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[GRAPHIC]
TAX-FREE INCOME FUNDS
PROPECTUS
FEBRUARY 1, 1998
TAX-FREE INCOME FUND
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COLORADO TAX-FREE FUND
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MINNESOTA TAX-FREE FUND
[LOGO]
NOT FDIC INSURED
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TABLE OF CONTENTS
1. PROSPECTUS SUMMARY.............................................. 2
Highlights of the Funds......................................... 2
Expense Information............................................. 5
2. FINANCIAL HIGHLIGHTS............................................ 8
3. INVESTMENT OBJECTIVES AND POLICIES.............................. 14
Tax-Free Income Fund............................................ 14
Colorado Tax-Free Fund.......................................... 15
Minnesota Tax-Free Fund......................................... 16
Investment Considerations and Risk Factors...................... 18
Additional Investment Policies and Risk Considerations.......... 20
4. MANAGEMENT...................................................... 27
Investment Advisory Services.................................... 27
Management, Administration and Distribution Services............ 28
Shareholder Servicing and Custody............................... 29
Expenses of the Funds........................................... 29
5. CHOOSING A SHARE CLASS.......................................... 31
A Shares........................................................ 32
B Shares........................................................ 35
6. HOW TO BUY SHARES............................................... 40
Minimum Investment.............................................. 40
Purchase Procedures............................................. 40
Account Application............................................. 42
General Information............................................. 42
7. HOW TO SELL SHARES.............................................. 43
General Information............................................. 43
Redemption Procedures........................................... 43
Other Redemption Matters........................................ 44
8. OTHER SHAREHOLDER SERVICES...................................... 46
Exchanges....................................................... 46
Automatic Investment Plan....................................... 47
Automatic Withdrawal Plan....................................... 48
Reopening Accounts.............................................. 48
9. DIVIDENDS AND TAX MATTERS....................................... 49
Dividends....................................................... 49
Tax Matters..................................................... 49
10. OTHER INFORMATION............................................... 53
Banking Law Matters............................................. 53
Determination of Net Asset Value................................ 53
Performance Information......................................... 53
The Trust and Its Shares........................................ 54
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FEBRUARY 1, 1998
This Prospectus offers A Shares and B Shares of Tax-Free Income Fund, Colorado
Tax-Free Fund and Minnesota Tax-Free Fund (each a "Fund" and collectively the
"Funds"). The Funds are separate tax-exempt, fixed income portfolios of Norwest
Advantage Funds (the "Trust"), which is a registered, open-end, management
investment company. Tax-Free Income Fund is a diversified portfolio; the other
Funds are non-diversified portfolios.
This Prospectus sets forth concisely the information concerning the Trust and
the Funds that a prospective investor should know before investing. The Trust
has filed with the Securities and Exchange Commission (the "SEC") a Statement of
Additional Information ("SAI") with respect to each Fund dated October 1, 1997,
as may be further amended from time to time, which is available for reference on
the SEC's Web Site (http://www.sec.gov) and which contains more detailed
information about the Trust and each of the Funds and is incorporated into this
Prospectus by reference. An investor may obtain a copy of the SAI without charge
by contacting the Trust's distributor, Forum Financial Services, Inc., at Two
Portland Square, Portland, Maine 04101 or by calling (207) 879-0001. Investors
should read this Prospectus and retain it for future reference.
Shares of the Colorado and Minnesota Tax-Free Funds are offered solely to
residents of Colorado and Minnesota, respectively.
NORWEST ADVANTAGE FUNDS IS A FAMILY OF MUTUAL FUNDS. THE SHARES OF MUTUAL FUNDS
ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL
RESERVE SYSTEM OR ANY OTHER GOVERNMENT AGENCY. THE SHARES ALSO ARE NOT
OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED OR GUARANTEED BY NORWEST BANK
MINNESOTA, N.A. OR ANY OTHER BANK OR BANK AFFILIATE.
AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS 1
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1. PROSPECTUS SUMMARY
HIGHLIGHTS OF THE FUNDS
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION CONTAINED IN THIS PROSPECTUS.
INVESTMENT OBJECTIVES AND POLICIES
TAX-FREE INCOME FUND seeks to provide current income exempt from federal income
taxes. This objective is pursued by investing primarily in a portfolio of
investment grade municipal securities, the interest on which is free from
federal income tax.
COLORADO TAX-FREE FUND seeks to provide a high level of current income exempt
from both federal and Colorado state income taxes (including the alternative
minimum tax) consistent with preservation of capital. This objective is pursued
by investing primarily in a portfolio of investment grade municipal securities
of Colorado issuers.
MINNESOTA TAX-FREE FUND seeks to provide a high level of current income exempt
from both federal and Minnesota state income taxes (including the alternative
minimum tax) without assuming undue risk. This objective is pursued by investing
primarily in a portfolio of investment grade municipal securities of Minnesota
issuers.
INVESTMENT ADVISER
NORWEST INVESTMENT MANAGEMENT, INC. ("Norwest"), a subsidiary of Norwest Bank
Minnesota, N.A. ("Norwest Bank"), is the Funds' investment adviser. Norwest
provides investment advice to various institutions, pension plans and other
accounts and, as of August 31, 1997, managed over $22 billion in assets. (See
"Management - Investment Advisory Services.") Norwest Bank serves as transfer
agent, dividend disbursing agent and custodian of the Trust. (See "Management -
Shareholder Servicing and Custody.")
FUND MANAGEMENT AND ADMINISTRATION
THE MANAGER OF THE TRUST AND DISTRIBUTOR OF ITS SHARES IS FORUM FINANCIAL
SERVICES, INC. ("Forum"), a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. Forum Administrative Services, LLC
("FAS") provides administrative services to the Funds. (See "Management -
Management, Administration and Distribution Services.")
SHARES OF THE FUNDS
Each Fund currently offers three separate classes of shares: A class ("A
Shares"), B class ("B Shares") and I class ("I Shares"). A Shares and B Shares
are sold through this Prospectus and are collectively referred to as the
"Shares."
2 NORWEST ADVANTAGE FUNDS
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A SHARES. A Shares are offered at a price equal to their net asset value
plus a sales charge imposed at the time of purchase or, in some cases, a
contingent deferred sales charge imposed on redemptions made within two
years of purchase.
B SHARES. B Shares are offered at a price equal to their net asset value
plus a contingent deferred sales charge imposed on most redemptions made
within four years of purchase. B Shares pay a distribution services fee at
an annual rate of up to 0.75%, and a maintenance fee in an amount equal to
0.25%, of the B Shares' average daily net assets. B Shares automatically
convert to A Shares of the same Fund six years after the end of the
calendar month in which the B Shares were originally purchased.
The choice of A Shares or B Shares permits each investor to purchase those
shares that the investor believes to be most beneficial given the amount
purchased, the length of time the investor expects to hold the shares and other
circumstances. A Shares will normally be more beneficial to the investor who
qualifies for reduced initial sales charges as described below. (See "Choosing a
Share Class.")
I Shares are offered by a separate Prospectus to fiduciary, agency and custodial
clients of bank trust departments, trust companies and their affiliates. Shares
of each class of a Fund have identical interests in the investment portfolio of
the Fund and, with certain exceptions, have the same rights. (See "Other
Information - The Trust and Its Shares.")
HOW TO BUY AND SELL SHARES
Shares may be purchased or redeemed by mail, by bank wire and through an
investor's broker-dealer or other financial institution. The minimum initial
investment in Shares is $1,000. The minimum subsequent investment is $100. (See
"How to Buy Shares" and "How to Sell Shares.")
EXCHANGES
Shareholders may exchange A Shares and B Shares for A Shares and B Shares,
respectively, of certain other funds of the Trust. In addition, A Shares may be
exchanged for investor class shares of certain money market funds of the Trust
and B Shares may be exchanged for exchange class shares of Ready Cash Investment
Fund of the Trust. (See "Other Shareholder Services - Exchanges.")
SHAREHOLDER FEATURES
Each Fund offers an Automatic Investment Plan, Automatic Withdrawal Plan and
Directed Dividend Option. Purchases of A Shares may be subject to Rights of
Accumulation, Cumulative Quantity Discounts or a Reinstatement Privilege. (See
"Other Shareholder Services" and "Choosing a Share Class.")
PROSPECTUS 3
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DIVIDENDS AND DISTRIBUTIONS
Dividends of each Fund's net investment income are declared daily and paid
monthly. Dividends paid out of tax-exempt interest income generally will not be
subject to federal income tax and applicable state taxes. Each Fund's net
capital gain, if any, is distributed annually. All dividends and distributions
are reinvested in additional Fund shares unless the shareholder elects to have
them paid in cash. (See "Dividends and Tax Matters.")
CERTAIN INVESTMENT CONSIDERATIONS
AND RISK FACTORS
There can be no assurance that any Fund will achieve its investment objective,
and a Fund's net asset value and total return will fluctuate based upon changes
in the value of its portfolio securities. Normally, the value of a Fund's
investments varies inversely with changes in interest rates. Upon redemption, an
investment in a Fund may be worth more or less than its original value. The
Fund's investments are subject to "credit risk" relating to the financial
condition of the issuers of the securities that each Fund holds. Each Fund
(other than Minnesota Tax-Free Fund), however, invests only in investment grade
securities (those rated in the top four grades by a nationally recognized
statistical rating organization ("NRSRO") such as Standard & Poor's). MINNESOTA
TAX-FREE FUND may invest in non-investment grade municipal securities, which may
entail certain risks. (See "Investment Objectives and Policies - Minnesota
Tax-Free Fund - Non-Investment Grade Securities.")
All investments made by the Funds entail some risk. Certain investments and
investment techniques, however, entail additional risks, such as the potential
use of leverage by certain Funds through borrowings, purchasing when-issued
securities and securities on a forward commitment basis and other investment
techniques. (See "Investment Objectives and Policies - Additional Investment
Policies and Risk Considerations.") The portfolio turnover rate for certain
Funds may from time to time be high, resulting in increased brokerage costs or
short-term capital gains or losses. (See "Investment Objectives and Policies -
Additional Investment Policies and Risk Considerations - Portfolio
Transactions.")
COLORADO TAX-FREE FUND and MINNESOTA TAX-FREE FUND each invests principally in
securities issued by the government of and municipalities in the State of
Colorado or Minnesota, respectively, and is therefore more susceptible to
factors adversely affecting issuers in those states than would be a more
geographically diverse municipal securities portfolio. Each of these Funds is
non-diversified, which means they have greater latitude than a diversified Fund
to invest in fewer issuers and to invest more of their assets in any one issuer.
Non-diversified funds may present greater risks than a diversified fund. (See
"Investment Objectives and Policies - Investment Considerations and Risk Factors
- - Diversification Matters.")
4 NORWEST ADVANTAGE FUNDS
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EXPENSE INFORMATION
The purpose of the Shareholder Transaction Expenses and Annual Fund Operating
Expenses tables in this section is to assist investors in understanding the
expenses that an investor in Shares of a Fund will bear directly or indirectly.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
(APPLICABLE TO EACH FUND)
A B
SHARES SHARES
-------- -----------
<S> <C> <C>
Maximum sales charge imposed
on purchases
(as a percentage of offering
price)...................... 4.0%(1) Zero
Maximum deferred sales charge
(as a percentage of the
lesser of original purchase
price or redemption
proceeds)................... Zero(2) 3.0%(1)(3)
Exchange Fee.................. Zero Zero
</TABLE>
(1) Sales charge waivers and reduced sales charge plans are available for
A and B Shares. (See "Choosing a Share Class.")
(2) If A Shares of a Fund purchased without an initial sales charge
(purchases of $1,000,000 or more) are redeemed within two years after
purchase, a deferred sales charge of up to 0.75% will be applied to
the redemption.
(3) The maximum 3.0% deferred sales charge on B Shares of a Fund applies
to redemptions during the first year after purchase; the charge
declines thereafter, and is 2.0% for redemptions during the second and
third years, 1.0% for redemptions during the fourth year and zero the
following year.
PROSPECTUS 5
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ANNUAL FUND OPERATING EXPENSES(4)
<TABLE>
<CAPTION>
COLORADO MINNESOTA
TAX-FREE INCOME TAX-FREE TAX-FREE
FUND FUND FUND
................ ................ ................
A B A B A B
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS) SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees(5) (after fee waivers)............. ....... 0.36% 0.36% 0.31% 0.31% 0.26% 0.26%
Rule 12b-1 Fees(6) (after fee waivers)...................... ....... None 0.75% None 0.75% None 0.75%
Other Expenses (after fee waivers and reimbursements) ...... ....... 0.24% 0.24% 0.29% 0.29% 0.34% 0.34%
------- ------- ------- ------- ------- -------
Total Operating Expenses(7)................................. ....... 0.60% 1.35% 0.60% 1.35% 0.60% 1.35%
</TABLE>
(4) For a further description of the various expenses associated with
investing in the Funds, see "Management." Expenses associated with I
Shares of a Fund differ from those listed in the table. The table is
based on amounts incurred during the Funds' most recent fiscal year
ended May 31, 1997, restated to reflect current fees.
(5) Absent waivers, "Investment Advisory Fees" for A Shares and B Shares
of each Fund would be 0.50%.
(6) Absent waivers, "Rule 12b-1 Fees" would be 1.00% for B Shares of each
Fund. Long-term shareholders of B Shares may pay Rule 12b-1 Fees and
contingent deferred sales charges totaling in the aggregate more than
the economic equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers, Inc.
(7) Absent expense reimbursements and fee waivers, the expenses of A
Shares of Tax-Free Income Fund, Colorado Tax-Free Fund and Minnesota
Tax-Free Fund would be: "Other Expenses," 0.48%, 0.54% and 0.58%,
respectively; and "Total Operating Expenses," 0.98%, 1.04% and 1.08%,
respectively. Absent expense reimbursements and fee waivers, the
expenses of B Shares of Tax-Free Income Fund, Colorado Tax-Free Fund
and Minnesota Tax-Free Fund would be: "Other Expenses," 0.54%, 0.54%
and 0.58%, respectively; and "Total Operating Expenses," 2.04%, 2.04%
and 2.08%, respectively. Expense reimbursements and fee waivers are
voluntary and may be reduced or eliminated at any time.
6 NORWEST ADVANTAGE FUNDS
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EXAMPLE
The following Hypothetical Expense Example indicates the dollar amount of
expenses that an investor would pay assuming a $1,000 investment in a Fund's
Shares, the expenses listed in the "Annual Fund Operating Expense" table, a 5%
annual return, reinvestment of all dividends and distributions, the deduction of
the maximum initial sales charge for A Shares, the deduction of the applicable
contingent deferred sales charge for B Shares and the conversion of B Shares to
A Shares at the end of six years. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR RETURN. ACTUAL EXPENSES AND RETURN
MAY BE GREATER OR LESS THAN INDICATED. The 5% annual return is not predictive of
and does not represent the Funds' projected returns; rather, it is required by
government regulation.
