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As filed with the Securities and Exchange Commission on September 14, 1999
File Nos. 33-9645 and 811-4881
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No. 58
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 59
NORWEST ADVANTAGE FUNDS
(Formerly "Norwest Funds" and "Prime Value Funds, Inc.")
Two Portland Square
Portland, Maine 04101
(207) 879-1900
Don L. Evans, Esq.
Forum Administrative Services, LLC
Two Portland Square
Portland, Maine 04101
Copies to:
Anthony C. J. Nuland, Esq.
Seward & Kissel, LLP
1200 G Street, N.W.
Washington, D.C. 20005
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to Rule 485, paragraph (b)
[ ] on_________________ pursuant to Rule 485, paragraph (b)
[X] 60 days after filing pursuant to Rule 485, paragraph (a)(1)
[ ] on _________________ pursuant to Rule 485, paragraph (a)(1)
[ ] 75 days after filing pursuant to Rule 485, paragraph(a)(2)
[ ] on _________________ pursuant to Rule 485, paragraph (a)(2)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Cash Investment Fund, Ready Cash
Investment Fund, U.S. Government Fund, Treasury Plus Fund, Treasury Fund,
Municipal Money Market Fund, Stable Income Fund, Limited Term Government Income
Fund, Intermediate Government Income Fund, Diversified Bond Fund, Income Fund,
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<PAGE>
Total Return Bond Fund, Strategic Income Fund, Limited Term Tax-Free Fund,
Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota Intermediate Tax-Free
Fund, Minnesota Tax-Free Fund, Moderate Balanced Fund, Growth Balanced Fund,
Aggressive Balanced Equity Fund, Index Fund, Income Equity Fund, ValuGrowthSM
Stock Fund, Diversified Equity Fund, Growth Equity Fund, Large Company Growth
Fund, Diversified Small Cap Fund, Small Company Stock Fund, Small Cap
Opportunities Fund, Small Company Growth Fund, International Fund, Performa
Strategic Value Bond Fund, Performa Disciplined Growth Fund, Performa Small Cap
Value Fund, Performa Global Growth Fund, Norwest WealthBuilder II Growth
Balanced Portfolio, Norwest WealthBuilder II Growth and Income Portfolio and
Norwest WealthBuilder II Growth Portfolio.
Ready Cash Investment Fund, Stable Income Fund, Total Return Bond Fund, Index
Fund, Income Equity Fund, Large Company Growth Fund, Small Company Growth
FundPerforma Strategic Value Bond Fund, Performa Disciplined Growth Fund and
Performa Small Cap Value Fund of Registrant are structured as master-feeder
funds and this amendment is also executed by Core Trust (Delaware).
PROSPECTUS
October 1, 1999
AN INVESTMENT IN A FUND IS NOT A DEPOSIT OF NORWEST BANK MINNESOTA, N.A. OR ANY
OTHER BANK AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
The U.S. Securities and Exchange Commission has not approved or disapproved
these securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
<PAGE>
Table Of Contents
<TABLE>
<S> <C> <C> <C>
PAGE
1. OVERVIEW...........................................................................................................
2. FINANCIAL HIGHLIGHTS...............................................................................................
3. GLOSSARY...........................................................................................................
4. INVESTMENT OBJECTIVES AND POLICIES.................................................................................
Money Market Funds.................................................................................................
Fixed Income Funds.................................................................................................
Tax-Free Fixed Income Funds........................................................................................
Balanced Funds.....................................................................................................
Equity Funds.......................................................................................................
Portfolio Descriptions.............................................................................................
5. RISK CONSIDERATIONS................................................................................................
6. COMMON POLICIES....................................................................................................
7. MANAGEMENT OF THE FUNDS ...........................................................................................
Investment Advisory Services......................................................................................
Other Fund Services ...............................................................................................
8. HOW TO BUY AND SELL SHARES.........................................................................................
General Purchase Information.......................................................................................
Purchase Procedures................................................................................................
General Redemption Information.....................................................................................
Redemption Procedures..............................................................................................
Exchanges..........................................................................................................
9. DISTRIBUTIONS AND TAX MATTERS......................................................................................
Distributions......................................................................................................
Tax Matters........................................................................................................
10. OTHER INFORMATION..................................................................................................
Determination of Net Asset Value...................................................................................
Additional Information about the Portfolios........................................................................
</TABLE>
ii
<PAGE>
Risk/Return Summary
The following is a summary of certain key information about the Funds.
You will find additional information about the Funds after this
summary.
In this summary, we will identify certain kinds of risks that apply to
one or more of the Funds. These risks are:
o Market Risk. This is the risk that the value of a Fund's investments
will fluctuate as the stock or bond markets fluctuate and that prices
overall will decline or short or longer-term periods.
o Interest Rate Risk. This is the risk that changes in interest rates
will affect the value of a Fund's investments, particularly those
investments in debt or income-producing securities. Increases in
interest rates may cause the value of a Fund's investments to decline.
o Credit Risk. This is the risk that the issuer of a security will be
unable to make timely payments of interest or principal or to
otherwise honor its obligations.
o Management Risk. This is the risk that a Fund's manager will make poor
choices in selected securities. All actively managed Funds have
management risk.
The Risk/Return Summary includes a bar chart for each Fund showing its
annual returns and a table showing its average annual returns. The bar
chart and table provide an indication of the historical risk of an
investment in each Fund by showing:
o changes in the Fund's performance from year to year over 10 years or,
if less, the life of a Fund; and
o how the Fund's average annual returns for one, five and 10 years, or,
if less, the life of the Fund, compare to those of a broad-based
securities market index.
Another important thing for you to note: You may lose money by
investing in a Fund.
3
<PAGE>
Money Market Funds
Cash Investment Fund Treasury Plus Fund
Ready Cash Investment Fund Treasury Fund
U.S. Government Fund Municipal Money Market Fund
OBJECTIVES. The investment objectives of the Money Market Funds are high current
income to the extent consistent with preservation of capital and liquidity. The
Municipal Money Market Fund seeks current income that is exempt from federal
income taxes.
PRINCIPAL INVESTMENT STRATEGY. The Funds are "money market funds" that seek to
maintain a stable net asset value of $1.00 per share. Each Fund pursues its
objectives by maintaining a portfolio of high-quality money market securities.
Each Fund primarily invests in:
o Cash Investment Fund and Ready Cash Investment Fund: Money market
instruments of U.S. and foreign issuers.
o U.S. Government Fund: Securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
o Treasury Plus Fund: Securities issued or guaranteed by the U.S.
Treasury and repurchase agreements on those obligations.
o Treasury Fund: Securities issued or guaranteed by the U.S. Treasury.
o Municipal Money Market Fund: Tax-exempt municipal securities.
PRINCIPAL RISKS. The principal risks of investing in the Money Market Funds are
interest rate risk and credit risk. Although the Funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose money by
investing in the Funds.
BAR CHARTS AND PERFORMANCE INFORMATION
The bar charts and performance information provides an indication of the
historical risk of an investment in the Funds.
CASH INVESTMENT FUND
[EDGAR Representation of Bar Chart]
1989 9.20%
1990 8.18%
1991 6.06%
1992 3.79%
1993 3.18%
1994 3.84%
1995 5.75%
1996 5.21%
1997 5.36%
1998 5.32%
The calendar year-to-date total return as of June 30, 1999 was
2.32%.
During the periods shown in the chart, the highest quarterly return was 2.37%
(for the quarter ended June 30, 1989) and the lowest quarterly return was 0.74%
(for the quarter ended March 31, 1991).
The following table lists the Fund's average annual total returns as of December
31, 1998.
Cash Investment
Year(s) Fund
1 Year 5.32%
5 Year 5.09%
10 Year 5.57%
Since Inception (10/14/87) 5.77%
4
<PAGE>
READY CASH INVESTMENT FUND
[EDGAR Representation of Bar Chart]
1989 8.84%
1990 7.78%
1991 5.75%
1992 3.52%
1993 2.79%
1994 3.49%
1995 5.42%
1996 4.87%
1997 5.02%
1998 4.96%
The calendar year-to-date total return as of June 30, 1999 was 2.14%.
During the periods shown in the chart, the highest quarterly return was 2.29%
(for the quarter ended June 30, 1989) and the lowest quarterly return was 0.64%
(for the quarter ended March 31, 1994).
The following table lists the Fund's average annual total returns as of December
31, 1998.
Ready Cash
Year(s) Investment Fund
1 Year 4.96%
5 Year 4.75%
10 Year 5.23%
Since Inception (12/20/88) 5.39%
U.S. GOVERNMENT FUND
[EDGAR Representation of Bar Chart]
1989 8.86%
1990 7.87%
1991 5.78%
1992 3.49%
1993 2.98%
1994 3.80%
1995 5.51%
1996 5.01%
1997 5.16%
1998 5.07%
The calendar year-to-date total return as of June 30, 1999 was
2.22%.
During the periods shown in the chart, the highest quarterly return was 2.27%
(for the quarter ended June 30, 1989) and the lowest quarterly return was 0.72%
(for the quarter ended June 30, 1993).
The following table lists the Fund's average annual total returns as of December
31, 1998.
5
<PAGE>
U.S. Government
Year(s) Fund
1 Year 5.07%
5 Year 4.91%
10 Year 5.34%
Since Inception (11/16/87) 5.53%
TREASURY FUND
[EDGAR Representation of Bar Chart]
1991 5.79%
1992 3.45%
1993 2.78%
1994 3.63%
1995 5.29%
1996 4.83%
1997 4.95%
1998 4.80%
The calendar year-to-date total return as of June 30, 1999 was
2.10%.
During the periods shown in the chart, the highest quarterly return was 1.60%
(for the quarter ended March 31, 1991) and the lowest quarterly return was 0.68%
(for the quarter ended March 31, 1994).
The following table lists the Fund's average annual total returns as of December
31, 1998.
Treasury
Year(s) Fund
1 Year 4.80%
5 Year 4.70%
Since Inception (12/3/90) 4.47%
MUNICIPAL MONEY MARKET FUND
[EDGAR Representation of Bar Chart]
1989 5.93%
1990 5.48%
1991 4.07%
1992 2.51%
1993 2.07%
1994 2.72%
1995 3.74%
1996 3.28%
1997 3.40%
1998 3.19%
The calendar year-to-date total return as of June 30, 1999 was
1.37%.
6
<PAGE>
During the periods shown in the chart, the highest quarterly return was 1.58%
(for the quarter ended June 30, 1989) and the lowest quarterly return was 0.47%
(for the quarter ended March 31, 1993).
The following table lists the Fund's average annual total returns as of December
31, 1998.
Municipal Money
Year(s) Market Fund
1 Year 2.99%
5 Year 3.06%
10 Year 3.52%
Since Inception (1/7/88) 3.64%
Fixed Income Funds
STABLE INCOME FUND
OBJECTIVE. The investment objective of the Fund is to maintain safety of
principal while providing low volatility total return.
PRINCIPAL INVESTMENT STRATEGY. The Fund invests in a diversified portfolio of,
primarily, short-term investment grade securities. The Fund invests in fixed and
variable rate U.S, dollar-denominated debt securities of a broad spectrum of
U.S. and foreign issuers, including U.S. Government securities. The Fund's
investments may include mortgage-related and asset-backed securities. The Fund
seeks to maintain average dollar-weighted maturity of between 2 and 5 years.
PRINCIPAL RISKS. The principal risks of investing in the Fund are interest rate
risk and credit risk. The Fund's investments in mortgage-related and
asset-backed securities have prepayment risk, which is the risk that mortgage
loans or other obligations will be prepaid when interest rates decline, forcing
the Fund to reinvest in securities with lower interest rates. For this and other
reasons, mortgage-related and asset-backed securities may have significantly
greater price and yield volatility than traditional debt securities.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1995 7.931%
1996 5.46%
1997 6.46%
1998 5.77%
The calendar year-to-date total return as of June 30, 1999 was
1.56%.
During the periods shown in the chart, the highest quarterly return was 2.24%
(for the quarter ended June 30, 1995) and the lowest quarterly return was 0.79%
(for the quarter ended December 31, 1998).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Merrill Lynch 1-Year U.S. Treasury Bill Index.
7
<PAGE>
Stable Merrill Lynch
Year(s) Income Fund 1 Year U.S. Treasury Bill Index
1 Year 5.77% 5.89%
Since Inception (11/9/94) 6.35% 5.93%(1)
(1) For the period 10/31/94 - 12/31/98.
The Merrill Lynch 1-Year U.S. Treasury Bill Index is ____________________.
LIMITED TERM GOVERNMENT INCOME FUND
OBJECTIVE. The investment objective of the Fund is to provide income and safety
of principal by investing primarily in U.S. Government securities.
PRINCIPAL INVESTMENT STRATEGY. The Fund normally invests at least 65% of its
total assets in fixed and variable rate U.S. Government securities and may
invest up to 35% of its total assets in debt securities that are not U.S.
Government securities. The Fund's investments include mortgage-backed and
asset-backed securities. In selecting investments, the Fund emphasizes the use
of short maturity securities to lessen interest rate risk and uses
mortgage-backed securities to enhance yield. The Fund seeks to maintain average
dollar-weighted maturity of between 1 and 5 years.
PRINCIPAL RISKS. The principal risks of investing in the Fund are interest rate
risk and credit risk. The Fund's investments in mortgage-backed and asset-backed
securities have prepayment risk, which is the risk that mortgage loans or other
obligations will be prepaid when interest rates decline, forcing the Fund to
reinvest in securities with lower interest rates. For this and other reasons,
mortgage-related and asset-backed securities may have significantly greater
price and yield volatility than traditional debt securities.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1998 7.68%
The calendar year-to-date total return as of June 30, 1999 was
- -0.59%.
During the periods shown in the chart, the highest quarterly return was 4.37%
(for the quarter ended September 30, 1998) and the lowest quarterly return was
0.16% (for the quarter ended December 31, 1998).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Merrill Lynch 1 to 3 Year Government Index.
Limited Term Government Merrill Lynch 1 to 3 Year
Year(s) Income Fund Government Index
1 Year 7.68% 6.97%
Since Inception (10/1/97) 7.79% 5.75%(1)
(1) For the period 9/30/97 - 12/31/98.
The Merrill Lynch 1 to 3 Year Government Index is _____________________.
8
<PAGE>
INTERMEDIATE GOVERNMENT INCOME FUND
OBJECTIVE. The investment objective of the Fund is to provide income and safety
of principal by investing primarily in U.S. Government securities.
PRINCIPAL INVESTMENT STRATEGY. The Fund normally invests at least 65% of its
total assets in fixed and variable rate U.S. Government securities and may
invest up to 35% of its total assets in debt securities that are not U.S.
Government obligations. The Fund's investments include mortgage-backed and
asset-backed securities. In selecting investments, the Fund emphasizes the use
of intermediate maturity securities to lessen interest rate risk and uses
mortgage-backed securities to enhance yield. The Fund seeks to maintain average
dollar-weighted maturity of between 3 to 10 years.
PRINCIPAL RISKS. The principal risks of investing in the Fund are interest rate
risk and credit risk. The Fund's investments in mortgage-backed and asset-backed
securities have prepayment risk, which is the risk that mortgage loans or other
obligations will be prepaid when interest rates decline, forcing the Fund to
reinvest in securities with lower interest rates. For this and other reasons,
mortgage-related and asset-backed securities may have significantly greater
price and yield volatility than traditional debt securities.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1989 9.72%
1990 8.78%
1991 14.00%
1992 6.00%
1993 8.96%
1994 -6.16%
1995 13.75%
1996 3.13%
1997 8.82%
1998 9.55%
The calendar year-to-date total return as of June 30, 1999 was
- -2.62%.
During the periods shown in the chart, the highest quarterly return was 6.00%
(for the quarter ended September 30, 1998) and the lowest quarterly return was
- -3.73% (for the quarter ended June 30, 1994).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Lehman Intermediate Government Index.
Intermediate Government Lehman Intermediate Government Index
Year(s) Income Fund
1 Year 9.55% 8.47%
5 Year 5.59% 7.15%
10 Year 7.51% 8.69%
Since Inception
(12/31/82) 7.91% 7.81%(1)
(1) For the period 4/30/86 - 12/31/98.
The Lehman Intermediate Government Index is __________________.
9
<PAGE>
DIVERSIFIED BOND FUND
OBJECTIVE. The investment objective of the Fund is to provide total return by
diversifying its investments among different fixed-income styles.
PRINCIPAL INVESTMENT STRATEGY. The Fund uses a "multi-style" approach to reduce
the price and return volatility of the Fund and to provide returns that are more
consistent. The Fund allocates its investments among 3 different fixed-income
styles, including an intermediate term style, a value style, and a balanced
total return style.
PRINCIPAL RISKS. The principal risks of investing in the Fund are interest rate
risk and credit risk. The Fund's investments in different investment styles have
allocation risk, which is the risk that the allocation of investments may have a
more significant effect on the Fund's net asset value when one of these styles
is performing more poorly than the others.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1989 11.13%
1990 8.23%
1991 11.60%
1992 7.25%
1993 6.54%
1994 -2.04%
1995 12.96%
1996 3.44%
1997 10.23%
1998 9.10%
The calendar year-to-date total return as of June 30, 1999 was
- -1.88%.
During the periods shown in the chart, the highest quarterly return was 5.30%
(for the quarter ended September 30, 1998) and the lowest quarterly return was
- -1.94% (for the quarter ended March 31, 1994).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Lehman Intermediate Government/Corporate Index.
Diversified Lehman Intermediate
Year(s) Bond Fund Government/Corporate Index
1 Year 9.10% 8.42%
5 Year 6.55% 6.59%
10 Year 7.73% 8.51%
Since Inception (12/31/82) 8.60% 7.71%(1)
(1) For the period 4/30/86 - 12/31/98.
The Lehman Intermediate Government/Corporate Index is a
________________________.
10
<PAGE>
INCOME FUND
OBJECTIVE. The investment objective of the Fund is to provide total return
consistent with current income.
PRINCIPAL INVESTMENT STRATEGY. The Fund invests in a diversified portfolio of
fixed and variable rate debt securities issued by domestic and foreign issuers.
The Fund's investments include corporate, mortgage-backed, asset-backed, and
U.S. Government debt securities primarily of investment grade quality or better.
In selecting investments, the Fund applies fundamental economic, credit, and
market analysis to increase portfolio performance. The Fund seeks to maintain an
average dollar-weighted portfolio maturity between 3 and 15 years.
PRINCIPAL RISKS. The principal risks of investing in the Fund are interest rate
risk and credit risk. The Fund's investments in foreign securities have foreign
risk. This is the risk of investments located in foreign countries, which may
have greater price volatility and less liquidity. Investments in foreign
securities also are subject to political, regulatory, and diplomatic risks.
Foreign risk includes currency risk, which may occur due to fluctuations in the
exchange rates between the U.S. dollar and foreign currencies. This risk could
negatively affect the value of a Fund's investments. The Fund's investments in
mortgage-backed and asset-backed securities have prepayment risk, which is the
risk that mortgage loans or other obligations will be prepaid when interest
rates decline, forcing the Fund to reinvest in securities with lower interest
rates. For this and other reasons, mortgage-related and asset-backed securities
may have significantly greater price and yield volatility than traditional debt
securities.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1989 9.73%
1990 9.20%
1991 18.87%
1992 7.96%
1993 8.77%
1994 -7.02%
1995 17.35%
1996 1.91%
1997 10.26%
1998 8.98%
The calendar year-to-date total return as of June 30, 1999 was
- -3.53%.
During the periods shown in the chart, the highest quarterly return was 6.21%
(for the quarter ended September 30, 1991) and the lowest quarterly return was
- -3.30% (for the quarter ended June 30, 1994).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Lehman Intermediate Government/Corporate Index.
Lehman Intermediate
Year(s) Income Fund Government/Corporate Index
1 Year 8.98% 8.42%
5 Year 5.97% 6.59%
10 Year 8.37% 8.51%
Since Inception (6/9/87) 8.19% 7.95%(1)
(1) For the period 5/31/87 - 12/31/98.
The Lehman Intermediate Government/Corporate Index is _______________________.
11
<PAGE>
TOTAL RETURN BOND FUND
OBJECTIVE. The investment objective of the Fund is to seek total return.
PRINCIPAL INVESTMENT STRATEGY. The Fund invests in a broad range of fixed
fixed-income securities to create a strategically diversified portfolio of
fixed-income investments. The Fund's investments include corporate,
mortgage-backed, asset-backed, and U.S. Government debt securities, preferred
stock, convertible bonds, and foreign bonds. In selecting investments, the Fund
focuses on relative value as opposed predicting the direction of interest rates.
The Fund uses fundamental economic, credit, and market analysis to identify the
best relative economic value. The Fund seeks to maintain an average
dollar-weighted portfolio maturity between 5 and 15 years.
PRINCIPAL RISKS. The principal risks of investing in the Fund are interest rate
risk and credit risk. The Fund's investments in foreign securities have foreign
risk. This is the risk of investments located in foreign countries, which may
have greater price volatility and less liquidity. Investments in foreign
securities also are subject to political, regulatory, and diplomatic risks.
Foreign risk includes currency risk, which may occur due to fluctuations in the
exchange rates between the U.S. dollar and foreign currencies. This risk could
negatively affect the value of a Fund's investments. The Fund's investments in
mortgage-backed and asset-backed securities have prepayment risk, which is the
risk that mortgage loans or other obligations will be prepaid when interest
rates decline, forcing the Fund to reinvest in securities with lower interest
rates. For this and other reasons, mortgage-related and asset-backed securities
may have significantly greater price and yield volatility than traditional debt
securities.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1994 -0.65%
1995 13.80%
1996 2.90%
1997 8.91%
1998 7.11%
The calendar year-to-date total return as of June 30, 1999 was
- -1.62%.
During the periods shown in the chart, the highest quarterly return was 4.65%
(for the quarter ended June 30, 1995) and the lowest quarterly return was -1.40%
(for the quarter ended March 31, 1994).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Lehman Intermediate Government/Corporate Index.
Total Return Lehman Intermediate
Year(s) Bond Fund Government/Corporate Index
1 Year 7.11% 8.42%
5 Year 6.30% 6.59%
Since Inception (12/31/93) 5.29% 5.94%(1)
(1) For the period 11/30/93 - 12/31/98.
The Lehman Intermediate Government/Corporate Index is ________________________.
12
<PAGE>
STRATEGIC INCOME FUND
OBJECTIVE. The investment objective of the Fund is to provide a combination of
current income and capital appreciation by diversified investments in stocks,
bonds, and other fixed-income investments.
PRINCIPAL INVESTMENT STRATEGY. The Fund is designed for investors seeking to
invest in fixed income securities with limited exposure to equity securities.
The Fund emphasizes safety of principal and invests 70% to 90% of its assets in
fixed income investments and 10%-30% of its assets in equity investments. For
the fixed-income portion of its portfolio, the Fund uses multiple fixed income
investment styles intended to reduce the price and return volatility of, and
provide more consistent returns. The Fund uses a similar approach for the equity
portion of the portfolio blending multiple equity investment styles. This
approach is intended to reduce the risk associated with the use of a single
style, which may move in and out of favor during the course of a market cycle.
PRINCIPAL RISKS. The principal risks of investing in the Fund are market risk,
interest rate risk, and credit risk. The Fund's investments in different styles
and in both equity and fixed-income securities have allocation risk, which is
the risk that the allocation of investments may have a more significant effect
on the Fund's net asset value when one investment style or asset classes is
performing more poorly than others.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1990 5.70%
1991 16.90%
1992 6.05%
1993 7.77%
1994 0.49%
1995 15.11%
1996 7.99%
1997 13.23%
1998 12.44%
The calendar year-to-date total return as of June 30, 1999 was
2.18%.
During the periods shown in the chart, the highest quarterly return was 12.44%
(for the quarter ended June 30, 1997) and the lowest quarterly return was -3.01%
(for the quarter ended September 30, 1990).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Standard & Poor's 500 Index ("S&P 500 Index").
Strategic S&P 500
Year(s) Income Fund Index
1 Year 12.44% 28.58%
5 Year 9.72% 24.03%
Since Inception (4/30/89) 9.71% 18.34%
The S&P 500 Index is a widely recognized index of common stock. The Standard &
Poor's 500 Index figures assume reinvestment of all dividends paid by stocks
included in the index. Unlike the performance figures of the Fund, the S&P 500
Index's performance does not reflect the effect of expenses. The index is
unmanaged and is not available for investment.
13
<PAGE>
LIMITED TERM TAX-FREE FUND
OBJECTIVE. The Fund's investment objective is to produce current income exempt
from federal income taxes.
PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests substantially all its
assets in investment grade municipal securities. The Fund invests at least 80%
of its total assets in securities paying interest exempt from federal income
taxes. The Fund invests primarily in securities paying interest exempt from the
Alternative Minimum Tax or AMT. The Fund seeks to maintain an average
dollar-weighted portfolio maturity of between 1 and 5 years.
PRINCIPAL RISKS. The principal risks of investing in the Fund are interest rate
risk and credit risk. The Fund's investments in municipal securities have the
risk that special factors may adversely affect the value of municipal securities
and have a significant effect on the value of the Fund's investments. These
factors include political or legislative changes and uncertainties related to
the tax status of municipal securities or the rights of investors in these
securities.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1997 6.58%
1998 5.28%
The calendar year-to-date total return as of June 30, 1999 was
- -0.51%.
During the periods shown in the chart, the highest quarterly return was 2.27%
(for the quarter ended September 30, 1998) and the lowest quarterly return was
0.49% (for the quarter ended March 31, 1997).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Lehman 3-Year Municipal Bond Index.
Limited Term Lehman 3-Year Municipal
Year(s) Tax-Free Fund Bond Index
1 Year 5.28% 5.20%
Since Inception (10/1/96) 7.63% 5.14%(1)
(1) For the period 9/30/96 - 12/31/98.
The Lehman 3-Year Municipal Bond Index is ____________________________
14
<PAGE>
TAX-FREE INCOME FUND
OBJECTIVE. The Fund's investment objective is to produce current income exempt
from federal income taxes.
PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in investment grade
municipal securities. The Fund normally invests at least 80% of its total assets
in municipal securities paying interest exempt from federal income taxes,
including AMT. The Fund seeks to maintain an average dollar-weighted portfolio
maturity of between 10 and 20 years.
PRINCIPAL RISKS. The principal risks of investing in the Fund are interest rate
risk and credit risk. The Fund's investments in municipal securities have the
risk that special factors may adversely affect the value of municipal securities
and have a significant effect on the value of the Fund's investments. These
factors include political or legislative changes and uncertainties related to
the tax status of municipal securities or the rights of investors in these
securities.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1990 5.88%
1991 9.41%
1992 7.33%
1993 9.59%
1994 -4.85%
1995 16.74%
1996 4.74%
1997 10.26%
1998 6.54%
The calendar year-to-date total return as of June 30, 1999 was
- -1.88%.
During the periods shown in the chart, the highest quarterly return was 5.85%
(for the quarter ended March 31, 1995) and the lowest quarterly return was
- -5.59% (for the quarter ended March 31, 1994).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Lehman Brothers 10-Year Municipal Index.
Tax-Free Lehman Brothers 10-Year
Year(s) Income Fund Municipal Index
1 Year 6.54% 6.76%
5 Year 6.45% 6.63%
Since Inception (8/1/89) 7.07% 7.96%(1)
(1) For the period 7/31/89 - 12/31/98.
The Lehman Brothers 10-Year Municipal Index is a ______________________________.
15
<PAGE>
COLORADO TAX-FREE FUND
OBJECTIVE. The Fund's investment objective is to provide shareholders with a
high level of current income exempt from both federal (including the AMT) and
Colorado state income taxes consistent with the preservation of capital. The
Fund offers shares only to residents of Colorado.
PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests substantially all its
assets in investment grade municipal securities issued by (1) the state of
Colorado and its subdivisions, authorities, instrumentalities, and corporations,
and (2) territories and possessions of the United States. The Fund invests at
least 80% of its total assets in municipal securities paying interest exempt
from both federal (including the AMT) and Colorado state income taxes. Normally,
the Fund expects to have an average dollar-weighted portfolio maturity of
greater than 10 years.
PRINCIPAL RISKS. The principal risks of investing in the Fund are interest rate
risk and credit risk. The Fund's investments in municipal securities have the
risk that special factors may adversely affect the value of municipal securities
and have a significant effect on the value of the Fund's investments. These
factors include political or legislative changes and uncertainties related to
the tax status of municipal securities or the rights of investors in these
securities. Because the Fund invests a large portion of its assets in a
particular state's municipal securities, it is more vulnerable to events
adversely affecting that state, including economic, political, or regulatory
occurrences.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1994 -5.93%
1995 16.99%
1996 4.88%
1997 10.29%
1998 1 6.14%
The calendar year-to-date total return as of June 30, 1999 was
- -2.17%.
During the periods shown in the chart, the highest quarterly return was 5.75%
(for the quarter ended March 31, 1995) and the lowest quarterly return was
- -5.39% (for the quarter ended March 31, 1994).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Lehman Brothers 10-Year Municipal Index.
Colorado Lehman Brothers 10-Year Municipal
Year(s) Tax-Free Fund Index
1 Year 6.14% 6.76%
5 Year 6.21% 6.63%
Since Inception (6/1/93) 6.75% 6.74%(1)
(1) For the period 5/31/93 - 12/31/98.
The Lehman Brothers 10-Year Municipal Index is a ___________________________.
16
<PAGE>
MINNESOTA INTERMEDIATE TAX-FREE FUND and MINNESOTA TAX-FREE FUND
OBJECTIVE. The investment objective of the Funds is to provide shareholders with
a high level of current income exempt from both federal (including the AMT) and
Minnesota state income taxes without assuming undue risk. The Funds offers
shares only to residents of Minnesota.
PRINCIPAL INVESTMENT STRATEGIES. The Funds normally invest substantially all
(and always at least 80% of) their assets in investment grade municipal
securities issued by (1) the state of Minnesota and its subdivisions,
authorities, instrumentalities, and corporations and (2) territories and
possessions of the United States. The Funds invest at least 80% of its total
assets in securities paying interest exempt from both federal and Minnesota
State income taxes (including the AMT). The Minnesota Intermediate Tax-Free Fund
seeks to maintain an average dollar-weighted maturity of between 5 and 10 years.
Normally, the Minnesota Tax-Free Fund expects to have an average dollar-weighted
portfolio maturity of greater than 10 years.
PRINCIPAL RISKS. The principal risks of investing in the Funds are interest rate
risk and credit risk. The Funds' investments in municipal securities have the
risk that special factors may adversely affect the value of municipal securities
and have a significant effect on the value of the Funds' investments. These
factors include political or legislative changes and uncertainties related to
the tax status of municipal securities or the rights of investors in these
securities. Because the Funds invest a large portion of their assets in a
particular state's municipal securities, it is more vulnerable to events
adversely affecting that state, including economic, political, or regulatory
occurrences.
Bar Charts and Performance Information
The bar charts and performance information provide an indication of the
historical risk of an investment in the Funds.
MINNESOTA INTERMEDIATE TAX-FREE FUND
[EDGAR Representation of Bar Chart]
1989 -0.82%
1990 9.25%
1991 6.67%
1992 8.80%
1993 7.31%
1994 9.07%
1995 -3.09%
1996 13.34%
1997 3.80%
1998 7.60%
The calendar year-to-date total return as of June 30, 1999 was
- -0.82%.
During the periods shown in the chart, the highest quarterly return was 5.19%
(for the quarter ended March 31, 1995) and the lowest quarterly return was
- -3.15% (for the quarter ended March 31, 1994).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Lehman Brothers 10-Year Municipal Bond Index.
Minnesota Intermediate Lehman Brothers 10-Year
Year(s) Tax-Free Fund Municipal Bond Index
1 Year 5.59% 6.48%
5 Year 5.31% 6.22%
10 Year 6.75% 8.21%
Since Inception (9/30/76) 6.30% N/A
The Lehman Brothers 10-Year Municipal Bond Index is a _________________________.
17
<PAGE>
MINNESOTA TAX-FREE FUND
[EDGAR Representation of Bar Chart]
1989 -1.45%
1990 9.37%
1991 6.35%
1992 8.53%
1993 7.55%
1994 11.23%
1995 -5.91%
1996 17.09%
1997 3.78%
1998 9.16%
The calendar year-to-date total return as of June 30, 1999 was
- -1.45%.
During the periods shown in the chart, the highest quarterly return was 6.73%
(for the quarter ended March 31, 1995) and the lowest quarterly return was
- -5.48% (for the quarter ended March 31, 1994).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Lehman Brothers 10-Year Municipal Bond Index.
Minnesota Lehman Brothers 10-Year Municipal
Year(s) Tax-Free Fund Bond Index
1 Year 6.22% 6.76%
5 Year 5.80% 6.63%
10 Year 7.19% N/A
Since Inception (1/12/88) 7.01% 8.22%(1)
(1) For the period 12/31/87 - 12/31/98.
The Lehman Brothers 10-Year Municipal Bond Index is a _________________________.
18
<PAGE>
THE BALANCED FUNDS
MODERATE BALANCED FUND
OBJECTIVE. The Fund's investment objective is to provide a combination of
current income and capital appreciation by diversifying investments in stocks,
bonds, and other fixed income investments.
PRINCIPAL INVESTMENT STRATEGIES. The Fund is designed for investors seeking
roughly equivalent exposures to fixed income securities and equity securities.
The Fund's portfolio is more evenly balanced between fixed income and equity
securities than the other balanced funds. The Fund invests in several different
equity and fixed income investment styles. This allocation is intended to reduce
the risk of relying on a single equity or fixed income investment style.
PRINCIPAL RISKS. The principal risks of investing in the Fund are market risk,
interest rate risk, and credit risk. The Fund's investments in different styles
and in both equity and fixed-income securities have allocation risk, which is
the risk that the allocation of investments may have a more significant effect
on the Fund's net asset value when one investment style or asset class is
performing more poorly than the others.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Funds.
[EDGAR Representation of Bar Chart]
1990 4.30%
1991 20.81%
1992 6.03%
1993 8.86%
1994 42.00%
1995 18.36%
1996 10.11%
1997 16.00%
1998 16.74%
The calendar year-to-date total return as of June 30, 1999 was
4.63%.
During the periods shown in the chart, the highest quarterly return was 10.19%
(for the quarter ended December 31, 1998) and the lowest quarterly return was
- -5.70% (for the quarter ended September 30, 1990).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the S&P 500 Index.
Moderate S&P 500
Year(s) Balanced Fund Index
1 Year 16.74% 28.58%
5 Year 12.13% 24.03%
Since Inception (4/30/89) 11.61% 18.34%
The S&P 500 Index is a widely recognized index of common stocks. The S&P 500
Index figures assume reinvestment of all dividends paid by stocks included in
the index. Unlike the performance figures of the Fund, the S&P 500 Index's
performance does not reflect the effect of expenses. The index is unmanaged and
is not available for investment.
GROWTH BALANCED FUND
OBJECTIVE. The Fund's investment objective is to provide a combination of
current income and capital appreciation by diversified investments in stocks and
bonds.
PRINCIPAL INVESTMENT STRATEGIES. The Fund is designed for investors seeking
long-term capital appreciation in the equity securities market in a balanced
fund. The Fund invests the equity portion of its portfolio in several different
equity investment styles including an index style, an income equity style, a
large company style, a diversified small cap style, and an international style.
The blending of multiple equity investment styles is intended to reduce the risk
associated with the use of a single style, which may move in and out of favor
during the course of a market cycle.
The Fund invests the fixed income-portion of its portfolio in several different
fixed-income investment styles. The blending of these multiple fixed-income
investment styles is intended to reduce the price and return volatility of, and
provide more consistent returns within, the fixed income-portion of the Fund's
investments.
PRINCIPAL RISKS. The principal risks of investing in the Fund are market risk,
interest rate risk, and credit risk. The Fund's investments in different styles
and in both equity and fixed-income securities have allocation risk, which is
the risk that the allocation of investments may have a more significant effect
on the Fund's net asset value when one investment style or asset class is
performing more poorly than the others. To the extent that the Fund may invest
in small-capitalization companies, it may have capitalization risk. These
investments tend to be more volatile than investments in large-cap companies. In
addition, small-cap companies may have more risk because they often have limited
product lines, markets, or financial resources. The Fund's investments in
foreign securities have foreign risk. This is the risk of investments in issuers
located in foreign countries, which may have greater price volatility and less
liquidity. Investments in foreign securities also are subject to political,
regulatory, and diplomatic risks. Foreign risk includes currency risk, which may
occur due to fluctuations in the exchange rates between the U.S. dollar and
foreign currencies. This risk could negatively affect the value of a Fund's
investments.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1990 1.95%
1991 27.91%
1992 5.58%
1993 10.26%
1994 -0.14%
1995 23.25%
1996 14.25%
1997 20.77%
1998 22.45%
The calendar year-to-date total return as of June 30, 1999 was
7.37%.
During the periods shown in the chart, the highest quarterly return was 16.86%
(for the quarter ended December 31, 1998) and the lowest quarterly return was
- -10.02% (for the quarter ended September 30, 1990).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the S&P 500 Index.
Growth S&P 500
Year(s) Balanced Fund Index
1 Year 22.45% 28.58%
5 Year 15.77% 24.03%
Since Inception (4/30/89) 13.91% 18.34%
The S&P 500 Index is a widely recognized index of common stocks. The S&P 500
Index figures assume reinvestment of all dividends paid by stocks included in
the index. Unlike the performance figures of the Fund, the S&P 500 Index's
performance does not reflect the effect of expenses. The index is unmanaged and
is not available for investment.
19
<PAGE>
AGGRESSIVE BALANCED-EQUITY FUND
OBJECTIVE. The Fund's investment objective is to provide a combination of
current income and capital appreciation by diversifying investments in stocks
and bonds.
PRINCIPAL INVESTMENT STRATEGIES. The Fund is designed for investors seeking
long-term capital appreciation in the equity securities market in a balanced
fund. In relation to other balanced funds, the Fund emphasizes its positions in
equity securities. The Fund invests the equity portion of its portfolio in
several different equity investment styles including an index style, an income
equity style, a large company style, a diversified small cap style, and an
international style. The blending of multiple equity investment styles is
intended to reduce the risk associated with the use of a single style, which may
move in and out of favor during the course of a market cycle.
The Fund invests the fixed income-portion of its portfolio in several different
fixed-income investment styles. The blending of these multiple fixed-income
investment styles is intended to reduce the price and return volatility of, and
provide more consistent returns within, the fixed income-portion of the Fund's
investments.
PRINCIPAL RISKS. The principal risks of investing in the Fund are market risk,
interest rate risk, and credit risk. The Fund's investments in different styles
and in both equity and fixed-income securities have allocation risk, which is
the risk that the allocation of investments may have a more significant effect
on the Fund's net asset value when one investment style or asset class is
performing more poorly than the others. To the extent that the Fund may invest
in small-capitalization companies, it may have capitalization risk. These
investments tend to be more volatile than investments in large-cap companies. In
addition, small-cap companies may have more risk because they often have limited
product lines, markets, or financial resources. The Fund's investments in
foreign securities have foreign risk. This is the risk of investments in issuers
located in foreign countries, which may have greater price volatility and less
liquidity. Investments in foreign securities also are subject to political,
regulatory, and diplomatic risks. Foreign risk includes currency risk, which may
occur due to fluctuations in the exchange rates between the U.S. dollar and
foreign currencies. This risk could negatively affect the value of a Fund's
investments. To the extent the Fund invests in small capitalization companies,
its returns may be more volatile and differ, sometimes significantly, from the
overall U.S. market.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1998 24.21%
The calendar year-to-date total return as of June 30, 1999 was
9.41%.
During the periods shown in the chart, the highest quarterly return was 20.01%
(for the quarter ended December 31, 1998) and the lowest quarterly return was
- -8.89% (for the quarter ended September 30, 1998).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the S&P 500 Index.
Aggressive Balanced- S&P 500
Year(s) Equity Fund Index
1 Year 24.21% 28.58%
Since Inception (12/2/97) 22.39% 24.73%(1)
(1) For the period 11/30/97 - 12/31/98.
The S&P 500 Index is a widely recognized index of common stocks. The S&P 500
Index figures assume reinvestment of all dividends paid by stocks included in
the index. Unlike the performance figures of the Fund, the S&P 500 Index's
performance does not reflect the effect of expenses. The index is unmanaged and
is not available for investment.
THE EQUITY FUNDS
INDEX FUND
OBJECTIVE. The Fund's investment objective is to replicate the return of the S&P
500 Index.
PRINCIPAL INVESTMENT STRATEGIES. The Fund is designed to replicate the return of
the S&P 500 Index with minimum tracking error and to minimize transaction costs.
Under normal circumstances, the Fund holds stocks representing 100% of the
capitalization-weighted market values of the S&P 500 Index.
PRINCIPAL RISKS. The principal risk of investing in the Fund is market risk.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1989 30.47%
1990 -3.70%
1991 30.00%
1992 7.77%
1993 8.95%
1994 1.11%
1995 36.00%
1996 22.26%
1997 33.18%
1998 28.33%
The calendar year-to-date total return as of June 30, 1999 was
12.04%.
During the periods shown in the chart, the highest quarterly return was 21.32%
(for the quarter ended December 31, 1998) and the lowest quarterly return was
- -13.86% (for the quarter ended September 30, 1990).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the S&P 500 Index.
Index S&P 500
Year(s) Fund Index
1 Year 28.33% 28.58%
5 Year 23.50% 24.03%
10 Year 18.61% 19.18%
Since Inception (1/30/87) 16.04% 16.61%(1)
(1) For the period 1/31/87 - 12/31/98.
The S&P 500 Index is a widely recognized index of common stocks. The S&P 500
Index figures assume reinvestment of all dividends paid by stocks included in
the index. Unlike the performance figures of the Fund, the S&P 500 Index's
performance does not reflect the effect of expenses. The index is unmanaged and
is not available for investment.
20
<PAGE>
INCOME EQUITY FUND
OBJECTIVE. The Fund's investment objective is to provide long-term capital
appreciation consistent with above-average dividend income.
PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in the common stocks
of large, high-quality domestic companies that have above-average return
potential based on current market valuations. The Fund primarily emphasizes
investments in securities of companies with above-average dividend income. The
Fund also may invest in foreign securities.
PRINCIPAL RISKS. The principal risk of investing in the Fund is market risk. To
the extent the Fund invests in foreign securities, it has foreign risk. This is
the risk of investments in issuers located in foreign countries, which may have
greater price volatility and less liquidity. Investments in foreign securities
also are subject to political, regulatory, and diplomatic risks. Foreign risk
includes currency risk, which may occur due to fluctuations in the exchange
rates between the U.S. dollar and foreign currencies. This risk could negatively
affect the value of a Fund's investments.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1990 1.30%
1991 28.76%
1992 5.51%
1993 7.63%
1994 4.64%
1995 38.43%
1996 20.25%
1997 28.04%
1998 17.85%
The calendar year-to-date total return as of June 30, 1999 was
13.40%.
During the periods shown in the chart, the highest quarterly return was 15.68%
(for the quarter ended December 31, 1998) and the lowest quarterly return was
- -10.74% (for the quarter ended September 30, 1990).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the S&P 500 Index
Income S&P 500
Year(s) Equity Fund Index
1 Year 17.85% 28.58%
5 Year 21.32% 24.03%
Since Inception (3/31/89) 17.21% 18.86%(1)
(1) For the period 2/28/89 - 12/31/98.
The S&P 500 Index is a widely recognized index of common stocks. The S&P 500
Index figures assume reinvestment of all dividends paid by stocks included in
the index. Unlike the performance figures of the Fund, the S&P 500 Index's
performance does not reflect the effect of expenses. The index is unmanaged and
is not available for investment.
21
<PAGE>
VALUGROWTH STOCK FUND
OBJECTIVE. The Fund's investment objective is to provide long-term capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in medium- and
large-capitalization companies that, in the view of the Adviser, possess above
average growth characteristics, and appear to be undervalued. The Adviser
considers medium-capitalization companies to be those whose market
capitalization is in the range of $500 million to $8 billion. The Adviser
considers large companies to be those whose market capitalization is greater
than the median of the Russell 1000 Index.
In selecting investments, the Fund seeks to identify and invest in those
companies with earnings and dividends that the Adviser believes will grow faster
than both inflation and the economy in general. The Fund invests in companies
with growth potential that, in the opinion of its Adviser, have not yet been
fully reflected in the market price of the companies' shares. In seeking these
investments, the Adviser relies primarily on a company-by-company analysis,
rather than on a broader analysis of industry or economic sector trends.
PRINCIPAL RISKS. The principal risk of investing in the Fund is market risk. To
the extent that the Fund may invest in medium-capitalization companies, it may
have capitalization risk. These investments tend to be more volatile than
investments in large-cap companies. There also is a risk of using a value
strategy because the stocks in which the Fund invests may remain undervalued
during a given period or decline in price. This may occur because larger stocks
or investments based on large-stock indices are more appealing to investors or
because value stocks as a category lose favor with investors compared to growth
stocks.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1989 26.86%
1990 -1.25%
1991 36.89%
1992 9.65%
1993 6.36%
1994 -4.13%
1995 23.75%
1996 20.52%
1997 22.59%
1998 9.46%
The calendar year-to-date total return as of June 30, 1999 was 8.02%.
During the periods shown in the chart, the highest quarterly return was 17.73%
(for the quarter ended December 31, 1998) and the lowest quarterly return was
- -17.70% (for the quarter ended September 30, 1998).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the S&P 500 Index.
ValuGrowth S&P 500
Year(s) Stock Fund Index
1 Year 9.46% 28.58%
5 Year 13.92% 24.03%
10 Year 14.39% 19.18%
Since Inception (1/8/88) 13.43% 18.84%(1)
(1) For the period 12/31/87 - 12/31/98.
The S&P 500 Index is a widely recognized index of common stocks. The S&P 500
Index figures assume reinvestment of all dividends paid by stocks included in
the index. Unlike the performance figures of the Fund, the S&P 500 Index's
performance does not reflect the effect of expenses. The index is unmanaged and
is not available for investment.
22
<PAGE>
DIVERSIFIED EQUITY FUND
OBJECTIVE. The Fund's investment objective is to provide long-term capital
appreciation with moderate annual return volatility by diversifying its
investments among different equity investment styles.
PRINCIPAL INVESTMENT STRATEGIES. The Fund invests in a "multi-style" approach
designed to minimize the volatility and risk of investing in a single investment
style. The Fund's investments combine 5 different equity investment styles - an
index style, an income equity style, a large company style, a diversified small
cap style, and an international style.
PRINCIPAL RISKS. The principal risk of investing in the Fund is market risk. The
Fund has allocation risk, which is the risk that the allocation of investments
may have a more significant effect on the Fund's net asset value when one
investment style is performing more poorly than the others. To the extent that
the Fund invests in small-capitalization companies, it may have capitalization
risk. These investments tend to be more volatile than investments in large-cap
companies. In addition, small-cap companies may have more risk because they
often have limited product lines, markets, or financial resources. Also, the
market for the sale of small-cap stocks may be less liquid. The Fund's
investments in foreign securities have foreign risk. This is the risk of
investments in issuers located in foreign countries, which may have greater
price volatility and less liquidity. Investments in foreign securities also are
subject to political, regulatory, and diplomatic risks. Foreign risk includes
currency risk, which may occur due to fluctuations in the exchange rates between
the U.S. dollar and foreign currencies. This risk could negatively affect the
value of a Fund's investments.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1989 28.35%
1990 -1.25%
1991 37.40%
1992 4.74%
1993 12.14%
1994 0.83%
1995 30.94%
1996 20.43%
1997 25.72%
1998 22.35%
The calendar year-to-date total return as of June 30, 1999 was
11.38%.
During the periods shown in the chart, the highest quarterly return was 19.88%
(for the quarter ended December 31, 1998) and the lowest quarterly return was
- -15.86% (for the quarter ended September 30, 1990).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the S&P 500 Index.
Diversified S&P 500
Year(s) Equity Fund Index
1 Year 22.35% 28.58%
5 Year 19.59% 24.03%
10 Year 17.47% 19.18%
Since Inception (12/31/88) 17.47% 19.06%
The S&P 500 Index is a widely recognized index of common stocks. The S&P 500
Index figures assume reinvestment of all dividends paid by stocks included in
the index. Unlike the performance figures of the Fund, the S&P 500 Index's
performance does not reflect the effect of expenses. The index is unmanaged and
is not available for investment.
23
<PAGE>
GROWTH EQUITY FUND
OBJECTIVE. The Fund's investment objective is to provide a high level of
long-term capital appreciation with moderate annual return volatility by
diversifying its investments among different equity investment styles.
PRINCIPAL INVESTMENT STRATEGIES. The Fund invests in a "multi-style" approach
designed to reduce the volatility and risk of investing in a single equity
style. The Fund's investments combine 3 different equity styles - a large
company growth style, a diversified small cap style, and an international style.
PRINCIPAL RISKS. The principal risk of investing in the Fund is market risk.
There also is the risk of using a growth strategy because the stocks in which
the Fund invests may not achieve the anticipated growth during a given period or
decline in price. This may occur if growth stocks as a category lose favor with
investors compared to value stocks. The Fund also has allocation risk, which is
the risk that the allocation of investments may have a more significant effect
on the Fund's net asset value when one investment style is performing more
poorly than the others. To the extent that the Fund may invest in
small-capitalization companies, it may have capitalization risk. These
investments tend to be more volatile than investments in large-cap companies. In
addition, small-cap companies may have more risk because they often have limited
product lines, markets, or financial resources. Also, the market for the sale of
small-cap stocks may be less liquid. The Fund's investments in foreign
securities have foreign risk. This is the risk of investments in issuers located
in foreign countries, which may have greater price volatility and less
liquidity. Investments in foreign securities also are subject to political,
regulatory, and diplomatic risks. Foreign risk includes currency risk, which may
occur due to fluctuations in the exchange rates between the U.S. dollar and
foreign currencies. This risk could negatively affect the value of a Fund's
investments.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1990 -1.36%
1991 46.72%
1992 5.06%
1993 19.75%
1994 -1.38%
1995 24.87%
1996 18.78%
1997 20.09%
1998 16.50%
The calendar year-to-date total return as of June 30, 1999 was
9.30%.
During the periods shown in the chart, the highest quarterly return was 20.28%
(for the quarter ended March 31, 1991) and the lowest quarterly return was
- -20.14% (for the quarter ended September 30, 1990).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the S&P 500 Index.
Growth S&P 500
Year(s) Equity Fund Index
1 Year 16.50% 28.58%
5 Year 15.40% 24.03%
Since Inception (4/30/89) 16.16% 18.34%
The S&P 500 Index is a widely recognized index of common stocks. The S&P 500
Index figures assume reinvestment of all dividends paid by stocks included in
the index. Unlike the performance figures of the Fund, the S&P 500 Index's
performance does not reflect the effect of expenses. The index is unmanaged and
is not available for investment.
24
<PAGE>
LARGE COMPANY GROWTH FUND
Objective. The Fund's investment objective is to provide long-term capital
appreciation by investing primarily in large, high-quality domestic companies
that the Adviser believes have superior growth potential.
Principal Investment Strategies. The Fund invests primarily in the common stock
of large, high-quality domestic companies that have superior growth potential.
For the purposes of the Fund's investments, large companies are those with
market capitalization greater than the median of the Russell 1000 Index or
approximately $3.7 billion. In selecting securities, the Fund seeks companies
whose stock is attractively valued with fundamental characteristics that are
significantly better than the market average and support internal earnings
growth capability.
Principal Risks. The principal risk of investing in the Fund is market risk.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1989 27.05%
1990 3.43%
1991 67.04%
1992 1.85%
1993 -0.36%
1994 -1.07%
1995 29.24%
1996 25.11%
1997 33.35%
1998 48.01%
The calendar year-to-date total return as of June 30, 1999 was 16.12%.
During the periods shown in the chart, the highest quarterly return was 31.64%
(for the quarter ended December 31, 1998) and the lowest quarterly return was
- -17.49% (for the quarter ended September 30, 1990).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the S&P 500 Index.
Large Company S&P 500
Year(s) Growth Fund Index
1 Year 48.01% 28.58%
5 Year 25.85% 24.03%
10 Year 21.54% 19.18%
Since Inception (12/31/82) 17.49% 17.15%(1)
(1) For the period 4/30/86 - 12/31/98.
The S&P 500 Index is a widely recognized index of common stocks. The S&P 500
Index figures assume reinvestment of all dividends paid by stocks included in
the index. Unlike the performance figures of the Fund, the S&P 500 Index's
performance does not reflect the effect of expenses. The index is unmanaged and
is not available for investment.
25
<PAGE>
DIVERSIFIED SMALL CAP FUND
Objective. The Fund's investment objective is to provide long-term capital
appreciation with moderate annual return volatility by diversifying its
investments across different small capitalization equity investment styles.
Principal Investment Strategies. The Fund uses in a "multi-style" approach and
invests in small-cap equity securities. The Fund invests in several different
small-cap equity styles in order to reduce the risk of price and return
volatility associated with reliance on a single investment style.
Principal Risks. The principal risk of investing in the Fund is market risk.
Because the Fund invests in small-cap companies, it also has capitalization
risk. These investments tend to be more volatile than investments in large-cap
companies. In addition, small-cap companies may have more risk because they
often have limited product lines, markets, or financial resources. Also, the
market for the sale of small-cap stocks may be less liquid. The Fund also has
allocation risk, which is the risk that the allocation of investments may have a
more significant effect on the Fund's net asset value when one small-cap
investment style is performing more poorly than the others.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1998 -8.60%
The calendar year-to-date total return as of June 30, 1999 was
3.94%.
During the periods shown in the chart, the highest quarterly return was 14.68%
(for the quarter ended December 31, 1998) and the lowest quarterly return was
- --23.73% (for the quarter ended September 30, 1998).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Russell 2000 Value Index.
Diversified Small Russell 2000
Year(s) Cap Fund Value Index
1 Year -8.60% %
Since Inception (12/31/97) -8.60% -1.17%(1)
(1) For the period 11/30/97 - 12/31/98.
The Russell 2000 Value Index is comprised of securities in The Russell 2000
Index with less than average growth orientation. Companies in this index
generally have low price to book and price-earnings ratios.
26
<PAGE>
SMALL COMPANY STOCK FUND
OBJECTIVE. The Fund's investment objective is long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in the common stock
of small and medium-size domestic companies that have market capitalizations
well below that of the average company in the S&P 500 Index. For the purposes of
its investments, small companies are those with market capitalizations of less
than the largest stock in the Russell 2000 Index or approximately $1.4 billion.
Medium companies are those with market capitalizations ranging from $500 million
to $8 billion. In selecting securities, the Fund seeks securities with
significant price appreciation potential and attempts to identify companies that
show above-average growth, as compared to long-term overall market growth. The
Fund also may invest in foreign securities.
PRINCIPAL RISKS. The principal risk of investing in the Fund is market risk. The
Fund investments in small- and medium-capitalization companies have
capitalization risk. These investments tend to be more volatile than investments
in large-cap companies. In addition, small-cap companies may have more risk
because they often have limited product lines, markets, or financial resources.
Also, the market for the sale of small-cap stocks may be less liquid. To the
extent the Fund invests in foreign securities, it has foreign risk. This is the
risk of investments in issuers located in foreign countries, which may have
greater price volatility and less liquidity. Investments in foreign securities
also are subject to political, regulatory, and diplomatic risks. Foreign risk
includes currency risk, which may occur due to fluctuations in the exchange
rates between the U.S. dollar and foreign currencies. This risk could negatively
affect the value of a Fund's investments.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1994 2.74%
1995 19.41%
1996 25.98%
1997 9.38%
1998 -17.07%
The calendar year-to-date total return as of June 30, 1999 was
- -5.07%.
During the periods shown in the chart, the highest quarterly return was 18.84%
(for the quarter ended June 30, 1997) and the lowest quarterly return was
- -30.09% (for the quarter ended September 30, 1998).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Russell 2000 Index.
Small Company Russell 2000
Year(s) Stock Fund Index
1 Year -17.07% -2.24%
5 Year 6.99% 11.46%
Since Inception (12/31/93) 6.99% 11.92%(1)
(1) For the period 11/30/93 - 12/31/98.
The Russell 2000 Index is a capitalization weighted price only index, which is
comprised of 2000 of the smallest stocks (on the basis of capitalization), in
the Russell 3000 Index. Representing approximately 10% of The Russell 3000 total
market cap, this is a small cap index.
27
<PAGE>
SMALL CAP OPPORTUNITIES FUND
OBJECTIVE. The Fund's investment objective is to provide capital appreciation.
Current income will be incidental to the objective of capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in equity securities
of U.S. companies that, at the time of purchase, have market capitalizations of
$1.5 billion or less. In selecting securities, the Fund seeks to identify
securities of companies that it believes can generate above-average earnings
growth and sell at favorable prices in relation to book values and earnings.
PRINCIPAL RISKS. The principal risk of investing in the Fund is market risk. The
Fund investments in small-cap companies have capitalization risk. These
investments tend to be more volatile than investments in large-cap companies. In
addition, small-cap companies may have more risk because they often have limited
product lines, markets, or financial resources. Also, the market for the sale of
small-cap stocks may be less liquid.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1994 4.45%
1995 49.08%
1996 22.63%
1997 27.42%
1998 -9.36%
The calendar year-to-date total return as of June 30, 1999 was
7.90%.
During the periods shown in the chart, the highest quarterly return was 18.65%
(for the quarter ended June 30, 1997) and the lowest quarterly return was
- -23.27% (for the quarter ended September 30, 1998).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Russell 2000 Index.
Small Cap Russell 2000
Year(s) Opportunities Fund Index
1 Year -9.36% -2.24%
5 Year 17.14% 11.46%
Since Inception (8/1/93) 18.17% 12.30%(1)
(1) For the period 7/31/93 - 12/31/98.
The Russell 2000 Index is a capitalization weighted price only index, which is
comprised of 2000 of the smallest stocks (on the basis of capitalization), in
the Russell 3000 Index. Representing approximately 10% of The Russell 3000 total
market cap, this is a small cap index.
28
<PAGE>
SMALL COMPANY GROWTH FUND
OBJECTIVE. The Fund's investment objective is to provide long-term capital
appreciation by investing in smaller domestic companies.
PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in the common stock
of small domestic companies that are either growing rapidly or completing a
period of significant change. These changes may involve a sharp increase in
earnings, the hiring of new management or measures taken to close the gap
between share price and takeover/asset value. Small companies are those with
market capitalizations of less than the largest stock in the Russell 2000 Index
or approximately $1.4 billion.
PRINCIPAL RISKS. The principal risk of investing in the Fund is market risk. The
Fund's investments in small- cap companies have capitalization risk. These
investments tend to be more volatile than investments in large-cap companies. In
addition, small-cap companies may have more risk because they often have limited
product lines, markets, or financial resources. Also, the market for the sale of
small-cap stocks may be less liquid. There also is a risk of using a growth
strategy because the stocks in which the Fund invests may not achieve the
anticipated during a given period or decline in price. This may occur growth
stocks as a category lose favor with investors compared to value stocks.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1989 32.05%
1990 2.75%
1991 72.43%
1992 17.02%
1993 22.14%
1994 -3.44%
1995 39.48%
1996 19.82%
1997 22.16%
1998 -9.11%
The calendar year-to-date total return as of June 30, 1999 was
8.52%.
During the periods shown in the chart, the highest quarterly return was 30.61%
(for the quarter ended March 31, 1991) and the lowest quarterly return was
- -24.63% (for the quarter ended September 30, 1998).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the Russell 2000 Index.
Small Company Russell 2000
Year(s) Growth Fund Index
1 Year -9.11% -2.24%
5 Year 12.37% 11.46%
10 Year 19.61% 11.79%
Since Inception (12/31/82) 16.57% 9.13%(1)
(1) For the period 4/30/86 - 12/31/98.
The Russell 2000 Index is a capitalization weighted price only index, which is
comprised of 2000 of the smallest stocks (on the basis of capitalization), in
the Russell 3000 Index. Representing approximately 10% of The Russell 3000 total
market cap, this is a small cap index.
29
<PAGE>
INTERNATIONAL FUND
OBJECTIVE. The Fund's investment objective is to provide long-term capital
appreciation by investing directly or indirectly in high-quality companies based
outside the United States.
PRINCIPAL INVESTMENT STRATEGIES. The Fund invests in a "multi-style" approach
designed to minimize the volatility and risk of investing in international
securities. The Fund's investment portfolio utilizes two different investment
styles - an international equity investment style and an international emerging
markets investment style. The Fund also may invest in more or fewer Portfolios
or invest directly in portfolio securities.
PRINCIPAL RISKS. The principal risks of investing in the Fund is market risk.
The Fund's investments in foreign securities have foreign risk. This is the risk
of investments in issuers located in foreign countries, which may have greater
price volatility and less liquidity. Investments in foreign securities also are
subject to political, regulatory, and diplomatic risks. Foreign risk includes
currency risk, which may occur due to fluctuations in the exchange rates between
the U.S. dollar and foreign currencies. This risk could negatively affect the
value of a Fund's investments. In addition, the Fund's investments in emerging
markets may have additional foreign risk because securities markets and legal
systems in emerging markets may not be well developed, information about
companies in these markets may not be readily available, and prices of stocks
may be more volatile. To the extent that the Fund invests in small-cap
companies, it may have capitalization risk. These investments tend to be more
volatile than investments in large-cap companies. In addition, small-cap
companies may have more risk because they often have limited product lines,
markets, or financial resources.
Also, the market for the sale of small-cap stocks may be less liquid.
Bar Chart and Performance Information
The bar chart and performance information provide an indication of the
historical risk of an investment in the Fund.
[EDGAR Representation of Bar Chart]
1989 22.57%
1990 -11.27%
1991 4.72%
1992 -4.05%
1993 45.24%
1994 0.74%
1995 11.79%
1996 9.63%
1997 3.06%
1998 12.60%
The calendar year-to-date total return as of June 30, 1999 was
6.12%.
During the periods shown in the chart, the highest quarterly return was 18.00%
(for the quarter ended September 30, 1989) and the lowest quarterly return was
- -19.69% (for the quarter ended September 30, 1990).
