION AND DISTRIBUTION

FORUM ADMINISTRATIVE SERVICES, LLC ("FAS") serves as administrator to the Funds
and also provides administrative services to the Portfolios. Schroder Fund
Advisors Inc. ("Schroder Advisors") serves as the administrator of Schroder
Global Growth Portfolio and FAS serves as that Portfolio's subadministrator. The
manager of the Funds and distributor of their shares is Forum Financial
Services, Inc. ("Forum"). See "How the Funds are Managed - The Funds' Other
Service Providers."

PURCHASE AND REDEMPTION OF SHARES

You may purchase or redeem your shares without a sales or other charge. The
minimum initial investment is $1,000, the minimum subsequent investment is $100
and you may make $100 monthly periodic investments. See "About Your Investment."

DIVIDENDS AND DISTRIBUTIONS

Dividends of net investment income are declared and paid monthly in the case of
PERFORMA STRATEGIC VALUE BOND FUND and declared and paid annually in the case of
all other Funds. Each Fund's net capital gain, if any, is distributed at least
annually. See "The Funds' Distributions and Certain Tax Information."

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 the securities held by its corresponding Portfolio. Upon
redemption, an investment in a Fund may be worth more or less than its original
value. An investment in any Fund involves certain risks, depending on the types
of investments made and the types of investment techniques employed. All
investments made by the Portfolios entail some risk.

Each Fund is designed for the investment of that portion of an investor's funds
that can appropriately bear the special risks associated with the Fund. The
risks of investing in each Fund are more specifically described in "How the
Funds Pursue Their Objectives."

Normally, the value of PERFORMA STRATEGIC VALUE BOND FUNDS' investments will
vary inversely with changes in interest rates. While the Fund invests at least
65% of its assets in investment grade securities (securities rated in the top
four highest ratings categories by a nationally recognized statistical rating
organization ("NRSRO") such as Standard & Poor's), it may invest in lower rated
securities. See "How the Funds Pursue Their Objectives - Performa Strategic
Value Bond Fund - Risks of Non-Investment Grade Securities." In addition,
repayment of principal investment in securities entails certain risks.

4
<PAGE>
Your investment in PERFORMA DISCIPLINED GROWTH FUND, PERFORMA SMALL CAP VALUE
FUND and PERFORMA GLOBAL GROWTH FUND, each of which invests primarily in equity
securities, is subject to the general risks of investing in the stock market.
PERFORMA SMALL CAP VALUE FUND and PERFORMA GLOBAL GROWTH FUND invest in
securities of smaller companies. These investments entail certain additional
risks, including lower trading volumes and, therefore, the potential for greater
price volatility. These Funds are designed for the investment of that portion of
your funds that can appropriately bear the special risks associated with an
investment in smaller market capitalization companies. PERFORMA GLOBAL GROWTH
FUND invests in securities of foreign issuers. These investments entail certain
additional risks, including the risks of foreign political and economic
instability, adverse movements in foreign exchange rates, the imposition or
tightening of exchange controls or other limitations on repatriation of foreign
capital, and changes in foreign governmental attitudes towards private
investment, possibly leading to nationalization, increased taxation or
confiscation of foreign investors' assets.

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

EXPENSES OF INVESTING IN THE FUNDS

Fund costs and expenses are one of several factors to consider when investing.
Your costs and expenses are summarized in the following three tables. The
Shareholder Transaction Expenses table summarizes your transaction costs of
buying and selling Fund shares. The Annual Fund Operating Expenses table
summarizes the expenses you will bear directly or indirectly on your investment
in a Fund and is based on estimated expenses for the Funds' initial fiscal year
of operations ending May 31, 1998. The Examples show your cumulative expenses
attributable to a hypothetical $1,000 investment over specified periods.

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Sales charges on purchases and reinvested distributions None
Deferred sales charges or redemption fees None
Exchange fees None
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets after applicable expense reimbursements)

<TABLE>
<CAPTION>
OTHER
EXPENSES
INVESTMENT (AFTER TOTAL FUND
ADVISORY RULE 12b-1 REIMBURSE- OPERATING
FEES FEES MENTS) EXPENSES
---------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Performa Strategic Value Bond Fund 0.50% None 0.35% 0.85%
Performa Disciplined Growth Fund 0.90% None 0.35% 1.25%
Performa Small Cap Value Fund 0.95% None 0.35% 1.30%
Performa Global Growth Fund 0.90% None 0.55% 1.45%
</TABLE>

This table is provided to help you understand the expenses of investing and sets
forth your share of a Fund's operating expenses. Each Fund's expenses include
the Fund's pro rata portion of all expenses of the Portfolio in which the Fund
invests. "Investment Advisory Fees" are those incurred by the Portfolio in which
the Fund invests. For Performa Global Growth Fund, "Investment Advisory Fees"
includes the administrative services fee payable to Norwest and the
administration fee and portfolio management fee payable to Schroder. "Other
Expenses" are estimated for the current fiscal year and reflect projected
expense reimbursements. Absent projected expense reimbursements, "Other
Expenses" would be 0.52%, 0.60%, 0.55% and 2.02%,

5
<PAGE>
respectively, and "Total Fund Operating Expenses" would be 1.39%, 1.87%, 1.87%
and 2.92%, respectively. Expense reimbursements are voluntary and may be reduced
or eliminated at any time. For a further description of the fees and expenses
incurred in the operation of the Funds. See "How the Funds are Managed."

EXAMPLES

Your investment of $1,000 would incur the following expenses assuming: (1) the
investment of all of the Fund's assets in its corresponding Portfolio, (2) a 5%
annual return, (3) the reinvestment of all your dividends and distributions and
(4) redemption at the end of each period. The example is based on the expenses
listed in the Annual Fund Operating Expenses table.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Performa Strategic Value Bond Fund $ 9 $ 27 $ 47 $ 105
Performa Disciplined Growth Fund $ 13 $ 40 $ 69 $ 151
Performa Small Cap Value Fund $ 13 $ 41 $ 71 $ 157
Performa Global Growth Fund $ 15 $ 46 $ 79 $ 174
</TABLE>

THE EXAMPLE DOES NOT REPRESENT PAST OR FUTURE EXPENSE LEVELS. ACTUAL EXPENSES
AND RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. The five percent annual
return is required by government regulation and does not represent the Fund's
actual returns.

2. INVESTMENT OBJECTIVES

Each Fund pursues its investment objective as listed below in accordance with
its own separate investment policies. No Fund is intended to be a complete
investment program, and there is no assurance that any Fund will achieve its
investment objective.

PERFORMA STRATEGIC VALUE BOND FUND seeks total return by investing primarily in
income producing securities.

PERFORMA DISCIPLINED GROWTH FUND seeks capital appreciation by investing
primarily in common stocks of larger companies.

PERFORMA SMALL CAP VALUE FUND seeks capital appreciation by investing primarily
in common stocks of smaller companies.

PERFORMA GLOBAL GROWTH FUND seeks long-term growth of capital by investing
primarily in common stocks of established companies throughout the world,
including the United States.

3. HOW THE FUNDS PURSUE THEIR OBJECTIVES

STRUCTURE OF THE FUNDS

Each Fund seeks to achieve its objective by investing all of its investable
assets in the Fund's corresponding Portfolio. Each Portfolio has the same
investment objective and substantially similar investment policies as the
corresponding Fund. Accordingly, the investment experience of each Fund will
correspond directly with the investment experience of its corresponding
Portfolio. The Portfolios in which the Funds invest are:

<TABLE>
<CAPTION>
FUND CORRESPONDING PORTFOLIO
- ----------------------------------------- ------------------------------------------------
<S> <C>
Performa Strategic Value Bond Fund Strategic Value Bond Portfolio
Performa Disciplined Growth Fund Disciplined Growth Portfolio
Performa Small Cap Value Fund Small Cap Value Portfolio
Performa Global Growth Fund Schroder Global Growth Portfolio
</TABLE>

6
<PAGE>
By pooling their assets in a Portfolio with other institutional investors, each
of the Funds may be able to achieve certain efficiencies, economies of scale and
enhanced portfolio diversification. Nonetheless, these investments could have
adverse effects on the Funds which investors should consider. Investment
decisions are made by the Advisers of each Portfolio independently. See
"Organization - Core and Gateway Structure."

You should read the "Additional Investment Policies" section and the appendices
in conjunction with this section in order to fully understand the Funds'
investments and risks. Although this section discusses the investment policies
of the Portfolios, it applies equally to the Funds.

PERFORMA STRATEGIC VALUE BOND FUND

Strategic Value Bond Portfolio invests in a broad range of fixed income
instruments including corporate bonds, asset-backed securities, Mortgage-related
securities, U.S. Government Securities, preferred stock, convertible bonds and
foreign bonds in order to create a strategically diversified portfolio of high
quality fixed income investments.

The Portfolio's investments are subject to the various risks of investing in
fixed-income securities. To limit the Portfolio's "credit risk," in general 65%
of the Portfolio's assets will be invested in fixed income securities rated in
one of the three highest rating categories by at least one NRSRO, such as
Moody's Investors Service, Standard & Poor's, Fitch Investors Service, L.P. or
Duff & Phelps Credit Rating Co., or which are unrated and determined by the
investment adviser to be of comparable quality. In addition, the Portfolio will
limit its investment in securities with a less than an investment grade rating
to 20% of the Portfolio's assets. While the average quality of the Portfolio
will vary over an economic cycle, the average rating of the Portfolio's
investments will be "A" or better. A description of the rating categories of
various NRSRO's is contained in Appendix B. Investment grade instruments include
those that are rated in one of four highest long-term rating categories by an
NRSRO or are unrated and determined by the investment adviser to be of
comparable quality.

One of the primary tenets of the Fund is strategic diversification. Toward that
end, the Fund will not invest more than: (1) 75% in corporate bonds, (2) 25% in
one industry of the corporate market, (3) 50% in asset-backed securities, or (4)
60% in mortgage-related securities. U.S. Government securities may be held in
any amount without restriction. With respect to corporate bonds, generally no
more than 5% will be held in one issuer.