HYPOTHETICAL EXPENSE EXAMPLE
<TABLE>
<CAPTION>
3 5 10
1 YEAR YEARS YEARS YEARS
------ ------ ------ -------
<S> <C> <C> <C> <C>
TAX-FREE INCOME FUND
A Shares................................... 46 58 72 112
B Shares
Assuming redemption at the end of the
period................................. 44 63 74 -
Assuming no redemption................... 14 43 74 -
...............................
COLORADO TAX-FREE FUND
A Shares................................... 46 58 72 112
B Shares
Assuming redemption at the end of the
period................................. 44 63 74 -
Assuming no redemption................... 14 43 74 -
...............................
MINNESOTA TAX-FREE FUND
A Shares................................... 46 58 72 112
B Shares
Assuming redemption at the end of the
period................................. 44 63 74 -
Assuming no redemption................... 14 43 74 -
</TABLE>
PROSPECTUS 7
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2. FINANCIAL HIGHLIGHTS
The following tables provide financial highlights for each Fund. This
information represents selected data for a single outstanding A and B Share of
each Fund for the periods shown. Information for the periods ended May 31, 1994
and thereafter was audited by KPMG Peat Marwick LLP, independent auditors.
Information for prior periods was audited by other
TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
NET REALIZED
AND UNREALIZED DIVIDENDS
BEGINNING NET NET GAIN FROM NET
ASSET VALUE INVESTMENT (LOSS) ON INVESTMENT
PER SHARE INCOME INVESTMENTS INCOME
<S> <C> <C> <C> <C> <C>
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A SHARES
June 1, 1997 to November 30,
1997(a)..................... $10.05 $0.26 $0.32 ($0.26)
June 1, 1996 to May 31,
1997........................ $ 9.78 $0.54 $0.27 ($0.54)
June 1, 1995 to May 31,
1996........................ $ 9.82 $0.55 ($0.04) ($0.55)
June 1, 1994 to May 31,
1995........................ $ 9.60 $0.55 $0.22 ($0.55)
June 1, 1993 to May 31,
1994........................ $10.06 $0.58 ($0.39) ($0.58)
June 1, 1992 to May 31,
1993........................ $ 9.98 $0.66 $0.11 ($0.66)
June 1, 1991 to May 31,
1992........................ $ 9.95 $0.70 $0.04 ($0.70)
June 1, 1990 to May 31,
1991........................ $ 9.78 $0.70 $0.17 ($0.70)
August 1, 1989 to May 31,
1990(b)..................... $10.00 $0.57 ($0.22) ($0.57)
B SHARES
June 1, 1997 to November 30,
1997(a)..................... $10.05 $0.23 $0.32 ($0.23)
June 1, 1996 to May 31,
1997........................ $ 9.78 $0.46 $0.27 ($0.46)
June 1, 1995 to May 31,
1996........................ $ 9.82 $0.48 ($0.04) ($0.48)
June 1, 1994 to May 31,
1995........................ $ 9.60 $0.48 $0.22 ($0.48)
August 6, 1993 to May 31,
1994(b)..................... $10.17 $0.39 ($0.50) ($0.39)
..............................................................................................
(a) Unaudited.
(b) The Fund commenced operations on August 1, 1989. The Fund's original class of shares
subsequently became A Shares. The Fund commenced the offering of B Shares on August 6,
1993.
(c) The ratio of Gross Expenses to Average Net Assets does not reflect fee waivers or
expense reimbursements.
(d) Total Return does not reflect the effects of sales charges. Total Return would have been
lower absent expense reimbursements and/or fee waivers.
(e) Annualized.
(f) Not annualized.
</TABLE>
8 NORWEST ADVANTAGE FUNDS
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independent auditors. The information for the six month period ended November
30, 1997, is unaudited. Each Fund's financial statements for the year ended May
31, 1997, and independent auditors' report thereon, are contained in the Fund's
Annual Report. These financial statements are incorporated by reference into the
SAI. Further information about each Fund's performance is contained in the
Fund's Annual Report, which may be obtained from the Trust without charge.
<TABLE>
<CAPTION>
ENDING
NET RATIO TO AVERAGE NET ASSETS NET ASSETS
ASSET ................................... AT END OF
DISTRIBUTIONS VALUE NET PORTFOLIO PERIOD
FROM NET PER INVESTMENT NET GROSS TOTAL TURNOVER (000'S
REALIZED GAIN SHARE INCOME EXPENSES EXPENSES(c) RETURN(d) RATE OMITTED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
A SHARES
June 1, 1997 to November 30,
1997(a)..................... - $10.37 5.13%(e) 0.60%(e) 1.00%(e) 5.86%(f) 78.78% $ 30,956
June 1, 1996 to May 31,
1997........................ - $10.05 5.41% 0.50% 1.06% 8.43% 152.33% $ 29,217
June 1, 1995 to May 31,
1996........................ - $ 9.78 5.54% 0.40% 1.06% 5.29% 126.20% $ 33,914
June 1, 1994 to May 31,
1995........................ - $ 9.82 5.87% 0.60% 1.12% 8.42% 130.90% $ 30,786
June 1, 1993 to May 31,
1994........................ ($0.07) $ 9.60 5.77% 0.60% 1.14% 1.74% 116.54% $ 34,426
June 1, 1992 to May 31,
1993........................ ($0.03) $10.06 6.47% 0.60% 1.12% 7.86% 42.81% $109,983
June 1, 1991 to May 31,
1992........................ ($0.01) $ 9.98 7.03% 0.34% 1.14% 7.65% 73.66% $ 56,250
June 1, 1990 to May 31,
1991........................ - $ 9.95 7.09% 0.14% 1.08% 9.16% 101.11% $ 35,215
August 1, 1989 to May 31,
1990(b)..................... - $ 9.78 6.96%(e) 0.03%(e) 0.97%(e) 4.34%(e) 41.16% $ 17,439
B SHARES
June 1, 1997 to November 30,
1997(a)..................... - $10.37 4.36%(e) 1.35%(e) 2.12%(e) 5.47%(f) 78.78% $ 9,243
June 1, 1996 to May 31,
1997........................ - $10.05 4.64% 1.26% 2.15% 7.63% 152.33% $ 7,329
June 1, 1995 to May 31,
1996........................ - $ 9.78 4.77% 1.14% 2.21% 4.50% 126.20% $ 5,897
June 1, 1994 to May 31,
1995........................ - $ 9.82 5.05% 1.35% 2.21% 7.61% 130.90% $ 3,729
August 6, 1993 to May 31,
1994(b)..................... ($0.07) $ 9.60 4.76%(e) 1.31%(e) 2.24%(e) (0.98%)(e) 116.54% $ 2,674
....................................................................................................................................
(a) Unaudited.
(b) The Fund commenced operations on August 1, 1989. The Fund's original class of shares subsequently became A Shares. The Fund
commenced the offering of B Shares on August 6, 1993.
(c) The ratio of Gross Expenses to Average Net Assets does not reflect fee waivers or expense reimbursements.
(d) Total Return does not reflect the effects of sales charges. Total Return would have been lower absent expense reimbursements
and/or fee waivers.
(e) Annualized.
(f) Not annualized.
</TABLE>
PROSPECTUS 9
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COLORADO TAX-FREE FUND
<TABLE>
<CAPTION>
NET REALIZED
AND UNREALIZED DIVIDENDS
BEGINNING NET NET GAIN FROM NET
ASSET VALUE INVESTMENT (LOSS) ON INVESTMENT
PER SHARE INCOME INVESTMENTS INCOME
<S> <C> <C> <C> <C> <C>
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A SHARES
June 1, 1997 to November 30,
1997(a)..................... $10.22 $0.26 $0.32 ($0.26)
June 1, 1996 to May 31,
1997........................ $ 9.89 $0.54 $0.33 ($0.54)
June 1, 1995 to May 31,
1996........................ $ 9.90 $0.53 ($0.01) ($0.53)
June 1, 1994 to May 31,
1995........................ $ 9.69 $0.48 $0.21 ($0.48)
June 1, 1993 to May 31,
1994(b)..................... $10.00 $0.51 ($0.30) ($0.51)
B SHARES
June 1, 1997 to November 30,
1997(a)..................... $10.23 $0.23 $0.33 ($0.23)
June 1, 1996 to May 31,
1997........................ $ 9.90 $0.47 $0.33 ($0.47)
June 1, 1995 to May 31,
1996........................ $ 9.91 $0.46 ($0.01) ($0.46)
June 1, 1994 to May 31,
1995........................ $ 9.70 $0.41 $0.21 ($0.41)
August 2, 1993 to May 31,
1994(b)..................... $10.04 $0.35 ($0.33) ($0.35)
..............................................................................................
(a) Unaudited.
(b) The Fund commenced operations on June 1, 1993. The Fund's original class of shares
subsequently became A Shares. The Fund commenced the offering of B Shares on August 2,
1993.
(c) The ratio of Gross Expenses to Average Net Assets does not reflect fee waivers or
expense reimbursements.
(d) Total Return does not reflect the effects of sales charges. Total Return would have been
lower absent expense reimubursements and/or fee waivers.
(e) Annualized.
(f) Not annualized.
</TABLE>
10 NORWEST ADVANTAGE FUNDS
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<TABLE>
<CAPTION>
ENDING
NET RATIO TO AVERAGE NET ASSETS NET ASSETS
DISTRIBUTIONS ASSET ................................. AT END OF
FROM NET VALUE NET PORTFOLIO PERIOD
REALIZED PER INVESTMENT NET GROSS TOTAL TURNOVER (000'S
GAIN SHARE INCOME EXPENSES EXPENSES(c) RETURN(d) RATE OMITTED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
A SHARES
June 1, 1997 to November 30,
1997(a)..................... - $10.54 5.07%(e) 0.60%(e) 1.03%(e) 5.77%(f) 34.97% $29,862
June 1, 1996 to May 31,
1997........................ - $10.22 5.36% 0.45% 1.14% 9.00% 129.26% $27,806
June 1, 1995 to May 31,
1996........................ - $ 9.89 5.30% 0.30% 1.13% 5.35% 171.41% $26,991
June 1, 1994 to May 31,
1995........................ - $ 9.90 5.10% 0.30% 1.15% 7.47% 47.88% $25,997
June 1, 1993 to May 31,
1994(b)..................... ($0.01) $ 9.69 4.94% 0.07% 1.23% 2.02% 40.92% $31,724
B SHARES
June 1, 1997 to November 30,
1997(a)..................... - $10.56 4.31%(e) 1.35%(e) 2.03%(e) 5.49%(f) 34.97% $ 7,538
June 1, 1996 to May 31,
1997........................ - $10.23 4.60% 1.20% 2.15% 8.19% 129.26% $ 7,218
June 1, 1995 to May 31,
1996........................ - $ 9.90 4.64% 1.05% 2.16% 4.56% 171.41% $ 6,400
June 1, 1994 to May 31,
1995........................ - $ 9.91 4.32% 1.05% 2.16% 6.67% 47.88% $ 5,198
August 2, 1993 to May 31,
1994(b)..................... ($0.01) $ 9.70 4.08%(e) 0.85%(e) 2.24%(e) 0.27%(e) 40.92% $ 4,494
................................................................................................................................
(a) Unaudited.
(b) The Fund commenced operations on June 1, 1993. The Fund's original class of shares subsequently became A Shares. The Fund
commenced the offering of B Shares on August 2, 1993.
(c) The ratio of Gross Expenses to Average Net Assets does not reflect fee waivers or expense reimbursements.
(d) Total Return does not reflect the effects of sales charges. Total Return would have been lower absent expense
reimubursements and/or fee waivers.
(e) Annualized.
(f) Not annualized.
</TABLE>
PROSPECTUS 11
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MINNESOTA TAX-FREE FUND
<TABLE>
<CAPTION>
NET REALIZED
AND UNREALIZED DIVIDENDS
BEGINNING NET NET GAIN FROM NET
ASSET VALUE INVESTMENT (LOSS) ON INVESTMENT
PER SHARE INCOME INVESTMENTS INCOME
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
A SHARES
June 1, 1997 to November 30,
1997(a)..................... $10.57 $0.27 $0.30 ($0.26)
June 1, 1996 to May 31,
1997........................ $10.30 $0.54 $0.27 ($0.54)
June 1, 1995 to May 31,
1996........................ $10.45 $0.56 ($0.15) ($0.56)
June 1, 1994 to May 31,
1995........................ $10.15 $0.53 $0.30 ($0.53)
June 1, 1993 to May 31,
1994........................ $10.65 $0.53 ($0.31) ($0.53)
June 1, 1992 to May 31,
1993........................ $10.27 $0.55 $0.39 ($0.55)
December 1, 1991 to May 31,
1992........................ $10.20 $0.30 $0.11 ($0.30)
December 1, 1990 to November
30, 1991.................... $10.15 $0.61 $0.12 ($0.61)
December 1, 1989 to November
30, 1990.................... $10.14 $0.62 $0.02 ($0.62)
December 1, 1988 to November
30, 1989.................... $ 9.78 $0.62 $0.36 ($0.62)
January 12, 1988 to November
30, 1988(b)................. $10.00 $0.55 ($0.22) ($0.55)
B SHARES
June 1, 1997 to November 30,
1997(a)..................... $10.57 $0.22 $0.31 ($0.22)
June 1, 1996 to May 31,
1997........................ $10.30 $0.46 $0.27 ($0.46)
June 1, 1995 to May 31,
1996........................ $10.44 $0.48 ($0.14) ($0.48)
June 1, 1994 to May 31,
1995........................ $10.15 $0.45 $0.29 ($0.45)
August 6, 1993 to May 31,
1994(b)..................... $10.77 $0.35 ($0.43) ($0.35)
..............................................................................................
(a) Unaudited.
(b) The Fund commenced operations on January 12, 1988. The Fund's original class of shares
subsequently became A Shares. The Fund commenced the offering of B Shares on August 6,
1993.
(c) The ratio of Gross Expenses to Average Net Assets does not reflect fee waivers or
expense reimbursements.
(d) Total Return does not include the effects of sales charges. Total Return would have been
lower absent expense reimbursements and/or fee waivers.
(e) Annualized.
(f) Not annualized.