The following table compares the Fund's average annual total returns as of
December 31, 1998 to the MSCI EAFE Index.
International MSCI EAFE
Year(s) Fund Index
1 Year 12.60% 20.00%
5 Year 7.46% 9.14%
10 Year 8.56% 5.51%
Since Inception (7/15/87) 7.87% 5.98%(1)
(1) For the period 5/31/87 - 12/31/98.
The MSCI EAFE Index (Morgan Stanley Capital International Europe, Australia,
Asia, and the Far East Index) is a market-weighted index composed of companies
representative of the market structure of 20 developed market countries in
Europe, Australia, Asia and the Far East, and reflects dividends net of
non-recoverable withholding tax. Companies included in the index replicate the
industry composition of each local market and, in addition, represent a sampling
of large, medium and small capitalization companies from each local market,
taking into account the stocks' liquidity. The index is unmanaged and is not
available for investment.
30
<PAGE>
FEES and EXPENSES OF THE FUNDS
The following table describes the fees and expenses that you will pay if you
invest in a Fund. There are no transaction charges for purchasing, redeeming, or
exchanging shares. The Funds do not have distribution expenses.
ANNUAL FUND OPERATING EXPENSES (1)
(expenses that are deducted from Fund assets)
<TABLE>
<S> <C> <C> <C>
Investment Total Annual
Advisory Other Fund Operating
Fees Expenses(2) Expenses(3)
Money Market Funds
Cash Investment Fund 0.23% 0.33% 0.56%
Ready Cash Investment Fund (Investor Shares) 0.33% 0.49% 0.82%
U.S. Government Fund 0.13% 0.39% 0.52%
Treasury Plus Fund 0.20% 0.64% 0.84%
Treasury Fund 0.14% 0.39% 0.53%
Municipal Money Market Fund
Institutional Shares 0.33% 0.24% 0.57%
Investor Shares 0.33% 0.53% 0.86%
Fixed Income Funds (I Shares)
Stable Income Fund 0.30% 0.46% 0.76%
Limited Term Government Income Fund 0.33% 0.48% 0.81%
Intermediate Government Income Fund 0.33% 0.39% 0.72%
Diversified Bond Fund 0.55% 0.52% 1.07%
Income Fund 0.50% 0.42% 0.92%
Total Return Bond Fund 0.50% 0.48% 0.98%
Strategic Income Fund 0.62% 0.42% 1.04%
Tax-Free Fixed Income Funds (I Shares)
Limited Term Tax-Free Fund 0.50% 0.54% 1.04%
Tax-Free Income Fund 0.50% 0.41% 0.91%
Colorado Tax-Free Fund 0.50% 0.49% 0.99%
Minnesota Intermediate Tax-Free Fund 0.25% 0.43% 0.68%
Minnesota Tax-Free Fund 0.50% 0.50% 1.00%
Balanced Funds (I Shares)
Moderate Balanced Fund 0.66% 0.43% 1.09%
Growth Balanced Fund 0.70% 0.43% 1.13%
Aggressive Balanced-Equity Fund 0.72% 0.64% 1.36%
Equity Funds (I Shares)
Index Fund 0.15% 0.40% 0.55%
Income Equity Fund 0.50% 0.39% 0.89%
ValuGrowth Stock Fund 0.79% 0.40% 1.19%
Diversified Equity Fund 0.74% 0.43% 1.17%
Growth Equity Fund 0.90% 0.48% 1.38%
Large Company Growth Fund 0.65% 0.44% 1.09%
Diversified Small Cap Fund 0.99% 0.64% 1.63%
Small Company Stock Fund 0.90% 0.53% 1.43%
Small Cap Opportunities Fund 0.60% 0.75% 1.35%
Small Company Growth Fund 0.90% 0.40% 1.30%
International Fund 0.70% 0.91% 1.61%
</TABLE>
(1) Based on amounts incurred during each Fund's fiscal year ended May 31, 1999
stated as a percentage of net assets.
(2) Other expenses are based on estimated amounts for the current fiscal year.
(3) Many of the Funds are subject to voluntary fee waivers and expense
reimbursements that reduce the operating expenses of the Funds. See the
Financial Highlights Table for information about fund expenses net of fee
waivers and expense reimbursements.
31
<PAGE>
EXAMPLE OF EXPENSES
These examples are intended to help you compare the cost of investing in a Fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in a Fund for the time periods indicated and then redeem all of
your shares at the end of these periods. The example also assumes that your
investment has a 5% annual return, that the fund's operating expenses remain the
same, and that distributions are reinvested.
Your actual costs may be higher or lower than those shown.
<TABLE>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Money Market Funds
Cash Investment Fund $57 $179 $313 $701
Ready Cash Investment Fund (Investor Shares) 84 262 455 1,014
U.S. Government Fund 53 167 291 653
Treasury Plus Fund 86 268 466 1,037
Treasury Fund 54 170 296 665
Municipal Money Market Fund
Institutional Shares 58 183 318 714
Investor Shares 88 274 477 1,061
Fixed Income Funds (I Shares)
Stable Income Fund 78 243 422 942
Limited Term Government Income Fund 83 259 450 1,002
Intermediate Government Income Fund 74 230 401 894
Diversified Bond Fund 109 340 590 1,306
Income Fund 94 293 509 1,131
Total Return Bond Fund 100 312 542 1,201
Strategic Income Fund 106 331 574 1,271
Tax-Free Fixed Income Funds (I Shares)
Limited Term Tax-Free Fund 106 331 574 1,271
Tax-Free Income Fund 93 290 504 1,120
Colorado Tax-Free Fund 101 315 547 1,213
Minnesota Intermediate Tax-Free Fund 69 218 379 847
Minnesota Tax-Free Fund 102 318 552 1,225
Balanced Funds (I Shares)
Moderate Balanced Fund $111 $347 $601 $1,329
Growth Balanced Fund 115 359 622 1,375
Aggressive Balanced-Equity Fund 138 431 745 1,635
Equity Funds (I Shares)
Index Fund 56 176 307 689
Income Equity Fund 91 284 493 1,096
ValuGrowth Stock Fund 121 378 654 1,443
Diversified Equity Fund 119 372 644 1,420
Growth Equity Fund 140 437 755 1,657
Large Company Growth Fund 111 347 601 1,329
Diversified Small Cap Fund 166 514 887 1,933
Small Company Stock Fund 146 452 782 1,713
Small Cap Opportunities Fund 137 428 739 1,624
Small Company Growth Fund 132 412 713 1,568
International Fund 164 508 876 1,911
</TABLE>
32
<PAGE>
GLOSSARY
This Glossary of frequently used terms will help you understand the
discussion of the Funds' objectives, policies, and risks.
Term Definition
AMT Alternative minimum tax.
Board The Board of Trustees of Norwest Advantage
Funds.
Dollar Roll A transaction in which a Fund sells
fixed income securities and commits to
purchase similar, but not identical,
securities at a later date from the same
party.
Duration A measure of a debt security's average
life that reflects the present value of
the security's cash flow. Prices of
securities with longer durations generally
are more volatile.
Fundamental Requiring shareholder approval to change.
Investment Grade Rated at the time of purchase in 1
of the 4 highest long-term or 2 highest
short-term ratings categories by an NRSRO
or unrated and determined by the Adviser
to be of comparable quality.
Market Capitalization The total market value of a company's
outstanding common stock.
Municipal Security A debt security 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, with
interest exempt from federal income tax.
NRSRO A nationally recognized statistical rating
organization, such as S&P, that rates
fixed-income securities and preferred
stock by relative credit risk.
NRSROs also rate money market mutual
funds.
Non-Investment Grade Neither rated at the time of
purchase in 1 of the 4 highest long-term
or 2 highest short-term ratings categories
by an NRSRO nor unrated and determined by
the Adviser to be of comparable quality.
Russell 1000(R) Index An index of large- and medium-
capitalization companies.
Russell 2000(R) Index An index of smaller
capitalization companies with a broader
base of companies than the S&P 600 Small
Cap Index.
S&P Standard & Poor's Corporation.
S&P 500 Index Standard & Poor's 500 Composite Stock
Price Index, an index of large
capitalization companies.
S&P 600 Small Cap Index Standard & Poor's Small Cap 600 Composite
Stock Price Index, an index of small
capitalization companies.
33
<PAGE>
SAI Statement of Additional Information.
SEC The U.S.Securities and Exchange
Commission.
STRIPS Separately traded principal or interest
components of securities issued or
guaranteed by the U.S. Treasury under the
Treasury's Separate Trading of Registered
Interest and Principal of Securities
program.
U.S. Government Security A security issued or guaranteed as to
principal and interest by the U.S.
Government, its agencies, or its
instrumentalities.
U.S. Treasury Security A security issued or guaranteed by the
U.S. Treasury.
34
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISK CONSIDERATIONS
This section of the Prospectus provides a more complete description of each
Fund's investment objectives and principal strategies and risks. Except as
otherwise indicated, the Board may change the Funds' investment policies without
shareholder approval. The Funds' investment objectives are fundamental. There
can, of course, be no assurance that any Fund will achieve its investment
objective.
Some of the Funds invest directly in a portfolio of securities. Other Funds are
"gateway" funds in a "core/gateway" structure. In this structure a "gateway"
fund invests some of all of its assets in one or more "core portfolios" that
have a substantially identical investment objective and substantially similar
policies as the gateway fund. Gateway funds investing in the same core portfolio
can enhance their investment opportunities and reduce their expense rations
through sharing the costs of managing a large pool of assets. Except when
necessary to describe a Fund's investment in a core portfolio, references to the
gateway fund also include the core portfolio.
This section describes risks that affect the Funds' portfolios as a whole.
Certain of these risks may apply to one or more of the Funds. These risks are:
o Market Risk. This is the risk that the value of a Fund's investments will
fluctuate as the stock or bond markets fluctuate and that prices overall
will decline or short or longer-term periods.
o Interest Rate Risk. This is the risk that changes in interest rates will
affect the value of a Fund's investments, particularly those investments in
debt or income-producing securities. Increases in interest rates may cause
the value of a Fund's investments to decline.
o Credit Risk. This is the risk that the issuer of a security will be unable
to make timely payments of
interest or principal or to otherwise honor its obligations.
o Management Risk. This is the risk that a Fund's manager will make poor
choices in selected securities. All actively managed Funds have management
risk.
MONEY MARKET FUNDS
INVESTMENT OBJECTIVES AND STRATEGIES
The investment objectives of the Funds are high current income to the
extent consistent with preservation of capital and liquidity. The
Municipal Money Market Fund seeks current income that is exempt from
federal income taxes.
The Funds' investments are made under the requirements of an SEC rule
governing money market funds. Each Fund invests only in high-quality,
U.S. dollar-denominated short-term money market instruments that are
determined by the Adviser, under procedures adopted by the Board, to be
eligible for purchase and to present minimal credit risks. The Funds
may invest in securities with fixed, variable, or floating rates of
interest.
High-quality instruments include those that: (1) are rated (or, if
unrated, are issued by an issuer with comparable outstanding short-term
debt that is rated) in 1 of the 2 highest rating categories by 2 NRSROs
or, if only 1 NRSRO has issued a rating, by that NRSRO; or (2) are
otherwise unrated and determined by the Adviser to be of comparable
quality. Each Fund, other than Municipal Money Market Fund, invests at
least 95% of its total assets in securities in the highest rating
category.
CASH INVESTMENT FUND AND READY CASH INVESTMENT FUND
CASH INVESTMENT FUND invests equally in 2 Portfolios - Money Market
Portfolio and Prime Money Market Portfolio. Cash Investment Fund, Money
Market Portfolio, and Prime Money Market Portfolio generally have the
same investment objectives and investment policies. Because Prime Money
Market Portfolio seeks to maintain a rating within the 2 highest
short-term categories assigned by at least 1 NRSRO, it is more limited
in the type and amount of securities it may purchase.
READY CASH INVESTMENT FUND invests its assets in Prime Money Market
Portfolio. The Fund seeks to maintain a rating within the two highest
categories assigned by an NRSRO.
The Funds invest in a broad spectrum of high-quality money market
instruments of U.S. and foreign issuers, including U.S. Government
35
<PAGE>
securities, municipal securities, and corporate debt securities.
The Funds may invest in obligations of financial institutions. These
include negotiable certificates of deposit, bank notes, bankers'
acceptances, and time deposits of U.S. banks (including savings banks
and savings associations), foreign branches of U.S. banks, foreign
banks and their non-U.S. branches, U.S. branches and agencies of
foreign banks, and wholly-owned banking-related subsidiaries of foreign
banks. The Funds limit their investments in obligations of financial
institutions to institutions that at the time of investment have total
assets in excess of $1 billion, or the equivalent in other currencies.
Each Fund normally will invest more than 25% of its total assets in the
obligations of domestic and foreign financial institutions, their
holding companies, and their subsidiaries. Neither Fund may invest more
than 25% of its total assets in any other single industry.
U.S. GOVERNMENT FUND
The Fund invests primarily in U.S. Government securities and repurchase
agreements for U.S. Government securities. Under normal circumstances,
the Fund invests at least 65% of its total assets in these securities.
The Fund may invest in zero coupon U.S. Government securities.
TREASURY PLUS FUND
Under normal circumstances, the Fund invests at least 80% of its total
assets in U.S. Treasury Securities and in repurchase agreements for
U.S. Treasury Securities. The Fund also may invest in U.S. Government
securities and in repurchase agreements for U.S. Government
securities. The Fund may invest in zero coupon securities.
TREASURY FUND
The Fund invests solely in U.S. Treasury Securities, including
zero-coupon securities.
MUNICIPAL MONEY MARKET FUND
The Fund expects to invest 100% of its assets in municipal securities,
including short-term municipal bonds and municipal notes and leases.
These investments may have fixed, variable or floating rates of
interest and may be zero-coupon securities. As part of its objective,
the Fund normally will invest at least 80% of its total assets in
federally tax-exempt instruments whose income may be subject to the
federal AMT. The Fund may invest up to 20% of its total assets in
securities that pay interest income subject to federal income tax.
The Fund may invest more than 25% but, under normal circumstances, will
not invest more than 35% of its assets in issuers located in a single
state. The Fund may invest more than 25% of its assets in industrial
development bonds and in participation interests in these types of
bonds issued by banks.
RISK CONSIDERATIONS
The Funds' principal risks are interest rate risk and credit risk.
Because the Funds invest in short-term securities, a decline in
interest rates will affect the Funds' yields as these securities mature
or are sold and the Funds purchase new short-term securities with lower
yields. Generally, an increase in interest rates causes the value of a
debt instrument to decrease. The change in value for short-term
securities is usually smaller than for securities with longer
maturities. Because the Funds invest in securities with short
maturities and seek to maintain a stable net asset value of $1.00 per
share, it is possible, though unlikely, that an increase in interest
rates would change the value of your investment.
Credit risk is the possibility that a security's credit rating will be
downgraded or that the issuer of a security will default (fail to make
scheduled interest and principal payments). The Funds invest in highly
rated securities to minimize credit risk.
The Cash Investment and Ready Cash Investment Funds' foreign
investments may be subject to foreign risk. Foreign securities issuers
usually are not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting and auditing standards of foreign
countries differ, in some cases, significantly from U.S. standards.
Foreign risk includes nationalization, expropriation, or confiscatory
taxation, political changes or diplomatic developments that could
adversely affect a Fund's investments.
36
<PAGE>
The Municipal Money Market Fund faces municipal market risk and
geographic concentration risk. Municipal market risk is the risk that
special factors may adversely affect the value of municipal securities
and have a significant effect on the yield or value of the Fund's
investments. These factors include political or legislative changes,
uncertainties related to the tax status of municipal securities, or the
rights of investors in these securities. The Fund's investments in
certain municipal securities with principal and interest payments that
are made from the revenues of a specific project or facility, and not
general tax revenues, may have increased risks. Factors affecting the
project or facility, such as local business or economic conditions,
could have a significant effect on the project's ability to make
payments of principal and interest on those securities.
Geographic concentration risk is the risk that factors adversely
affecting the Fund's investments in issuers located in a state, country
or region will affect the Fund's net asset value more than would be the
case if the Fund had made more geographically diverse investments.
FIXED INCOME FUNDS
STABLE INCOME FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to maintain safety of principal while providing low volatility total
return. The Fund invests in a diversified portfolio of, primarily,
short-term investment grade securities. The Fund invests in fixed and
variable rate U.S. dollar-denominated fixed income securities of a
broad spectrum of U.S. and foreign issuers, including U.S. Government
securities and the debt securities of financial institutions,
corporations, and others.
The Fund investments include:
o up to 65% of its total assets in mortgage-backed securities;
o up to 25% of its total assets in other types of asset-backed
securities;
o up to 25% of its total assets in mortgage-backed securities that are
not U.S. Government securities to not more than 25% of its total
assets; and
o up to 50% of its total assets in U.S. Government securities.
The Fund limits its investments in the securities issued or guaranteed
by any single agency or instrumentality of the U.S. Government, except
the U.S. Treasury, to 30% of its total assets and does not invest more
than 10% of its total assets in the securities of any other issuer.
The Fund invests in debt obligations with maturities (or average life
in the case of mortgage-backed and similar securities) ranging from
overnight to 12 years and seeks to maintain an average dollar-weighted
portfolio maturity of between 2 and 5 years.
RISK CONSIDERATIONS. The principal risks of investing in the Fund are
interest rate risk and credit risk. The Fund's investments in
mortgage-related and asset-backed securities have prepayment risk,
which is the risk that mortgage loans or other obligations will be
prepaid when interest rates decline, forcing the Fund to reinvest in
securities with lower interest rates. For this and other reasons,
mortgage-related and asset-backed securities may have significantly
greater price and yield volatility than traditional debt securities.
LIMITED TERM GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide income and safety of principal by investing primarily in
U.S. Government securities. The Fund normally invests at least 65% of
its total assets in fixed and variable rate U.S. Government securities
and may invest up to 35% of its total assets in other fixed income
securities. In selecting investments, the Fund emphasizes the use of
short maturity securities to lessen interest rate risk and uses
mortgage-backed securities to enhance yield.
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<PAGE>
The Fund's investments include:
o up to 50% of its total assets in mortgage-backed securities ;
o up to 25% of its total assets in other types of asset-backed
securities ; and
o up to 10% of its total assets in zero-coupon securities, except in
STRIPS.
In addition, the Fund may not invest more than 25% of its total assets
in securities issued or guaranteed by any single agency or
instrumentality of the U.S. Government, except the U.S. Treasury.
The Fund will only purchase securities that are rated, at the time of
purchase, within the 2 highest rating categories assigned by an NRSRO,
or which are unrated and determined by the Adviser to be of comparable
quality.
The Fund will invest primarily in debt obligations with maturities (or
average life in the case of mortgage-backed and similar securities)
ranging from overnight to ten years. Under normal circumstances, the
Fund's portfolio of securities will have an average dollar-weighted
maturity of between 1 and 5 years.
RISK CONSIDERATIONS. The principal risks of investing in the Fund are
interest rate risk and credit risk. The Fund's investments in
mortgage-backed and asset-backed securities have prepayment risk, which
is the risk that mortgage loans or other obligations will be prepaid
when interest rates decline, forcing the Fund to reinvest in securities
with lower interest rates. For this and other reasons, mortgage-related
and asset-backed securities may have significantly greater price and
yield volatility than traditional debt securities.
INTERMEDIATE GOVERNMENT INCOME FUND
Investment Objective and Strategies. The Fund's investment objective
is to provide income and safety of principal by investing primarily in
U.S. Government securities.
The Fund normally invests at least 65% of its total assets in fixed
and variable rate U.S. Government securities and may invest up to 35%
of its assets in fixed income securities that are not U.S. Government
securities. In selecting investments, the Fund emphasizes the use of
intermediate maturity securities to lessen interest rate risk and uses
mortgage-backed securities to enhance yield.
The Fund's investments include:
o up to 50% of its total assets in mortgage-backed securities
o up to 25% of its total assets in other types of asset-backed
securities; and
o up to 10% of its total assets in zero-coupon securities, except in
STRIPS.
As part of its mortgage-backed securities investments, the Fund may
enter into dollar rolls. The Fund its investments in securities issued
or guaranteed by any single agency or instrumentality of the U.S.
Government to 25% of its total assets, except the U.S. Treasury. The
Fund may enter into short sales.
The Fund will purchase only securities that are rated, at the time of
purchase, within the 2 highest rating categories assigned by an NRSRO,
or which are unrated and determined by the Adviser to be of comparable
quality.
The Fund will invest primarily in debt obligations with maturities (or
average life in the case of mortgage-backed and similar securities)
ranging from overnight to 30 years. Under normal circumstances, the
Fund's portfolio securities will have an average dollar-weighted
maturity of between 3 and 10 years and a Duration of between 70% and
130% of the duration of a 5-year Treasury Note.
RISK CONSIDERATIONS. The principal risks of investing in the Fund are
interest rate risk and credit risk. The Fund's investments in
mortgage-backed and asset-backed securities have prepayment risk, which
is the risk that mortgage loans or other obligations will be prepaid
when interest rates decline, forcing the Fund to reinvest in securities
with lower interest rates. For this and other reasons, mortgage-related
38
<PAGE>
and asset-backed securities may have significantly greater price and
yield volatility than traditional debt securities.
DIVERSIFIED BOND FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective
is to provide total return by diversifying its investments among
different fixed-income investment styles. The Fund uses a
"multi-style" approach designed to reduce the price and return
volatility of the Fund and to provide returns that are more
consistent. The Fund's portfolio combines the different fixed income
investment styles of 3 Portfolios - Managed Fixed Income style,
Strategic Value Bond style, and Positive Return style.
ALLOCATION. The current allocations and ranges of investments by the
Fund in each Portfolio are:
<TABLE>
<S> <C> <C>
current range of
allocation investment
Managed Fixed Income Portfolio 50.0% 45% - 55%
Strategic Value Bond Portfolio 16.7% 11.7% - 21.7%
Positive Return Portfolio 33.3% 28.3% - 38.3%
---------------------------------------------------------------------------------------------------------
TOTAL FUND ASSETS 100%
</TABLE>
The percentage of Fund assets invested in each Portfolio may
temporarily deviate from the current allocations due to changes in
market values. The Adviser will effect transactions periodically to
reestablish the current allocations. The Adviser may make changes in
the current allocations at any time in response to market or other
conditions. The Fund also may invest in more or fewer Portfolios or
invest directly in portfolio securities.
RISK CONSIDERATIONS. The principal risks of investing in the Fund are
interest rate risk and credit risk. The Fund's investments in different
investment styles have allocation risk, which is the risk that the
allocation of investments may have a more significant effect on the
Fund's net asset value when one of these styles is performing more
poorly than the others.
INCOME FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide total return consistent with current income. The Fund
invests in a diversified portfolio of fixed and variable rate fixed
income securities issued by domestic and foreign issuers. The Fund
invests in a broad spectrum of U.S. issuers, including U.S. Government
securities, mortgage- and other asset-backed securities, and the debt
securities of financial institutions, corporations, and others. In
selecting investments, the Fund attempts to increase the Fund's
performance by applying various fixed income management techniques. The
Fund combines these techniques with fundamental economic, credit, and
market analysis while at the same time controlling total return
volatility by targeting the Fund's Duration within a narrow band around
the Duration of the Lipper Corporate A-Rated Debt Average.
The Fund normally invests at least 30% of its total assets in U.S.
Government securities. The Fund limits its investments in
mortgage-backed securities to not more than 50% of its total assets and
its investments in other asset-backed securities to not more than 25%
of its total assets.
The Fund may invest up to 70% of its total assets in corporate
securities, such as bonds, debentures and notes, and fixed income
securities that can be converted into or exchanged for common stocks.
The Fund also may invest in zero coupon securities and enter into
dollar rolls.
The Fund may invest in debt securities registered and sold in the
United States by foreign issuers and debt securities sold outside the
United States by foreign or U.S. issuers. The Fund restricts its
purchases of debt securities to those denominated and payable in U. S.
dollars.
Normally, the Fund will invest at least 80% of its total assets in
investment grade securities. The Fund also may invest up to 20% of its
total assets in below investment grade securities (also known as "junk
bonds") rated at the time of purchase, in the fifth highest long-term
rating category assigned by an NRSRO or unrated and determined by the
Adviser to be of comparable quality.
39
<PAGE>
The Fund invests primarily in securities with maturities (or average
life in the case of mortgage-backed and similar securities) ranging
from overnight to 40 years. The Fund expects to maintain an average
dollar-weighted portfolio maturity of between 3 and 15 years. The
Fund's portfolio of securities will normally have a duration of between
70% and 130% of the duration of the Lipper Corporate A-Rated Debt
Average.
RISK CONSIDERATIONS. The principal risks of investing in the Fund are
interest rate risk and credit risk. The Fund's investments in
lower-rated securities involve greater credit risk than higher-rated
securitries. The Fund's investments in mortgage-backed and asset-backed
securities have prepayment risk, which is the risk that mortgage loans
or other obligations will be prepaid when interest rates decline,
forcing the Fund to reinvest in securities with lower interest rates.
For this and other reasons, mortgage-related and asset-backed
securities may have significantly greater price and yield volatility
than traditional debt securities. The Fund's investments in foreign
securities have foreign risk. This is the risk of investments located
in foreign countries, which may have greater price volatility and less
liquidity. Investments in foreign securities also are subject to
political, regulatory, and diplomatic risks. Foreign risk includes
currency risk, which may occur due to fluctuations in the exchange
rates between the U.S. dollar and foreign currencies. This risk could
negatively affect the value of a Fund's investments.
TOTAL RETURN BOND FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to seek total return. The Fund invests in a broad range of fixed-income
instruments in order to create a strategically diversified portfolio of
fixed-income investments. These investments include corporate bonds,
mortgage- and other asset-backed securities, U.S. Government
securities, preferred stock, convertible bonds, and foreign bonds.
In selecting investments, the Fund focuses on relative value as opposed
to predicting the direction of interest rates. In general, the Fund
seeks higher current income instruments such as corporate bonds and
mortgage-and other asset-backed securities in order to enhance returns.
The Fund believes that this exposure enhances performance in varying
economic and interest rate cycles and avoids excessive risk
concentrations. The Fund's investment process involves rigorous
evaluation of each security, including identifying and valuing cash
flows, embedded options, credit quality, structure, liquidity,
marketability, current versus historical trading relationships, supply
and demand for the instrument, and expected returns in varying
economic/interest rate environments. The Fund uses this process to seek
to identify securities, which represent the best relative economic
value. The Fund then evaluates the results of the investment process
against the Fund's objective and purchases those securities that are
consistent with the Fund's investment objective.
The Fund particularly seeks strategic diversification. The Fund
investments include:
o up to 75% of its total assets in corporate bonds;
o up to 65% of its total assets in mortgage-backed securities; and
o Up to 50% of its total assets in asset-backed securities.
The Fund may invest in U.S. Government securities without restriction
and the Fund generally limits its investments in the corporate bonds of
any single issuer to no more than 5% of its total assets..
The Fund will invest 65% of its total assets in fixed-income securities
rated, at the time of purchase, within the 3 highest rating categories
assigned by at least 1 NRSRO, or which are unrated and determined by
the Adviser to be of comparable quality. The Fund may invest up to 20%
of its total assets in non-investment grade securities.
The Fund expects to maintain an average dollar-weighted portfolio
maturity of between 5 and 15 years. The Fund's duration normally will
vary between 3 and 8 years.
RISK CONSIDERATIONS. The principal risks of investing in the Fund are
interest rate risk and credit risk. The Fund's investments in
mortgage-backed and asset-backed securities have prepayment risk, which
is the risk that mortgage loans or other obligations will be prepaid
when interest rates decline, forcing the Fund to reinvest in securities
with lower interest rates. For this and other reasons, mortgage-related
and asset-backed securities may have significantly greater price and
yield volatility than traditional debt securities. The Fund's
investments in foreign securities have foreign risk. This is the risk
of investments located in foreign countries, which may have greater
price volatility and less liquidity. Investments in foreign securities
40
<PAGE>
also are subject to political, regulatory, and diplomatic risks.
Foreign risk includes currency risk, which may occur due to
fluctuations in the exchange rates between the U.S. dollar and foreign
currencies. This risk could negatively affect the value of a Fund's
investments.
STRATEGIC INCOME FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide a combination of current income and capital appreciation by
diversifying investments in bonds, other fixed-income investments and,
stocks. The Fund is designed for investors seeking to invest in fixed
income securities with limited exposure to equity securities. The Fund
emphasizes safety of principal. The Fund emphasizes safety of principal
and invests 70% to 90% of its assets in fixed income investments and
10%-30% of its assets in equity investments. The Fund currently invests
in 14 Portfolios.
The Fund invests the fixed income portion of its portfolio in the same
3 Portfolios as Diversified Bond Fund and in Stable Income Portfolio.
The blending of multiple fixed income investment styles is intended to
reduce the price and return volatility of, and provide more consistent
returns within, the fixed income portion of the Fund's investments. The
equity portion of the Fund's portfolio uses the 5 different equity
investment styles of Diversified Equity Fund. The blending of multiple
equity investment styles is intended to reduce the risk associated with
the use of a single style, which may move in and out of favor during
the course of a market cycle.
ALLOCATION. The current allocations and ranges of investments by the
Fund in each Portfolio are:
<TABLE>
<S> <C> <C>
current range of
Investment style allocation investment
Diversified Bond Fund style 55% 45% - 65%
Positive Return Bond Portfolio 18.3% 15% - 21.7%
Strategic Value Bond Portfolio 9.2% 7.5% - 10.8%
Managed Fixed Income Portfolio 27.5% 22.5% - 32.5%
Stable Income Portfolio 25% 25%
Diversified Equity Fund style 20% 10% - 30%
Index Portfolio 5% 2.5% - 7.5%
Income Equity Portfolio 5% 2.5% - 7.5%
Large Company style 5% 2.5% - 7.5%
Large Company Growth Portfolio 4% 2% - 6%
Disciplined Growth Portfolio 1% 0.5% - 1.5%
Diversified Small Cap style 2.0% 1% - 3%
Small Cap Index Portfolio 0.5% 0.3% - 0.8%
Small Company Growth Portfolio 0.5% 0.3% - 0.8%
Small Company Value Portfolio 0.5% 0.3% - 0.8%
Small Cap Value Portfolio 0.5% 0.3% - 0.8%
International style 3.0% 1.5% - 4.5%
International Portfolio 2.3% 1.2% - 3.5%
International Equity Portfolio 0.7% 0.3% - 1.0%
--------------------------------------------------------------------------------------------------------------
TOTAL FUND ASSETS 100%
</TABLE>
The percentage of the Fund's assets invested in different styles may
temporarily deviate from the Fund's current allocation due to changes
in market values. The Adviser will effect transactions periodically to
reestablish the current allocation.
As market or other conditions change, the Adviser may attempt to
enhance the Fund's returns by changing the percentage of Fund assets
invested in fixed income and equity securities. The Fund may also
invest in more or fewer Portfolios or invest directly in portfolio
securities. Absent unstable market conditions, the Adviser does not
anticipate making a substantial number of changes. When the Adviser
believes that a change in the current allocation percentages is
desirable, it will sell and purchase securities to effect the change.
When the Adviser believes that a change will be temporary (generally, 3
years or less), it may effect the change by using futures contracts.
41
<PAGE>
RISK CONSIDERATIONS. The principal risks of investing in the Fund are
market risk, interest rate risk, and credit risk. The Fund's
investments in different styles and in both equity and fixed-income
securities have allocation risk, which is the risk that the allocation
of investments may have a more significant effect on the Fund's net
asset value when one investment style or asset classes is performing
more poorly than others.
TAX-FREE FIXED INCOME FUNDS
Each Tax-Free Fixed Income Fund invests at least 80% of its total
assets in municipal securities paying interest that is exempt from
federal income tax. In order to respond to business and financial
conditions, each Fund may invest up to 20% of its total assets in
securities paying taxable interest income or securities paying interest
income that may be a preference item for purposes of AMT. In addition,
each Fund may hold a portion of its assets in cash and cash-equivalent
securities pending investment in municipal securities, to meet requests
for redemptions or to assume a temporary defensive position.
LIMITED TERM TAX-FREE FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide current income exempt from federal income taxes. The Fund
normally invests substantially all its assets in investment grade
municipal securities. The Fund invests at least 80% of its total assets
in securities paying interest exempt from federal income taxes. The
Fund invests primarily in securities paying interest exempt from AMT.
The Fund expects to maintain an average dollar-weighted portfolio
maturity of between 1 and 5 years, but portfolio maturity may vary
depending on market conditions. The Fund emphasizes investments in
municipal securities with interest income rather than maintaining
stability of the Fund's net asset value.
RISK CONSIDERATIONS. The principal risks of investing in the Fund are
interest rate risk and credit risk. The Fund's investments in municipal
securities have the risk that special factors may adversely affect the
value of municipal securities and have a significant effect on the
value of the Fund's investments. These factors include political or
legislative changes and uncertainties related to the tax status of
municipal securities or the rights of investors in these securities.
TAX-FREE INCOME FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to produce current income exempt from federal income taxes. The Fund
invests primarily in a portfolio of investment grade municipal
securities. The Fund normally invests at least 80% of its total assets
in municipal securities paying interest exempt from federal income
taxes, including AMT.
The Fund expects to maintain an average dollar-weighted portfolio
maturity of between 10 and 20 years, but portfolio maturity may vary
depending on market conditions. The Fund emphasizes investments in
municipal securities with interest income rather than stability of the
Fund's net asset value.
RISK CONSIDERATIONS. The principal risks of investing in the Fund are
interest rate risk and credit risk. The Fund's investments in municipal
securities have the risk that special factors may adversely affect the
value of municipal securities and have a significant effect on the
value of the Fund's investments. These factors include political or
legislative changes and uncertainties related to the tax status of
municipal securities or the rights of investors in these securities.
COLORADO TAX-FREE FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide shareholders with a high level of current income exempt from
both federal and Colorado state income taxes (including AMT) consistent
with the preservation of capital. The Fund offers shares only to
residents of Colorado. The Fund normally invests substantially all its
assets in investment grade municipal securities issued by (1) the state
of Colorado and its subdivisions, authorities, instrumentalities, and
corporations and (2) territories and possessions of the United States
The Fund invests at least 80% of its total assets in municipal
securities paying interest exempt from both federal (including the AMT)
and Colorado state income taxes. The Fund invests in securities of a
comparatively small number of issuers.
The Fund expects that its average dollar-weighted portfolio maturity
normally will be greater than 10 years, but portfolio maturity may
reach or exceed 20 years. While the Fund emphasizes investments in
42
<PAGE>
municipal securities paying interest income rather than maintaining the
Fund's stability of net asset value, the Fund also attempts to limit
net asset value fluctuations.
RISK CONSIDERATIONS. The principal risks of investing in the Fund are
interest rate risk and credit risk. The Fund's investments in municipal
securities have the risk that special factors may adversely affect the
value of municipal securities and have a significant effect on the
value of the Fund's investments. These factors include political or
legislative changes and uncertainties related to the tax status of
municipal securities or the rights of investors in these securities.
Because the Fund invests a large portion of its assets in a smaller
number of issuers and in a particular state's municipal securities, it
is more vulnerable to events adversely affecting these issuers or that
state, including economic, political, or regulatory occurrences.
MINNESOTA INTERMEDIATE TAX-FREE FUND and MINNESOTA TAX-FREE FUND
INVESTMENT OBJECTIVES AND STRATEGIES. Each Fund's investment objective
is to provide shareholders with a high level of current income exempt
from both federal and Minnesota state income taxes (including AMT)
without assuming undue risk. The Funds offer shares only to residents
of Minnesota. The Funds normally invest substantially all (and always
at least 75% of) their assets in investment grade municipal securities
issued by (1) the state of Minnesota and its subdivisions, authorities,
instrumentalities, and corporations and (2) territories and possessions
of the United States. The Funds invest at least 80% of their total
assets in securities paying interest exempt from both federal
(including AMT) and Minnesota state income taxes. The Funds may invest
in securities of a comparatively small number of issuers.
The Minnesota Intermediate Tax-Free Fund expects to maintain an average
dollar-weighted maturity of between 5 and 10 years, but portfolio
maturity may vary depending on market conditions. Normally, the
Minnesota Tax-Free Fund to have an average dollar-weighted maturity of
greater than 10 years, but the portfolio maturity may reach or exceed
20 years.
The Funds may invest up to 25% of their total assets in non-investment
grade municipal securities rated in the fifth highest long-term rating
category assigned by an NRSRO or unrated and determined by the Adviser
to be of comparable quality.
RISK CONSIDERATIONS. The principal risks of investing in the Fund are
interest rate risk and credit risk. The Fund's investments in
lower-rated securities could involve more credit risk than higher-rated
securities. The Fund's investments in municipal securities have the
risk that special factors may adversely affect the value of municipal
securities and have a significant effect on the value of the Fund's
investments. These factors include political or legislative changes and
uncertainties related to the tax status of municipal securities or the
rights of investors in these securities. Because the Fund invests a
large portion of its assets in a smaller number of issuers and in a
particular state's municipal securities, it is more vulnerable to
events adversely affecting these issuers or that state, including
economic, political, or regulatory occurrences.
BALANCED FUNDS
Each Balanced Fund invests in a balanced portfolio of fixed income and
equity securities. Moderate Balanced Fund has the smallest investment
in equity securities and is the most conservative Balanced Fund.
Aggressive Balanced-Equity Fund has the largest investment in equity
securities and is the most aggressive Balanced Fund.
The equity portion of each Balanced Fund's portfolio uses the 5
different equity investment styles of Diversified Equity Fund. The
blending of multiple equity investment styles is intended to reduce the
risk associated with the use of a single style, which may move in and
out of favor during the course of a market cycle. The fixed income
portion of each Balanced Fund's portfolio uses 3 or 4 different fixed
income investment styles. The blending of multiple fixed income
investment styles is intended to reduce the price and return volatility
of, and provide more consistent returns within, the fixed income
portion of the Funds.
The percentage of a Balanced Fund's assets invested in different styles
may temporarily deviate from the Fund's current allocation due to
changes in market values. The Adviser will effect transactions
periodically to reestablish the current allocation.
As market or other conditions change, the Adviser may attempt to
enhance the returns of a Balanced Fund by changing the percentage of
Fund assets invested in fixed income and equity securities. The Fund
also may invest in more or fewer Portfolios or invest directly in
portfolio securities. Absent unstable market conditions, the Adviser
does not anticipate making a substantial number of percentage changes.
When the Adviser believes that a change in the current allocation
percentages is desirable, it will sell and purchase securities to
effect the change. When the Adviser believes that a change will be
temporary (generally, 3 years or less), it may effect the change by
using futures contracts.
43
<PAGE>
MODERATE BALANCED FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide a combination of current income and capital appreciation by
diversifying investments in stocks, bonds, and other fixed income
investments. The Fund is designed for investors seeking roughly
equivalent exposures to fixed income securities and equity securities.
The Fund's portfolio is more evenly balanced between fixed income and
equity securities than the other Balanced Funds. The Fund currently
invests in 15 Portfolios.
The Fund invests the fixed income portion of its portfolio in the same
3 Portfolios as Diversified Bond Fund and in Stable Income Portfolio.
This allocation is intended to reduce the risk of relying on a single
fixed income investment style.
ALLOCATION. The current allocations and ranges of investments by the Fund in
each Portfolio are:
<TABLE>
<S> <C> <C>
current range of
Investment style allocation investment
Diversified Bond Fund style 45% 30% - 60%
Positive Return Bond Portfolio 15% 10% - 20%
Strategic Value Bond Portfolio 7.5% 5% - 10%
Managed Fixed Income Portfolio 22.5% 15% - 30%
Stable Income Portfolio 15% 15%
Diversified Equity Fund style 40% 25% - 55%
Index Portfolio 10% 6.3% - 13.8%
Income Equity Portfolio 10% 6.3% - 13.8%
Large Company style 10% 6.3% - 13.8%
Large Company Growth Portfolio 8% 5.0% - 11.0%
Disciplined Growth Portfolio 2% 1.3% - 2.8%
Diversified Small Cap style 4% 2.5% - 5.5%
Small Cap Index Portfolio 1.0% 0.6% - 1.4%
Small Company Growth Portfolio 1.0% 0.6% - 1.4%
Small Company Value Portfolio 1.0% 0.6% - 1.4%
Small Cap Value Portfolio 1.0% 0.6% - 1.4%
International style 6% 3.8% - 8.3%
International Portfolio 4.7% 2.9% - 6.4%
International Equity Portfolio 1.4% 0.8% - 1.9%
TOTAL FUND ASSETS 100%
</TABLE>
RISK CONSIDERATIONS. The principal risks of investing in the Fund are
market risk, interest rate risk, and credit risk. The Fund's
investments in different styles and in both equity and fixed-income
securities have allocation risk, which is the risk that the allocation
of investments may have a more significant effect on the Fund's net
asset value when one investment style or asset class is performing more
poorly than the others.
GROWTH BALANCED FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide a combination of current income and capital appreciation by
diversified investments in stocks and bonds. The Fund is designed for
investors seeking long-term capital appreciation in the equity
securities market in a balanced fund. The Fund currently invests in 13
Portfolios.
44
<PAGE>
The Fund invests the equity portion of its portfolio in the 5 different
equity investment styles of the Diversified Equity Fund described
below. The blending of multiple equity investment styles is intended to
reduce the risk associated with the use of a single style, which may
move in and out of favor during the course of a market cycle. The Fund
invests the fixed income-portion of its portfolio in Positive Return
Bond Portfolio, Strategic Value Bond Portfolio, and Managed Fixed
Income Portfolio. The blending of multiple fixed-income investment
styles is intended to reduce the price and return volatility of, and
provide more consistent returns within, the fixed income-portion of the
Fund's investments.
ALLOCATION. The current allocations and ranges of investments by the
Fund in each Portfolio are:
<TABLE>
<S> <C> <C>
current range of
Investment style allocation investment
---------------- ---------- ----------
Diversified Equity Fund style 65% 45% - 85%
Index Portfolio 16.3% 11.3% - 21.3%
Income Equity Portfolio 16.3% 11.3% - 21.3%
Large Company style 16.3% 11.3% - 21.3%
Large Company Growth Portfolio 13.0% 9.0% - 17.0%
Disciplined Growth Portfolio 3.3% 2.3% - 4.3%
Diversified Small Cap style 6.5% 4.5% - 8.5%
Small Cap Index Portfolio 1.6% 1.1% - 2.1%
Small Company Growth Portfolio 1.6% 1.1% - 2.1%
Small Company Value Portfolio 1.6% 1.1% - 2.1%
Small Cap Value Portfolio 1.6% 1.1% - 2.1%
International style 9.8% 6.8% - 12.8%
International Portfolio 7.6% 5.2% - 9.9%
International Equity Portfolio 2.2% 1.5% - 2.9%
Diversified Bond Fund style 35% 15% - 55%
Managed Fixed Income Portfolio 17.5% 7.5% - 27.5%
Strategic Value Bond Portfolio 5.8% 2.5% - 9.2%
Positive Return Bond Portfolio 11.7% 5% - 18.3%
---------------------------------------------------------------------------------------------------------------
TOTAL FUND ASSETS 100%
</TABLE>
RISK CONSIDERATIONS. The Fund's investments in different styles and in
both equity and fixed-income securities have allocation risk, which is
the risk that the allocation of investments may have a more significant
effect on the Fund's net asset value when one investment style or asset
class is performing more poorly than the others. To the extent that the
Fund may invest in small-capitalization companies, it may have
capitalization risk. These investments tend to be more volatile than
investments in large-cap companies. In addition, small-cap companies
may have more risk because they often have limited product lines,
markets, or financial resources. The Fund's investments in foreign
securities have foreign risk. This is the risk of investments in
issuers located in foreign countries, which may have greater price
volatility and less liquidity. Investments in foreign securities also
are subject to political, regulatory, and diplomatic risks. Foreign
risk includes currency risk, which may occur due to fluctuations in the
exchange rates between the U.S. dollar and foreign currencies. This
risk could negatively affect the value of a Fund's investments.
AGGRESSIVE BALANCED-EQUITY FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide a combination of current income and capital appreciation by
diversifying investments in stocks and bonds. The Fund is designed for
investors seeking long-term capital appreciation in the equity
securities market in a balanced fund. The Fund has the largest equity
securities position of the Balanced Funds. The Fund currently invests
in 13 Portfolios.
The Fund invests the fixed income portion of its portfolio in the same
3 Portfolios as Diversified Bond Fund. This allocation is intended to
reduce the risk of relying on a single fixed income investment style.
45
<PAGE>
ALLOCATION. The current allocations and ranges of investments by the
Fund in each Portfolio are:
<TABLE>
<S> <C> <C>
current range of
Investment style allocation investment
Diversified Equity Fund style 80% 60% - 100%
Index Portfolio 20% 15% - 25%
Income Equity Portfolio 20% 15% - 25%
Large Company style 20% 15% - 25%
Large Company Growth Portfolio 16% 12% - 20%
Disciplined Growth Portfolio 4% 3% - 5%
Diversified Small Cap style 8% 6% - 10%
Small Cap Index Portfolio 2.0% 1.5% - 2.5%
Small Company Growth Portfolio 2.0% 1.5% - 2.5%
Small Company Value Portfolio 2.0% 1.5% - 2.5%
Small Cap Value Portfolio 2.0% 1.5% - 2.5%
International style 12% 9% - 15%
International Portfolio 9.3% 7.0% - 11.6%
International Equity Portfolio 2.7% 2% - 3.4%
Diversified Bond Fund style 20.0% 0% - 40%
Managed Fixed Income Portfolio 10.0% 0% - 20%
Strategic Value Bond Portfolio 3.3% 0% - 6.7%
Positive Return Bond Portfolio 6.7% 0% - 13.3%
-----------------------------------------------------------------------------------------------------------------
TOTAL FUND ASSETS 100%
</TABLE>
RISK CONSIDERATIONS. The Fund's investments in different styles and in
both equity and fixed-income securities have allocation risk, which is
the risk that the allocation of investments may have a more significant
effect on the Fund's net asset value when one investment style or asset
class is performing more poorly than the others. To the extent that the
Fund may invest in small-capitalization companies, it may have
capitalization risk. These investments tend to be more volatile than
investments in large-cap companies. In addition, small-cap companies
may have more risk because they often have limited product lines,
markets, or financial resources. The Fund's investments in foreign
securities have foreign risk. This is the risk of investments in
issuers located in foreign countries, which may have greater price
volatility and less liquidity. Investments in foreign securities also
are subject to political, regulatory, and diplomatic risks. Foreign
risk includes currency risk, which may occur due to fluctuations in the
exchange rates between the U.S. dollar and foreign currencies. This
risk could negatively affect the value of a Fund's investments.
EQUITY FUNDS
INDEX FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to replicate the return of the S&P 500 Index. The Fund is designed to
replicate the return of the S&P 500 Index with minimum tracking error
and to minimize transaction costs. Under normal circumstances, the Fund
holds stocks representing 100% of the capitalization-weighted market
values of the S&P 500 Index. The Adviser generally executes portfolio
transactions for the Fund only to replicate the composition of the S&P
500 Index, to invest cash received from portfolio security dividends or
investments in the Fund, and to raise cash to fund redemptions. The
Fund may hold cash or cash equivalents to facilitate payment of the
Fund's expenses or redemptions and may invest in index futures
contracts to a limited extent. For these and other reasons, the Fund's
performance can be expected to approximate but not equal the S&P 500
Index.
RISK CONSIDERATIONS. The principal risk of investing in the Fund is
market risk
INCOME EQUITY FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide long-term capital appreciation consistent with above-average
dividend income. The Fund invests primarily in the common stock of
large, high-quality domestic companies that have above-average return
potential based on current market valuations. The Fund primarily
emphasizes investments in securities of companies with above-average
dividend income. In selecting securities, the Fund uses various
valuation measures, including above-average dividend yields and below
industry average price-to-earnings, price-to-book, and price-to-sales
46
<PAGE>
ratios. Large companies are those with market capitalizations are
greater than the median of the Russell 1000 Index.
The Fund also may invest in preferred stock, convertible securities,
and securities of foreign companies.
RISK CONSIDERATIONS. The principal risk of investing in the Fund is
market risk. To the extent the Fund invests in foreign securities, it
has foreign risk. This is the risk of investments in issuers located in
foreign countries, which may have greater price volatility and less
liquidity. Investments in foreign securities also are subject to
political, regulatory, and diplomatic risks. Foreign risk includes
currency risk, which may occur due to fluctuations in the exchange
rates between the U.S. dollar and foreign currencies. This risk could
negatively affect the value of a Fund's investments.
VALUGROWTH STOCK FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide long-term capital appreciation. The Fund invests primarily
in medium- and large-capitalization companies that possess above
average growth characteristics, and appear to be undervalued. For the
purposes of the Fund's investments, medium-cap companies are those with
market capitalizations in the range of $500 million to $8 billion.
Large companies are those with market capitalizations greater than the
median of the Russell 1000 Index.
In selecting investments, the Fund seeks to identify and invest in
those companies with earnings and dividends that will grow faster than
both inflation and the economy in general. The Fund invests in
companies with growth potential that has not yet been fully reflected
in the market price of the companies' shares. In seeking these
investments, the Fund relies primarily on a company-by-company analysis
(rather than on a broader analysis of industry or economic sector
trends. The Fund considers such matters as the quality of a company's
management, the existence of a leading or dominant position in a major
product line or market, the soundness of the company's financial
position, and the maintenance of a relatively high rate of return on
invested capital and shareholder's equity. Once companies are
identified as possible investments, the Fund applies a number of
valuation measures to determine the relative attractiveness of each
company and selects those companies whose shares are most attractively
priced.
The Fund may invest in companies that are "special situations." Special
situation companies often have the potential for significant future
earnings growth but have not performed well in the recent past. These
situations may include management turnarounds, corporate or asset
restructurings, or significantly undervalued assets. These investments
form a comparatively small portion of the Fund's portfolio.
The Fund may invest up to 20% of its total assets in securities of
foreign companies.
RISK CONSIDERATIONS. The principal risk of investing in the Fund is
market risk. To the extent that the Fund may invest in
medium-capitalization companies, it may have capitalization risk. These
investments tend to be more volatile than investments in large-cap
companies. There also is a risk of using a value strategy because the
stocks in which the Fund invests may remain undervalued during a given
period or decline in price. This may occur because larger stocks or
investments based on large-stock indices are more appealing to
investors or because value stocks as a category lose favor with
investors compared to growth stocks. To the extent that the Fund
invests in foreign securities, it has foreign risk. This is the risk of
investments in issuers located in foreign countries, which may have
greater price volatility and less liquidity. Investments in foreign
securities also are subject to political, regulatory, and diplomatic
risks. Foreign risk includes currency risk, which may occur due to
fluctuations in the exchange rates between the U.S. dollar and foreign
currencies. This risk could negatively affect the value of a Fund's
investments.
DIVERSIFIED EQUITY FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide long-term capital appreciation with moderate annual return
volatility by diversifying its investments among different equity
investment styles. The Fund invests in a "multi-style" approach
designed to minimize the volatility and risk of investing in a single
investment style. The Fund currently invests in 10 Portfolios.
47
<PAGE>
The Fund's investments combine 5 different equity investment styles -
an index style, an income equity style, a large company style, a
diversified small cap style, and an international style. The Fund
allocates the assets dedicated to large company investments to 2
Portfolios, the assets allocated to small company investments to 4
Portfolios and the assets dedicated to international investments to 2
Portfolios. Because Diversified Equity Fund blends 5 equity investment
styles, it is anticipated that its price and return volatility will be
less than that of Growth Equity Fund, which blends 3 equity investment
styles.
ALLOCATION. The current allocations and ranges of investments by the
Fund in each Portfolio are:
<TABLE>
<S> <C> <C>
Investment style current range of
allocation investment
Index Portfolio 25% 23.5% - 26.5%
Income Equity Portfolio 25% 23.5% - 26.5%
Large Company style 25% 23.5% - 26.5%
Large Company Growth Portfolio 20% 18.5% - 21.5%
Disciplined Growth Portfolio 5% 3.5% - 6.5%
Diversified Small Cap style 10% 8.5% - 11.5%
Small Cap Index Portfolio 2.5% 1.0% - 4.0%
Small Company Growth Portfolio 2.5% 1.0% - 4.0%
Small Company Value Portfolio 2.5% 1.0% - 4.0%
Small Cap Value Portfolio 2.5% 1.0% - 4.0%
International Style 15% 13.5% - 16.5%
International Portfolio 11.6% 10.1% - 13.1%
International Equity Portfolio 3.4% 1.9% - 4.9%
-----------------------------------------------------------------------------------------------------------------
TOTAL FUND ASSETS 100%
</TABLE>
The percentage of Fund assets invested in each Portfolio may
temporarily deviate from the current allocations due to changes in
market value. The Adviser will effect transactions daily to reestablish
the current allocations. The Adviser may make changes in the current
allocations at any time in response to market and other conditions. The
Fund also may invest in more or fewer Portfolios or invest directly in
portfolio securities.
RISK CONSIDERATIONS. The principal risk of investing in the Fund is
market risk. The Fund has allocation risk, which is the risk that the
allocation of investments may have a more significant effect on the
Fund's net asset value when one investment style is performing more
poorly than the others. To the extent that the Fund may invest in
small-capitalization companies, it may have capitalization risk. These
investments tend to be more volatile than investments in large-cap
companies. In addition, small-cap companies may have more risk because
they often have limited product lines, markets, or financial resources.
Also, the market for the sale of small-cap stocks may be less liquid.
To the extent that the Fund invests in foreign securities, it has
foreign risk. This is the risk of investments in issuers located in
foreign countries, which may have greater price volatility and less
liquidity. Investments in foreign securities also are subject to
political, regulatory, and diplomatic risks. Foreign risk includes
currency risk, which may occur due to fluctuations in the exchange
rates between the U.S. dollar and foreign currencies. This risk could
negatively affect the value of a Fund's investments.
GROWTH EQUITY FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide a high level of long-term capital appreciation with moderate
annual return volatility by diversifying its investments among
different equity investment styles. The Fund invests in a "multi-style"
approach designed to reduce the volatility and risk of investing in a
single equity style. The Fund currently invests in 7 Portfolios.
The Fund's investments combine 3 different equity styles - a large
company growth style, a diversified small cap style and an
international style. The Fund allocates the assets dedicated to small
company investments to 4 Portfolios and the assets dedicated to
international investments to 2 Portfolios. It is anticipated that the
Fund's price and return volatility will be somewhat greater than those
of Diversified Equity Fund, which blends 5 equity styles.
48
<PAGE>
ALLOCATION. The current allocations and ranges of investments by the
Fund in each Portfolio are:
<TABLE>
<S> <C> <C>
current range of
Investment style allocation investment
---------------- ---------- ----------
Large Company Growth Portfolio 35% 33% - 37%
Diversified Small Cap Style 35% 33% - 37%
Small Cap Index Portfolio 8.8% 6.8% - 10.8%
Small Company Growth Portfolio 8.8% 6.8% - 10.8%
Small Company Value Portfolio 8.8% 6.8% - 10.8%
Small Cap Value Portfolio 8.8% 6.8% - 10.8%
International Style 30% 28% - 32%
International Portfolio 23.3% 21.3% - 25.3%
International Equity Portfolio 6.8% 4.8% - 8.8%
TOTAL FUND ASSETS 100%
</TABLE>
The percentage of Fund assets invested in each Portfolio may
temporarily deviate from the current allocations due to changes in
market values. The Adviser will effect transactions daily to
reestablish the current allocations. The Adviser may make changes in
the current allocations at any time in response to market or other
conditions. The Fund also may invest in more or fewer Portfolios or
invest directly in portfolio securities.
RISK CONSIDERATIONS. The risks of investing in the Fund include market
risk. There also is a risk of using a growth strategy because the
stocks in which the Fund invests may not achieve the anticipated growth
during a given period or decline in price. This may occur growth stocks
as a category lose favor with investors compared to value stocks. The
Fund also has allocation risk, which is the risk that the allocation of
investments may have a more significant effect on the Fund's net asset
value when one investment style is performing more poorly than the
others. To the extent that the Fund may invest in small-capitalization
companies, it may have capitalization risk. These investments tend to
be more volatile than investments in large-cap companies. In addition,
small-cap companies may have more risk because they often have limited
product lines, markets, or financial resources. Also, the market for
the sale of small-cap stocks may be less liquid. The Fund's investments
in foreign securities have foreign risk. This is the risk of
investments in issuers located in foreign countries, which may have
greater price volatility and less liquidity. Investments in foreign
securities also are subject to political, regulatory, and diplomatic
risks. Foreign risk includes currency risk, which may occur due to
fluctuations in the exchange rates between the U.S. dollar and foreign
currencies. This risk could negatively affect the value of a Fund's
investments.
LARGE COMPANY GROWTH FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide long-term capital appreciation by investing primarily in
large, high-quality domestic companies that have superior growth
potential. The Fund invests primarily in the common stock of large,
high-quality domestic companies that have superior growth potential.
For the purposes of its investments, large companies are those with
market capitalization greater than the median of the Russell 1000 Index
or approximately $3.7 billion. In selecting securities, the Fund seeks
issuers whose stock is attractively valued with fundamental
characteristics that are significantly better than the market average
and support internal earnings growth capability. The Fund may invest in
the securities of companies whose growth potential is generally
unrecognized or misperceived by the market.
The Fund may invest up to 20% of its total assets in the securities of
foreign companies and may hedge against currency risk by using foreign
currency forward contracts.
RISK CONSIDERATIONS. The principal risk of investing in the Fund is
market risk. The Fund's investments in foreign securities have foreign
risk. This is the risk of investments in issuers located in foreign
countries, which may have greater price volatility and less liquidity.
Investments in foreign securities also are subject to political,
regulatory, and diplomatic risks. Foreign risk includes currency risk,
which may occur due to fluctuations in the exchange rates between the
U.S. dollar and foreign currencies. This risk could negatively affect
the value of a Fund's investments.
DIVERSIFIED SMALL CAP FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide long-term capital appreciation with moderate annual return
volatility by diversifying its investments across different small- cap
equity investment styles. The Fund invests in a "multi-style" approach
49
<PAGE>
designed to minimize the volatility and risk of investing in small-cap
equity securities. The Fund invests in several different small-cap
equity styles in order to reduce the risk of price and return
volatility associated with reliance on a single investment style. The
Fund currently invests in 4 Portfolios.
ALLOCATION. The current allocations and ranges of investments by the
Fund in each Portfolio are:
<TABLE>
<S> <C> <C>
current range of
Investment style allocation investment
---------------- ---------- ----------
Small Cap Index Portfolio 25% 23.5% - 26.5%
Small Company Growth Portfolio 25% 23.5% - 26.5%
Small Company Value Portfolio 25% 23.5% - 26.5%
Small Cap Value Portfolio 25% 23.5% - 26.5%
--------------------------------------------------------------------------------------------------------------
Total Fund Assets 100%
</TABLE>
The percentage of Fund assets invested in each Portfolio may
temporarily deviate from the current allocations due to changes in
market values. The Adviser will effect transactions daily to
reestablish the current allocations. The Adviser may make changes in
the current allocations at any time in response to market and other
conditions. The Fund also may invest in more or fewer Portfolios or
invest directly in portfolio securities.
RISK CONSIDERATIONS. The principal risk of investing in the Fund is
market risk. Because the Fund invests in small-capitalization
companies, it also has capitalization risk. These investments tend to
be more volatile than investments in large-cap companies. In addition,
small-cap companies may have more risk because they often have limited
product lines, markets, or financial resources. Also, the market for
the sale of small-cap stocks may be less liquid. The Fund also has
allocation risk, which is the risk that the allocation of investments
may have a more significant effect on the Fund's net asset value when
one investment style is performing more poorly than the others.
SMALL COMPANY STOCK FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
long-term capital appreciation. The Fund invests primarily in the
common stock of small and medium-size domestic companies that have
market capitalizations well below that of the average company in the
S&P 500 Index. For the purposes of the Fund's investments, small
companies are those with market capitalizations of less than the
largest stock in the Russell 2000 Index or approximately $1.4 billion.
Medium companies are those with capitalizations ranging from $500
million to $8 billion.
In selecting securities, the Fund seeks securities with significant
price appreciation potential and attempts to identify companies that
show above-average growth, as compared to long-term overall market
growth. The Fund invests in companies that may be in a relatively early
stage of development or may produce goods and services that have
favorable prospects for growth due to increasing demand or developing
markets. Frequently, such companies have a small management group and
single product or product line expertise, which may result in an
enhanced entrepreneurial spirit and greater focus. The Fund believes
that such companies may develop into significant business enterprises
and that an investment in these companies offers a greater opportunity
for capital appreciation than an investment in larger, more established
companies.
The Fund may invest up to 20% of its total assets in the securities of
foreign companies.
RISK CONSIDERATIONS. The principal risk of investing in the Fund is
market risk. The Fund investments in small- and medium-capitalization
companies have capitalization risk. These investments tend to be more
volatile than investments in large-cap companies. In addition,
small-cap companies may have more risk because they often have limited
product lines, markets, or financial resources. Also, the market for
the sale of small-cap stocks may be less liquid. The Fund's investments
in foreign securities have foreign risk. This is the risk of
investments in issuers located in foreign countries, which may have
greater price volatility and less liquidity. Investments in foreign
securities also are subject to political, regulatory, and diplomatic
risks. Foreign risk includes currency risk, which may occur due to
fluctuations in the exchange rates between the U.S. dollar and foreign
currencies. This risk could negatively affect the value of a Fund's
investments.
50
<PAGE>
SMALL CAP OPPORTUNITIES FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide capital appreciation. Current income will be incidental to
the objective of capital appreciation. The Fund invests primarily in
equity securities of U.S. companies that, at the time of purchase, have
market capitalizations of $1.5 billion or less.
In selecting investments, the Fund attempts to identify securities of
companies that can generate above-average earnings growth and sell at
favorable prices in relation to book values and earnings. An assessment
of a company's management's competence will be an important
consideration. These criteria are not rigid and the Fund may make other
investments to achieve its objective.