7
<PAGE>
The Portfolio may enter into derivative transactions to receive favorable
financing or diversify portfolio risk. The Portfolio may invest in securities
that are restricted as to disposition under the federal securities laws
(sometimes referred as "private placements" or "restricted securities.") In
addition the Portfolio may invest in interest in other investment companies,
which also may be "restricted securities." See "Additional Investment Policies -
Derivative Investments" and "Appendix A - Glossary of Investment Terms -
Futures, Options and Other Derivatives."

RISKS OF INVESTING IN FIXED INCOME SECURITIES. The primary risks of investing in
any fixed income instrument are market risk (the risk of changing interest
rates) and credit risk. In addition, prepayment risk and extension risk exist
for certain types of fixed income instruments in which the Portfolio may invest.

Market risk refers to the change in the market value of fixed income investments
held by a Portfolio, including money market instruments, when there is a change
in interest rates. There is normally an inverse relationship between the market
value of these securities and actual changes in interest rates. Thus, an
increase in interest rates generally produces a decrease in market value of
fixed income securities, while a decrease in interest rates generally produces
an increase in market value of fixed income securities. Moreover, the longer the
remaining maturity of a security, the greater is the affect of interest rate
changes on the market value of the security.

Fixed income investments are subject to CREDIT RISK which refers to the ability
of the debtor (the issuer of the instrument) and any other obligor, to pay
principal and interest on the debt as it becomes due. Changes in the ability of
an issuer to make payments of interest and principal and the market's perception
of an issuer's creditworthiness will affect the market value of the debt
securities of that issuer. Obligations of issuers of debt securities are 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.

Mortgage-related and asset-backed securities are subject to PREPAYMENT RISK,
which refers to the fact that holders of these instruments may have all or any
part of their principal investment returned by the issuer as the mortgages or
other assets backing the investment are paid off. Prepayments during times of
declining interest rates tend to lower the return of a Fund. Prepayments also
may result in losses to a Fund if the securities were acquired at a premium
(that is, for an amount above the security's par value).

Certain debt instruments may also be subject to EXTENSION RISK, which refers to
the change in total return on a debt instrument resulting from extension or
abbreviation of the instrument's maturity.

RISKS OF NON-INVESTMENT GRADE SECURITIES. The Portfolio may invest up to 20% of
its assets in non-investment grade securities rated "C" and above (commonly
referred to as "junk bonds"). These securities have speculative or predominantly
speculative characteristics and provide poor protection for payment of principal
and interest, but may have greater potential for capital appreciation than do
higher quality securities. Non-investment grade securities involve greater risk
of default or price changes due to changes in the issuers' creditworthiness than
do investment grade securities. The market for these securities may be thinner
and less active than that for higher quality securities, which may affect the
price at which the lower rated securities can be sold. In addition, the market
prices of lower rated securities may fluctuate more than the market prices of
higher quality securities and may decline significantly in periods of general
economic difficulty.

THE EQUITY FUNDS

Each of Disciplined Growth Portfolio, Small Cap Value Portfolio, and Global
Growth Portfolio (the "Equity Portfolios") invest primarily in common stock. The
fundamental risk of investing in common stock is the risk that the value of the
stock might decrease. Stock values fluctuate in response to the activities of an
individual company or in response to general market and/or economic conditions.
Historically, common

8
<PAGE>
stocks have provided greater long-term returns and have entailed greater
short-term risks than preferred stocks, fixed-income and money market
investments. Common stocks in which a Portfolio may invest may be traded on a
securities exchange or in the over-the-counter market and, particularly for
smaller and foreign companies, may not be traded every day in the volume typical
of securities traded on a major U.S. national securities exchange. As a result,
disposition by a Portfolio of a security to meet redemptions by interest holders
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. 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.

PERFORMA DISCIPLINED GROWTH FUND

Disciplined Growth Portfolio seeks greater long-term returns by investing
primarily in the common stock of companies that, in the view of the investment
adviser, possess above average potential for growth. The average market
capitalization of the companies in which the Portfolio invests will be greater
than $5 billion.

The Portfolio seeks to identify growth companies that will report a level of
corporate earnings that exceeds the level expected by investors. In seeking
these companies, the investment adviser uses both quantitative and fundamental
analysis. Among the factors that the investment adviser considers are changes of
earnings estimates by investment analysts, the recent trend of company earnings
reports, and an analysis of the fundamental business outlook for the company.
The investment adviser uses a variety of valuation measures to determine whether
the share price already reflects any positive fundamentals identified by the
investment adviser. The investment adviser attempts to constrain the variability
of the investment returns by employing risk control screens for price
volatility, financial quality and valuation and to the extent possible, gives
equal weighting to portfolio securities.

PERFORMA SMALL CAP VALUE FUND

Small Cap Value Portfolio seeks higher growth rates and greater long-term
returns by investing primarily in the common stock of smaller companies that, in
the view of the investment adviser, are undervalued. Under normal circumstances,
the Portfolio will invest substantially all of its assets, but not less than 65%
of its net assets, in securities of companies with a market capitalization which
reflects the market capitalization of companies included in the Russell 2000
Index.

RISKS OF INVESTING IN SMALLER COMPANIES. Investment in smaller capitalization
companies carries greater risk than investment in larger capitalization
companies. Smaller capitalization companies generally experience higher growth
rates and higher failure rates than do larger capitalization companies. The
trading volume of smaller capitalization companies' securities is normally lower
than that of larger capitalization companies. Heavy trading 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).
Accordingly, the net asset value of the Fund can be expected to fluctuate more
that that of other funds that invest in larger capitalization companies.

9
<PAGE>
Smaller companies 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 the
Portfolio's ability to sell the securities and can result in such securities
being priced lower than otherwise might be the case. If other institutional
investors trade in the securities of a smaller company in which the Portfolio
holds an interest, the Portfolio may be forced to dispose of its holdings at
prices lower than might otherwise be obtained.

PERFORMA GLOBAL GROWTH FUND

Global Growth Portfolio invests in common stocks of established companies
located in the developed, newly industrialized and emerging markets. Under
normal market conditions, the Portfolio will invest at least 65% of the value of
its total assets in companies located in at least five countries, one of which
will be the United States. The Portfolio can purchase stocks without regard to a
company's market capitalization, although investments will generally be
concentrated in the larger and, to a lesser extent, medium-sized companies
relative to the particular market. The percentage of the Portfolio's assets
invested in U.S. and non-U.S. stocks will vary over time in accordance with the
outlook of the investment adviser.

Stock selection is at the heart of the investment adviser's investment process.
The investment adviser emphasizes fundamental company analysis in its approach
to selecting investments for the Portfolio. The investment adviser seeks
companies that it believes have a sustainable competitive advantage and whose
growth potential is undervalued by investors. In selecting companies for
investment, the investment adviser considers historical growth rates and future
growth prospects, management capability, competitive position in both domestic
and export markets and other factors. The investment adviser will seek to add
value through active geographic allocation. The investment adviser's allocation
decisions are based upon its assessment of the likelihood that the country will
have a favorable long-term business environment in which corporate growth will
not be impeded by adverse macroeconomic or political factors.

The Portfolio may invest in debt securities issued or guaranteed by foreign
governments (including countries, provinces and municipalities) or their
agencies and instrumentalities; debt securities issued or guaranteed by
international organizations designated or supported by multiple foreign
governmental entities (which are not obligations of foreign governments) to
promote economic reconstruction or development; and debt securities issued by
corporations or financial institutions.

GEOGRAPHIC CONCENTRATION. The Portfolio may invest more than 25% of its total
assets in issuers located in any one country and to the extent that it does so,
is susceptible to a range of factors that could adversely affect that country,
including the political and economic developments and foreign exchange rate
fluctuations discussed below. As a result of investing substantially in one
country, the value of the Portfolio's assets may fluctuate more widely than the
value of shares of a comparable fund with a lesser degree of geographic
concentration.

RISKS OF INTERNATIONAL INVESTING. All investments, domestic and foreign, involve
risks. Investment in the securities of foreign issuers may involve risks in
addition to those normally associated with investments in the securities of U.S.
issuers. While the Portfolio will generally invest only in securities of
companies and governments in countries that the investment adviser, in its
judgment, considers both politically and economically stable, 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.
Foreign investments are subject to the risk of changes in foreign governmental
attitudes towards private investment that could lead to nationalization,
increased taxation or confiscation of Portfolio assets.

Moreover, (1) dividends payable on foreign securities may be subject to foreign
withholding taxes, thereby reducing the income earned by the Portfolio; (2)
commission rates payable on foreign portfolio transactions

10
<PAGE>
are generally higher than in the United States; (3) accounting, auditing and
financial reporting standards differ from those in the United States, which
means that less information about foreign companies may be available than is
generally available about issuers of comparable securities in the United
States.; (4) foreign securities often trade less frequently and with lower
volume than U.S. securities and consequently may exhibit greater price
volatility; and (5) foreign securities trading practices, including those
involving securities settlement, may expose the Portfolio to increased risk in
the event of a failed trade or the insolvency of a foreign broker-dealer or
registrar.

EMERGING MARKETS. Investing in emerging market countries generally presents
greater risk than does other foreign investing. In any emerging market country,
there is the increased possibility of expropriation of assets, confiscatory
taxation, nationalization of companies or industries, foreign exchange controls,
foreign investment controls on daily stock market movements, default in foreign
government securities, political or social instability, or diplomatic
developments that could affect investments in those countries. In the event of
expropriation, nationalization or other confiscation, the Portfolio could lose
its entire investment in the country involved. The economies of developing
countries are more likely to be adversely affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade. There may also be less monitoring and regulation of emerging markets and
the activities of brokers there. Investing may require that the Portfolio adopt
special procedures, seek local government approvals or take other actions that
may incur costs for the Portfolio.