</TABLE>
12 NORWEST ADVANTAGE FUNDS
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ENDING
NET RATIO TO AVERAGE NET ASSETS NET ASSETS
DISTRIBUTIONS ASSET ................................... AT END OF
FROM NET VALUE NET PORTFOLIO PERIOD
REALIZED PER INVESTMENT NET GROSS TOTAL TURNOVER (000'S
GAIN SHARE INCOME EXPENSES EXPENSES(c) RETURN(d) RATE OMITTED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
A SHARES
June 1, 1997 to November 30,
1997(a)..................... - $10.88 4.89%(e) 0.60%(e) 1.07%(e) 5.48%(f) 33.45% $29,488
June 1, 1996 to May 31,
1997........................ - $10.57 5.11% 0.60% 1.21% 7.98% 96.68% $25,739
June 1, 1995 to May 31,
1996........................ - $10.30 5.26% 0.48% 1.26% 3.97% 77.10% $26,610
June 1, 1994 to May 31,
1995........................ - $10.45 5.25% 0.49% 1.61% 8.55% 139.33% $15,559
June 1, 1993 to May 31,
1994........................ ($0.19) $10.15 4.92% 0.61% 1.52% 1.94% 84.23% $10,008
June 1, 1992 to May 31,
1993........................ ($0.01) $10.65 5.13% 0.75% 1.79% 9.35% 44.29% $10,852
December 1, 1991 to May 31,
1992........................ ($0.04) $10.27 5.86%(e) 0.90%(e) 2.38%(e) 8.10%(e) 6.70% $ 4,896
December 1, 1990 to November
30, 1991.................... ($0.07) $10.20 6.01% 0.90% 2.63% 7.40% 37.32% $ 4,575
December 1, 1989 to November
30, 1990.................... ($0.01) $10.15 6.21% 0.90% 2.37% 6.50% 30.86% $ 4,243
December 1, 1988 to November
30, 1989.................... - $10.14 6.21% 0.90% 1.70% 10.30% 26.31% $ 5,309
January 12, 1988 to November
30, 1988(b)................. - $ 9.78 6.51%(e) 0.76%(e) 1.47%(e) 4.03%(e) 32.34% $ 5,904
B SHARES
June 1, 1997 to November 30,
1997(a)..................... - $10.88 4.13%(e) 1.35%(e) 2.07%(e) 5.08%(f) 33.45% $12,877
June 1, 1996 to May 31,
1997........................ - $10.57 4.35% 1.34% 2.21% 7.18% 96.68% $11,128
June 1, 1995 to May 31,
1996........................ - $10.30 4.51% 1.23% 2.29% 3.28% 77.10% $ 8,825
June 1, 1994 to May 31,
1995........................ - $10.44 4.52% 1.21% 2.62% 7.63% 139.33% $ 5,090
August 6, 1993 to May 31,
1994(b)..................... ($0.19) $10.15 3.99%(e) 1.31%(e) 2.45%(e) (0.58%)(e) 84.23% $ 2,485
..................................................................................................................................
(a) Unaudited.
(b) The Fund commenced operations on January 12, 1988. The Fund's original class of shares subsequently became A Shares. The
Fund commenced the offering of B Shares on August 6, 1993.
(c) The ratio of Gross Expenses to Average Net Assets does not reflect fee waivers or expense reimbursements.
(d) Total Return does not include the effects of sales charges. Total Return would have been lower absent expense reimbursements
and/or fee waivers.
(e) Annualized.
(f) Not annualized.
</TABLE>
PROSPECTUS 13
<PAGE>
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- ----
3. INVESTMENT OBJECTIVES AND POLICIES
TAX-FREE INCOME FUND
INVESTMENT OBJECTIVE. The investment objective of Tax-Free Income Fund is to
produce current income exempt from federal income taxes. The Fund pursues this
objective by investing primarily in a portfolio of investment grade fixed income
securities the interest on which is free from federal income tax. There can be
no assurance that the Fund will achieve its investment objective.
INVESTMENT POLICIES. Substantially all of the Fund's total assets normally will
be invested in municipal securities, which are debt obligations issued by or on
behalf of the states, territories or possessions of the United States, the
District of Columbia and their subdivisions, authorities, instrumentalities and
corporations the interest on which is exempt from federal income tax and not
treated as a preference item for individuals for purposes of the federal
alternative minimum tax ("municipal securities"). As a fundamental investment
policy, except during periods when the Fund assumes a temporary defensive
position, the Fund will invest at least 80% of its total assets in securities
exempt from federal income taxes (including the federal alternative minimum
tax). In order to respond to business and financial conditions, the Fund may
invest up to 20% of its assets in instruments on which the interest is subject
to federal taxation. (See "Additional Investment Policies and Risk
Considerations - Temporary Defensive Position;" "- Taxable Investments" and
"Dividends and Tax Matters.")
The average dollar-weighted maturity of the Fund's assets normally will be
between 10 and 20 years. Depending on market conditions, however, the average
dollar-weighted maturity could be higher or lower. In general, the longer the
maturity of a municipal security, the higher the rate of interest it pays.
However, a longer maturity is generally associated with a higher level of
volatility in the market value of a security. As the Fund's objective is to
provide high current income, the Fund invests in municipal securities with an
emphasis on income rather than stability of the Fund's net asset value, and the
average maturity of the Fund's portfolio will vary depending on anticipated
market conditions.
Substantially all of the Fund's assets will be invested in municipal securities
that are rated within the top four grades by an NRSRO at the time of purchase.
For example, for municipal bonds, these grades are "Aaa," "Aa," "A" and "Baa" in
the case of Moody's Investors Service ("Moody's") and "AAA," "AA," "A" and "BBB"
in the case of Standard & Poor's ("S&P") and Fitch IBCA, Inc. ("Fitch"). These
securities are generally considered to be
14 NORWEST ADVANTAGE FUNDS
<PAGE>
- ----
- ----
investment grade securities, although Moody's indicates that municipal
securities rated "Baa" have speculative characteristics. The Fund also may
invest in unrated securities that Norwest believes are comparable in quality to
rated securities in which the Fund may invest. A description of the rating
categories of certain NRSROs is contained in the SAI.
COLORADO TAX-FREE FUND
INVESTMENT OBJECTIVE. The investment objective of Colorado Tax-Free Fund is to
seek to provide shareholders with a high level of current income exempt from
both federal and Colorado state income taxes (including the alternative minimum
tax) consistent with the preservation of capital. Shares of the Fund are offered
only to residents of the State of Colorado. There can be no assurance that the
Fund will achieve its investment objective.
INVESTMENT POLICIES. Substantially all the Fund's total assets normally will be
invested in investment grade municipal securities, which are debt obligations
issued by the state of Colorado and its political subdivisions, various
authorities, instrumentalities, public corporations and special districts
("municipal securities"). Municipal securities also include the securities
issued by the various territories and possessions of the United States, such as
Puerto Rico. As a fundamental policy, except during periods when the Fund
assumes a temporary defensive position, the Fund will invest at least 80% of its
total assets in securities exempt from both federal and Colorado state income
taxes (including the federal alternative minimum tax). In order to respond to
business and financial conditions, the Fund may invest up to 20% of its assets
in instruments on which the interest is subject to taxation. (See "Additional
Investment Policies - Temporary Defensive Position;" "- Taxable Investments" and
"Dividends and Tax Matters.")
The yields of Colorado municipal securities depend on, among other things,
conditions in the Colorado municipal bond market and fixed income markets
generally, the size of a particular offering, the maturity of the obligation and
the rating of the issue. In some cases, Colorado issues may have yields that are
slightly less than the yields of municipal obligations of issuers located in
other states because of the favorable Colorado state tax exemption on Colorado
issues.
There are no restrictions on the Fund's average portfolio maturity, but the
average portfolio maturity is currently expected to be greater than 10 years.
Average portfolio maturity may reach or exceed 20 years in the future. In
general, the longer the maturity of a municipal security, the higher the rate of
interest it pays. However, a longer average maturity is generally associated
with a higher level of volatility in the market value of a security. As the
Fund's
PROSPECTUS 15
<PAGE>
- ----
- ----
objective is to provide high current income, the Fund invests in municipal
securities with an emphasis on income rather than maintaining a stable net asset
value. However, the Fund attempts to limit net asset value fluctuations.
Substantially all of the Fund's assets will be invested in municipal securities
that are rated within the top four grades by an NRSRO at the time of purchase.
For example, for municipal bonds, these grades are "Aaa," "Aa," "A" and "Baa" in
the case of Moody's Investors Service ("Moody's") and "AAA," "AA," "A" and "BBB"
in the case of Standard & Poor's ("S&P") and Fitch IBCA, Inc. ("Fitch"). These
securities are generally considered to be investment grade securities, although
Moody's indicates that municipal securities rated "Baa" have speculative
characteristics. The Fund also may invest in unrated securities that Norwest
believes are comparable in quality to rated securities in which the Fund may
invest. A description of the rating categories of certain NRSROs is contained in
the SAI.
MINNESOTA TAX-FREE FUND
INVESTMENT OBJECTIVE. The investment objective of Minnesota Tax-Free Fund is to
provide shareholders with a high level of current income exempt from both
federal and Minnesota state income taxes (including the alternative minimum tax)
without assuming undue risk. Shares of the Fund are offered only to residents of
the State of Minnesota. There can be no assurance that the Fund will achieve its
investment objective.
INVESTMENT POLICIES. Substantially all the Fund's total assets normally will be
invested in investment grade municipal securities, which are debt obligations
issued by the state of Minnesota and its political subdivisions, duly
constituted authorities and corporations ("municipal securities"). Municipal
securities also include the securities issued by the various territories and
possessions of the United States, such as Puerto Rico. In order to respond to
business and financial conditions, the Fund may invest up to 20% of its assets
in instruments on which the interest is subject to taxation. (See "Additional
Investment Policies - Temporary Defensive Position;" "- Taxable Investments" and
"Dividends and Tax Matters.") As a fundamental policy, except during periods
when the Fund assumes a temporary defensive position, the Fund will invest at
least 80% of its total assets in securities exempt from both federal and
Minnesota state income taxes (including the federal alternative minimum tax).
The yields of Minnesota municipal securities depend on, among other things,
conditions in the Minnesota municipal bond market and fixed income markets
generally, the maturity of the obligation, the rating of the issue and the size
of a particular offering. In some cases, Minnesota issues may have yields that
are slightly less than the yields of municipal obligations of issuers located in
other states because of the favorable Minnesota state tax exemption on
16 NORWEST ADVANTAGE FUNDS
<PAGE>
- ----
- ----
Minnesota issues. (See "Dividends and Tax Matters - Taxes - Minnesota Tax-Free
Fund" for a description of certain tax matters that may effect the Fund and its
shareholders.)
There are no restrictions on the Fund's average portfolio maturity, but the
average dollar-weighted maturity is currently expected to be greater than 10
years. Average portfolio maturity may reach or exceed 20 years in the future.
Depending on market conditions, however, the average dollar-weighted maturity
could be higher or lower. In general, the longer the maturity of a municipal
security, the higher the rate of interest it pays. However, a longer average
maturity is generally associated with a higher level of volatility in the market
value of a municipal security. As the Fund's objective is to provide high
current income, the Fund invests in municipal securities with an emphasis on
income rather than stability of the Fund's net asset value.
Normally, at least 75% of the Fund's assets will be invested in municipal
securities that are rated within the top four grades by an NRSRO at the time of
purchase. For example, for municipal bonds, these grades are "Aaa," "Aa," "A"
and "Baa" in the case of Moody's Investors Service ("Moody's") and "AAA," "AA,"
"A" and "BBB" in the case of Standard & Poor's ("S&P") and Fitch IBCA, Inc.
("Fitch"). These securities are generally considered to be investment grade
securities, although Moody's indicates that municipal securities rated "Baa"
have speculative characteristics. The Fund also may invest in unrated securities
that Norwest believes are comparable in quality to rated securities in which the
Fund may invest. A description of the rating categories of certain NRSROs is
contained in the SAI.
NON-INVESTMENT GRADE SECURITIES. Minnesota Tax-Free Fund may invest up to 25% of
its total assets in municipal bonds rated in the fifth highest rating category
of an NRSRO ("Ba" by Moody's or "BB" by S&P or Fitch), or which are unrated and
judged by Norwest to be of comparable quality to securities rated in the fifth
highest category. Such securities (commonly referred to as "junk bonds") are not
considered to be investment grade and have speculative or predominantly
speculative characteristics. Non-investment grade, high risk securities provide
poor protection for payment of principal and interest but may have greater
potential for capital appreciation than do higher quality securities. These
lower rated securities involve greater risk of default or price changes due to
changes in the issuer's creditworthiness than do higher quality securities. The
market for these securities may be thinner and less active than that for higher
quality securities, which may affect the price at which the lower rated
securities can be sold. In addition, the market prices of lower rated securities
may fluctuate more than the market prices of higher quality securities and may
decline significantly in periods of general economic difficulty or rising
interest rates.
PROSPECTUS 17
<PAGE>
- ----
- ----
During the fiscal year ended May 31, 1997, the Fund had 88.8% of its average
annual assets in municipal securities rated by Moody's or S&P and 11.2% of its
average annual assets in unrated investments, including cash and short-term cash
equivalents which are typically unrated. During that year, the Fund had the
following percentages of its average annual net assets invested in rated
securities: "Aaa"/"AAA" - 36.3%, "Aa"/"AA" - 38.4%, "A"/"A" - 9.8%, "Baa"/"BBB"
- - 4.3% and "Ba"/"BB" and below - 0%. For this purpose, securities with different
ratings from Moody's and S&P were assigned the higher rating. This information
reflects the average composition of the Fund's assets for the Fund's last fiscal
year and is not necessarily representative of the Fund as of the current fiscal
year or any other time.
INVESTMENT CONSIDERATIONS
AND RISK FACTORS
GEOGRAPHIC CONCENTRATION. Because Colorado Tax-Free Fund and Minnesota Tax-Free
Fund invest principally in municipal securities issued by issuers within a
particular state and the state's political subdivisions, those Funds are more
susceptible to factors adversely affecting issuers of those municipal securities
than would be a more geographically diverse municipal securities portfolio.
Tax-Free Income Fund will be subject to similar risks to the extent it
concentrates its investments in a particular jurisdiction. These risks are
linked to the financial condition of the state and its political subdivisions.
To the extent state or local governmental entities are unable to meet their
financial obligations, the income derived by a Fund, its ability to preserve or
realize appreciation of its portfolio assets or its liquidity could be impaired.
To the extent a Fund's investments are primarily concentrated in issuers located
in a particular state, the value of the Fund's shares may be especially affected
by factors pertaining to that state's economy and other factors specifically
affecting the ability of issuers of that state to meet their obligations. As a
result, the value of the Fund's assets may fluctuate more widely than the value
of shares of a portfolio investing in securities relating to a number of
different states. The ability of state, county or local governments and
quasi-government agencies to meet their obligations will depend primarily on the
availability of tax and other revenues to those governments and on their fiscal
conditions generally. The amounts of tax and other revenues available to
governmental issuers may be affected from time to time by economic, political
and demographic conditions within their state. In addition, constitutional or
statutory restrictions may limit a government's power to raise revenues or
increase taxes. The availability of federal, state and local aid to governmental
issuers may also affect their ability to meet obligations. Payments of principal
of and interest on private activity securities will depend
18 NORWEST ADVANTAGE FUNDS
<PAGE>
- ----
- ----
on the economic condition of the facility or specific revenue source from whose
revenues the payments will be made, which in turn could be affected by economic,
political or demographic conditions in the state.