The Fund will invest principally in equity securities, including common
stocks, securities convertible into common stocks, or, subject to
special limitations, rights or warrants to subscribe for or purchase
common stocks. The Fund also may invest to a limited degree in
non-convertible debt securities and preferred stocks.
RISK CONSIDERATIONS. The principal risk of investing in the Fund is
market risk. The Fund investments in small-capitalization companies
have capitalization risk. These investments tend to be more volatile
than investments in large-cap companies. In addition, small-cap
companies may have more risk because they often have limited product
lines, markets, or financial resources. Also, the market for the sale
of small-cap stocks may be less liquid. To the extent that the Fund
invests in foreign securities, it has foreign risk. This is the risk of
investments in issuers located in foreign countries, which may have
greater price volatility and less liquidity. Investments in foreign
securities also are subject to political, regulatory, and diplomatic
risks. Foreign risk includes currency risk, which may occur due to
fluctuations in the exchange rates between the U.S. dollar and foreign
currencies. This risk could negatively affect the value of a Fund's
investments.
SMALL COMPANY GROWTH FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide long-term capital appreciation by investing in smaller
domestic companies. The Fund invests primarily in the common stock of
small and medium-sized domestic companies that are either growing
rapidly or completing a period of significant change. Small companies
are those with capitalizations of less than the largest stock in the
Russell 2000 Index or approximately $1.4 billion.
In selecting securities, the Fund seeks to identify companies that are
rapidly growing (usually with relatively short operating histories) or
that are emerging from a period of investor neglect by undergoing a
dramatic change. These changes may involve a sharp increase in
earnings, the hiring of new management or measures taken to close the
gap between share price and takeover/asset value.
The Fund may invest up to 10% of its total assets in securities of
foreign companies.
RISK CONSIDERATIONS. The principal risk of investing in the Fund is
market risk. The Fund investments in small-capitalization companies
have capitalization risk. These investments tend to be more volatile
than investments in large-cap companies. In addition, small-cap
companies may have more risk because they often have limited product
lines, markets, or financial resources. Also, the market for the sale
of small-cap stocks may be less liquid. To the extent that the Fund may
invest in foreign securities, it may have foreign risk. This is the
risk of investments in issuers located in foreign countries, which may
have greater price volatility and less liquidity. Investments in
foreign securities also are subject to political, regulatory, and
diplomatic risks. Foreign risk includes currency risk, which may occur
due to fluctuations in the exchange rates between the U.S. dollar and
foreign currencies. This risk could negatively affect the value of a
Fund's investments.
INTERNATIONAL FUND
INVESTMENT OBJECTIVE AND STRATEGIES. The Fund's investment objective is
to provide long-term capital appreciation by investing directly or
indirectly in high-quality companies based outside the United States.
The Fund invests in a "multi-style" approach designed to minimize the
volatility and risk of investing in international securities. The
Fund's investment portfolio, within International Portfolio, utilizes
two different investment styles - an international equity investment
style and an international emerging markets investment style. The Fund
also may invest in more or fewer Portfolios or invest directly in
portfolio securities.
51
<PAGE>
RISK CONSIDERATIONS. The risks of investing in the Fund include market
risk. The Fund's investments in foreign securities have foreign risk.
This is the risk of investments in issuers located in foreign
countries, which may have greater price volatility and less liquidity.
Investments in foreign securities also are subject to political,
regulatory, and diplomatic risks. Foreign risk includes currency risk,
which may occur due to fluctuations in the exchange rates between the
U.S. dollar and foreign currencies. This risk could negatively affect
the value of a Fund's investments. In addition, the Fund's investments
in emerging markets may have additional foreign risk because securities
markets and legal systems in emerging markets may not be well
developed, information about companies in these markets may not be
readily available, and prices of stocks may be more volatile. To the
extent that the Fund may invest in small-capitalization companies, it
may have capitalization risk. These investments tend to be more
volatile than investments in large-cap companies. In addition,
small-cap companies may have more risk because they often have limited
product lines, markets, or financial resources. Also, the market for
the sale of small-cap stocks may be less liquid.
DESCRIPTIONS OF CORE PORTFOLIOS
The following is a discussion of the investment objectives and strategies of the
core portfolios, or Portfolios, in which some of the Funds that are gateway
funds invest. Risk considerations for the Portfolios are included, as relevant,
with the description of the gateway Fund above.
MONEY MARKET PORTFOLIO and PRIME MONEY MARKET PORTFOLIO
The Cash Investment Fund and Ready Cash Investment Fund section of this
prospectus describes these Portfolios.
POSITIVE RETURN BOND PORTFOLIO
The Portfolio seeks to produce a positive total return each calendar
year regardless of general bond market performance by investing in a
portfolio of U.S. Government securities and corporate fixed income
securities. The Portfolio's assets are divided into 2 components, short
bonds with maturities (or average life) of 2 years or less and long
bonds with maturities of 25 years or more. Shifts between short bonds
and long bonds are made based on movement in the prices of bonds rather
than on the Adviser's forecast of interest rates. During periods of
falling prices (generally, increasing interest rate environments) long
bonds are sold to protect capital and limit losses. Conversely, when
bond prices rise, long bonds are purchased. The average dollar-weighted
maturity of the Portfolio will vary between 1 and 30 years.
Under normal circumstances, the Portfolio invests at least 50% of its
net assets in U.S. Government securities, including U.S. Treasury
Securities. The Portfolio only purchases securities that are rated, at
the time of purchase, within 1 of the 2 highest long-term rating
categories assigned by an NRSRO or that are unrated and determined by
the Adviser to be of comparable quality. The Portfolio may invest up to
25% of its assets in securities rated in the second highest rating
category. The Portfolio does not invest more than 25% of its total
assets in zero-coupon securities, securities with variable or floating
rates of interest, or asset-backed securities.
STABLE INCOME PORTFOLIO
The Stable Income Fund section of this prospectus describes this
Portfolio.
MANAGED FIXED INCOME PORTFOLIO
The Portfolio seeks consistent fixed income returns by investing
primarily in Investment grade intermediate-term securities. The
Portfolio invests in a diversified portfolio of fixed and variable rate
U.S. dollar-denominated, fixed income securities of a broad spectrum of
U.S. and foreign issuers, including U.S. Government securities, and the
debt securities of financial institutions, corporations, and others.
The Adviser emphasizes the use of intermediate maturity securities to
lessen Duration and employs low risk yield enhancement techniques to
enhance return over a complete economic or interest rate cycle. The
Adviser considers intermediate-term securities to be those with
maturities of between 2 and 20 years.
The Portfolio will limit its investment in mortgage-backed securities
to not more than 65% of its total assets and its investment in other
asset-backed securities to not more than 25% of its net assets. In
addition, the Portfolio may not invest more than 30% of its total
assets in the securities issued or guaranteed by any single agency or
instrumentality of the U.S. Government, except the U.S. Treasury.
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The Portfolio invests in debt securities with maturities (or average
life in the case of mortgage-backed and similar securities) ranging
from overnight to 30 years. The Portfolio normally will have an average
dollar-weighted portfolio maturity of between 3 and 12 years and a
Duration of between 2 and 6 years.
The Portfolio also may invest up to 10% of its total assets in
securities issued or guaranteed by foreign governments the Adviser
deems stable, or their subdivisions, agencies, or instrumentalities;
loan or security participations; securities of supranational
organizations; and municipal securities.
The Portfolio may use options, swap agreements, interest rate caps,
floors, collars, and futures contracts to manage risk. The Portfolio
also may use options to enhance return.
STRATEGIC VALUE BOND PORTFOLIO
The Total Return Bond Fund section of this prospectus describes this
Portfolio. Total Return Bond Fund invests all its assets in this
Portfolio. The only difference between the Fund and the Portfolio is
that the Portfolio's investment objective is to seek total return by
investing primarily in income producing securities.
INDEX PORTFOLIO
The Index Fund section of this prospectus describes this Portfolio.
INCOME EQUITY PORTFOLIO
The Income Equity Fund section of this prospectus describes this
Portfolio.
LARGE COMPANY GROWTH PORTFOLIO
The Large Company Growth Fund section of this prospectus describes
this Portfolio.
DISCIPLINED GROWTH PORTFOLIO
The Portfolio seeks capital appreciation by investing in common stocks
of larger companies. The Portfolio seeks higher long-term returns by
investing primarily in the common stock of companies that, in the view
of the Adviser, possess above average potential for growth. The
Portfolio invests in companies with average market capitalizations
greater than $5 billion.
The Portfolio seeks to identify growth companies that will report a
level of corporate earnings that exceed the level expected by
investors. In seeking these companies, the Adviser uses both
quantitative and fundamental analysis. The Adviser may consider, among
other factors, changes of earnings estimates by investment analysts,
the recent trend of company earnings reports, and an analysis of the
fundamental business outlook for the company. The Adviser uses a
variety of valuation measures to determine whether the share price
already reflects any positive fundamentals identified by the Adviser.
In addition to approximately equal weighting of portfolio securities,
the Adviser attempts to constrain the variability of the investment
returns by employing risk control screens for price volatility,
financial quality, and valuation.
SMALL CAP INDEX PORTFOLIO
The Portfolio seeks to replicate the return of the S&P 600 Small Cap
Index with minimum tracking error and to minimize transaction costs.
Under normal circumstances, the Portfolio will hold stocks representing
100% of the capitalization-weighted market values of the S&P 600 Small
Cap Index. The Adviser generally executes portfolio transactions only
to replicate the composition of the S&P 600 Small Cap Index, to invest
cash received from portfolio security dividends or investments in the
Portfolio, and to raise cash to fund redemptions. The Fund may hold
cash or cash equivalents to facilitate payment of the Fund's expenses
or redemptions and may invest in index futures contracts. For these and
other reasons, the Portfolio's performance can be expected to
approximate but not equal that of the S&P 600 Small Cap Index.
The S&P 600 Small Cap Index tracks the total return performance of 600
common stocks which are chosen for inclusion in the S&P 600 Small Cap
Index by S&P on a statistical basis. The 600 securities, most of which
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<PAGE>
trade on the New York Stock Exchange, represent 4% of the total market
value of all U.S. common stocks. Each stock in the S&P 600 Small Cap
Index is weighted by its market value. The S&P 600 Small Cap Index
emphasizes smaller capitalizations and typically, companies included in
the S&P 600 Small Cap Index may not be the largest nor most dominant
firms in their respective industries.
SMALL COMPANY GROWTH PORTFOLIO
The Small Company Growth Fund section of this prospectus describes
this Portfolio.
SMALL COMPANY VALUE PORTFOLIO
The Portfolio seeks to provide long-term capital appreciation by
investing primarily in smaller companies whose market capitalization is
less than the largest stock in the Russell 2000 Index or approximately
$1.4 billion. The Adviser focuses on securities that are conservatively
valued in the marketplace relative to the stock of comparable
companies, determined by price/earnings ratios, cash flows, or other
measures. Value investing provides investors with a less aggressive way
to take advantage of growth opportunities of small companies. Value
investing may reduce downside risk and offer potential for capital
appreciation as a stock gains favor among other investors and its stock
price rises.
SMALL CAP VALUE PORTFOLIO
The Portfolio seeks capital appreciation by investing in common stocks
of smaller companies. The Portfolio will normally invest substantially
all of its assets in securities of companies with market
capitalizations that reflect the market capitalization of companies
included in the Russell 2000 Index, which range from approximately
$221.9 million to approximately $1.4 billion. The Portfolio seeks
higher growth rates and greater long-term returns by investing
primarily in the common stock of smaller companies that the Adviser
believes to be undervalued and likely to report a level of corporate
earnings exceeding the level expected by investors. The Adviser values
companies based upon both the price-to-earnings ratio of the company
and a comparison of the public market value of the company to a
proprietary model that values the company in the private market. In
seeking companies that will report a level of earnings exceeding that
expected by investors, the Adviser uses both quantitative and
fundamental analysis. Among other factors, the Adviser considers
changes of earnings estimates by investment analysts, the recent trend
of company earnings reports, and the fundamental business outlook for
the company.
INTERNATIONAL PORTFOLIO
The Portfolio seeks to provide long-term capital appreciation by
investing directly or indirectly in high-quality companies based
outside the United States. The Portfolio selects its investments on the
basis of their potential for capital appreciation without regard to
current income. The Portfolio also may invest in the securities of
domestic closed-end investment companies that invest primarily in
foreign securities and may invest in debt securities of foreign
governments or their political subdivisions, agencies, or
instrumentalities, of supranational organizations, and of foreign
corporations. The Portfolio's investments are generally diversified
among securities of issuers in foreign countries including, but not
limited to, Japan, Germany, the United Kingdom, France, the
Netherlands, Hong Kong, Singapore, and Australia. In general, the
Portfolio will invest only in securities of companies and governments
in countries that the Adviser, in its judgment, considers both
politically and economically stable. The Fund may invest more than 25%
of its total assets in investments in a particular country, region, or
type of investment.
The Portfolio may purchase preferred stock and convertible debt
securities, including convertible preferred stock. The Portfolio also
may enter into foreign exchange contracts, including forward contracts
to purchase or sell foreign currencies, in anticipation of its currency
requirements and to protect against possible adverse movements in
foreign exchange rates.
INTERNATIONAL EQUITY PORTFOLIO
The Portfolio seeks long-term total return, with an emphasis on capital
appreciation, by investing primarily in equity securities of foreign
companies. The Portfolio invests at least 80% of its assets in a
diversified portfolio of common stock of companies located or operating
in developed and emerging markets. It is expected that the securities
held by the Portfolio will be traded on a stock exchange or other
market in the country in which the issuer is based, but they also may
be traded in other countries, including the United States. The
Portfolio must invest its assets in the securities of at least five
different countries other than the United States. The Portfolio may
also invest in American Depositary Receipts, European Depositary
Receipts, or other similar instruments convertible into securities of
foreign issuers.
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<PAGE>
The Adviser uses a fundamentals-driven, value-oriented analysis to
identify companies with above-average potential for long-term growth.
The Adviser considers a company's historical performance and its
projected future earnings. The Adviser also considers other key
criteria such as a company's local, regional or global franchise;
history of effective management demonstrated by expanding revenues and
earnings growth; prudent financial and accounting policies and ability
to take advantage of a changing business environment. In allocating
among countries, regions and industry sectors, the Adviser considers
economic growth prospects, monetary and fiscal policies, political
stability, currency trends, market liquidity and investor sentiment.
OTHER CONSIDERATIONS
DERIVATIVES
The Funds may use certain derivative instruments, such as options, swap
agreements, interest rate caps, collars, and floors, and futures
contracts to manage risk. Derivatives are financial contracts whose
value depends on, or is derived from, the value of an underlying
assets, reference rate, or index. In addition to other risks,
derivatives involve the risk of difficulties in pricing and valuation
and the risk that changes in the value of a derivative may not
correlate perfectly with relevant assets, rates, or indices.
DOWNGRADED SECURITIES
Each Fund may retain a security whose rating has been lowered (or a
security of comparable quality to a security whose rating has been
lowered) below the Fund's lowest permissible rating category if the
Fund's Adviser determines that retaining the security is in the best
interests of the Fund. Because a downgrade often results in a reduction
in the market price of the security, sale of a downgraded security may
result in a loss.
TEMPORARY DEFENSIVE POSITION
To respond to adverse market, economic, political, or other conditions,
each Fund may assume a temporary defensive position and invest without
limit in cash and cash equivalents. When a Fund makes temporary
defensive investments, it may not achieve its investment objective.
When a Tax-Free Fixed Income Fund assumes a temporary defensive
position, it is likely that its shareholders may be subject to federal
and applicable state income taxes on a greater portion of the Fund's
income distributions.
PORTFOLIO TURNOVER
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. Higher portfolio turnover rates may result in
increased brokerage costs and a possible increase in short-term capital
gains or losses. The Financial Highlights table lists each Fund's
portfolio turnover rate.
YEAR 2000
Certain computer systems may not process date-related information
properly on and after January 1. 2000. The Adviser is addressing this
matter for its systems. The Funds' other service providers have
informed the Fund that they are taking similar measures. Investments in
foreign companies are particularly vulnerable to Year 2000 risk because
these companies may not have the financial resources, technology, or
personnel needed to address Year 2000 readiness concerns. This matter,
if not corrected, could adversely affect the services provided to the
Fund or the issues in which the Fund invests and could therefore, lower
the value of your Fund shares.
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<PAGE>
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISORY SERVICES
NORWEST INVESTMENT MANAGEMENT, INC. is the investment adviser for each
Fund and each Portfolio except the Portfolios advised by Schroder. In
this capacity, Norwest makes investment decisions for and administers
the Funds' and Portfolios' investment programs. Norwest Investment
Management, Inc.'s address is Norwest Center, Sixth Street and
Marquette, Minneapolis, MN 55479.
SCHRODER INVESTMENT MANAGEMENT NORTH AMERICA INC. is the investment
adviser for International Portfolio. In this capacity, Schroder makes
investment decisions for and administers the Portfolio's investment
programs. Schroder Investment Management North America Inc.'s address
is 787 Seventh Avenue, 34th Floor, New York, NY 10019.
WELLS FARGO BANK, or WFB, is the investment adviser for International
Equity Portfolio. In this capacity, WFB makes investment decisions for
and administers the Portfolio's investment program. WFB's address is
525 Market Street, San Francisco, CA 94105.
Norwest and certain of the Funds and the Portfolios have retained
investment subadvisers to make investment decisions for and administer
the investment programs of those Funds and Portfolios. Norwest decides
which portion of the assets of a Fund or Portfolio the subadviser
should manage and supervises the subadvisers' performance of their
duties. The subadvisers are:
GALLIARD CAPITAL MANAGEMENT, INC. or GALLIARd, an investment advisory
subsidiary of Norwest Bank, provides investment advisory services to
bank and thrift institutions, pension and profit sharing plans, trusts
and charitable organizations, and corporate and other business
entities. Galliard Capital Management, Inc.'s address is 800 LaSalle
Ave. Suite 2060, Minneapolis, MN 55479.
PEREGRINE CAPITAL MANAGEMENT, INC. or PEREGRINE, an investment
advisory subsidiary of Norwest Bank, provides investment advisory
services to corporate and public pension plans, profit sharing plans,
savings-investment plans, and 401(k) plans. Peregrine Capital
Management, Inc's address is, LaSalle Plaza, 800 LaSalle Avenue, Suite
1850, Minneapolis, MN 55402.
SCHRODER INVESTMENT MANAGEMENT NORTH AMERICA INC. is the investment
sub-adviser for Small Cap Opportunities Fund. In this capacity,
Schroder makes investment decisions for and administers the Fund's
investment program. Schroder Investment Management North America
Inc.'s address is 787 Seventh Avenue, 34th Floor, New York, NY 10019.
SMITH ASSET MANAGEMENT GROUP, L.P. or SMITH, an investment advisory
affiliate of Norwest Bank, provides investment management services to
company retirement plans, foundations, endowments, trust companies,
and high net worth individuals using a disciplined equity style. Smith
Asset Management Group, L.P.'s address is 300 Crescent Court, Suite
750, Dallas, TX 75201
WELLS CAPITAL MANAGEMENT INCORPORATED, or WCM, a wholly-owned
subsidiary of WFB, is the investment Subadviser for International
Equity Portfolio. WCM provides investment advisory services to various
bank and thrift institutions, investment companies, pension and profit
sharing plans, trusts, estates, corporations and other business
entities. WCM's address is 525 Market Street, 10th Floor, San
Francisco, CA 94105.
Listed below, for each Fund, are the portfolio managers primarily
responsible for the day-to-day management of the Funds' investments.
The year a portfolio manager began managing a Fund or Portfolio
follows the manager's name in parenthesis. The list includes the
investment advisory fees payable to Norwest or Schroder by the Fund
and by any Portfolios in which it invests. The list states the
investment advisory fees on an annualized basis as a percentage of a
Fund's or Portfolio's average daily net assets. Descriptions of the
portfolio managers' recent experience follow the list of portfolio
managers and advisory fees.
How investment advisory fees are paid depends on whether or not a Fund
invests in Portfolios.
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o If a Fund invests directly in a portfolio of securities,
Norwest receives an investment advisory fee directly from the
Fund.
o If a Fund invests in a single Portfolio, Norwest or Schroder
receives an investment advisory fee from the Portfolio.
o If a Fund invests in more than one Portfolio, Norwest or
Schroder receives an investment advisory fee from each of
those Portfolios. In addition, Norwest receives a fee from
each Fund, except Cash Investment Fund, for the "asset
allocation services" of determining the Funds' investments in
the Portfolios and how much of the Fund's assets to invest in
each Portfolio.
If a Fund invests in more than one Portfolio, the total amount of the
investment advisory fee paid to Norwest or Schroder as a result of the
Fund's investments varies depending on how much of the Fund's assets
are invested in, and the investment advisory fee payable to, each
Portfolio.
Norwest (and not the Funds or Portfolios) pays the subadvisers'
investment subadvisory fees. The investment subadvisory fees do not
increase the amount of the investment advisory fees paid to Norwest by
the Funds or Portfolios.
MONEY MARKET FUNDS
<TABLE>
<S> <C>
Cash Investment Fund
Portfolio: Prime Money Market Portfolio
Portfolio Managers: David D. Sylvester (1987), Laurie R. White (1991), and Robert G. Leuty
(1998)
Advisory Fee: 0.40% - first $300 million; 0.36% - next $400 million; and 0.32% - remaining
Portfolio: Money Market Portfolio
Portfolio Managers: David D. Sylvester (1987), Laurie R. White (1991), and Robert G. Leuty
(1998)
Advisory Fee: 0.20% - first $300 million; 0.16% - next $400 million, and
0.12% - remaining
Ready Cash Investment Fund
Portfolio: Prime Money Market Portfolio
Portfolio Managers: David D. Sylvester (1988), Laurie R. White (1991), and Robert G. Leuty
(1998)
Advisory Fee: 0.40% - first $300 million; 0.36% - next $400 million; and
0.32% - remaining
U.S. Government Fund
Treasury Fund
Treasury Plus Fund
Portfolio Managers: David D. Sylvester (1987, 1990, 1998), Laurie R. White (1991, 1998), and
Robert G. Leuty (1998)
Advisory Fee: for each Fund: 0.20% - first $300 million; 0.16% - next $400 million; and
0.12% - remaining
Municipal Money Market Fund
Portfolio Managers: David D. Sylvester (1995), Laurie R. White (1998), and Robert G. Leuty
(1998)
Advisory Fee: 0.35% - first $500 million; 0.325% - next $500 million; and 0.30% -
remaining
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FIXED INCOME FUNDS
Stable Income Fund
Portfolio: Stable Income Portfolio
Subadviser: Galliard
Portfolio Managers: John Huber (1998)
Advisory Fee: 0.30%
Limited Term Government Income Fund
Intermediate Government Income Fund
Portfolio Manager: Marjorie H. Grace, CFA (1997, 1995)
Advisory Fee: For each Fund: 0.33%
Diversified Bond Fund
Fund Advisory Fee: 0.25%
Portfolio: Positive Return Bond Portfolio
Subadviser: Peregrine
Portfolio Managers: William D. Giese, CFA (1994) and Patricia Burns, CFA (1998)
Advisory Fee: 0.35%
Portfolio: Strategic Value Bond Portfolio
Subadviser: Galliard
Portfolio Managers: Richard Merriam, CFA (1997), John Huber (1998), and David Yim (1998)
Advisory Fee: 0.50%
Portfolio: Managed Fixed Income Portfolio
Subadviser: Galliard
Portfolio Managers: Richard Merriam, CFA (1995) and Ajay Mirza (1998)
Advisory Fee: 0.35%
Income Fund
Portfolio Manager: Marjorie H. Grace, CFA (1996)
Advisory Fee: 0.50%
Total Return Bond Fund
Portfolio: Strategic Value Bond Portfolio
Subadviser: Galliard
Portfolio Managers: Richard Merriam, CFA (1998), John Huber (1998), and David Yim (1998)
Advisory Fee: 0.50%
Strategic Income Fund
Fund Advisory Fee: 0.25%
Portfolio: Positive Return Bond Portfolio
Subadviser: Peregrine
Portfolio Managers: William D. Giese (1994), CFA and Patricia Burns (1998)
Advisory Fee: 0.35%
Portfolio: Strategic Value Bond Portfolio
Subadviser: Galliard
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Portfolio Managers: Richard Merriam, CFA (1997), John Huber (1998), and David Yim (1998)
Advisory Fee: 0.50%
Portfolio: Managed Fixed Income Portfolio
Subadviser: Galliard
Portfolio Managers: Richard Merriam, CFA (1995) and Ajay Mirza (1998)
Advisory Fee: 0.35%
Portfolio: Stable Income Portfolio
Subadviser: Galliard
Portfolio Manager: John Huber (1998)
Advisory Fee: 0.30%
Portfolio: Money Market Portfolio
Portfolio Managers: David D. Sylvester (1991), Laurie R. White (1991), and Robert G. Leuty
(1998)
Advisory Fees: 0.20% - first $300 million; 0.16% - next $400 million; and 0.12% -
remaining
Portfolio: Index Portfolio
Portfolio Managers: David D. Sylvester (1996) and Laurie R. White (1996)
Advisory Fee: 0.15%
Portfolio: Income Equity Portfolio
Portfolio Manager: David L. Roberts, CFA (1994) and Gary J. Dunn (1994)
Advisory Fee: 0.50%
Portfolio: Large Company Growth Portfolio
Subadviser: Peregrine
Portfolio Managers: John S. Dale, CFA (1994) and Gary E. Nussbaum, CFA (1998)
Advisory Fee: 0.65%
Portfolios: Disciplined Growth Portfolio and Small Cap Value Portfolio
Subadviser: Smith
Portfolio Manager: Stephen S. Smith, CFA (1997)
Advisory Fee: Disciplined Growth Portfolio: 0.90%
Small Cap Value Portfolio: 0.95%
Portfolio: Small Cap Index Portfolio
Portfolio Managers: David D. Sylvester (1998) and Laurie R. White (1998)
Advisory Fee: 0.25%
Portfolio: Small Company Growth Portfolio
Subadviser: Peregrine
Portfolio Managers: Robert B. Mersky, CFA (1994), and Paul E. von Kuster, CFA (1998)
Advisory Fee: 0.90%
Portfolio: Small Company Value Portfolio
Subadviser: Peregrine
Portfolio Managers: Tasso H. Coin, Jr. (1995) and Douglas G. Pugh, CFA (1997)
Advisory Fee: 0.90%
Portfolio: International Portfolio
Adviser: Schroder
Portfolio Manager: Michael Perelstein (1997)
Advisory Fee: 0.45%
Portfolio: International Equity Portfolio
Subadviser: WCM
Portfolio Managers: Katherine Schapiro, CFA (1999) and Stacey Ho, CFA (1999)
Advisory Fee: 1.20%
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TAX-FREE FIXED INCOME FUNDS
Limited Term Tax-Free Fund
Tax-Free Income Fund
Portfolio Manager: William T. Jackson, CFA (1996, 1993)
Advisory Fee: for each Fund: 0.50%
Colorado Tax-Free Fund
Portfolio Manager: William T. Jackson, CFA (1993)
Advisory Fee: 0.50% -first $300 million; 0.46% - next $400 million; and 0.42% -
remaining
Minnesota Intermediate Tax-Free Fund
Minnesota Tax-Free Fund
Portfolio Manager: Patricia D. Hovanetz, CFA (1997, 1991)
Advisory Fee: Minnesota Intermediate Tax-Free Fund: 0.25%
Minnesota Tax-Free Fund
0.50% - first $300 million; 0.46% -
next $400 million; and 0.42% remaining
BALANCED FUNDS
Moderate Balanced Fund
Growth Balanced Fund
Aggressive Balanced-Equity Fund
Fund Advisory Fee: 0.25%
Portfolio: Positive Return Bond Portfolio
Subadviser: Peregrine
Portfolio Managers: William D. Giese, CFA (1994) and Patricia Burns (1998)
Advisory Fee: 0.35%
Portfolio: Strategic Value Bond Portfolio
Subadviser: Galliard
Portfolio Managers: Richard Merriam, CFA (1997), John Huber (1998), and David Yim (1998)
Advisory Fee: 0.50%
Portfolio: Managed Fixed Income Portfolio
Subadviser: Galliard
Portfolio Managers: Richard Merriam, CFA (1995) and Ajay Mirza (1998)
Advisory Fee: 0.35%
Portfolio: Stable Income Portfolio (Moderate Balanced Fund only)
Subadviser: Galliard.
Portfolio Manager: John Huber (1998)
Advisory Fee: 0.30%
Portfolio: Index Portfolio
Portfolio Managers: David D. Sylvester (1996) and Laurie R. White (1996)
Advisory Fee: 0.15%
Portfolio: Income Equity Portfolio
Portfolio Manager: David L. Roberts, CFA (1994) and Gary J. Dunn (1994)
Advisory Fee: 0.50%
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Portfolio: Large Company Growth Portfolio
Subadviser: Peregrine
Portfolio Managers: John S. Dale, CFA (1994) and Gary E. Nussbaum, CFA (1998)
Advisory Fee: 0.65%
Portfolios: Disciplined Growth Portfolio and Small Cap Value Portfolio
Subadviser: Smith
Portfolio Manager: Stephen S. Smith, CFA (1997)
Advisory Fee: Disciplined Growth Portfolio: 0.90%
Small Cap Value Portfolio: 0.95%
Portfolio: Small Cap Index Portfolio
Portfolio Managers: David D. Sylvester (1998) and Laurie R. White (1998)
Advisory Fee: 0.25%
Portfolio: Small Company Growth Portfolio
Subadviser: Peregrine
Portfolio Managers: Robert B. Mersky, CFA (1994) and Paul E. von Kuster, CFA (1998)
Advisory Fee: 0.90%
Portfolio: Small Company Value Portfolio
Subadviser: Peregrine
Portfolio Managers: Tasso H. Coin (1995), Jr. and Douglas G. Pugh (1997)
Advisory Fee: 0.90%
Portfolio: International Portfolio
Adviser: Schroder
Portfolio Manager: Michael Perelstein (1997)
Advisory Fee: 0.45%
Portfolio: International Equity Portfolio
Subadviser: WCM
Portfolio Managers: Katherine Schapiro, CFA (1999) and Stacey Ho, CFA (1999)
Advisory Fee: 1.20%
EQUITY FUNDS
Index Fund
Portfolio: Index Portfolio
Portfolio Managers: David D. Sylvester (1996) and Laurie R. White (1996)
Advisory Fee: 0.15%
Income Equity Fund
Portfolio: Income Equity Portfolio
Portfolio Manager: David L. Roberts, CFA (1994) and Gary J. Dunn (1994)
Advisory Fee: 0.50%.
ValuGrowth Stock Fund
Portfolio Manager: Kelli K. Hill (1999)
Advisory Fee: 0.80% - first $300 million; 0.76% - next $400 million; 0.72% - remaining
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Diversified Equity Fund
Growth Equity Fund
Fund Advisory Fee: 0.25%
Portfolio: Index Portfolio (Diversified Equity Fund only)
Portfolio Managers: David D. Sylvester (1996) and Laurie R. White (1996)
Advisory Fee: 0.15%
Portfolio: Income Equity Portfolio (Diversified Equity Fund only)
Portfolio Manager: David L. Roberts, CFA (1994) and Gary J. Dunn (1994)
Advisory Fee: 0.50%
Portfolio: Large Company Growth Portfolio
Subadviser: Peregrine
Portfolio Managers: John S. Dale, CFA (1994) and Gary E. Nussbaum, CFA (1998)
Advisory Fee: 0.65%
Portfolios: Disciplined Growth Portfolio (Diversified Equity Fund only) and Small Cap
Value Portfolio
Subadviser: Smith
Portfolio Manager: Stephen S. Smith (1997)
Advisory Fee: Disciplined Growth Portfolio: 0.90%
Small Cap Value Portfolio 0.95%
Portfolio: Small Cap Index Portfolio
Portfolio Managers: David D. Sylvester (1998) and Laurie R. White (1998)
Advisory Fee: 0.25%
Portfolio: Small Company Growth Portfolio
Subadviser: Peregrine
Portfolio Managers: Robert B. Mersky, CFA (1994) and Paul E. von Kuster, CFA (1998)
Advisory Fee: 0.90%
Portfolio: Small Company Value Portfolio
Subadviser: Peregrine
Portfolio Managers: Tasso H. Coin, Jr. (1995) and Douglas G. Pugh (1997)
Advisory Fee: 0.90%
Portfolio: International Portfolio
Adviser: Schroder
Portfolio Manager: Michael Perelstein (1997)
Advisory Fee: 0.45%
Portfolio: International Equity Portfolio
Subadviser: WCM
Portfolio Managers: Katherine Schapiro, CFA (1999) and Stacey Ho, CFA (1999)
Advisory Fee: 1.20%
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Large Company Growth Fund
Portfolio: Large Company Growth Portfolio
Subadviser: Peregrine
Portfolio Managers: John S. Dale, CFA (1994) and Gary E. Nussbaum, CFA (1998)
Advisory Fee: 0.65%
Diversified Small Cap Fund
Fund Advisory Fee: 0.25%
Portfolio: Small Cap Index Portfolio
Portfolio Managers: David D. Sylvester (1998) and Laurie R. White (1998)
Advisory Fee: 0.25%
Portfolio: Small Company Growth Portfolio
Subadviser: Peregrine
Portfolio Managers: Robert B. Mersky, CFA (1994) and Paul von Kuster, CFA (1998)
Advisory Fee: 0.90%
Portfolio: Small Company Value Portfolio
Subadviser: Peregrine
Portfolio Managers: Tasso H. Coin, Jr. (1995) and Douglas G. Pugh (1997)
Advisory Fee: 0.90%
Portfolios: Small Cap Value Portfolio
Subadviser: Smith
Portfolio Manager: Stephen S. Smith, CFA (1997)
Advisory Fee: 0.95%
Small Company Stock Fund
Portfolio Manager: Thomas Zeifang (1999)
Advisory Fee: 0.90%
Small Cap Opportunities Fund
Portfolio Manager: Ira L. Unschuld (1998)
Advisory Fee: 0.60%
Small Company Growth Fund
Portfolio: Small Company Growth Portfolio
Subadviser: Peregrine
Portfolio Managers: Robert B. Mersky, CFA (1994) and Paul E. von Kuster, CFA (1998)
Advisory Fee: 0.90%
International Fund
Fund Advisory Fee: 0.25%
Portfolio: International Portfolio
Adviser: Schroder
Portfolio Manager: Michael Perelstein (1997)
Advisory Fee: 0.45%
</TABLE>
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<PAGE>
PORTFOLIO MANAGERS
Norwest Portfolio Managers:
PATRICIA BURNS, associated with Norwest or its affiliates since 19__. Ms. Burns
is a Senior Vice-President of Peregrine and has been a portfolio manager at
Peregrine for more than ten years.
TASSO H. COIN, JR., associated with Norwest or its affiliates since 1995. Mr.
Coin has been a Senior Vice President of Peregrine since 1995. From 1992 to
1995, Mr. Coin was a research officer at Lord Asset Management.
JOHN S. DALE, associated with Norwest or its affiliates since 1968. Mr. Dale is
a Senior Vice President of Peregrine.
WILLIAM D. GIESE, associated with Norwest or its affiliates since 1982. Mr.
Giese is a Senior Vice President of Peregrine, has been a portfolio manager at
Peregrine for more than ten years, and has more than 20 years' experience in
fixed income securities management.
MARJORIE H. GRACE, associated with Norwest or its affiliates since 1992. Ms.
Grace is a Director, Taxable Fixed Income of Norwest.
KELLI K. HILL, associated with Norwest since 1999. Ms. Hill is also a portfolio
manager at WCM, with whom she has been associated since 1989. Ms. Hill is also
the Treasurer for the San Francisco Ballet Association Encore!, and a board
member for Las Casa de les Madres, the largest women's shelter in the San
Francisco area.
PATRICIA D. HOVANETZ, associated with Norwest or its affiliates since 1966. Ms.
Hovanetz is a Director-Tax-Exempt Fixed Income of Norwest and has been
associated with Norwest or Norwest Bank for more than 25 years in capacities
related to municipal bond investments.
JOHN HUBER, associated with Norwest or its affiliates since 1990. Mr. Huber has
been a portfolio manager and Corporate Trading Specialist at Galliard since 1995
and has been in investment management since 1991.
WILLIAM T. JACKSON, associated with Norwest or its affiliates since 1993. Mr.
Jackson is a Managing Director, Tax-Exempt Fixed Income of Norwest.
ROBERT G. LEUTY, associated with Norwest or its affiliates since 1992. Mr. Leuty
is a Senior Portfolio Manager of Norwest.
DAVID S. LUNT, associated with Norwest or its affiliates since 1992. Mr. Lunt is
a Managing Director, Equities of Norwest.
RICHARD MERRIAM, associated with Norwest or its affiliates since 1995. Mr.
Merriam has been a managing partner of Galliard since 1995 and is responsible
for investment process and strategy. Mr. Merriam was previously Chief Investment
Officer of Insight Investment Management.
ROBERT B. MERSKY, associated with Norwest or its affiliates since 1968. Mr.
Mersky is the President of Peregrine.
AJAY MIRZA, associated with Norwest or its affiliates since 1995. Mr. Mirza has
been a Portfolio Manager and Mortgage Specialist with Galliard since 1995.
Before joining Galliard, Mr. Mirza was a research analyst at Insight Investment
Management and at Lehman Brothers.
GARY E. NUSSBAUM, associated with Norwest or its affiliates since 1990. Mr.
Nussbaum is a Senior Vice President of Peregrine.
DOUGLAS G. PUGH, associated with Norwest or its affiliates since 1997. Mr. Pugh
is a Senior Vice President of Peregrine. Before joining Peregrine, Mr. Pugh was
a senior equity analyst and portfolio manager for Advantus Capital Management
and an analyst with Kemper Corporation.
DAVID L. ROBERTS, associated with Norwest or its affiliates since 1972. Mr.
Roberts is a Managing Director, Equities of Norwest.
STEPHEN S. SMITH, associated with Norwest or its affiliates since 1997. Mr.
Smith has been a Chief Investment Officer and principal of the Smith Group since
1995. Mr. Smith previously served as senior portfolio manager with NationsBank
and in several capacities with AIM Management Company's Summit Fund.
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<PAGE>
DAVID D. SYLVESTER, associated with Norwest or its affiliates since 1979. Mr.
Sylvester currently is a Managing Director - Reserve Asset Management.
KARL P. TOURVILLE, associated with Norwest or its affiliates since 1986. Mr.
Tourville has been a managing partner of Galliard since 1995.
PAUL E. VON KUSTER, associated with Norwest or its affiliates since 1972. Mr.
Von Kuster is a Senior Vice President of Peregrine.
LAURIE R. WHITE, associated with Norwest or its affiliates since 1991. Ms. White
is a Director-Reserve Asset Management.
DAVID YIM, associated with Norwest or its affiliates since 1995. Mr. Yim has
been a portfolio manager and Director of Investment Research of Galliard since
1995 and previously worked for American Express Financial Advisors as a Research
Analyst.
THOMAS ZEIFANG, associated with Norwest or its affiliates since 1999. Mr.
Zeifang also is a portfolio manager at WCM, with whom he has been associated
since 1995. Prior to 1995, he served as an analyst at Fleet Investment Advisors.
Schroder Portfolio Managers:
MARK BRIDGEMAN, associated with Schroder or its affiliates since 1990. Mr.
Bridgeman is a Vice President of Schroder.
HEATHER CRIGHTON, associated with Schroder or its affiliates since 1992. Ms.
Crighton is a Vice President of Schroder.
MICHAEL PERELSTEIN, associated with Schroder or its affiliates since 1997. Mr.
Perelstein has been a Senior Vice President of Schroder since January 1997.
Previously Mr. Perelstein was a Managing Director at MacKay Shields.
JOHN A. TROIANO, associated with Schroder or its affiliates since 1981. Mr.
Troiano has been Chief Executive Officer of Schroder since April 1, 1997 and a
Managing Director of Schroder since October 1995.
Wells Fargo Portfolio Managers:
STACEY HO, CFA, associated with WCM since 1997. Ms. Ho is co-manager for the
international equity portfolios and funds. Prior thereto, she was a senior
portfolio manager at Clemente Capital Management and prior thereto, managed
Japanese and U.S. equity portfolios at Edison International.
KATHERINE SCHAPIRO, CFA, associated with WFB since 1992. Prior to her
association with WFB, she was a vice president and fund manager for Newport
Pacific Management, an international investment advisory firm based in San
Francisco. Ms. Schapiro is President of the Security Analysts of San Francisco.
DORMANT INVESTMENT ADVISORY ARRANGEMENTS
Norwest has been retained as a "dormant" or "back-up" investment
adviser to manage any assets redeemed and invested directly by a Fund
that invests in 1 or more Portfolios. Norwest does not receive any
compensation under this arrangement as long as a Fund invests entirely
in Portfolios. If a Fund redeems assets from a Portfolio and invests
them directly, Norwest receives an investment advisory fee from the
Fund for the management of those assets.
OTHER FUND SERVICES
The FORUM FINANCIAL GROUP of companies provide managerial,
administrative, and underwriting services to the Funds. NORWEST BANK
acts as the Funds' transfer agent, dividend disbursing agent, and
custodian.
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<PAGE>
HOW TO BUY AND SELL SHARES
CLASSES OF SHARES
This Prospectus offers certain classes of shares of the Funds. Each
class is designed for a different type of investor and may have
different fees or investment minimums.
o All Money Market Funds, except Ready Cash Investment Fund, offer
Institutional Shares. Institutional Shares are designed for
institutional investors.
o Ready Cash Investment Fund and Municipal Money Market Fund offer
Investor Shares. Investor Shares are designed for retail
investors.
o All Funds, other than Money Market Funds, offer I Shares. I
Shares are designed for clients of investment advisers and bank
trust departments, trust companies, and their affiliates,
including broker-dealers if the Fund does not offer other classes
of shares.
DETERMINATION OF NET ASSET VALUE
Each Fund determines its net asset value or NAV on each Fund business
day, which is any day that the New York Stock Exchange is open, by
dividing the value of its net assets (i.e.,. the value of its
securities and other assets less its liabilities) by the number of
shares outstanding at the time the determination is made. The Funds
determine their net asset values at the following times:
Municipal Money Market Fund Noon, Eastern Time
Treasury Fund 1:00 p.m., Eastern Time
U.S. Government Fund 2:00 p.m., Eastern Time
Cash Investment Fund and Ready Cash Investment Fund 3:00 p.m., Eastern Time
Each other Fund 4:00 p.m., Eastern Time
Treasury Plus Fund 5:00 p.m., Eastern Time
All Funds other than Money Market Funds value portfolio securities at
current market value if market quotations are readily available. If
market quotations are not readily available, the Funds value those
securities at fair value as determined by or pursuant to procedures
adopted by the Board.
In order to maintain net asset value per share at $1.00, the Money
Market Funds (and the Portfolios in which they invest) value their
portfolio securities at amortized cost. Amortized cost valuation
involves valuing an instrument at its cost and then assuming a constant
amortization to maturity of any discount or premium.
European, Far Eastern, and other international securities exchanges and
over-the-counter markets normally complete trading well before the
close of business on each Fund business day. Trading in foreign
securities, however, may not take place on all Fund business days or
may take place on days that are not Fund business days. The
determination of the prices of foreign securities may be based on the
latest market quotations for the securities. If events occur that
affect the securities' value after the close of the markets on which
they trade, the Funds may make an adjustment to the value of the
securities for purposes of determining net asset value.
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<PAGE>
For purposes of determining net asset value, the Funds convert all
assets and liabilities denominated in foreign currencies into U.S.
dollars at the mean of the bid and asked prices of such currencies
against the U.S. dollar last quoted by a major bank prior to the time
of conversion.
You may purchase or redeem shares at a price equal to their NAV next
determined after receipt of your purchase order, or redemption request
in proper form on fund business day.
GENERAL PURCHASE INFORMATION
You may purchase shares directly or through a financial institution.
The Funds' transfer agent processes all transactions in Fund shares.
You may purchase and redeem Fund shares without a sales or redemption
charge. I Shares and Investor Shares require a minimum initial
investment of $1,000 and a minimum subsequent investments of $100.
Institutional Shares require a minimum initial investment of $100,000
and have no minimum for subsequent investments.
If you purchase Money Market Fund shares, your shares become eligible
to receive distributions on the day that your order is accepted. If you
purchase shares of any other Fund, your shares become eligible to
receive distributions the Fund Business Day after a purchase order is
received in proper form.
The Funds reserve the right to reject any subscription for the purchase
of shares. You will receive share certificates for your shares only if
you request them in writing. No certificates are issued for fractional
shares.
If you purchase Money Market Fund shares, your order will not be
complete until the Fund receives immediately available funds. The Money
Market Funds must receive purchase and redemption orders before the
times indicated below..
Times indicated are Eastern Time
order must be payment must be
received by received by
Cash Investment Fund 3:00 p.m. 4:00 p.m.
Ready Cash Investment Fund 3:00 p.m. 4:00 p.m.
U.S. Government Fund 2:00 p.m. 4:00 p.m.
Treasury Plus Fund 5:00 p.m. 5:00 p.m.
Treasury Fund 1:00 p.m. 4:00 p.m.
Municipal Money Market Fund Noon 4:00 p.m.
The Money Market Funds may advance the time by which purchase or
redemption orders and payments must be received on days that the New
York Stock Exchange or Minneapolis Federal Reserve Bank closes early,
the Public Securities Association recommends that the government
securities markets close early or other circumstances affect a Fund's
trading hours.
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<PAGE>
PURCHASE PROCEDURES
DIRECT PURCHASES
You may obtain an account application by writing Norwest Advantage
Funds at the following address:
By regular mail: NORWEST ADVANTAGE FUNDS
[NAME OF FUND]
P.O. Box 8265
Boston, MA 02266-8265
By overnight mail only to: NORWEST ADVANTAGE FUNDS
[NAME OF FUND]
Attn: CCSU
Boston Financial
66 Brooks Drive
Braintree, MA 02184
When you sign an application for a new Fund account, you are
certifying that your Social Security number or other taxpayer
identification number is correct and that you are not subject to
backup withholding. If you violate certain federal income tax
provisions, the Internal Revenue Service can require the Funds to
withhold 31% of your distributions and redemptions.
You must pay for your shares in U.S. dollars by check or money order
drawn on a U.S. bank, by bank or federal funds wire transfer, or by
electronic bank transfer. Cash cannot be accepted.
Call or write the transfer agent if you wish to participate in
shareholder services not offered on the account application or change
information on your account (such as addresses). Norwest Advantage
Funds may in the future modify, limit or terminate any shareholder
privilege upon appropriate notice and may charge a fee for certain
shareholder services, although no such fees are currently
contemplated. You may terminate your participation in any shareholder
program by writing to Norwest Advantage Funds.
PURCHASES BY MAIL
You may send a check or money order along with a completed account
application to Norwest Advantage Funds at the address listed above.
Checks and money orders are accepted at full value subject to
collection. Payment by a check drawn on any member of the Federal
Reserve System can normally be converted into federal funds within 2
business days after receipt of the check. Checks drawn on some
non-member banks may take longer. If your check does not clear, the
purchase order will be canceled and you will be liable for any losses
or fees incurred by Norwest Advantage Funds, the transfer agent, or the
distributor.
To purchase shares for individual or Uniform Gift to Minors Act
accounts, you must write a check or purchase a money order payable to
Norwest Advantage Funds, or endorse a check made out to you to Norwest
Advantage Funds. For corporation, partnership, trust, 401(k) plan, or
other non-individual type accounts, make the check used to purchase
shares payable to Norwest Advantage Funds. No other methods of payment
by check will be accepted for these types of accounts.
PURCHASES BY BANK WIRE
You must first telephone the Funds' transfer agent at 1-612-667-8833 or
1-800-338-1348 to obtain an account number before making an initial
investment in a Fund by bank wire. Then instruct your bank to wire your
money immediately to:
STATE STREET BANK & TRUST
BOSTON, MA
ABA 011000028
FNF: (NORWEST ADVANTAGE FUND NAME)
AC: 9905-434-8
FOR FURTHER CREDIT: ___________________
(NAME ON NORWEST FUND ACCOUNT AND FUND ACCOUNT NUMBER
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<PAGE>
Complete and mail the account application promptly. Your bank may
charge for transmitting the money by wire. The Funds do not charge for
the receipt of wire transfers. The Funds treat payment by bank wire as
a federal funds payment when received.
PURCHASES THROUGH FINANCIAL INSTITUTIONS
You may purchase and redeem shares through certain broker-dealers,
banks, and other financial institutions. When you purchase a Fund's
shares through a financial institution, the shares may be held in your
name or in the name of the financial institution. Subject to your
institution's procedures, you may have Fund shares held in the name of
your financial institution transferred into your name. If your shares
are held in the name of your financial institution, you must contact
the financial institution on matters involving your shares. Your
financial institution may charge you for purchasing, redeeming, or
exchanging shares.
SUBSEQUENT PURCHASES OF SHARES
You can make subsequent purchases by mailing a check, by sending a bank
wire, or through a financial institution as indicated above. All
payments should clearly indicate your name and account number.
GENERAL REDEMPTION INFORMATION
You may redeem Fund shares at their net asset value on any Fund
Business Day. There is no minimum period of investment and no
restriction on the frequency of redemptions.
Fund shares are redeemed as of the next determination of the Fund's net
asset value following receipt by the transfer agent of the redemption
order in proper form (and any supporting documentation that the
transfer agent may require). Redeemed Money Market Fund shares are not
entitled to receive distributions on the day on which the redemption is
effective. Redeemed shares of any other Fund are not entitled to
receive distributions after the day on which the redemption is
effective.
Redemption orders for Money Market Fund shares are accepted up to the
times indicated above for acceptance of purchase orders of Money Market
Fund shares. As described above, the Money Market Funds may advance the
times for receipt of redemption orders.
Normally, redemption proceeds are paid immediately following receipt of
a redemption order in proper form. In any event, you will be paid
within 7 days, unless: (1) your bank has not cleared the check to
purchase the shares (which may take up to 15 days); (2) the New York
Stock Exchange is closed (or trading is restricted) for any reason
other than normal weekend or holiday closings; (3) there is an
emergency in which it is not practical for the Fund to sell its
portfolio securities or for the Fund to determine its net asset value;
or (4) the SEC deems it inappropriate for redemption proceeds to be
paid. You can avoid the delay of waiting for your bank to clear your
check by paying for shares with wire transfers. Unless otherwise
indicated, redemption proceeds normally are paid by check mailed to
your record address.
To protect against fraud, the following must be in writing with a
signature guarantee: (1) endorsement on a share certificate; (2)
instruction to change your record name; (3) modification of a
designated bank account for wire redemptions; (4) instruction regarding
an Automatic Investment Plan or Automatic Withdrawal Plan; (5)
distribution elections; (6) election of telephone redemption
privileges; (7) election of exchange or other privileges in connection
with your account; (8) written instruction to redeem shares whose value
exceeds $50,000; (9) redemption in an account when 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 payment of redemption proceeds to
any address, person or account for which there are not established
standing instructions.
You may obtain signature guarantees at any of the following types of
organizations: authorized banks, broker-dealers, national securities
exchanges, credit unions, savings associations or other eligible
institutions. The specific institution must be 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.
The Funds and the transfer agent will use reasonable procedures to
verify that telephone requests are genuine, including recording
telephone instructions and sending written confirmations of the
transactions. Such procedures are necessary because the Funds and
transfer agent could be liable for losses due to unauthorized or
fraudulent telephone instructions. You should verify the accuracy of a
telephone instruction as soon as you receive the confirmation
statement. Telephone redemption and exchanges may be difficult to
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<PAGE>
implement in times of drastic economic or market changes. If you cannot
reach the transfer agent by telephone, you may mail or hand-deliver
requests to the transfer agent.
Because of the cost of maintaining smaller accounts, Norwest Advantage
Funds may redeem, upon not less than 60 days' written notice, any
account holding I Shares or Investor Shares with a net asset value of
less than $1,000 or any account holding Institutional Shares with a net
asset value of less than $100,000 immediately following any redemption.
REDEMPTION PROCEDURES
If you have invested directly in a Fund, you may redeem your shares as
described below. If you have invested through a financial institution,
you may redeem shares through the financial institution. If you wish to
redeem shares by telephone or receive redemption proceeds by bank wire,
you should complete the appropriate sections of the account
application. These privileges may not be available until several weeks
after the application is received. You may not redeem shares by
telephone if you have certificates for those shares.
REDEMPTION BY MAIL
You may redeem shares by sending a written request to the transfer
agent accompanied by any share certificate you have been issued. Sign
all requests and endorse all certificates with signatures guaranteed.
REDEMPTION BY TELEPHONE
If you have elected telephone redemption privileges, you may redeem
shares by telephoning the transfer agent at 1-800-338-1348 or
1-612-667-8833 and providing your shareholder account number, the exact
name in which the shares are registered and your Social Security number
or other taxpayer identification number. Norwest Advantage Funds will
mail a check to your record address or, if you have chosen wire
redemption privileges, wire the proceeds.
REDEMPTION BY BANK WIRE
If you have elected wire redemption privileges, you may request a Fund
to transmit redemption proceeds of more than $5,000 by federal funds
wire to a bank account you have designated in writing. You must have
chosen the telephone redemption privilege to request bank redemptions
by telephone. Redemption proceeds are transmitted by wire on the Fund
Business Day of, in the case of Money Market Funds, or after, in the
case of other Funds, the transfer agent receives a redemption request
in proper form.
EXCHANGES
If you hold I Shares or Institutional Shares, you may exchange those
shares for I Shares or Institutional Shares of other Funds offering
those shares. If you hold Investor Shares, you may exchange those
shares for Investor Shares of the Funds offering Investor Shares or for
a class of shares of certain of the Funds that is not offered by this
prospectus. Call or write the transfer agent for more information.
The Funds do not charge for exchanges, and there is currently no limit
on the number of exchanges you may make. The Funds, however, may limit
your ability to exchange shares if you exchange too often. Exchanges
are subject to the fees charged by, and the limitations (including
minimum investment restrictions) of the Fund into which you are
exchanging.
You may only exchange shares into a pre-existing account if that
account is identically registered. You must submit a new account
application if you wish to exchange shares into an account registered
differently or with different shareholder privileges. You may exchange
into a Fund only if that Fund's shares legally may be sold in your
state of residence.
The Funds and federal tax law treat an exchange as a redemption and a
purchase of shares. The Funds may amend or terminate exchange
procedures on 60 days' notice.
EXCHANGES BY MAIL
You may make an exchange by sending a written request to the transfer
agent accompanied by any share certificates for the shares to be
exchanged. Sign all written requests and endorse all certificates with
signature guaranteed.
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<PAGE>
EXCHANGES BY TELEPHONE
If you have telephone exchange privileges, you may make a telephone
exchange by calling the transfer agent at 1-800-338-1348 or
1-612-667-8833 and giving your account number, the exact name in which
the shares are registered and your Social Security number or other
taxpayer identification number.
DISTRIBUTIONS AND TAX MATTERS
DISTRIBUTIONS
Distributions of net investment income are declared and paid as
follows:
<TABLE>
<S> <C>
Declared daily and paid monthly: Each Money Market Fund, Limited Term Government Income Fund,
Income Fund, Total Return Bond Fund, and each Tax-Free Fixed
Income Fund.
Declared and paid monthly: Stable Income Fund, Intermediate Government Income Fund, and
Diversified Bond Fund.
Declared and paid quarterly: Income Equity Fund, ValuGrowth Stock Fund, and Small Company
Stock Fund.
Declared and paid annually:
Strategic Income Fund, each Balanced Fund, Index Fund,
Diversified Equity Fund, Growth Equity Fund, Large Company
Growth Fund, Diversified Small Cap Fund, Small Cap
Opportunities Fund, Small Company Growth Fund,and International
Fund.
</TABLE>
Each Fund's net capital gain, if any, is distributed at least
annually.
You have 3 choices for receiving distributions: the Reinvestment
Option, the Cash Option, and the Directed Dividend Option.
o Under the Reinvestment Option, all distributions of a Fund
are automatically invested in additional shares of that
Fund. You are automatically assigned this option unless you
select another option.
o Under the Cash Option, you are paid all distributions in
cash.
o Under the Directed Dividend Option, if you own $10,000 or
more of a Fund's shares in a single account, you can have
that Fund's distributions reinvested in shares of another
Fund. Call or write the transfer agent for more
information about the Directed Dividend Option.
All distributions are treated in the same manner for federal income tax
purposes whether received in cash or reinvested in shares of a Fund.
All distributions reinvested in a Fund are reinvested at the Fund's net
asset value as of the payment date of the distribution.
TAX MATTERS
The Funds are managed so that they do not owe federal income or excise
taxes. Distributions paid by a Fund out of its net investment income
(including net short-term capital gain) are taxable to shareholders as
ordinary income. Distributions of net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) are
taxable as long-term capital gain, regardless of how long a shareholder
has held shares in the Fund. If shares are sold at a loss after being
held for six months or less, the loss will be treated as long-term
capital loss to the extent of any distribution of net capital gain
received on those shares.
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<PAGE>
Distributions (other than distributions of net investment income of
Funds that distribute net investment income daily) reduce the net asset
value of the Fund paying the distribution by the amount of the
distribution. Furthermore, a distribution made shortly after you
purchase shares, although in effect a return of capital to you, is
taxable.
FUNDS INVESTING IN FOREIGN SECURITIES
If a Fund receives investment income from sources within foreign
countries, that income may be subject to foreign income or other taxes.
International Fund intends, if eligible to do so, to permit its
shareholders to take a credit (or a deduction) for foreign income and
other taxes paid by International Portfolio and Schroder EM Core
Portfolio. If you own shares of International Fund, you will be
notified of your share of those foreign taxes and will be required to
treat the amount of the foreign taxes as additional income. In that
event, you may be entitled to claim a credit or deduction for those
taxes on your federal income tax return.
TAX-EXEMPT DISTRIBUTIONS
Generally, you will not be subject to federal income tax on
distributions paid by Municipal Money Market Fund or by a Tax-Free
Fixed Income Fund out of tax-exempt interest income earned by the Fund
("exempt-interest distributions"). If you use, or are related to
someone who uses, facilities financed by private activity bonds held by
a Fund, you may be subject to federal income tax on your pro rata share
of the interest income from those securities and should consult your
tax adviser before purchasing shares. Interest on certain private
activity bonds is treated as an item of tax preference for purposes of
the federal AMT imposed on individuals and corporations. In addition,
exempt-interest distributions are included in the "adjusted current
earnings" of corporations for AMT purposes. As noted above, the
Municipal Money Market Fund and each Tax-Free Fixed Income Fund may
invest a portion of its assets in securities that generate income that
is not exempt from federal income tax. Further, capital gain, if any,
distributed by these Funds are subject to tax. If you borrow money to
purchase or carry shares of these Funds, the interest on your debt
generally is not deductible for federal income tax purposes. If shares
are sold at a loss after being held for six months or less, the loss
will be disallowed to the extent of any exempt-interest dividends
received on those shares.
MUNICIPAL MONEY MARKET FUND, LIMITED-TERM TAX-FREE FUND, and TAX-FREE
INCOME FUND. The federal income tax exemption on exempt-interest
distributions does not necessarily result in an exemption under the
income or other tax laws of any state or local taxing authority. You
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 you reside. You may, however, be
subject to tax on distributions of interest derived from the municipal
securities of other jurisdictions. Consult your tax adviser concerning
the application of state and local taxes to investments in a Fund that
may differ from the federal income tax consequences described above.
COLORADO TAX-FREE FUND. It is anticipated that substantially all of the
exempt interest distributions paid by the Fund to individuals will be
exempt from Colorado personal income tax. 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 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 AMT. Because the Fund may, except as indicated,
purchase only Colorado municipal securities, none of the
exempt-interest distributions paid by the Fund will be subject to
Colorado income tax.
MINNESOTA INTERMEDIATE TAX-FREE FUND and MINNESOTA TAX-FREE FUND. It is
anticipated that substantially all of the exempt-interest distributions
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 distributions paid by the Fund must be derived from
Minnesota municipal securities in order for any portion of the
exempt-interest distributions paid by the Fund to be exempt from the
Minnesota personal income tax. Exempt-interest distributions 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. This treatment would begin with the taxable years that begin
72
<PAGE>
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 AMT on resident individuals is based in part on their
income for purposes of the federal AMT. Accordingly, individual
shareholders of the Fund may be subject to the Minnesota AMT on
exempt-interest distributions paid by the Fund which are attributable
to interest received by the Fund on certain private activity
securities, even though those distributions are exempt from the regular
Minnesota personal income tax.
73
<PAGE>
OTHER INFORMATION
FUND REORGANIZATIONS
On March 25, 1999, the Board of Trustees of Norwest Advantage Funds approved the
reorganization of each Norwest Advantage Fund into a new portfolio of Wells
Fargo Funds Trust. The reorganizations are part of a plan to consolidate the
Stagecoach and Norwest Advantage fund families following the November 1998
merger of Wells Fargo & Company and Norwest Corporation. Norwest Advantage Funds
presented each proposed fund reorganization to the fund's shareholders for their
approval at a special shareholders' meeting that was held in August 1999.
THE SHAREHOLDERS OF EACH OF THE NORWEST ADVANTAGE FUNDS APPROVED THE FUND
REORGANIZATIONS AND EACH OF THE NORWEST ADVANTAGE FUNDS WILL REORGANIZE INTO A
CORRESPONDING WELLS FARGO FUNDS TRUST PORTFOLIO AS APPROVED BY THE FUNDS'
SHAREHOLDERS.
You may not purchase shares of the Wells Fargo Funds Trust portfolios until
after the reorganizations occur, but you currently may purchase shares of
substantially similar funds within the Stagecoach or Norwest Advantage fund
families.