Certain emerging market countries may restrict investment by foreign investors.
These restrictions or controls may at times limit or preclude investment in
certain securities and may increase the costs and expenses of the Portfolio.
Several emerging market countries have experienced high, and in some periods
extremely high, rates of inflation in recent years. Inflation and rapid
fluctuations in inflation rates may adversely affect these countries' economies
and securities markets. Further, inflation accounting rules in some emerging
market countries may indirectly generate losses or profits for certain emerging
market companies.

CURRENCY FLUCTUATIONS AND DEVALUATIONS. Because the Portfolio will invest
heavily in non-U.S. currency-denominated securities, changes in foreign currency
exchange rates will affect the value of the Portfolio's investments. A decline
against the dollar in the value of currencies in which the Portfolio's
investments are denominated will result in a corresponding decline in the dollar
value of the Portfolio's assets. This risk is heightened in some emerging market
countries.

The Portfolio may at times have to liquidate portfolio securities in order to
acquire sufficient U.S. dollars to fund redemptions of the Funds or other
investors or to purchase the U.S. dollars in order to pay its expenses. Changes
in foreign currency exchange rates may contribute to the need to liquidate
portfolio securities.

FOREIGN EXCHANGE CONTRACTS. Because the Portfolio will invest in non-U.S. dollar
denominated securities, changes in foreign currency exchange rates will affect
the value of the Portfolio's investments. A decline against the dollar in the
value of currencies in which the Portfolio's investments are denominated will
result in a corresponding decline in the dollar value of its assets. This risk
tends to be heightened in the case of investing in certain emerging market
countries. For example, some currencies of emerging market countries have
experienced repeated devaluations relative to the U.S. dollar, and major
adjustments have periodically been made in certain of such currencies. Some
emerging market countries may also have managed currencies that do not float
freely against the dollar. 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. When investing in foreign
securities, the Portfolio usually effects currency exchange transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign exchange
market. The Portfolio incurs foreign exchange expenses in converting assets from
one currency to another.

11
<PAGE>
The Portfolio may enter into foreign currency 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. 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 and may expose the Portfolio to the risk
that the counterparty is unable to perform. Although such contracts may reduce
the risk of loss to the Portfolio due to a decline in the value of the currency
sold, they also limit any possible gain that might result should the value of
such currency rise. The Portfolio does not intend to maintain a net exposure to
such contracts where the fulfillment of obligations under such contracts would
obligate it to deliver an amount of foreign currency in excess of the value of
its portfolio securities or other assets denominated in the currency. The
Portfolio will not enter into these contracts for speculative purposes and will
not enter into non-hedging currency contracts. These contracts involve a risk of
loss if the investment adviser fails to predict currency values correctly. The
Portfolio has no present intention to enter into currency futures or options
contracts, but may do so in the future.

DEBT SECURITIES. The Portfolio may seek capital appreciation through investment
in convertible or non-convertible debt securities. Capital appreciation in debt
securities may arise as a result of a favorable change in relative foreign
exchange rates, in relative interest rate levels, or in the creditworthiness of
issuers. The receipt of income from these securities is incidental to the
Portfolio's objective of long-term capital appreciation. Such income can be
used, however, to offset the operating expenses of the Portfolio. The Portfolio
will not seek to benefit from anticipated short-term fluctuations in currency
exchange rates. The Portfolio may invest to a certain extent in debt securities
in order to participate in debt-to-equity conversion programs incident to
corporate reorganizations.

ADDITIONAL INVESTMENT POLICIES

Each Fund's (and each Portfolio's) investment objective and all investment
policies of the Funds (and 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 Portfolio). A majority of outstanding voting
securities means the lesser of 67% of the shares present or represented at a
shareholders' meeting at which the holders of more than 50% of the outstanding
shares are present or represented, or more than 50% of the outstanding shares.
Except as otherwise indicated, investment policies of the Funds are not
fundamental and may be changed by the Board of Trustees of the Trust (the
"Board") without shareholder approval. Likewise, nonfundamental investment
policies of a Portfolio may be changed by that investment company's board of
trustees without shareholder approval. See "Appendix A" and the SAI for further
information.

BORROWING AND LENDING. As a fundamental policy, each Portfolio may borrow money
but will limit borrowings to amounts not in excess of 33 1/3% of the value of
the Portfolio's total assets. Borrowing for other than temporary or emergency
purposes or meeting redemption requests is not expected to exceed 5% of the
value of a Portfolio's assets. Certain transactions, such as reverse repurchase
agreements, that are similar to borrowings are not treated as borrowings to the
extent that the are fully collateralized. Each Portfolio may lend its investment
securities to brokers, dealers and financial institutions for the purpose of
realizing additional income. The total market value of securities loaned will
not at any time exceed one-third of the value of the total assets of the
Portfolio. Lending portfolio securities may result in the possible loss of
rights in the collateral should the borrower fail financially.

DIVERSIFICATION AND CONCENTRATION. Each Portfolio is diversified as that term is
defined in the Investment Company Act of 1940 (the "1940 Act"). As a fundamental
policy, with respect to 75% of its assets, no Portfolio may purchase a security
(other than a U.S. Government Security or a security of an investment company)
if, as a result: (1) more than 5% of the Portfolio's total assets would be
invested in the securities of a single issuer; or (2) the Portfolio would own
more than 10% of the outstanding voting securities of any

12
<PAGE>
single issuer. No Portfolio may concentrate its assets in the securities of
issuers in any one industry. As a fundamental policy, no Portfolio may purchase
a security if, as a result, more than 25% of the value of the Portfolio'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, or repurchase agreements covering
U.S. Government Securities.

U.S. GOVERNMENT SECURITIES. U.S. Government Securities are obligations issued or
guaranteed as to principal and interest by the United States Government, its
agencies or instrumentalities. U.S. Government Securities include obligations
backed by the full faith and credit of the U.S. Government as well as securities
supported primarily or solely by the creditworthiness of the agency or
instrumentality issuing the security, such as securities of the Federal National
Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation
("Freddie Mac") and the Student Loan Marketing Association ("Sallie Mae"). There
is no guarantee that the U.S. Government will support securities not backed by
its full faith and credit.

ILLIQUID SECURITIES AND RESTRICTED SECURITIES. Illiquid securities are
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount at which the Portfolio has valued the
securities and include, among other things, repurchase agreements not entitling
the holder to payment within seven days and securities subject to restrictions
on resale, I.E., restricted securities, (other than those determined to be
liquid by the investment advisers). Limitations on resale may have an adverse
effect on the marketability of portfolio securities, and a Portfolio might also
have to register securities subject to restrictions on resale in order to
dispose of them, resulting in expense and delay. A Portfolio 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.

TEMPORARY DEFENSIVE POSITION. When business or financial conditions warrant,
each Portfolio may assume a temporary defensive position and invest without
limit in cash or prime quality cash equivalents, including: (1) short-term U.S.
Government Securities; (2) certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of commercial banks doing business in the
United States; (3) commercial paper; (4) repurchase agreements; and (5) shares
of "money market funds" registered under the 1940 Act within the limits
specified therein. During periods when and to the extent that a Portfolio has
assumed a temporary defensive position, it may not be pursuing its investment
objective. Apart from temporary defensive purposes, a Portfolio may at any time
invest a portion of its assets in cash and cash equivalents or, in other
investment companies to the extent permitted under the 1940 Act. Except during
periods when a Portfolio assumes a temporary defensive position, each Equity
Portfolio will have at least 65% of its total assets invested in common stock
and Strategic Value Bond Portfolio will have at least 65% of its total assets
invested in bonds.

REPURCHASE AGREEMENTS. Repurchase Agreements involve the purchase of a security
by a Portfolio and a simultaneous agreement by the seller (generally a bank or
dealer) to repurchase the security from the Portfolio at a specified date or
upon demand. This technique offers a method of earning income on idle cash.
Repurchase agreements involve the risk that the seller will fail to repurchase
the security as agreed. In that case, the Portfolio will bear the risk of market
value fluctuations until the security can be sold and may encounter delays and
incur costs in liquidating the security.

COMMON AND PREFERRED STOCK AND WARRANTS. Each Equity Portfolio may invest in
common and preferred stock. Common stockholders are the owners of the company
issuing the stock and, accordingly, vote on various corporate governance matters
such as mergers. They are not creditors of the company, but rather, upon
liquidation of the company, are entitled to their pro rata share of the
company's assets after creditors (including fixed income security holders) and
preferred stockholders, if any, 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 also a shareholder and not a
creditor of the company. Equity

13
<PAGE>
securities owned by a Portfolio may be traded in the over-the-counter market or
on a securities exchange, but may not be traded every day or in the volume
typical of securities traded on a major U.S. national securities exchange. As a
result, disposition by an Equity Portfolio of a security to meet withdrawals by
interest holders or otherwise may require a 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. The market
value of all securities, including equity securities, is based upon the market's
perception of value and not necessarily the "book value" of an issuer or other
objective measure of a company's worth.

The Equity Portfolio(s) may also 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.

MORTGAGE-RELATED SECURITIES. Strategic Value Bond Portfolio may invest in
mortgage-related securities, which represent an interest in a pool of mortgages
originated by lenders such as commercial banks, savings associations and
mortgage bankers and brokers. Mortgage-related securities may be issued by
governmental or government-related entities or by non-governmental entities.
Interests in mortgage-related securities differ from other forms of debt
securities. Mortgage-related 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.

The market for certain mortgage-related securities may be limited. This may
increase the volatility of the price of a particular security and make it
difficult for the portfolio to sell a security.

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.

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

ARMs may have less risk of a decline in value during periods of rapidly rising
rates, but they may also have less potential for capital appreciation than other
debt securities of comparable maturities due to the periodic adjustment of the
interest rate on the underlying mortgages and due to the likelihood of increased
prepayments of mortgages as interest rates decline. Furthermore, during periods
of declining interest rates, income to a Fund will decrease as the coupon rate
resets to reflect the decline in interest rates. During periods of rising
interest rates, changes in the coupon rates of the mortgages underlying a Fund's
ARMs may lag

14
<PAGE>
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.