The Colorado constitution restricts the ability of the state and local
governments to increase taxes, revenues, debt and spending. In particular, prior
voter approval is now required to impose any new tax or tax rate increase or to
issue any "multiple-fiscal year" debt and revenues collected in excess of
certain limits must be refunded unless voters authorize their retention. The
future impact on the financial operations and obligations of the state and local
governments cannot be determined at this time. Norwest will continue to monitor
the situation closely and will, if necessary, seek the advice of counsel
concerning its effect on instruments being considered for purchase by the Fund.
A further discussion of potential risks of investment in Colorado municipal
securities is contained in the SAI.
RELATED ISSUERS. Some municipal securities are related in such a way that an
economic, business or political development affecting one municipal security
would have a similar effect on another municipal security. For example, the
repayment of different obligations may depend on similar types of projects. No
Fund will invest more than 25% of its total assets in securities that are so
related or invest more than 25% of its total assets in a single type of revenue
bond (e.g., electric revenue, housing revenue, etc.) Similarly, under normal
circumstances, Tax-Free Income Fund will not invest more than 25% of its total
assets in issuers located in the same state.
DIVERSIFICATION MATTERS. Each of Colorado Tax-Free Fund and Minnesota Tax-Free
Fund is non-diversified, which means that it has greater latitude than a
diversified fund with respect to the investment of its assets in the securities
of a relatively few municipal issuers. As non-diversified portfolios, these
Funds may present greater risks than a diversified fund. However, each Fund
intends to comply with applicable diversification requirements of the Internal
Revenue Code. These requirements provide that, as of the last day of each fiscal
quarter, with respect to 50% of its assets, a Fund may not: (1) own the
securities of a single issuer with a value of more than 5% of the Fund's total
assets; or (2) own more than 10% of the outstanding voting securities of a
single issuer. Tax-Free Income Fund is diversified and, therefore, as a
fundamental policy, with respect to 75% of its assets, may not purchase a
security if, as a result, more than 5% of the Fund's total assets would be
invested in the securities of a single issuer. These limits do not apply to U.S.
Government securities and the securities of investment companies. Each Fund
reserves the right to invest up to 100% of its investable assets in one or more
other investment companies.
Except for investment in U.S. Government Securities, no more than 25% of the
total assets of Colorado Tax-Free Fund, and no more than 20% of the
PROSPECTUS 19
<PAGE>
- ----
- ----
total assets of Minnesota Tax-Free Fund, may be invested in securities of any
one issuer. These limitations do not apply to securities of an issuer payable
solely from the proceeds of escrowed U.S. Government Securities.
The "issuer" of securities is deemed to be the entity whose assets and revenues
secure the securities, whether that entity is a governmental entity (so long as
its revenues and assets are separate from the government which created it) or a
non-governmental user of facilities financed through industrial development
bonds issued by or on behalf of a public authority or entity.
ADDITIONAL INVESTMENT POLICIES
AND RISK CONSIDERATIONS
Each Fund's investment objective and all investment policies of the Funds that
are designated as fundamental may not be changed without approval of the holders
of a majority of the Fund's outstanding voting securities. A majority of a
Fund's outstanding voting securities means the lesser of 67% of the shares
present or represented at a shareholders' meeting at which the holders of more
than 50% of the outstanding shares are present or represented or more than 50%
of the outstanding shares. Except as otherwise indicated, investment policies of
the Funds are not fundamental and may be changed by the Board of Trustees of the
Trust (the "Board") without shareholder approval. A further description of the
Funds' investment policies, including additional fundamental policies, is
contained in the SAI.
No Fund may invest more than 15% of its net assets in illiquid securities,
including repurchase agreements not entitling the Fund to payment within seven
days. As used herein, the term U.S. Government Securities means obligations
issued or guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities.
As part of its regular banking operations, Norwest Bank may make loans to public
companies. Thus, it may be possible, from time to time, for a Fund to hold or
acquire the securities of issuers which are also lending clients of Norwest
Bank. A lending relationship will not be a factor in the selection of portfolio
securities for a Fund.
BORROWING. As a fundamental policy, each Fund may borrow money from banks or by
entering into reverse repurchase agreements and will limit borrowings to amounts
not in excess of 33 1/3% of the value of the Fund's total assets. Borrowing for
other than temporary or emergency purposes or meeting redemption requests may
not exceed 5% of the value of any Fund's assets. Each Fund may enter reverse
repurchase agreements, transactions in which a Fund sells a security and
simultaneously commits to repurchase that security from the buyer at an agreed
upon price on an agreed upon future date.
20 NORWEST ADVANTAGE FUNDS
<PAGE>
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- ----
MUNICIPAL SECURITIES. The municipal securities in which the Funds may invest
include municipal bonds, notes and leases. Municipal securities may be
zero-coupon securities. Yields on municipal securities are dependent on a
variety of factors, including the general conditions of the municipal security
markets and the fixed income markets in general, the size of a particular
offering, the maturity of the obligation and the rating of the issue. The
achievement of a Fund's investment objective is dependent in part on the
continuing ability of the issuers of municipal securities in which the Fund
invests to meet their obligations for the payment of principal and interest when
due.
The market value of the interest-bearing debt securities, including municipal
securities, held by the Funds will be affected by changes in interest rates.
There is normally an inverse relationship between the market value of securities
sensitive to prevailing interest rates and actual changes in interest rates;
e.g., a decline in interest rates produces an increase in market value, while an
increase in rates produces a decrease in market value. Moreover, the longer the
remaining maturity of a security, the greater will be the affect of interest
rate changes on the market value of that security. In addition, fixed income
investments held by the Funds are subject to "credit risk." Changes in the
ability of an issuer to make payments of interest and principal and the market's
perception of an issuer's creditworthiness will affect the market value of the
debt securities of that issuer. Obligations of issuers of debt securities,
including municipal issuers, are also subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors which
may restrict the ability of any issuer to pay, when due, the principal of and
interest on its debt securities. The possibility exists that, the ability of any
issuer to pay, when due, the principal of and interest on its debt securities
may become impaired.
The Funds may retain securities whose rating has been lowered below the lowest
permissible rating category or, in the case of an unrated security, determined
by Norwest to be of comparable quality, if Norwest determines that retaining
such security is in the best interests of the Fund. Because a downgrade often
results in a reduction in the market price of the security, sale of a downgraded
security may result in a loss.
MUNICIPAL BONDS. Municipal bonds can be classified as either "general
obligation" bonds or "revenue" bonds. General obligation bonds are secured by a
municipality's pledge of its full faith, credit and taxing power for the payment
of principal and interest. Revenue bonds are usually payable only from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other tax, but not from general
tax revenues.
PROSPECTUS 21
<PAGE>
- ----
- ----
Municipal bonds also include industrial development bonds and private activity
bonds, which in most cases are revenue bonds and generally are not secured by a
pledge of the credit of the municipality. The payment of the principal and
interest on such bonds is dependent solely on the ability of an initial or
subsequent user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment.
MUNICIPAL NOTES AND LEASES. Municipal notes, which may be either "general
obligation" or "revenue" securities, are intended to fulfill the short-term
capital needs of the issuer and generally have original maturities not exceeding
one year. They include tax anticipation notes, revenue anticipation notes (which
generally are issued in anticipation of various seasonal revenues), bond
anticipation notes, construction loan notes and tax-exempt commercial paper.
Municipal leases, which may take the form of a lease or an installment purchase
or conditional sale contract, are issued by state and local governments and
authorities to acquire a wide variety of equipment and facilities such as fire
and sanitation vehicles, telecommunications equipment and other capital assets.
PARTICIPATION INTERESTS. The Funds may purchase participation interests in
municipal securities that are held by banks or other financial institutions.
Participation interests usually carry a demand feature backed by a letter of
credit or guarantee of the bank or other financial institution permitting the
holder to tender them back to the bank or other financial institution. Prior to
purchasing any participation interest, each Fund will obtain appropriate
assurances from counsel that the interest earned by the Fund from the
obligations in which it holds participation interests is exempt from federal
and, in the case of Colorado Tax-Free Fund and Minnesota Tax-Free Fund,
applicable state income tax.
STAND-BY COMMITMENTS. The Funds may purchase municipal securities together with
the right to resell them to the seller or a third party at an agreed-upon price
or yield within specified periods prior to their maturity dates. Such a right to
resell is commonly known as a "stand-by commitment," and the aggregate price
which a Fund pays for securities with a stand-by commitment may be higher than
the price which otherwise would be paid. The primary purpose of this practice is
to permit a Fund to be as fully invested as practicable in municipal securities
while preserving the necessary flexibility and liquidity to meet unanticipated
redemptions. In this regard, a Fund acquires stand-by commitments solely to
facilitate portfolio liquidity and does not exercise its rights thereunder for
trading purposes. Stand-by commitments involve certain expenses and risks,
including the inability of the issuer of the commitment to pay for the
securities at the time the commitment is exercised, non-marketability of the
commitment, and differences between the maturity of the underlying security and
the maturity of the commitment.
22 NORWEST ADVANTAGE FUNDS
<PAGE>
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The Funds' policy is to enter into stand-by commitment transactions only with
municipal securities dealers which, in the view of Norwest, present minimal
credit risks.
PUTS ON MUNICIPAL SECURITIES. The Funds may acquire "puts" on municipal
securities they purchase. A put gives the Fund the right to sell the municipal
security at a specified price at any time on or before a specified date. The
Fund will acquire puts only to enhance liquidity, shorten the maturity of the
related municipal security or permit the Fund to invest its funds at more
favorable rates. Generally, the Fund will buy a municipal security that is
accompanied by a put only if the put is available at no extra cost. In some
cases, however, the Fund may pay an extra amount to acquire a put, either in
connection with the purchase of the related municipal security or separately
from the purchase of the security. Puts involve the same risks discussed above
with respect to stand-by commitments.
VARIABLE AND FLOATING RATE SECURITIES. The securities in which the Funds invest
(including mortgage-related securities) may have variable or floating rates of
interest. These securities pay interest at rates that are adjusted periodically
according to a specified formula, usually with reference to some interest rate
index or market interest rate (the "underlying index"). The interest paid on
these securities is a function primarily of the underlying index upon which the
interest rate adjustments are based. Such adjustments minimize changes in the
market value of the obligation and, accordingly, enhance the ability of the Fund
to maintain a stable net asset value. Similar to fixed rate debt instruments,
variable and floating rate instruments are subject to changes in value based on
changes in market interest rates or changes in the issuer's creditworthiness.
The rate of interest on securities purchased by a Fund may be tied to Treasury
or other government securities or indices on those securities as well as any
other rate of interest or index. Certain variable rate securities (including
mortgage-related securities) pay interest at a rate that varies inversely to
prevailing short-term interest rates (sometimes referred to as inverse
floaters). For instance, upon reset the interest rate payable on a security may
go down when the underlying index has risen. During times when short-term
interest rates are relatively low as compared to long-term interest rates a Fund
may attempt to enhance its yield by purchasing inverse floaters. Certain inverse
floaters may have an interest rate reset mechanism that multiplies the effects
of changes in the underlying index. This form of leverage may have the effect of
increasing the volatility of the security's market value while increasing the
security's, and thus the Fund's, yield.
There may not be an active secondary market for certain floating or variable
rate instruments (particularly inverse floaters and similar instruments) which
could make it difficult for a Fund to dispose of the instrument during periods
that the Fund is not entitled to exercise any demand rights (such as puts) it
may have. A Fund could, for this or other reasons, suffer a loss with respect
PROSPECTUS 23
<PAGE>
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to an instrument. Norwest monitors the liquidity of each Fund's investment in
variable and floating rate instruments, but there can be no guarantee that an
active secondary market will exist.
ZERO-COUPON SECURITIES. Zero-coupon securities are sold at original issue
discount and pay no interest to holders prior to maturity, but a Fund holding a
zero-coupon security must include the original issue discount of the security as
income. Zero-coupon securities may be subject to greater fluctuation of market
value than the other securities in which the Fund's may invest. The Funds
distribute all of their net investment income, and may have to sell portfolio
securities to distribute imputed income, which may occur at a time when Norwest
would not have chosen to sell such securities and which may result in a taxable
gain or loss.
REPURCHASE AGREEMENTS AND LENDING OF PORTFOLIO SECURITIES. Each Fund may seek
additional income by entering into repurchase agreements or by lending
securities from its portfolio to brokers, dealers and other financial
institutions. These investments may entail certain risks not associated with
direct investments in securities. For instance, in the event that bankruptcy or
similar proceedings were commenced against a counterparty in these transactions
or a counterparty defaulted on its obligations, a Fund might suffer a loss.
Repurchase agreements are transactions in which a Fund purchases a security and
simultaneously commits to resell that security to the seller at an agreed-upon
price on an agreed-upon future date, normally one to seven days later. The
resale price reflects a market rate of interest that is not related to the
coupon rate or maturity of the purchased security. When a Fund lends a security
it receives interest from the borrower or from investing cash collateral. The
Trust maintains possession of the purchased securities and any underlying
collateral in these transactions, the total market value of which on a
continuous basis is at least equal to the repurchase price or value of
securities loaned, plus accrued interest. The Funds may pay fees to arrange
securities loans and each Fund will, as a fundamental policy, limit securities
lending to not more than 33 1/3% of the value of its total assets, as determined
by SEC guidelines.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. Each Fund may purchase
securities offered on a "when-issued" basis and may purchase securities on a
"forward commitment" basis. When such transactions are negotiated, the price is
fixed at the time the commitment is made, but delivery and payment for the
securities take place at a later date. Normally, the settlement date occurs
within three months after the transaction, but delayed settlements beyond three
months may be negotiated.
During the period between a commitment and settlement, no payment is made for
the securities purchased and, thus, no interest accrues to the Fund.
24 NORWEST ADVANTAGE FUNDS
<PAGE>
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At the time a Fund makes a commitment to purchase securities in this manner,
however, the Fund immediately assumes the risk of ownership, including price
fluctuation. Failure by the other party to deliver or pay for a security
purchased or sold by the Fund may result in a loss or a missed opportunity to
make an alternative investment. Any significant commitment of a Fund's assets
committed to the purchase of securities on a when-issued or forward commitment
basis may increase the volatility of its net asset value.
The use of when-issued transactions and forward commitments enables a Fund to
hedge against anticipated changes in interest rates and prices. If Norwest were
to forecast incorrectly the direction of interest rate movements, however, a
Fund might be required to complete when-issued or forward transactions at prices
inferior to the current market values. The Funds enter into when-issued and
forward commitments only with the intention of actually receiving the
securities, but a Fund may sell the securities before the settlement date if
deemed advisable. If a Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition or to dispose of its right to
deliver or receive against a forward commitment, it can incur a gain or loss.