THE FUNDS' REORGANIZATIONS (EXCEPT FOR THOSE OF READY CASH INVESTMENT FUND AND
MUNICIPAL MONEY MARKET FUND) ARE EXPECTED TO BE TAX-FREE TRANSACTIONS. READY
CASH INVESTMENT FUND'S AND MUNICIPAL MONEY MARKET FUND'S REORGANIZATIONS WILL
NOT BE TAX-FREE TRANSACTIONS, BUT ARE NOT EXPECTED TO RESULT IN TAX CONSEQUENCES
TO SHAREHOLDERS.
If you have any questions, you should call 1-800-394-0736.
<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand each Fund's
financial performance for 10 years or, if shorter, the Fund's operating history.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that an investor would have earned
on an investment in a Fund, assuming reinvestment of all distributions. The
information from June 1, 1994 through May 31, 1999, has been audited by
_____________________, independent auditors, whose reports dated July 16, 1998
about a Fund, along with the Fund's financial statements, are included in the
Fund's Annual Report, which is available at no charge upon request. These
financial statements are incorporated by reference into the SAI. Other
independent auditors audited information for prior periods.
THE MONEY MARKET FUNDS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net Realized
and Distributions Capital Ending
Beginning Net Net Unrealized from Net Contribution Net Asset
MONEY MARKET FUNDS - I SHARES Asset Value Investment Gain (Loss) Investment From Value Per
Per Share Income on Investments Income Adviser Share
- -----------------------------------------------------------------------------------------------------------------------------------
Cash Investment Fund
Year Ended May 31, 1999 $1.00 $0.049 -- ($0.049) -- $1.00
Year Ended May 31, 1998 $1.00 $0.053 -- ($0.053) -- $1.00
Year Ended May 31, 1997 $1.00 $0.051 -- ($0.051) -- $1.00
Year Ended May 31, 1996 $1.00 $0.054 -- ($0.054) -- $1.00
Year Ended May 31, 1995 $1.00 $0.049 -- ($0.049) -- $1.00
Year Ended May 31, 1994 $1.00 $0.031 -- ($0.031) -- $1.00
Year Ended May 31, 1993 $1.00 $0.033 -- ($0.033) -- $1.00
December 1, 1991 to May 31, 1992 $1.00 $0.021 -- ($0.021) -- $1.00
Year Ended November 30, 1991 $1.00 $0.061 -- ($0.061) -- $1.00
Year Ended November 30, 1990 $1.00 $0.079 -- ($0.079) -- $1.00
Year Ended November 30, 1989 $1.00 $0.088 -- ($0.088) -- $1.00
Year Ended November 30, 1988 $1.00 $0.071 -- ($0.071) -- $1.00
Ready Cash Investment Fund- Investor Shares
Year Ended May 31, 1999 $1.00 $0.046 -- ($0.046) -- $1.00
Year Ended May 31, 1998 $1.00 $0.050 -- ($0.050) -- $1.00
Year Ended May 31, 1997 $1.00 $0.047 -- ($0.047) -- $1.00
Year Ended May 31, 1996 $1.00 $0.051 -- ($0.051) -- $1.00
Year Ended May 31, 1995 $1.00 $0.045 -- ($0.045) -- $1.00
Year Ended May 31, 1994 $1.00 $0.027 -- ($0.027) -- $1.00
Year Ended May 31, 1993 $1.00 $0.030 -- ($0.030) -- $1.00
December 1, 1991 to May 31, 1992 $1.00 $0.020 -- ($0.020) -- $1.00
Year Ended November 30, 1991 $1.00 $0.058 -- ($0.058) -- $1.00
Year Ended November 30, 1990 $1.00 $0.076 -- ($0.076) -- $1.00
Year Ended November 30, 1989 $1.00 $0.085 -- ($0.085) -- $1.00
January 20, 1988(e) to November 30, 1988 $1.00 $0.059 -- ($0.059) -- $1.00
<PAGE>
Net Realized
And Distributions Capital Ending
Beginning Net Net Unrealized from Net Contribution Net Asset
Asset Value Investment Gain (Loss) Investment From Value Per
Per Share Income on Investments Income Adviser Share
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
U.S. Government Fund
Year Ended May 31, 1999 $1.00 $0.047 -- ($0.047) -- $1.00
Year Ended May 31, 1998 $1.00 $0.051 -- ($0.051) -- $1.00
Year Ended May 31, 1997 $1.00 $0.049 -- ($0.049) -- $1.00
Year Ended May 31, 1996 $1.00 $0.052 -- ($0.052) -- $1.00
Year Ended May 31, 1995 $1.00 $0.047 -- ($0.047) -- $1.00
Year Ended May 31, 1994 $1.00 $0.030 -- ($0.030) -- $1.00
Year Ended May 31, 1993 $1.00 $0.030 -- ($0.030) -- $1.00
December 1, 1991 to May 31, 1992 $1.00 $0.020 -- ($0.020) -- $1.00
Year Ended November 30, 1991 $1.00 $0.058 -- ($0.058) -- $1.00
Year Ended November 30, 1990 $1.00 $0.077 -- ($0.077) -- $1.00
Year Ended November 30, 1989 $1.00 $0.085 -- ($0.085) -- $1.00
Year Ended November 30, 1988 $1.00 $0.069 -- ($0.069) -- $1.00
Treasury Plus Fund
July 6, 1998(e) to May 31, 1999 $1.00 $0.033 -- ($0.033) -- $1.00
Treasury Fund
Year Ended May 31, 1999 $1.00 $0.044 -- ($0.044) -- $1.00
Year Ended May 31, 1998 $1.00 $0.049 -- ($0.049) -- $1.00
Year Ended May 31, 1997 $1.00 $0.047 -- ($0.047) -- $1.00
Year Ended May 31, 1996 $1.00 $0.050 -- ($0.050) -- $1.00
Year Ended May 31, 1995 $1.00 $0.046 -- ($0.046) -- $1.00
Year Ended May 31, 1994 $1.00 $0.028 -- ($0.028) -- $1.00
Year Ended May 31, 1993 $1.00 $0.029 -- ($0.029) -- $1.00
December 1, 1991 to May 31, 1992 $1.00 $0.020 -- ($0.020) -- $1.00
December 3, 1990(e) to November 30, 1991 $1.00 $0.058 -- ($0.058) -- $1.00
<PAGE>
Municipal Money Market Fund
<PAGE>
Investor Shares
Year Ended May 31, 1999 $1.00 $0.027 -- ($0.027) -- $1.00
Year Ended May 31, 1998 $1.00 $0.031 -- ($0.031) -- $1.00
Year Ended May 31, 1997 $1.00 $0.030 -- ($0.030) -- $1.00
Year Ended May 31, 1996 $1.00 $0.033 -- ($0.033) -- $1.00
Year Ended May 31, 1995 $1.00 $0.031 ($0.004) ($0.031) $0.004 $1.00
Year Ended May 31, 1994 $1.00 $0.021 -- ($0.021) -- $1.00
Year Ended May 31, 1993 $1.00 $0.021 -- ($0.021) -- $1.00
December 1, 1991 to May 31, 1992 $1.00 $0.014 -- ($0.014) -- $1.00
Year Ended November 30, 1991 $1.00 $0.042 -- ($0.042) -- $1.00
Year Ended November 30, 1990 $1.00 $0.053 -- ($0.053) -- $1.00
Year Ended November 30, 1989 $1.00 $0.058 -- ($0.058) -- $1.00
January 7, 1988(e) to November 30, 1988 $1.00 $0.042 -- ($0.042) -- $1.00
Institutional Shares
Year Ended May 31, 1998 $1.00 $0.029 -- ($0.029) -- $1.00
Year Ended May 31, 1998 $1.00 $0.033 -- ($0.033) -- $1.00
Year Ended May 31, 1997 $1.00 $0.032 -- ($0.032) -- $1.00
Year Ended May 31, 1996 $1.00 $0.035 -- ($0.035) -- $1.00
Year Ended May 31, 1995 $1.00 $0.033 ($0.004) ($0.033) $0.004 $1.00
August 3, 1993(e) to May 31, 1994 $1.00 $0.019 -- ($0.019) -- $1.00
- ----------------------------------------------------------------------------------------------
Ratio to Average
Net Assets
--------------------------------------
Net Net Assets at
MONEY MARKET FUNDS - I SHARES Investment Net Gross Total End of Period
Income Expenses Expenses(a) Return(b) (000's Omitted
- ------------------------------------------------------------------------------------------------------------------------------
Cash Investment Fund
Year Ended May 31, 1999 4.91%(d) 0.48%(d) 0.57%(d) 5.04% $5,481,802
Year Ended May 31, 1998 5.29%(d) 0.48%(d) 0.57% (d) 5.42% $4,685,818
Year Ended May 31, 1997 5.07% 0.48% 0.49% 5.21% $2,147,894
Year Ended May 31, 1996 5.36% 0.48% 0.49% 5.50% $1,739,549
Year Ended May 31, 1995 4.87% 0.48% 0.50% 4.96% $1,464,304
Year Ended May 31, 1994 3.11% 0.49% 0.49% 3.16% $1,381,402
Year Ended May 31, 1993 3.29% 0.50% 0.51% 3.36% $1,944,948
December 1, 1991 to May 31, 1992 4.23%(c) 0.50%(c) 0.56%(c) 4.29%(c) $1,292,196
Year Ended November 30, 1991 6.11% 0.51% 0.54% 6.31% $1,004,979
Year Ended November 30, 1990 7.92% 0.45% 0.57% 8.22% $747,744
Year Ended November 30, 1989 8.81% 0.45% 0.64% 9.22% $662,698
Year Ended November 30, 1988 7.00% 0.43% 0.74% 7.32% $316,349
Ready Cash Investment Fund- Investor Shares
Year Ended May 31, 1999 4.46%(d) 0.82%(d) 0.82%(d) 4.68% $953,175
Year Ended May 31, 1998 4.95%(d) 0.82%(d) 0.82%(d) 5.07% $789,380
Year Ended May 31, 1997 4.75% 0.82% 0.83% 4.87% $576,011
Year Ended May 31, 1996 5.02% 0.82% 0.87% 5.17% $473,879
Year Ended May 31, 1995 4.64% 0.82% 0.91% 4.62% $268,603
Year Ended May 31, 1994 2.70% 0.82% 0.92% 2.74% $164,138
Year Ended May 31, 1993 3.04% 0.82% 0.94% 3.08% $162,585
December 1, 1991 to May 31, 1992 4.01%(c) 0.82%(c) 0.93%(c) 4.05%(c) $176,378
Year Ended November 30, 1991 5.81% 0.82% 0.96% 5.98% $183,775
Year Ended November 30, 1990 7.56% 0.82% 0.97% 7.83% $166,911
Year Ended November 30, 1989 8.51% 0.81% 0.99% 8.86% $144,117
January 20, 1988(e) to November 30, 1988 7.11%(c) 0.77%(c) 1.13%(c) 6.97%(c) $46,736
<PAGE>
Ratio to Average
Net Assets
--------------------------------------
Net Net Assets at
Investment Net Gross Total End of Period
Income Expenses Expenses(a) Return(b) (000's Omitted)
- -------------------------------------------------------------------------------------------------------------------------------
<PAGE>
U.S. Government Fund
Year Ended May 31, 1999 4.69% 0.50% 0.52% 4.81% $3,368,534
Year Ended May 31, 1998 5.08% 0.50% 0.51% 5.20% $2,260,208
Year Ended May 31, 1997 4.91% 0.49% 0.49% 5.04% $1,912,574
Year Ended May 31, 1996 5.13% 0.50% 0.51% 5.27% $1,649,721
Year Ended May 31, 1995 4.68% 0.50% 0.52% 4.81% $1,159,421
Year Ended May 31, 1994 3.02% 0.47% 0.53% 3.07% $1,091,141
Year Ended May 31, 1993 3.00% 0.45% 0.57% 3.06% $903,274
December 1, 1991 to May 31, 1992 3.99%(c) 0.45%(c) 0.61%(c) 4.07%(c) $623,685
Year Ended November 30, 1991 5.84% 0.45% 0.60% 6.00% $469,487
Year Ended November 30, 1990 7.66% 0.45% 0.61% 7.94% $500,794
Year Ended November 30, 1989 8.51% 0.45% 0.65% 8.87% $394,137
Year Ended November 30, 1988 6.87% 0.42% 0.73% 7.13% $254,104
Treasury Plus Fund
July 6, 1998(e) to May 31, 1999 4.25%(c) 0.50%(c) 0.84%(c) 3.30% $92,139
Treasury Fund
Year Ended May 31, 1999 4.34% 0.46% 0.53% 4.49% $1,548,549
Year Ended May 31, 1998 4.89% 0.46% 0.54% 5.00% $1,440,515
Year Ended May 31, 1997 4.74% 0.46% 0.53% 4.87% $1,003,697
Year Ended May 31, 1996 4.91% 0.46% 0.56% 5.04% $802,270
Year Ended May 31, 1995 4.62% 0.46% 0.57% 4.65% $661,098
Year Ended May 31, 1994 2.81% 0.46% 0.58% 2.83% $526,483
Year Ended May 31, 1993 2.93% 0.47% 0.58% 2.98% $384,751
December 1, 1991 to May 31, 1992 4.01%(c) 0.47%(c) 0.59%(c) 4.07%(c) $374,492
December 3, 1990(e) to November 30, 1991 5.62%(c) 0.31%(c) 0.66%(c) 6.02%(c) $354,200
<PAGE>
Municipal Money Market Fund
<PAGE>
Investor Shares
Year Ended May 31, 1999 2.72% 0.65% 0.86% 2.76% $41,174
Year Ended May 31, 1998 3.13% 0.65% 0.83% 3.18% $44,070
Year Ended May 31, 1997 3.01% 0.65% 0.87% 3.08% $54,616
Year Ended May 31, 1996 3.25% 0.65% 0.88% 3.31% $57,021
Year Ended May 31, 1995 3.10% 0.65% 0.93% 3.13%(f) $47,424
Year Ended May 31, 1994 2.03% 0.65% 0.99% 2.09% $33,554
Year Ended May 31, 1993 2.13% 0.65% 0.97% 2.18% $75,521
December 1, 1991 to May 31, 1992 2.81%(c) 0.63%(c) 0.96%(c) 2.89%(c) $82,678
Year Ended November 30, 1991 4.10% 0.64% 1.08% 4.26% $66,327
Year Ended November 30, 1990 5.34% 0.64% 1.16% 5.48% $29,801
Year Ended November 30, 1989 5.78% 0.62% 1.15% 5.94% $18,639
January 7, 1988(e) to November 30, 1988 4.64%(c) 0.60%(c) 1.20%(c) 4.76%(c) $8,963
Institutional Shares
Year Ended May 31, 1998 2.91% 0.45% 0.57% 2.97% $1,019,589
Year Ended May 31, 1998 3.32% 0.45% 0.59% 3.39% $977,693
Year Ended May 31, 1997 3.21% 0.45% 0.70% 3.28% $635,655
Year Ended May 31, 1996 3.41% 0.45% 0.72% 3.52% $592,436
Year Ended May 31, 1995 3.37% 0.45% 0.74% 3.33%(f) $278,953
August 3, 1993(e) to May 31, 1994 2.33%(c) 0.45%(c) 0.77%(c) 2.34%(c) $190,356
- ----------------------------------------------------------------------------------------------
</TABLE>
(a) The ratio of Gross Expenses to Average Net Assets does not reflect fee
waivers or expense reimbursements.
(b) Total Return would have been lower absent expense reimbursements and fee
waivers.
(c) Annualized.
(d) Includes expenses allocated from the Portfolio(s) in which the Fund invests.
(e) Commencement of operations; Municipal Money Market Fund's initial class
became Investor Shares.
(f) Total Return for 1995 includes the effect of a capital contribution from
Norwest Bank. Without the capital contribution, total return would have been
2.59% for Investor Shares and 2.79% for Institutional Shares.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net Realized
and DistributionDistributions Ending
Beginning Net Unrealized from Net from Net Net Asset
Net
FIXED INCOME FUNDS - I SHARES Asset Value Investment Gain (Loss) Investment Realized Value Per
Per Share Income on Investments Income Gain Share
- ----------------------------------------------------------------------------------------------------------------------------
Stable Income Fund
Year Ended May 31, 1999 $10.30 $0.52 ($0.02) ($0.53) -- $10.27
Year Ended May 31, 1998 $10.24 $0.58 $0.05 ($0.57) -- $10.30
Year Ended May 31, 1997 $10.20 $0.58 $0.04 ($0.58) -- $10.24
November 1, 1995 to May 31, 1996 $10.72 $0.28 $0.03 ($0.77) ($0.06) $10.20
November 11, 1994(e) to October 31, 1995 $10.00 $0.50 $0.22 -- -- $10.72
Limited Term Government Income Fund
Year Ended May 31, 1999 $9.88 $0.58 ($0.12) ($0.58) (40.05) $9.71
October 1, 1997(e) to May 31, 1998 $10.00 $0.38 ($0.11) ($0.38) ($0.01) $9.88
Year Ended May 31, 1999 $11.22 $0.66 ($0.18) ($0.65) -- $11.05
Year Ended May 31, 1998 $10.84 $0.71 $0.37 ($0.70) -- $11.22
Year Ended May 31, 1997 $10.89 $0.72 ($0.04) ($0.73) -- $10.84
November 1, 1995 to May 31, 1996 $12.40 $0.40 $0.53 ($1.32) ($1.12) $10.89
November 11, 1994(e) to October 31, $11.11 $0.93 $0.36 -- -- $12.40
1995(g)
Diversified Bond Fund
Year Ended May 31, 1999 $27.03 $1.34 ($0.17) ($1.43) ($0.66 $26.11
Year Ended May 31, 1998 $25.60 $1.61 $1.51 ($1.66) ($0.03) $27.03
Year Ended May 31, 1997 $26.03 $1.59 $0.01 ($1.69) ($0.34) $25.60
November 1, 1995 to May 31, 1996 $27.92 $1.07 ($0.99) ($1.67) ($0.30) $26.03
November 11, 1994(e) to October 31, 1995 $25.08 $1.65 $1.19 -- -- $27.92
Income Fund
Year Ended May 31, 1999 $9.78 $0.59 ($0.31) ($0.59) -- $9.47
Year Ended May 31, 1998 $9.27 $0.61 $0.51 ($0.61) -- $9.78
Year Ended May 31, 1997 $9.26 $0.62 $0.01 ($0.62) -- $9.27
Year Ended May 31, 1996 $9.62 $0.61 ($0.36) ($0.61) -- $9.26
Year Ended May 31, 1995 $9.51 $0.65 $0.11 ($0.65) -- $9.62
August 2, 1993(e) to May 31, 1994 $10.68 $0.58 ($0.91) ($0.58) ($0.26) $9.51
Total Return Bond Fund
Year Ended May 31, 1999 $9.64 $0.56 ($0.24) ($0.56) ($0.22) $9.18
Year Ended May 31, 1998 $9.41 $0.59 $0.28 ($0.59) ($0.05) $9.64
Year Ended May 31, 1997 $9.40 $0.60 $0.04 ($0.60) ($0.03) $9.41
Year Ended May 31, 1996 $9.73 $0.64 ($0.31) ($0.64) ($0.02) $9.40
Year Ended May 31, 1995 $9.54 $0.67 $0.19 ($0.67) -- $9.73
December 31, 1993(e) to May 31, 1994 $10.00 $0.27 ($0.46) ($0.27) -- $9.54
<PAGE>
Net Realized
And DistributionDistributions Ending
Beginning Net Unrealized from Net from Net Net Asset
Net
Asset Value Investment Gain (Loss) Investment Realized Value Per
Per Share Income on Investments Income Gain Share
Strategic Income Fund(i)
Year Ended May 31, 1999 $19.56 $0.82 $0.81 ($0.84) ($0.37) $19.98
Year Ended May 31, 1998 $18.47 $0.79 $1.75 ($0.86) ($0.59) $19.56
Year Ended May 31, 1997 $18.12 $0.97 $0.71 ($0.95) ($0.38) $18.47
November 1, 1995 to May 31, 1996 $18.21 $0.48 $0.42 ($0.76) ($0.23) $18.12
November 11, 1994(e) to October 31, 1995 $16.19 $0.75 $1.27 -- -- $18.21
Ratio to Average
Net Assets
---------------------------------------
Net Portfolio Net Assets at
FIXED INCOME FUNDS - I SHARES Investment Net Gross Total Turnover End of Period
Income (Loss) Expenses Expenses(a) Return(b) Rate (000's Omitted)
- -----------------------------------------------------------------------------------------------------------------------------------
Stable Income Fund
Year Ended May 31, 1999 5.10%(c) 0.65%(c) 0.76%(c) 4.95% 29.46%(d) $179,201
Year Ended May 31, 1998 5.69%(c) 0.65%(c) 0.76%(c) 6.28% 37.45%(d) $144,215
Year Ended May 31, 1997 5.73% 0.65% 0.79% 6.24% 41.30% $111,030
November 1, 1995 to May 31, 1996 5.74%(f) 0.65%(f) 0.92%(f) 2.97% 109.95% $83,404
November 11, 1994(e) to October 31, 1995 5.91%(f) 0.65%(f) 0.98%(f) 7.20% 115.85% $48,087
Limited Term Government Income Fund
Year Ended May 31, 1999 5.78% 0.42% 0.81% 4.63% 19.20% $80,518
October 1, 1997(e) to May 31, 1998 5.78%(f) 0.40%(f) 0.89%(f) 4.42% 99.49% $66,113
Intermediate Government Income Fund
Year Ended May 31, 1999 5.77% 0.68% 0.72% 4.30% 123.61% $420,305
Year Ended May 31, 1998 6.35% 0.68% 0.72% 10.19% 96.76% $400,346
Year Ended May 31, 1997 6.57% 0.68% 0.72% 6.36% 183.05% $371,278
November 1, 1995 to May 31, 1996 6.71%(f) 0.71%(f) 1.17%(f) 0.60% 74.64% $399,324
November 11, 1994(e) to October 31, 7.79%(f) 0.68%(f) 0.93%(f) 11.58% 240.90% $50,213
1995(g)
Diversified Bond Fund
Year Ended May 31, 1999 5.58%(c) 0.70%(c) 1.07%(c) 4.15% N/A(h) $179,133
Year Ended May 31, 1998 5.98%(c) 0.70%(c) 1.02%(c) 12.39% N/A(h) $134,831
Year Ended May 31, 1997 6.19% 0.70% 0.77% 6.23% 57.19% $162,310
November 1, 1995 to May 31, 1996 6.78%(f) 0.70%(f) 0.77%(f) 0.22% 118.92% $167,159
November 11, 1994(e) to October 31, 1995 5.87%(f) 0.67%(f) 0.82%(f) 11.32% 58.90% $171,453
Income Fund
Year Ended May 31, 1999 6.00% 0.75% 0.92% 2.81% 202.22% $348,472
Year Ended May 31, 1998 6.32% 0.75% 0.95% 12.35% 167.09% $290,566
Year Ended May 31, 1997 6.59% 0.75% 1.02% 6.90% 231.00% $258,207
Year Ended May 31, 1996 6.30% 0.75% 1.06% 2.58% 270.17% $271,157
Year Ended May 31, 1995 7.02% 0.75% 1.06% 8.49% 98.83% $109,994
August 2, 1993(e) to May 31, 1994 6.75%(f) 0.61%(f) 1.09%(f) (4.04%)(f) 26.67% $93,665
Total Return Bond Fund
Year Ended May 31, 1999 5.88%(c) 0.75%(c) 0.98%(c) 3.26% 48.43%(d) $85,857
Year Ended May 31, 1998 6.14%(c) 0.75%(c) 0.86%(c) 9.45% 134.56%(d) $109,084
Year Ended May 31, 1997 6.36% 0.75% 1.05% 6.95% 55.07% $125,437
Year Ended May 31, 1996 6.57% 0.75% 1.07% 3.41% 77.49% $120,767
Year Ended May 31, 1995 7.04% 0.71% 1.17% 9.43% 35.19% $96,199
December 31, 1993(e) to May 31, 1994 6.81%(f) 0.46%(f) 2.10%(f) (4.62%)(f) 37.50% $11,694
<PAGE>
Ratio to
Average
Net Assets
Net Portfolio Net Assets at
Investment Net Gross Total Turnover End of Period
Income(c) Expenses(c) Expenses(a)(c) Return(b) Rate (000's Omitted)
Strategic Income Fund(i)
Year Ended May 31, 1999 4.22% 0.80% 1.04% 8.45% N/A(h) $263,328
Year Ended May 31, 1998 4.47% 0.80% 1.03% 14.13% N/A(h) $235,254
Year Ended May 31, 1997 4.38% 0.81% 0.98% 9.58% 72.03% $128,777
November 1, 1995 to May 31, 1996 4.65%(f) 0.82%(f) 0.97%(f) 5.14% 56.47% $146,950
November 11, 1994(e) to October 31, 1995 4.67%(f) 0.82%(f) 1.03%(f) 12.48% 65.53% $136,710
</TABLE>
(a) The ratio of Gross Expenses to Average Net Assets does not reflect fee
waivers or expense reimbursements.
(b) Total Return would have been lower absent expense reimbursements and fee
waivers.
(c) Includes expenses allocated from the Portfolio(s) in which the Fund invests.
(d) Reflects the activity of the Portfolio(s) in which the Fund invests.
(e) Commencement of operations.
(f) Annualized.
(g) Adjusted for a five to one stock split.
(h) Portfolio Turnover Rate is not applicable as the Fund invested in more than
one Portfolio.
(i) Prior to October 1, 1997, Strategic Income Fund was named Conservative
Balanced Fund.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net Realized
and DistributionDistributions Ending
TAX-FREE FIXED Beginning Net Unrealized from Net from Net Net Asset
Net
INCOME FUNDS - I SHARES Asset Value Investment Gain (Loss) Investment Realized Value Per
Per Share Income On Investments Income Gain Share
- ------------------------------------------------------------------------------------------------------------------------------
Limited Term Tax-Free Fund
Year Ended May 31, 1999 $10.59 $0.46 ($0.04) ($0.47) -- $10.54
Year Ended May 31, 1998 $10.39 $0.47 $0.21 ($0.47) ($0.01) $10.59
October 1, 1996(c) to May 31, 1997 $10.00 $0.31 $0.39 ($0.31) -- $10.39
Tax-Free Income Fund
Year Ended May 31, 1999 $10.54 $0.52 ($0.10) ($0.51) ($0.01) $10.44
Year Ended May 31, 1998 $10.06 $0.53 $0.48 ($0.53) -- $10.54
Year Ended May 31, 1997 $9.78 $0.54 $0.28 ($0.54) -- $10.06
Year Ended May 31, 1996 $9.82 $0.55 ($0.04) ($0.55) -- $9.78
Year Ended May 31, 1995 $9.60 $0.55 $0.22 ($0.55) -- $9.82
August 2, 1993(c) to May 31, 1994 $10.14 $0.47 ($0.47) ($0.47) ($0.07) $9.60
Colorado Tax-Free Fund
Year Ended May 31, 1999 $10.69 $0.51 ($0.10) ($0.51) ($0.04) $10.55
Year Ended May 31, 1998 $10.22 $0.53 $0.47 ($0.53) -- $10.69
Year Ended May 31, 1997 $9.89 $0.54 $0.33 ($0.54) -- $10.22
Year Ended May 31, 1996 $9.90 $0.53 ($0.01) ($0.53) -- $9.89
Year Ended May 31, 1995 $9.69 $0.48 $0.21 ($0.48) -- $9.90
August 23, 1993(c) to May 31, 1994 $10.22 $0.39 ($0.52) ($0.39) ($0.01) $9.69
Minnesota Intermediate Tax-Free Fund
Year Ended May 31, 1999 $10.03 $0.49 ($0.09) ($0.49) ($0.03) $9.91
October 1, 1997(c) to May 31, 1998 $10.00 $0.33 $0.03 ($0.33) -- $10.03
Minnesota Tax-Free Fund
Year Ended May 31, 1999 $11.05 $0.52 ($0.09) ($0.51) ($0.01) $10.96
Year Ended May 31, 1998 $10.57 $0.53 $0.48 ($0.53) -- $11.05
Year Ended May 31, 1997 $10.30 $0.54 $0.27 ($0.54) -- $10.57
Year Ended May 31, 1996 $10.45 $0.56 ($0.15) ($0.56) -- $10.30
Year Ended May 31, 1995 $10.16 $0.53 $0.29 ($0.53) -- $10.45
August 2, 1993(c) to May 31, 1994 $10.74 $0.43 ($0.39) ($0.43) ($0.19) $10.16
- -------------------------------------------------------------------------------------
Ratio to Average
Net Assets
-------------------------------------
TAX-FREE FIXED Net Portfolio Net Asstes at
INCOME FUNDS - I SHARES Investment Net Gross Total Turnover End of Period
Income Expenses Expenses(a) Return(b) Rate (000's Omitted)
- ---------------------------------------------------------------------------------------------------------------------------------
Limited Term Tax-Free Fund
Year Ended May 31, 1999 4.26% 0.65% 1.04% 3.97% 40.56% $88,223
Year Ended May 31, 1998 4.47% 0.65% 1.03% 6.70% 46.06% $54,602
October 1, 1996(c) to May 31, 1997 4.45%(d) 0.65%(d) 1.27%(d) 6.99% 16.39% $40,990
Tax-Free Income Fund
Year Ended May 31, 1999 4.83% 0.60% 0.91% 4.04% 105.53% $311,757
Year Ended May 31, 1998 5.09% 0.60% 0.92% 10.22% 142.81% $286,734
Year Ended May 31, 1997 5.40% 0.50% 1.03% 8.54% 152.33% $259,861
Year Ended May 31, 1996 5.57% 0.32% 1.06% 5.29% 126.20% $276,159
Year Ended May 31, 1995 5.84% 0.60% 1.05% 8.42% 130.90% $94,454
August 2, 1993(c) to May 31, 1994 5.71%(d) 0.60%(d) 1.10%(d) (0.21%)(d) 116.54% $102,084
Colorado Tax-Free Fund
Year Ended May 31, 1999 4.71% 0.60% 0.99% 3.79% 76.62% $48,926
Year Ended May 31, 1998 5.01% 0.60% 1.01% 9.97% 69.87% $32,342
Year Ended May 31, 1997 5.35% 0.45% 1.13% 9.00% 129.26% $25,917
Year Ended May 31, 1996 5.30% 0.30% 1.13% 5.35% 171.41% $24,074
Year Ended May 31, 1995 5.08% 0.30% 1.16% 7.47% 47.88% $24,539
August 23, 1993(c) to May 31, 1994 5.03%(d) 0.11%(d) 1.21%(d) 0.90%(d) 40.92% $15,153
Minnesota Intermediate Tax-Free Fund
Year Ended May 31, 1999 4.84% 0.60% 0.68% 3.95% 19.54% $222,953
October 1, 1997(c) to May 31, 1998 5.02%(d) 0.60%(d) 0.72%(d) 3.61% 15.13% $209,685
Minnesota Tax-Free Fund
Year Ended May 31, 1999 4.62% 0.60% 1.00% 3.96% 24.84% $27,261
Year Ended May 31, 1998 4.84% 0.60% 1.04% 9.71% 68.27% $20,736
Year Ended May 31, 1997 5.12% 0.60% 1.23% 7.98% 96.68% $11,135
Year Ended May 31, 1996 5.24% 0.51% 1.30% 3.97% 77.10% $3,988
Year Ended May 31, 1995 5.29% 0.48% 1.58% 8.44% 139.33% $1,799
August 2, 1993(c) to May 31, 1994 4.90%(d) 0.61%(d) 1.54%(d) 0.29%(d) 84.23% $872
- -------------------------------------------------------------------------------------
</TABLE>
(a) The ratio of Gross Expenses to Average Net Assets does not reflect fee
waivers or expense reimbursements.
(b) Total Return would have been lower absent expense reimbursements and fee
waivers.
(c) Commencement of operations.
(d) Annualized.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net Realized
And DistributionDistributions Ending
Beginning Net Net Unrealized from Net from Net Net Asset
BALANCED FUNDS - I SHARES Asset Value Investment Gain (Loss) Investment Realized Value Per
Per Share Income on Investments Income Gain Share
- ----------------------------------------------------------------------------------------------------------------------------------
Moderate Balanced Fund
Year Ended May 31, 1999 $22.98 $0.85 $1.94 ($0.75) ($0.78) $24.14
Year Ended May 31, 1998 $21.59 $0.80 $2.72 ($0.86) ($1.27) $22.98
Year Ended May 31, 1997 $20.27 $0.77 $1.60 ($0.76) ($0.29) $21.59
November 1, 1995 to May 31, 1996 $19.84 $0.46 $0.89 ($0.66) ($0.26) $20.27
November 11, 1994(e) to October 31, 1995 $17.25 $0.65 $1.94 -- -- $19.84
Growth Balanced Fund
Year Ended May 31, 1999 $28.06 $0.60 $3.88 ($0.58) ($1.03) $30.93
Year Ended May 31, 1998 $24.77 $0.58 $4.52 ($0.60) ($1.21) $28.06
Year Ended May 31, 1997 $22.83 $0.62 $2.86 ($0.63) ($0.91) $24.77
November 1, 1995 to May 31, 1996 $21.25 $0.31 $1.95 ($0.51) ($0.17) $22.83
November 11, 1994(e) to October 31, 1995 $17.95 $0.47 $2.83 -- -- $21.25
Aggressive Balanced-Equity Fund
Year Ended May 31, 1999 $11.04 $0.15 $1.83 ($0.09) -- $12.93
December 2, 1997(e) to May 31, 1998 $10.00 $0.06 $0.99 ($0.01) -- $11.04
Ratio to Average
Net Assets
---------------------------------------
Net Portfolio Net Assets
at
BALANCED FUNDS - I SHARES Investment Net Gross Total Turnover End of
Period
Income(a) Expenses(a) Expenses(a)(b) Return(c) Rate (000's
Omitted)
- -----------------------------------------------------------------------------------------------------------------------------------
Moderate Balanced Fund
Year Ended May 31, 1999 3.26% 0.88% 1.09% 12.02% N/A(f) $527,693
Year Ended May 31, 1998 3.57% 0.88% 1.05% 17.04% N/A(f) $464,384
Year Ended May 31, 1997 3.70% 0.88% 1.04% 12.04% 45.33% $418,680
November 1, 1995 to May 31, 1996 3.95%(d) 0.90%(d) 1.04%(d) 7.03% 52.71% $398,005
November 11, 1994(e) to October 31, 1995 3.76%(d) 0.92%(d) 1.11%(d) 15.01% 62.08% $373,998
Growth Balanced Fund
Year Ended May 31, 1999 2.16% 0.93% 1.13% 16.38% N/A(f) $850,503
Year Ended May 31, 1998 2.38% 0.93% 1.09% 21.40% N/A(f) $665,758
Year Ended May 31, 1997 2.47% 0.94% 1.16% 15.81% 24.33% $503,382
November 1, 1995 to May 31, 1996 2.66%(d) 0.98%(d) 1.16%(d) 10.87% 38.78% $484,641
November 11, 1994(e) to October 31, 1995 2.63%(d) 0.99%(d) 1.23%(d) 18.38% 41.04% $374,892
Aggressive Balanced-Equity Fund
Year Ended May 31, 1999 1.34% 1.00% 1.36% 17.98% N/A(f) $31,975
December 2, 1997(e) to May 31, 1998 1.58%(d) 1.00%(d) 2.29%(d) 10.55% N/A(f) $8,872
</TABLE>
(a) Includes expenses allocated from the Portfolios in which the Fund invests.
(b) The ratio of Gross Expenses to Average Net Assets does not reflect fee
waivers or expense reimbursements.
(c) Total Return would have been lower absent expense reimbursements and fee
waivers.
(d) Annualized.
(e) Commencement of operations.
(f) Portfolio Turnover Rate is not applicable as the fund invested in more than
one Portfolio
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Net Realized
and DistributionDistributions Ending
Beginning Net Net Unrealized from Net from Net Return Net Asset
EQUITY FUNDS - I SHARES Asset Value Investment Gain (Loss) Investment Realized of Value Per
Per Share Income (Loss) on Investments Income Gain Capital Share
- -----------------------------------------------------------------------------------------------------------------------------------
Index Fund
Year Ended May 31, 1999 $46.63 $0.57 $8.87 ($0.57) ($0.40) -- $54.83
Year Ended May 31, 1998 $39.49 $0.58 $10.74 ($0.65) ($3.80) -- $46.36
Year Ended May 31, 1997 $31.49 $0.49 $8.50 ($0.48) ($0.51) -- $39.49
November 1, 1995 to May 31, 1996 $27.67 $0.36 $4.08 ($0.43) ($0.19) -- $31.49
November 11, 1994(f) to October 31, $21.80 $0.45 $5.42 -- -- -- $27.67
1995
Income Equity Fund
Year Ended May 31, 1999 $41.18 $0.51 $5.45 ($0.53) ($0.26) -- $46.35
Year Ended May 31, 1998 $33.16 $0.52 $8.76 ($0.54) ($0.72) -- $41.18
Year Ended May 31, 1997 $27.56 $0.56 $5.55 ($0.51) -- -- $33.16
November 1, 1995 to May 31, 1996 $24.02 $0.29 $4.02 ($0.69) ($0.08) -- $27.56
November 11, 1994(f) to October 31, $18.90 $0.46 $4.66 -- -- -- $24.02
1995
ValuGrowth Stock Fund
Year Ended May 31, 1999 $26.15 0.25 ($0.40) ($0.13) ($4.51) -- $21.36
Year Ended May 31, 1998 $25.03 $0.06 $4.76 ($0.16) ($3.54) -- $26.15
Year Ended May 31, 1997 $22.61 $0.16 $4.80 ($0.13) ($2.41) -- $25.03
Year Ended May 31, 1996 $18.80 $0.14 $3.91 ($0.12) ($0.12) -- $22.61
Year Ended May 31, 1995 $17.16 $0.18 $1.64 ($0.18) -- -- $18.80
August 2, 1993(f) to May 31, 1994 $16.91 $0.13 $0.46 ($0.12) ($0.22) -- $17.16
Diversified Equity Fund
Year Ended May 31, 1999 $43.06 $0.22 $6.15 ($0.20) ($0.98) -- $48.25
Year Ended May 31, 1998 $36.50 $0.22 $8.94 ($0.27) ($2.33) -- $43.06
Year Ended May 31, 1997 $30.55 $0.25 $6.05 ($0.16) ($0.19) -- $36.50
November 1, 1995 to May 31, 1996 $27.53 $0.16 $4.25 ($0.42) ($0.97) -- $30.55
November 11, 1994(f) to October 31, $22.21 $0.22 $5.10 -- -- -- $27.53
1995
Growth Equity Fund
Year Ended May 31, 1999 $35.72 ($0.03) $2.58 ($0.03) ($2.07) -- $36.17
Year Ended May 31, 1998 $32.48 ($0.04) $6.86 ($0.04) ($3.54) -- $35.72
Year Ended May 31, 1997 $29.08 ($0.02) $4.05 ($0.04) ($0.59) -- $32.48
November 1, 1995 to May 31, 1996 $26.97 -- $4.09 ($0.12) ($1.86) -- $29.08
November 11, 1994(f) to October 31, $22.28 ($0.02) $4.71 -- -- -- $26.97
1995
<PAGE>
Net Realized
and DistributionDistributions Ending
Beginning Net Net Unrealized from Net from Net Return Net Asset
EQUITY FUNDS - I SHARES Asset Value Investment Gain (Loss) Investment Realized of Value Per
Per Share Income (Loss) on Investments Income Gain Capital Share
- ----------------------------------------------------------------------------------------------------------------------------------
Large Company Growth Fund
Year Ended May 31, 1999 $39.94 ($0.17) $15.95 -- ($1.05) -- $54.67
Year Ended May 31, 1998 $32.63 ($0.11) $10.20 -- ($2.78) -- $39.94
Year Ended May 31, 1997 $26.97 ($0.03) $5.91 -- ($0.22) -- $32.63
November 1, 1995 to May 31, 1996 $23.59 ($0.04) $3.64 -- ($0.22) -- $26.97
November 11, 1994(f) to October 31, $18.50 ($0.05) $5.14 -- -- -- $23.59
1995
Diversified Small Cap Fund
Year Ended May 31, 1999 $10.52 -- ($1.53) --(h) -- -- $8.99
December 31, 1997(e) to May 31, 1998 $10.00 -- $0.52 -- -- -- $10.52
Small Company Stock Fund
Year Ended May 31, 1999 $11.93 ($0.01) ($3.24) -- -- -- $8.68
Year Ended May 31, 1998 $13.88 ($0.09) $1.11 -- ($2.90) ($0.07) $11.93
Year Ended May 31, 1997 $13.96 ($0.04) $0.87 -- ($0.91) -- $13.88
Year Ended May 31, 1996 $10.59 $0.01 $3.93 ($0.03) ($0.54) -- $13.96
Year Ended May 31, 1995 $9.80 $0.12 $0.87 ($0.12) ($0.08) -- $10.59
December 31, 1993(f) to May 31, 1994 $10.00 $0.08 ($0.20) ($0.08) -- -- $9.80
Small Cap Opportunities Fund
Year Ended May 31, 1999 $23.61 ($0.11) ($2.97) -- ($0.02) -- $20.51
Year Ended May 31, 1998 $19.84 ($0.06) $4.36 -- ($0.53) -- $23.61
August 15, 1996 to(f) May 31, 1997 $16.26 ($0.01) $3.60 -- ($0.01) -- $19.84
Small Company Growth Fund
Year Ended May 31, 1999 $33.69 ($0.15) ($3.67) -- ($2.43) -- $27.44
Year Ended May 31, 1998 $31.08 ($0.23) $6.88 -- ($4.04) -- $33.69
Year Ended May 31, 1997 $33.00 ($0.18) $1.83 -- ($3.57) -- $31.08
November 1, 1995 to May 31, 1996 $29.99 ($0.07) $5.94 -- ($2.86) -- $33.00
November 11, 1994(f) to October 31, $21.88 ($0.11) $8.22 -- -- -- $29.99
1995
<PAGE>
International Fund
Year Ended May 31, 1999 $23.85 $0.10 ($0.48) ($0.21) ($0.46) -- $22.80
Year Ended May 31, 1998 $21.67 $0.09 $2.29 ($0.20) -- -- $23.85
Year Ended May 31, 1997 $19.84 $0.09 $1.94 ($0.20) -- -- $21.67
November 1, 1995 to May 31, 1996 $17.99 $0.14 $2.04 ($0.33) -- -- $19.84
November 11, 1994(f) to October 31, $17.28 $0.09 $0.62 -- -- -- $17.99
1995
- ------------------------------------------------------------------------------------
Ratio to Average
Net Assets
--------------------------------------
Net Portfolio Net Assets
at
EQUITY FUNDS - I SHARES Investment Net Gross Total Turnover End of
Period
Income Expenses Expenses(a) Return(b) Rate (000's
Omitted)
- ----------------------------------------------------------------------------------------------------------------------------
Index Fund
Year Ended May 31, 1999 1.28%(c) 0.25%(c) 0.55%(c) 20.57% 3.55%(d) $1,154,289
Year Ended May 31, 1998 1.53%(c) 0.25%(c) 0.58%(c) 30.32% 6.68%(d) $784,205
Year Ended May 31, 1997 2.10% 0.25% 0.56% 29.02% 24.17% $513,134
November 1, 1995 to May 31, 1996 2.25%(e) 0.31%(e) 0.57%(e) 16.27% 9.12% $249,644
November 11, 1994(f) to October 31, 2.12%(e) 0.50%(e) 0.64%(e) 26.93% 14.48% $186,197
1995
Income Equity Fund
Year Ended May 31, 1999 1.23%(c) 0.85%(c) 0.89%(c) 14.75% 3.21%(d) $1,519,541
Year Ended May 31, 1998 1.43%(c) 0.85%(c) 0.86%(c) 28.61% 3.46%(d) $1,214,385
Year Ended May 31, 1997 1.97% 0.85% 0.90% 22.40% 4.76% $425,197
November 1, 1995 to May 31, 1996 2.72%(e) 0.86%(e) 1.13%(e) 18.14% 0.69% $230,831
November 11, 1994(f) to October 31, 2.51%(e) 0.85%(e) 1.12%(e) 27.09% 7.03% $49,000
1995
ValuGrowth Stock Fund
Year Ended May 31, 1999 0.50% 1.00% 1.19% (0.16%) 68.72% $198,672
Year Ended May 31, 1998 0.53% 1.00% 1.20% 21.18% 74.25% $609,056
Year Ended May 31, 1997 0.67% 1.01% 1.33% 23.30% 75.50% $180,204
Year Ended May 31, 1996 0.62% 1.20% 1.32% 21.72% 105.43% $156,553
Year Ended May 31, 1995 1.02% 1.20% 1.33% 10.67% 63.82% $136,589
August 2, 1993(f) to May 31, 1994 0.92%(e) 1.20%(e) 1.39%(e) 2.99%(e) 86.07% $113,061
Diversified Equity Fund
Year Ended May 31, 1999 0.47%(c) 1.00%(c) 1.17%(c) 15.08% N/A(g) $1,629,191
Year Ended May 31, 1998 0.60%(c) 1.00%(c) 1.13%(c) 26.12% N/A(g) $1,520,343
Year Ended May 31, 1997 0.79%(c) 1.02%(c) 1.31%(c) 20.76% 48.08% $1,212,565
November 1, 1995 to May 31, 1996 1.00%(c)(e) 1.06%(c)(e) 1.30%(c)(e) 16.38% 5.76% $907,223
November 11, 1994(f) to October 31, 1.01%(c)(e) 1.09%(c)(e) 1.37%(c)(e) 23.95% 10.33% $711,111
1995
Growth Equity Fund
Year Ended May 31, 1999 (0.08%)(c) 1.25%(c) 1.38%(c) 7.60% N/A(g) $920,586
Year Ended May 31, 1998 (0.11%)(c) 1.25%(c) 1.35%(c) 22.52% N/A(g) $1,033,251
Year Ended May 31, 1997 (0.09%)(c) 1.30%(c) 1.84%(c) 14.11% 9.06% $895,420
November 1, 1995 to May 31, 1996 0.01%(c)(e) 1.35%(c)(e) 1.85%(c)(e) 15.83% 7.39% $735,728
November 11, 1994(f) to October 31, (0.11%)(c)(e) 1.38%(c)(e) 1.92%(c)(e) 21.10% 8.90% $564,004
1995
<PAGE>
Ratio to Average
Net Assets
--------------------------------------
Net Portfolio Net Assets
at
EQUITY FUNDS - I SHARES Investment Net Gross Total Turnover End of
Period
Income Expenses Expenses(a) Return(b) Rate (000's
Omitted)
- --------------------------------------------------------------------------------------------------------------------------------
Large Company Growth Fund
Year Ended May 31, 1999 (0.49%)(c) 1.00%(c) 1.09%(c) 39.96% 28.15% $645,385
Year Ended May 31, 1998 (0.36%)(c) 1.00%(c) 1.03%(c) 32.29% 13.03%(d) $232,499
Year Ended May 31, 1997 (0.18%) 0.99% 1.09% 21.93% 24.37% $131,768
November 1, 1995 to May 31, 1996 (0.30%)(e) 1.00%(e) 1.13%(e) 15.40% 16.93% $82,114
November 11, 1994(f) to October 31, (0.23%)(e) 1.00%(e) 1.20%(e) 27.51% 31.60% $63,567
1995
Diversified Small Cap Fund
Year Ended May 31, 1999 (0.05%)(c) 1.20%(c) 1.65%(c) (14.54%) N/A(g) $60,261
December 31, 1997(e) to May 31, 1998 (0.25%)(c)(e) 1.21%(c)(e) 2.65%(c)(e) 5.20% N/A(g) $12,551
Small Company Stock Fund
Year Ended May 31, 1999 (0.11%)(c) 1.20%(c) 1.43%(c) (27.24%) 183.61%(d) $22,592
Year Ended May 31, 1998 (0.53%)(c) 1.20%(c) 1.32%(c) 8.12% 166.16%(d) $112,713
Year Ended May 31, 1997 (0.38%) 1.19% 1.56% 6.30% 210.19% $161,995
Year Ended May 31, 1996 0.05% 1.21% 1.60% 38.30% 134.53% $125,986
Year Ended May 31, 1995 1.14% 0.52% 1.82% 10.13% 68.09% $54,240
December 31, 1993(f) to May 31, 1994 2.03%(e) 0.20%(e) 4.33%(e) (2.93%)(e) 14.98% $9,251
Small Cap Opportunities Fund
Year Ended May 31, 1999 (0.47%)(c) 1.25%(c) 1.35%(c) (13.02%) 238.84%(d) $201,816
Year Ended May 31, 1998 (0.40%)(c) 1.25%(c) 1.38%(c) 21.95% 54.98%(d) $284,828
August 15, 1996 to(f) May 31, 1997 (0.16%)(c)(e) 1.25%(c)(e) 1.89%(c)(e) 11.42% 34.45%(d) $77,174
Small Company Growth Fund
Year Ended May 31, 1999 (0.52%)(c) 1.25%(c) 1.30%(c) (10.72%) 133.98%(d) $557,516
Year Ended May 31, 1998 (0.73%)(c) 1.25%(c) 1.26%(c) 22.38% 123.36%(d) $748,269
Year Ended May 31, 1997 (0.71%) 1.24% 1.29% 5.65% 124.03% $447,580
November 1, 1995 to May 31, 1996 (0.41%)(e) 1.25%(e) 1.29%(e) 21.43% 62.06% $378,546
November 11, 1994(f) to October 31, (0.47%)(e) 1.25%(e) 1.35%(e) 37.07% 106.55% $278,058
1995
<PAGE>
International Fund
Year Ended May 31, 1999 0.44%(c) 1.50%(c) 1.61%(c) (1.32%) N/A(g) $271,240
Year Ended May 31, 1998 0.45%(c) 1.47%(c) 1.50%(c) 11.19% N/A(g) $279,667
Year Ended May 31, 1997 0.40%(c) 1.43%(c) 1.44%(c) 10.27% 48.23%(d) $228,552
November 1, 1995 to May 31, 1996 0.60%(c)(e) 1.50%(c)(e) 1.52%(c)(e) 12.31% 14.12%(d) $143,643
November 11, 1994(f) to October 31, 0.54%(c)(e) 1.50%(c)(e) 1.66%(c)(e) 4.11% 29.41%(d) $91,401
1995
- --------------------------------------------------------------------------------
</TABLE>
(a) The ratio of Gross Expenses to Average Net Assets does not reflect fee
waivers and expense reimbursements.
(b) Total Return would have been lower absent expense reimbursements and fee
waivers.
(c) Includes expenses allocated from the Portfolio(s) in which the Fund invests.
(d) Reflects the activity of the Portfolio(s) in which the Fund invests.
(e) Annualized.
(f) Commencement of
operations.
(g) Portfolio Turnover Rate is not applicable as the fund invested in more than
one Portfolio.
(h) Actual dividends per share were less than $0.01.
<PAGE>
If you would like more information about the Funds and their investments, you
may want to read the following documents:
STATEMENT OF ADDITIONAL INFORMATION. A Fund's statement of additional
information, or "SAI," contains detailed information about each of the Funds,
such as its investments, management, and organization. It is incorporated into
this Prospectus by reference.
ANNUAL AND SEMI-ANNUAL REPORTS. Additional information about each Fund's
investments is available in its annual and semi-annual reports to shareholders.
In the annual report, each Fund's portfolio manager discusses the market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
You may obtain free copies of the SAI, annual report, and semi-annual report by
contacting your investment representative or by contacting Norwest Advantage
Funds at 733 Marquette Avenue, Minneapolis, Minnesota 55479 or by calling
1-800-338-1348 or 1-612-667-8833.
The Funds' reports and SAI are available from the Securities and Exchange
Commission in Washington, D.C. You may obtain copies of these documents, upon
payment of a duplicating fee, by writing the Public Reference Section of the
SEC, Washington D.C. 20549-6009. The scheduled hours of operation of the Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Free copies
of the reports and SAIs are available from the SEC's Internet website at http://
www.sec.gov.
The SEC's Investment Company Act file number for the Funds is 811-4881.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
October 1, 1999
- --------------------------------------------------------------------------------
Cash Investment Fund Minnesota Intermediate Tax-Free Fund
Ready Cash Investment Fund Minnesota Tax-Free Fund
U. S. Government Fund Moderate Balanced Fund
Treasury Plus Fund Growth Balanced Fund
Treasury Fund Aggressive Balanced-Equity Fund
Municipal Money Market Fund Index Fund
Stable Income Fund Income Equity Fund
Limited Term Government Income Fund ValuGrowth SM Stock Fund
Intermediate Government Income Fund Diversified Equity Fund
Diversified Bond Fund Growth Equity Fund
Income Fund Large Company Growth Fund
Total Return Bond Fund Diversified Small Cap Fund
Strategic Income Fund Small Company Stock Fund
Limited Term Tax-Free Fund Small Cap Opportunities Fund
Tax-Free Income Fund Small Company Growth Fund
Colorado Tax-Free Fund International Fund
<PAGE>
NORWEST ADVANTAGE FUNDS
STATEMENT OF ADDITIONAL INFORMATION
October 1, 1999
Account Information and
Shareholder Servicing: Distribution:
Norwest Bank Minnesota, N.A. Forum Financial Services, Inc.
Transfer Agent Manager and Distributor
733 Marquette Avenue Two Portland Square
Minneapolis, MN 55479-0040 Portland, Maine 04101
(612) 667-8833/(800) 338-1348 (207) 879-1900
Norwest Advantage Funds is registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended.
This Statement of Additional Information supplements the Prospectuses dated
October 1, 1999, as may be amended from time to time, offering the following
classes of shares of the series of Norwest Advantage Funds: Cash Investment
Fund, Ready Cash Investment Fund (Public Entities Shares, Investor Shares and
Exchange Shares), U.S. Government Fund, Treasury Plus Fund, Treasury Fund,
Municipal Money Market Fund (Institutional Shares and Investor Shares), A
Shares, B Shares and I Shares of Stable Income Fund, I Shares of Limited Term
Government Income Fund, A Shares, B Shares, and I Shares of Intermediate
Government Income Fund, I Shares of Diversified Bond Fund, A Shares, B Shares
and I Shares of Income Fund and Total Return Bond Fund, I Shares of Strategic
Income Fund and Limited Term Tax-Free Fund, A Shares, B Shares and I Shares of
Tax-Free Income Fund and Colorado Tax-Free Fund, I Shares of Minnesota
Intermediate Tax-Free Fund, A Shares, B Shares and I Shares of Minnesota
Tax-Free Fund, I Shares of Moderate Balanced Fund, A Shares B Shares, C Shares
and I Shares of Growth Balanced Fund, I Shares of Aggressive Balanced Equity
Fund and Index Fund, A Shares, B Shares, C Shares and I Shares of Income Equity
Fund, A Shares, B Shares and I Shares of ValuGrowthSM Stock Fund, A Shares, B
Shares, C Shares and I Shares of Diversified Equity Fund and Growth Equity Fund,
A Shares, B Shares and I Shares of Large Company Growth Fund, Diversified Small
Cap Fund, Small Company Stock Fund and Small Cap Opportunities Fund, I Shares of
Small Company Growth Fund and A Shares, B Shares and I Shares of International
Fund.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ ONLY IN CONJUNCTION WITH
A CORRESPONDING PROSPECTUS, COPIES OF WHICH MAY BE OBTAINED BY AN INVESTOR
WITHOUT CHARGE BY CONTACTING THE DISTRIBUTOR AT THE ADDRESS LISTED ABOVE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
1. Introduction 1
Glossary 1
Background Information 3
2. Additional Information Regarding Investments and Strategies 4
General Information 4
Equity Securities 4
Fixed Income Securities 6
General Money Market Fund Guidelines 12
Borrowing 12
Dollar Roll Transactions 13
Repurchase Agreements 13
Lending Fund Securities 13
When-Issued and Delayed Delivery Securities and Forward Commitments 13
Illiquid Investments 14
Purchases on Margin and Short Sales 14
Options and Futures Contracts 15
Small Cap Opportunities Fund Options and Futures Contracts 16
Foreign Currency Transactions 18
Swaps, Caps, Floors and Collars 19
Temporary Defensive Position 20
3. Risk Considerations 20
Counterparty Risk 20
Fixed Income Securities 21
Foreign Securities 23
Leverage 23
Options and Futures Contracts 24
Small Capitalization Stocks 25
Geographic Concentration 25
Diversification 25
4. Information Concerning Colorado and Minnesota 26
Colorado 26
Minnesota 27
i
<PAGE>
5. Investment Limitations 28
Fundamental Limitations 29
Non - Fundamental Limitations 33
6. Performance and Advertising Data 36
General 36
SEC Yield Calculations 37
Total Return Calculations 38
Multiclass, Collective Investment Fund, Common Trust Fund and
Core and Gateway Performance 39
Other Advertisement Matters 40
7. Management 42
Trustees and Officers 42
Investment Advisory Services 49
Management and Administrative Services 55
Distribution 59
Transfer Agent 62
Custodian 63
Portfolio Accounting 63
Expenses 64
ii
<PAGE>
8. Portfolio Transactions 65
9. Additional Purchase, Redemption and Exchange Information 68
General 68
Money Market Funds 68
Purchases Through Financial Institutions 68
Shareholder Services 68
Purchases of A Shares 69
Exchanges 71
Redemptions 72
Redemption Charge (A Shares) 73
Redemption Charge and Contingent Deferred Sales Charge (A Shares,
B Shares, and C Shares) 74
Conversion of B Shares and Exchange Shares 74
10. Taxation 74
11. Additional Information About the Trust and the Shareholders of the Funds 76
Determination of Net Asset Value - Money Market Funds 76
Counsel and Auditors 76
General Information 76
Core and Gateway Structure 77
Banking Law Matters 78
Shareholdings 78
Financial Statements 78
Registration Statement 78
Appendix A - Description of Securities Ratings A-1
Appendix B - Miscellaneous Tables B-1
Table 1 - Investment Advisory Fees B-1
Table 2 - Management Fees B-5
Table 3 - Distribution Fees B-13
Table 4 - Sales Charges B-15
Table 5 - Accounting Fees B-18
Table 6 - Commissions B-22
Table 7 - 5% Shareholders B-24
Appendix C - Performance Data C-1 Table 1 - Money Market Fund C-1 Table
2 - Yields C-1 Table 3 - Total Returns C-4
Appendix D - Other Advertisement Matters D-1
</TABLE>
iii
<PAGE>
1. INTRODUCTION
Glossary
"Adviser" means Norwest, Schroder, Wells Fargo Bank or a Subadviser.
"Board" means the Board of Trustees of the Trust.
"Balanced Fund" means Moderate Balanced Fund, Growth Balanced Fund or
Aggressive Balanced-Equity Fund.
"CFTC" means the U.S. Commodities Futures Trading Commission.
"Code" means the Internal Revenue Code of 1986, as amended.
"Core and Gateway Structure" means a structure in which a Fund invests
in one or more Portfolios.
"Core Trust" means Core Trust (Delaware), an open-end, management
investment company registered under the 1940 Act.
"Core Trust Board" means the Board of Trustees of Core Trust.
"Custodian" means Norwest Bank acting in its capacity as custodian of
a Fund.
"Equity Fund" means Income Equity Fund, Index Fund, ValuGrowth Stock
Fund, Diversified Equity Fund, Growth Equity Fund, Large Company Growth
Fund, Diversified Small Cap Fund, Small Company Stock Fund, Small Cap
Opportunities Fund, Small Company Growth Fund or International Fund.
"FAdS" means Forum Administrative Services, Limited Liability Company,
the Trust's administrator.
"Fitch" means Fitch IBCA, Inc.
"Fixed Income Funds" means Stable Income Fund, Limited Term Government
Income Fund, Intermediate Government Income Fund, Diversified Bond
Fund, Income Fund, Total Return Bond Fund and Strategic Income Fund.
"Forum" means Forum Financial Services, Inc., a registered
broker-dealer that is the Trust's manager and the distributor of the
Trust's shares.
"FAcS" means Forum Accounting Services, Limited Liability Company, the
Trust's fund accountant.
1
<PAGE>
"Fund" means each of the thirty-two separate series of the Trust to
which this SAI relates as identified on the cover page.
"Galliard" means Galliard Capital Management, Inc., the investment
subadviser to Stable Income Portfolio, Strategic Value Bond Portfolio,
Managed Fixed Income Portfolio, Stable Income Fund, Diversified Bond
Fund, Strategic Income Fund, Moderate Balanced Fund, Growth Balanced
Fund and Aggressive Balanced-Equity Fund.
"Money Market Fund" means Cash Investment Fund, Ready Cash Investment
Fund, U.S. Government Fund, Treasury Plus Fund, Treasury Fund or
Municipal Money Market Fund.
"Moody's" means Moody's Investors Service.
"Norwest" means Norwest Investment Management, Inc., the investment
adviser to each Fund and each Portfolio except those for which Schroder
or Wells Fargo Bank serves as investment adviser.
"Norwest Bank" means Norwest Bank Minnesota, N.A.
"NRSRO" means a nationally recognized statistical rating organization.
"Peregrine" means Peregrine Capital Management, Inc., the investment
subadviser to Positive Return Bond Portfolio, Small Company Value
Portfolio, Large Company Growth Portfolio, Small Company Growth
Portfolio, Diversified Bond Fund, Strategic Income Fund, Moderate
Balanced Fund, Growth Balanced Fund, Aggressive Balanced-Equity Fund,
Diversified Equity Fund, Growth Equity Fund, Large Company Growth Fund,
Diversified Small Cap Fund and Small Company Growth Fund.
"Portfolio" means Prime Money Market Portfolio, Money Market Portfolio,
Positive Return Bond Portfolio, Stable Income Portfolio, Managed Fixed
Income Portfolio, Strategic Value Bond Portfolio, Index Portfolio,
Income Equity Portfolio, Large Company Growth Portfolio, Disciplined
Growth Portfolio, Small Company Growth Portfolio, Small Company Stock
Portfolio, Small Company Value Portfolio, Small Cap Value Portfolio,
Small Cap Index Portfolio, International Portfolio and International
Equity Portfolio, series of Core Trust, and Schroder U.S. Smaller
Companies Portfolio and Schroder EM Core Portfolio, series of Schroder
Core.