Stripped mortgage-related securities are classes of mortgage-related securities
that receive different proportions of the interest and principal distributions
from the underlying assets. 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
underlying 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, the Portfolio does not purchase IOs or POs.

ASSET-BACKED SECURITIES. Strategic Value Bond Portfolio may invest in
asset-backed securities, which represent direct or indirect participations in,
or are secured by and payable from, assets other than mortgage-related assets
such as motor vehicle installment sales contracts, leases of various types of
real and personal property and receivables from revolving credit card
agreements. Asset-backed securities, including adjustable rate asset-backed
securities, have yield characteristics similar to those of mortgage-related
securities and, accordingly, are subject to many of the same risks.

Assets are securitized through the use of trusts and special purpose
corporations that issue securities that are often backed by a pool of assets
representing the obligations of a number of different parties. Asset-backed
securities do not always have the benefit of a security interest in collateral
comparable to the security interests associated with mortgage-related
securities. As a result, the risk that recovery on repossessed collateral might
be unavailable or inadequate to support payments on asset-backed securities is
greater for asset-backed securities than for mortgage-related securities. In
addition, the market experience in these asset-backed securities is limited and
the market may not be able to sustain liquidity through all phases of an
interest rate or economic cycle.

DERIVATIVE INVESTMENTS. Each Portfolio may from time to time use various
derivative instruments to protect its investment portfolio from movements in
securities prices and interest rates. Besides Performa Global Growth Portfolio,
the Portfolios may also use a variety of currency hedging techniques, including
forward currency contracts, to manage exchange rate risk when investing in
securities denominated in foreign currencies. See "How the Funds Pursue Their
Objectives - Performa Global Growth Fund - Foreign Exchange Contracts."

Derivative instruments include futures contracts on securities, financial
indices and foreign currencies, options on contracts and on securities,
financial indices and foreign currencies and interest rate swaps and
swap-related products. The Portfolios use derivative instruments primarily to
hedge the value of its portfolio against potential adverse movements in
securities prices, foreign currency markets or interest rates. To a limited
extent, a Portfolio may also use derivative instruments for non-hedging purposes
such as seeking to increase the Portfolio's income or otherwise seeking to
enhance return. See "Appendix A" and the SAI for a more detailed discussion of
these instruments.

The use of derivative instruments exposes a Portfolio to additional investment
risks and transaction costs. Risks inherent in the use of derivative instruments
include: (1) the risk that interest rates, securities prices and currency
markets will not move in the directions that the portfolio manager anticipates;
(2) imperfect correlation between the price of derivative instruments and
movements in the prices of the securities, interest rates or currencies being
hedged; (3) the fact that skills needed to use these strategies are different
from those needed to select portfolio securities; (4) inability to close out
certain hedged positions to avoid adverse tax consequences; (5) the possible
absence of a liquid secondary market for any particular instrument and possible
exchange-imposed price fluctuation limits, either of which may make it difficult
or impossible to close out a position when desired; (6) leverage risk, that is,
the risk that adverse price movements in an instrument can result in a loss
substantially greater than the Portfolio's initial investment

15
<PAGE>
in that instrument (in some cases, the potential loss is unlimited); and (7)
particularly in the case of privately negotiated instruments, the risk that the
counterparty will fail to perform its obligations, which could leave the
Portfolio worse off than if it had not entered into the position.

Although the Portfolios believe that the use of derivative instruments will be
beneficial, a Portfolio's performance could be worse than if the Portfolio had
not used such instruments if the investment adviser's judgment proves incorrect.

4. HOW PERFORMANCE IS SHOWN

Fund performance figures are based upon historical results and are not intended
to indicate future performance. Investment returns and net asset value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.

This section will help you understand various terms that are commonly used to
describe the Funds' performance. You may see references to these terms in the
Funds' advertisements and in general media articles. These advertisements may
include comparisons of the Funds' performance to the performance of other mutual
funds, mutual fund averages or recognized stock market indices. The Funds may
measure performance in terms of yield or total return.

Cumulative total return represents the actual rate of return on an investment
for a specified period. Cumulative total return is generally quoted for more
than one year (i.e., the life of the Fund), and does not show interim
fluctuations in the value of an investment.

Average annual total return represents the average annual percentage change of
an investment over a specified period. It is calculated by taking the cumulative
total return for the stated period and determining what constant annual return
would have produced the same cumulative return. Average annual returns for more
than one year tend to smooth out variations in the Fund's return and are not the
same as actual annual results.

Yield shows the rate of income a Fund earns on its investments as a percentage
of the Fund's share price. It is calculated by dividing the Fund's net
investment income for a 30-day period by the average number of shares entitled
to receive dividends and dividing the result by the Fund's net asset value per
share at the end of the 30-day period. Yield does not include changes in NAV.
Generally, yields are calculated according to standardized SEC formulas and may
not equal the income on an investor's account. Yield is usually quoted on an
annualized basis. An annualized yield represents the amount you would earn if
you remained in a Fund for a year and the Fund continued to have the same yield
for the entire year.

5. ORGANIZATION

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; the costs of doing so will
be borne by the Trust. As of the date of this Prospectus, each Fund offers one
class of shares. The Trust currently offers thirty-nine separate series.

VOTING AND OTHER RIGHTS

Each share has one vote, with fractional shares voting proportionally. Shares of
the Trust will vote together without regard to series or classes of shares on
all matters except: (1) when required by the 1940 Act or when the Trustees have
determined that the matter affects the interests of one or more series or
classes materially differently, shares will be voted by individual series or
class; and (2) when the Trustees have

16
<PAGE>
determined that the matter affects only the interest of one or more series or
classes, only shareholders of that series or class shall be entitled to vote
thereon. Shares are freely transferable, are entitled to dividends as declared
by the Trustees. If a Fund were liquidated, its shareholder would receive the
net assets of the Fund.

Delaware law does not require the Trust to hold annual meetings of shareholders,
and it is anticipated that shareholder meetings will be held only when
specifically required by federal or state law. Shareholders (and Trustees) have
available certain procedures for the removal of Trustees. There are no
conversion or preemptive rights in connection with shares of the Trust. All
shares when issued in accordance with the terms of the offering will be fully
paid and nonassessable. Shares are redeemable at net asset value, at the option
of the shareholder. 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 Portfolio normally will not hold meetings of investors except as required
by the 1940 Act. Each investor in a Portfolio will be entitled to vote in
proportion to its relative beneficial interest in the 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 Portfolio in proportion to the
votes cast by its shareholders. If there are other investors in a Portfolio,
there can be no assurance that any issue that receives a majority of the votes
cast by Fund shareholders will receive a majority of votes cast by all investors
in the Portfolio; indeed, if other investors hold a majority interest in the
Portfolio, they could hold have voting control of the Portfolio.

From time to time, certain shareholders may own a large percentage of the Shares
of a Fund and, accordingly, may be able to greatly affect (if not determine) the
outcome of a shareholder vote. Due to its initial investment in each Fund, prior
to the public offering of each Fund, Forum may be deemed to control each Fund.

CORE AND GATEWAY STRUCTURE

Each Fund seeks to achieve its investment objective by investing all of its
investable assets in its corresponding Portfolio, that has the same investment
objective and substantially identical investment policies as the Fund.
Accordingly, each Portfolio directly acquires portfolio securities and a Fund
acquires an indirect interest in those securities. Each Portfolio (other than
Schroder Global Growth Portfolio) is a separate series of Core Trust (Delaware)
("Core Trust"), a business trust organized under the laws of the State of
Delaware in 1994. Schroder Global Growth Portfolio is a separate series of
Schroder Capital Funds ("Schroder Core"), a business trust organized under the
laws of the State of Delaware in 1995. Core Trust and Schroder Core are
registered under the 1940 Act as open-end, management, investment companies. The
assets of each Portfolio belong only to, and the liabilities of each Portfolio
are borne solely by, that Portfolio and no other portfolio of Core Trust or
Schroder Core, as applicable.

THE PORTFOLIOS. A Fund's investment in a Portfolio is in the form of a
non-transferable beneficial interest. All investors in a Portfolio will invest
on the same terms and conditions and will pay a proportionate share of the
Portfolio's expenses.

The Portfolios do not sell their shares directly to members of the general
public. Another investor in a Portfolio, such as an investment company, that
might sell its shares to members of the general public would not be required to
sell its shares at the same public offering price as 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 Portfolio. Information regarding any such funds is
available from Core Trust by calling Forum at (207) 879-1900.

CERTAIN RISKS OF INVESTING IN PORTFOLIOS. A Fund's investment in a Portfolio may
be affected by the actions of other large investors in that Portfolio. For
example, if Disciplined Growth Portfolio had a large investor other than
Performa Disciplined Growth Fund that redeemed its interest, Disciplined Growth
Portfolio's remaining investors (including Disciplined Growth Fund) might, as a
result, experience higher pro rata

17
<PAGE>
operating expenses, thereby producing lower returns. As there may be other
investors in a 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 Portfolio; indeed, other investors holding a
majority interest in a Portfolio could have voting control of the Portfolio.

The Board retains the right to withdraw each Fund's investment in a Portfolio at
any time, and the Fund could thereafter invest directly in individual securities
or could re-invest its assets in one or more other Core Portfolio. A Fund might
withdraw its investment from a Portfolio, for example, if there were other
investors in the Portfolio with power to, and who did by a vote of all investors
(including the Fund), change the investment objective or policies of the
Portfolio in a manner not acceptable to the Board. A withdrawal could result in
a distribution in kind of portfolio securities (as opposed to a cash
distribution) by the Portfolio. That distribution could result in a less
diversified portfolio of investments for the Fund and could affect adversely the
liquidity of the Fund's portfolio. If 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 Portfolio, the Board would consider what
action might be taken, including the management of the Fund's assets directly by
Norwest or the investment of the Fund's assets in another pooled investment
entity. The inability of the Fund to find a suitable replacement investment, in
the event the Board decided not to permit Norwest to manage the Fund's assets
directly, could have a significant impact on shareholders of the Fund.