When-issued securities may include bonds purchased on a "when, as and if issued"
basis under which the issuance of the securities depends upon the occurrence of
a subsequent event.
TEMPORARY DEFENSIVE POSITION. When business or financial conditions warrant,
each Fund may assume a temporary defensive position and invest without limit in
cash or prime quality cash equivalents, including: (1) short-term U.S.
Government Securities; (2) certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of commercial banks doing business in the
United States; (3) commercial paper; (4) repurchase agreements; and (5) shares
of "money market funds" registered under the Investment Company Act of 1940 (the
"1940 Act") within the limits specified therein. Prime quality instruments are
those that are rated in one of the two highest short-term rating categories by
an NRSRO or, if not rated, determined by Norwest to be of comparable quality.
During periods when and to the extent that the Fund has assumed a temporary
defensive position, it may not be pursuing its investment objective. Apart from
temporary defensive purposes, a Fund may at any time invest a portion of its
assets in cash and cash equivalents as described above. When a Fund assumes a
temporary defensive position, it is likely that shareholders will be subject to
federal and applicable state income taxes on a greater portion of their income
dividends received from the Fund.
TAXABLE INVESTMENTS. Apart from temporary defensive purposes, each Fund may
invest up to 20% of the value of its total assets in cash equivalents the
interest on which is not exempt from federal income tax or is treated as a
preference item for purposes of the federal alternative minimum tax. For more
information regarding the alternative minimum tax, see "Dividends
PROSPECTUS 25
<PAGE>
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and Tax Matters." In addition, the Funds may hold a portion of their assets in
cash and cash-equivalents pending investment in municipal securities, to meet
requests for redemptions or to assume a temporary defensive position. With
respect to Tax-Free Income Fund, these securities include debt securities of
corporate issuers meeting the Fund's investment quality standards described
above and bonds or notes issued by or on behalf of a municipality, the interest
on which is an item of tax preference for purposes of the federal alternative
minimum tax on individuals.
PORTFOLIO TRANSACTIONS. The frequency of portfolio transactions of each Fund
(the portfolio turnover rate) will vary from year to year depending on many
factors. From time to time a Fund may engage in active short-term trading to
take advantage of price movements affecting individual issues, groups of issues
or markets. The Funds' portfolio turnover is reported under "Financial
Highlights." An annual portfolio turnover rate of 100% would occur if all the
securities in a Fund were replaced once in a period of one year. Higher
portfolio turnover rates may result in increased short-term capital gains, which
are not tax-exempt, and losses. It is each Fund's policy to obtain best net
results in effecting portfolio transactions. Norwest may effect transactions for
the Funds through brokers who sell Fund shares. The Funds have no obligation to
deal with any specific broker or dealer in the execution of portfolio
transactions.
YEAR 2000 COMPLIANT. Like other mutual funds, financial and business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the Adviser and other service providers
to the Funds do not properly process and calculate date-related information and
data from and after January 2000. The Adviser has taken steps to address the
Year 2000 issue with respect to the computer systems that it uses and to obtain
reasonable assurances that comparable steps are being taken by the Funds' other
major service providers. The Adviser does not anticipate that the move to the
Year 2000 will have a material impact on its ability to continue to provide the
Funds with service at current levels.
26 NORWEST ADVANTAGE FUNDS
<PAGE>
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4. MANAGEMENT
The business of the Trust is managed under the direction of the Board of
Trustees (the "Board"). The Board formulates the general policies of the Funds
and meets periodically to review the results of the Funds, monitor investment
activities and practices and discuss other matters affecting the Funds and the
Trust. The Board consists of eight persons.
INVESTMENT ADVISORY SERVICES
NORWEST INVESTMENT MANAGEMENT. Subject to the general supervision of the Board,
Norwest makes investment decisions for the Funds and continuously reviews,
supervises and administers each Fund's investment program. Norwest, which is
located at Norwest Center, Sixth Street and Marquette, Minneapolis, Minnesota
55479, is an indirect subsidiary of Norwest Corporation, a multi-bank holding
company that was incorporated under the laws of Delaware in 1929. As of June 30,
1997, Norwest Corporation had assets of $83.6 billion, which made it the 11th
largest bank holding company in the United States. As of June 30, 1997, Norwest
and its affiliates managed assets with a value of approximately $52.9 billion.
For its services, Norwest receives an advisory fee at an annual rate of 0.50% of
the average daily net assets of Tax-Free Income Fund and, with respect to each
of the Colorado Tax-Free Fund and Minnesota Tax-Free Fund, at an annual rate of
0.50% of the first $300 million of the Fund's average daily net assets, 0.46% of
the next $400 million of the Fund's average daily net assets and 0.42% of the
Fund's remaining average daily net assets.
PORTFOLIO MANAGERS. Many persons on the advisory staff of Norwest contribute to
the investment services provided to the Funds. The following persons, however,
are primarily responsible for day-to-day management and, unless otherwise noted,
have been since the inception of the Fund. For periods prior to June 1, 1997,
all persons served in their current positions with Norwest Bank. Prior to that
date Norwest Bank was each Fund's investment adviser. In addition to their
responsibilities as listed below, each of the portfolio managers may perform
portfolio management and other duties for Norwest Bank.
TAX-FREE INCOME FUND and COLORADO TAX-FREE FUND Mr. William T. Jackson,
CFA. Mr. Jackson has been a Vice President of Norwest since 1993. Prior
thereto, Mr. Jackson was a Senior Vice President and Institutional Sales
Manager with Norwest Investment Services from 1992 to 1993; a Vice
President and Municipal Bond Trading Manager from 1991 to 1992; and a Vice
President and Municipal Bond Trader with Kemper Securities, Inc., from 1984
to 1991.
PROSPECTUS 27
<PAGE>
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MINNESOTA TAX-FREE FUND Ms. Patricia D. Hovanetz, CFA. Ms. Hovanetz, a Vice
President of Norwest, has been associated with Norwest for more than 25
years in various capacities related to municipal bond investments. She has
been a municipal bond fund portfolio manager since 1988 and has served as
portfolio manager of the Fund since 1991.
MANAGEMENT, ADMINISTRATION AND
DISTRIBUTION SERVICES
As manager, Forum supervises the overall management of the Trust (including the
Trust's receipt of services for which the Trust is obligated to pay) other than
investment advisory services. In this capacity Forum provides the Trust with
general office facilities, provides persons satisfactory to the Board to serve
as officers of the Trust and oversees the performance of administrative and
professional services rendered to the Funds by others. FAS is responsible for
performing certain administrative services necessary for the Trust's operations
with respect to each Fund including: (1) preparing and printing updates of the
Trust's registration statement and prospectuses to its shareholders, the SEC and
state securities administrators; (2) preparing proxy and information statements
and any other communications to shareholders; (3) monitoring the sales of shares
and ensuring that such shares are properly and duly registered with the SEC and
applicable state securities administrators; and (4) supervising the declaration
of dividends and distributions to shareholders.
As of December 1, 1997, Forum and FAS provided management and administrative
services to registered investment companies and collective investment funds with
assets of approximately $30 billion. Forum is a member of the National
Association of Securities Dealers, Inc. For their services with respect to each
Fund, Forum and FAS each receives a fee, at an annual rate of 0.05% of the
Fund's average daily net assets.
Pursuant to a separate agreement, Forum Accounting Services, LLC ("Forum
Accounting") provides portfolio accounting services to each Fund and to each
Core Portfolio. Forum, FAS, and Forum Accounting are members of the Forum
Financial Group of companies which together provide a full range of services to
the investment company and financial services industry. As of February 1, 1998,
Forum, FAS and Forum Accounting were controlled by John Y. Keffer, President and
Chairman of the Trust.
Forum also acts as the distributor of the Shares. As the Funds' distributor,
Forum pays a broker-dealers' reallowance on A Shares and a sales commission on B
Shares to broker-dealers who sell shares of the Funds. Normally, Forum will make
payments to broker-dealers as discussed under "Characteristics of The Shares."
From its own resources, Forum may pay additional fees
28 NORWEST ADVANTAGE FUNDS
<PAGE>
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to broker-dealers or other persons for distribution or other services related to
the Funds. For further information about the Funds' distribution plan, including
the fees payable thereunder, see "Choosing a Share Class."
SHAREHOLDER SERVICING AND
CUSTODY
Norwest Bank serves as transfer agent and dividend disbursing agent for the
Trust (in this capacity, the "Transfer Agent"). The Transfer Agent maintains an
account for each shareholder of the Trust (unless such accounts are maintained
by sub-transfer agents or processing agents), performs other transfer agency
functions and acts as dividend disbursing agent for the Trust. The Transfer
Agent is permitted to subcontract any or all of its functions with respect to
all or any portion of the Trust's shareholders to one or more qualified
sub-transfer agents or processing agents, which may be affiliates of the
Transfer Agent. Sub-transfer agents and processing agents may be "Processing
Organizations" as described under "How to Buy Shares - Purchase Procedures." The
Transfer Agent is permitted to compensate those agents for their services;
however, that compensation may not increase the aggregate amount of payments by
the Trust to the Transfer Agent. For its services, the Transfer Agent receives a
fee a fee with respect to each Fund at an annual rate of 0.25% of each Fund's
average daily net assets attributable to each class of the Fund.
Norwest Bank also serves as each Fund's custodian. For its custodial services,
Norwest Bank receives a fee with respect to each Fund at an annual rate of:
0.02% of the first $100 million of the Fund's average daily net assets, 0.015%
of the next $100 million of the Fund's average daily net assets and 0.01% of the
Fund's remaining average daily net assets.
EXPENSES OF THE FUNDS
Subject to the obligation of Norwest to reimburse the Trust for certain expenses
of the Funds, the Trust has confirmed its obligation to pay all of its expenses.
The Funds' expenses include Trust expenses attributable to the Funds, which are
allocated to each Fund, and expenses not specifically attributable to the Funds,
which are allocated among the Funds and all other funds of the Trust in
proportion to their average net assets. Each service provider to a Fund may
elect to waive (or continue to waive) all or a portion of their fees. Any such
waivers will have the effect of increasing a Fund's performance for the period
during which the waiver is in effect. Fee waivers are voluntary and may be
reduced or eliminated at any time.
Each service provider to the Trust or their agents and affiliates may also act
in various capacities for, and receive compensation from, their customers who
are shareholders of a Fund. Under agreements with those customers, these
PROSPECTUS 29
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entities may elect to credit against the fees payable to them by their customers
or to rebate to customers all or a portion of any fee received from the Trust
with respect to assets of those customers invested in a Fund.
30 NORWEST ADVANTAGE FUNDS
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5. CHOOSING A SHARE CLASS
Investors should compare sales charges and fees before selecting a particular
class of shares. Investors should consider whether, during the anticipated life
of their investment in a Fund, the accumulated distribution services fee and
maintenance fee and contingent deferred sales charges on B Shares prior to
conversion would be less than the initial sales charge on A Shares purchased at
the same time and whether that differential would be offset by the higher yield
of A Shares. A summary of the charges applicable to shares of each Fund is
listed under "Prospectus Summary - Expense Information." Sales personnel of
broker-dealers and other financial institutions selling a Fund's shares may
receive differing compensation for selling A Shares and B Shares.
Because initial sales charges are deducted at the time of purchase, investors
purchasing a Fund's A Shares receive fewer shares than if the sales charge were
not deducted and, accordingly, do not have the entire purchase price invested.
Investors not qualifying for reduced initial sales charges who expect to
maintain their investment for an extended period of time should consider
whether, in light of the initial sales charge and its effect on the amount of
the purchase price invested, purchases of A Shares are more or less advantageous
than purchases of B Shares with their associated accumulated continuing
distribution and maintenance charges. For example, based on estimated current
fees and expenses, an investor subject to the 4.0% initial sales charge who
elects to reinvest all dividends would have to hold the shareholder's investment
approximately five years for the B Shares' distribution services fee and
maintenance fee to exceed the initial sales charge. The foregoing example does
not take into account the time value of money, fluctuations in net asset value
or the effects of different performance assumptions.
PROSPECTUS 31
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A SHARES
The public offering price of A Shares is their next-determined net asset value
plus an initial sales charge assessed as follows (no sales charge is assessed on
the reinvestment of dividends or distributions):
<TABLE>
<CAPTION>
BROKER-
DEALERS'
SALES CHARGE REALLOWANCE AS
AS A PERCENTAGE OF A PERCENTAGE
................................ OF OFFERING
AMOUNT OF PURCHASE OFFERING PRICE NET ASSET VALUE* PRICE
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000...... 4.00% 4.17% 3.50%
$50,000 to $99,999..... 3.50% 3.63% 3.00%
$100,000 to $249,000... 3.00% 3.09% 2.50%
$250,000 to $499,999... 2.50% 2.56% 2.25%
$500,000 to $999,000... 2.00% 2.04% 1.75%
$1,000,000 to
$2,499,999............ 0.00% 0.00% 0.75%
$2,500,000 to
$4,999,999............ 0.00% 0.00% 0.50%
Over $5,000,000........ 0.00% 0.00% 0.25%
* Rounded to the nearest one-hundredth percent
</TABLE>
Forum may pay a broker-dealers' reallowance to selected broker-dealers
purchasing shares as principal or agent, which may include banks, bank
affiliates and Processing Organizations. Normally, Forum will reallow discounts
to selected broker-dealers in the amounts indicated in the table above. In
addition, Forum may elect to reallow the entire sales charge to selected
broker-dealers for all sales with respect to which orders are placed with Forum.
The broker-dealers' reallowance may be changed from time to time. Forum may make
additional payments (out of its own resources) to selected broker-dealers of up
to 0.75% of the value of Fund shares purchased at net asset value.
In addition, from time to time and at its own expense, Forum may provide
compensation, including financial assistance, to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns, sales incentive programs, or other dealer-
sponsored special events. Compensation may include: (1) the provision of travel
arrangements and lodging; (2) tickets for entertainment events; and (3)
merchandise.
In some instances, this compensation may be made available only to certain
dealers or other financial intermediaries who have sold or are expected to sell
significant amounts of shares of the Funds or who charge an asset based fee
(whether or not they have a fiduciary relationship with their clients).
32 NORWEST ADVANTAGE FUNDS
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No sales charge is assessed on purchases: (1) by any bank, trust company or
other institution acting on behalf of its fiduciary customer accounts or any
other account maintained by its trust department (including a pension, profit
sharing or other employee benefit trust created pursuant to a plan qualified
under Section 401 of the Internal Revenue Code of 1986, as amended); (2) by
trustees and officers of the Trust; directors, officers and full-time employees
of Forum, of Norwest Corporation or of any of their affiliates; the spouse,
direct ancestor or direct descendant (collectively, "relatives") of any such
person; any trust or individual retirement account or self-employed retirement
plan for the benefit of any such person or relative; or the estate of any such
person or relative; (3) by any registered investment adviser with whom Forum has
entered into a share purchase agreement and which is acting on behalf of its
fiduciary customer accounts; and (4) of A Shares of a Fund made through the
Directed Dividend Option from a fund of the Trust that charges a front-end sales
charge. (See, "Dividends and Tax Matters".) Shares sold without a sales charge
may not be resold except to the Funds and share purchases must be made for
investment purposes.