"Schroder" means Schroder Investment Management North America Inc.,
the investment Adviser to International Portfolio.
"SEC" means the U.S. Securities and Exchange Commission.
2
<PAGE>
"S&P" means Standard & Poor's Ratings Group.
"Smith" means Smith Asset Management Group, L.P., the investment
adviser to Disciplined Growth Portfolio, Small Cap Value Portfolio,
Strategic Income Fund, Moderate Balanced Fund, Growth Balanced Fund,
Aggressive Balanced-Equity Fund, Diversified Equity Fund, Growth Equity
Fund and Diversified Small Cap Fund.
"Stock Index Futures" means futures contracts that relate to broadly
based stock indices.
"Subadviser" means Galliard, Peregrine, Smith and WCM.
"Tax-Free Income Fund" means Limited Term Tax-Free Fund, Tax-Free
Income Fund, Colorado Tax-Free Fund, Minnesota Intermediate Tax-Free
Fund or Minnesota Tax-Free Fund.
"Transfer Agent" means Norwest Bank acting in its capacity as transfer
and dividend disbursing agent of a Fund.
"Trust" means Norwest Advantage Funds.
"U.S. Government Securities" means obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
"WCM" means Wells Capital Management Incorporated, a wholly owned
subsidiary of Wells Fargo Bank, N.A. and the investment Subadviser to
International Equity Portfolio.
"Wells Fargo Bank" means Wells Fargo Bank, N.A., a wholly owned
subsidiary of Wells Fargo & Company, a national bank holding company,
and the investment Adviser to International Equity Portfolio.
"1933 Act" means the Securities Act of 1933, as amended.
"1940 Act" means the Investment Company Act of 1940, as amended.
BACKGROUND INFORMATION
The Trust was originally organized under the name "Prime Value Funds, Inc." as a
Maryland corporation on August 29, 1986. On July 30, 1993, Prime Value Funds,
Inc. was reorganized as a Delaware business trust under the name "Norwest
Funds." The Trust is currently named "Norwest Advantage Funds." Norwest, a
subsidiary of Norwest Bank, is each Fund's investment adviser.
Norwest also is the investment adviser of each Portfolio except those for which
Schroder or Wells Fargo Bank serves as investment adviser.
Norwest and Wells Fargo Bank employ the Subadvisers to subadvise certain of the
Funds and Portfolios. Norwest Bank, a subsidiary of Wells Fargo & Company, is
the Trust's transfer agent, dividend disbursing agent and custodian. Forum
serves as the Trust's manager and as distributor of the Trust's shares. FAdS
serves as the Trust's administrator.
3
<PAGE>
Each of the following Funds invests all its investable assets in a Portfolio
with substantially similar investment objectives and policies: Ready Cash
Investment Fund, Stable Income Fund, Total Return Bond Fund, Index Fund, Income
Equity Fund, Large Company Growth Fund and Small Company Growth Fund.
Each of the following Funds invests all of its investable assets in multiple
Portfolios with different investment policies: Cash Investment Fund, Diversified
Bond Fund, Strategic Income Fund, Moderate Balanced Fund, Growth Balanced Fund,
Aggressive Balanced-Equity Fund, Diversified Equity Fund, Growth Equity Fund,
Diversified Small Cap Fund and International Fund. The percentage of each of
these Fund's (except Cash Investment Fund's) assets invested in each Portfolio
may be changed at any time in response to market or other conditions.
Allocations are made within specified ranges as described in each Fund's
prospectus under "Investment Objectives and Policies."
The other Funds invest directly in portfolio securities.
Each Fund that invest in one or more Portfolios bears its pro rata share of the
expenses of the Portfolio(s) in which it invests.
4
<PAGE>
2. ADDITIONAL INFORMATION REGARDING INVESTMENTS AND STRATEGIES
GENERAL INFORMATION
This section discusses in greater detail than the prospectus certain of the
investments the Funds may make. A Fund will make only those investments
described below that are in accordance with its investment objectives and
policies. If a Fund that invests in one or more Portfolios is described below as
being able to make a certain type of investment, the Fund makes that type of
investment through the Portfolio or Portfolios.
Each Fund's investment objective and all its investment policies that are
designated as fundamental may not be changed without approval by the lesser of:
(i) more than 50% of the outstanding shares of the Fund, or (ii) 67% or more of
the shares present or represented at an investors' meeting, if more than 50% of
the outstanding shares of the Fund are present or represented at the meeting in
person or by proxy. A Fund may change any other investment policy upon
appropriate notice to investors.
EQUITY SECURITIES
Equity securities include common stock, preferred stock, convertible securities,
warrants, depository receipts, shares of closed-end investment companies and
equity-related securities. The market value of all securities, particularly
equity securities, is based upon the market's perception of value and not
necessarily the book value of an issuer or other objective measure of a
company's worth. Overall economic and market conditions also impact an equity
security's price. The market value of an equity security also may fluctuate
based on changes in a company's financial condition. It is possible that a Fund
may experience a substantial or complete loss on an individual equity
investment.
Equity securities owned by a Fund may be traded on a securities exchange or in
the over-the-counter market and may not be traded every day or in the volume
typical of securities traded on a major national securities exchange. As a
result, disposition by a Fund of equity securities to meet redemptions by
investors or otherwise may require the Fund to sell these securities at a
discount from market prices, to sell during periods when disposition is not
desirable, or to make many small sales over an extended period of time.
COMMON STOCK. Common stock represents an equity (ownership) interest in a
company, and usually possesses voting rights and earns dividends. Common
stockholders are not creditors of the company, but rather, upon liquidation of
the company are entitled to their pro rata share of the company's assets after
creditors and, if applicable, preferred stockholders are paid. Dividends on
common stock are not fixed but are declared at the discretion of the issuer.
Common stock generally represents the riskiest investment in a company. In
addition, common stock generally has the greatest appreciation and depreciation
potential because increases and decreases in earnings are usually reflected in a
company's stock price.
PREFERRED STOCK. Preferred stock is a class of stock having a preference over
common stock as to the payment of dividends and the recovery of investment
should a company be liquidated. Preferred stock, however, is usually junior to
the debt securities of the issuer. Preferred stock typically does not possess
voting rights and its market value may change based on changes in interest
rates.
5
<PAGE>
CONVERTIBLE SECURITIES. Convertible securities are fixed income securities,
preferred stock or other securities that may be converted into or exchanged for
a given amount of common stock of the same or a different issuer during a
specified period of time at a specified price or formula. A convertible security
entitles the holder to receive interest on debt or the dividend on preferred
stock until the convertible security matures or is redeemed, converted or
exchanged. Before conversion, convertible securities ordinarily provide a stream
of income with generally higher yields than those of common stock of the same or
similar issuers, but lower than the yield of nonconvertible debt. Convertible
securities rank senior to common stock in a company's capital structure but are
usually subordinated to comparable nonconvertible securities. By investing in
convertible securities, a Fund obtains the right to benefit from the capital
appreciation potential in the underlying common stock upon the exercise of the
conversion right, while earning higher current income than could be available if
the stock was purchased directly.
In general, the value of a convertible security is the higher of its investment
value (its value as a fixed income security) and its conversion value (the value
of the underlying shares of common stock if the security is converted). As a
fixed income security, the value of a convertible security generally increases
when interest rates decline and generally decreases when interest rates rise.
The credit standing of the issuer and other factors also may have an effect on
the convertible security's investment value. The conversion value of a
convertible security is determined by the market price of the underlying common
stock. If the conversion value is low relative to the investment value, the
price of the convertible security is governed principally by its investment
value. Generally, a convertible security's conversion value decreases as the
convertible security approaches maturity. To the extent the market price of the
underlying common stock approaches or exceeds the conversion price, the price of
the convertible security will be increasingly influenced by its conversion
value. In addition, a convertible security generally will sell at a premium over
its conversion value determined by the extent to which investors place value on
the right to acquire the underlying common stock while holding a fixed income
security.
Because convertible securities are typically issued by smaller capitalized
companies whose stock price may be volatile, the price of a convertible security
may reflect variations in the price of the underlying common stock in a way that
nonconvertible debt does not. Also, while convertible securities generally have
higher yields than common stock, they have lower yields than comparable
nonconvertible securities and are subject to less fluctuations in value than
underlying stock since they have fixed income characteristics. A convertible
security may be subject to redemption at the option of the issuer at a price
established in the convertible security's governing instrument. If a convertible
security is called for redemption, the Fund will be required to permit the
issuer to redeem the security, convert it into the underlying common stock or
sell it to a third party.
WARRANTS. Warrants are securities, typically issued with preferred stock or
bonds, that give the holder the right to purchase a given number of shares of
common stock at a specified price, usually during a specified period of time.
The price usually represents a premium over the applicable market value of the
common stock at the time of the warrant's issuance. Warrants have no voting
rights with respect to the common stock, receive no dividends and have no rights
with respect to the assets of the issuer. Warrants do not pay a fixed dividend.
Investments in warrants involve certain risks, including the possible lack of a
liquid market for the resale of the warrants, potential price fluctuations as a
result of speculation or other factors and failure of the price of the common
stock to rise. A warrant becomes worthless if it is not exercised within the
specified time period.
EQUITY-RELATED SECURITIES. Equity-related securities are securities whose
interest and/or principal payment obligations are linked to a specified index of
equity securities, or determined pursuant to specific formulas. A Fund may
invest in these instruments when the securities provide a higher amount of
dividend income than is available from a company's common stock. The amount
received by an investor at maturity of these securities is not fixed but is
based on the price of the underlying common stock, which may rise or fall.
Adverse changes in the securities markets may reduce interest payments made
under, and/or the principal of, equity-linked securities held by a Fund. In
addition, it is not possible to predict how equity-related securities will trade
in the secondary market or whether the market for the securities will be liquid.
6
<PAGE>
DEPOSITARY RECEIPTS. A depositary receipt is a receipt for shares of a
foreign-based company that entitles the holder to distributions on the
underlying security. Depositary receipts include sponsored and unsponsored
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and
other similar global instruments. ADRs typically are issued by a U.S. bank or
trust company, evidence ownership of underlying securities issued by a foreign
company, and are designed for use in U.S. securities markets. EDRs (sometimes
called Continental Depositary Receipts) are receipts issued by a European
financial institution evidencing an arrangement similar to that of ADRs, and are
designed for use in European securities markets. The Funds invest in depositary
receipts in order to obtain exposure to foreign securities markets.
Unsponsored depositary receipts may be created without the participation of the
foreign issuer. Holders of these receipts generally bear all the costs of the
depositary receipt facility, whereas foreign issuers typically bear certain
costs in a sponsored depositary receipt. The bank or trust company depository of
an unsponsored depositary receipt may be under no obligation to distribute
shareholder communications received from the foreign issuer or to pass through
voting rights. Accordingly, available information concerning the issuer may not
be current and the prices of unsponsored depositary receipts may be more
volatile than the prices of sponsored depositary receipts.
CLOSED-END INVESTMENT COMPANIES. International Fund may invest in the securities
of closed-end investment companies that invest primarily in foreign securities.
Because of restrictions on direct investment by U.S. entities in certain
countries, other investment companies may provide the most practical or only way
for the Fund to invest in certain markets. The Fund will invest in such
companies when, in the Adviser's judgment, the potential benefits of the
investment justify the payment of any applicable premium or sales charge. Other
investment companies incur their own fees and expenses.
FIXED INCOME SECURITIES
Fixed income securities include corporate debt obligations, U.S. Government
Securities, municipal securities, mortgage-related securities, asset-backed
securities, guaranteed investment contracts, zero coupon securities, variable
and floating rate securities, financial institution obligations, commercial
paper and participation interests.
CORPORATE DEBT OBLIGATIONS. The Funds may invest in corporate bonds, debentures,
notes, commercial paper and other similar corporate debt instruments. Companies
use these instruments to borrow money from investors. The issuer pays the
investor a fixed or variable rate of interest and must repay the amount borrowed
at maturity. Companies issue commercial paper (short-term unsecured promissory
notes) to finance their current obligations. Commercial paper normally has a
maturity of less than 9 months.
U.S. GOVERNMENT SECURITIES. U.S. Government Securities include securities issued
by the U.S. Treasury and by U.S. Government agencies and instrumentalities. U.S.
Government Securities may be supported by the full faith and credit of the
United States (e.g., mortgage-related securities and certificates of the
Government National Mortgage Association and securities of the Small Business
Administration); by the right of the issuer to borrow from the U.S. Treasury
(e.g., Federal Home Loan Bank securities); by the discretionary authority of the
U.S. Treasury to lend to the issuer (e.g., Fannie Mae (formerly the Federal
National Mortgage Association) securities); or solely by the creditworthiness of
the issuer (e.g., Federal Home Loan Mortgage Corporation securities).
Holders of U.S. Government Securities not backed by the full faith and credit of
the United States must look principally to the agency or instrumentality issuing
the obligation for repayment and may not be able to assert a claim against the
United States in the event that the agency or instrumentality does not meet its
commitment. There is no assurance that the U.S. Government will support
securities not backed by its full faith and credit. Neither the U.S. Government
nor any of its agencies or instrumentalities guarantees the market value of the
securities they issue.
7
<PAGE>
MUNICIPAL SECURITIES. The states, territories and possessions of the United
States, their political subdivisions (such as cities, counties and towns) and
various authorities (such as public housing or redevelopment authorities),
instrumentalities, public corporations and special districts (such as water,
sewer or sanitation districts) issue municipal securities. In addition,
municipal securities include securities issued by or on behalf of public
authorities to finance various privately operated facilities, such as industrial
development bonds, that are backed only by the assets and revenues of the
non-governmental user (such as hospitals and airports).
Municipal securities are issued to obtain funds for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. Municipal securities
generally are classified as bonds, notes and leases. Municipal securities may be
zero-coupon securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable from revenue derived from a particular facility,
class of facilities or the proceeds of a special excise tax or other specific
revenue source but not from the issuer's general taxing power. Many of these
bonds are additionally secured by a debt service reserve fund which can be used
to make a limited number of principal and interest payments should the pledged
revenues be insufficient. Various forms of credit enhancement, such as a bank
letter of credit or municipal bond insurance, may also be employed in revenue
bond issues. Private activity bonds and industrial revenue bonds do not carry
the pledge of the credit of the issuing municipality, but generally are
guaranteed by the corporate entity on whose behalf they are issued. Municipal
bonds may also be moral obligation bonds, which are normally issued by special
purpose public authorities. If the issuer is unable to meet its obligations
under the bonds from current revenues, it may draw on a reserve fund that is
backed by the moral commitment (but not the legal obligation) of the state or
municipality that created the issuer.
Municipal bonds meet longer term capital needs of a municipal issuer and
generally have maturities of more than one year when issued. Municipal notes are
intended to fulfill the short-term capital needs of the issuer and generally
have maturities not exceeding one year. They include tax anticipation notes,
revenue anticipation notes, bond anticipation notes, construction loan notes and
tax-exempt commercial paper. Municipal notes also include longer term issues
that are remarketed to investors periodically, usually at one year intervals or
less. Municipal leases generally take the form of a lease or an installment
purchase or conditional sale contract. Municipal leases are entered into by
state and local governments and authorities to acquire equipment and facilities
such as fire and sanitation vehicles, telecommunications equipment and other
capital assets. Leases and installment purchase or conditional sale contracts
(which normally provide for title to the leased asset to pass eventually to the
government issuer) have evolved as a means for governmental issuers to acquire
property and equipment without being required to meet the constitutional and
statutory requirements for the issuance of debt. The debt-issuance limitations
of many state constitutions and statutes are deemed to be inapplicable because
of the inclusion in many leases or contracts of "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. Generally, the
Funds will invest in municipal lease obligations through certificates of
participation.
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.
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The acquisition of a stand-by commitment does not affect the valuation or
maturity of the underlying municipal securities. A Fund values stand-by
commitments at zero in determining net asset value. When a Fund pays directly or
indirectly for a stand-by commitment, its cost is reflected as unrealized
depreciation for the period during which the commitment is held. Stand-by
commitments do not affect the average weighted maturity of the Fund's portfolio
of securities.
PUTS. The Funds may acquire "puts" with respect to municipal securities. A put
gives the Fund the right to sell the municipal security at a specified price at
any time on or before a specified date. The Funds may sell, transfer or assign
puts only in conjunction with the sale, transfer or assignment of the underlying
securities. The amount payable to a Fund upon its exercise of a "put" is
normally: (1) the Fund's acquisition cost of the municipal securities (excluding
any accrued interest which the Fund paid on their acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Fund owned the securities, plus (2) all interest accrued
on the securities since the last interest payment date during that period.
The Funds may acquire puts to facilitate the liquidity of portfolio assets. The
Funds may use puts to facilitate the reinvestment of assets at a rate of return
more favorable than that of the underlying security. The Funds expect that they
will generally acquire puts only where the puts are available without the
payment of any direct or indirect consideration. However, if necessary or
advisable, the Funds may pay for a put either separately in cash or by paying a
higher price for portfolio securities which are acquired subject to the puts
(thus reducing the yield to maturity otherwise available for the same
securities).
MORTGAGE-RELATED SECURITIES. Mortgage-related securities represent interests in
a pool of mortgage loans originated by lenders such as commercial banks, savings
associations and mortgage bankers and brokers. Mortgage-related securities may
be issued by governmental or government-related entities or by non-governmental
entities such as special purpose trusts created by commercial lenders.
Pools of mortgages consist of whole mortgage loans or participations in mortgage
loans. The majority of these loans are made to purchasers of 1-4 family homes.
The terms and characteristics of the mortgage instruments are generally uniform
within a pool but may vary among pools. For example, in addition to fixed-rate,
fixed-term mortgages, the Funds may purchase pools of adjustable-rate mortgages,
growing equity mortgages, graduated payment mortgages and other types. Mortgage
poolers apply qualification standards to lending institutions which originate
mortgages for the pools as well as credit standards and underwriting criteria
for individual mortgages included in the pools. In addition, many mortgages
included in pools are insured through private mortgage insurance companies.
Mortgage-related securities differ from other forms of debt securities, which
normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or on specified call dates. Most mortgage-related
securities, however, are pass-through securities, which means that investors
receive payments consisting of a pro-rata share of both principal and interest
(less servicing and other fees), as well as unscheduled prepayments, as loans in
the underlying mortgage pool are paid off by the borrowers. Additional
prepayments to holders of these securities are caused by prepayments resulting
from the sale or foreclosure of the underlying property or refinancing of the
underlying loans. As prepayment rates of individual pools of mortgage loans vary
widely, it is not possible to predict accurately the average life of a
particular mortgage-related security. Although mortgage-related securities are
issued with stated maturities of up to forty years, unscheduled or early
payments of principal and interest on the mortgages may shorten considerably the
securities' effective maturities. See "Risk Considerations."
GOVERNMENT AND AGENCY MORTGAGE-RELATED SECURITIES. The principal issuers or
guarantors of mortgage-related securities are the Government National Mortgage
Association ("GNMA"), Fannie Mae ("FNMA") and the Federal Home Loan Mortgage
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Corporation ("FHLMC"). GNMA, a wholly-owned U.S. Government corporation within
the Department of Housing and Urban Development ("HUD"), creates pass-through
securities from pools of government guaranteed (Federal Housing Authority or
Veterans Administration) mortgages. The principal and interest on GNMA
pass-through securities are backed by the full faith and credit of the U.S.
Government.
FNMA, which is a U.S. Government-sponsored corporation owned entirely by private
stockholders that is subject to regulation by the Secretary of HUD, and FHLMC, a
corporate instrumentality of the U.S. Government, issue pass-through securities
from pools of conventional and federally insured and/or guaranteed residential
mortgages. FNMA guarantees full and timely payment of all interest and
principal, and FHMLC guarantees timely payment of interest and ultimate
collection of principal of its pass-through securities. Mortgage-related
securities from FNMA and FHLMC are not backed by the full faith and credit of
the U.S. Government.
PRIVATELY ISSUED MORTGAGE-RELATED SECURITIES. Mortgage-related securities
offered by private issuers include pass-through securities comprised of pools of
conventional residential mortgage loans; mortgage-backed bonds, which are
considered to be debt obligations of the institution issuing the bonds and are
collateralized by mortgage loans; and bonds and collateralized mortgage
obligations that are collateralized by mortgage-related securities issued by
GNMA, FNMA or FHLMC or by pools of conventional mortgages of multi-family or of
commercial mortgage loans.
Privately-issued mortgage-related securities generally offer a higher rate of
interest (but greater credit and interest rate risk) than securities issued by
U.S. Government issuers because there are no direct or indirect governmental
guarantees of payment. Many non-governmental issuers or servicers of
mortgage-related securities guarantee or provide insurance for timely payment of
interest and principal on the securities. The market for privately-issued
mortgage-related securities is smaller and less liquid than the market for
mortgage-related securities issued by U.S. government issuers.
STRIPPED MORTGAGE-RELATED SECURITIES. Stripped mortgage-related securities are
multi-class mortgage-related securities that are created by separating the
securities into their principal and interest components and selling each piece
separately. Stripped mortgage-related securities are usually structured with two
classes that receive different proportions of the interest and principal
distributions in a pool of mortgage assets. The market values of these
securities are extremely sensitive to prepayment rates.
ADJUSTABLE RATE MORTGAGE SECURITIES. Adjustable rate mortgage securities
("ARMs") are pass-through securities representing interests in pools of mortgage
loans with adjustable interest rates that are reset at periodic intervals,
usually by reference to some interest rate index or market interest rate, and
that may be subject to certain limits. Although the rate adjustment feature may
reduce sharp changes in the value of adjustable rate securities, these
securities can change in value based on changes in market interest rates or
changes in the issuer's creditworthiness. Changes in the interest rates on ARMs
may lag behind changes in prevailing market interest rates. Because of the
resetting of interest rates, adjustable rate securities are less likely than
non-adjustable rate securities of comparable quality and maturity to increase
significantly in value when market interest rates fall. A Fund could suffer some
principal loss if the Fund sold the securities before the interest rates on the
underlying mortgages were adjusted to reflect current market rates. Some
adjustable rate securities (or the underlying mortgages) are subject to caps or
floors, that limit the maximum change in interest rates during a specified
period or over the life of the security.
COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized mortgage obligations
("CMOs") are multiple-class debt obligations that are fully collateralized by
mortgage-related pass-through securities or by pools of mortgages ("Mortgage
Assets"). Payments of principal and interest on the Mortgage Assets are passed
through to the holders of the CMOs as they are received, although certain
classes (often referred to as "tranches") of CMOs have priority over other
classes with respect to the receipt of mortgage prepayments.
Multi-class mortgage pass-through securities are interests in trusts that hold
Mortgage Assets and that have multiple classes similar to those of CMOs.
Payments of principal of and interest on the underlying Mortgage Assets (and in
the case of CMOs, any reinvestment income thereon) provide funds to pay debt
service on the CMOs or to make scheduled distributions on the multi-class
mortgage pass-through securities. Parallel pay CMOs are structured to provide
payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which, as with other CMO
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structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. Planned amortization class mortgage-related
securities ("PAC Bonds") are a form of parallel pay CMO. PAC Bonds are designed
to provide relatively predictable payments of principal provided that, among
other things, the actual prepayment experience on the underlying mortgage loans
falls within a contemplated range. CMOs may have complicated structures and
generally involve more risks than simpler forms of mortgage-related securities.
Delinquency or loss in excess of that covered by credit enhancement protection
could adversely affect the return on an investment in such a security.
The final tranche of a CMO may be structured as an accrual bond (sometimes
referred to as a "Z-tranche"). Holders of accrual bonds receive no cash payments
for an extended period of time. During the time that earlier tranches are
outstanding, accrual bonds receive accrued interest which is a credit for
periodic interest payments that increases the face amount of the security at a
compounded rate, but is not paid to the bond holder. After all previous tranches
are retired, accrual bond holders start receiving cash payments that include
both principal and continuing interest. The market value of accrual bonds can
fluctuate widely and their average life depends on the other aspects of the CMO
offering. Interest on accrual bonds is taxable when accrued even though the
holders receive no accrual payment. The Funds distribute all of their net
investment income, and may have to sell portfolio securities to distribute
imputed income, which may occur at a time when an Adviser would not have chosen
to sell such securities and which may result in a taxable gain or loss.
CREDIT ENHANCEMENTS. To lessen the effect of the failures by obligors on
Mortgage Assets to make payments, CMOs and other mortgage-related securities may
contain elements of credit enhancement, consisting of either (1) liquidity
protection or (2) protection against losses resulting after default by an
obligor on the underlying assets and allocation of all amounts recoverable
directly from the obligor and through liquidation of the collateral. This
protection may be provided through guarantees, insurance policies or letters of
credit obtained by the issuer or sponsor from third parties, through various
means of structuring the transaction or through a combination of these methods.
The Funds will not pay any additional fees for credit enhancements for
mortgage-related securities, although the credit enhancement may increase the
costs of the mortgage-related securities. Delinquency or loss in excess of that
covered by credit enhancement protection could adversely affect the return on an
investment in such a security.
ASSET-BACKED SECURITIES. Asset-backed securities have structural characteristics
similar to mortgage-related securities but have underlying assets that are not
mortgage loans or interests in mortgage loans. Asset-backed securities represent
fractional interests in, or are secured by and payable from, pools of assets
such as motor vehicle installment sales contracts, installment loan contracts,
leases of various types of real and personal property and receivables from
revolving credit (e.g., credit card) agreements. Assets are securitized through
the use of trusts and special purpose corporations that issue securities that
are often backed by a pool of assets representing the obligations of a number of
different parties. Asset-backed securities have structures and characteristics
similar to those of mortgage-related securities and, accordingly, are subject to
many of the same risks, although often to a greater extent. See "Risk
Considerations." No Fund may invest more than 10% of its net assets in
asset-backed securities that are backed by a particular type of credit, (e.g.,
credit card receivables).
FOREIGN GOVERNMENT AND SUPRANATIONAL ORGANIZATIONS DEBT SECURITIES. A Fund may
invest in fixed income securities issued by the governments of foreign countries
or by those countries' political subdivisions, agencies or instrumentalities as
well as by supranational organizations such as the International Bank for
Reconstruction and Development and the Inter-American Development Bank if the
Adviser believes that the securities do not present risks inconsistent with the
Fund's investment objective.
GUARANTEED INVESTMENT CONTRACTS. Guaranteed investment contracts ("GICs") are
issued by insurance companies. In purchasing a GIC, a Fund contributes cash to
the insurance company's general account and the insurance company then credits
to the Fund's deposit fund on a monthly basis guaranteed interest at a specified
rate. The GIC provides that this guaranteed interest will not be less than a
certain minimum rate. The insurance company may assess periodic charges against
a GIC for expense and service costs allocable to it. There is no secondary
market for GICs and, accordingly, GICs are generally treated as illiquid
investments. GICs are typically unrated.
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ZERO-COUPON SECURITIES. Zero-coupon securities are debt obligations that are
issued or sold at a significant discount from their face value and do not pay
current interest to holders prior to maturity, a specified redemption date or
cash payment date. The discount approximates the total interest the securities
will accrue and compound over the period to maturity or the first interest
payment date at a rate of interest reflecting the market rate of interest at the
time of issuance. The original issue discount on the zero-coupon securities must
be included ratably in the income of a Fund (and thus an investor's) as the
income accrues, even though payment has not been received. The Funds distribute
all of their net investment income, and may have to sell portfolio securities to
distribute imputed income, which may occur at a time when an Adviser would not
have chosen to sell such securities and which may result in a taxable gain or
loss. Because interest on zero-coupon securities is not paid on a current basis
but is in effect compounded, the value of these securities is subject to greater
fluctuations in response to changing interest rates, and may involve greater
credit risks, than the value of debt obligations which distribute income
regularly.
Zero-coupon securities may be securities that have been stripped of their
unmatured interest stream. Zero-coupon securities may be custodial receipts or
certificates, underwritten by securities dealers or banks, that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Government securities. The underwriters of these certificates or receipts
generally purchase a U.S. Government security and deposit the security in an
irrevocable trust or custodial account with a custodian bank, which then issues
receipts or certificates that evidence ownership of the purchased unmatured
coupon payments and the final principal payment of the U.S. Government Security.
These certificates or receipts have the same general attributes as zero-coupon
stripped U.S. Treasury securities but are not supported by the issuer of the
U.S. Government Security. The risks associated with stripped securities are
similar to those of other zero-coupon securities, although stripped securities
may be more volatile, and the value of certain types of stripped securities may
move in the same direction as interest rates.
VARIABLE AND FLOATING RATE SECURITIES. Certain debt securities have variable or
floating rates of interest and, under certain limited circumstances, may have
varying principal amounts. These securities pay interest at rates that are
adjusted periodically according to a specified formula, usually with reference
to one or more interest rate indices or market interest rates (the "underlying
index"). The interest paid on these securities is a function primarily of the
underlying index upon which the interest rate adjustments are based. These
adjustments minimize changes in the market value of the obligation. 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 U.S. Government Securities or indices on those securities as
well as any other rate of interest or index. Certain variable rate securities
pay interest at a rate that varies inversely to prevailing short-term interest
rates (sometimes referred to as "inverse floaters"). Certain inverse floaters
may have an interest rate reset mechanism that multiplies the effects of changes
in the underlying index. This mechanism may increase the volatility of the
security's market value while increasing the security's yield. The Money Market
Funds may not invest in inverse floaters.
Many variable rate instruments include the right of the holder to demand
prepayment of the principal amount of the obligation prior to its stated
maturity and the right of the issuer to prepay the principal amount prior to
maturity.
Variable and floating rate demand notes of corporations include master demand
notes that permit investment of fluctuating amounts at varying interest rates
under direct arrangements with the issuer of the instrument. The issuer of these
obligations often has the right, after a given period, to prepay the outstanding
principal amount of the obligations upon a specified number of days' notice.
Because master demand notes are direct lending arrangements between a Fund and
the issuer, they are not normally traded. Although there is no secondary market
in the notes, the Fund may demand payment of principal and accrued interest at
any time upon a specified period of notice.
Certain securities may have an initial principal amount that varies over time
based on an interest rate index, and, accordingly, a Fund might be entitled to
less than the initial principal amount of the security upon the security's
maturity. A Fund will purchase these securities only when its Adviser believes
the interest income from the instrument justifies any principal risks associated
with the instrument. The Advisers may attempt to limit any potential loss of
principal by purchasing similar instruments that are intended to provide an
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offsetting increase in principal. There can be no assurance that the Advisers
will be able to limit the effects of principal fluctuations and, accordingly, a
Fund may incur losses on those securities even if held to maturity without
issuer default.
There may not be an active secondary market for any particular floating or
variable rate instruments, which could make it difficult for a Fund to dispose
of the instrument during periods that the Fund is not entitled to exercise any
demand rights it may have. A Fund could, for this or other reasons, suffer a
loss with respect to those instruments. The Advisers monitor 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.
FINANCIAL INSTITUTION OBLIGATIONS. A Fund may invest in obligations of financial
institutions, including certificates of deposit, bankers' acceptances, time
deposits and other short-term debt obligations. Certificates of deposit
represent an institution's obligation to repay funds deposited with it that earn
a specified interest rate over a given period. Bankers' acceptances are
negotiable obligations of a bank to pay a draft which has been drawn by a
customer and are usually backed by goods in international trade. Time deposits
are non-negotiable deposits with a banking institution that earn a specified
interest rate over a given period. Certificates of deposit and fixed time
deposits, which are payable at the stated maturity date and bear a fixed rate of
interest, generally may be withdrawn on demand by a Fund but may be subject to
early withdrawal penalties which could reduce a Fund's performance. Although
fixed time deposits do not in all cases have a secondary market, there are no
contractual restrictions on a Fund's right to transfer a beneficial interest in
the deposits to third parties.
Funds that invest in foreign securities may invest in Eurodollar certificates of
deposit, which are issued by offices of foreign and domestic banks located
outside the United States; Yankee certificates of deposit, which are issued by a
U.S. branch of a foreign bank and held in the United States; Eurodollar time
deposits, which are deposits in a foreign branch of a U.S. bank or a foreign
bank; and Canadian time deposits, which are issued by Canadian offices of major
Canadian banks. Each of these instruments is U.S. dollar denominated.
Small Cap Opportunities Fund may invest in obligations (including certificates
of deposit and bankers' acceptances) of U.S. banks that have total assets at the
time of purchase in excess of $1 billion and are members of the Federal Deposit
Insurance Corporation.
PARTICIPATION INTERESTS. A Fund may purchase participation interests in loans or
instruments in which the Fund may invest directly that are owned by banks or
other institutions. A participation interest gives a Fund an undivided
proportionate interest in a loan or instrument. Participation interests may
carry a demand feature permitting the holder to tender the interests back to the
bank or other institution. Participation interests, however, do not provide the
Fund with any right to enforce compliance by the borrower, nor any rights of
set-off against the borrower and the Fund may not directly benefit from any
collateral supporting the loan in which it purchased a participation interest.
As a result, the Fund will assume the credit risk of both the borrower and the
lender that is selling the participation interest. A Fund will not invest more
than 10% of its total assets in participation interests in which the Fund does
not have demand rights. Each Tax-Free Income Fund will obtain appropriate
assurances that the interest earned by the Fund from the municipal securities in
which it holds participation interests is exempt from federal and, in the case
of Colorado Tax-Free Fund, Minnesota Tax-Free Fund and Minnesota Intermediate
Tax-Free Fund, applicable state income tax.
GENERAL MONEY MARKET FUND GUIDELINES
Each Money Market Fund will invest only in high-quality, U.S. dollar-denominated
instruments. As used herein, high-quality instruments include those that (1) are
rated (or, if unrated, are issued by an issuer with comparable outstanding
short-term debt that is rated) in one of the two highest rating categories by
two NRSROs or, if only one NRSRO has issued a rating, by that NRSRO; or (2) are
otherwise unrated and determined by the Adviser, pursuant to procedures adopted
by the Board, to be of comparable quality. A Money Market Fund (except for
Municipal Money Market Fund) will not invest in a security that has received, or
is deemed comparable in quality to a security that has received, the second
highest rating by an NRSRO (a "second tier security") if, immediately after the
acquisition, the Fund would have invested more than (1) the greater of 1% of its
total assets in any single second tier security; or (2) 5% of its total assets
in second tier securities. Municipal Money Market Fund is subject to certain
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issuer diversification rules described below under "Investment Limitations,
Non-fundamental Limitations." Appendix A to this SAI contains a description of
the rating categories of Standard & Poor's, Moody's and certain other NRSROs.
In addition, each Money Market Fund (1) will invest only in instruments that
have a remaining maturity of 397 days or less (as calculated in accordance with
Rule 2a-7 under the 1940 Act); (2) will maintain a dollar-weighted average
maturity of 90 days or less; (3) will not invest more than 5% of its total
assets in the securities of any one issuer (except U.S. Government Securities
and to the extent permitted by Rule 2a-7); and (4) will not purchase a security
if the value of all securities held by the Fund and issued or guaranteed by the
same issuer (including letters of credit in support of a security) would exceed
10% of the Fund's total assets. These limitations apply with respect to only 75%
of the total assets of Municipal Money Market Fund.
INVESTMENT BY FEDERAL CREDIT UNIONS. U.S. Government Fund and Treasury Fund seek
to limit their investments to investments that are legally permissible for
Federally chartered credit unions under applicable provisions of the Federal
Credit Union Act (including 12 U.S.C. Section 1757(7), (8) and (15)) and the
applicable rules and regulations of the National Credit Union Administration
(including 12 C.F.R. Part 703, Investment and Deposit Activities), as these
statutes and rules and regulations may be amended.
BORROWING
Each Fund may borrow money in accordance with its investment policies set forth
under "Investment Limitations." Interest costs on borrowings may offset or
exceed the return earned on borrowed funds (or on the assets that were retained
rather than sold to meet the needs for which funds were borrowed). Under adverse
market conditions, a Fund might have to sell portfolio securities to meet
interest or principal payments at a time when investment considerations would
not favor such sales. A Fund's use of borrowed proceeds to make investments
would subject the Fund to the risks of leveraging. Reverse repurchase
agreements, short sales not against the box, dollar roll transactions and other
similar investments that involve a form of leverage have characteristics similar
to borrowings but are not considered borrowings if the Fund maintains a
segregated account.
DOLLAR ROLL TRANSACTIONS
Dollar roll transactions are transactions in which a Fund sells securities to a
bank or securities dealer, and makes a commitment to purchase similar, but not
identical, securities at a later date from the same party. During the period
between the commitment and settlement, no payment is made for the securities
purchased and no interest or principal payments on the securities accrue to the
purchaser, but the Fund assumes the risk of ownership. A Fund is compensated for
entering into dollar roll transactions by the difference between the current
sales price and the forward price for the future purchase, as well as by the
interest earned on the cash proceeds of the initial sale. The Funds will engage
in dollar roll transactions for the purpose of acquiring securities for their
investment portfolios. Each Fund will limit its obligations on dollar roll
transactions to 35% of the Fund's net assets.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which a Fund purchases securities from
a bank or securities dealer and simultaneously commits to resell the securities
to the bank or dealer at an agreed-upon date and at a price reflecting a market
rate of interest unrelated to the purchased security. During the term of a
repurchase agreement, the Funds' custodian maintains possession of the purchased
securities and any underlying collateral, which is maintained at not less than
100% of the repurchase price. Repurchase agreements allow a Fund to earn income
on its uninvested cash for periods as short as overnight, while retaining the
flexibility to pursue longer-term investments. A Money Market Fund will only
enter into a repurchase agreement with a primary dealer that reports to the
Federal Reserve Bank of New York ("primary dealers") or one of the largest 100
commercial banks in the United States. International Fund may enter into
repurchase agreements with foreign entities. Small Cap Opportunities Fund may
invest only in repurchase agreements maturing in seven days or less.
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REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are transactions in which a Fund sells a security
and simultaneously commits to repurchase that security from the buyer at an
agreed upon price on an agreed upon future date. The resale price in a reverse
repurchase agreement reflects a market rate of interest that is not related to
the coupon rate or maturity of the sold security. For certain demand agreements,
there is no agreed upon repurchase date and interest payments are calculated
daily, often based upon the prevailing overnight repurchase rate.
LENDING FUND SECURITIES
Each Fund may lend Fund securities in an amount up to 33-1/3% (25% in the case
of Small Cap Opportunities Fund) of its total assets to brokers, dealers and
other financial institutions. Securities loans must be continuously
collateralized and the collateral must have market value at least equal to value
of the Fund's loaned securities, plus accrued interest. In a portfolio
securities lending transaction, the Fund receives from the borrower an amount
equal to the interest paid or the dividends declared on the loaned securities
during the term of the loan as well as the interest on the collateral
securities, less any fees (such as finders or administrative fees) the Fund pays
in arranging the loan. The Fund may share the interest it receives on the
collateral securities with the borrower. The terms of a Fund's loans permit the
Fund to reacquire loaned securities on five business days' notice or in time to
vote on any important matter. Loans are subject to termination at the option of
a Fund or the borrower at any time, and the borrowed securities must be returned
when the loan is terminated. The Funds will not lend portfolio securities to any
officer, director, employee or affiliate of the Funds or an Adviser.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
Each Fund may purchase or sell portfolio securities on a "when-issued," "delayed
delivery" or "forward commitment" basis. When-issued securities may be purchased
on a "when, as and if issued" basis under which the issuance of the securities
depends upon the occurrence of a subsequent event. When these 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. When-issued
securities and forward commitments may be sold prior to the settlement date, but
the Funds enter into these transactions only with the intention of actually
receiving securities or delivering them, as appropriate. The Funds may dispose
of the right to acquire these securities before the settlement date if deemed
advisable. During the period between the time of commitment and settlement, no
payment is made for the securities purchased and no interest or dividends on the
securities accrue to the purchaser. At the time a Fund makes a commitment to
purchase securities in this manner, the Fund immediately assumes the risk of
ownership, including price fluctuation. The use of when-issued transactions and
forward commitments enables a Fund to protect against anticipated changes in
interest rates and prices, but also tends to increase the volatility of the
Fund's net asset value per share. Except for dollar-roll transactions, a Fund
will not purchase securities on a when-issued, delayed delivery or forward
commitment basis if, as a result, more than 15% (35% in the case of Total Return
Bond Fund) of the value of the Fund's total assets would be committed to such
transactions.
The use of when-issued transactions and forward commitments enables the Funds to
hedge against anticipated changes in interest rates and prices. If an Adviser
were to forecast incorrectly the direction of interest rate movements, however,
a Fund might be required to complete when-issued or forward transactions at
prices inferior to the current market values.
At the time a Fund makes the commitment to purchase securities on a when-issued
or delayed delivery basis, the Fund will record the transaction as a purchase
and thereafter reflect the value each day of such securities in determining its
net asset value.
ILLIQUID INVESTMENTS
No Fund may knowingly invest more than 15% (10% in the case of the Money Market
Funds) of the Fund's net assets in illiquid investments. Illiquid investments
are investments that cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which the Fund has valued the
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investment and include, among other instruments, repurchase agreements not
entitling the Fund to payment of principal within seven days.
An institutional market has developed for certain securities that are not
registered under the 1933 Act. Institutional investors usually will not seek to
sell these instruments to the general public, but instead will often depend on
either an efficient institutional market in which the unregistered security can
be readily resold or on an issuer's ability to honor a demand for repayment of
the unregistered security. A security's contractual or legal restrictions on
resale to the general public or to certain institutions therefore may not be
determinative of the liquidity of such investments.
If unregistered securities are eligible for purchase by institutional buyers in
accordance with applicable exemptions under guidelines adopted by the Board, an
Adviser may determine that the securities are liquid. Under these guidelines,
the Advisers are required to take into account: (1) the frequency of trades and
quotations for the investment; (2) the number of dealers willing to purchase or
sell the investment; (3) the number of dealers that have undertaken to make a
market in the investment; (4) the number of other potential purchasers; and (5)
the nature of the marketplace trades, including the time needed to dispose of
the investment, the method of soliciting offers and the mechanics of the
transfer.
Illiquid investments may be more difficult to value than liquid investments and
the sale of illiquid investments generally may require more time and result in
higher selling expenses than the sale of liquid investments. A Fund might not be
able to dispose of restricted or other securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions.
Restrictions on resale may have an adverse effect on the marketability of
illiquid investments and a Fund might also have to register certain investments
in order to dispose of them, resulting in expense and delay.
PURCHASES ON MARGIN AND SHORT SALES
Limited Term Government Income Fund and Intermediate Government Income Fund may
purchase securities on margin and make short sales that are not "against the
box." When a Fund purchases securities on margin, it only pays part of the
purchase price and borrows the remainder. As a borrowing, a Fund's purchase of
securities on margin is subject to the limitations and risks of borrowing. In
addition, if the value of the securities purchased on margin decreases such that
the Fund's borrowing with respect to the security exceeds the maximum
permissible borrowing amount, the Fund will be required to make margin payments.
A Fund's obligation to satisfy margin calls may require the Fund to sell
securities at an inappropriate time.
Each of these Funds also may make short sales of securities which it does not
own or have the right to acquire in anticipation of a decline in the market
price for the security. When a Fund makes a short sale, the proceeds it receives
are retained by the broker until the Fund replaces the borrowed security. In
order to deliver the security to the buyer, a Fund must arrange through a broker
to borrow the security and, in so doing, the Fund becomes obligated to replace
the security borrowed at its market price at the time of replacement, whatever
that price may be. Short sales create opportunities to increase a Fund's return
but, at the same time, involve special risk considerations and may be considered
a speculative technique. Since a Fund in effect profits from a decline in the
price of the securities sold short without the need to invest the full purchase
price of the securities on the date of the short sale, the Fund's net asset
value per share, will tend to increase more when the securities it has sold
short decrease in value, and to decrease more when the securities it has sold
short increase in value, than would otherwise be the case if it had not engaged
in such short sales. Short sales theoretically involve unlimited loss potential,
as the market price of securities sold short may continuously increase, although
a Fund may mitigate such losses by replacing the securities sold short before
the market price has increased significantly. Under adverse market conditions, a
Fund might have difficulty purchasing securities to meet its short sale delivery
obligations and might have to sell portfolio securities to raise the capital
necessary to meet its short sale obligations at a time when fundamental
investment considerations would not favor those sales.
All Funds may engage in short sales "against the box." A short sale is "against
the box" to the extent that while the short position is open, the Fund must own
an equal amount of the securities sold short, or by virtue of ownership of
securities have the right, without payment of further consideration, to obtain
an equal amount of the securities sold short. Short sales against-the-box may in
certain cases be made to defer, for Federal income tax purposes, recognition of
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gain or loss on the sale of securities "in the box" until the short position is
closed out. If a Portfolio has unrealized gain with respect to a long position
and enters into a short sale against-the-box, the Portfolio generally will be
deemed to have sold the long position for tax purposes and thus will recognize
gain. Prohibitions on entering short sales other than against the box does not
restrict a Fund's ability to use short-term credits necessary for the clearance
of portfolio transactions and to make margin deposits in connection with
permitted transactions in options and futures contracts. No Fund except Treasury
Plus Fund, Diversified Small Cap Fund and Small Cap Opportunities Fund may make
short sales if, as a result, more than 25% of the Fund's total assets would be
so invested or such a position would represent more than 2% of the outstanding
voting securities of any single issuer or class of an issuer.
OPTIONS AND FUTURES CONTRACTS
Each Fund (except for Small Cap Opportunities Fund, whose use of options and
futures contracts is described separately below) may (1) purchase or sell
(write) put and call options on securities to enhance the Fund's performance and
(2) seek to hedge against a decline in the value of securities owned by the Fund
or an increase in the price of securities that the Fund plans to purchase
through the writing and purchase of exchange-traded and over-the-counter options
on individual securities or securities or financial indices and through the
purchase and sale of interest-rate futures contracts and options on those
futures contracts. A Fund may only write options that are covered. To the extent
a Fund invests in foreign securities, it may in the future invest in options on
foreign currencies, foreign currency futures contracts and options on those
futures contracts. These instruments are considered to be derivatives. Use of
these instruments is subject to regulation by the SEC, the several options and
futures exchanges on which futures and options are traded or the CFTC. No
assurance can be given that any hedging or option income strategy will achieve
its intended result. Certain futures strategies employed by Strategic Income
Fund and the Balanced Funds in allocating assets temporarily may not be deemed
to be for bona fide hedging purposes, as defined by the CFTC. A Fund may enter
into futures contracts only if the aggregate of initial margin deposits for open
futures contract positions does not exceed 5% of the Fund's total assets.
COVER FOR OPTIONS AND FUTURES CONTRACTS. A Fund will hold securities,
currencies, or other options or futures positions whose values are expected to
offset ("cover") its obligations under the transactions. A Fund will enter into
a hedging strategy that exposes it to an obligation to another party only if the
Fund owns either (1) an offsetting ("covered") position in the underlying
security, currency or options or futures contract, or (2) cash, receivables and
liquid debt securities with a value sufficient at all times to cover its
potential obligations. Each Fund will comply with SEC guidelines with respect to
coverage of these strategies and, if the guidelines require, will set aside
cash, liquid debt securities and other permissible assets ("Segregated Assets")
in a segregated account with the Custodian in the prescribed amount. Segregated
Assets cannot be sold or closed out while the hedging or option income strategy
is outstanding, unless the Segregated Assets are replaced with similar assets.
As a result, there is a possibility that the use of cover or segregation
involving a large percentage of a Fund's assets could impede portfolio
management or a Fund's ability to meet redemption requests or other current
obligations.
The Funds have no current intention of investing in futures contracts and
options thereon for purposes other than hedging. No Fund may purchase any call
or put option on a futures contract if the premiums associated with all such
options held by the Fund would exceed 5% of the Fund's total assets as of the
date the option is purchased. No Fund may sell a put option if the exercise
value of all put options written by the Fund would exceed 50% of the Fund's
total assets or sell a call option if the exercise value of all call options
written by the Fund would exceed the value of the Fund's assets. In addition,
the current market value of all open futures positions held by a Fund will not
exceed 50% of its total assets.
OPTIONS ON SECURITIES. A call option is a contract under which the purchaser of
the call option, in return for a premium paid, has the right to buy the security
underlying the option at a specified exercise price at any time during the term
of the option. The writer of the call option, who receives the premium, has the
obligation upon exercise of the option to deliver the underlying security
against payment of the exercise price during the option period. A put option
gives its purchaser, in return for a premium, the right to sell the underlying
security at a specified price during the term of the option. The writer of the
put, who receives the premium, has the obligation to buy the underlying security
upon exercise at the exercise price during the option period. The amount of
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premium received or paid is based upon certain factors, including the market
price of the underlying assets, the relationship of the exercise price to the
market price, the historical price volatility of the underlying assets, the
option period, supply and demand and interest rates.
OPTIONS ON STOCK INDICES. A stock index assigns relative values to the stock
included in the index, and the index fluctuates with changes in the market
values of the stocks included in the index. Stock index options operate in the
same way as the more traditional options on securities except that exercises of
stock index options are effected with cash payments and do not involve delivery
of securities (i.e., stock index options are settled exclusively in cash). Thus,
upon exercise of stock index options, the purchaser will realize and the writer
will pay an amount based on the differences between the exercise price and the
closing price of the stock index.
OPTIONS ON FUTURES CONTRACTS. Options on futures contracts are similar to
options on securities except that an option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract rather than to purchase or sell stock, at a specified exercise
price at any time during the period of the option. Upon exercise of the option,
the delivery of the futures position to the holder of the option will be
accompanied by transfer to the holder of an accumulated balance representing the
amount by which the market price of the futures contract exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the option
on the future.
FUTURES CONTRACTS AND INDEX FUTURES CONTRACTS. A futures contract is a bilateral
agreement where one party agrees to accept, and the other party agrees to make,
delivery of cash, an underlying debt security or a currency, as called for in
the contract, at a specified date and at an agreed-upon price. A bond or stock
index futures contract involves the delivery of an amount of cash equal to a
specified dollar amount times the difference between the bond or stock index
value at the close of trading of the contract and the price at which the futures
contract is originally struck. No physical delivery of the securities comprising
the index is made. Generally, these futures contracts are closed out prior to
the expiration date of the contracts.
SMALL CAP OPPORTUNITIES FUND OPTIONS AND FUTURES CONTRACTS
Small Cap Opportunities Fund may write covered calls on up to 100% of its total
assets or employ one or more types of instruments to hedge ("Hedging
Instruments"). When hedging to attempt to protect against declines in the market
value of the Fund's securities, to permit the Fund to retain unrealized gains in
the value of Fund securities which have appreciated, or to facilitate selling
securities for investment reasons, the Fund would: (1) sell Stock Index Futures;
(2) purchase puts on such futures or securities; or (3) write covered calls on
securities or on Stock Index Futures. When hedging to establish a position in
the equities markets as a temporary substitute for purchasing particular equity
securities (which the Fund will normally purchase and then terminate the hedging
position), the Fund would: (1) purchase Stock Index Futures, or (2) purchase
calls on such Futures or on securities. The Fund's strategy of hedging with
Stock Index Futures and options on such Futures will be incidental to the Fund's
activities in the underlying cash market.
The Fund may write (i.e., sell) call options ("calls") if: (1) the calls are
listed on a domestic securities or commodities exchange and (2) the calls are
"covered" (i.e., the Fund owns the securities subject to the call or other
securities acceptable for applicable escrow arrangements) while the call is
outstanding. A call written on a Stock Index Future must be covered by
deliverable securities or segregated liquid assets. If a call written by the
Fund is exercised, the Fund forgoes any profit from any increase in the market
price above the call price of the underlying investment on which the call was
written.
When the Fund writes a call on a security, it receives a premium and agrees to
sell the underlying securities to a purchaser of a corresponding call on the
same security during the call period (usually not more than 9 months) at a fixed
exercise price (which may differ from the market price of the underlying
security), regardless of market price changes during the call period. The risk
of loss will have been retained by the Fund if the price of the underlying
security should decline during the call period, which may be offset to some
extent by the premium.
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To terminate its obligation on a call it has written, the Fund may be purchase a
corresponding call in a "closing purchase transaction." A profit or loss will be
realized, depending upon whether the net of the amount of option transaction
costs and the premium previously received on the call written was more or less
than the price of the call subsequently purchased. A profit may also be realized
if the call lapses unexercised, because the Fund retains the underlying security
and the premium received. Any such profits are considered short-term capital
gains for Federal income tax purposes, and when distributed by the Fund are
taxable as ordinary income. If the Fund could not effect a closing purchase
transaction due to the lack of a market, it would have to hold the callable
securities until the call lapsed or was exercised.
The Fund may also write calls on Stock Index Futures without owning a futures
contract or a deliverable bond, provided that at the time the call is written,
the Fund covers the call by segregating in escrow an equivalent dollar amount of
liquid assets. The Fund will segregate additional liquid assets if the value of
the escrowed assets drops below 100% of the current value of the Stock Index
Future. In no circumstances would an exercise notice require the Fund to deliver
a futures contract; it would simply put the Fund in a short futures position,
which is permitted by the Fund's hedging policies.
PURCHASING CALLS AND PUTS. The Fund may purchase put options ("puts") which
relate to: (1) securities held by it; (2) Stock Index Futures (whether or not it
holds such Stock Index Futures in its Fund); or (3) broadly-based stock indices.
The Fund may not sell puts other than those it previously purchased, nor
purchase puts on securities it does not hold. The Fund may purchase calls: (1)
as to securities, broadly-based stock indices or Stock Index Futures or (2) to
effect a "closing purchase transaction" to terminate its obligation on a call it
has previously written. A call or put may be purchased only if, after such
purchase, the value of all put and call options held by the Fund would not
exceed 5% of the Fund's total assets.
When the Fund purchases a call (other than in a closing purchase transaction),
it pays a premium and, except as to calls on stock indices, has the right to buy
the underlying investment from a seller of a corresponding call on the same
investment during the call period at a fixed exercise price. The Fund benefits
only if the call is sold at a profit or if, during the call period, the market
price of the underlying investment is above the sum of the call price plus the
transaction costs and the premium paid for the call and the call is exercised.
If the call is not exercised or sold (whether or not at a profit), it will
become worthless at its expiration date and the Fund will lose its premium
payments and the right to purchase the underlying investment. When the Fund
purchases a call on a stock index, it pays a premium, but settlement is in cash
rather than by delivery of an underlying investment.
When the Fund purchases a put, it pays a premium and, except as to puts on stock
indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on a security or Stock Index Future the Fund owns
enables the Fund to attempt to protect itself during the put period against a
decline in the value of the underlying investment below the exercise price by
selling the underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is equal to
or above the exercise price and, as a result, the put is not exercised or
resold, the put will become worthless at its expiration date and the Fund will
lose its premium payment and the right to sell the underlying investment; the
put may, however, be sold prior to expiration (whether or not at a profit).
Purchasing a put on either a stock index or on a Stock Index Future not held by
the Fund permits the Fund either to resell the put or to buy the underlying
investment and sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the market price
of the underlying investment is above the exercise price and, as a result, the
put is not exercised, the put will become worthless on its expiration date. In
the event of a decline in price of the underlying investment, the Fund could
exercise or sell the put at a profit to attempt to offset some or all of its
loss on its Fund securities. When the Fund purchases a put on a stock index, or
on a Stock Index Future not held by it, the put protects the Fund to the extent
that the index moves in a similar pattern to the securities held. In the case of
a put on a stock index or Stock Index Future, settlement is in cash rather than
by the Fund's delivery of the underlying investment.
STOCK INDEX FUTURES. The Fund may buy and sell futures contracts only if they
are Stock Index Futures. A stock index is "broadly-based" if it includes stocks
that are not limited to issuers in any particular industry or group of
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industries. Stock Index Futures obligate the seller to deliver (and the
purchaser to take) cash to settle the futures transaction, or to enter into an
offsetting contract. No physical delivery of the underlying stocks in the index
is made.
No price is paid or received upon the purchase or sale of a Stock Index Future.
Upon entering into a futures transaction, the Fund will be required to deposit
an initial margin payment in cash or U.S. Treasury bills with a futures
commission merchant (the "futures broker"). The initial margin will be deposited
with the Fund's custodian in an account registered in the futures broker's name;
however the futures broker can gain access to that account only under specified
conditions. As the future is marked to market to reflect changes in its market
value, subsequent margin payments, called variation margin, will be paid to or
by the futures broker on a daily basis. Prior to expiration of the future, if
the Fund elects to close out its position by taking an opposite position, a
final determination of variation margin is made, additional cash is required to
be paid by or released to the Fund, and any loss or gain is realized for tax
purposes. Although Stock Index Futures by their terms call for settlement by the
delivery of cash, in most cases the obligation is fulfilled without such
delivery, by entering into an offsetting transaction. All futures transactions
are effected through a clearinghouse associated with the exchange on which the
contracts are traded.
Puts and calls on broadly-based stock indices or Stock Index Futures are similar
to puts and calls on securities or futures contracts except that all settlements
are in cash and gain or loss depends on changes in the index in question (and
thus on price movements in the stock market generally) rather than on price
movements in individual securities or futures contracts. When the Fund buys a
call on a stock index or Stock Index Future, it pays a premium. During the call
period, upon exercise of a call by the Fund, a seller of a corresponding call on
the same index will pay the Fund an amount of cash to settle the call if the
closing level of the stock index or Stock Index Future upon which the call is
based is greater than the exercise price of the call; that cash payment is equal
to the difference between the closing price of the index and the exercise price
of the call times a specified multiple (the "multiplier") which determines the
total dollar value for each point of difference. When the Fund buys a put on a
stock index or Stock Index Future, it pays a premium and has the right during
the put period to require a seller of a corresponding put, upon the Fund's
exercise of its put, to deliver to the Fund an amount of cash to settle the put
if the closing level of the stock index or Stock Index Future upon which the put
is based is less than the exercise price of the put; that cash payment is
determined by the multiplier, in the same manner as described above as to calls.
FOREIGN CURRENCY TRANSACTIONS
Funds that make foreign investments may conduct foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign exchange market or by entering into a forward foreign currency
contract. A forward foreign currency contract ("forward contract") involves an
obligation to purchase or sell a specific amount of a specific currency at a
future date, which may be any fixed number of days (usually less than one year)
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. Forward contracts are considered to be derivatives. A Fund
enters into forward contracts in order to "lock in" the exchange rate between
the currency it will deliver and the currency it will receive for the duration
of the contract. In addition, a Fund may enter into forward contracts to hedge
against risks arising from securities a Fund owns or anticipates purchasing, or
the U.S. dollar value of interest and dividends paid on those securities. A Fund
will not enter into forward contracts for speculative purposes. A Fund will not
have more than 25% of its total assets committed to forward contracts, or
maintain a net exposure to forward contracts that would obligate the Fund to
deliver an amount of foreign currency in excess of the value of the Fund's
investment securities or other assets denominated in that currency.
If a Fund makes delivery of the foreign currency at or before the settlement of
a forward contract, it may be required to obtain the currency through the
conversion of assets of the Fund into the currency. The Fund may close out a
forward contract obligating it to purchase a foreign currency by selling an
offsetting contract, in which case it will realize a gain or a loss.
Foreign currency transactions involve certain costs and risks. The Fund incurs
foreign exchange expenses in converting assets from one currency to another.
Forward contracts involve a risk of loss if the Adviser is inaccurate in its
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prediction of currency movements. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. The precise matching of forward contract
amounts and the value of the securities involved is generally not possible.
Accordingly, it may be necessary for the Fund to purchase additional foreign
currency if the market value of the security is less than the amount of the
foreign currency the Fund is obligated to deliver under the forward contract and
the decision is made to sell the security and make delivery of the foreign
currency. The use of forward contracts as a hedging technique does not eliminate
fluctuations in the prices of the underlying securities the Fund owns or intends
to acquire, but it does fix a rate of exchange in advance. Although forward
contracts can reduce the risk of loss due to a decline in the value of the
hedged currencies, they also limit any potential gain that might result from an
increase in the value of the currencies.
In addition, there is no systematic reporting of last sale information for
foreign currencies, and there is no regulatory requirement that quotations
available through dealers or other market sources be firm or revised on a timely
basis. Quotation information available is generally representative of very large
transactions in the interbank market. The interbank market in foreign currencies
is a global around-the-clock market. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, a Fund may be
disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
The Funds have no present intention to enter into currency futures or options
contracts, but may do so in the future. A Fund might take positions in options
on foreign currencies in order to hedge against the risk of foreign exchange
fluctuation on foreign securities the Fund holds in its portfolio or which it
intends to purchase.
SWAPS, CAPS, FLOORS AND COLLARS
A Fund may enter into interest rate, currency and mortgage (or other asset)
swaps, and may purchase and sell interest rate "caps," "floors" and "collars."
Interest rate swaps involve the exchange by a Fund and a counterparty of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Mortgage swaps are similar to interest
rate swap agreements, except that the contractually-based principal amount (the
"notional principal amount") is tied to a reference pool of mortgages. Currency
swaps' notional principal amount is tied to one or more currencies, and the
exchange commitments can involve payments in the same or different currencies.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on the notional principal amount from the party selling the cap. The
purchase of an interest rate floor entitles the purchaser, to the extent that a
specified index falls below a predetermined value, to receive payments on a
notional principal amount from the party selling the floor. A collar entitles
the purchaser to receive payments to the extent a specified interest rate falls
outside an agreed range.
A Fund will enter into these transactions primarily to preserve a return or a
spread on a particular investment or portion of its portfolio or to protect
against any interest rate fluctuations or increase in the price of securities it
anticipates purchasing at a later date. The Funds intend to use these
transactions as a hedge and not as a speculative investment, and will enter into
the transactions in order to shift a Fund's investment exposure from one type of
investment to another.
A Fund may enter into interest rate protection transactions on an asset-based
basis, depending on whether it is hedging its assets or its liabilities, and
will usually enter into interest rate swaps on a net basis, i.e., the two
payment streams are netted out, with the Fund receiving or paying, as the case
may be, only the net amount of the two payments.