6. HOW THE FUNDS ARE MANAGED

TRUSTEES

The Board of Trustees oversees the business affairs of the Funds and is
responsible for major decisions relating to each Fund's investment objective and
policies. 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. A board of trustees for each Core Trust (each a
"Core Board") performs similar functions with respect to the Portfolios of that
investment company. The Board also monitors the activities of each Portfolio and
its service providers.

INVESTMENT ADVISORY SERVICES

Norwest Investment Management, Inc. Subject to the general supervision of the
Core Board, Norwest makes investment decisions for the Portfolios (except for
Global Growth Portfolio) and continuously reviews, supervises and administers
each Portfolio's investment program or oversees the investment decisions of the
subadvisers, as applicable. Norwest, which is located at Norwest Center, Sixth
Street and Marquette, Minneapolis, Minnesota 55479, is an indirect subsidiary of
Norwest Corporation, a multi-bank holding company that was incorporated under
the laws of Delaware in 1929. As of June 30, 1997, Norwest Corporation had
assets of $83.6 billion, which made it the 11th largest bank holding company in
the United States. As of that date, Norwest Corporation and its affiliates
managed assets with a value of approximately $52.9 billion.

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

To assist Norwest, the Portfolios and Norwest have retained the services of
three subadvisers. The subadvisers make investment decisions for, and
continuously review, supervise and administer, that portion of a Portfolio's
assets that Norwest believes should be managed by the subadviser. Norwest
supervises the performance of the subadvisers.

GALLIARD CAPITAL MANAGEMENT, INC. Galliard, which is located at 800 LaSalle
Avenue, Suite 2060, Minneapolis, Minnesota, is a registered investment adviser
that specializes in fixed income management. The firm

18
<PAGE>
manages assets on the premise that outstanding performance is achieved through
fundamental security analysis and strategic portfolio diversification. As of
August 31, 1997, Galliard had over $3.1 billion in assets under management.
Galliard is the subadviser of Strategic Value Bond Portfolio.

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. Schroder, whose principal
business address is 787 7th Avenue, 34th Floor, New York, New York 10019, is a
registered investment adviser. Subject to the general supervision of the Core
Board for Global Growth Portfolio, Schroder makes investment decisions for the
Portfolio and continuously reviews, supervises and administers the Portfolio's
investment program. Schroder is a wholly owned U.S. subsidiary of Schroders
Incorporated (doing business in New York State as Schroders Holdings), the
wholly owned U.S. holding company subsidiary of Schroders plc. Schroders plc is
the holding company parent of a large world-wide group of banks and financial
services companies (referred to as the "Schroder Group") with associated
companies and branch and representative offices in eighteen countries. The
Schroder Group specializes in providing investment management services. As of
June 30, 1997, Schroder Group had over $175 billion in assets under management.

SMITH ASSET MANAGEMENT GROUP, LP. Smith Group, whose principal business address
is 500 Crescent Court, Suite 250, Dallas, Texas, is a registered investment
adviser. Smith group provides investment management services to company
retirement plans, foundations, endowments, trust companies, and high net worth
individuals. As of August 31, 1997, the Smith Group managed over $230 million in
assets. Smith Group is the subadviser of Disciplined Growth Portfolio and Small
Cap Value Portfolio.

PORTFOLIO MANAGERS

The following persons are primarily responsible for the management of the
Portfolios' assets and have served as the portfolio managers since the inception
of the Portfolios.

PERFORMA STRATEGIC VALUE BOND FUND (Strategic Value Bond Portfolio). The
investment management team of Richard Merriam, John Huber and David Yim at
Galliard Capital Management. Mr. Merriam, CFA, has been a Principal in the firm
since 1995 and is responsible for Galliard's investment process and strategy.
Prior to joining Galliard, Mr. Merriam was Chief Investment Officer of Insight
Investment Management. Prior thereto, he served as a Senior Vice President at
Washington Square Capital where he oversaw management of nearly $5.0 billion in
assets. He obtained a B.A. from the University of Michigan and an M.B.A. from
the University of Minnesota. Mr. Huber has been a Portfolio Manager and Director
of Trading at Galliard since 1995 and has been actively involved in the
management of the Norwest Advantage Stable Income Fund and the Norwest Advantage
Diversified Bond Fund. He has over seven years' investment management experience
and has obtained a B.A. from the University of Iowa and an M.B.A. from the
University of Minnesota. Mr. Yim has been a Portfolio Manager and Director of
Investment Research since 1995. Prior to joining Galliard, he worked for
American Express Financial Advisors for 6 years, most recently as a Research
Analyst focusing on the Insurance and Finance Industries. He obtained a B.A.
from Middlebury College and an M.B.A. from the University of Minnesota.

PERFORMA DISCIPLINED GROWTH FUND (Disciplined Growth Portfolio) and PERFORMA
SMALL CAP VALUE FUND (Small Cap Value Portfolio). Stephen S. Smith, CFA. Mr.
Smith is the Chief Investment Officer for Smith Group and is a principal in the
firm. He has held this position since November, 1995. Prior thereto, Mr. Smith
served as senior portfolio manger with NationsBank where he managed
approximately $1 billion of client assets. At NationsBank, Mr. Smith held a
variety of management positions including manager of the institutional asset
management group, manager of the disciplined equity style used in a mutual fund
and collective investment fund and member of the Investment Policy Committee. At
NationsBank he also served as sub-adviser for an identified segment in the
disciplined equity style for an unaffiliated mutual fund. His educational
background includes a B.S. in Industrial Engineering and an M.B.A., both
received from the University of Alabama. He was awarded the Chartered Financial
Analyst (CFA) designation in 1981.

PERFORMA GLOBAL GROWTH FUND (Schroder Global Growth Portfolio). The investment
management team of Michael Perelstein and Paul Morris (with the assistance of a
Schroder investment committee). Mr. Perelstein

19
<PAGE>
has been a Senior Vice President of Schroder since January 2, 1997. Prior
thereto, he was a Managing Director at MacKay Shields. Mr. Perelstein has more
than twelve years of international and global investment experience. Mr. Morris
has been a Senior Vice President of SCMI and a Director of Schroder Capital
Management Inc. since January 1997. Prior thereto he was Principal and Senior
Portfolio Manager at Weiss Peck & Greer, L.L.C.; Managing Director (Equity
Division) UBS Asset Management and Equity Portfolio Manager at Chase Investors
Management Corp.

BACKGROUND OF SMITH GROUP PERFORMANCE

The following table sets forth composite performance data relating to the
historical performance of separate accounts and mutual fund portfolios primarily
managed by Stephen Smith, the portfolio manager of Disciplined Growth Portfolio
and Small Cap Value Portfolio, since the dates indicated, that have investment
objectives, policies, strategies and risks substantially similar to those of the
Portfolios. The data are provided to illustrate the past performance of Mr.
Smith in managing substantially similar accounts as measured against specified
market indices and does not represent the performance of the Portfolios.
Investors should not consider this performance data as an indication of future
performance of the Portfolios, the Smith Group or Mr. Smith.

Mr. Smith's composite performance data were calculated on a total return basis
and include all dividends and interest, accrued income and realized and
unrealized gain and loss. All returns reflect the deduction of the highest
effective investment advisory fees, brokerage commissions and execution costs
paid by the investment adviser's private accounts, without provision for federal
or state income taxes. Custodial fees, if any, were not included in the
calculation. Account fees vary depending on, among other things, the applicable
fee schedule, portfolio size and nature of the account. Mr. Smith's fees are
available on request. Mr. Smith's composites include all actual, fee-paying,
discretionary institutional private accounts and mutual fund portfolios managed
by Mr. Smith that have substantially the same investment objectives and
policies. Securities transactions are accounted for on the trade date and
accrual accounting is used. Cash and equivalents are included in performance
returns. The monthly returns of Mr. Smith's composites combine the individual
accounts' returns (calculated on a time-weighted rate of return) by
asset-weighing each individual account's asset value as of the beginning of the
month. Quarterly and yearly returns are calculated by geometrically linking the
monthly and quarterly returns, respectively.

The institutional private accounts that are included in Mr. Smith's composites
are not subject to certain investment limitations, diversification requirements,
specific tax restrictions and investment limitations imposed on the Portfolios
by the 1940 Act or the Internal Revenue Code. Consequently, the performance
results for Mr. Smith's composites could have been adversely affected if the
institutional private accounts included in the composite had been regulated as
investment companies.

The investment results of Mr. Smith's composites presented below are unaudited
and do not represent the past performance of nor predict the future returns that
might be experienced by the Portfolios or an individual investor investing in
the Performa Disciplined Growth Fund or the Performa Small Cap Value Fund.
Investors should also be aware that the use of a methodology different from that
used below to calculate performance could result in different performance data.

<TABLE>
<CAPTION>
MR. SMITH'S COMPOSITE FOR THE
DISCIPLINED GROWTH STYLE(2) S&P 500 INDEX(3)
-------------------------------------- -----------------
<S> <C> <C>
1995 38.05% 37.54%
1996 31.26% 22.99%
1997 to Date(1) 42.94% 29.58%
1 Year(1) 53.62% 40.43%
2 Years(1) 37.38% 29.97%
Since Inception
1/1/95(1) 41.35% 33.30%
</TABLE>

20
<PAGE>
<TABLE>
<CAPTION>
MR. SMITH'S COMPOSITE FOR THE
SMALL CAP VALUE STYLE RUSSELL 2000(4)
-------------------------------------- -----------------
Since Inception
11/1/96(1) 42.19% 33.25%
<S> <C> <C>
Year to Date(1) 28.78% 26.04%
</TABLE>

(1) Average annual return through September 30, 1997. Return for less than one
year is not annualized.
(2) The composite returns shown in this chart consists of total returns for the
period January 1995 through September 1997 of accounts for which Stephen S.
Smith, now Chief Investment Officer of the Smith Group, served as the
primary manager as described above, including the period January 1, 1995 -
October 31, 1995, during which Mr. Smith was senior portfolio manager for
another firm. The composite does not include the performance of other
accounts not managed similarly to the Portfolio. Since November 1, 1995 at
Smith Group, Mr. Smith has employed the same investment style in
discretionary private accounts as he employed in the accounts described
above. No other person played a significant part in achieving the prior
performance of these accounts during Mr. Smith's tenure. The data for
January 1, 1995 - October 31, 1995 are not, and should not be, construed as
the performance data of Smith Group, which began business on November 1,
1995.
(3) The S&P 500 Index is an unmanaged index containing common stocks of 500
industrial, transportation, utility and financial companies, regarded as
generally representative of the U.S. stock market. The Index reflects the
reinvestment of income dividends and capital gain distributions, if any, but
does not reflect fees, brokerage commissions, or other expenses of
investing.
(4) The Russell 2000 Index is an unmanaged index consisting of the securities of
the 2,000 issuers having the smallest capitalization in the Russell 3000
Index, representing approximately 10% of the Russell 3000 total market
capitalization. The average market capitalization of companies included in
the Index is approximately $500 million. The Index reflects the reinvestment
of income dividends and capital gain distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.