REINSTATEMENT PRIVILEGE. An investor who has redeemed A Shares of a Fund may,
within 60 days following the redemption, purchase without a sales charge A
Shares in an amount up to the amount of the redemption. Investors who desire to
exercise this "Reinstatement Privilege" should contact the Trust for further
information.
INVESTORS IN OTHER FUND FAMILIES. No sales charge is assessed on purchases of A
Shares of a Fund with the proceeds of a redemption, within the preceding 60
days, of shares of a mutual fund that imposed on the redeemed shares at the time
of their purchase a sales charge equal to or greater than that applicable to the
A Shares of that Fund. Investors should contact the Trust for further
information and to obtain the necessary forms.
REDUCED INITIAL SALES CHARGES. To qualify for a reduced sales charge, an
investor or the investor's Processing Organization must notify the Transfer
Agent at the time of purchase of the investor's intention to qualify and must
provide the Transfer Agent with sufficient information to verify that the
purchase qualifies for the reduced sales charge. Reduced sales charges may be
modified or terminated at any time and are subject to confirmation of an
investor's holdings. Further information about reduced sales charges is
contained in the SAI.
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). An investor's purchase of
additional A Shares of a Fund may qualify for rights of accumulation ("ROA")
under which the applicable sales charge will be based on the total of the
investor's current purchase and the net asset value (at the end of the previous
Fund Business Day) of all A Shares of that Fund held by the investor. For
example, if an investor owned A Shares of a Fund worth $500,000 at the
PROSPECTUS 33
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then current net asset value and purchased A Shares of that Fund worth an
additional $50,000, the sales charge for the $50,000 purchase would be at the
2.0% rate applicable to a $550,000 purchase, rather than at the 3.5% rate
applicable to a $50,000 purchase.
In addition, an investor in a Fund that has previously purchased A Shares of any
other fund of the Trust that is sold with a sales charge equal to or greater
than the sales charge imposed on the A Shares of the Fund ("Eligible Fund") may
also qualify for ROA and may aggregate existing investments in A Shares of
Eligible Funds with current purchases of A Shares of the Fund to determine the
applicable sales charge. In addition, purchases of A Shares of a Fund by an
investor and the investor's spouse, direct ancestor or direct descendant may be
combined for purposes of ROA.
STATEMENT OF INTENTION. A Shares investors may also obtain reduced sales charges
based on cumulative purchases by means of a written Statement of Intention,
expressing the investor's intention to invest $50,000 or more in A Shares of a
Fund within a period of 13 months. Each purchase of shares under a Statement of
Intention will be made at net asset value plus the sales charge applicable at
the time of the purchase to a single transaction of the dollar amount indicated
in the Statement.
Investors wishing to enter into a Statement of Intention in conjunction with
their initial investment in shares of a Fund should complete the appropriate
portion to the account application form. Current Fund shareholders can obtain a
Statement of Intention form by contacting the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. A Shares of a Fund on which no initial sales
charge was assessed due to the amount purchased in a single transaction or
pursuant to the Cumulative Quantity Discount or a Statement of Intention and
that are redeemed (including certain redemptions in connection with an exchange)
within specified periods after the purchase date of the shares will be subject
to contingent deferred sales charges equal to the percentages set forth below of
the dollar amount subject to the charge. The charge will be assessed on an
amount equal to the lesser of the cost of the shares being redeemed and their
net asset value at the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial purchase price. In
addition, no charge will be assessed on shares derived from the reinvestment of
dividends and distributions.
34 NORWEST ADVANTAGE FUNDS
<PAGE>
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<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A %
OF DOLLAR AMOUNT
AMOUNT OF PURCHASE PERIOD SHARES HELD SUBJECT TO CHARGE
- -----------------------------------------------------------------------------
<S> <C> <C>
$1,000,000 to $2,499,999............ Less than one year 0.75%
One to two years 0.50%
$2,500,000 to $4,999,999............ Less than one year 0.50%
Over $5,000,000..................... Less than one year 0.25%
</TABLE>
No contingent deferred sales charge is charged on redemptions to the same extent
as described under "B Shares - Contingent Deferred Sales Charge." The contingent
deferred sales charge on shares purchased through an exchange from another fund
of the Trust is based upon the original purchase date and price of the other
fund's shares. For A shareholders with a Statement of Intention that do not
purchase $1,000,000 of a Fund's A Shares pursuant to their Statement, no
contingent deferred sales charge is imposed. The Statement of Intention provides
for a contingent deferred sales charge in certain other cases. Further
information about the contingent deferred sales charge is contained in the SAI.
B SHARES
DISTRIBUTION PLAN. B Shares are sold at their net asset value per share without
the imposition of a sales charge at the time of purchase. With respect to B
Shares, each Fund has adopted a distribution plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act providing for distribution payments, at an annual
rate of up to 0.75% of the average daily net assets of the Fund attributable to
B Shares (the "distribution services fee"), by each Fund to Forum, to compensate
Forum for its distribution activities. The distribution payments due to Forum
from each Fund comprise: (1) sales commissions at levels set from time to time
by the Board ("sales commissions"); and (2) an interest fee calculated by
applying the rate of 1% over the prime rate to the outstanding balance of
uncovered distribution charges (as described below). The current sales
commission rate is 3% and Forum currently expects to pay sales commissions to
each broker-dealer at the time of sale of up to 3% of the purchase price of B
Shares of each Fund sold by the broker-dealer.
Under the distribution services agreement between Forum and the Trust, Forum
will receive, in addition to the distribution services fee, all contingent
deferred sales charges due upon redemptions of B Shares. The combined contingent
deferred sales charge and distribution services fee on B Shares are intended to
finance the distribution of those shares by permitting an investor to purchase
shares through broker-dealers without the assessment of an initial sales charge
and, at the same time, permitting Forum to compensate broker-dealers in
connection with the sales of the shares. Proceeds from the contingent deferred
sales charge with respect to a Fund are paid to Forum to
PROSPECTUS 35
<PAGE>
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defray the expenses related to providing distribution-related services in
connection with the sales of B Shares, such as the payment of compensation to
broker-dealers selling B Shares. Forum may spend the distribution services fees
it receives as it deems appropriate on any activities primarily intended to
result in the sale of those shares.
Under the Plan, a Fund will make distribution services fee payments to Forum
only for periods during which there are outstanding uncovered distribution
charges attributable to that Fund. Uncovered distribution charges are equivalent
to all sales commissions previously due (plus interest), less amounts received
pursuant to the Plan and all contingent deferred sales charges previously paid
to Forum. At May 31, 1997, uncovered distribution expenses for Tax-Free Income
Fund, Colorado Tax-Free Fund and Minnesota Tax-Free Fund were $105,116, $84,082
and $201,650, respectively, or approximately 1.43%, 1.16%, and 1.81% of each
respective Fund's net assets attributable to B Shares as of the same date.
The amount of distribution services fees and contingent deferred sales charge
payments received by Forum with respect to a Fund is not related directly to the
amount of expenses incurred by Forum in connection with providing distribution
services to the B Shares and may be higher or lower than those expenses. Forum
may be considered to have realized a profit under the Plan if, at any time, the
aggregate amounts of all distribution services fees and contingent deferred
sales charge payments previously made to Forum exceed the total expenses
incurred by Forum in distributing B Shares.
Pursuant to the Plan, each Fund has agreed also to pay Forum a maintenance fee
in an amount equal to 0.25% of the average daily net assets of the Fund
attributable to B Shares for providing personal services to shareholder
accounts. The maintenance fee may be paid by Forum to broker-dealers in an
amount not to exceed 0.25% of the value of B Shares held by the customers of the
broker-dealers. The distribution services fee and the maintenance fee are each
accrued daily and paid monthly and will cause a Fund's B Shares to have a higher
expense ratio and to pay lower dividends than A Shares of that Fund.
Notwithstanding the discontinuation of distribution services fees with respect
to a Fund, the Fund may continue to pay maintenance fees.
A Fund does not accrue future distribution services fees as a liability of the
Fund with respect to the B Shares or reduce the Fund's current net assets in
respect to distribution services fees which may become payable under the Plan in
the future.
In the event that the Plan is terminated or not continued with respect to a
Fund, the Fund may, under certain circumstances, continue to pay distribution
services fees to Forum (but only with respect to sales that occurred prior to
the termination or discontinuance of the Plan). Those circumstances are
described in detail in the SAI. In deciding whether to purchase B Shares of a
36 NORWEST ADVANTAGE FUNDS
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Fund, investors should consider that payments of distribution services fees
could continue until such time as there are no uncovered distribution charges
under the Plan attributable to that Fund. In approving the Plan, the Board
determined that there was a reasonable likelihood that the Plan would benefit
each Fund and its B shareholders.
Periods with a high level of sales of B Shares of a Fund accompanied by a low
level of redemptions of those shares that are subject to contingent deferred
sales charges will tend to increase uncovered distribution charges. Conversely,
periods with a low level of sales of B Shares of a Fund accompanied by a high
level of redemptions of those shares that are subject to contingent deferred
sales charges will tend to reduce uncovered distribution charges. A high level
of sales of B Shares during the first few years of operations, coupled with the
limitation on the amount of distribution services fees payable by a Fund with
respect to B Shares during any fiscal year, would cause a large portion of the
distribution services fees attributable to a sale of the B Shares to be accrued
and paid by the Fund to Forum with respect to those shares in fiscal years
subsequent to the years in which those shares were sold. The payment delay would
in turn result in the incurrence and payment of increased interest fees under
the Plan.
CONTINGENT DEFERRED SALES CHARGE. B Shares of a Fund which are redeemed within
six years of purchase will be subject to contingent deferred sales charges equal
to the percentages set forth below of the dollar amount subject to the charge.
The amount of the contingent deferred sales charge, if any, will vary depending
on the number of years between the payment for the purchase of B Shares of a
Fund and their redemption.
The contingent deferred sales charge will be assessed on an amount equal to the
lesser of the cost of the shares being redeemed and their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed on increases in
net asset value above the initial purchase price. In addition, no charge will be
assessed on shares derived from the reinvestment of dividends and distributions.
PROSPECTUS 37
<PAGE>
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<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A % OF
DOLLAR AMOUNT SUBJECT
YEAR SINCE PURCHASE TO CHARGE
- ----------------------------------------------------------------
<S> <C>
First................................... 3.0%
Second.................................. 2.0%
Third................................... 2.0%
Fourth.................................. 1.0%
Fifth................................... None
Sixth................................... None
</TABLE>
Redemptions of shares will be effected in the manner that results in the
imposition of the lowest deferred sales charge. Redemptions with respect to a
shareholder's investment in a Fund will automatically be made first from any A
Shares in the Fund, second from B Shares of the Fund acquired pursuant to
reinvestment of dividends and distributions, third from B Shares of the Fund
held for over four years and fourth from the longest outstanding B Shares of the
Fund held for less than four years.
No contingent deferred sales charge is imposed on: (1) redemptions of shares
acquired through the reinvestment of dividends and distributions; (2)
involuntary redemptions by a Fund of shareholder accounts with low account
balances; (3) redemptions of shares following the death or disability of a
shareholder if the Fund is notified within one year of the shareholder's death
or disability; (4) redemptions to effect a distribution (other than a lump sum
distribution) from an IRA, Keogh plan or Section 403(b) custodial account or
from a qualified retirement plan; and (5) redemptions by any registered
investment adviser with whom Forum has entered into a share purchase agreement
and which is acting on behalf of its fiduciary customer accounts. (See the SAI
for further information.)
CONVERSION FEATURE. After six years from the end of the calendar month in which
the shareholder's purchase order for B shares was accepted, the B Shares will
automatically convert to A Shares of that Fund (the "conversion"). The
conversion will be on the basis of the relative net asset values of the A and B
Shares, without the imposition of any sales load, fee or other charge. For
purposes of conversion, B Shares of a Fund purchased through the reinvestment of
dividends and distributions will be considered to be held in a separate
sub-account. Each time any B Shares in the shareholder's account (other than
those in the sub-account) convert, an equal pro rata portion of those shares in
the sub-account will also convert. The conversion is subject to the continuing
availability of certain opinions of counsel and may be suspended if such an
opinion is no longer available at the time the
38 NORWEST ADVANTAGE FUNDS
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conversion is to occur. In that event, no further conversions would occur, and
shares might continue to be subject to distribution services and maintenance
fees for an indefinite period.
PROSPECTUS 39
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6. HOW TO BUY SHARES
MINIMUM INVESTMENT
There is a $1,000 minimum for initial purchases and a $100 minimum for
subsequent purchases of Shares of the Funds. A Fund may in its discretion waive
the investment minimums. Shareholders who elect electronic share purchase
privileges such as the Automatic Investment Plan or the Directed Dividend Option
are not subject to the initial investment minimum. (See "Other Shareholder
Services - Automatic Investment Plan" and "Dividends and Tax Matters.")
The Funds reserve the right to reject any subscription for the purchase of their
shares. Share certificates are issued only to shareholders of record upon their
written request and no certificates are issued for fractional shares.
PURCHASE PROCEDURES
INITIAL PURCHASES
THERE ARE THREE WAYS TO PURCHASE SHARES INITIALLY.
1. BY MAIL. Investors may send a check or money order (cash cannot be accepted)
along with a completed account application form to the Trust at the address
listed under "Account Application." Checks or money orders are accepted at full
value subject to collection. If a check or money order does not clear, the
purchase order will be canceled and the investor will be liable for any losses
or fees incurred by the Trust, the Transfer Agent or Forum.
For individual or Uniform Gift to Minors Act accounts, the check or money order
used to purchase shares of a Fund must be made payable to "Norwest Advantage
Funds" or to one or more owners of that account and endorsed to Norwest
Advantage Funds. No other method of payment by check will be accepted. For
corporation, partnership, trust, 401(k) plan or other non-individual type
accounts, the check used to purchase shares of a Fund must be made payable on
its face to "Norwest Advantage Funds." No other method of payment by check will
be accepted.
2. BY BANK WIRE. Investors may make an initial investment in a Fund using the
wire system for transmittal of money among banks. The investor should first
telephone the Transfer Agent at (612) 667-8833 or (800) 338-1348 to obtain an
account number. The investor should then instruct a bank to wire the investor's
money immediately to:
NORWEST BANK MINNESOTA, N.A.