The use of interest rate protection transactions is a highly specialized
activity which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. If an Adviser
incorrectly forecasts market values, interest rates and other applicable
factors, there may be considerable impact on a Fund's performance. Even if the
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Advisers are correct in their forecasts, there is a risk that the transaction
may correlate imperfectly with the price of the asset or liability being hedged.
TEMPORARY DEFENSIVE POSITION
When, in the judgment of an Adviser, market or economic conditions warrant, each
Fund, other than a Money Market Fund, may assume a defensive position and
temporarily hold cash or invest without limit in cash equivalents to retain
flexibility in meeting redemptions, paying expenses and timing of new
investments. These investments will be rated in one of the two highest
short-term rating categories by an NRSRO or, if not rated, determined by the
Adviser to be of comparable quality, 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 that have, at the time of investment, except in the case of
International Fund, total assets in excess of one billion dollars and that are
insured by the Federal Deposit Insurance Corporation; (3) commercial paper; (4)
repurchase agreements covering any of the securities in which the Fund may
invest directly; and (5) shares of money market funds registered under the 1940
Act within the limits specified therein. To the extent that a Fund assumes a
temporary defensive position, it may not be invested to pursue its investment
objective. International Fund may hold cash and invest in bank instruments
denominated in any major foreign currency.
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 Tax-Exempt
Fixed Income Fund assumes a temporary defensive position, it is likely that its
shareholders will be subject to federal and applicable state income taxes on a
greater portion of their income distributions received from the Fund.
3. RISK CONSIDERATIONS
COUNTERPARTY RISK
The Funds may be exposed to the risks of financial failure or insolvency of
another party. To help reduce those risks, the Advisers, subject to the Board's
supervision, monitor and evaluate the creditworthiness of counterparties to the
Funds' transactions and intend to enter into a transaction only when they
believe that the counterparty presents minimal credit risks and the benefits
from the transaction justify the attendant risks.
The use of repurchase agreements, securities lending, reverse repurchase
agreements, interest rate protection transactions (such as swaps, caps, collars
and floors), forward commitments (including dollar roll transactions) and
forward contracts involving currencies present particular counterparty risk. In
the event that bankruptcy, insolvency or similar proceedings were commenced
against a counterparty while these transactions remained open or a counterparty
defaulted on its obligations, a Fund may have difficulties in exercising its
rights to the underlying securities or currencies, as applicable, it may incur
costs and expensive time delays in disposing of the underlying securities and it
may suffer a loss. Failure by the other party to deliver a security or currency
purchased by a Fund may result in a missed opportunity to make an alternative
investment. Counterparty insolvency risk with respect to repurchase agreements
is reduced by favorable insolvency laws that allow a Fund, among other things,
to liquidate the collateral held in the event of the bankruptcy of the
counterparty. Those laws do not apply to securities lending, reverse repurchase
agreements and dollar roll transactions, and therefore, those transactions
involve more risk than repurchase agreements. For example, in the event the
purchaser of securities in a dollar roll transaction files for bankruptcy or
becomes insolvent, a Fund's use of the proceeds of the transaction may be
restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
As a result of entering into forward commitments and reverse repurchase
agreements, as well as lending its securities, a Fund may be exposed to greater
potential fluctuations in the value of its assets and net asset value per share.
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FIXED INCOME SECURITIES
GENERAL. The market value of the interest-bearing fixed income 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. The longer the
remaining maturity (and duration) of a security, the more sensitive the security
is to changes in interest rates. All fixed income securities, including U.S.
Government Securities, can change in value when there is a change in interest
rates. Changes in the ability of an issuer to make payments of interest and
principal and in the markets' perception of an issuer's creditworthiness will
also affect the market value of that issuer's debt securities. As a result, an
investment in a Fund is subject to risk even if all fixed income securities in
the Fund's investment portfolio are paid in full at maturity. In addition,
certain fixed income securities may be subject to extension risk, which refers
to the change in total return on a security resulting from an extension or
abbreviation of the security's maturity.
Yields on fixed income securities, including municipal securities, are dependent
on a variety of factors, including the general conditions of the fixed income
securities markets, the size of a particular offering, the maturity of the
obligation and the rating of the issue. Fixed income securities with longer
maturities tend to produce higher yields and are generally subject to greater
price movements than obligations with shorter maturities. A portion of the
municipal securities held by the Funds may be supported by credit and liquidity
enhancements, such as letters of credit (which are not covered by federal
deposit insurance) or puts or demand features of third party financial
institutions, generally domestic and foreign banks.
The issuers of fixed income securities are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors that may restrict the ability of the issuer to pay, when due, the
principal of and interest on its debt securities. The possibility exists
therefore, that, as a result of bankruptcy, litigation or other conditions, the
ability of an issuer to pay, when due, the principal of and interest on its debt
securities may become impaired.
CREDIT RISK. The Funds' investments in fixed income securities are subject to
credit risk relating to the financial condition of the issuers of the securities
that each Fund holds. To limit credit risk, each Fixed Income Fund, Tax-Free
Fixed Income Fund and Balanced Fund will generally buy debt securities that are
rated in the top four long-term rating categories by an NRSRO or in the top two
short-term rating categories by an NRSRO (although certain Funds have greater
restrictions). Moody's, Standard & Poor's and other NRSROs are private services
that provide ratings of the credit quality of debt obligations, including
convertible securities. A description of the range of ratings assigned to
various types of securities by several NRSROs is included in Appendix A. The
Advisers may use these ratings to determine whether to purchase, sell or hold a
security. Ratings are not, however, absolute standards of quality. Credit
ratings attempt to evaluate the safety of principal and interest payments and do
not evaluate the risks of fluctuations in market value. Consequently, similar
securities with the same rating may have different market prices. In addition,
rating agencies may fail to make timely changes in credit ratings and the
issuer's current financial condition may be better or worse than a rating
indicates.
Each Fund may retain a security that ceases to be rated or whose rating has been
lowered below the Fund's lowest permissible rating category (except in certain
cases with respect to the Money Market Funds) if the Adviser determines that
retaining the security is in the best interests of the Fund. Because a downgrade
often results in a reduction in the market price of the security, sale of a
downgraded security may result in a loss.
Each Fund may purchase unrated securities if the Adviser determines that the
security is of comparable quality to a rated security that the Fund may
purchase. Unrated securities may not be as actively traded as rated securities.
MORTGAGE-RELATED SECURITIES. The value of mortgage-related securities may be
significantly affected by changes in interest rates, the markets' perception of
issuers, the structure of the securities and the creditworthiness of the parties
involved. The ability of the Funds to successfully utilize mortgage-related
securities depends in part upon the ability of the Advisers to forecast interest
rates and other economic factors correctly. Some mortgage-related securities
have structures that make their reaction to interest rate changes and other
factors difficult to predict.
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Prepayments of principal of mortgage-related securities by mortgagors or
mortgage foreclosures affect the average life of the mortgage-related
securities. The occurrence of mortgage prepayments is affected by various
factors, including the level of interest rates, general economic conditions, the
location and age of the mortgages and other social and demographic conditions.
In periods of rising interest rates, the prepayment rate tends to decrease,
lengthening the average life of a pool of mortgage-related securities. In
periods of falling interest rates, the prepayment rate tends to increase,
shortening the average life of a pool. The volume of prepayments of principal on
the mortgages underlying a particular mortgage-related security will influence
the yield of that security, affecting the Fund's yield. Because prepayments of
principal generally occur when interest rates are declining, it is likely that
the Funds, to the extent they retain the same percentage of debt securities, may
have to reinvest the proceeds of prepayments at lower interest rates then those
of their previous investments. If this occurs, a Fund's yield will
correspondingly decline. Thus, mortgage-related securities may have less
potential for capital appreciation in periods of falling interest rates (when
prepayment of principal is more likely) than other fixed income securities of
comparable duration, although they may have a comparable risk of decline in
market value in periods of rising interest rates. A decrease in the rate of
prepayments may extend the effective maturities of mortgage-related securities,
increasing their sensitivity to changes in market interest rates. To the extent
that the Funds purchase mortgage-related securities at a premium, unscheduled
prepayments, which are made at par, result in a loss equal to any unamortized
premium.
ASSET-BACKED SECURITIES. Like mortgages underlying mortgage-related securities,
the collateral underlying assets are subject to prepayment, which may reduce the
overall return to holders of asset-backed securities. Asset-backed securities
present certain additional and unique risks. Primarily, these securities do not
always have the benefit of a security interest in collateral comparable to the
security interests associated with mortgage-related securities. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to set-off certain amounts owed on the credit cards,
thereby reducing the balance due. Automobile receivables generally are secured
by automobiles. Most issuers of automobile receivables permit the loan servicers
to retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the asset-backed
securities. In addition, because of the large number of vehicles involved in a
typical issuance and the technical requirements under state laws, the trustee
for the holders of the automobile receivables may not have a proper security
interest in the underlying automobiles. As a result, the risk that recovery on
repossessed collateral might be unavailable or inadequate to support payments on
asset-backed securities is greater for asset-backed securities than for
mortgage-related securities. In addition, because asset-backed securities are
relatively new, the market experience in these securities is limited and the
market's ability to sustain liquidity through all phases of an interest rate or
economic cycle has not been tested.
NON-INVESTMENT GRADE SECURITIES. Non-investment grade securities are securities
rated below the fourth highest rating category by an NRSRO or which are unrated
and judged by the Adviser to be of comparable quality. Such high risk securities
(commonly referred to as "junk bonds") are not considered to be investment grade
and have speculative or predominantly speculative characteristics.
Non-investment grade, high risk securities provide poor protection for payment
of principal and interest but may have greater potential for capital
appreciation than do higher quality securities. These lower rated securities
involve greater risk of default or price changes due to changes in the issuers'
creditworthiness than do higher quality securities. The market for these
securities may be thinner and less active than that for higher quality
securities, which may affect the price at which the lower rated securities can
be sold. In addition, the market prices of lower rated securities may fluctuate
more than the market prices of higher quality securities and may decline
significantly in periods of general economic difficulty or rising interest
rates. Under such conditions, the Funds may have to use subjective rather than
objective criteria to value its high yield/high risk securities investments
accurately and rely more heavily on the judgment of the Fund's Adviser.
Lower rated or unrated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the Fund's
Adviser may have to replace the security with a lower yielding security,
resulting in a decreased return for investors. If a Fund experiences unexpected
net redemptions, the Fund's Adviser may be forced to sell the Fund's higher
rated securities, resulting in a decline in the overall credit quality of the
Fund's portfolio and increasing the exposure of the Fund to the risks of high
yield/high risk securities.
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FOREIGN SECURITIES
All investments, domestic and foreign, involve certain risks. Investments in the
securities of foreign issuers may involve risks in addition to those normally
associated with investments in the securities of U.S. issuers. All foreign
investments are subject to risks of foreign political and economic instability,
adverse movements in foreign exchange rates, the imposition or tightening of
exchange controls or other limitations on repatriation of foreign capital, and
changes in foreign governmental attitudes towards private investment, possibly
leading to nationalization, increased taxation or confiscation of foreign
investors' assets.
Moreover, dividends payable on foreign securities may be subject to foreign
withholding taxes, thereby reducing the income available for distribution to a
Fund's shareholders; commission rates payable on foreign transactions are
generally higher than in the United States; foreign accounting, auditing and
financial reporting standards differ from those in the United States and,
accordingly, less information may be available about foreign companies than is
available about issuers of comparable securities in the United States; and
foreign securities may trade less frequently and with lower volume and may
exhibit greater price volatility than United States securities.
Changes in foreign exchange rates will also affect the value in U.S. dollars of
all foreign currency-denominated securities held by a Fund. Exchange rates are
influenced generally by the forces of supply and demand in the foreign currency
markets and by numerous other political and economic events occurring outside
the United States, many of which may be difficult, if not impossible, to
predict.
Income from foreign securities will be received and realized in foreign
currencies, and a Fund is required to compute and distribute income in U.S.
dollars. Accordingly, a decline in the value of a particular foreign currency
against the U.S. dollar occurring after the Fund's income has been earned and
computed in U.S. dollars may require the Fund to liquidate portfolio securities
to acquire sufficient U.S. dollars to make a distribution. Similarly, if the
exchange rate declines between the time a Fund incurs expenses in U.S. dollars
and the time such expenses are paid, the Fund may be required to liquidate
additional foreign securities to purchase the U.S. dollars required to meet such
expenses.
Certain Funds may purchase foreign bank obligations. In addition to the risks
described above that are generally applicable to foreign investments, the
investments that the Funds make in obligations of foreign banks, branches or
subsidiaries may involve further risks, including differences between foreign
banks and U.S. banks in applicable accounting, auditing and financial reporting
standards, and the possible establishment of exchange controls or other foreign
government laws or restrictions applicable to the payment of certificates of
deposit or time deposits that may affect adversely the payment of principal and
interest on the securities held by the Funds.
LEVERAGE
The Funds may use leverage in an effort to increase their returns. Leverage
involves special risks and may involve speculative investment techniques.
Leverage exists when cash made available to a Fund through an investment
technique is used to make additional Fund investments. Borrowing for other than
temporary or emergency purposes, lending portfolio securities, entering into
reverse repurchase agreements, purchasing securities on a when-issued, delayed
delivery or forward commitment basis (including dollar roll transactions) and
the use of swaps and related agreements are transactions that result in
leverage. Certain Funds also may purchase securities on margin or enter into
short sales. The Funds use these investment techniques only when the Advisers
believe that the leveraging and the returns available to the Funds from
investing the cash will provide investors a potentially higher return.
Leverage creates the risk of magnified capital losses which occur when losses
affect an asset base, enlarged by borrowings or the creation of liabilities,
that exceeds the equity base of the Fund. Leverage may involve the creation of a
liability that requires a Fund to pay interest (for instance, reverse repurchase
agreements) or the creation of a liability that does not entail any interest
costs (for instance, forward commitment costs). The risks of leverage include a
higher volatility of the net asset value of the Fund's interests and the
relatively greater effect on the net asset value of the interests caused by
favorable or adverse market movements or changes in the cost of cash obtained by
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leveraging and the yield from invested cash. So long as a Fund is able to
realize a net return on its investment portfolio that is higher than interest
expense incurred, if any, leverage will result in higher current net investment
income for the Fund than if a Fund were not leveraged. Changes in interest rates
and related economic factors could cause the relationship between the cost of
leveraging and the yield to change so that rates involved in the leveraging
arrangement may substantially increase relative to the yield on the obligations
in which the proceeds of the leveraging have been invested. To the extent that
the interest expense involved in leveraging approaches the net return on the
Fund's investment portfolio, the benefit of leveraging will be reduced, and, if
the interest expense on borrowings were to exceed the net return to investors,
the Fund's use of leverage would result in a lower rate of return than if the
Fund were not leveraged. In an extreme case, if the Fund's current investment
income were not sufficient to meet the interest expense of leveraging, it could
be necessary for the Fund to liquidate certain of its investments at an
inappropriate time.
SEGREGATED ACCOUNTS. In order to attempt to reduce the risks involved in various
transactions involving leverage, a Fund's custodian will set aside and maintain,
in a segregated account, cash and liquid securities. The account's value, which
is marked to market daily, will be at least equal to the Fund's commitments
under these transactions. The use of a segregated account in connection with
leveraged transactions may result in a Fund's investment portfolio being 100%
leveraged.
OPTIONS AND FUTURES CONTRACTS
A Fund's use of options and futures contracts subjects the Fund to certain
unique investment risks. These risks include: (1) dependence on an Adviser's
ability to correctly predict movements in the prices of individual securities
and fluctuations in interest rates, the general securities markets and other
economic factors; (2) imperfect correlations between movements in the prices of
options or futures contracts and movements in the price of the securities hedged
or used for cover which may cause a given hedge not to achieve its objective;
(3) the fact that the skills and techniques needed to trade these instruments
are different from those needed to select the other securities in which a Fund
invests; (4) lack of assurance that a liquid secondary market will exist for any
particular instrument at any particular time, which, among other things, may
hinder a Fund's ability to limit exposures by closing its positions; (5) the
possible need to defer closing out certain options, futures contracts and
related options to avoid adverse tax consequences; and (6) the potential for
unlimited losses when investing in futures contracts or writing options for
which an offsetting position is not held.
Other risks include the inability of a Fund, as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise price and the possible loss of the entire premium paid for options
purchased by the Fund. In addition, the futures exchanges may limit the amount
of fluctuation permitted in certain futures contract prices on related options
during a single trading day. A Fund may be forced, therefore, to liquidate or
close out a futures contract position at a disadvantageous price. There is no
assurance that a counterparty in an over-the-counter option transaction will be
able to perform its obligations. There are a limited number of options on
interest rate futures contracts and exchange-traded options contracts on fixed
income securities. The Funds may use various futures contracts that are
relatively new instruments without a significant trading history. As a result,
there can be no assurance that an active secondary market in those contracts
will develop or continue to exist. A Fund's activities in the futures and
options markets may result in higher portfolio turnover rates and additional
brokerage costs, which could reduce a Fund's yield.
SMALL CAPITALIZATION STOCKS
Investments in smaller capitalization companies carry greater risk than
investments in larger capitalization companies. Smaller capitalization companies
generally experience higher growth rates and higher failure rates than do larger
capitalization companies; and the trading volume of smaller capitalization
companies' securities is normally lower than that of larger capitalization
companies and, consequently, generally has a disproportionate effect on market
price (tending to make prices rises more in response to buying demand and fall
more in response to selling pressure).
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Securities owned by a Fund that are traded in the over-the-counter market or on
a regional securities exchange may not be traded every day or in the volume
typical of securities trading on a national securities exchange. As a result,
disposition by a Fund of a portfolio security, to meet redemption requests by
investors or otherwise, may require the Fund to sell these securities at a
discount from market prices, to sell during periods when disposition is not
desirable, or to make many small sales over a lengthy period of time.
Investments in small, unseasoned issuers generally carry greater risk than is
customarily associated with larger, more seasoned companies. Such issuers often
have products and management personnel that have not been tested by time or the
marketplace and their financial resources may not be as substantial as those of
more established companies. Their securities (which a Fund may purchase when
they are offered to the public for the first time) may have a limited trading
market which can adversely affect their sale by the Fund and can result in such
securities being priced lower than otherwise might be the case. If other
institutional investors engage in trading this type of security, a Fund may be
forced to dispose of its holdings at prices lower than might otherwise be
obtained.
GEOGRAPHIC CONCENTRATION
To the extent a Fund's investments are primarily concentrated in issuers located
in a particular state, region or country, the value of the Fund's shares may be
especially affected by factors pertaining to that state, region or country's
economy and other factors specifically affecting the ability of issuers of that
state, region or country 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 more
geographically diverse portfolio.
Colorado Tax-Free Fund, Minnesota Intermediate Tax-Free Fund and Minnesota
Tax-Free Fund invest principally in municipal securities issued by issuers
within a particular state and the state's political subdivisions. Those Funds
are more susceptible to factors adversely affecting issuers of those municipal
securities than would be a more geographically diverse municipal securities
portfolio. In addition, to the extent they may concentrate their investments in
a particular jurisdiction, Municipal Money Market Fund, Limited Term Tax-Free
Fund and Tax-Free Income Fund will be subject to similar risks. These risks
arise from the financial condition of the state and its political subdivisions.
To the extent state or local governmental entities are unable to meet their
financial obligations, the income derived by a Fund, its ability to preserve or
realize appreciation of its portfolio assets or its liquidity could be impaired.
DIVERSIFICATION
Colorado Tax-Free Fund, Minnesota Intermediate Tax-Free Fund and Minnesota
Tax-Free Fund are non-diversified, which means that they have greater latitude
than a diversified fund with respect to the investment of their assets in the
securities of a relatively small number of issuers. As non-diversified
portfolios, these Funds may present greater risks than a diversified fund
because each Fund's performance will generally be more heavily influenced by an
adverse movement in a single security's price. Each Fund intends to comply with
applicable diversification requirements of the Internal Revenue Code. These
requirements provide that, as of the last day of each fiscal quarter: (1) with
respect to 50% of its assets, a Fund may not: (a) own the securities of a single
issuer, other than a U.S. Government security, with a value of more than 5% of
the Fund's total assets; or (b) own more than 10% of the outstanding voting
securities of a single issuer; and (2) a Fund may not own the securities of a
single issuer, other than a U.S. Government security, with a value of more than
25% of the Fund's total assets.
4. INFORMATION CONCERNING COLORADO AND MINNESOTA
Following is a brief summary of some of the factors that may affect the
financial condition of the State of Colorado and the State of Minnesota and
their respective political subdivisions. It is not a complete or comprehensive
description of these factors or an analysis of financial conditions and may not
be indicative of the financial condition of issuers of obligations held by
Colorado Tax Free Fund, Minnesota Intermediate Tax-Free Fund and Minnesota
Tax-Free Fund or any particular projects financed with the proceeds of such
obligations. Many factors not included in the summary, such as the national
economy, social and environmental policies and conditions, and the national and
international markets for products produced in each state could have an adverse
impact on the financial condition of a State and its political subdivisions,
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including the issuers of obligations held by a Fund. It is not possible to
predict whether and to what extent those factors may affect the financial
condition of a State and its political subdivisions, including the issuers of
obligations held by a Fund.
The following summary is based on publicly available information that has not
been independently verified by the Trust or its legal counsel.
COLORADO
THE COLORADO STATE ECONOMY. Among the most significant sectors of the State's
economy are services, trade, manufacture of durable and non-durable goods and
tourism. During the mid-1980's, the State's economy was adversely affected by
numerous factors, including the contraction of the energy sector, layoffs by
advanced technology firms and an excess supply of both residential and
nonresidential buildings causing employment in the construction sector to
decline. As a result of these conditions, certain areas of the State experienced
particularly high unemployment. Furthermore, in 1986, for the first time in 32
years, job generation in the State was negative and, in 1986, for the first time
in 21 years, the State experienced negative migration, with more people leaving
the State than moving in.
From 1993 through 1997, there has been steady improvement in the Colorado
economy: per-capita income increased approximately 21.1% (5.35% in 1997) and
retail trade sales increased approximately 32.3% (5.6% in 1997). The State's
estimated growth rate is above the national growth rate and the State's
unemployment rate is still below the national unemployment rate (in 1997 the
State's unemployment rate was 3.3% and the United State's unemployment rate was
5.0%).
The State of Colorado's political subdivisions include approximately 1,600 units
of local government in Colorado, including counties, statutory cities and towns,
home-rule cities and counties, school districts and a variety of water,
irrigation, and other special districts and special improvement districts, all
with various constitutional and statutory authority to levy taxes and incur
indebtedness.
STATE REVENUES. The State operates on a fiscal year beginning July 1 and ending
June 30. Fiscal year 1997 refers to the fiscal year ended June 30, 1997.
The State derives all of its General Fund revenues from taxes. The two most
important sources of these revenues are sales and use taxes and personal income
taxes, which accounted for approximately 31.0% and 54.3%, respectively, of total
General Fund revenues during fiscal year 1996 and approximately 30.5% and 55.0%,
respectively, of total General Fund revenues during fiscal year 1997. The ending
General Fund balance for fiscal year 1996 was $368.5 million and for fiscal year
1997 was approximately $514.1 million.
The Colorado Constitution contains strict limitations on the ability of the
State to create debt except under certain very limited circumstances. However,
the constitutional provision has been interpreted not to limit the ability of
the State to issue certain obligations which do not constitute debt, including
short-term obligations which do not extend beyond the fiscal year in which they
are incurred and lease purchase obligations which are subject to annual
appropriation. The State is authorized pursuant to State statutes to issue
short-term notes to alleviate temporary cash flow shortfalls. The most recent
issue of such notes, issued on July 1, 1998, was given the highest rating
available for short-term obligations by S&P (SP-1+) and Fitch (F-1+) (A rating
on such notes was not requested from, and consequently no rating was given by,
Moody's). Because of the short-term nature of such notes, their ratings should
not be considered necessarily indicative of the State's general financial
condition.
TAX AND SPENDING LIMITATION AMENDMENT. On November 3, 1992, the Colorado voters
approved a State constitutional amendment (the "Amendment") that restricts the
ability of the State and local governments to increase taxes, revenues, debt and
spending. The Amendment provides that its provisions supersede conflicting State
constitutional, State statutory, charter or other State or local provisions.
The provisions of the Amendment apply to "districts," which are defined in the
Amendment as the State or any local government, with certain exclusions. Under
the terms of the Amendment, districts must have prior voter approval to impose
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any new tax, tax rate increase, mill levy increase, valuation for assessment
ratio increase and extension of an expiring tax. Such prior voter approval is
also required, except in certain limited circumstances, for the creation of "any
multiple-fiscal year direct or indirect district debt or other financial
obligation." The Amendment prescribes the timing and procedures for any
elections required by the Amendment.
Because the Amendment's voter approval requirements apply to any "multiple
fiscal year" debt or financial obligation, short-term obligations which do not
extend beyond the fiscal year in which they are incurred are exempt from the
voter approval requirements of the Amendment. In addition, the Colorado Court of
Appeals has determined that lease purchase obligations subject to annual
appropriation are not subject to the voter approval requirements of the
Amendment. The Amendment's voter approval requirements and other limitations
(discussed in the following paragraph) do not apply to "enterprises," which are
defined in the Amendment as follows: "a government-owned business authorized to
issue its own revenue bonds and receiving under 10% of annual revenue in grants
from all Colorado state and local governments combined."
Among other provisions, the Amendment requires the establishment of emergency
reserves, limits increases in district revenues and limits increases in district
fiscal year spending. As a general matter, annual State fiscal year spending may
change not more than inflation plus the percentage change in State population in
the prior calendar year. Annual local district fiscal year spending may change
no more than inflation in the prior calendar year plus annual local growth, as
defined in and subject to the adjustments provided in the Amendment. The
Amendment provides that annual district property tax revenues may change no more
than inflation in the prior calendar year plus annual local growth, as defined
in and subject to the adjustments provided in the Amendment. District revenues
in excess of the limits prescribed by the Amendment are required, absent voter
approval, to be refunded by any reasonable method, including temporary tax
credits or rate reductions. During fiscal year 1998, revenues in excess of the
limits applicable for the 1997 fiscal year, in the amount of approximately
$139.0 million were refunded to certain taxpayers in the State in accordance
with the Amendment. In fiscal year 1999, preliminary figures indicate that
approximately $562 million would be refunded for the excess over the fiscal year
1998 limit. In addition, the Amendment prohibits new or increased real property
transfer taxes, new State real property taxes and new local district income
taxes. The Amendment also provides that a local district may reduce or end its
subsidy to any program (other than public education through grade 12 or as
required by federal law) delegated to it by the State General Assembly for
administration.
This description is not intended to constitute a complete description of all of
the provisions of the Amendment. Furthermore, many provisions of the Amendment
and their application are unclear. Several statutes have been enacted since the
passage of the Amendment attempting to clarify the application of the Amendment
with respect to certain governmental entities and activities and numerous court
decisions have been rendered interpreting certain of the Amendment's provisions.
However, many provisions of the Amendment may require further legislative or
judicial clarification. The future impact of the Amendment on the financial
operations and obligations of the State and local governments in the State
cannot be determined at this time. Attempts to apply the provisions of the
Amendment to obligations issued prior to the approval of the Amendment may be
challenged as violation of protections afforded by the federal constitution
against impairment of contracts.
MINNESOTA
The following information has been derived from the 1997 edition of Historical
Economic Statistics and the Economic Report to the Governor for 1993 and 1994,
both prepared by the Economic Resource Group, and Compare Minnesota: An Economic
and Statistical Fact Book 1996/1997 by the Minnesota Department of Trade and
Economic Development. Generally, the information below is current only through
1994.
THE GENERAL STRUCTURE OF THE STATE'S ECONOMY
Based on the most current information readily available, derived from the
sources referred to above, a number of general conclusions can be drawn about
Minnesota's economy taken as a whole.
Diversity and a significant natural resource base are two important
characteristics of the State's economy.
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When viewed on an aggregate level, the structure of the State's economy,
according to the most recent readily available information, parallels the
structure of the United States economy as a whole. State employment in 10 major
sectors is distributed in approximately the same proportions as national
employment.
Some unique characteristics of the State's economy are apparent in employment
concentrations in many major industries. The State's concentration of employment
in high technology industries is higher than the United States average. This
emphasis is partly explained by the location in the State of Honeywell, IBM, 3M
Company, Unisys and Seagate Technology.
The importance of the State's resource base for overall employment is apparent
in the employment mix in non durable goods industries. According to the most
recent readily available information, the State's concentration of employment is
higher than the United States average in the food and kindred products industry
and in the forest and forestry products industry. Both of these industries rely
heavily on renewable resources in the State. Over half of the State's acreage is
devoted to agricultural purposes, and nearly one-third to forestry.
The printing and publishing industry and the medical products manufacturing
industry are also relatively more important to employment in the State than in
the United States.
Mining is currently a less significant factor in the State economy than it once
was. Mining employment, primarily in the iron ore or taconite industry, dropped
from 17.3 thousand in 1979 to 7.4 thousand in 1994. It is not expected that
mining employment will return to 1979 levels. However, Minnesota retains
significant quantities of taconite as well as copper, nickel, cobalt, and peat
which may be utilized in the future.
PERFORMANCE OF THE STATE'S ECONOMY
Since 1980, State per capita personal income has been within a few percentage
points of national per capita personal income. The State's per capita income,
which is computed by dividing personal income by total resident population, has
generally remained above the national average in spite of the early 1980's
recessions and some difficult years in agriculture.
According to the most recent readily available information, the annual
unemployment rate in Minnesota has been below that of the United States since
1985.
POPULATION TRENDS IN THE STATE
Minnesota resident population grew from 4,074,000 in 1980 to 4,565,000 in 1994,
for a growth rate of 12.1%. The United States growth rate between 1980 and 1994
was 15.1% and the overall growth rate for the twelve north central states was
4.4%. Based on the most recent readily available information, the Minnesota
population is forecast to grow 12.3% between 1994 and 2010.
5. INVESTMENT LIMITATIONS
For purposes of all fundamental and nonfundamental investment policies of the
Fund: (1) the term 1940 Act includes the rules thereunder, SEC interpretations
and any exemptive order upon which the Fund may rely and (2) the term Code
includes the rules thereunder, IRS interpretations and any private letter ruling
or similar authority upon which the Fund may rely.
Except as required by the 1940 Act or the Code, if any percentage restriction on
investment or utilization of assets is adhered to at the time an investment is
made, a later change in percentage resulting from a change in the market values
of a Fund's assets or purchases and redemptions of shares will not be considered
a violation of the limitation.
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FUNDAMENTAL LIMITATIONS
Each Fund has adopted the following fundamental investment policies.
(1) DIVERSIFICATION
Each Fund (other than Colorado Tax-Free Fund, Minnesota Intermediate
Tax-Free Fund and Minnesota Tax-Free Fund) may not, with respect to
75% of its assets, purchase a security (other than a U.S. Government
Security or a security of an investment company) if, as a result: (1)
more than 5% of the Fund's total assets would be invested in the
securities of a single issuer or (2) the Fund would own more than 10%
of the outstanding voting securities of any single issuer.
(2) CONCENTRATION
(a) CASH INVESTMENT FUND AND READY CASH INVESTMENT FUND may not purchase a
security if, as a result, more than 25% of the Fund's total assets
would be invested in securities of issuers conducting their principal
business activities in the same industry; provided: (1) there is no
limit on investments in U.S. Government Securities, in repurchase
agreements covering U.S. Government Securities or in foreign
government securities; (2) municipal securities are not treated as
involving a single industry; (3) there is no limit on investment in
issuers domiciled in a single country; (4) financial service companies
are classified according to the end users of their services (for
example, automobile finance, bank finance and diversified finance);
and (5) utility companies are classified according to their services
(for example, gas, gas transmission, electric and gas, electric and
telephone); and provided the Fund will invest more than 25% of the
value of the Fund's total assets in obligations of domestic and
foreign financial institutions and their holding companies.
Notwithstanding anything to the contrary, to the extent permitted by
the 1940 Act, the Fund may invest in one or more investment companies;
provided that, except to the extent the Fund invests in other
investment companies pursuant to Section 12(d)(1)(A) of the 1940 Act,
the Fund treats the assets of the investment companies in which it
invests as its own for purposes of this policy.
(b) TREASURY FUND, U.S. GOVERNMENT FUND AND MUNICIPAL MONEY MARKET FUND
may not purchase a security if, as a result, more than 25% of the
Fund's total assets would be invested in securities of issuers
conducting their principal business activities in the same industry;
provided: (1) there is no limit on investments in U.S. Government
Securities, in repurchase agreements covering U.S. Government
Securities, in foreign government securities, or in obligations of
domestic commercial banks (including U.S. branches of foreign banks
subject to regulations under U.S. laws applicable to domestic banks
and, to the extent that its parent is unconditionally liable for the
obligation, foreign branches of U.S. banks); (2) municipal securities
are not treated as involving a single industry; (3) there is no limit
on investment in issuers domiciled in a single country; (4) financial
service companies are classified according to the end users of their
services (for example, automobile finance, bank finance and
diversified finance); and (5) utility companies are classified
according to their services (for example, gas, gas transmission,
electric and gas, electric and telephone). Notwithstanding anything to
the contrary, to the extent permitted by the 1940 Act, the Fund may
invest in one or more investment companies; provided that, except to
the extent the Fund invests in other investment companies pursuant to
Section 12(d)(1)(A) of the 1940 Act, the Fund treats the assets of the
investment companies in which it invests as its own for purposes of
this policy.
(c) TREASURY PLUS FUND may not purchase a security if, as a result, more
than 25% of the Fund's total assets would be invested in securities of
issuers conducting their principal business activities in the same
industry. For purposes of this limitation, there is no limit on (i)
investments in U.S. Government securities, in repurchase agreements
covering U.S. Government securities, in securities issued by the
states, territories and possessions of the United States ("municipal
securities") or in foreign government securities or (ii) investment in
issuers domiciled in a single
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jurisdiction. Notwithstanding anything to the contrary, to the extent
permitted by the 1940 Act, the Fund may invest in one or more
investment companies; provided that, except to the extent the Fund
invests in other investment companies pursuant to Section 12(d)(1)(A)
of the 1940 Act, the Fund treats the assets of the investment
companies in which it invests as its own for purposes of this policy.
For purposes of this policy (i) "mortgage related securities," as that
term is defined in the 1934 Act are treated as securities of an issuer
in the industry of the primary type of asset backing the security,
(ii) financial service companies are classified according to the end
users of their services (for example, automobile finance, bank finance
and diversified finance) and (iii) utility companies are classified
according to their services (for example, gas, gas transmission,
electric and gas, electric and telephone).
(d) INCOME FUND, LIMITED TERM TAX-FREE FUND, TAX-FREE INCOME FUND,
COLORADO TAX-FREE FUND, MINNESOTA INTERMEDIATE TAX-FREE FUND,
MINNESOTA TAX-FREE FUND AND VALUGROWTH STOCK FUND may not purchase a
security if, as a result, more than 25% of the Fund's total assets
would be invested in securities of issuers conducting their principal
business activities in the same industry; provided: (1) there is no
limit on investments in repurchase agreements covering U.S. Government
Securities; (2) municipal securities are not treated as involving a
single industry; (3) financial service companies are classified
according to the end users of their services (for example, automobile
finance, bank finance and diversified finance); and (4) utility
companies are classified according to their services (for example,
gas, gas transmission, electric and gas, electric and telephone).
Notwithstanding anything to the contrary, to the extent permitted by
the 1940 Act, the Fund may invest in one or more investment companies;
provided that, except to the extent the Fund invests in other
investment companies pursuant to Section 12(d)(1)(A) of the 1940 Act,
the Fund treats the assets of the investment companies in which it
invests as its own for purposes of this policy.
(e) TOTAL RETURN BOND FUND may not purchase a security if, as a result,
more than 25% of the Fund's total assets would be invested in
securities of issuers conducting their principal business activities
in the same industry; provided: (1) there is no limit on investments
in U.S. Government Securities, or in repurchase agreements covering
U.S. Government Securities; (2) mortgage-related or housing-related
securities (including mortgage-related or housing-related U.S.
Government Securities) and municipal securities are not treated as
involving a single industry; (3) financial service companies are
classified according to the end users of their services (for example,
automobile finance, bank finance and diversified finance); and (4)
utility companies are classified according to their services (for
example, gas, gas transmission, electric and gas, electric and
telephone). Notwithstanding anything to the contrary, to the extent
permitted by the 1940 Act, the Fund may invest in one or more
investment companies; provided that, except to the extent the Fund
invests in other investment companies pursuant to Section 12(d)(1)(A)
of the 1940 Act, the Fund treats the assets of the investment
companies in which it invests as its own for purposes of this policy.
(f) SMALL COMPANY STOCK FUND may not purchase a security if, as a result,
more than 25% of the Fund's total assets would be invested in
securities of issuers conducting their principal business activities
in the same industry; provided: (1) there is no limit on investments
in U.S. Government Securities, or in repurchase agreements covering
U.S. Government Securities; (2) municipal securities are not treated
as involving a single industry; (3) financial service companies are
classified according to the end users of their services (for example,
automobile finance, bank finance and diversified finance); and (4)
utility companies are classified according to their services (for
example, gas, gas transmission, electric and gas, electric and
telephone). Notwithstanding anything to the contrary, to the extent
permitted by the 1940 Act, the Fund may invest in one or more
investment companies; provided that, except to the extent the Fund
invests in other investment companies pursuant to Section 12(d)(1)(A)
of the 1940 Act, the Fund treats the assets of the investment
companies in which it invests as its own for purposes of this policy.
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<PAGE>
(g) DIVERSIFIED SMALL CAP FUND AND SMALL CAP OPPORTUNITIES FUND may not
purchase a security if, as a result, more than 25% of the Fund's total
assets would be invested in securities of issuers conducting their
principal business activities in the same industry; provided, however,
that there is no limit on investments in U.S. Government Securities.
Notwithstanding anything to the contrary, to the extent permitted by
the 1940 Act, the Fund may invest in one or more investment companies;
provided that, except to the extent the Fund invests in other
investment companies pursuant to Section 12(d)(1)(A) of the 1940 Act,
the Fund treats the assets of the investment companies in which it
invests as its own for purposes of this policy.
(h) STABLE INCOME FUND, LIMITED TERM GOVERNMENT INCOME FUND, INTERMEDIATE
GOVERNMENT INCOME FUND, DIVERSIFIED BOND FUND, STRATEGIC INCOME FUND,
MODERATE BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE BALANCED
FUND, INCOME EQUITY FUND, INDEX FUND, DIVERSIFIED EQUITY FUND, GROWTH
EQUITY FUND, LARGE COMPANY GROWTH FUND, AND SMALL COMPANY GROWTH FUND
may not purchase a security if, as a result, more than 25% of the
Fund's total assets would be invested in securities of issuers
conducting their principal business activities in the same industry;
provided, however, that there is no limit on investments in U.S.
Government Securities, repurchase agreements covering U.S. Government
Securities, foreign government securities, mortgage-related or
housing-related securities, municipal securities and issuers domiciled
in a single country; that financial service companies are classified
according to the end users of their services (for example, automobile
finance, bank finance and diversified finance); and that utility
companies are classified according to their services (for example,
gas, gas transmission, electric and gas, electric and telephone.
Notwithstanding anything to the contrary, to the extent permitted by
the 1940 Act, the Fund may invest in one or more investment companies;
provided that, except to the extent the Fund invests in other
investment companies pursuant to Section 12(d)(1)(A) of the 1940 Act,
the Fund treats the assets of the investment companies in which it
invests as its own for purposes of this policy.
(i) INTERNATIONAL FUND may not purchase a security if, as a result, more
than 25% of the Fund's total assets would be invested in securities of
issuers conducting their principal business activities in the same
industry; provided: (1) there is no limit on investments in U.S.
Government Securities, or in repurchase agreements covering U.S.
Government Securities; (2) there is no limit on investment in issuers
domiciled in a single country; (3) financial service companies are
classified according to the end users of their services (for example,
automobile finance, bank finance and diversified finance); and (4)
utility companies are classified according to their services (for
example, gas, gas transmission, electric and gas, electric and
telephone). Notwithstanding anything to the contrary, to the extent
permitted by the 1940 Act, the Fund may invest in one or more
investment companies; provided that, except to the extent the Fund
invests in other investment companies pursuant to Section 12(d)(1)(A)
of the 1940 Act, the Fund treats the assets of the investment
companies in which it invests as its own for purposes of this policy.
(3) BORROWING
(a) Each MONEY MARKET FUND, INCOME FUND, TOTAL RETURN BOND FUND, EACH
TAX-FREE INCOME FUND, VALUGROWTH STOCK FUND, SMALL COMPANY STOCK FUND,
DIVERSIFIED SMALL CAP FUND AND SMALL CAP OPPORTUNITIES FUND may borrow
money from banks or by entering into reverse repurchase agreements,
but the Fund will limit borrowings to amounts not in excess of 33 1/3%
of the value of the Fund's total assets (computed immediately after
the borrowing).
(b) STABLE INCOME FUND, LIMITED TERM GOVERNMENT INCOME FUND, INTERMEDIATE
GOVERNMENT INCOME FUND, DIVERSIFIED BOND FUND, STRATEGIC INCOME FUND,
MODERATE BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE
BALANCED-EQUITY FUND, INDEX FUND, INCOME EQUITY FUND, DIVERSIFIED
EQUITY FUND, GROWTH EQUITY FUND, LARGE COMPANY GROWTH FUND, SMALL
COMPANY GROWTH FUND AND INTERNATIONAL FUND may borrow money for
33
<PAGE>
temporary or emergency purposes, including the meeting of redemption
requests, but not in excess of 33 1/3% of the value of the Fund's
total assets (as computed immediately after the borrowing).
(c) TREASURY PLUS FUND may not borrow money if, as a result, outstanding
borrowings would exceed an amount equal to 33 1/3% of the Fund's total
assets. For purposes of this limitation, the following are not treated
as borrowing to the extent they are fully collateralized: (i) the
delayed delivery of purchased securities (such as the purchase of
when-issued securities), (ii) reverse repurchase agreements; (iii)
dollar roll transactions; and (iv) the lending of securities.
(4) ISSUANCE OF SENIOR SECURITIES
No Fund may issue senior securities except to the extent permitted by
the 1940 Act.
(5) UNDERWRITING ACTIVITIES
(a) TREASURY PLUS FUND may not underwrite (as that term is defined by the
1933 Act) securities issued by other persons except, to the extent
that in connection with the disposition of the Fund's assets, the Fund
may be considered to be an underwriter.
(b) NO OTHER FUND may underwrite securities of other issuers, except to
the extent that the Fund may be considered to be acting as an
underwriter in connection with the disposition of portfolio
securities.
(6) MAKING LOANS
(a) TREASURY PLUS FUND may not make loans to other parties. For purposes
of this limitation, entering into repurchase agreements, lending
securities and acquiring any debt security are not deemed to be the
making of loans.
(b) NO OTHER FUND may make loans, except a Fund may enter into repurchase
agreements, purchase debt securities that are otherwise permitted
investments and lend portfolio securities.
(7) PURCHASES AND SALES OF REAL ESTATE
(a) EACH FUND (other than DIVERSIFIED SMALL CAP FUND, SMALL CAP
OPPORTUNITIES FUND AND TREASURY PLUS FUND) may not purchase or sell
real estate or any interest therein or real estate limited partnership
interests, except that the Fund may invest in debt obligations secured
by real estate or interests therein or securities issued by companies
that invest in real estate or interests therein.
(b) DIVERSIFIED SMALL CAP FUND AND SMALL CAP OPPORTUNITIES FUND may not
purchase or sell real estate or any interest therein, except that it
may invest in debt obligations secured by real estate or interests
therein or securities issued by companies that invest in real estate
or interests therein.
(c) TREASURY PLUS FUND may not purchase or sell real estate, unless
acquired as a result of ownership of securities or other investments
(but this shall not prevent the Fund from investing in securities or
other instruments backed by real estate or securities of companies
engaged in the real estate business).
(8) PURCHASES AND SALES OF COMMODITIES
(a) EACH FIXED INCOME FUND, EQUITY FUND (other than DIVERSIFIED SMALL CAP
FUND and SMALL CAP OPPORTUNITIES FUND) and BALANCED FUND may not
purchase or sell physical commodities or contracts, options or options
on contracts to purchase or sell physical commodities; provided that
34
<PAGE>
currency and currency-related contracts and contracts on indices will
not be deemed to be physical commodities.
(b) DIVERSIFIED SMALL CAP FUND and SMALL CAP OPPORTUNITIES FUND may not
purchase or sell physical commodities unless acquired as a result of
owning securities or other instruments, but it may purchase, sell or
enter into financial options and futures and forward currency
contracts and other financial contracts or derivative instruments.
(c) TREASURY PLUS FUND may not purchase or sell physical commodities
unless acquired as a result of the ownership of securities or other
instruments (but this shall not prevent the Fund from purchasing or
selling options and futures contracts or from investing in securities
or other instruments backed by physical commodities).
NONFUNDAMENTAL LIMITATIONS
Each Fund has adopted the following nonfundamental investment policies. The
Board may change any nonfundamental policy.
(1) DIVERSIFICATION
(a) To the extent required to qualify as a regulated investment company,
and with respect to 50% of its assets, MUNICIPAL MONEY MARKET FUND may
not purchase a security other than a U.S. Government Security, if as a
result, more than 5% of the Fund' s total assets would be invested in
a single issuer or the Fund would own more than 10% of the outstanding
rated securities of any single issuer.
(b) COLORADO TAX-FREE FUND, MINNESOTA INTERMEDIATE TAX-FREE FUND and
MINNESOTA TAX-FREE FUND are "non-diversified" as that term is defined
in the 1940 Act.
(c) With respect to each of COLORADO TAX-FREE FUND, MINNESOTA INTERMEDIATE
TAX-FREE FUND and MINNESOTA TAX-FREE FUND, to the extent required to
qualify as a regulated investment company under the Code, as amended,
the Fund may not purchase a security (other than a U.S. Government
security or a security of an investment company) if, as a result: (1)
with respect to 50% of its assets, more than 5% of the Fund's total
assets would be invested in the securities of any single issuer; (2)
with respect to 50% of its assets, the Fund would own more than 10% of
the outstanding securities of any single issuer; or (3) more than 25%
of the Fund's total assets would be invested in the securities of any
single issuer.
(2) BORROWING
(a) EACH FUND'S (other than TREASURY PLUS FUND'S, INTERMEDIATE GOVERNMENT
INCOME FUND'S and DIVERSIFIED BOND FUND'S) borrowings for other than
temporary or emergency purposes or meeting redemption requests may not
exceed an amount equal to 5% of the value of the Fund's net assets.
When STABLE INCOME FUND, LIMITED TERM GOVERNMENT INCOME FUND,
INTERMEDIATE GOVERNMENT INCOME FUND, DIVERSIFIED BOND FUND, STRATEGIC
INCOME FUND, MODERATE BALANCED FUND, GROWTH BALANCED FUND, AGGRESSIVE
BALANCED-EQUITY FUND, INCOME EQUITY FUND, INDEX FUND, DIVERSIFIED
EQUITY FUND, GROWTH EQUITY FUND, LARGE COMPANY GROWTH FUND, SMALL
COMPANY GROWTH FUND and INTERNATIONAL FUND establish a segregated
account to limit the amount of leveraging with respect to certain
investment techniques, they do not treat those techniques as involving
borrowings for purposes of this or other borrowing limitations.
(b) TREASURY PLUS FUND may not purchase or sell physical commodities
unless acquired as a result of the ownership of securities or other
instruments (but this shall not prevent the Fund from purchasing or
35
<PAGE>
selling options and futures contracts or from investing in securities
or other instruments backed by physical commodities).
(3) ILLIQUID SECURITIES
(a) No MONEY MARKET FUND other than TREASURY PLUS FUNd may acquire
securities or invest in repurchase agreements with respect to any
securities if, as a result, more than 10% of the Fund's net assets
(taken at current value) would be invested in repurchase agreements
not entitling the holder to payment of principal within seven days and
in securities which are not readily marketable, including securities
that are not readily marketable by virtue of restrictions on the sale
of such securities to the public without registration under the 1933
Act, as amended ("Restricted Securities").
(b) EACH FIXED INCOME FUND, EQUITY FUND and BALANCED FUND may not acquire
securities or invest in repurchase agreements with respect to any
securities if, as result, more than 15% of the Fund's net assets
(taken at current value) would be invested in repurchase agreements
not entitling the holder to payment of principal within seven days and
in securities which are not readily marketable, including securities
that are not readily marketable by virtue of restrictions on the sale
of such securities to the public without registration under the 1933
Act, as amended ("Restricted Securities").
(c) TREASURY PLUS FUND may not invest more than 10% of its net assets in
illiquid assets such as: (i) securities that cannot be disposed of
within seven days at their then-current value, (ii) repurchase
agreements not entitling the holder to payment of principal within
seven days and (iii) securities subject to restrictions on the sale of
the securities to the public without registration under the 1933 Act
("restricted securities") that are not readily marketable. The Fund
may treat certain restricted securities as liquid pursuant to
guidelines adopted by the Board of Trustees.
(4) OTHER INVESTMENT COMPANIES
No Fund may invest in securities of another investment company, except
to the extent permitted by the 1940 Act.
(5) MARGIN AND SHORT SALES
(a) EACH FUND (other than TREASURY PLUS FUND, LIMITED TERM GOVERNMENT
INCOME FUND and INTERMEDIATE GOVERNMENT INCOME FUNd) may not purchase
securities on margin, or make short sales of securities (except short
sales against the box), except for the use of short-term credit
necessary for the clearance of purchases and sales of portfolio
securities. EACH FUND other than TREASURY PLUS FUND may make margin
deposits in connection with permitted transactions in options, futures
contracts and options on futures contracts. NO FUND (other than
TREASURY PLUS FUND, DIVERSIFIED SMALL CAP FUND and SMALL CAP
OPPORTUNITIES FUND) may enter short sales if, as a result, more that
25% of the value of the Fund's total assets would be so invested, or
such a position would represent more than 2% of the outstanding voting
securities of any single issuer or class of an issuer.
(b) TREASURY PLUS FUND may not sell securities short, unless it owns or
has the right to obtain securities equivalent in kind and amount to
the securities sold short (short sales "against the box"), and
provided that transactions in futures contracts and options are not
deemed to constitute selling securities short. The Fund may not
purchase securities on margin, except that the Fund may use short-term
credit for clearance of the Fund's transactions, and provided that the
initial and variation margin payments in connection with futures
contracts and options on futures contracts shall not constitute
purchasing securities on margin.
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<PAGE>
(6) UNSEASONED ISSUERS
NO FUND (other than TREASURY PLUS FUND, DIVERSIFIED SMALL CAP FUND and
SMALL CAP OPPORTUNITIES FUND) may invest in securities (other than
fully-collateralized debt obligations) issued by companies that have
conducted continuous operations for less than three years, including
the operations of predecessors, unless guaranteed as to principal and
interest by an issuer in whose securities the Fund could invest, if, as
a result, more than 5% of the value of the Fund's total assets would be
so invested; provided, that each Fund may invest all or a portion of
its assets in another diversified, open-end management investment
company with substantially the same investment objective, policies and
restrictions as the Fund.
(7) PLEDGING
NO FUND may pledge, mortgage, hypothecate or encumber any of its assets
except to secure permitted borrowings or to secure other permitted
transactions.
(8) SECURITIES WITH VOTING RIGHTS
NO MONEY MARKET FUND or FIXED INCOME FUND may purchase securities
having voting rights except securities of other investment companies;
provided that the Funds may hold securities with voting rights obtained
through a conversion or other corporate transaction of the issuer of
the securities, whether or not the Fund was permitted to exercise any
rights with respect to the conversion or other transaction.
(9) LENDING OF PORTFOLIO SECURITIES
NO FUND (other than SMALL CAP OPPORTUNITIES FUND) may lend portfolio
securities if the total value of all loaned securities would exceed 33
1/3% of the Fund's total assets, as determined by SEC guidelines.
SMALL CAP OPPORTUNITIES FUND may not lend portfolio securities if the
total value of all loaned securities would exceed 25% of its total
assets.
(10) REAL ESTATE LIMITED PARTNERSHIPS
NO FUND other than TREASURY PLUS FUND may invest in real estate
limited partnerships.
(11) OPTIONS AND FUTURES CONTRACTS
(a) NO MONEY MARKET FUND may invest in options, futures contracts or
options on futures contracts.
(b) NO FIXED INCOME FUND, EQUITY FUND (other than SMALL CAP OPPORTUNITIES
FUND) or BALANCED FUND may purchase an option if, as a result, more
that 5% of the value of the Fund's total assets would be so invested.
(12) WARRANTS
NO FUND may invest in warrants if: (1) more than 5% of the value of the
Fund's net assets would will be invested in warrants (valued at the
lower of cost or market) or (2) more than 2% of the value of the Fund's
net assets would be invested in warrants which are not listed on the
New York Stock Exchange or the American Stock Exchange; provided, that
warrants acquired by a Fund attached to securities are deemed to have
no value.
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<PAGE>
(13) TREASURY FUND INVESTMENT LIMITATIONS
TREASURY FUND may not enter into repurchase agreements or purchase any
security other than those that are issued or guaranteed by the U.S.
Treasury, including separately traded principal and interest components
of securities issued or guaranteed by the U.S. Treasury.
(14) PURCHASES AND SALES OF COMMODITIES
NO MONEY MARKET FUND except TREASURY PLUS FUND may purchase or sell
physical commodities or contracts, options or options on contracts to
purchase or sell physical commodities, provided that currencies and
currency-related contracts and contracts on indices are not be deemed
to be physical commodities.
TREASURY PLUS FUND may not purchase or sell physical commodities or
contracts, options or options on contracts to purchase or sell physical
commodities.
(15) VALUGROWTH STOCK FUND INVESTMENT LIMITATIONS
VALUGROWTH STOCK FUND may not enter into commitments under when-issued
and forward commitment obligations in an amount greater than 15% of the
value of the Fund's total assets.
(16) EXERCISING CONTROL OF ISSUERS
TREASURY PLUS FUND may not make investments for the purpose of
exercising control of an issuer. Investments by the Fund in entities
created under the laws of foreign countries solely to facilitate
investment in securities in that country will not be deemed the making
of investments for the purpose of exercising control.
6. PERFORMANCE AND ADVERTISING DATA
GENERAL
Quotations of performance may from time to time be used in advertisements, sales
literature, shareholder reports or other communications to shareholders or
prospective investors. All performance information supplied by the Funds is
historical and is not intended to indicate future returns. All performance
information for a Fund is calculated on a class basis. Each Fund's yield and
total return fluctuate in response to market conditions and other factors.
Investment return and principal value will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost.
A Fund's performance may be quoted in terms of yield or total return. 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. Municipal Money Market Fund and the
Tax-Exempt Fixed Income Funds may also quote tax-equivalent yields, which show
the taxable yields a shareholder would have to earn to equal the Fund's tax-free
yield, after taxes.
A Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and distributions are
reinvested. A cumulative total return reflects a Fund's performance over a
stated period of time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same cumulative total
return if the Fund's performance had been constant over the entire period.
Because average annual returns tend to smooth out variations in the Fund's
returns, 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 will be
higher than a similar computation that takes into account payment of sales
charges.
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<PAGE>
For a listing of certain performance data as of May 31, 1999 (see Appendix C --
Performance Data, Table 3 -- Total Returns).
In performance advertising, the Funds may compare any of their performance
information with data published by independent evaluators such as Morningstar,
Inc., Lipper, Inc., or other companies which track the investment performance of
investment companies ("Fund Tracking Companies"). The Funds may also compare any
of their performance information with the performance of recognized stock, bond
and other indexes, including but not limited to the Municipal Bond Buyers
Indices, the Salomon Brothers Bond Index, Shearson Lehman Bond Index, the
Standard & Poor's 500 Composite Stock Price Index, Russell 2000 Index, Morgan
Stanley - Europe, Australian and Far East Index, Lehman Brothers Intermediate
Government Index, Lehman Brothers Intermediate Government/Corporate Index, the
Dow Jones Industrial Average, U.S. Treasury bonds, bills or notes and changes in
the Consumer Price Index as published by the U.S. Department of Commerce. These
indices may be comprised of a composite of various recognized securities indices
to reflect the investment policies of a Fund that invests its assets using
different investment styles. Indexes are not used in the management of a Fund
but rather are standards by which an Adviser and shareholders may compare the
performance of a Fund to an unmanaged composite of securities with similar, but
not identical, characteristics as the Fund. This material is not to be
considered representative or indicative of future performance. The Funds may
refer to general market performances over past time periods such as those
published by Ibbotson Associates (for instance, its "Stocks, Bonds, Bills and
Inflation Yearbook"). In addition, the Funds may also refer in such materials to
mutual fund performance rankings and other data published by Fund Tracking
Companies. Performance advertising may also refer to discussions of the Funds
and comparative mutual fund data and ratings reported in independent
periodicals, such as newspapers and financial magazines.
SEC YIELD CALCULATIONS
Although published yield information is useful in reviewing a Fund's
performance, the Fund's yield fluctuates from day to day and the Fund's yield
for any given period is not an indication or representation by the Fund of
future yields or rates of return on the Fund's shares. Norwest, financial
institutions that sell Fund shares and others may charge their customers,
various retirement plans or other shareholders that invest in a Fund fees in
connection with an investment in a Fund, which will have the effect of reducing
the Fund's net yield to those shareholders. The yields of a Fund are not fixed
or guaranteed, and an investment in a Fund is not insured or guaranteed.
Accordingly, yield information may not necessarily be used to compare shares of
a Fund with investment alternatives which, like money market instruments or bank
accounts, may provide a fixed rate of interest. Also, it may not be appropriate
to compare a Fund's yield information directly to similar information regarding
investment alternatives which are insured or guaranteed.
MONEY MARKET FUNDS. Yield quotations for the Money Market Funds will include an
annualized historical yield, carried at least to the nearest hundredth of one
percent, based on a specific seven-calendar-day period and are calculated by
dividing the net change during the seven-day period in the value of an account
having a balance of one share at the beginning of the period by the value of the
account at the beginning of the period, and multiplying the quotient by 365/7.
For this purpose, the net change in account value reflects the value of
additional shares purchased with dividends declared on the original share and
dividends declared on both the original share and any such additional shares,
but would not reflect any realized gains or losses from the sale of securities
or any unrealized appreciation or depreciation on portfolio securities. In
addition, any effective annualized yield quotation used by a Money Market Fund
is calculated by compounding the current yield quotation for such period by
adding 1 to the product, raising the sum to a power equal to 365/7, and
subtracting 1 from the result. The standardized tax equivalent yield is the rate
an investor would have to earn from a fully taxable investment in order to equal
a Fund's yield after taxes. Tax equivalent yields are calculated by dividing the
Fund's yield by one minus the stated Federal or combined Federal and state tax
rate. If a portion of a Fund's yield is tax-exempt, only that portion is
adjusted in the calculation.
FIXED INCOME FUNDS, TAX-FREE FIXED INCOME FUNDS, BALANCED FUNDS AND EQUITY
FUNDS. Standardized yields for the Funds used in advertising are computed by
dividing a Fund's interest income (in accordance with specific standardized
rules) for a given 30 days or one month period, net of expenses, by the average
number of shares entitled to receive distributions during the period, dividing
this figure by the Fund's net asset value per share at the end of the period and
39
<PAGE>
annualizing the result (assuming compounding of income in accordance with
specific standardized rules) in order to arrive at an annual percentage rate. In
general, interest income is reduced with respect to municipal securities
purchased at a premium over their par value by subtracting a portion of the
premium from income on a daily basis. In general, interest income is increased
with respect to municipal securities purchased at original issue at a discount
by adding a portion of the discount to daily income. Capital gains and losses
generally are excluded from these calculations.
The standardized tax equivalent yield is the rate an investor would have to earn
from a fully taxable investment in order to equal a Fund's yield after taxes.
Tax equivalent yields are calculated by dividing the Fund's yield by one minus
the stated Federal or combined Federal and state tax rate. If a portion of a
Fund's yield is tax-exempt, only that portion is adjusted in the calculation.
Income calculated for the purpose of determining each Fund's standardized yield
differs from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding assumed in
yield calculations, the yield quoted for a Fund may differ from the rate of
distribution the Fund paid over the same period or the rate of income reported
in the Fund's financial statements.
TOTAL RETURN CALCULATIONS
Standardized total returns quoted in advertising and sales literature reflect
all aspects of a Fund's return, including the effect of reinvesting dividends
and capital gain distributions, any change in the Fund's net asset value per
share over the period and maximum sales charge, if any, applicable to purchases
of the Fund's shares. Average annual total returns are calculated, through the
use of a formula prescribed by the SEC, by determining the growth or decline in
value of a hypothetical historical investment in a Fund over a stated period,
and then calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative return of 100% over ten
years would produce an average annual return of 7.18%, which is the steady
annual rate that would equal 100% growth on a compounded basis in ten years. The
average annual total return is computed separately for each class of shares of a
Fund. While average annual returns are a convenient means of comparing
investment alternatives, performance is not constant over time but changes from
year to year, and average annual returns represent averaged figures as opposed
to the actual year-to-year performance of the Funds.
Average annual total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment, over such periods
according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at the
end of the applicable period, of a hypothetical $1,000
payment made at the beginning of the applicable period
Standardized total return quotes may be accompanied by non-standardized total
return figures calculated by alternative methods. For example, average annual
total return may be calculated without assuming payment of the sales load
according to the following formula:
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<PAGE>
P(1+U)n = ERV
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming non payment of
the maximum sales load at the beginning of the stated
period.