ADVISORY FEES

Norwest (Schroder in the case of Global Growth Portfolio) is paid an advisory
fee at the following annual rates of the Portfolios' average daily net assets.

<TABLE>
<CAPTION>
FUND ADVISORY FEE
- ---------------------------------------------------------------------------- ---------------
<S> <C>
Strategic Value Bond Portfolio (Performa Strategic Value Bond Fund) 0.50%
Disciplined Growth Portfolio (Performa Disciplined Growth Fund) 0.90%
Small Cap Value Portfolio (Performa Small Cap Value Fund) 0.95%
Schroder Global Growth Portfolio (Performa Global Growth Fund) 0.50%
</TABLE>

Norwest (and not the Portfolios) pays Smith and Galliard a fee for their
investment subadvisory services. This compensation does not increase the amount
paid by the Portfolio to Norwest.

Each Fund may withdraw its investments from its corresponding Portfolio at any
time if the Board determines that it is in the best interests of the Fund to do
so. See "Organization - Core and Gateway Structure." Accordingly, each Fund has
retained Norwest as its investment adviser and the corresponding Portfolio's
subadviser as a subadviser. Similarly, in the event that Performa Global Growth
Fund withdraws its investment from its corresponding Portfolio, the Fund has
retained Schroder as a subadviser. Under these "dormant" investment advisory
arrangements, no Fund pays any advisory fees as long as the Fund remains
completely invested in its corresponding Portfolio or any other investment
company. In the event that a Fund were to withdraw its assets from its
corresponding Portfolio (other than Schroder Global Growth Portfolio), Norwest
would receive an advisory fee from the Fund at the same rate as the fee paid by
the Portfolio. In the event that Performa Global Growth Fund were to withdraw
its assets from Global Growth

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Portfolio, Norwest would receive an advisory fee from the Fund at an annual rate
of 0.90% of the Fund's average daily net assets. Pursuant to the Funds' dormant
subadvisory agreements, Norwest (and not the Funds) would pay Schroder, Smith or
Galliard, as applicable, a fee for its subadvisory services.

THE FUNDS' EXPENSES

Each Fund is responsible for all expenses related to its operations. Theses
expenses include legal and accounting expenses; trustees' fees and expenses;
insurance premiums; fees and expenses of the Fund's service providers; brokerage
fees and expenses; expenses of registering and qualifying shares for sale with
the SEC and with various state securities commissions; expenses of obtaining
quotations on portfolio securities; 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 a 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. Similar policies pertain to the
Portfolios.

PORTFOLIO TRADING AND 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.
Each Adviser seeks "best execution" for all portfolio transactions, but a
Portfolio may pay higher than the lowest available commission rates when the
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 Portfolio
that invests in foreign securities than would be the case for comparable
transactions effected on U.S. securities exchanges.

Subject to the Portfolios' policy of obtaining the best price consistent with
quality of execution of transactions, each Adviser may employ broker-dealer
affiliates of the Adviser (collectively "Affiliated Brokers") to effect
brokerage transactions. The payment of commissions to Affiliated Brokers is
subject to procedures to provide that the commissions will not exceed the usual
and customary broker's commissions charged by unaffiliated brokers. No specific
portion of a Portfolio's brokerage will be directed to Affiliated Brokers and in
no event will a broker affiliated with the Adviser directing the transaction
receive brokerage transactions in recognition of research services provided to
the Adviser. The Advisers may effect transactions through brokers who sell Fund
shares.

The frequency of portfolio transactions (the portfolio turnover rate) will vary
from year to year depending on many factors. From time to time a Portfolio may
engage in active short-term trading to take advantage of price movements
affecting individual issues, groups of issues or markets. The Advisers
anticipate that the annual portfolio turnover rate of each Portfolio 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 Portfolio were replaced
once in a period of one year. Higher portfolio turnover rates may result in
increased brokerage costs and an increase in short term capital gains or losses
to the Portfolio.

THE FUNDS' OTHER SERVICE PROVIDERS

MANAGEMENT, ADMINISTRATION AND DISTRIBUTION SERVICES. As manager, Forum
supervised the overall management of the Trust (including the Trust's receipt of
services for which the Trust is obligated to pay) other than investment advisory
services. In this capacity, Forum provides the Trust with general office
facilities, provides persons satisfactory to the Board to serve as officers of
the Trust and oversees the performance of administrative and professional
services rendered to the Funds by others.

FAS is responsible for performing certain administrative services necessary for
the Trust's operations with respect to each Fund including preparing and
printing updates of the Trust's registration statement and

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prospectuses, preparing proxy and information statements and monitoring the sale
of shares and ensuring that such shares are properly and duly registered with
the SEC and applicable state securities administrators.

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. For their services to the Funds, FAS and
Forum each receives a fee at an annual rate of 0.025% of the Fund's average
daily net assets.

FAS also serves as administrator of each Portfolio, except Schroder Global
Growth Portfolio, for which it serves as subadministrator. FAS provides services
to the Portfolios (other than Schroder Global Growth Portfolio) that are similar
to those provided to the Funds by Forum and FAS. Schroder Advisors serves as
administrator and Forum serves as subadministrator of Schroder Global Growth
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 its services with respect to each Core Portfolio (other than Schroder Global
Growth Portfolio) FAS receives a fee at an annual rate of 0.05% of the
Portfolio's average daily net assets. For their services to Schroder Global
Growth Portfolio, Schroder Advisors receives a fee at an annual rate of 0.15%
and Forum receives a fee at an annual rate of 0.075% of the Portfolio's average
daily net assets.

Pursuant to a separate agreement, Norwest receives a fee with respect to
Performa Global Growth Fund at an annual rate of 0.25% of the Fund's 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 Portfolio and
reimbursing the Fund for certain excess expenses. Fees are payable under this
agreement based on the Fund's assets invested in the Portfolio.

Forum Accounting Services, LLC provides portfolio accounting services to each
Fund and to each Portfolio. Forum is the manager of the Funds and distributor of
their shares. Forum is a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. Forum also serves as the placement agent
of the Portfolios. These companies are members of the Forum Financial Group of
companies, Two Portland Square, Portland, Maine 04101, which together provide a
full range of services to the investment company and financial services
industry. As of October 1, 1997, they were controlled by John Y. Keffer,
President and Chairman of the Trust.

TRANSFER AGENT AND CUSTODIAN. Norwest Bank serves as transfer agent and dividend
disbursing agent for the Funds (in this capacity, the "Transfer Agent"). The
Transfer Agent maintains an account for each shareholder of the Funds, performs
other transfer agency functions and acts as dividend disbursing agent for the
Funds. The Transfer Agent is permitted to subcontract any or all of its
functions with to qualified agents. 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.

Norwest Bank also serves as each Fund's and each Portfolio's (other than Global
Growth Portfolio's) custodian and may appoint subcustodians for the foreign
securities and other assets held in foreign countries. For its custodial
service, Norwest Bank receives a fee with respect to each Portfolio at an annual
rate of 0.02% of the first $100 million of the Portfolio's average daily net
assets, 0.015% of the next $200 million of the Portfolio's average daily net
assets and 0.01% of the Portfolio's remaining average daily net assets. No fee
is directly payable by a Fund to the extent the Fund is invested in a Portfolio.
The Chase Manhattan Bank serves as custodian of Schroder Global Growth Portfolio
and is paid a fee for its services.

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BANKING LAW MATTERS

Federal banking rules generally permit a bank or bank affiliate to act as
investment adviser, transfer agent, or custodian to a fund 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.
Norwest and any bank or other bank affiliate also may perform Processing
Organization or similar services for the Funds and their shareholders. If a bank
or bank affiliate were prohibited in the future from so acting, changes in the
operation of the Funds 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.

7. ABOUT YOUR INVESTMENT

GENERAL INFORMATION

Shares are continuously sold and redeemed at a price equal to their net asset
value next-determined after acceptance of an order, or receipt of a redemption
request, on every weekday except customary national holidays (New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas) and Good Friday ("Fund Business Day").

GENERAL PURCHASE INFORMATION

Accounts may be opened - and shares purchased and redeemed - only through
certain broker-dealers, banks and other financial institutions ("Processing
Organizations"). For information regarding opening an account to purchase shares
of the Funds, please call toll free: (888) 800-6748.

When you purchase shares through a Processing Organization, you are subject to
the Processing Organization's procedures, and you should read this Prospectus
along with all materials and other information provided by the Processing
Organization. Processing Organizations are responsible for promptly transmitting
purchase, redemption and other requests to the Funds and may charge you a fee
for these services. Typically, there is a three-day settlement period for
purchases and redemptions through broker-dealers.

When you purchase and redeem through a Processing Organization the Trust
confirms your transactions directly with the Processing Organization. The
Processing Organization, in turn, provides you with confirmations and periodic
statements. If a Processing Organization fails to carry out its obligations to
you, the Trust is not responsible. The Funds may suspend the sale of shares at
any time and may refuse any order to purchase shares.