ABA 091 000 019
FOR CREDIT TO: NORWEST ADVANTAGE FUNDS
0844-131
RE: [NAME OF FUND]
[DESIGNATE A SHARES OR B SHARES]
ACCOUNT NO.:
ACCOUNT NAME:
40 NORWEST ADVANTAGE FUNDS
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The investor should then promptly complete and mail the account application
form. There may be charges by the investor's bank for transmitting the money by
bank wire. The Trust does not charge investors for the receipt of wire
transfers. Payment by bank wire is treated as a federal funds payment when
received.
3. THROUGH FINANCIAL INSTITUTIONS. Shares may be purchased and redeemed through
certain broker-dealers, banks and other financial institutions ("Processing
Organizations"). The Transfer Agent, Forum and their affiliates may be
Processing Organizations. Processing Organizations, may receive as a
broker-dealer's reallowance a portion of the sales charge paid by their
customers who purchase A Shares of a Fund, may receive payments from Forum with
respect to sales of B Shares and may receive payments as a processing agent from
the Transfer Agent. In addition, financial institutions, including Processing
Organizations, may charge their customers a fee for their services and are
responsible for promptly transmitting purchase, redemption and other requests to
the Funds.
Investors who purchase shares through a Processing Organization will be subject
to the procedures of their Processing Organization, which may include charges,
limitations, investment minimums, cutoff times and restrictions in addition to,
or different from, those applicable to shareholders who invest in a Fund
directly. These investors should acquaint themselves with their institution's
procedures and should read this Prospectus in conjunction with any materials and
information provided by their institution. Customers who purchase a Fund's
shares through a Processing Organization may or may not be the shareholder of
record and, subject to their institution's and the Funds' procedures, may have
Fund shares transferred into their name. There is typically a three-day
settlement period for purchases and redemptions through broker-dealers. Certain
Processing Organizations may also enter purchase orders with payment to follow.
Certain shareholder services may not be available to shareholders who have
purchased shares through a Processing Organization. These shareholders should
contact their Processing Organization for further information. The Trust may
confirm purchases and redemptions of a Processing Organization's customers
directly to the Processing Organization, which in turn will provide its
customers with confirmations and periodic statements. The Trust is not
responsible for the failure of any Processing Organization to carry out its
obligations to its customer.
SUBSEQUENT PURCHASES
Subsequent purchases may be made by mailing a check, by sending a bank wire or
through the shareholder's Processing Organization as indicated above. All
payments should clearly indicate the shareholder's name and account number.
PROSPECTUS 41
<PAGE>
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ACCOUNT APPLICATION
Investors may obtain the account application form necessary to open an account
by writing the Trust at the following address:
NORWEST ADVANTAGE FUNDS
[NAME OF FUND]
NORWEST BANK MINNESOTA, N.A.
TRANSFER AGENT
733 MARQUETTE AVENUE
MINNEAPOLIS, MN 55479-0040
To participate in shareholder services not referenced on the account application
form and to change information on a shareholder's account (such as addresses),
investors or existing shareholders should contact the Trust. The Trust reserves
the right in the future to modify, limit or terminate any shareholder privilege
upon appropriate notice to shareholders and to charge a fee for certain
shareholder services, although no such fees are currently contemplated. Any
privilege and participation in any program may be terminated by the shareholder
at any time by writing to the Trust.
GENERAL INFORMATION
Fund shares are continuously sold on every weekday except customary national
business holidays (New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving
and Christmas) and Good Friday ("Fund Business Day"). The purchase price for
Fund shares equals their net asset value next-determined after acceptance of an
order plus, in the case of the A Shares, any applicable sales charge imposed at
the time of purchase.
Fund shares become entitled to receive dividends and distributions on the next
Fund Business Day after a purchase order is accepted. The Funds reserve the
right to reject any subscription for the purchase of their shares. Share
certificates are issued only to shareholders of record upon their written
request and no certificates are issued for fractional shares.
All payments for Shares must be in U.S. dollars. Investments in a Fund may be
made either through certain financial institutions or by an investor directly.
An investor who invests in a Fund directly will be the shareholder of record.
All transactions in Fund shares are effected through the Transfer Agent which
accepts orders for redemptions and for subsequent purchases only from
shareholders of record. Shareholders of record will receive from the Trust
periodic statements listing all account activity during the statement period.
42 NORWEST ADVANTAGE FUNDS
<PAGE>
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7. HOW TO SELL SHARES
GENERAL INFORMATION
Fund Shares may be sold (redeemed) at their net asset value on any Fund Business
Day subject to a contingent deferred sales charge imposed, in the case of A
Shares, on some redemptions made within two years of purchase and, in the case
of B Shares, on most redemptions made within six years of purchase. There is no
minimum period of investment and no restriction on the frequency of redemptions.
Fund shares are redeemed as of the next determination of the Fund's net asset
value following receipt by the Transfer Agent of the redemption order in proper
form (and any supporting documentation which the Transfer Agent may require).
Redeemed shares are not entitled to receive dividends declared after the day the
redemption becomes effective.
Normally, redemption proceeds are paid immediately, but in no event later than
seven days, following receipt of a redemption order. Proceeds of redemption
requests (and exchanges), however, will not be paid unless any check to purchase
the shares being redeemed has been cleared by the shareholder's bank, which may
take up to 15 days. This delay may be avoided by paying for shares through wire
transfers. Unless otherwise indicated, redemption proceeds normally are paid by
check mailed to the shareholder's record address. The right of redemption may
not be suspended nor the payment dates postponed for more than seven days after
the tender of the shares to a Fund except when the New York Stock Exchange is
closed (or when trading thereon is restricted) for any reason other than its
customary weekend or holiday closings, for any period during which an emergency
exists as a result of which disposal by the Fund of its portfolio securities or
determination by the Fund of the value of its net assets is not reasonably
practicable and for such other periods as the SEC may permit.
REDEMPTION PROCEDURES
Shareholders who have invested through a Processing Organization may redeem
their shares through the Processing Organization as described above.
Shareholders who have invested directly in a Fund may redeem their Shares as
described below. Shareholders who wish to redeem shares by telephone or receive
redemption proceeds by bank wire must elect these options by properly completing
the appropriate sections of their account application form. These privileges may
not be available until several weeks after a shareholder's application is
received. Shares for which certificates have been issued may not be redeemed by
telephone.
PROSPECTUS 43
<PAGE>
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1. BY MAIL. Shareholders may redeem shares by sending a written request to the
Transfer Agent accompanied by any share certificate that may have been issued to
the shareholder to evidence the shares being redeemed. All written requests for
redemption must be signed by the shareholder with signature guaranteed, and all
certificates submitted for redemption must be endorsed by the shareholder with
signature guaranteed. (See "How to Sell Shares - Other Redemption Matters.")
2. BY TELEPHONE. A shareholder who has elected telephone redemption privileges
may make a telephone redemption request by calling the Transfer Agent at (800)
338-1348 or (612) 667-8833 and providing the shareholder's account number, the
exact name in which his shares are registered and the shareholder's social
security or taxpayer identification number. In response to the telephone
redemption instruction, the Trust will mail a check to the shareholder's record
address or, if the shareholder has elected wire redemption privileges, wire the
proceeds. (See "How to Sell Shares - Other Redemption Matters.")
3. BY BANK WIRE. For redemptions of more than $5,000, a shareholder who has
elected wire redemption privileges may request a Fund to transmit the redemption
proceeds by federal funds wire to a bank account designated in writing by the
shareholder. To request bank wire redemptions by telephone, the shareholder also
must have elected the telephone redemption privilege. Redemption proceeds are
transmitted by wire on the day after a redemption request in proper form is
received by the Transfer Agent.
OTHER REDEMPTION MATTERS
To protect shareholders and the Funds against fraud, signatures on certain
requests must have a signature guarantee. Requests must be made in writing and
include a signature guarantee for any of the following transactions: (1) any
endorsement on a share certificate; (2) instruction to change a shareholder's
record name; (3) modification of a designated bank account for wire redemptions;
(4) instruction regarding an Automatic Investment Plan or Automatic Withdrawal
Plan; (5) dividend and distribution election; (6) telephone redemption; (7)
exchange option election or any other option election in connection with the
shareholder's account; (8) written instruction to redeem Shares whose value
exceeds $50,000; (9) redemption in an account in which the account address has
changed within the last 30 days; (10) redemption when the proceeds are deposited
in a Norwest Advantage Funds account under a different account registration; and
(11) the remitting of redemption proceeds to any address, person or account for
which there are not established standing instructions on the account.
44 NORWEST ADVANTAGE FUNDS
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Signature guarantees may be provided by any bank, broker-dealer, national
securities exchange, credit union, savings association or other eligible
institution that is authorized to guarantee signatures and is acceptable to the
Transfer Agent. Whenever a signature guarantee is required, the signature of
each person required to sign for the account must be guaranteed.
Shareholders who want telephone redemption or exchange privileges must elect
those privileges. The Trust and Transfer Agent will employ reasonable procedures
in order to verify that telephone requests are genuine, including recording
telephone instructions and causing written confirmations of the resulting
transactions to be sent to shareholders. If the Trust and Transfer Agent did not
employ such procedures, they could be liable for losses due to unauthorized or
fraudulent telephone instructions. Shareholders should verify the accuracy of
telephone instructions immediately upon receipt of confirmation statements.
During times of drastic economic or market changes, telephone redemption and
exchange privileges may be difficult to implement. In the event that a
shareholder is unable to reach the Transfer Agent by telephone, requests may be
mailed or hand-delivered to the Transfer Agent.
Due to the cost to the Trust of maintaining smaller accounts, the Trust reserves
the right to redeem, upon not less than 60 days' written notice, all shares in
any Fund account whose aggregate net asset value is less than $1,000 immediately
following any redemption.
PROSPECTUS 45
<PAGE>
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8. OTHER SHAREHOLDER SERVICES
EXCHANGES
Shareholders of A Shares and B Shares may exchange their shares for A Shares and
B Shares, respectively, of the other funds of the Trust that offer those shares.
As of the date of this Prospectus, the funds of the Trust that offer A Shares
and B Shares, which are offered through separate prospectuses, are Stable Income
Fund, Intermediate Government Income Fund, Income Fund, Total Return Bond Fund,
Income Equity Fund, ValuGrowth-SM- Stock Fund, Diversified Equity Fund, Growth
Equity Fund, Small Company Stock Fund, Small Cap Opportunities Fund and
International Fund. It is anticipated that the Trust may in the future create
additional funds that will offer Shares which will be exchangeable with the
Funds' Shares. In addition, A Shares may be exchanged for Investor Shares of
Ready Cash Investment Fund and Municipal Money Market Fund of the Trust. B
Shares may be exchanged for Exchange Shares of Ready Cash Investment Fund.
Prospectuses for the shares of the funds listed above, as well as a current list
of the funds of the Trust that offer shares exchangeable with the Shares of the
Funds, can be obtained through Forum by contacting the Transfer Agent.
The Funds do not charge for exchanges, and there is currently no limit on the
number of exchanges a shareholder may make. The Funds reserve the right,
however, to limit excessive exchanges by any shareholder. Exchanges are subject
to the fees (other than contingent deferred sales charges) charged by, and the
limitations (including minimum investment restrictions) of, the fund into which
a shareholder is exchanging.
Exchanges may only be made between identically registered accounts or by opening
a new account. A new account application is required to open a new account
through an exchange if the new account will not have an identical registration
and the same shareholder privileges as the account from which the exchange is
being made. Shareholders may only exchange into a fund if that fund's shares may
legally be sold in the shareholder's state of residence.
Under federal tax law, the Funds treat an exchange as a redemption and a
purchase. Accordingly, a shareholder may realize a capital gain or loss
depending on whether the value of the shares redeemed is more or less than the
shareholder's basis in the shares at the time of the exchange transaction.
Exchange procedures may be amended materially or terminated by the Trust at any
time upon 60 days' notice to shareholders. (See "Additional Purchase and
Redemption Information" in the SAI.)
SALES CHARGES. The exchange of A Shares may result in additional sales charges.
If an exchange of A Shares is made into a fund that imposes an initial sales
charge, the shareholder is required to pay an amount equal to any excess of that
fund's initial sales charge attributable to the number of shares being
46 NORWEST ADVANTAGE FUNDS
<PAGE>
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acquired in the exchange over any initial sales charge paid by the shareholder
for the shares being exchanged. For example, if a shareholder paid a 2% initial
sales charge in connection with a purchase of shares and then exchanged those
shares into A Shares of another fund with a 3% initial sales charge, the
shareholder would pay an additional 1% sales charge on the exchange. A Shares
acquired through the reinvestment of dividends or distributions are deemed to
have been acquired with a sales charge rate equal to that applicable to the
shares on which the dividends or distributions were paid.
Shares of a Fund ("Original Shares") may be exchanged without the payment of any
contingent deferred sales charge. A and B Shares acquired as a result of such
exchange ("New Shares") and subsequently redeemed will nonetheless be subject to
the contingent deferred sales charge applicable to the Original Shares as if
those shares were being redeemed at that time. For purposes of computing both
the contingent deferred sales charge payable upon redemption of the New Shares
and, in the case of B Shares, the time remaining before the New B Shares convert
to A Shares of that Fund, the deferred sales charge and the time remaining
applicable to the Original Shares will apply to the New Shares rather than the
deferred sales charge and time remaining that would otherwise apply. The
deferred sales charge and time remaining applicable to Shares first purchased by
a shareholder will apply to New Shares resulting from both an initial and any
subsequent exchanges.
1. EXCHANGES BY MAIL. Exchanges may be made by sending a written request to the
Transfer Agent accompanied by any share certificates for the shares to be
exchanged. All written requests for exchanges must be signed by the shareholder,
and all certificates submitted for exchange must be endorsed by the shareholder
with signature guaranteed. (See "How to Sell Shares - Other Redemption
Matters.")
2. EXCHANGES BY TELEPHONE. A shareholder who has elected telephone exchange
privileges may make a telephone exchange request by calling the Transfer Agent
at (800) 338-1348 or (612) 667-8833 and providing the shareholder's account
number, the exact name in which the shareholder's shares are registered and the
shareholder's social security or taxpayer identification number. (See "How to
Sell Shares - Other Redemption Matters.")
AUTOMATIC INVESTMENT PLAN
Under the Funds' Automatic Investment Plan, shareholders may authorize monthly
amounts of $50 or more to be withdrawn automatically from the shareholder's
designated bank account (other than passbook savings) and sent to the Transfer
Agent for investment in either A or B Shares of a Fund. Shareholders wishing to
use this plan must complete an application which may be obtained by writing or
calling the Transfer Agent. The Trust may
PROSPECTUS 47
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modify or terminate the automatic investment plan with respect to any
shareholder in the event that the Trust is unable to settle any transaction with
the shareholder's bank. If the Automatic Investment Plan is terminated before
the shareholder's account totals $1,000, the Trust reserves the right to close
the account in accordance with the procedures described under "How to Sell
Shares - Other Redemption Matters."