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
at the end of the stated period
In addition to average annual returns, each Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Total returns may be broken down into their components of
income and capital (including capital gains and changes in share price) in order
to illustrate the relationship of these factors and their contributions to total
return. Total returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Period total return
is calculated according to the following formula:
PT = (ERV/P-1)
Where:
PT = period total return
The other definitions are the same as in average annual total return
above
MULTICLASS, COLLECTIVE INVESTMENT FUND, COMMON TRUST FUND AND CORE AND GATEWAY
PERFORMANCE MULTICLASS PERFORMANCE. When a Fund has more than one class of
shares, performance calculations for the classes of shares that are created
after the initial class may be stated so as to include the performance of the
initial class or classes of the Fund. Generally, performance of the initial
class is not restated to reflect the expenses or expense ratio of the subsequent
class. For instance, if A Shares of a Fund are created after I Shares have been
in existence, the inception of performance for the A Shares will be deemed to be
the inception date of the I Shares and the performance of the I Shares (based on
the I Shares actual expenses) from the inception of I Shares to the inception of
A Shares will be deemed to be the performance of A Shares for that period. For
standardized total return calculations, the current maximum initial sales load
and applicable 12b-1 fees on A Shares would be used in determining the total
return of A Shares as if assessed at the inception of I Shares. Generally, the
performance of B Shares and C Shares will be calculated only from the inception
date of B Shares, regardless of the existence of prior share classes in the same
Fund.
Prior to November 11, 1994, Norwest Bank Minnesota, N.A. managed a collective
investment fund with an investment objective and policies that were, in all
material respects, equivalent to the Fund. The performance for the Fund includes
the performance of the predecessor collective investment fund for periods before
it became a mutual fund on November 11, 1994. The collective investment fund was
not registered under the 1940 Act nor subject to restrictions imposed by the
Act, which, if applicable, may have adversely affected the performance.
Class B shares for Growth Balanced Fund, Large Company Growth Fund and
Diversified Small Cap Fund commenced operations on October 1, 1998. Returns
prior to October 1, 1998 are for Class I shares, adjusted for Class B share
expenses. Performance shown or advertised for the Class B Shares for each of
these funds for periods prior to November 11, 1994 reflects performance of the
shares of predecessor collective investment funds adjusted to reflect Class B
expenses (before waivers and reimbursements).
Class C shares for Growth Balanced Fund, Income Equity Fund, Diversified Equity
Fund and Growth Equity Fund commenced operations on October 1, 1998. Returns
prior to October 1, 1998 are for Class I shares, adjusted for Class C share
expenses. Performance shown or advertised for the Class C Shares for each of
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<PAGE>
these funds for periods prior to November 11, 1994 reflects performance of the
shares of predecessor collective investment funds adjusted to reflect Class C
expenses (before waivers and reimbursements).
Class B shares for Income Equity Fund, Diversified Equity Fund, Growth Equity
Fund, Small Company Stock Fund and International Fund commenced operations on
May 2, 1996, May 6, 1996, May 6, 1996, December 31, 1993 and May 12, 1995,
respectively. Returns prior to those dates are for Class I shares, adjusted for
Class B share expenses. Performance shown or advertised for the Class B Shares
for each of these funds for periods prior to November 11, 1994 reflects
performance of the shares of predecessor collective investment funds adjusted to
reflect Class B expenses (before waivers and reimbursements).
Small Cap Opportunities Fund's Class B shares commenced operations on November
8, 1996. Returns prior to November 8, 1996 are for Class I shares, adjusted for
Class B share expenses.
Class B shares for Income Fund, Tax-Free Income Fund, Colorado Tax-Free Fund,
Minnesota Tax-Free Fund and ValuGrowth (SM) Stock Fund commenced operations on
August 5, 1993, August 5, 1993, August 6, 1993, August 2, 1993 and August 6,
1993, respectively. Returns prior to these dates are for Class A shares,
adjusted for Class B share expenses.
COLLECTIVE INVESTMENT AND COMMON TRUST FUND PERFORMANCE. Prior to November 11,
1994, Norwest Bank managed several collective investment funds each of which had
an investment objective and investment policies that were in all material
respects equivalent to a particular Fund which became the successor to the
collective investment fund. Therefore, the performance for these Funds includes
the performance of their predecessor collective investment funds for periods
before those Funds became mutual funds on November 11, 1994. The collective
investment fund performance was adjusted to reflect those Funds' 1994 estimate
of their expense ratios for the first year of operations as a mutual fund
(without giving effect to any fee waivers or expense reimbursements). Prior to
October 1, 1997, Norwest Bank managed a common trust fund which had an
investment objective and investment policies that were in all material respects
equivalent to one of the Funds which became the successor to the common trust
fund. Therefore, the performance for the Fund includes the performance of the
predecessor common trust fund for the period before the Fund became a mutual
fund on October 1, 1997. The common trust fund performance was adjusted to
reflect the Fund's 1997 estimate of its expense ratio for the first year of
operation as a mutual fund (without giving effect to any fee waivers or expense
reimbursements). The collective investment funds and common trust fund were not
registered under the 1940 Act nor subject to certain investment limitations,
diversification requirements, and other restrictions imposed by the 1940 Act and
the Code, which, if applicable, may have adversely affected the performance
result. The performance of International Fund reflects the historical
performance of Schroder International Equity Fund (managed by Schroder Capital
Management International Inc.) in which International Fund's predecessor
collective investment fund invested.
CORE AND GATEWAY PERFORMANCE. When a Fund invests all of its investable assets
in a Portfolio that has a performance history prior to the investment by the
Fund, the Fund will assume the performance history of the Portfolio. That
history may be restated to reflect the estimated expenses of the Fund.
OTHER ADVERTISEMENT MATTERS. The Funds may advertise other forms of performance.
For example, the Funds may quote unaveraged or cumulative total returns
reflecting the change in the value of an investment over a stated period.
Average annual and cumulative total returns may be quoted as a percentage or as
a dollar amount, and may be calculated for a single investment, a series of
investments and/or a series of redemptions over any time period. Total returns
may be broken down into their components of income and capital (including
capital gains and changes in share price) in order to illustrate the
relationship of these factors and their contributions to total return. Total
returns may be quoted with or without taking into consideration a Fund's
front-end sales charge or contingent deferred sales charge; excluding sales
charges from a total return calculation produces a higher return figure. Any
performance information may be presented numerically or in a table, graph or
similar illustration.
The Funds may also include various information in their advertisements
including, but not limited to: (1) portfolio holdings and portfolio allocation
as of certain dates, such as portfolio diversification by instrument type, by
instrument, by location of issuer or by maturity; (2) statements or
illustrations relating to the appropriateness of types of securities and/or
42
<PAGE>
mutual funds that may be employed by an investor to meet specific financial
goals, such as funding retirement, paying for children's education and
financially supporting aging parents; (3) information (including charts and
illustrations) showing the effects of compounding interest (compounding is the
process of earning interest on principal plus interest that was earned earlier;
interest can be compounded at different intervals, such as annually, quarterly
or daily); (4) information relating to inflation and its effects on the dollar;
for example, after ten years the purchasing power of $25,000 would shrink to
$16,621, $14,968, $13,465 and $12,100, respectively, if the annual rates of
inflation were 4%, 5%, 6% and 7%, respectively; (5) information regarding the
effects of automatic investment and systematic withdrawal plans, including the
principal of dollar cost averaging; (6) biographical descriptions of the Funds'
portfolio managers and the portfolio management staff of the Advisers or
summaries of the views of the portfolio managers with respect to the financial
markets; (7) the results of a hypothetical investment in a Fund over a given
number of years, including the amount that the investment would be at the end of
the period; (8) the effects of earning Federally and, if applicable, state
tax-exempt income from a Fund or investing in a tax-deferred account, such as an
individual retirement account or Section 401(k) pension plan; and (9) the net
asset value, net assets or number of shareholders of a Fund as of one or more
dates.
As an example of compounding, $1,000 compounded annually at 9.00% will grow to
$1,090 at the end of the first year (an increase in $90) and $1,118 at the end
of the second year (an increase in $98). The extra $8 that was earned on the $90
interest from the first year is the compound interest. One thousand dollars
compounded annually at 9.00% will grow to $2,367 at the end of ten years and
$5,604 at the end of 20 years. Other examples of compounding are as follows: at
7% and 12% annually, $1,000 will grow to $1,967 and $3,106, respectively, at the
end of ten years and $3,870 and $9,646, respectively, at the end of twenty
years. These examples are for illustrative purposes only and are not indicative
of any Fund's performance.
The Funds may advertise information regarding the effects of automatic
investment and systematic withdrawal plans, including the principal of dollar
cost averaging. In a dollar cost averaging program, an investor invests a fixed
dollar amount in a Fund at period intervals, thereby purchasing fewer shares
when prices are high and more shares when prices are low. While such a strategy
does not insure a profit or guard against a loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers of shares
had been purchased at those intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares through periods of
low price levels. For example, if an investor invests $100 a month for a period
of six months in a Fund the following will be the relationship between average
cost per share ($14.35 in the example given) and average price per share:
<TABLE>
<S> <C> <C> <C>
Systematic Share Shares
Period Investment Price Purchased
------ ---------- ----- ---------
1 $100 $10 10.00
2 $100 $12 8.33
3 $100 $15 6.67
4 $100 $20 5.00
5 $100 $18 5.56
6 $100 $16 6.25
---- --- ----
Total Invested $600 Average Price $15.17 Total Shares 41.81
</TABLE>
With respect to the Funds that invest in municipal securities and distribute
Federally tax-exempt (and in certain cases state tax exempt) dividends, the
Funds may advertise the benefits of and other effects of investing in municipal
securities. For instance, the Funds' advertisements may note that municipal
bonds have historically offered higher after tax yields than comparable taxable
alternatives for those persons in the higher tax brackets, that municipal bond
yields may tend to outpace inflation and that changes in tax law have eliminated
many of the tax advantages of other investments. The combined Federal and state
income tax rates for a particular state may also be described and advertisements
may indicate equivalent taxable and tax-free yields at various approximate
combined marginal Federal and state tax bracket rates. All yields so advertised
are for illustration only are not necessarily representative of a Fund's yield.
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<PAGE>
In connection with its advertisements each Fund may provide "shareholders
letters" which serve to provide shareholders or investors an introduction into
the Fund's, the Trust's or any of the Trust's service provider's policies or
business practices. For instance, advertisements may provide for a message from
Norwest or its parent corporation that Norwest has for more than 60 years been
committed to quality products and outstanding service to assist its customers in
meeting their financial goals and setting forth the reasons that Norwest
believes that it has been successful as a national financial service firm.
7. MANAGEMENT
Those officers, as well as certain other officers and Trustees of the Trust, may
be directors, officers or employees of (and persons providing services to the
Trust may include) Forum, its affiliates or certain non-banking affiliates of
Norwest.
TRUSTEES AND OFFICERS
TRUSTEES AND OFFICERS OF THE TRUST. The Trustees and officers of the Trust and
their principal occupations during the past five years and age as of October 1,
1999 are set forth below. Each Trustee who is an "interested person" (as defined
by the 1940 Act) of the Trust is indicated by an asterisk.
JOHN Y. KEFFER, Chairman and President,* Age 56.
President and Owner, Forum Financial Services, Inc. (a registered
broker-dealer), Forum Administrative Services, Limited Liability
Company (a mutual fund administrator), Forum Financial Corp. (a
registered transfer agent), and other companies within the Forum
Financial Group of companies. Mr. Keffer is a Director, Trustee and/or
officer of various registered investment companies for which Forum
Financial Services, Inc. or its affiliates serves as manager,
administrator or distributor. His address is Two Portland Square,
Portland, Maine 04101.
ROBERT C. BROWN, Trustee,* Age 67.
Former Director Federal Farm Credit Banks Funding Corporation and Farm
Credit System Financial Assistance Corporation (1993-March 1999). His
address is 5038 Kestral Parkway South, Sarasota, Florida 34231.
DONALD H. BURKHARDT, Trustee, Age 72.
Principal of The Burkhardt Law Firm. His address is 777 South Steele
Street, Denver, Colorado 80209.
JAMES C. HARRIS, Trustee, Age 78.
President and sole Director of James C. Harris & Co., Inc. (a
financial consulting firm). Mr. Harris is also a liquidating trustee
and former Director of First Midwest Corporation (a small business
investment company). His address is 6950 France Avenue South,
Minneapolis, Minnesota 55435.
RICHARD M. LEACH, Trustee, Age 65.
President of Richard M. Leach Associates (a financial consulting firm)
since 1992. Prior thereto, Mr. Leach was Senior Adviser of Taylor
Investments (a registered investment adviser), a Director of
Mountainview Broadcasting (a radio station) and Managing Director of
Digital Techniques, Inc. (an interactive video design and
manufacturing company). His address is P.O. Box 1888, New London, New
Hampshire 03257.
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<PAGE>
JOHN S. MCCUNE,* Trustee, Age 53.
President, Norwest Investment Services, Inc. (a broker-dealer
subsidiary of Norwest bank) His address is 608 2nd Avenue South,
Minneapolis, Minnesota 55479.
TIMOTHY J. PENNY, Trustee, Age 46.
Senior Counselor to the public relations firm of Himle-Horner since
January 1995 and Senior Fellow at the Humphrey Institute, Minneapolis,
Minnesota (a public policy organization) since January 1995. Prior
thereto Mr. Penny was the Representative to the United States Congress
from Minnesota's First Congressional District. His address is 500
North State Street, Waseca, Minnesota 56095.
DONALD C. WILLEKE, Trustee, Age 58.
Principal of the law firm of Willeke & Daniels. His address is 201
Ridgewood Avenue, Minneapolis, Minnesota 55403.
SARA M. MORRIS, Vice President and Treasurer, Age 35.
Managing Director, Forum Financial Services, Inc., with which she has
been associated since 1994. Prior thereto, from 1991 to 1994 Ms.
Morris was Controller of Wright Express Corporation (a national credit
card company) and for six years prior thereto was employed at Deloitte
& Touche LLP as an accountant. Ms. Morris is also an officer of
various registered investment companies for which Forum Administrative
Services, LLC or Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. Her address is Two Portland Square,
Portland, Maine 04101.
DAVID I. GOLDSTEIN, Vice President and Secretary, Age 37.
Managing Director and General Counsel, Forum Financial Services, Inc.,
with which he has been associated since 1991. Mr. Goldstein is also an
officer of various registered investment companies for which Forum
Administrative Services, LLC or Forum Financial Services, Inc. serves
as manager, administrator and/or distributor. His address is Two
Portland Square, Portland, Maine 04101.
THOMAS G. SHEEHAN, Vice President and Assistant Secretary, Age 44.
Managing Director and Counsel, Forum Financial Services, Inc., with
which he has been associated since 1993. Prior thereto, Mr. Sheehan
was Special Counsel to the Division of Investment Management of the
SEC. Mr. Sheehan is also an officer of various registered investment
companies for which Forum Administrative Services, LLC or Forum
Financial Services, Inc. serves as manager, administrator and/or
distributor. His address is Two Portland Square, Portland, Maine
04101.
PAMELA J. WHEATON, Assistant Treasurer, Age 39.
Manager - Fund Accounting, Forum Financial Services, Inc., with which
she has been associated since 1989. Ms. Wheaton is also an officer of
various registered investment companies for which Forum Administrative
Services, LLC or Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. Her address is Two Portland Square,
Portland, Maine 04101.
DON L. EVANS, Assistant Secretary, Age 50.
Counsel, Forum Financial Services, Inc., with which he has been
associated since 1995. Prior thereto, Mr. Evans was associated with
the law firm of Bisk & Lutz and prior thereto was associated with the
law firm of Weiner & Strother. Mr. Evans is also an officer of various
registered investment companies for which Forum Administrative
Services, LLC or Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. His address is Two Portland Square,
Portland, Maine.
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<PAGE>
COMPENSATION OF TRUSTEES AND OFFICERS OF THE TRUST. Each Trustee of the Trust is
paid a quarterly retainer fee of $6,000, for the Trustee's service to the Trust
and to Norwest Select Funds, a separate registered open-end management
investment company for which each Trustee serves as trustee. In addition, each
Trustee is paid $3,000 for each regular Board meeting attended except the annual
meeting, for which each Trustee is paid $5,000 (whether in person or by
electronic communication) and is paid $1,000 for each Committee meeting attended
on a date when a Board meeting is not held. Trustees are also reimbursed for
travel and related expenses incurred in attending meetings of the Board. Messrs.
Keffer and McCune received no compensation for their services as Trustees for
the past year or reimbursement for their associated expenses. In addition, no
officer of the Trust is compensated by the Trust.
Mr. Burkhardt, Chairman of the Trust's and Norwest Select Funds' audit
committees, receives additional compensation of $8,000 from the Trust and
Norwest Select Funds allocated pro rata between the Trust and Norwest Select
Funds based upon relative net assets, for his services as Chairman. Each Trustee
was elected by shareholders on April 30, 1997.
The following table provides the aggregate compensation paid to the Trustees of
the Trust by the Trust and Norwest Select Funds, combined. Norwest Select Funds
have a December 31 fiscal year end. Information is presented for the twelve
month period ended May 31, 1999, which was the fiscal year end of all of the
Trust's portfolios.
<TABLE>
<S> <C> <C>
TOTAL COMPENSATION FROM
TOTAL COMPENSATION THE TRUST AND NORWEST
FROM THE TRUST SELECT FUNDS
Mr. Brown $37,770 $38,000
Mr. Burkhardt $45,722 $46,000
Mr. Harris $31,802 $32,000
Mr. Leach $37,770 $38,000
Mr. Penny $37,770 $38,000
Mr. Willeke $37,770 $38,000
</TABLE>
Neither the Trust nor Norwest Select Funds has adopted any form of retirement
plan covering Trustees or officers. For the twelve month period ended May 31,
1999 total expenses of the Trustees (other than Messrs. Keffer and McCune) was
$38,958 and total expenses of the trustees of Norwest Select Funds was $444 .
As of October 1, 1999, the Trustees and officers of the Trust in the aggregate
owned less than 1% of the outstanding shares of the Funds.
TRUSTEES AND OFFICERS OF CORE TRUST. The Trustees and officers of the Trust and
their principal occupations during the past five years are set forth below. Each
Trustee who is an "interested person" (as defined by the 1940 Act) of the Trust
is indicated by an asterisk.
JOHN Y. KEFFER*, Chairman and President (Age 56).
President , Forum Financial Group, LLC (mutual fund services company
holding company). Mr. Keffer is a Trustee/Director and/or officer of
various registered investment companies for which Forum Financial
Services, Inc. serves as manager, administrator and/or distributor.
His address is Two Portland Square, Portland, Maine 04101.
COSTAS AZARIADIS, Trustee (Age 55).
Professor of Economics, University of California, Los Angeles, since
July 1992. Prior thereto, Dr. Azariadis was Professor of Economics at
the University of Pennsylvania. His address is Department of
Economics, University of California, Los Angeles, 405 Hilgard Avenue,
Los Angeles, California 90024.
46
<PAGE>
JAMES C. CHENG, Trustee (Age 56).
President, Technology Marketing Associates (a marketing company for
small and medium size businesses in New England) since 1991. Prior
thereto, Mr. Cheng was President of Network Dynamics, Inc. (a software
development company). His address is 27 Temple Street, Belmont, MA
02718.
J. MICHAEL PARISH, Trustee (Age 55).
Partner at the law firm of Reid & Priest L.L.P. since 1995. From 1989
to 1995, he was a partner at Winthrop, Stimson, Putnam & Roberts. His
address is 40 West 57th Street, New York, New York 10019.
STACEY HONG, Treasurer (Age 32)
Director, Fund Accounting, Forum Financial Group, LLC, with which he
has been associated since April 1992. Prior thereto, Mr. Hong was a
Senior Accountant at Ernst & Young, LLP. His address is Two Portland
Square, Portland, Maine 04101.
THOMAS G. SHEEHAN, Vice President (Age 44).
Managing Director, Forum Financial Group, LLC, with which he has been
associated since October 1993. Prior thereto, Mr. Sheehan was Special
Counsel to the Division of Investment Management of the SEC. Mr.
Sheehan also serves as an officer of other registered investment
companies for which the various Forum Financial Group of Companies
provides services. His address is Two Portland Square, Portland, Maine
04101.
DAVID I. GOLDSTEIN, Secretary (Age 37).
General Counsel, Forum Financial Group , LLC, with which he has been
associated since 1991. Prior thereto, Mr. Goldstein was associated
with the law firm of Kirkpatrick & Lockhart, LLP. Mr. Goldstein is
also an officer of various registered investment companies for which
Forum Financial Services, Inc. serves as manager, administrator and/or
distributor. His address is Two Portland Square, Portland, Maine
04101.
LESLIE K. KLENK, Secretary (Age 34)
Counsel, Forum Financial Group, LLC with which she has been associated
since April 1998. Prior thereto, Ms. Klenk was Vice President and
Associate General Counsel of Smith Barney Inc. Ms. Klenk also serves
as an officer of other registered investment companies for which the
various Forum Financial Group of Companies provides services. Her
address is Two Portland Square, Portland, Maine 04101.
DON L. EVANS, Assistant Secretary (Age 50).
Counsel, Forum Financial Services, Inc., with which he has been
associated since 1995. Prior thereto, Mr. Evans was associated with
the law firm of Bisk & Lutz and prior thereto was associated with the
law firm of Weiner & Strother. Mr. Evans is also an officer of various
registered investment companies for which Forum Administrative
Services, LLC or Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. His address is Two Portland Square,
Portland, Maine.
PAMELA STUTCH, Assistant Secretary (Age 31)
Senior Fund Specialist, Forum Financial Group, LLC with which she has
been associated since May 1998. Prior thereto, Ms. Stutch attended
Temple University School of Law and graduated in 1997. Ms. Stutch was
also a legal intern for the Maine Department of the Attorney General.
Ms. Stutch also serves as an officer of other registered investment
companies for which the various Forum Financial Group of Companies
provides services. Her address is Two Portland Square, Portland, Maine
04101.
47
<PAGE>
HEIDI HOEFLER, Assistant Secretary (Age __)
Senior Fund Specialist, Forum Financial Group, LLC with which she has
been associated since ___ 199_. Prior thereto, Ms. Hoefler
___________________________.
INVESTMENT ADVISORY SERVICES
GENERAL. Table 1 in Appendix B shows, with respect to each Fund that invests
directly in portfolio securities, the dollar amount of fees payable by the Fund
to Norwest under its Investment Advisory Agreement. The table shows, with
respect to each Fund that invests in a Core and Gateway Structure, the aggregate
dollar amount of (i) the Fund's share of the aggregate investment advisory fees
payable by the Portfolio(s) in which the Fund invests to Norwest, Wells Fargo
Bank and/or Schroder, as the case may be, under the Investment Advisory
Agreement(s) of the Portfolio(s) and (ii) the asset allocation fees payable by
the Fund to Norwest, if any, if the Fund invests in multiple Portfolios. The
table also shows the amount of the fee that was waived by Norwest, Wells Fargo
Bank and/or Schroder, if any, and the actual fee received by Norwest, Wells
Fargo Bank and/or Schroder. The data is for the past three fiscal years or for a
shorter period if the Fund has been in operation for a shorter period.
The advisory fee for each Fund investing directly in portfolio securities is
disclosed in the Fund's prospectuses. If a Fund invests in a Core and Gateway
Structure, the asset allocation fee payable to Norwest, if any, and the
aggregate of the advisory fees payable with respect to the Fund's assets by the
Portfolio or Portfolios in which the Fund invests are also disclosed in the
Fund's prospectuses. All investment advisory fees are accrued daily and paid
monthly. Each Adviser, in its sole discretion, may waive or continue to waive
all or any portion of its investment advisory fees.
In addition to receiving its advisory fee from the Funds, each Adviser or its
affiliates may act and be compensated as investment manager for its clients with
respect to assets which are invested in a Fund. In some instances Norwest or its
affiliates may elect to credit against any investment management, custodial or
other fee received from, or rebate to, a client who is also a shareholder in a
Fund an amount equal to all or a portion of the fees received by Norwest or any
of its affiliates from a Fund with respect to the client's assets invested in
the Fund.
NORWEST INVESTMENT MANAGEMENT. For each Fund investing directly in portfolio
securities, Norwest makes investment decisions for the Fund and continuously
reviews, supervises and administers the Fund's investment program or oversees
the investment decisions of the Fund's Subadviser, as applicable. For Funds that
invest in a Core and Gateway Structure, Norwest provides investment advisory
services to the Funds indirectly through its investment advisory services to the
Portfolios other than those for which Schroder or Wells Fargo Bank serves as
investment adviser. In this capacity, Norwest makes investment decisions for
those Portfolios and continuously reviews, supervises and administers those
Portfolios' investment programs or oversees the investment decisions of the
Subadvisers, as applicable. For each Fund investing in a Core and Gateway
Structure pursuant which the Fund invests in multiple Portfolios and Norwest
allocates the Fund's assets among the Portfolios, Norwest makes investment
decisions regarding the asset allocations of the Fund and continuously reviews,
supervises and administers the Fund's asset allocations. Norwest provides these
investment advisory services to the Funds and the Portfolios subject to the
supervision of the Board or the Core Board, as appropriate.
Norwest provides investment advisory services to the Funds under the Investment
Advisory Agreement between the Trust and Norwest. Norwest provides investment
advisory services to the Portfolios under an Investment Advisory Agreement
between Core Trust and Norwest. The Investment Advisory Agreement between
Norwest and Core Trust is identical to the Investment Advisory Agreement between
Norwest and the Trust, except for the fees payable thereunder and certain
immaterial matters. Accordingly, the description of the Investment Advisory
Agreement set forth below applies equally to the Investment Advisory Agreement
between Norwest and Core Trust.
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<PAGE>
Norwest furnishes at its expense all services, facilities and personnel
necessary in connection with managing each Fund's investments and effecting
portfolio transactions for each Fund. Under the Investment Advisory Agreement,
Norwest may delegate its responsibilities to any Subadviser approved by the
Board and, as applicable, shareholders, with respect to all or a portion of the
assets of the Fund. With respect to each Fund, the Investment Advisory Agreement
will continue in effect only if such continuance is specifically approved at
least annually by the Board or by vote of the shareholders, and in either case,
by a majority of the Trustees who are not interested persons of any party to the
Investment Advisory Agreement, at a meeting called for the purpose of voting on
the Investment Advisory Agreement.
The Investment Advisory Agreement is terminable without penalty with respect to
a Fund on 60 days' written notice: (1) by the Trust to Norwest, if the Board
determines to terminate the Investment Advisory Agreement with respect to the
Fund or a majority of the outstanding voting securities of the Fund vote to
terminate the Investment Advisory Agreement with respect to the Fund or (2) by
the Adviser to the Trust. The Investment Advisory Agreement terminates if
assigned. The Investment Advisory Agreement also provides that, with respect to
the Funds, neither Norwest nor its personnel shall be liable for any mistake of
judgment or in any event whatsoever, except for lack of good faith, provided
that nothing in the Investment Advisory Agreement shall be deemed to protect, or
purport to protect, the Adviser against liability by reason of willful
misfeasance, bad faith or gross negligence in the performance of Norwest's
duties or by reason of reckless disregard of its obligations and duties under
the Investment Advisory Agreement. The Investment Advisory Agreement provides
that Norwest may render services to others.
Norwest, which is located at Norwest Center, Sixth Street and Marquette,
Minneapolis, Minnesota 55479, is a subsidiary of Wells Fargo & Company, [a
multi-bank holding company that was incorporated under the laws of Delaware in
1929]. Wells Fargo & Company currently has assets in excess of $__ billion.
Norwest and its affiliates currently manage assets with a value of approximately
$____ billion.
"DORMANT" INVESTMENT ADVISORY ARRANGEMENTS. Under its Investment Advisory
Agreement with the Trust, Norwest has been retained as a "dormant" or "back-up"
investment adviser for the Funds currently investing in a Core and Gateway
Structure. In this capacity, Norwest does not receive any compensation from the
Funds as long as the Funds invest entirely in Portfolios. If a Fund were to
redeem assets from a Portfolio and invest them directly, Norwest would receive
an investment advisory fee from the Fund for the management of those assets at
the following rates:
<TABLE>
<S> <C>
FEE AS A
FUND % OF THE FUND'S AVERAGE DAILY NET ASSETS
Cash Investment Fund 0.20% for the first $300 million;
0.16% for the next $400 million;
0.12% for the remaining assets.
Ready Cash Investment Fund 0.40% for the first $300 million;
0.36% for the next $400 million;
0.32% for the remaining assets
Stable Income Fund 0.30%
Diversified Bond Fund 0.35%
Total Return Bond Fund 0.50%
Strategic Income Fund 0.45%
Moderate Balanced Fund 0.53%
Growth Balanced Fund 0.58%
Aggressive Balanced-Equity Fund 0.63%
Index Fund 0.15%
Income Equity Fund 0.50%
Diversified Equity Fund 0.65%
Growth Equity Fund 0.90%
Large Company Growth Fund 0.65%
Diversified Small Cap Fund 0.90%
Small Company Stock Fund 0.90%
Small Cap Opportunities Fund 0.60%
Small Company Growth Fund 0.90%
International Fund 0.85%
</TABLE>
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<PAGE>
SCHRODER INVESTMENT MANAGEMENT NORTH AMERICA INC. Subject to the general
supervision of the Core Boards, Schroder Investment Management North America
Inc. makes investment decisions for International Portfolio and continuously
reviews, supervises and administers the Portfolio's investment program.
International Fund invests all of its assets in International Portfolio.
Pursuant to a separate Advisory Agreement between Core Trust and Schroder,
Schroder acts as investment adviser to International Portfolio, and is required
to furnish at its expense all services, facilities and personnel necessary in
connection with managing that Portfolio's investments and effecting portfolio
transactions for that Portfolio. This Advisory Agreement will continue in effect
only if such continuance is specifically approved at least annually: (1) by the
Core Trust Board or by vote of a majority of the outstanding voting interests of
the Portfolio and (2) by a majority of the trustees of Core Trust who are not
parties to the Advisory Agreement or interested persons of any such party (other
than as trustees of Core Trust), at a meeting called for the purpose of voting
on the Advisory Agreement; provided further, however, that if the Advisory
Agreement or the continuation of the Advisory Agreement is not approved as to
the Portfolio, Schroder may continue to render to the Portfolio the services
described herein in the manner and to the extent permitted by the 1940 Act and
the rules and regulations thereunder.
The Advisory Agreement between Schroder and Core Trust is substantially
identical to the Investment Advisory Agreement, except for the parties, the fees
payable thereunder and certain immaterial matters.
WELLS FARGO BANK. Subject to the general supervision of the Core Trust Board,
Wells Fargo Bank makes investment decisions for International Equity Portfolio
and continuously reviews, supervises and administers that Portfolio's investment
program.
Pursuant to a separate Advisory Agreement between Core Trust and Wells Fargo
Bank, Wells Fargo Bank acts as investment adviser to International Equity
Portfolio, and is required to furnish at its expense all services, facilities
and personnel necessary in connection with managing that Portfolio's investments
and effecting portfolio transactions for that Portfolio. This Advisory Agreement
will continue in effect with respect to the Portfolio only if such continuance
is specifically approved at least annually: (1) by the Core Trust Board, or by
vote of a majority of the outstanding voting interests of the Portfolio and, in
either case, (2) by a majority of the trustees of Core Trust, who are not
parties to the Advisory Agreement or interested persons of any such party (other
than as trustees of Core Trust), at a meeting called for the purpose of voting
on the Advisory Agreement; provided further, however, that if the Advisory
Agreement or the continuation of the Advisory Agreement is not approved as to a
Portfolio, Wells Fargo Bank may continue to render to that Portfolio the
services described herein in the manner and to the extent permitted by the 1940
Act and the rules and regulations thereunder.
The Advisory Agreement between Wells Fargo Bank and Core Trust is substantially
identical to the Investment Advisory Agreement, except for the parties, the fees
payable thereunder and certain immaterial matters.
"DORMANT" INVESTMENT SUBADVISORY ARRANGEMENTS. Norwest and the Trust have
entered into an Investment Subadvisory Agreement with Schroder on behalf of
International Fund. The Investment Subadvisory Agreement would become operative
and Schroder would directly manage the Fund's assets if the Board determined it
was no longer in the best interest of the Fund to invest in international
securities by investing in another registered investment company. In that event,
pursuant to the Investment Subadvisory Agreement, Schroder would make investment
decisions directly for the Fund and would continuously review, supervise and
administer the Fund's investment program with respect to that portion, if any,
of the Fund's portfolio that Norwest had so delegated. Schroder would furnish at
its own expense all services, facilities and personnel necessary in connection
with managing of the Fund's investments and effecting portfolio transactions for
the Fund, to the extent of Norwest's delegation.
50
<PAGE>
The Investment Subadvisory Agreement will continue in effect only if such
continuance is specifically approved at least annually: (1) by the Board or by
vote of a majority of the outstanding voting securities of the Fund, and (2) by
a majority of the Trust's trustees who are not parties to the Investment
Subadvisory Agreement or interested persons of any such party (other than as
trustees of the Trust), at a meeting called for the purpose of voting on the
Investment Subadvisory Agreement; provided further, however, that if the
Investment Subadvisory Agreement or the continuation of the Investment
Subadvisory Agreement is not approved as to the Fund, Schroder may continue to
render to the Fund the services described herein in the manner and to the extent
permitted by the 1940 Act and the rules and regulations thereunder.
The Investment Subadvisory Agreement is terminable without penalty with respect
to the Fund on 60 days' written notice when authorized either by majority vote
of the Fund's shareholders or by the Board, or by Schroder on 60 days written
notice to the Trust, and will automatically terminate in the event of its
assignment. The Investment Subadvisory Agreement also provide that, with respect
to the Fund, neither Schroder nor its personnel shall be liable for any mistake
of judgment or in any event whatsoever, except for lack of good faith, provided
that nothing shall be deemed to protect the Adviser against liability by reason
of willful misfeasance, bad faith or gross negligence in the performance of
Schroder's duties or by reason of reckless disregard of its obligations and
duties under the Investment Subadvisory Agreement. The Investment Subadvisory
Agreement provides that Schroder may render services to others.
The Fund does not currently pay any fees to Schroder under the Investment
Subadvisory Agreement because the Fund currently invests all of its assets in
Portfolio.
SUBADVISERS. As set forth in the Prospectuses, Norwest, Wells Fargo Bank and
Core Trust have retained the services of Galliard, Peregrine, Smith and WCM
pursuant to Investment Subadvisory Agreements to assist Norwest and Wells Fargo
Bank in carrying out their obligations with respect to certain Portfolios.
Norwest and Wells Fargo Bank each pay a fee to each such Subadviser for the
investment subadvisory services provided to each Portfolio by that Subadviser.
These fees do not increase the fees paid by the interestholders of the
Portfolios. The amount of the fees paid by Norwest or Wells Fargo Bank to each
Subadviser may vary from time to time as a result of periodic negotiations with
the Subadviser regarding matters such as the nature and extent of the services
(other than investment selection and order placement activities) provided by the
Subadviser, the cost and complexity of providing services, the investment record
of the Subadviser in managing the Portfolio and the nature and magnitude of the
expenses incurred by the Subadviser in managing the Portfolio's assets and by
Norwest or Wells Fargo Bank in overseeing the Portfolio.
Generally, Norwest has entered into a dormant Investment Subadvisory Agreement
with each Subadviser on behalf of each Fund that invests all or a portion of its
assets in a Portfolio subadvised by that Subadviser. [This is not the case only
with respect to Galliard and Total Return Bond Fund and Smith and Strategic
Income Fund, Moderate Balanced Fund, Growth Balanced Fund, Diversified Equity
Fund and Growth Equity Fund.] With respect to each Subadviser, the terms of the
Investment Subadvisory Agreement between Core Trust, Norwest and the Subadviser
and the dormant Investment Subadvisory Agreement between the Trust, Norwest and
the Subadviser are identical, except with respect to the fees payable (no fee is
payable under the investment subadvisory agreements with respect to a Fund to
the extent that the Fund is invested in an investment company) and certain
immaterial matters.
Norwest and Wells Fargo Bank perform internal due diligence on each Subadviser
and monitor each Subadviser's performance using their proprietary investment
adviser selection and monitoring process. Norwest and Wells Fargo Bank will be
responsible for communicating performance targets and evaluations to
Subadvisers, supervising each Subadviser's compliance with fundamental
investment objectives and policies, authorizing Subadvisers to engage in certain
investment techniques, and recommending to the Core Board whether investment
subadvisory agreements should be renewed, modified or terminated. Norwest and
Wells Fargo Bank also may from time to time recommend that the Core Board
replace one or more Subadvisers or appoint additional Subadvisers, depending on
Norwest's and Wells Fargo Bank's assessment of what combination of Subadvisers
it believes will optimize each Portfolio's chances of achieving its investment
objectives.
51
<PAGE>
GALLIARD CAPITAL MANAGEMENT, INC. To assist Norwest in carrying out its
obligations with respect to Stable Income Portfolio, Strategic Value Bond
Portfolio and Managed Fixed Income Portfolio, Norwest has entered into an
Investment Subadvisory Agreement with Galliard, located at 800 LaSalle Avenue,
Suite 2060, Minneapolis, Minnesota 55479. Stable Income Fund, Diversified Bond
Fund, Total Return Bond Fund, Strategic Income Fund, Moderate Balanced Fund,
Growth Balanced Fund and Aggressive Balanced-Equity Fund each invest all or a
portion of their assets in at least one of those Portfolios. Galliard is
registered with the SEC as an investment adviser and is an investment advisory
subsidiary of Norwest Bank. Galliard is required to furnish at its own expense
all services, facilities and personnel necessary in connection with managing
each Portfolio's investments and effecting portfolio transactions for each
Portfolio (to the extent of Norwest's delegation). Pursuant to the Investment
Subadvisory Agreement, Galliard makes investment decisions for each of the
Portfolios and continuously reviews, supervises and administers each Portfolio's
investment program with respect to that portion, if any, of the Portfolio's
investment portfolio that Norwest believes should be invested using Galliard as
a subadviser. Currently, Galliard manages all the assets of each Portfolio and
has done so since each Portfolio's inception. Norwest supervises the performance
of Galliard including its adherence to the Portfolios' investment objectives and
policies and pays Galliard a fee for its investment management services. The fee
Norwest pays Galliard does not affect the total fees paid by the Portfolios to
Norwest.
The Investment Subadvisory Agreement will continue in effect with respect to a
Portfolio only if such continuance is specifically approved at least annually:
(1) by the Core Trust Board or by vote of a majority of the outstanding voting
securities of the Portfolios, and, in either case; (2) by a majority of the Core
Trust's trustees who are not parties to the Investment Subadvisory Agreement or
interested persons of any such party (other than as trustees of the Core Trust),
at a meeting called for the purpose of voting on the Investment Subadvisory
Agreement; provided further, however, that if the Investment Subadvisory
Agreement or the continuation of the Agreement is not approved, the Subadviser
may continue to render to each Portfolio the services described in the
Investment Subadvisory Agreement in the manner and to the extent permitted by
the 1940 Act and the rules and regulations thereunder.
The Investment Subadvisory Agreement is terminable without penalty with respect
to a Portfolio on 60 days' written notice when authorized either by majority
vote of the Portfolio's shareholders or by the Core Trust Board, or by Galliard
on 60 days written notice to the Core Trust, and will automatically terminate in
the event of its assignment. The Investment Subadvisory Agreement also provides
that, with respect to each Portfolio, neither Galliard nor its personnel shall
be liable for any mistake of judgment or in any event whatsoever, except for
lack of good faith, provided that nothing shall be deemed to protect Galliard
against liability by reason of willful misfeasance, bad faith or gross
negligence in the performance of Galliard's duties or by reason of reckless
disregard of its obligations and duties under the Investment Subadvisory
Agreement. The Investment Subadvisory Agreement provides that Galliard may
render services to others.
PEREGRINE CAPITAL MANAGEMENT, INC. To assist Norwest in carrying out its
obligations with respect to Positive Bond Portfolio, Large Company Growth
Portfolio, Small Company Growth Portfolio and Small Company Value Portfolio,
Norwest has entered into an Investment Subadvisory Agreement with Peregrine,
located at 800 LaSalle Avenue, Suite 1850, Minneapolis, Minnesota 55479.
Diversified Bond Fund, Strategic Income Fund, Moderate Balanced Fund, Growth
Balanced Fund, Aggressive Balanced-Equity Fund, Diversified Equity Fund, Growth
Equity Fund, Large Company Growth Fund, Diversified Small Cap Fund and Small
Company Growth Fund each invest all or a portion of their assets in at least one
of those Portfolios. Peregrine is registered with the SEC as an investment
adviser and is an investment advisory subsidiary of Norwest Bank. Peregrine is
required to furnish at its own expense all services, facilities and personnel
necessary in connection with managing each Portfolio's investments and effecting
portfolio transactions for each Portfolio (to the extent of Norwest's
delegation). Pursuant to the Investment Subadvisory Agreement, Peregrine makes
investment decisions for each of the Portfolios and continuously reviews,
supervises and administers each Portfolio's investment program with respect to
that portion, if any, of the Portfolio's investment portfolio that Norwest
believes should be invested using Peregrine as a subadviser. Currently,
Peregrine manages all the assets of each Portfolio and has done so since each
Portfolio's inception. Norwest supervises the performance of Peregrine including
its adherence to the Portfolios' investment objectives and policies and pays
52
<PAGE>
Peregrine a fee for its investment management services. The fee Norwest pays
Peregrine does not affect the total fees paid by the Portfolios to Norwest.
The Investment Subadvisory Agreement will continue in effect with respect to a
Portfolio only if such continuance is specifically approved at least annually:
(1) by the Core Trust Board or by vote of a majority of the outstanding voting
securities of the Portfolio, and, in either case; (2) by a majority of the Core
Trust's trustees who are not parties to the Investment Subadvisory Agreement or
interested persons of any such party (other than as trustees of the Core Trust),
at a meeting called for the purpose of voting on the Investment Subadvisory
Agreement; provided further, however, that if the Investment Subadvisory
Agreement or the continuation of the Agreement is not approved, the Subadviser
may continue to render to each Portfolio the services described in the
Investment Subadvisory Agreement in the manner and to the extent permitted by
the 1940 Act and the rules and regulations thereunder.
The Investment Subadvisory Agreement is terminable without penalty with respect
to a Portfolio on 60 days' written notice when authorized either by majority
vote of the Portfolio's shareholders or by the Core Trust Board, or by Peregrine
on 60 days written notice to the Core Trust, and will automatically terminate in
the event of its assignment. The Investment Subadvisory Agreement also provides
that, with respect to each Portfolio, neither Peregrine nor its personnel shall
be liable for any mistake of judgment or in any event whatsoever, except for
lack of good faith, provided that nothing shall be deemed to protect Peregrine
against liability by reason of willful misfeasance, bad faith or gross
negligence in the performance of Peregrine's duties or by reason of reckless
disregard of its obligations and duties under the Investment Subadvisory
Agreement. The Investment Subadvisory Agreement provides that Peregrine may
render services to others.
SMITH ASSET MANAGEMENT GROUP, L.P. To assist Norwest in carrying out its
obligations with respect to Disciplined Growth Portfolio and Small Cap Value
Portfolio, Norwest has entered into an Investment Subadvisory Agreement with
Smith, located at 500 Crescent Court, Suite 250, Dallas, Texas. Strategic Income
Fund, Moderate Balanced Fund, Growth Balanced Fund, Aggressive Balanced-Equity
Fund, Diversified Equity Fund, Growth Equity Fund and Diversified Small Cap Fund
each invest all or a portion of their assets in at least one of those
Portfolios. Smith is registered with the SEC as an investment adviser. Smith is
required to furnish at its own expense all services, facilities and personnel
necessary in connection with managing each Portfolio's investments and effecting
portfolio transactions for each Portfolio (to the extent of Norwest's
delegation). Pursuant to the Investment Subadvisory Agreement, Smith makes
investment decisions for each of the Portfolios and continuously reviews,
supervises and administers each Portfolio's investment program with respect to
that portion, if any, of the Portfolio's investment portfolio that Norwest
believes should be invested using Smith as a subadviser. Currently, Smith
manages all the assets of each Portfolio and has done so since each Portfolio's
inception. Norwest supervises the performance of Smith including its adherence
to the Portfolios' investment objectives and policies and pays Smith a fee for
its investment management services. The fee Norwest pays Smith does not affect
the total fees paid by the Portfolios to Norwest.
The Investment Subadvisory Agreement will continue in effect with respect to a
Portfolio only if such continuance is specifically approved at least annually:
(1) by the Core Trust Board or by vote of a majority of the outstanding voting
securities of the Portfolio, and, in either case; (2) by a majority of the Core
Trust's trustees who are not parties to the Investment Subadvisory Agreement or
interested persons of any such party (other than as trustees of the Core Trust),
at a meeting called for the purpose of voting on the Investment Subadvisory
Agreement; provided further, however, that if the Investment Subadvisory
Agreement or the continuation of the Agreement is not approved, the Subadviser
may continue to render to each Portfolio the services described in the
Investment Subadvisory Agreement in the manner and to the extent permitted by
the 1940 Act and the rules and regulations thereunder.
The Investment Subadvisory Agreement is terminable without penalty with respect
to a Portfolio on 60 days' written notice when authorized either by majority
vote of the Portfolio's shareholders or by the Core Trust Board, or by Smith on
60 days written notice to the Core Trust, and will automatically terminate in
the event of its assignment. The Investment Subadvisory Agreement also provides
that, with respect to each Portfolio, neither Smith nor its personnel shall be
liable for any mistake of judgment or in any event whatsoever, except for lack
53
<PAGE>
of good faith, provided that nothing shall be deemed to protect Smith against
liability by reason of willful misfeasance, bad faith or gross negligence in the
performance of Smith's duties or by reason of reckless disregard of its
obligations and duties under the Investment Subadvisory Agreement. The
Investment Subadvisory Agreement provides that Smith may render services to
others.
WELLS CAPITAL MANAGEMENT INCORPORATED. To assist Wells Fargo Bank in carrying
out its obligations with respect to International Equity Portfolio, Wells Fargo
Bank has entered into an Investment Subadvisory Agreement with WCM, located at
525 Market Street, 10th Floor, San Francisco, California 94105. Strategic Income
Fund, Moderate Balanced Fund, Growth Balanced Fund, Aggressive Balanced-Equity
Fund, Diversified Equity Fund and Growth Equity Fund each invest a portion of
their assets in International Equity Portfolio. WCM is registered with the SEC
as an investment adviser. WCM is required to furnish at its own expense all
services, facilities and personnel necessary in connection with managing the
Portfolio's investments and effecting portfolio transactions for the Portfolio
(to the extent of Wells Fargo Bank's delegation). Pursuant to the Investment
Subadvisory Agreement, WCM makes investment decisions for International Equity
Portfolio and continuously reviews, supervises and administers the Portfolio's
investment program with respect to that portion, if any, of the Portfolio's
investment portfolio that Wells Fargo Bank believes should be invested using WCM
as a subadviser. Currently, WCM manages all the assets of the Portfolio and has
done so since the Portfolio's inception. Wells Fargo Bank supervises the
performance of WCM including its adherence to the Portfolios' investment
objectives and policies and pays WCM a fee for its investment management
services. The fee Wells Fargo Bank pays WCM does not affect the total fees paid
by the Portfolio to Wells Fargo Bank.
MANAGEMENT AND ADMINISTRATIVE SERVICES
FORUM AND FAdS. Forum manages all aspects of the Trust's operations with respect
to each Fund except those which are the responsibility of FAdS, Norwest, Wells
Fargo Bank, any other investment adviser or investment subadviser to a Fund, or
Norwest in its capacity as administrator pursuant to an investment
administration or similar agreement. With respect to each Fund, Forum has
entered into a Management Agreement that will continue in effect only if such
continuance is specifically approved at least annually by the Board or by the
shareholders and, in either case, by a majority of the Trustees who are not
interested persons of any party to the Management Agreement.
On behalf of the Trust and with respect to each Fund, Forum: (1) oversees: (a)
the preparation and maintenance by the Advisers and the Trust's administrator,
custodian, transfer agent, dividend disbursing agent and fund accountant (or if
appropriate, prepares and maintains) in such form, for such periods and in such
locations as may be required by applicable law, of all documents and records
relating to the operation of the Trust required to be prepared or maintained by
the Trust or its agents pursuant to applicable law; (b) the reconciliation of
account information and balances among the Advisers and the Trust's custodian,
transfer agent, dividend disbursing agent and fund accountant; (c) the
transmission of purchase and redemption orders for Shares; (d) the notification
of the Advisers of available funds for investment; and (e) the performance of
fund accounting, including the calculation of the net asset value per Share; (2)
oversees the Trust's receipt of the services of persons competent to perform
such supervisory, administrative and clerical functions as are necessary to
provide effective operation of the Trust; (3) oversees the performance of
administrative and professional services rendered to the Trust by others,
including its administrator, custodian, transfer agent, dividend disbursing
agent and fund accountant, as well as accounting, auditing, legal and other
services performed for the Trust; (4) provides the Trust with adequate general
office space and facilities and provides, at the Trust's request and expense,
persons suitable to the Board to serve as officers of the Trust; (5) oversees
the preparation and the printing of the periodic updating of the Trust's
registration statement, Prospectuses and SAIs, the Trust's tax returns, and
reports to its shareholders, the SEC and state and other securities
administrators; (6) oversees the preparation of proxy and information statements
and any other communications to shareholders; (7) with the cooperation of the
Trust's counsel, Advisers and other relevant parties, oversees the preparation
and dissemination of materials for meetings of the Board; (8) oversees the
preparation, filing and maintenance of the Trust's governing documents,
including the Trust Instrument, Bylaws and minutes of meetings of Trustees,
Board committees and shareholders; (9) oversees registration and sale of Fund
shares, to ensure that such shares are properly and duly registered with the SEC
and applicable state and other securities commissions; (10) oversees the
calculation of performance data for dissemination to information services
54
<PAGE>
covering the investment company industry, sales literature of the Trust and
other appropriate purposes; (11) oversees the determination of the amount of and
supervises the declaration of dividends and other distributions to shareholders
as necessary to, among other things, maintain the qualification of each Fund as
a regulated investment company under the Code, as amended, and oversees the
preparation and distribution to appropriate parties of notices announcing the
declaration of dividends and other distributions to shareholders; (12) reviews
and negotiates on behalf of the Trust normal course of business contracts and
agreements; (13) maintains and reviews periodically the Trust's fidelity bond
and errors and omission insurance coverage; and (14) advises the Trust and the
Board on matters concerning the Trust and its affairs.
The Management Agreement terminates automatically if assigned and may be
terminated without penalty with respect to any Fund by vote of that Fund's
shareholders or by either party on not more than 60 days' nor less than 30 days'
written notice. The Management Agreement also provides that neither Forum nor
its personnel shall be liable for any error of judgment or mistake of law or for
any act or omission in the administration or management of the Trust, except for
willful misfeasance, bad faith or gross negligence in the performance of Forum's
or their duties or by reason of reckless disregard of their obligations and
duties under the Management Agreement.
FAdS manages all aspects of the Trust's operations with respect to each Fund
except those which are the responsibility of Forum, Norwest, or any other
investment adviser or investment subadviser to a Fund, or Norwest in its
capacity as administrator pursuant to an investment administration or similar
agreement. With respect to each Fund, Forum has entered into a Administrative
Agreement that will continue in effect only if such continuance is specifically
approved at least annually by the Board or by the shareholders and, in either
case, by a majority of the Trustees who are not interested persons of any party
to the Management Agreement.
On behalf of the Trust and with respect to each Fund, FAdS: (1) provides the
Trust with, or arranges for the provision of, the services of persons competent
to perform such supervisory, administrative and clerical functions as are
necessary to provide effective operation of the Trust; (2) assists in the
preparation and the printing and the periodic updating of the Trust's
registration statement, Prospectuses and SAIs, the Trust's tax returns, and
reports to its shareholders, the SEC and state and other securities
administrators; (3) assists in the preparation of proxy and information
statements and any other communications to shareholders; (4) assists the
Advisers in monitoring Fund holdings for compliance with Prospectus and SAI
investment restrictions and assist in preparation of periodic compliance
reports; (5) with the cooperation of the Trust's counsel, the Advisers, the
officers of the Trust and other relevant parties, is responsible for the
preparation and dissemination of materials for meetings of the Board; (6) is
responsible for preparing, filing and maintaining the Trust's governing
documents, including the Trust Instrument, Bylaws and minutes of meetings of
Trustees, Board committees and shareholders; (7) is responsible for maintaining
the Trust's existence and good standing under state law; (8) monitors sales of
shares and ensures that such shares are properly and duly registered with the
SEC and applicable state and other securities commissions; (9) is responsible
for the calculation of performance data for dissemination to information
services covering the investment company industry, sales literature of the Trust
and other appropriate purposes; and (10) is responsible for the determination of
the amount of and supervises the declaration of dividends and other
distributions to shareholders as necessary to, among other things, maintain the
qualification of each Fund as a regulated investment company under the Code, as
amended, and prepares and distributes to appropriate parties notices announcing
the declaration of dividends and other distributions to shareholders.
The Administrative Agreement terminates automatically if assigned and may be
terminated without penalty with respect to any Fund by vote of that Fund's
shareholders or by either party on not more than 60 days' nor less than 30 days'
written notice. The Administrative Agreement also provides that neither FAdS nor
its personnel shall be liable for any error of judgment or mistake of law or for
any act or omission in the administration or management of the Trust, except for
willful misfeasance, bad faith or gross negligence in the performance of FAdS's
or their duties or by reason of reckless disregard of their obligations and
duties under the Administrative Agreement.
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Pursuant to their agreements with the Trust, Forum and FAdS may subcontract any
or all of their duties to one or more qualified subadministrators who agree to
comply with the terms of Forum's Management Agreement or FAdS's Administration
Agreement, respectively. Forum and FAdS may compensate those agents for their
services; however, no such compensation may increase the aggregate amount of
payments by the Trust to Forum or FAdS pursuant to their Management and
Administration Agreements with the Trust.
For their services, Forum and FAdS each receives a fee with respect to U.S.
Government Fund, Treasury Fund, Institutional Shares of Municipal Money Market
Fund, Limited Term Government Income Fund, Intermediate Government Income Fund,
Income Fund, each Tax-Free Fixed Income Fund, ValuGrowth Stock Fund Small
Company Stock Fund, Small Cap Opportunities Fund and International Fund at an
annual rate of 0.05% of the Fund's (of class') average daily net assets, with
respect to Investor Shares of Municipal Money Market Fund at an annual rate of
0.10% of the class' average daily net assets, with respect to Public Entities
Shares and Investor Shares of Ready Cash Investment Fund at an annual rate of
0.075% of the class' average daily net asset, and with respect to each other
Fund at an annual rate of 0.025% of the Fund's average daily net assets.
As of August 31, 1999, Forum and FAdS provided management and administrative
services to registered investment companies and collective investment funds with
assets of approximately $__ billion.
Table 2 in Appendix B shows the dollar amount of fees payable to Forum and FAdS
for management and administrative services with respect to each Fund (or class
thereof for those periods when multiple classes were outstanding), the amount of
fees that were waived by Forum and FAdS, if any, and the actual fees received by
Forum and FAdS. The data is for the past three fiscal years or shorter period if
the Fund has been in operation for a shorter period.
PORTFOLIOS OF CORE TRUST. FAdS manages all aspects of Core Trust's operations
with respect to the Portfolios except those which are the responsibility of
Norwest or Schroder. With respect to each Portfolio, FAdS has entered into an
Administration Agreement that will continue in effect only if such continuance
is specifically approved at least annually by the Core Trust Board or by the
shareholders and, in either case, by a majority of the Trustees who are not
interested persons of any party to the Administration Agreement. Under the
Administration Agreement, FAdS performs similar services for each Portfolio as
it and Forum perform for the Funds under the Management Agreement and
Administration Agreement, to the extent the services are applicable to the
Portfolios and their structure.
The Administration Agreement provides that FAdS shall not be liable to Core
Trust or any of Core Trust's interestholders for any action or inaction of FAdS
relating to any event whatsoever in the absence of bad faith, willful
misfeasance or gross negligence in the performance of FAdS' duties or
obligations under the Agreement or by reason of FAdS' reckless disregard of its
duties and obligations under this Agreement.
The Administration Agreement may be terminated with respect to a Portfolio at
anytime, without the payment of any penalty (i) by the Core Board on 60 days'
written notice to FAdS or (ii) by FAdS on 60 days' written notice to Core Trust.
For its services FAdS receives a fee with respect to each Portfolio of Core
Trust at an annual rate of 0.05% of the Portfolio's average daily net assets
(0.15% in the case of International Portfolio).
NORWEST ADMINISTRATIVE SERVICES. Under an Administrative Services Agreement
between the Trust and Norwest Bank with respect to International Fund, Norwest
performs ministerial, administrative and oversight functions for the Fund and
undertakes to reimburse certain excess expenses of the Fund. Among other things,
Norwest Bank gathers performance and other data from Schroder as the adviser of
International Portfolio and from other sources, formats the data and prepares
reports to the Fund's shareholders and the Trustees. Norwest Bank also ensures
that Schroder is aware of pending net purchases or redemptions of the Fund's
shares and other matters that may affect Schroder's performance of its duties.
Lastly, Norwest Bank has agreed to reimburse the Fund for any amounts by which
its operating expenses (exclusive of interest, taxes and brokerage fees,
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organization expenses and, if applicable, distribution expenses, all to the
extent permitted by applicable state law or regulation) exceed the limits
prescribed by any state in which the Funds' shares are qualified for sale. No
fees will be paid to Norwest Bank under the Administrative Services Agreement
unless the Fund's assets are invested solely in International Portfolio or in a
portfolio of another registered investment company. This agreement will continue
in effect only if such continuance is specifically approved at least annually by
the Board or by the shareholders and, in either case, by a majority of the
Trustees who are not parties to the Administrative Services Agreement or
interested persons of any such party.
The Administrative Services Agreement provides that neither Norwest Bank nor its
personnel shall be liable for any error of judgment or mistake of law or for any
act or omission in the performance of its or their duties to the Fund, except
for willful misfeasance, bad faith or gross negligence in the performance of
Forum's or their duties or by reason of reckless disregard of its or their
obligations and duties under the agreement.
Under the agreement, Norwest Bank receives a fee with respect to International
Fund at an annual rate of 0.25% of the Funds' average daily net assets.
International Fund incurs total management and administrative fees at a higher
rate than many other mutual funds, including other funds of the Trust.
Table 2 in Appendix B shows the dollar amount of fees payable under the
Administrative Services Agreement, the amount of the fee that was waived, if
any, and the amount received by Norwest Bank for the past three fiscal years of
the Funds.
DISTRIBUTION
Forum also acts as distributor of the shares of the Fund. Forum acts as the
agent of the Trust in connection with the offering of shares of the Funds on a
"best efforts" basis pursuant to a Distribution Services Agreement.
Under the Distribution Services Agreement, the Trust has agreed to indemnify,
defend and hold Forum, and any person who controls Forum within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which Forum or any such controlling person may incur,
under the 1933 Act, or under common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained in the Trust's
Registration Statement or a Fund's Prospectus or Statement of Additional
Information in effect from time to time under the 1933 Act or arising out of or
based upon any alleged omission to state a material fact required to be stated
in any one thereof or necessary to make the statements in any one thereof not
misleading. Forum is not, however, protected against any liability to the Trust
or its shareholders to which Forum would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of Forum's reckless disregard of its obligations and duties
under the Distribution Services Agreement.
With respect to each Fund, the Distribution Services Agreement will continue in
effect only if such continuance is specifically approved at least annually by
the Board or by the shareholders and, in either case, by a majority of the
Trustees who are not parties to the Distribution Services Agreement or
interested persons of any such party and, with respect to each class of a Fund
for which there is an effective plan of distribution adopted pursuant to Rule
12b-1, who do not have any direct or indirect financial interest in any
distribution plan of the Fund or in any agreement related to the distribution
plan cast in person at a meeting called for the purpose of voting on such
approval ("12b-1 Trustees").
The Distribution Services Agreement terminates automatically if assigned. With
respect to each Fund, the Distribution Services Agreement may be terminated at
any time without the payment of any penalty: (1) by the Board or by a vote of
the Fund's shareholders or, with respect to each class of a Fund for which there
is an effective plan of distribution adopted pursuant to Rule 12b-1, a majority
of 12b-1 Trustees, on 60 days' written notice to Forum or (2) by Forum on 60
days' written notice to the Trust.
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Under the Distribution Services Agreement related to the Funds that offer A
Shares, Forum receives, and may reallow to certain financial institutions, the
initial sales charges assessed on purchases of A Shares of the Funds. The Funds
have also adopted the distribution plans described below.
A SHARES DISTRIBUTION PLAN. The Trust, on behalf of Growth Balanced Fund, Large
Company Growth Fund and Diversified Small Cap Fund, has adopted a distribution
plan pursuant to Rule 12b-1 under the 1940 Act (the "A Shares Plan") providing
for distribution payments with respect to A Shares. Each of the Funds
compensates Forum for its distribution activities with respect to A Shares by
making distribution payments on A Shares to Forum at an annual rate of up to
0.10% per annum of the average daily net assets of the Fund attributable to A
Shares (the "distribution services fee"). In consideration of the payment of the
distribution services fee, Forum provides the Funds with distribution-related
services that are primarily intended to result in the sale of A Shares,
including, but not limited to, compensation of employees of Forum, compensation
and expenses, including overhead and telephone and other communication expenses,
of Forum and other broker-dealers, banks and other financial intermediaries that
engage in or support the distribution of A Shares, the preparation, printing and
distribution of prospectuses, statements of additional information, sales
literature and advertising materials relating to the A Shares, and such other
promotional activities in such amounts Forum deems necessary or appropriate. The
amount of distribution services fees is not related directly to the amount of
expenses incurred by Forum in connection with providing distribution services,
which expenses may be greater or less than those fees and charges. The Fund will
not be obligated to reimburse Forum for those expenses.
B SHARES AND C SHARES DISTRIBUTION PLANS. The Trust, on behalf of Funds offering
B Shares and C Shares, has adopted distribution plans pursuant to Rule 12b-1
under the 1940 Act (each, a "Plan") providing for distribution payments with
respect to B Shares and C Shares. [Each of the Funds compensates Forum] for its
distribution activities with respect to B Shares by paying a distribution
services fee on B Shares to Forum at an annual rate of up to 0.75% of the
average daily net assets of the Fund attributable to the B Shares. Each Fund
offering C Shares compensates Forum for its distribution activities with respect
to C Shares by paying a distribution services fee to Forum of up to 0.75% of the
average daily net assets of the Fund attributable to the C Shares. 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.