Generally, a minimum investment of $1,000 is required to open an account, the
minimum subsequent investment is $100 and you may make $100 monthly periodic
investments. A Processing Organization may set different minimums. Refer to your
Processing Organization for instructions pertaining to the purchase of shares.

GENERAL REDEMPTION INFORMATION

Generally, shares may be redeemed at their net asset value next determined on
any Fund Business Day. The Funds impose no minimum period of investment and no
restriction on the frequency of redemptions, however Processing Organizations
may impose such minimums and restrictions. Refer to your Processing Organization
for instructions pertaining to the redemption of shares. For information
regarding redemption of shares of the Funds, please call toll free: (888)
800-6748.

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HOW THE FUNDS VALUE THEIR SHARES

Each Fund calculates the net asset value of its shares on each Fund Business Day
by dividing the total value of its assets, less liabilities, by the number of
its shares outstanding. Shares are valued as of the close of regular trading on
the New York Stock Exchange. The Funds only determine net asset value on Fund
Business Days.

Securities of a Portfolio for which market quotations are readily available are
valued at market value. Short-term investments that will mature in 60 days or
less are valued at amortized cost, which approximates market value. All other
securities and assets are valued at their fair value following procedures
approved by applicable Core Board.

Trading on 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, as applicable,
determines that the particular event would materially affect net asset value, in
which case an adjustment will be made.

8. THE FUNDS' DISTRIBUTIONS AND CERTAIN TAX INFORMATION

HOW THE FUNDS MAKE DISTRIBUTIONS TO SHAREHOLDERS

Dividends of net investment income are declared and paid monthly in the case of
Performa Strategic Value Bond Fund and declared and paid annually in the case of
all other Funds. Distributions of net capital gain, if any, realized by a Fund
are distributed annually. You may have dividends and distributions reinvested in
shares of the same Fund (the "Reinvestment Option"), receive dividends and
distributions in cash (the "Cash Option") or have dividends and distributions
reinvested in shares of another Fund or Investor Shares of Ready Cash Investment
Fund (the "Directed Dividend Option"). All dividends and distributions are
treated in the same manner for federal income tax purposes whether received in
cash or reinvested in shares of a fund.

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

TAX INFORMATION

Each Fund intends to qualify for each fiscal year to be taxed as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended, (the
"Code"). As such, each Fund will not be liable for federal

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income and excise taxes on the net investment income and net capital gain
distributed to its shareholders. Because each Fund intends to distribute all of
its net investment income and net capital gain each year, each Fund should
thereby avoid all federal income and excise taxes.

Dividends paid by a Fund out of its net investment income (including net
short-term capital gain) are taxable to you as ordinary income. Two different
tax rates apply to net capital gain - that is, the excess of gains from capital
assets held for more than one year over net losses from capital assets held for
not more than one year. One rate (generally 28%) applies to net gain from
capital assets held for more than one year but not more than 18 months
("mid-term gain"), and a second rate (generally 20%) applies to the balance of
net capital gain ("adjusted net capital gain"). Distributions of mid-term gain
and adjusted net capital gain will be taxable to shareholders as such,
regardless of how long a shareholder has held shares in the Fund. If you hold
shares for six months or less and during that period receive a long-term capital
gain distribution, any loss realized on the sale of the shares during that
six-month period will be a long-term capital loss to the extent of the
distribution. Dividends and distributions reduce the net asset value of the Fund
paying the dividend or distribution by the amount of the dividend or
distribution. Dividends or distributions made to you shortly after the purchase
of Shares, although in effect a return of capital to you, will be taxable to you
as described above.

It is expected that a portion of the dividends of each Fund, except Performa
Strategic Value Bond Fund, will be eligible for the dividends received deduction
for corporations. The amount of such dividends eligible for the dividends
received deduction is limited to the amount of dividends from domestic
corporations received during a Fund's fiscal year.

No Portfolio is required to pay federal income taxes on its net investment
income and capital gain, as each Portfolio is treated as a partnership for
federal income tax purposes. All interest, dividends and gains and losses of a
Portfolio are deemed to have been "passed through" to the Funds investing in the
Portfolio in proportion to the Funds' holdings of the Portfolio, regardless of
whether such interest, dividends or gains have been distributed by the Portfolio
or losses have been realized by the Portfolio.

Investment income received by a Fund from sources within foreign countries may
be subject to foreign income or other taxes. Performa Global Growth 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 its Portfolio. As a
shareholder of that Fund, you will be notified of your share of those foreign
taxes and will be required to treat the amount of such foreign taxes as
additional income. In that event, you may be entitled to claim a credit or
deduction for those taxes.

Each Fund is required by federal law to withhold 31% of reportable payments paid
to you (which may include dividends, capital gain distributions and redemptions)
if you fail to provide the Fund with a correct taxpayer identification number or
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 you shortly after the close of each calendar year.

You should consult your tax advisor with respect to your specific tax situation
as well as with respect to state and local taxes.

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APPENDIX A
GLOSSARY OF INVESTMENT TERMS

This glossary describes some of the types of securities and other obligations in
which a Fund (or Portfolio) may invest. Although the descriptions refer to
Portfolios only, the descriptions apply also to investments by the Funds. The
Funds (and Portfolios) are not limited to the securities and obligations listed
below, and may invest in the securities and other obligations described below
and in other types of securities and obligations to the extent permitted by its
investment objectives and policies. Refer to the SAI for a more detailed
discussion of the Funds' investment policies and these and other securities and
obligations in which the Funds (and Portfolios) may invest.

EQUITY AND RELATED SECURITIES

COMMON STOCK represents a share of ownership in a company, and usually carries
voting rights and may earn dividends. Common stockholders 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 holders of
debt securities) and, if applicable, preferred stockholders, are paid. Unlike
preferred stock, dividends on common stock are not fixed but are declared at the
discretion of the issuer.

CONVERTIBLE SECURITIES are preferred stocks or bonds that are convertible into
common stock at a specified price or conversion ratio within a specific amount
of time.

DEPOSITARY RECEIPTS are receipts for shares of a foreign-based company that
entitle the holder to dividends and capital gain on the underlying security.
Receipts include those issued by domestic banks (American Depositary Receipts
("ADRs")), foreign financial institutions (Global or European Depositary
Receipts) and broker-dealers (depositary shares). 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 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.

PREFERRED STOCK is a class of stock that generally pays dividends at a specified
rate and has preference over common stock in the payment of dividends and
liquidation. A preferred stockholder generally is a shareholder in the company
and not a creditor of the company. Preferred stock generally does not carry
voting rights.

WARRANTS are securities, typically issued with preferred stocks or bonds, that
give the holder the right to buy a proportionate amount of common stock at a
specified price, usually at a price that is higher than the market price at the
time of issuance of the warrant. The right may last for a specified period or
indefinitely. The specified price for warrants usually represents a premium over
the applicable market value of the underlying equity security at the time of the
warrant's issuance.

DEBT AND RELATED INVESTMENTS

BILLS, NOTES, BONDS AND DEBENTURES are debt securities issued by a corporation
or other business entity, municipality, government or government agency. Bills
usually have the shortest maturities and bonds the longest maturities. The
issuer is required to pay the holder the face or principal amount of the loan at
a specified maturity and, except for zero coupon securities, to make scheduled
interest payments during the term of the securities.

COMMERCIAL PAPER is a short-term debt obligation with a maturity ranging from 1
to 270 days issued by banks, corporations and other borrowers.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") are debt obligations that are
collateralized by mortgages or mortgage pass-through securities ("Mortgage
Assets"). 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,

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certain classes (often referred to as tranches) of CMOs may have priority over
other classes with respect to the receipt of payments. CMOs may have complicated
structures and generally involve more risks than less complex mortgage-related
securities.

DEMAND NOTES are unsecured obligations redeemable upon a specified number of
days' notice (typically not more than 30 days). These obligations include master
demand notes that permit investment of fluctuating amounts at varying rates of
interest pursuant to direct arrangement with the issuer of the instrument. The
issuers of these obligations often have the right, after a given period, to
prepay 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 them. Although a
purchaser of a demand note would generally not be able to resell a master demand
note to a third party, the purchaser is entitled to demand payment from the
issuer at any time in accordance with the note's notice provisions.

FIXED-INCOME SECURITIES are securities that pay a specified rate of return. The
term generally includes securities of all maturities (for instance, bills, notes
and bonds), securities on which interest or dividend payments are made before
maturity and zero coupon securities, and securities of various issuers (for
instance, corporate instruments, municipal securities and U.S. Government
Securities) that pay a specified rate of interest for a specified period of
time. The term also can include preferred stock, which pays fixed-dividends.
Coupon, discount and dividend rates usually are fixed for the term of a
security, but can provide for an increase or decrease in rate during the term of
the security.

GUARANTEED INVESTMENT CONTRACTS are arrangements with an insurance companies
under which the purchaser of the contract 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 may be fixed or tied to a
specified market index, and the principal and interest are guaranteed by the
insurance company.

HIGH-YIELD/HIGH-RISK SECURITIES are securities that are rated below investment
grade by an NRSRO (i.e., "BB" or lower by S&P's and "Ba" or lower by Moody's).
Other terms commonly used to describe these securities include "lower rated
bonds," "non-investment grade bonds" and "junk bonds." These securities have
speculative or predominantly speculative characteristics.

MORTGAGE-RELATED AND ASSET-BACKED SECURITIES are shares in a pool of mortgages
or other debt. These securities are generally pass-through securities, which
means that principal and interest payments on the underlying securities (less
servicing fees) are passed through to securityholders on a pro rata basis. These
securities involve prepayment risk, which is the risk that during periods of
declining interest rates, the underlying mortgages or other debt may be
refinanced or paid off prior to their maturities, leaving the holder unable to
reinvest the prepaid amount at an interest rate comparable to the rate on the
prepaid securities.

PARTICIPATION INTERESTS are 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 the participation interests back to
the bank or other institution.

REVERSE REPURCHASE AGREEMENTS involve the sale of a security by a Portfolio to
another party (generally a bank or dealer) in return for cash and an agreement
by the Portfolio to buy the security back at a specified price and time. This
technique is similar to borrowing.