AUTOMATIC WITHDRAWAL PLAN
A shareholder whose Shares in a single account total $1,000 or more may
establish a withdrawal plan to provide for the preauthorized payment from the
shareholder's account of $250 or more on a monthly, quarterly, semi-annual or
annual basis. Under the withdrawal plan, sufficient shares in the shareholder's
account are redeemed to provide the amount of the periodic payment and any
taxable gain or loss is recognized by the shareholder upon redemption of the
shares. Shareholders wishing to utilize the withdrawal plan may do so by
completing an application which may be obtained by writing or calling the
Transfer Agent. The Trust may suspend a shareholder's withdrawal plan without
notice if the account contains insufficient funds to effect a withdrawal or if
the account balance is less than $1,000 at any time.
REOPENING ACCOUNTS
A shareholder may reopen an account, without filing a new account application
form, at any time within one year after the shareholder's account is closed,
provided that the information on the account application form on file with the
Trust is still applicable.
48 NORWEST ADVANTAGE FUNDS
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9. DIVIDENDS AND TAX MATTERS
DIVIDENDS
Dividends of each Fund's net investment income are declared daily and paid
monthly. Distributions of net capital gain, if any, realized by a Fund are
distributed annually. Dividends and distributions paid by a Fund with respect to
each class of shares are calculated in the same manner and at the same time. The
per share dividends on a Fund's B Shares will be lower than the per share
dividends on A Shares as a result of the distribution services fees and
maintenance fees applicable to B Shares.
Shareholders may choose to have dividends and distributions of a Fund reinvested
in shares of that Fund (the "Reinvestment Option"), to receive dividends and
distributions in cash (the "Cash Option") or to direct dividends and
distributions to be reinvested in shares of another fund of the Trust (the
"Directed Dividend Option"). All dividends and distributions are treated in the
same manner for federal income tax purposes whether received in cash or
reinvested in shares of a fund.
Under the Reinvestment Option, all dividends and distributions of a Fund are
automatically invested in additional shares of that Fund. All dividends and
distributions are reinvested at a Fund's net asset value as of the payment date
of the dividend or distribution. Shareholders are assigned this option unless
one of the other two options is selected. Under the Cash Option, all dividends
and distributions are paid to the shareholder in cash. Under the Directed
Dividend Option, shareholders of a Fund whose shares in a single account of that
Fund total $10,000 or more may elect to have all dividends and distributions
reinvested in shares of another fund of the Trust, provided that those shares
are eligible for sale in the shareholder's state of residence. For further
information concerning the Directed Dividend Option, shareholders should contact
the Transfer Agent.
TAX MATTERS
Each Fund intends to qualify for each fiscal year to be taxed as a "regulated
investment company" under the Internal Revenue Code of 1986 (the "Code"). As
such, each Fund will not be liable for federal income and excise taxes on the
net investment income and capital gain distributed to its shareholders. Because
each Fund intends to distribute all of its net investment income and net capital
gain each year, each Fund should thereby avoid all federal income and excise
taxes.
Dividends paid by a Fund out of tax-exempt interest income earned by the Fund
("exempt-interest dividends") generally will not be subject to federal income
tax in the hands of the Fund's shareholders. Persons who are "substantial users"
or "related persons" thereof of facilities financed by private
PROSPECTUS 49
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activity securities held by a Fund, however, may be subject to federal income
tax on their pro rata share of the interest income from those securities and
should consult their tax advisers before purchasing Shares. Interest on certain
private activity securities issued after August 7, 1986 is treated as an item of
tax preference for purposes of the AMT imposed on individuals and corporations.
In addition, exempt-interest dividends are included in the "adjusted current
earnings" of corporations for AMT purposes.
Interest on indebtedness incurred by shareholders to purchase or carry shares of
a Fund generally is not deductible for federal income tax purposes. Under rules
for determining when borrowed funds are used for purchasing or carrying
particular assets, Shares of a Fund may be considered to have been purchased or
carried with borrowed funds even though those funds are not directly linked to
the Shares.
Substantially all of the dividends paid by each Fund are anticipated to be
exempt from federal income taxes. Shortly after the close of each calendar year,
a statement is sent to each shareholder advising the shareholder of the portion
of the Fund's dividends that is derived from obligations of issues on the
various states and the portion of the Fund's dividends that is exempt from
federal income taxes. These portions are determined for a Fund's entire year
and, thus, are annual averages, rather than day-by-day determinations for each
shareholder. Dividends paid by a Fund out of its net investment income
(including net short-term capital gain) are taxable to shareholders of the Fund
as ordinary income.
Dividends paid by a Fund out of its net investment income (including net
short-term capital gain) are taxable to shareholders of the Fund as ordinary
income. Two different tax rates apply to net capital gain - that is, the excess
of gains from capital assets held for more than one year over net losses from
capital assets held for not more than one year. One rate (generally 28%) applies
to net gain on capital assets held for more than one year but not more than 18
months ("mid-term gain"), and a second rate (generally 20%) applies to the
balance of net capital gain ("adjusted net capital gain"). Distributions of
mid-term gain and adjusted net capital gain will be taxable to shareholders as
such, regardless of how long a shareholder has held shares in the Fund. If a
shareholder holds Shares for six months or less and during that period receives
a distribution of net capital gain, any loss realized on the sale of the Shares
during that six-month period would be a long-term capital loss to the extent of
the distribution. Distributions reduce the net asset value of the Fund paying
the distribution by the amount of the distribution. Furthermore, these
distributions made shortly after the purchase of Shares by a shareholder,
although in effect a return of capital to that particular shareholder, will be
taxable to the shareholder.
50 NORWEST ADVANTAGE FUNDS
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Each Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gain distributions and redemptions) paid
to a shareholder who fails to provide the Fund with a correct taxpayer
identification number or to make required certifications, or who is subject to
backup withholding.
Reports containing appropriate information with respect to the federal income
tax status of dividends and distributions paid during the year by each Fund will
be mailed to shareholders shortly after the close of each calendar year.
TAX-FREE INCOME FUND. The exemption for federal income tax purposes of dividends
derived from interest on municipal securities does not necessarily result in an
exemption under the income or other tax laws of any state or local taxing
authority. Shareholders of the Fund may be exempt from state and local taxes on
distributions of tax-exempt interest income derived from obligations of the
state and/or municipalities of the state in which they reside but may be subject
to tax on income derived from the municipal securities of other jurisdictions.
Shareholders are advised to consult with their tax advisers concerning the
application of state and local taxes to investments in the Fund which may differ
from the federal income tax consequences described above.
COLORADO TAX-FREE FUND. It is anticipated that substantially all of the
dividends paid by the Fund to individuals will be exempt from Colorado personal
income tax. Dividends and distributions made by the Fund to Colorado
individuals, trusts, estates and corporations subject to the Colorado income tax
generally will be treated for Colorado income tax purposes in the same manner as
they are treated under the Code for federal income tax purposes. Some
differences may arise for taxpayers subject to the AMT, because interest on
Colorado private activity bonds is not a preference item for Colorado income tax
purposes. Furthermore, Colorado has no corporate alternative minimum tax.
Because the Fund may, except as indicated, purchase only Colorado municipal
securities, none of the exempt interest dividends paid by the Fund will be
subject to Colorado income tax.
MINNESOTA TAX-FREE FUND. It is anticipated that substantially all of the
dividends paid by the Fund to individuals will be exempt from Minnesota personal
income tax. Interest earned on Minnesota municipal securities is generally
excluded from gross income for Minnesota state income tax purposes, while
interest earned on securities issued by municipal issuers from other states is
not excluded. At least 95% of the exempt-interest dividends paid by the Fund
must be derived from Minnesota municipal securities in order for any portion of
the exempt-interest dividends paid by the Fund to be
PROSPECTUS 51
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exempt from the Minnesota personal income tax. Exempt-interest dividends paid by
the Fund to shareholders that are corporations are subject to Minnesota
franchise tax.
Under Minnesota law, if the difference in state income tax treatment between
Minnesota municipal securities and the municipal securities of issuers in other
states should be judicially determined to discriminate against interstate
commerce, the Minnesota legislature has expressed its intention that the
discrimination be remedied by adding interest on Minnesota municipal securities
to the taxable income of Minnesota residents. Such treatment would begin with
the taxable years that begin during the calendar year in which the court's
decision is final. If the interest on Minnesota municipal securities is
determined in general to be taxable income for Minnesota income tax, the Fund
will consider what actions are to be taken, in light of its current investment
objectives and investment policies.
The Minnesota alternative minimum tax on resident individuals is based in part
on their federal alternative minimum taxable income. Accordingly, individual
shareholders of the Fund may be subject to the Minnesota alternative minimum tax
on exempt-interest dividends paid by the Fund which are attributable to interest
received by the Fund on certain private activity securities issued after August
7, 1986, even though these dividends are exempt from the regular Minnesota
personal income tax.
52 NORWEST ADVANTAGE FUNDS
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10. OTHER INFORMATION
BANKING LAW MATTERS
Federal banking rules generally permit a bank or bank affiliate to act as
investment adviser, transfer agent and custodian to an investment company and to
purchase shares of the investment company as agent for and upon the order of a
customer and, in connection therewith, to retain a sales charge or similar
payment. Forum believes that Norwest and any bank or other bank affiliate also
may perform Processing Organization or similar services for the Trust and its
shareholders without violating applicable federal banking rules. If a bank or
bank affiliate were prohibited in the future from so acting, changes in the
operation of the Trust could occur and a shareholder serviced by the bank or
bank affiliate may no longer be able to avail itself of those services. It is
not expected that shareholders would suffer any adverse financial consequences
as a result of any of these occurrences.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of each Fund is determined as of
4:00 p.m., Eastern Time, on each Fund Business Day by dividing the value of the
Fund's net assets (i.e., the value of its securities and other assets less its
liabilities) by the number of shares outstanding at the time the determination
is made. Securities owned by a Fund for which market quotations are readily
available are valued at current market value or, in their absence, at fair value
as determined by the Board. The Funds only determine net asset value on Fund
Business Days.
PERFORMANCE INFORMATION
A Fund's performance may be quoted in terms of yield or total return. All
performance information is based on historical results and are not intended to
indicate future performance. A Fund's yield is a way of showing the rate of
income the Fund earns on its investments as a percentage of the Fund's share
price. To calculate standardized yield, a Fund takes the income it earned from
its investments for a 30-day period (net of expenses), divides it by the average
number of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on the Fund's share price at the end of the
30-day period. A Fund may also quote tax-equivalent yield, which shows the
taxable yield a shareholder would have to earn to equal the Fund's tax-free
yield, after taxes. A tax-equivalent yield is calculated by dividing a Fund's
tax-free yield by one minus a stated federal, state or combined federal and
state tax rate.
A Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and distributions are
PROSPECTUS 53
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reinvested. A cumulative total return reflects a Fund's performance over a
stated period of time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same cumulative total
return if the Fund's performance had been constant over the entire period.
Because average annual returns tend to smooth out variations in the Funds'
returns, shareholders should recognize that they are not the same as actual
year-by-year results. Published yield quotations are, and total return figures
may be, based on amounts invested in a Fund net of sales charges that may be
paid by an investor. A computation of yield or total return that does not take
into account sales charges paid by an investor will be higher than a similar
computation that takes into account payment of sales charges.
The Funds' advertisements may reference ratings and rankings among similar
mutual funds by independent evaluators such as Morningstar, Inc., Lipper
Analytical Services, Inc. and IBC Financial Data, Inc. In addition, the
performance of a Fund may be compared to securities indices. This material is
not to be considered representative or indicative of future performance. All
performance information for a Fund is calculated on a class basis.
THE TRUST AND ITS SHARES
The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate portfolios or series (such as the Funds) and may
divide portfolios or series into classes of shares (such as A Shares); the costs
of doing so will be borne by the Trust. Currently the authorized shares of the
Trust are divided into thirty-nine separate series.
OTHER CLASSES OF SHARES. The Funds currently issue three classes of shares, A
Shares, B Shares and I Shares. I Shares are offered to fiduciary, agency and
custodial clients of bank trust departments, trust companies and their
affiliates without any sales charges. Each class of a Fund will have a different
expense ratio and may have different sales charges (including distribution
fees). Each class' performance is affected by its expenses and sales charges.
For more information on any other class of shares of the Funds investors may
contact the Transfer Agent at (612) 667-8833 or (800) 338-1348 or the Funds'
distributor. Investors may also contact their Norwest sales representative to
obtain information about the other classes.
SHAREHOLDER VOTING AND OTHER RIGHTS. Each share of each series of the Trust and
each class of shares has equal dividend, distribution, liquidation and voting
rights, and fractional shares have those rights proportionately, except that
expenses related to the distribution of the shares of each class (and certain
other expenses such as transfer agency and administration expenses) are borne
solely by those shares and each class votes separately with respect to the
provisions of any Rule 12b-1 plan which pertains to the class and other
54 NORWEST ADVANTAGE FUNDS
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matters for which separate class voting is appropriate under applicable law.
Generally, shares will be voted in the aggregate without reference to a
particular series or class, except if the matter affects only one series or
class or voting by series or class is required by law, in which case shares will
be voted separately by series or class, as appropriate. Delaware law does not
require the Trust to hold annual meetings of shareholders, and it is anticipated
that shareholder meetings will be held only when specifically required by
federal or state law. Shareholders (and Trustees) have available certain
procedures for the removal of Trustees. There are no conversion or preemptive
rights in connection with shares of the Trust. All shares when issued in
accordance with the terms of the offering will be fully paid and nonassessable.
Shares are redeemable at net asset value, at the option of the shareholders,
subject to any contingent deferred sales charge that may apply. A shareholder in
a series is entitled to the shareholder's pro rata share of all dividends and
distributions arising from that series' assets and, upon redeeming shares, will
receive the portion of the series' net assets represented by the redeemed
shares.
As of February 1, 1998, Norwest Bank Colorado, N.A. may be deemed to have
controlled Colorado Tax-Free Fund and Norwest Bank may be deemed to have
controlled Limited Term Tax-Free Fund and Tax-Free Income Fund due to
investments by their customers. From time to time, this shareholder or other
shareholders may own a large percentage of the Shares of a Fund and,
accordingly, may be able to greatly affect (if not determine) the outcome of a
shareholder vote.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION AND THE FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF THE FUNDS' SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO
ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
PROSPECTUS 55
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[LOGO] BULK RATE
733 MARQUETTE AVENUE U.S. POSTAGE
MINNEAPOLIS, MN 55479-0040 PAID
Permit No. 3489
Minneapolis, MN
[LOGO]
SHAREHOLDER INFORMATION:
Norwest Bank Minnesota, N.A.
733 Marquette Avenue
Minneapolis, Minnesota 55479-0040
612-667-8833 (MINNEAPOLIS/ST. PAUL)
800-338-1348 (ELSEWHERE)
- -C- 1998 NORWEST ADVANTAGE FUNDS
MFBPT004 2/98