SECURITY LOANS occur when the holder of a security lends it and receives a fee
from the borrower or is able to retain interest from investing cash collateral
deposited by the borrower. The lender may pay fees to arrange securities loans.
Security loans involve the risk that the borrower will fail to return the
borrowed security. In that case, the lender bears the risk of market value
fluctuations until the security is returned or collateral can be liquidated and
the proceeds (which may not cover the effects of fluctuations and the lenders
costs) used to replace the unreturned securities.

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VARIABLE AND FLOATING RATE SECURITIES are securities that have variable or
floating rates of interest that are adjusted periodically according to a
specified formula, usually with reference to some interest rate index or market
interest rate. In certain limited circumstances, adjustments in a security
interest rate may affect the amount of principal paid at maturity. The
adjustable rate tends to decrease the security's price sensitivity to changes in
interest rates.

ZERO COUPON SECURITIES are debt securities that are issued at a discount from
face value and do not pay interest prior to maturity. The discount approximates
the total amount of interest the security will accrue from the date of issuance
to maturity. The market value of these securities generally fluctuates more in
response to changes in interest rates than securities of comparable quality and
maturity that pay interest during their term. Holders of a zero-coupon security
with a term of more than a year must treat a portion of the discount of the
security as income on the purchase price paid for the security. As the Funds
distribute all of their net investment income, a Portfolio may have to sell
portfolio securities to distribute the income resulting from this treatment,
which may result in a taxable gain or loss and occur at a time when the
investment adviser would not otherwise have chosen to sell the securities.

OTHER INVESTMENT TERMS AND TECHNIQUES

DOLLAR ROLL TRANSACTIONS occur when a Portfolio sells fixed income securities,
typically mortgage-related securities, and makes a commitment to purchase
similar, but not identical, securities at a later date from the party to whom
the original securities were sold. 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 Portfolio but it assumes the
risk of ownership. A Portfolio is compensated for entering into dollar roll
transactions by the difference between the current sales price and the price for
the future purchase, as well as by the interest earned on the cash proceeds of
the initial sale. Like other forward commitments, dollar roll transactions
involve the risk that the market value of the securities to be purchased by the
Portfolio may decline below the price at which the Portfolio sold the original
securities. Also, if the buyer of the original securities under a dollar roll
transaction becomes insolvent, the Portfolio's use of the proceeds of the
transaction may be restricted pending a determination by the other buyer, or its
trustee or receiver, whether to enforce the Portfolio's obligation to repurchase
the securities, which may have increased a market value on the price at which
the original securities were sold.

MARKET CAPITALIZATION refers to the value of an issuer's outstanding stock and
is calculated by multiplying the total number of common shares outstanding by
the market price per share of the stock.

RULE 144A SECURITIES are securities that are not registered for sale to the
general public and may be resold only to certain types of institutional
investors. Because of the restrictions on their resale, these securities may be
difficult to resell at the same price as comparable non-restricted securities.

SHORT SALES AGAINST-THE-BOX occur when a Portfolio contemporaneously owns or has
the right to obtain at no added cost securities identical to securities which
the Portfolio has borrowed and sold, otherwise referred to as "sold short." For
federal income tax purposes, short sales against-the-box may in certain cases be
made to defer recognition of gain or loss on the sale of securities until the
short position is closed out. Under recently enacted legislation, if a Portfolio
has unrealized gain on securities it owns and sells identical securities short
against-the-box, the Portfolio generally will be deemed to have sold the long
position for tax purposes and thus will recognize gain.

WHEN-ISSUED, DELAYED DELIVERY and FORWARD TRANSACTIONS generally involve the
purchase of a security under an agreement to make payment and accept delivery at
some time in the future, (i.e., beyond the normal period of securities
settlement). A Portfolio does not earn interest on such securities until
settlement but bears the risk of market value fluctuations between the purchase
and settlement dates. New issues of stocks and bonds, private placements and
U.S. Government Securities may be sold in this manner.

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CERTIFICATES OF PARTICIPATION are certificates representing an interest in a
pool of securities. Holders are entitled to a proportionate interest in the
underlying securities.

FUTURES, OPTIONS AND OTHER DERIVATIVES

FORWARD CONTRACTS are contracts to purchase or sell a specified amount of
property for an agreed upon price at a specified time. Forward contracts
generally are not exchange traded and are typically negotiated on an individual
basis. The Portfolios may enter into forward currency contracts to hedge against
declines in the value of securities denominated in, or whose value is tied to, a
currency other than the U.S. dollar or to reduce the impact of currency
appreciation on future purchases of such securities. Portfolios may also enter
into forward contracts to purchase or sell securities indicies or other
financial indices.

FUTURES CONTRACTS are contracts that obligate the buyer to receive and the
seller to deliver a commodity at a specified price on a specified date. The
Portfolio may buy and sell futures contracts on foreign currencies, securities
indicies and financial indices, including interest rates or an index of U.S.
government, foreign government, equity or fixed-income securities. The
Portfolios may also buy options on futures contracts. An option on a futures
contract gives the buyer the right, but not the obligation, to buy or sell a
futures contract at a specified price on or before a specified date. Futures
contracts and options on futures contracts are standardized and traded on
exchanges.

INDEXED/STRUCTURED SECURITIES are typically short- to intermediate-term debt
securities whose value at maturity or interest rate is linked to currencies,
interest rates, securities, indices, commodity prices or other financial
indicies. These securities may be positively or negatively indexed (i.e., their
value may increase or decrease based on a movement in the price of the linked
component). Indexed/structured securities may have return characteristics
similar to direct investments in the linked component and may be more volatile
than a direct investment in the linked component. These investments may be
difficult to resell and a purchaser bears both the market risk of an investment
in the linked component and the credit risk of the issuer.

INVERSE FLOATERS, a type of indexed/structured security, are variable or
floating rate securities that pay interest at a rate that varies inversely with
movements in prevailing short-term interest rates. Upon reset of the interest
rate payable on an inverse floater, its interest rate may decrease if the linked
interest rate increases. When short-term interest rates are relatively low
compared to long-term interest rates, a Portfolio 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,
potential yield. These investments may be difficult to resell and a purchaser
bears both the market risk of the investment and the credit risk of the issuer.

OPTIONS are the right, but not the obligation, to buy or sell a specified amount
of securities or other assets on or before a fixed date at a predetermined
price. Options may have standardized terms and be traded as exchanges or may be
tailor-made and difficult to resell. The Portfolio may purchase and write put
and call options on securities, securities indices and foreign currencies. A
purchaser of a non-standardized option is subject both to market risk and the
credit risk of the issuer.

SWAP AGREEMENTS include interest rate and mortgage (or other asset) swap
agreements. In a typical interest rate swap agreement, one party agrees to make
regular payments equal to a floating interest rate on a specified amount (the
"notional principal amount") in return for payments equal to a fixed interest
rate on the same amount for a specified period. Mortgage swap agreements are
similar to interest rate swap agreements, except that the notional principal
amount is tied to a reference pool of mortgages. In a cap or floor, one party
agrees, usually in return for a fee, to make payments under particular
circumstances. For example, the purchaser of an interest rate cap has the right
to receive payments to the extent a specified interest rate exceeds an agreed
upon level; the purchaser of an interest rate floor has the right to receive

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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 substantial impact on a Portfolio's performance. Swap agreements
expose a Portfolio to movements in the relative value of the obligations being
swapped, to the credit risk of the counterparties and to the Portfolio's ability
to terminate its swap agreements or reduce its exposure to them through
offsetting transactions.

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APPENDIX B
EXPLANATION OF RATING CATEGORIES

The following is a description of credit ratings issued by two of the major
credit ratings agencies. Credit ratings evaluate only the safety of principal
and interest payments, not the market value risk of lower quality securities.
Credit rating agencies may fail to change credit ratings to reflect subsequent
events on a timely basis. Although the investment advisers consider security
ratings when making investment decisions, each adviser also performs its own
investment analysis and does not rely solely on the ratings assigned by credit
agencies.

BOND RATINGS
STANDARD & POOR'S RATINGS SERVICES

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INVESTMENT GRADE RATINGS

"AAA" Highest rating; extremely strong capacity to pay principal and interest.
"AA" High quality; very strong capacity to pay principal and interest.
"A" Strong capacity to pay principal and interest; somewhat more susceptible
to the adverse effects of changing circumstances and economic conditions.
"BBB" Adequate capacity to pay principal and interest; normally exhibit
adequate protection parameters, but adverse economic conditions or
changing circumstances more likely to lead to a weakened capacity to pay
principal and interest than for higher rated bonds.

NON-INVESTMENT GRADE RATINGS

"BB," "B" Predominantly speculative with respect to the issuer's capacity to meet
required interest and principal payments.
"CCC," "CC" Progressively higher degrees of speculation.
"C" Highest degree of speculation. Quality and protective characteristics
outweighed by large uncertainties or major risk exposure to adverse
conditions.
"D" In default.

MOODY'S INVESTORS SERVICE, INC.

INVESTMENT GRADE RATINGS

"Aaa" Highest quality, smallest degree of investment risk.
"Aa" High quality; together with Aaa bonds, they compose the high-grade bond
group.
"A" Upper-medium grade obligations; many favorable investment attributes.
"Baa" Medium-grade obligations; neither highly protected nor poorly secured.
Interest and principal appear adequate for the present but certain
protective elements may be lacking or may be unreliable over any great
length of time.

NON-INVESTMENT GRADE RATINGS

"Ba" More uncertain, with speculative elements. Protection of interest and
principal payments not well safeguarded during good and bad times.
"B" Lack characteristics of desirable investment; potentially low assurance
of timely interest and principal payments or maintenance of other
contract terms over time.
"Caa" Poor standing, may be in default; elements of danger with respect to
principal or interest payments.
"Ca" Speculative in a high degree; could be in default or have other marked
shortcomings.
"C" Lowest-rated; extremely poor prospects of ever attaining investment
standing.
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