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 and C Shares. The
combined contingent deferred sales charge and distribution services fee on B
Shares and C Shares is intended to finance the distribution of those shares by
permitting an investor to purchase shares through broker-dealers without the
assessment of an initial sales charge and, at the same time, permitting Forum to
compensate broker-dealers in connection with the sales of the shares. Proceeds
from the contingent deferred sales charge with respect to a Fund are paid to
Forum to defray the expenses related to providing distribution-related services
in connection with the sales of B Shares or C Shares, such as the payment of
compensation to broker-dealers selling B Shares or C Shares. Forum may spend the
distribution services fees it receives with respect to B Shares or C Shares as
it deems appropriate on any activities primarily intended to result in the sale
of B Shares or C Shares, respectively.
Under the Plans, a Fund will make distribution services fee payments to Forum
only for periods during which there are outstanding uncovered distribution
charges attributable to the appropriate class of that Fund. Uncovered
distribution charges for a class 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, 1999,
Ready Cash Investment Fund (Exchange Shares), Stable Income Fund, Intermediate
Government Income Fund, Income Fund, Total Return Bond Fund, Tax-Free Income
Fund, Colorado Tax-Free Fund, Minnesota Tax-Free Fund, Income Equity Fund,
ValuGrowth Stock Fund, Diversified Equity Fund, Growth Equity Fund, Small
Company Stock Fund, Small Cap Opportunities Fund and International Fund had
uncovered distribution expenses of $18,785; $112,707; $90,244; $38,700;
$152,328; $99,195; $273,966; $1,561,075; $115,392; $2,350,252; $465,310;
$111,593; $229,014 and $57,510, respectively, or approximately 1.04%, 1.36%,
1.88%, 1.47%, 1.38%, 1.09%, 1.66%, 2.32%, 1.28%, 2.89%, 2.80%, 1.93%, 3.73%, and
2.56% of each respective Fund's net assets attributable to B Shares as of the
same date.
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The amount of distribution services fees and contingent deferred sales charge
payments received by Forum with respect to B Shares or C Shares of a Fund are
not related directly to the amount of expenses incurred by Forum in connection
with providing distribution services to the B Shares or C Shares and may be
higher or lower than those expenses. Forum may be considered to have realized a
profit under a Plan if, at any time, the aggregate amounts of all distribution
services fees and contingent deferred sales charge payments previously made to
Forum with respect to B Shares or C Shares exceed the total expenses incurred by
Forum in distributing B Shares or C Shares.
A Fund does not accrue future distribution services fees as a liability of the
Fund with respect to the B Shares or C Shares or reduce the Fund's current net
assets in respect of distribution services fees which may become payable under a
Plan in the future.
In the event that a Plan is terminated or not continued with respect to B Shares
or C Shares of a Fund, the Fund may, under certain circumstances, continue to
pay distribution services fees to Forum (but only with respect to sales of the
class that occurred prior to the termination or discontinuance of the Plan). In
deciding whether to purchase B Shares and C Shares of a Fund, investors should
consider that payments of distribution services fees could continue until such
time as there are no uncovered distribution charges under the Plans attributable
to that Fund. In approving the Plans, the Board determined that there was a
reasonable likelihood that the Plans would benefit each Fund and its B Shares
shareholders and its C Shares shareholders.
Periods with a high level of sales of B Shares or C 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 with
respect to B Shares or C Shares. Conversely, periods with a low level of sales
of B Shares or C 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 with respect to B Shares or C Shares. A
high level of sales of B Shares or C 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 or C Shares during any fiscal
year, would cause a large portion of the distribution services fees attributable
to a sale of the B Shares or C 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 applicable Plan.
Each Plan provides that all written agreements relating to the Plan must be in a
form satisfactory to the Board. In addition, the Plans require the Trust and
Forum to prepare, at least quarterly, written reports setting forth all amounts
expended for distribution purposes by the Funds and Forum pursuant to the Plans
and identifying the distribution activities for which those expenditures were
made.
Each Plan provides that, with respect to each class of each Fund to which it
applies, it will remain in effect for one year from the date of its adoption and
thereafter may continue in effect for successive annual periods provided it is
approved by the shareholders of the respective class or by the Board, including
a majority of the 12b-1 Trustees. Each Plan further provides that it may not be
amended to increase materially the costs which may be borne by the Trust for
distribution pursuant to the Plan without shareholder approval and that other
material amendments to the Plan must be approved by the trustees in the manner
described in the preceding sentence. The Plans may be terminated at any time by
a vote of the Board or by the shareholders of the respective classes.
The Plans are "semi-enhanced" in that under the circumstances described below,
payments to Forum under a Plan continue while there are uncovered distribution
charges even though the Plan has been terminated. With respect to each Plan,
uncovered distribution charges include all sales commissions previously due,
plus interest, less amounts previously received by Forum (or other distributor)
pursuant to the Plan and contingent deferred sales charges previously paid to
Forum. Each Plan provides that in the event of a Complete Termination (as
defined below) of the Plan with respect to a Fund, payments by a Fund in
consideration of sales of B Shares that occurred prior to termination of the
Plan will cease. A Complete Termination in respect of any Fund means: (1) the
12b-1 Trustees acting in good faith have determined that termination is in the
best interest of the Trust and the shareholders of the Fund; (2) the Trust does
not alter the terms of the CDSC applicable to the B Shares or C Shares of the
Fund outstanding at the time of the termination; (3) the Trust does not pay any
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portion of the asset based sales charge or service fees to an entity other than
the distributor or its assignee (unless the distributor at the time of the
termination was in material breach under the Distribution Agreement in respect
of the Fund); and (4) the Fund does not adopt a distribution plan relating to a
class of shares of the Fund that has a sales load structure substantially
similar (as defined in the Plan) to that of the B shares or C Shares.
In the event of a termination of the B Shares Plan that does not satisfy clauses
(2), (3) and (4) of the definition of a Complete Termination above, Ready Cash
Investment Fund, ValuGrowth Stock Fund, Small Company Stock Fund, Income Fund,
Tax-Free Income Fund, Total Return Bond Fund and Minnesota Tax-Free Fund would
continue to pay distribution services fees for no more than four years. In
contrast, payments by Stable Income Fund, Intermediate Government Income Fund,
Growth Equity Fund and Diversified Equity Fund would continue until such time as
there exist no outstanding uncovered distribution charges attributable to the
Fund and, therefore, could continue for periods of time beyond four years after
the date of termination. In the event of a termination of the C Shares Plan that
does not satisfy clauses (2), (3) and (4) of the definition of a Complete
Termination above, the Funds would continue to pay distribution fees for no more
than four years.
In addition, pursuant to the B Shares Plan, each of Stable Income Fund, Income
Equity Fund and Intermediate Government Income Fund and, pursuant to the C
Shares Plan, each Fund offering C Shares may, subject to approval by the Rule
12b-1 Trustees, assume and pay: (i) any uncovered distribution charges of the
distributor of a fund whose assets are being acquired by the Fund and (ii) any
other amounts expended for distribution on behalf of such fund that are not
reimbursed or paid by the fund upon the merger or combination with or
acquisition of substantially all of the assets of that fund.
Pursuant to the B Shares Plan, each Fund has agreed also to pay Forum a
maintenance fee for B Shares in an amount equal to 0.25% of the average daily
net assets of the Fund attributable to B Shares for providing personal services
to shareholder accounts. The maintenance fee may be paid by Forum to
broker-dealers in an amount not to exceed 0.25% of the value of the B Shares
held by the customers of the broker-dealers.
The fees assessed under the Plans are accrued daily and paid monthly and will
cause a Fund's B Shares or C 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 B Shares of a Fund, the Fund's B
Shares may continue to pay maintenance fees.
Table 3 in Appendix B shows the dollar amount of fees payable to Forum for its
distribution services with respect to each Fund (or class thereof), the amount
of fee that was waived by Forum, if any, and the actual fee received by Forum.
All maintenance fees were waived by Forum during the fiscal years ended May 31,
1997, 1998 and 1999. With respect to each Fund, Forum has paid brokers that sold
B Shares in amounts greater than the distribution fees received by Forum with
respect to that Fund. The data is for the past three fiscal years or shorter
period if the Fund has been in operation for a shorter period.
Table 4 in Appendix B shows the dollar amount of sales charges payable to Forum
with respect to sales of A Shares (or of the respective Funds prior to the
offering of multiple classes of shares) and the amount of sales charge retained
by Forum and not reallowed to other persons. The data is for the past three
fiscal years or shorter period if the Fund has been in operation for a shorter
period.
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TRANSFER AGENT
Norwest Bank, Sixth Street and Marquette, Minneapolis, Minnesota 55479, serves
as transfer agent and dividend disbursing agent for the Trust pursuant to a
Transfer Agency Agreement. 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 sell Fund shares. 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.
The Transfer Agency Agreement will continue in effect only if such continuance
is specifically approved at least annually by the Board or by a vote of the
shareholders of the Trust and in either case by a majority of the Trustees who
are not parties to the Transfer Agency Agreement or interested persons of any
such party, at a meeting called for the purpose of voting on the Transfer Agency
Agreement.
The responsibilities of the Transfer Agent include: (1) answering customer
inquiries regarding account status and history, the manner in which purchases
and redemptions of shares of the Fund may be effected and certain other matters
pertaining to the Fund; (2) assisting shareholders in initiating and changing
account designations and addresses; (3) providing necessary personnel and
facilities to establish and maintain shareholder accounts and records; (4)
assisting in processing purchase and redemption transactions and receiving wired
funds; (5) transmitting and receiving funds in connection with customer orders
to purchase or redeem shares; (6) verifying shareholder signatures in connection
with changes in the registration of shareholder accounts; (7) furnishing
periodic statements and confirmations of purchases and redemptions; (8)
transmitting proxy statements, annual reports, prospectuses and other
communications from the Trust to its shareholders; (9) receiving, tabulating and
transmitting to the Trust proxies executed by shareholders with respect to
meetings of shareholders of the Trust; and (10) providing such other related
services as the Trust or a shareholder may request.
For its services, the Transfer Agent receives a fee computed daily and paid
monthly from the Trust, with respect to each Fund, at an annual rate of 0.25% of
the Fund's average daily net assets attributable to each class of the Fund
(0.10% in the case of Municipal Money Market Fund - Institutional Shares and
Ready Cash Investment Fund - Public Entities Shares and 0.14% in the case of A
Shares for Large Company Growth Fund, Growth Balanced Fund and Diversified Small
Cap Fund).
CUSTODIAN
Norwest Bank, Sixth Street and Marquette, Minneapolis, Minnesota 55479, serves
as each Fund's and each Portfolio's custodian and may appoint subcustodians for
the foreign securities and other assets held in foreign countries. For its
custodial services, Norwest Bank receives a fee with respect to each Fund and
each Portfolio at an annual rate of 0.02% of the first $100 million of the
Fund's or Portfolio's average daily net assets, 0.015% of the next $100 million
of the Fund's or Portfolio's average daily net assets and 0.01% of the Fund's or
Portfolio's remaining average daily net assets. Norwest Bank assesses certain
administration, holding and transaction fees in connection with its custodial
services. No fee is directly payable by a Fund to the extent the Fund is
invested in a Portfolio in accordance with Section 12(d)(1)(E) of the 1940 Act.
With respect to International Portfolio, Norwest Bank receives a fee at an
annual rate of 0.07% of the Portfolio's average daily net assets.
Pursuant to rules adopted under the 1940 Act, a Fund may maintain its foreign
securities and cash in the custody of certain eligible foreign banks and
securities depositories. Selection of these foreign custodial institutions is
made by the Board upon consideration of a number of factors, including (but not
limited to) the reliability and financial stability of the institution; the
ability of the institution to perform capably custodial services for the Fund;
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the reputation of the institution in its national market; the political and
economic stability of the country in which the institution is located; and
possible risks of potential nationalization or expropriation of Fund assets. The
Custodian employs qualified foreign subcustodians to provide custody of the
Funds foreign assets in accordance with applicable regulations.
Each Fund invested in one or more Portfolios incurs its proportionate share of
the custodial fees of the Portfolio(s) in which it invests.
PORTFOLIO ACCOUNTING
FAcS, an affiliate of Forum, performs portfolio accounting services for each
Fund pursuant to a Fund Accounting Agreement with the Trust. The Fund Accounting
Agreement will continue in effect only if such continuance is specifically
approved at least annually by the Board or by a vote of the shareholders of the
Trust and in either case by a majority of the Trustees who are not parties to
the Fund Accounting Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on the Fund Accounting Agreement.
Under the Fund Accounting Agreement, FAcS prepares and maintains books and
records of each Fund on behalf of the Trust that are required to be maintained
under the 1940 Act, calculates the net asset value per share of each Fund (and
class thereof) and dividends and capital gain distributions and prepares
periodic reports to shareholders and the SEC. For its services, FAcS receives
from the Trust with respect to each Fund (other than a Fund investing in a Core
and Gateway Structure) a fee of $3,000 per month plus for each additional class
of the Fund above one $1,000 per month. In addition, FAcS is paid additional
surcharges for each of the following: (1) Funds with asset levels exceeding $100
million - $500/month, Funds with asset levels exceeding $250 million -
$1000/month, Funds with asset levels exceeding $500 million - $1,500/month,
Funds with asset levels exceeding $1,000 million - $2,000/month; (2) Funds
requiring international custody - $1,000/month; (3) Funds with more than 30
international positions - $1,000/month; (4) Tax free money market Funds -
$1,000/month; (5) Funds with more than 25% of net assets invested in asset
backed securities - $1,000/month, Funds with more than 50% of net assets
invested in asset backed securities - $2,000/month; (6) Funds with more than 100
security positions - $1,000/month; and (7) Funds with a monthly portfolio
turnover rate of 10% or greater - $1,000/month.
FAcS receives from the Trust with respect to each Fund investing in a Core and
Gateway Structure a standard gateway fee of $1,000 per month plus for each
additional class of the Fund above one - $1,000 per month. FAcS also receives a
fee of $2,000 per month for each Fund investing in a Core and Gateway Structure
pursuant to Section 12(d)(1)(E) of the 1940 Act that invests in more than one
security. In addition to the standard gateway fees, FAcS is entitled to receive
from the Trust with respect to each Fund investing in a Core and Gateway
Structure pursuant to Section 12(d)(1)(H) of the 1940 Act additional surcharges
as described above if the Fund invests in securities other than investment
companies (calculated as if the securities were the Fund's only assets).
Surcharges are determined based upon the total assets, security positions or
other factors as of the end of the prior month and on the portfolio turnover
rate for the prior month. The rates set forth above shall remain fixed through
December 31, 1999. On January 1, 2000, and on each successive January 1, the
rates may be adjusted automatically by Forum without action of the Trust to
reflect changes in the Consumer Price Index for the preceding calendar year, as
published by the U.S. Department of Labor, Bureau of Labor Statistics. Forum
shall notify the Trust each year of the new rates, if applicable
FAcS is required to use its best judgment and efforts in rendering fund
accounting services and is not be liable to the Trust for any action or inaction
in the absence of bad faith, willful misconduct or gross negligence. FAcS is not
responsible or liable for any failure or delay in performance of its fund
accounting obligations arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control and the Trust has agreed to
indemnify and hold harmless FAcS, its employees, agents, officers and directors
against and from any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or in any way related to FAcS's
actions taken or failures to act with respect to a Fund or based, if applicable,
upon information, instructions or requests with respect to a Fund given or made
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to FAcS by an officer of the Trust duly authorized. This indemnification does
not apply to FAcS's actions taken or failures to act in cases of FAcS's own bad
faith, willful misconduct or gross negligence.
FAcS performs similar services for the Portfolios and, in addition, acts as the
Portfolios' transfer agent.
Forum, FAdS, and FAcS are members of the Forum Financial Group of companies
which together provide a full range of services to the investment company and
financial services industry. As of October 1, 1999, Forum, FAdS and FAcS were
controlled by John Y. Keffer, President and Chairman of the Trust.
Table 5 in Appendix B shows the dollar amount of fees payable to FAcS for its
accounting services with respect to each Fund, the amount of fee that was waived
by FAcS, if any, and the actual fee received by FAcS. The data is for the past
three fiscal years or shorter period if the Fund has been in operation for a
shorter period.
EXPENSES
Each Fund bears all costs of its operations. The costs borne by the Funds
include a pro rata portion of the following: legal and accounting expenses;
Trustees' fees and expenses; insurance premiums, custodian and transfer agent
fees and expenses; brokerage fees and expenses; expenses of registering and
qualifying the Fund's shares for sale with the SEC and with various state
securities commissions; expenses of obtaining quotations on fund securities and
pricing of the Fund's shares; a portion of the expenses of maintaining the
Fund's legal existence and of shareholders' meetings; and expenses of
preparation and distribution to existing shareholders of reports, proxies and
prospectuses. Trust expenses directly attributed to the Fund are charged to the
Fund; other expenses are allocated proportionately among all the series of the
Trust in relation to the net assets of each series.
Each service provider to the Trust or their agents and affiliates also may act
in various capacities for, and receive compensation from, their customers who
are shareholders of a Fund. Under agreements with those customers, these
entities may elect to credit against the fees payable to them by their customers
or to rebate to customers all or a portion of any fee received from the Trust
with respect to assets of those customers invested in a Fund.
The expenses of each Fund that invest in one or more Portfolios include the
Fund's pro rata share of the expenses of the Portfolio or Portfolios in which
the Fund invests.
Subject to the obligations of Norwest to reimburse the Trust for its excess
expenses as described above, the Trust has, under its Investment Advisory
Agreements, confirmed its obligation to pay all its other expenses, including:
(1) interest charges, taxes, brokerage fees and commissions; (2) certain
insurance premiums; (3) fees, interest charges and expenses of the Trust's
custodian, transfer agent and dividend disbursing agent; (4) telecommunications
expenses; (5) auditing, legal and compliance expenses; (6) costs of the Trust's
formation and maintaining its existence; (7) costs of preparing and printing the
Trust's prospectuses, statements of additional information, account application
forms and shareholder reports and delivering them to existing and prospective
shareholders; (8) costs of maintaining books of original entry for portfolio and
fund accounting and other required books and accounts and of calculating the net
asset value of shares of the Trust; (9) costs of reproduction, stationery and
supplies; (10) compensation of the Trust's trustees, officers and employees and
costs of other personnel performing services for the Trust who are not officers
of Norwest, Forum or affiliated persons of Norwest or Forum; (11) costs of
corporate meetings; (12) registration fees and related expenses for registration
with the SEC and the securities regulatory authorities of other countries in
which the Trust's shares are sold; (13) state securities law registration fees
and related expenses; (14) fees and out-of-pocket expenses payable to Forum
Financial Services, Inc. under any distribution, management or similar
agreement; (15) and all other fees and expenses paid by the Trust pursuant to
any distribution or shareholder service plan adopted pursuant to Rule 12b-1
under the Act.
8. PORTFOLIO TRANSACTIONS
The following discussion of portfolio transactions, while referring to the
Funds, relates equally to the Portfolios.
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The Advisers place orders for the purchase and sale of assets they manage with
brokers and dealers selected by and in the discretion of the respective Adviser.
The Funds have no obligation to deal with any specific broker or dealer in the
execution of portfolio transactions. The Advisers seek "best execution" for all
portfolio transactions, but a Fund may pay higher than the lowest available
commission rates when its Adviser believes it is reasonable to do so in light of
the value of the brokerage and research services provided by the broker
effecting the transaction.
Commission rates for brokerage transactions are fixed on many foreign securities
exchanges, and this may cause higher brokerage expenses to accrue to a Fund that
invests in foreign securities than would be the case for comparable transactions
effected on U.S.
securities exchanges.
Purchases and sales of portfolio securities for the Money Market Funds and Fixed
Income Funds usually are principal transactions. Debt instruments are normally
purchased directly from the issuer or from an underwriter or market maker for
the securities. There usually are no brokerage commissions paid for such
purchases. The Equity Funds and the Balanced Funds generally will effect
purchases and sales of equity securities through brokers who charge commissions
except in the over-the-counter markets. Purchases of debt and equity securities
from underwriters of the securities include a disclosed fixed commission or
concession paid by the issuer to the underwriter, and purchases from dealers
serving as market makers include the spread between the bid and asked price. In
the case of debt securities and equity securities traded in the foreign and
domestic over-the-counter markets, there is generally no stated commission, but
the price usually includes an undisclosed commission or markup. Allocations of
transactions to brokers and dealers and the frequency of transactions are
determined by the Advisers in their best judgment and in a manner deemed to be
in the best interest of shareholders of each Fund rather than by any formula.
The primary consideration is prompt execution of orders in an effective manner
and at the most favorable price available to the Fund. In transactions on stock
exchanges in the United States, commissions are negotiated, whereas on foreign
stock exchanges commissions are generally fixed. Where transactions are executed
in the over-the-counter market, each Fund will seek to deal with the primary
market makers; but when necessary in order to obtain best execution, they will
utilize the services of others. In all cases the Funds will attempt to negotiate
best execution.
The Money Market Funds and Fixed Income Funds may effect purchases and sales
through brokers who charge commissions, although the Trust does not anticipate
that the Money Market Funds will do so. Table 6 in Appendix B shows the
aggregate brokerage commissions with respect to each Fund. The data presented is
for the past three fiscal years or a shorter period if the Fund has been in
operation for a shorter period, except as otherwise noted. Any material change
in the last two years in the amount of brokerage commissions paid by a fund was
due to an increase or decrease in the Fund's assets.
Subject to the general policies regarding allocation of portfolio brokerage as
set forth above, the Board and Core Trust Board have authorized the Advisers to
employ their respective affiliates to effect securities transactions of the
Funds or the Portfolios, provided certain other conditions are satisfied. No
Fund has an understanding or arrangement to direct any specific portion of its
brokerage to an affiliate of an Adviser, and will not direct brokerage to an
affiliate of an Adviser in recognition of research services. Payment of
brokerage commissions to an affiliate of an Adviser for effecting such
transactions is subject to Section 17(e) of the 1940 Act, which requires, among
other things, that commissions for transactions on securities exchanges paid by
a registered investment company to a broker which is an affiliated person of
such investment company, or an affiliated person of another person so
affiliated, not exceed the usual and customary brokers' commissions for such
transactions. It is the Fund's policy that commissions paid to Norwest
Investment Services, Inc. ("NISI") and other affiliates of an Adviser will, in
the judgment of the Adviser responsible for making portfolio decisions and
selecting brokers, be: (1) at least as favorable as commissions
contemporaneously charged by the affiliate on comparable transactions for its
most favored unaffiliated customers and (2) at least as favorable as those which
would be charged on comparable transactions by other qualified brokers having
comparable execution capability. The Board, including a majority of the
disinterested Trustees, has adopted procedures to ensure that commissions paid
to affiliates of an Adviser by the Funds satisfy the foregoing standards. The
Core Trust Board has adopted similar policies with respect to the Portfolio.
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During the last three fiscal years certain Funds paid brokerage commissions to
NISI, a wholly-owned broker-dealer subsidiary of the parent of Norwest, Wells
Fargo & Company. The following table indicates the Funds that paid commissions
to NISI, the aggregate amounts of commissions paid, the percentage of aggregate
brokerage commissions paid to NISI and the percentage of the aggregate dollar
amount of transactions involving payment of commissions that were effected
through NISI.
<TABLE>
<S> <C> <C> <C>
PERCENTAGE OF
COMMISSION
AGGREGATE PERCENTAGE TRANSACTIONS
COMMISSIONS OF COMMISSIONS EXECUTED
VALUGROWTH STOCK FUND PAID TO NISI PAID TO NISI THROUGH NISI
Year Ended May 31, 1999 N/A N/A N/A
Year Ended May 31, 1998 N/A N/A N/A
Year Ended May 31, 1997 $41,474 8.25% 8.05%
</TABLE>
The practice of placing orders with NISI is consistent with each Fund's
objective of obtaining best execution and is not dependent on the fact that NISI
is an affiliate of Norwest.
The Funds and the Portfolios may not always pay the lowest commission or spread
available. Rather, in determining the amount of commissions, including certain
dealer spreads, paid in connection with securities transactions, an Adviser
takes into account factors such as size of the order, difficulty of execution,
efficiency of the executing broker's facilities (including the services
described below) and any risk assumed by the executing broker. The Advisers may
also take into account payments made by brokers effecting transactions for a
Fund or Portfolio: (1) to the Fund or Portfolio or (2) to other persons on
behalf of the Fund or Portfolio for services provided to the Fund or Portfolio
for which it would be obligated to pay.
In addition, the Advisers may give consideration to research services furnished
by brokers to the Advisers for their use and may cause the Funds and Portfolios
to pay these brokers a higher amount of commission than may be charged by other
brokers. Such research and analysis is of the types described in Section
28(e)(3) of the Securities Exchange Act of 1934, as amended, and is designed to
augment the Adviser's own internal research and investment strategy
capabilities. Such research and analysis may be used by the Advisers in
connection with services to clients other than the Funds and Portfolios, and not
all such services may be used by the Adviser in connection with the Funds. An
Adviser's fees are not reduced by reason of the Adviser's receipt of the
research services.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to the obligation to seek the most
favorable price and execution available and such other policies as the Boards
may determine, an Adviser may consider sales of shares of the Fund as a factor
in the selection of broker-dealers to execute portfolio transactions for the
Fund.
Investment decisions for the Funds (and for the Portfolios) will be made
independently from those for any other account or investment company that is or
may in the future become managed by the Advisers or their affiliates. Investment
decisions are the product of many factors, including basic suitability for the
particular client involved. Thus, a particular security may be bought or sold
for certain clients even though it could have been bought or sold for other
clients at the same time. Likewise, a particular security may be bought for one
or more clients when one or more clients are selling the security. In some
instances, one client may sell a particular security to another client. It also
sometimes happens that two or more clients simultaneously purchase or sell the
same security, in which event each day's transactions in such security are,
insofar as is possible, averaged as to price and allocated between such clients
in a manner which, in the respective Adviser's opinion, is equitable to each and
in accordance with the amount being purchased or sold by each. There may be
circumstances when purchases or sales of a portfolio security for one client
could have an adverse effect on another client that has a position in that
security. In addition, when purchases or sales of the same security for a Fund
and other client accounts managed by the Advisers occur contemporaneously, the
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purchase or sale orders may be aggregated in order to obtain any price
advantages available to large denomination purchases or sales. The Advisers
monitor the creditworthiness of counterparties to the Funds' transactions and
intends to enter into a transaction only when it believes that the counterparty
presents minimal credit risks and the benefits from the transaction justify the
attendant risks.
During their last fiscal year, certain Funds acquired securities issued by their
"regular brokers and dealers" or the parents of those brokers and dealers.
Regular brokers and dealers means the 10 brokers or dealers that: (1) received
the greatest amount of brokerage commissions during the Fund's last fiscal year;
(2) engaged in the largest amount of principal transactions for portfolio
transactions of the Fund during the Fund's last fiscal year; or (3) sold the
largest amount of the Fund's shares during the Fund's last fiscal year.
Following is a list of the regular brokers and dealers of the Funds whose
securities (or the securities of the parent company) were acquired during the
past fiscal year and the aggregate value of the Funds' holdings of those
securities as of May 31, 1999.
REGULAR BROKER OR DEALER VALUE OF SECURITIES HELD
Goldman Sachs $2,963,430
Merrill Lynch & Co., Inc. $5,327,050
Lehman Brothers Holding, Inc. $3,864,840
PORTFOLIO TURNOVER
The frequency of portfolio transactions of a Fund (the portfolio turnover rate)
will vary from year to year depending on many factors. From time to time a Fund
may engage in active short-term trading to take advantage of price movements
affecting individual issues, groups of issues or markets. An annual portfolio
turnover rate of 100% would occur if all of the securities in a Fund were
replaced once in a period of one year. Higher portfolio turnover rates may
result in increased brokerage costs to a Fund or a Portfolio and a possible
increase in short-term capital gains or losses. In order to qualify as a
regulated investment company for Federal tax purposes for taxable years
beginning on or before August 5, 1997, less than 30% of the gross income of the
Fund in that year must be derived from the sale of securities held by the Fund
for less than three months. See "Taxation" below. The change in portfolio
turnover rate for Income Fund and Intermediate Government Income Fund from 1995
to 1996 was due in part to the change in portfolio managers. Other significant
changes in portfolio turnover rates was due to changing market conditions and
the effect of those conditions on the Funds' investment policies.
9. ADDITIONAL PURCHASE, REDEMPTION AND
EXCHANGE INFORMATION
GENERAL
Shares of all Funds are sold on a continuous basis by the distributor.
The per share net asset values of each class of shares of a Fund are expected to
be substantially the same. Under certain circumstances, however, the per share
net asset value of each class may vary. Due to the higher expenses of B Shares,
the net asset value of B Shares will generally be lower than the net asset value
of the other classes. The per share net asset value of each class of a Fund
eventually will tend to converge immediately after the payment of dividends,
which will differ by approximately the amount of the expense accrual
differential among the classes.
MONEY MARKET FUNDS
As described in the Prospectuses, under certain circumstances a Money Market
Fund may close early and advance time by which the Fund must receive a purchase
or redemption order and payments. In that case, if an investor placed an order
after the cut-off time the order would be processed on the next business day and
the investor's access to the fund would be temporarily limited.
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PURCHASES THROUGH FINANCIAL INSTITUTIONS
You may purchase and redeem shares through certain broker-dealers, banks and
other financial institutions. These financial institutions may charge their
customers a fee for their services and are responsible for promptly transmitting
purchase, redemption and other requests to the Funds.
If you purchase shares through a financial institution, you will be subject to
the financial institution's procedures, which may include charges, limitations,
investment minimums, cutoff times and restrictions in addition to, or different
from, those applicable when you invest in a Fund directly. When you purchase a
Fund's shares through a financial institution, you may or may not be the
shareholder of record and, subject to your institution's procedures, you may
have Fund shares transferred into your name. There is typically a three-day
settlement period for purchases and redemptions through broker-dealers. Certain
financial institutions may also enter purchase orders with payment to follow.
You may not be eligible for certain shareholder services when you purchase
shares through a financial institution. Contact your financial institution for
further information. If you hold shares through a financial institution, the
Funds may confirm purchases and redemptions to the financial institution, which
will provide you with confirmations and periodic statements. The Funds are not
responsible for the failure of any financial institution to carry out its
obligations.
SHAREHOLDER SERVICES
AUTOMATIC INVESTMENT PLAN. You may elect the Automatic Investment Plan if you
purchase A Shares, B Shares, C Shares, I Shares or Investor Shares. Under the
Automatic Investment Plan, you may authorize monthly amounts of $50 or more to
be withdrawn automatically from a designated bank account (other than a passbook
savings account) and sent to the Transfer Agent for investment in a Fund. Call
or write the Transfer Agent for an application. The Trust may modify or
terminate the Automatic Investment Plan if it is unable to settle any
transaction with your bank. If the Automatic Investment Plan is terminated
before your account totals $1,000, the Funds may redeem your account.
RETIREMENT ACCOUNTS. The Funds (except Municipal Money Market Fund and the
Tax-Free Fixed Income Funds) may be a suitable investment vehicle for part or
all of the assets held in Traditional or Roth individual retirement accounts
(collectively, "IRAs"). Call the Funds at 1-800-338-1348 or 1-612-667-8833 to
obtain an IRA account application. Generally, all contributions and investment
earnings in an IRA will be tax-deferred until withdrawn. If certain requirements
are met, investment earnings held in a Roth IRA will not be taxed even when
withdrawn. You may contribute up to $2,000 annually to an IRA. Only
contributions to Traditional IRAs are tax-deductible. However, that deduction
may be reduced if you or your spouse is an active participant in an
employer-sponsored retirement plan and you have adjusted gross income above
certain levels. Your ability to contribute to a Roth IRA also may be restricted
if you or, if you are married, you and your spouse has adjusted gross income
above certain levels.
Your employer may also contribute to your IRA as part of a Savings Incentive
Match Plan for Employees, or "SIMPLE plan," established after December 31, 1996.
Under a SIMPLE plan, you may contribute up to $6,000 annually to your IRA, and
your employer must generally match such contributions up to 3% of your annual
salary. Alternatively, your employer may elect to contribute to your IRA 2% of
the lesser of your earned income or $160,000.
This information on IRAs is based on regulations in effect as of January 1, 1999
and summarizes only some of the important federal tax considerations affecting
IRA contributions. These comments are not meant to be a substitute for tax
planning. Consult your tax advisors about your specific tax situation.
AUTOMATIC WITHDRAWAL PLAN. If you hold more than $1,000 of a Fund's A Shares, B
Shares, C Shares, I Shares or Investor Shares or $10,000 of a Fund's
Institutional Shares in an account, you may establish an "Automatic Withdrawal
Plan" to provide for the preauthorized payment from your account of $250 or more
on a monthly, quarterly, semi-annual or annual basis. The Transfer Agent will
redeem the number of shares necessary to provide the amount of the payment. Any
taxable gain or loss is recognized upon redemption of the shares. Call or write
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the Transfer Agent for an application. The Funds may suspend a withdrawal plan
without notice if the account contains insufficient funds to effect a withdrawal
or if the account balance is less than the required minimum amounts at any time.
CHECKWRITING. You may elect checkwriting privileges if you own shares of a Money
Market Fund. Call or write the Transfer Agent for an application. If you elect
checkwriting privileges, you will receive checks that may be made payable to any
person in any amount of $500.00 or more. When a check is presented for payment,
the Transfer Agent will redeem the number of shares necessary to cover the
amount of the check. You cannot write checks against shares for which
certificates have been issued. The Funds will not honor a check for an amount
greater than the value of the uncertificated shares held in your account. In
addition, you may not liquidate your entire account by means of a check. Normal
restrictions on your ability to redeem shares will apply to redemptions by
check. The Transfer Agent may also restrict your ability to use checks.
Checkwriting procedures may be changed, modified or terminated at any time upon
written notification.
REOPENING ACCOUNTS. You may reopen an account without filing a new account
application at any time within one year after your account is closed, provided
that the information on the account application on file with the Funds is still
applicable.
PURCHASES OF A SHARES
WAIVERS OF SALES CHARGES. The Trust does not assess sales charges on the
following types of purchases:
o purchases 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);
o purchases by any financial intermediary acting on behalf of its asset based
fee account customers;
o purchases by trustees and officers of the Trust; directors, officers and
full-time employees of the Trust's manager, of Norwest Corporation,
Stagecoach Funds, Inc., Wells Fargo Bank, Stephens, Inc. and Broker Dealers
acting as selling agents, or of any of their affiliates; the spouse of any
of the above, as well as the grandparents, parents, siblings, children,
grandchildren, aunts, uncles, nieces, nephews, fathers-in-law,
mothers-in-law, brothers-in-law and sisters-in-law of either the spouse or
the current or retired employee, director or officer, ; 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;
o purchases by any registered investment adviser with whom the distributor
has entered into a share purchase agreement and which is acting on behalf
of its fiduciary customer accounts;
o purchases of A Shares made pursuant to the Directed Dividend Option from
the proceeds of dividends and distributions of another fund of the Trust
that assesses a sales charge; or
o purchases of at least $50,000 through an individual retirement account in A
Shares of Diversified Equity Fund or Growth Equity Fund, when the
shareholder makes a non-binding commitment to subsequently enroll the
assets in the Norwest WealthBuilder IRA program, an asset allocation
program offered by Norwest Investment Services, Inc. ("NISI"). In
connection with purchases of A Shares of Diversified Equity Fund or Growth
Equity Fund with no sales charge, Forum makes payments to NISI of up to
1.00% of the value of the shares purchased.
If you purchase A Shares without paying a sales charge, you many only resell the
shares to the Fund and you must make the purchase with the intent of investing
in the Fund.
If you qualify for a reduced sales charge, you or your financial institution
must both notify the Transfer Agent when you purchase the shares that you intend
to qualify for the reduced sales charge and verify that you qualify. The Trust
may modify or terminate reduced sales charge privileges at any time.
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REINSTATEMENT PRIVILEGE. If you redeem a Fund's A Shares, you will not have to
pay a sales charge if you repurchase some or all of the shares you redeemed
within 60 days of the redemption.
INVESTORS IN STAGECOACH FUNDS. You will not have to pay a sales charge on a
purchase of A Shares if you have redeemed A Shares of a Stagecoach Fund (series
of Stagecoach Funds, Inc. or Stagecoach Trust), on which you paid a sales load,
and you use those redemption proceeds to purchase the Fund's shares.
SELF-DIRECTED 401(K) PROGRAMS. If you purchase less than $100,000 of a Fund's A
Shares through a self-directed 401(k) program or other qualified retirement plan
offered by Norwest, the Trust's manager or their affiliates, your purchase will
eligible for the reduced sales charge applicable to a single purchase of
$100,000.
RIGHT OF ACCUMULATION. If you purchase A Shares, you may qualify for a
cumulative quantity discount or right of accumulation ("ROA"). If you elect a
ROA, the applicable sales charge will be based on the total of your current
purchase and the net asset value (at the end of the previous Fund Business Day,
as defined in the Prospectus) of some or all of the A Shares you hold. For
example, if you own A Shares of Income Fund with a net asset value of $500,000
and purchase an additional $50,000 of the Fund's A Shares, the additional
purchase would be subject to a sales charge 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, if you have previously purchased A Shares of a Fund other than the
Fund you wish to purchase that is sold with a sales charge equal to or greater
than the sales charge imposed on the Fund's A Shares, you also may qualify for a
ROA and may aggregate existing investments in A Shares of all those funds with
your current purchase of the Fund's A Shares to determine the applicable sales
charge. In addition, if your spouse, direct ancestor or direct descendant holds
A Shares, those shareholdings also may be combined for purposes of the ROA.
With respect to purchases of A Shares of Large Company Growth Fund, until
February 28, 1999, a ROA will be calculated based on your total investment in
both the Norwest Advantage Funds and Stagecoach Funds, Inc. fund families.
STATEMENT OF INTENTION. You also may obtain a reduced sales charge by making
cumulative purchases under a Statement of Intention (an "SOI"). A SOI is a
written statement expressing your intent to invest $50,000 or more in a Fund's A
Shares within a period of 13 months. Under an SOI, you may make a series of
purchases of shares where each purchase will be at net asset value plus the
sales charge applicable at the time of the purchase to a single purchase of the
total dollar amount of shares you promised to purchase.
Complete the appropriate portion of the account application to select the SOI.
The SOI is not a binding obligation upon you to purchase the full amount
indicated. A Shares purchased with the first 5% of such amount will be held
subject to a registered pledge (while remaining registered in the name of the
investor) to secure payment of the higher sales charge applicable to the shares
actually purchased if the full amount indicated is not purchased, and such
pledged shares will be involuntarily redeemed to pay the additional sales
charge, if necessary. When the full amount indicated has been purchased, the
shares will be released from pledge.
CALCULATION OF OFFERING PRICE. Set forth below is an example of the method of
computing the offering price of the A Shares of the Funds that offer A Shares.
Other shares of the Trust are offered at their next determined net asset value.
The example assumes a purchase of A Shares of each Fund in an amount such that
the purchase would be subject to each Fund's maximum sales charges set forth in
the Prospectus at a price based on the net asset value per share of A Shares of
each Fund at May 31, 1999. As of October 1, 1999, the maximum sales charges were
5.75% for each Equity Fund and Growth Balanced Fund and 4.5% for each Fixed
Income Fund, except Stable Income Fund, for which it was 1.50%. Offering price
is determined as follows: Net asset value per share times the sum of one (1)
plus the sales charge expressed as a percentage (for example 5.75% would equal
0.0575).
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<TABLE>
<S> <C> <C>
Net Asset Offering
Value Per Share Price
Stable Income Fund $10.31 $10.72
Intermediate Government Income Fund $11.22 $11.67
Income Fund $ 9.79 $10.18
Total Return Bond Fund $ 9.63 $10.02
Tax-Free Income Fund $10.54 $10.96
Colorado Tax-Free Fund $10.69 $11.12
Minnesota Tax-Free Fund $11.05 $11.49
Income Equity Fund $41.19 $43.46
ValuGrowth Stock Fund $26.18 $27.62
Diversified Equity Fund $43.06 $45.43
Growth Equity Fund $35.73 $37.70
Small Company Stock Fund $12.00 $12.66
Small Cap Opportunities Fund $23.60 $24.90
International Fund $23.84 $25.15
</TABLE>
EXCHANGES
By making an exchange by telephone, the investor authorizes the Transfer Agent
to act on telephonic instructions believed by the Transfer Agent to be genuine
instructions from any person representing himself or herself to be the investor.
The records of the Transfer Agent of such instructions are binding. The exchange
procedures may be modified or terminated at any time upon appropriate notice to
shareholders. For Federal income tax purposes, exchanges are treated as sales on
which a purchaser will realize a capital gain or loss depending on whether the
value of the shares redeemed is more or less than the shareholder's basis in
such shares at the time of such transaction.
Shareholders of A Shares may purchase, with the proceeds from a redemption of
all or part of their shares, A Shares of the other Funds that offer A Shares or
Investor Shares of Ready Cash Investment Fund or Municipal Money Market Fund.
Shareholders of B Shares may purchase, with the proceeds from a redemption of
all or part of their shares, B Shares of the other Funds that offer B Shares or
Exchange Shares of Ready Cash Investment Fund. Shareholders of C Shares may
purchase, with the proceeds from a redemption of all or part of their shares, C
Shares of the other Funds. Shareholders of I Shares may purchase, with the
proceeds from a redemption of all or part of their shares, I Shares of the other
Funds, Public Entities Shares of Ready Cash Investment Fund, Institutional
Shares of Municipal Money Market Fund or Shares of U.S. Government Fund and
Treasury Fund.
Shareholders of Investor Shares of Ready Cash Investment Fund and Municipal
Money Market Fund may purchase, with the proceeds from a redemption of all or
part of their shares, Investor Shares of the other Fund or A Shares of the Funds
that offer A Shares. Shareholders of Exchange Shares of Ready Cash Investment
Fund may purchase, with the proceeds from a redemption of all or part of their
shares, B Shares of the Funds that offer B Shares.
Shareholders of Public Entities Shares of Ready Cash Investment Fund and
Institutional Shares of Municipal Money Market Fund and others who are eligible
to purchase I Shares may purchase, with the proceeds from a redemption of all or
part of their shares, Institutional Shares of these Funds, or I Shares of the
other Funds of the Trust.
Shareholders of Institutional Shares of Municipal Money Market Fund who are not
eligible to purchase I Shares may purchase, with the proceeds from a redemption
of all or part of their shares, shares of Cash Investment Fund, U.S. Government
Fund and Treasury Fund. Similarly, shareholders of Cash Investment Fund, U.S.
Government Fund and Treasury Fund who are not eligible to purchase I Shares may
purchase, with the proceeds from a redemption of all or part of their shares,
shares of the other two Funds or Institutional Shares of Municipal Money Market
Fund.
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Shareholders of A Shares or Investor Shares making an exchange will be subject
to the applicable sales charge of any A Shares acquired in the exchange;
provided, that the sales charge charged with respect to the acquired shares will
be assessed at a rate that is equal to the excess (if any) of the rate of the
sales charge that would be applicable to the acquired shares in the absence of
an exchange over the rate of the sales charge previously paid on the exchanged
shares. For purposes of the preceding sentence, A Shares acquired through the
reinvestment of dividends or distributions are deemed to have been acquired with
a sales charge rate equal to that paid on the shares on which the dividend or
distribution was paid.
In addition, A Shares and Investor Shares acquired by a previous exchange
transaction involving shares on which a sales charge has directly or indirectly
been paid (e.g., shares purchased with a sales charge or issued in connection
with an exchange transaction involving shares that had been purchased with a
sales charge), as well as additional shares acquired through reinvestment of
dividends or distributions on such shares will be treated as if they had been
acquired subject to that sales charge.
Exchange Shares may only be acquired in exchange for B Shares of a Fund. B
Shares ("original B Shares") may be exchanged for Exchange Shares without the
payment of any contingent deferred sales charge; however, B Shares or Exchange
Shares acquired as a result of an exchange and subsequently redeemed will
nonetheless be subject to the contingent deferred sales charge applicable to the
original B Shares as if those shares were being redeemed at that time. Exchange
Shares may be exchanged without the payment of any contingent deferred sales
charge; however, B Shares acquired as a result of such exchange and subsequently
redeemed will nonetheless be subject to the contingent deferred sales charge
applicable to the original B Shares as if those shares were being redeemed at
that time.
REDEMPTIONS
In addition to the situations described in the Prospectus with respect to the
redemptions of shares, the Trust may redeem shares involuntarily to reimburse a
Fund for any loss sustained by reason of the failure of a shareholder to make
full payment for shares purchased by the shareholder or to collect any charge
relating to transactions effected for the benefit of a shareholder which is
applicable to a Fund's shares as provided in the Prospectus from time to time.
Proceeds of redemptions normally are paid in cash. However, payments may be made
wholly or partially in portfolio securities if the Board determines that payment
in cash would be detrimental to the best interests of the Fund. If payment for
shares redeemed is made wholly or partially in portfolio securities, brokerage
costs may be incurred by the shareholder in converting the securities to cash.
The Trust has filed a formal election with the SEC pursuant to which a Fund will
only effect a redemption in portfolio securities if the particular shareholder
is redeeming more than $250,000 or 1% of the Fund's total net assets, whichever
is less, during any 90-day period.
REDEMPTION CHARGE (A SHARES)
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 an SOI 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 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 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.
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STABLE INCOME FUND
<TABLE>
<S> <C> <C>
AMOUNT OF PURCHASE PERIOD SHARES HELD CHARGE
$1,000,000 to $4,999,999 Less than one year 0.50%
One to two years 0.25%
Over $5,000,000 Less than one year 0.25%
INTERMEDIATE GOVERNMENT INCOME FUND,
INCOME FUND, TOTAL RETURN BOND FUND AND THE
TAX-FREE FIXED INCOME FUNDS
AMOUNT OF PURCHASE PERIOD SHARES HELD CHARGE
$1,000,000 to $2,499,999 Less than one year 0.75%
One to two years 0.50%
$2,500,000 to $4,999,999 Less than one year 0.50%
Over $5,000,000 Less than one year 0.25%
EQUITY FUNDS
AMOUNT OF PURCHASE PERIOD SHARES HELD CHARGE
$1,000,000 to $2,499,999 Less than one year 1.00%
One to two years 0.75%
$2,500,000 to $4,999,999 Less than one year 0.50%
Over $5,000,000 Less than one year 0.25%
</TABLE>
The charge on shares purchased through an exchange from another Fund is based
upon the original purchase date and price of the other Fund's shares. As
discussed below, there may be charges in connection with the SOI and the ROA in
certain cases.
STATEMENT OF INTENTION. There may be charges on redemptions of A Shares
purchased without an initial sales charge pursuant to an SOI that are redeemed
within the first two years after purchase. If a shareholder purchases $1,000,000
or more within a 13 month period under an SOI, no initial sales charge will
apply with respect to the entire amount purchased. However, a charge will apply
with respect to the entire amount purchased if the shareholder fails to purchase
$1,000,000 or more of A Shares under the SOI. The holding period for each A
Share shall be determined from the date the share was purchased. If the
shareholder redeems A Shares during the period that the SOI is in effect, a
charge will be assessed at the time the shareholder has purchased $1,000,000 or
more worth of A Shares pursuant to the SOI at the rate applicable in the case of
a single purchase of the minimum amount specified in the SOI. If the shareholder
purchases less than the amount specified under the SOI, an additional contingent
deferred sales charge may be assessed in respect of A Shares previously redeemed
based on the amount actually purchased pursuant to the SOI.
RIGHT OF ACCUMULATION. The charge will be a charge assessed on A Shares
purchased without an initial sales charge pursuant to the ROA that are redeemed
within the first two years after purchase. No initial sales charge will apply to
A Shares purchased if the value of those shares on the date of purchase plus the
net asset value of all A Shares held by the shareholder (as of the close of
business on the previous Fund Business Day) exceed $1,000,000. In that case, the
charge will apply to redemptions of shares within the first two years after
purchase. For example, if a shareholder has made prior purchases of A Shares
which now have a value of $900,000, the purchase of $150,000 of A Shares will
not be subject to an initial sales charge but will be subject to the charge upon
redemption described above. The $900,000 of A Shares would not be subject to the
charge.
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REINSTATEMENT PRIVILEGE. A Shares purchased by a shareholder within 60 days
following the redemption by the shareholder of A Shares in the same Fund with a
value at least equal to the A Shares being purchased will not be subject to a
contingent deferred sales charge; provided, however, that this exemption is not
applicable to more than two purchases within a 12-month period.
REDEMPTION CHARGE AND CONTINGENT DEFERRED SALES CHARGE (A SHARES, B SHARES AND C
SHARES)
With respect to A Shares, B Shares and C Shares of the Funds, certain
redemptions are not subject to any redemption or contingent deferred sales
charge. No such 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. For these purposes, the term
disability shall have the meaning ascribed thereto in Section 72(m)(7) of the
Code. Under that provision, a person is considered disabled if the person is
unable to engage in any substantial activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or to be of long-continued and indefinite duration. Appropriate
documentation satisfactory to the Fund is required to substantiate any
shareholder death or disability.
CONVERSION OF B SHARES AND EXCHANGE SHARES
The conversion of Exchange Shares to Investor Shares and B Shares to A Shares is
subject to the continuing availability of an opinion of counsel to the effect
that: (1) the assessment of the distribution services fee with respect to the
Exchange Shares and B Shares does not result in the Funds dividends or
distributions constituting "preferential dividends" under the Code and (2) the
conversion of Exchange Shares and B Shares does not constitute a taxable event
under Federal income tax law. The conversion of Exchange Shares to Investor
Shares and B Shares to A Shares may be suspended if such an opinion is no longer
available at the time the conversion is to occur. In that event, no further
conversions would occur, and shares might continue to be subject to a
distribution services fee for an indefinite period, which may extend beyond the
specified number of years for conversion of the original B Shares.
10. TAXATION
Each Fund intends for each taxable year to qualify for tax treatment as a
"regulated investment company" under the Code. Such qualification does not, of
course, involve governmental supervision of management or investment practices
or policies. Investors should consult their own counsel for a complete
understanding of the requirements each Fund must meet to qualify for such
treatment, and of the application of state and local tax laws to his or her
particular situation.
Since each Money Market Fund and Fixed Income Fund expects to derive
substantially all of its gross income (exclusive of capital gains) from sources
other than dividends, it is expected that none of such Funds' dividends or
distributions will qualify for the dividends-received deduction for
corporations.
Certain listed options, regulated futures contracts and forward currency
contracts are considered "section 1256 contracts" for Federal income tax
purposes. Section 1256 contracts held by a Fund or Portfolio at the end of each
taxable year will be "marked to market" and treated for Federal income tax
purposes as though sold for fair market value on the last business day of such
taxable year. Gain or loss realized by a Fund or Portfolio on section 1256
contracts generally will be considered 60% long-term and 40% short-term capital
gain or loss. Each Fund or Portfolio can elect to exempt its section 1256
contracts which are part of a "mixed straddle" (as described below) from the
application of section 1256.
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With respect to over-the-counter put and call options, gain or loss realized by
a Fund or Portfolio upon the lapse or sale of such options held by such Fund or
Portfolio will be either long-term or short-term capital gain or loss depending
upon the Fund's (or Portfolio's) holding period with respect to such option.
However, gain or loss realized upon the lapse or closing out of such options
that are written by a Fund or Portfolio will be treated as short-term capital
gain or loss. In general, if a Fund or Portfolio exercises an option, or an
option that a Fund or Portfolio has written is exercised, gain or loss on the
option will not be separately recognized but the premium received or paid will
be included in the calculation of gain or loss upon disposition of the property
underlying the option.
Any option, futures contract, or other position entered into or held by a Fund
in conjunction with any other position held by such Fund or Portfolio may
constitute a "straddle" for Federal income tax purposes. A straddle of which at
least one, but not all, the positions are section 1256 contracts may constitute
a "mixed straddle". In general, straddles are subject to certain rules that may
affect the character and timing of a Fund's (or Portfolio's) gains and losses
with respect to straddle positions by requiring, among other things, that: (1)
loss realized on disposition of one position of a straddle not be recognized to
the extent that a Fund has unrealized gains with respect to the other position
in such straddle; (2) a Fund's (or Portfolio's) holding period in straddle
positions be suspended while the straddle exists (possibly resulting in gain
being treated as short-term capital gain rather than long-term capital gain);
(3) losses recognized with respect to certain straddle positions which are part
of a mixed straddle and which are non-section 1256 positions be treated as 60%
long-term and 40% short-term capital loss; (4) losses recognized with respect to
certain straddle positions which would otherwise constitute short-term capital
losses be treated as long-term capital losses; and (5) the deduction of interest
and carrying charges attributable to certain straddle positions may be deferred.
Various elections are available to a Fund or Portfolio which may mitigate the
effects of the straddle rules, particularly with respect to mixed straddles. In
general, the straddle rules described above do not apply to any straddles held
by a Fund or Portfolio all of the offsetting positions of which consist of
section 1256 contracts.
For federal income tax purposes, gains and losses attributable to fluctuations
in exchange rates which occur between the time a Fund accrues interest or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities are treated as ordinary income or ordinary loss. Similarly, gains or
losses from the disposition of foreign currencies, from the disposition of debt
securities denominated in a foreign currency, or from the disposition of a
forward contract denominated in a foreign currency which are attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the asset and the date of disposition also are treated as
ordinary gain or loss.
A Fund's (or Portfolio's) investments in zero coupon securities will be subject
to special provisions of the Code which may cause the Fund to recognize income
without receiving cash necessary to pay dividends or make distributions in
amounts necessary to satisfy the distribution requirements for avoiding federal
income and excise taxes. In order to satisfy those distribution requirements the
Fund or Portfolio may be forced to sell other portfolio securities.
If International Fund is eligible to do so, the Fund intends to file an election
with the Internal Revenue Service to pass through to its shareholders its share
of the foreign taxes paid by the Fund. Pursuant to this election, a shareholder
will be required to: (1) include in gross income rata share of foreign taxes
paid by the Fund; (2) treat his pro rata share of such foreign taxes as having
been paid by him; and (3) either deduct such pro rata share of foreign taxes in
computing his taxable income or treat such foreign taxes as a credit against
federal income taxes. No deduction for foreign taxes may be claimed by an
individual shareholder who does not itemize deductions. In addition, certain
shareholders may be subject to rules which limit or reduce their ability to
fully deduct, or claim a credit for, their pro rata share of the foreign taxes
paid by the Fund. Under recently enacted legislation, a shareholder's foreign
tax credit with respect to a dividend received from the Fund will be disallowed
unless the shareholder holds shares in the Fund at least 16 days during the
30-day period beginning 15 days before the date on which the shareholder becomes
entitled to receive the dividend.
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11. ADDITIONAL INFORMATION ABOUT THE TRUST AND
THE SHAREHOLDERS OF THE FUNDS
DETERMINATION OF NET ASSET VALUE - MONEY MARKET FUNDS
Pursuant to the rules of the SEC, the Board has established procedures to
stabilize each Money Market Funds' net asset value at $1.00 per share. These
procedures include a review of the extent of any deviation of net asset value
per share as a result of fluctuating interest rates, based on available market
rates, from the Fund's $1.00 amortized cost price per share. Should that
deviation exceed 1/2 of 1%, the Board will consider whether any action should be
initiated to eliminate or reduce material dilution or other unfair results to
shareholders. Such action may include redemption of shares in kind, selling
portfolio securities prior to maturity, reducing or withholding dividends and
utilizing a net asset value per share as determined by using available market
quotations.
COUNSEL AND AUDITORS
Legal matters in connection with the issuance of shares of beneficial interest
of the Trust are passed upon by the law firm of Seward & Kissel LLP,1200 G
Street, NW, Washington DC 20005.
____________,LLP, 99 High Street, Boston, MA 02110, independent auditors, served
as the independent auditors for the Trust for the fiscal years ended May 31,
1994 and thereafter. For the prior fiscal periods another audit firm acted as
independent auditors of the Trust's predecessor corporation.
GENERAL INFORMATION
The Trust is divided into thirty nine separate series representing shares of the
Funds. The Trust received an order from the SEC permitting the issuance and sale
of separate classes of shares representing interests in each of the Trust's
existing funds; however, the Trust currently issues and operates the various
Funds, separate classes of shares under the provisions of 1940 Act.
The Board has determined that currently no conflict of interest exists between
or among each Fund's classes of shares. On an ongoing basis, the Board, pursuant
to its fiduciary duties under the 1940 Act and state law, will seek to ensure
that no such conflict arises.
The Trust's shareholders are not personally liable for the obligations of the
Trust under Delaware law. The Delaware Business Trust Act (the "Delaware Act")
provides that a shareholder of a Delaware business trust shall be entitled to
the same limitation of liability extended to shareholders of private
corporations for profit. However, no similar statutory or other authority
limiting business trust shareholder liability exists in many other states. As a
result, to the extent that the Trust or a shareholder is subject to the
jurisdiction of courts in those states, the courts may not apply Delaware law,
and may thereby subject the Trust shareholders to liability. To guard against
this risk, the Trust Instrument of the Trust disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation and instrument entered into by the Trust or
its Trustees, and provides for indemnification out of Trust property of any
shareholder held personally liable for the obligations of the Trust. Thus, the
risk of a shareholder incurring financial loss beyond his investment because of
shareholder liability is limited to circumstances in which: (1) a court refuses
to apply Delaware law; (2) no contractual limitation of liability is in effect;
and (3) the Trust itself is unable to meet its obligations. In light of Delaware
law, the nature of the Trust's business, and the nature of its assets, the Board
believes that the risk of personal liability to a Trust shareholder is extremely
remote.
In order to adopt the name Norwest Funds, the Trust agreed in the investment
advisory agreement with Norwest that if Norwest ceases to act as Adviser to the
Trust or any Fund whose name includes the word "Norwest," or if Norwest requests
in writing, the Trust shall take prompt action to change the name of the Trust
and any such Fund to a name that does not include the word "Norwest." Norwest
may from time to time make available without charge to the Trust for the Trust's
use any marks or symbols owned by Norwest, including marks or symbols containing
the word "Norwest" or any variation thereof, as Norwest deems appropriate. Upon
Norwest's request in writing, the Trust shall cease to use any such mark or
symbol at any time. The Trust has acknowledged that any rights in or to the word
"Norwest" and any such marks or symbols which exist or may exist, and under any
and all circumstances, shall continue to be, the sole property of Norwest.
Norwest may permit other parties, including other investment companies, to use
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the word "Norwest" in their names without the consent of the Trust. The Trust
shall not use the word "Norwest" in conducting any business other than that of
an investment company registered under the Act without the permission of
Norwest.
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 Exchange Shares);
the costs of doing so will be borne by the Trust.
Each share of each series of the Trust and each class of shares has equal
dividend, distribution, liquidation and voting rights, and fractional shares
have those rights proportionately, except that expenses related to the
distribution of the shares of each class (and certain other expenses such as
transfer agency and administration expenses) are borne solely by those shares
and each class votes separately with respect to the provisions of any Rule 12b-1
plan which pertains to the class and other matters for which separate class
voting is appropriate under applicable law. Generally, shares will be voted in
the aggregate without reference to a particular series or class, except if the
matter affects only one series or class or voting by series or class is required
by law, in which case shares will be voted separately by series or class, as
appropriate. Delaware law does not require the Trust to hold annual meetings of
shareholders, and it is anticipated that shareholder meetings will be held only
when specifically required by federal or state law. Shareholders (and Trustees)
have available certain procedures for the removal of Trustees. There are no
conversion or preemptive rights in connection with shares of the Trust. All
shares, when issued in accordance with the terms of the offering, will be fully
paid and nonassessable. Shares are redeemable at net asset value, at the option
of the shareholders, subject to any contingent deferred sales charge that may
apply. A shareholder in a series is entitled to the shareholder's pro rata share
of all dividends and distributions arising from that series' assets and, upon
redeeming shares, will receive the portion of the series' net assets represented
by the redeemed shares.
A Portfolio normally will not hold meetings of investors except as required by
the 1940 Act. Each investor in a Portfolio will be entitled to vote in
proportion to its relative beneficial interest in the Portfolio. When required
by the 1940 Act and other applicable law, a Fund investing in a Portfolio will
solicit proxies from its shareholders and will vote its interest in the
Portfolio in proportion to the votes cast by its shareholders.
From time to time, certain shareholders may own a large percentage of the shares
of the Fund and, accordingly, may be able to greatly affect (if not determine)
the outcome of a shareholder vote.
CORE AND GATEWAY STRUCTURE
Certain Funds seek to achieve their investment objectives by investing all of
their investable assets in Portfolios. Accordingly, the Portfolios directly
acquires portfolio securities and the Funds acquire an indirect interest in
those securities. The Portfolios are separate series of Core Trust and Schroder
Core, business trusts organized under the laws of the State of Delaware in 1994.
The assets of each Portfolio belong only to, and the liabilities of each
Portfolio are borne solely by, that Portfolio and no other series of Core Trust
or Schroder Core.
THE PORTFOLIOS. The Funds' investments in the Portfolios are in the form of
non-transferable beneficial interests. All investors in a Portfolio will invest
on the same terms and conditions and will pay a proportionate share of the
Portfolio's expenses.
Portfolios do not sell its shares directly to members of the general public.
Other investors in Portfolios, such as other investment companies, that might
sell their shares to the public are not be required to sell their shares at the
same public offering price as the Funds, and could have different advisory and
other fees and expenses than the Funds. Therefore, Fund shareholders may have
different returns than shareholders in other investment companies that invest in
the Portfolios. Information regarding any such funds is available by calling
Forum at (207) 879-0001.
CERTAIN RISKS OF INVESTING IN PORTFOLIOS. The Funds' investment in the
Portfolios may be affected by the actions of other large investors in the
Portfolios. For example, if a Portfolio had a large investor other than a Fund
that redeemed its interest, the Portfolio's remaining investors (including the
Fund) might, as a result, experience higher pro rata operating expenses, thereby
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producing lower returns. As there may be other investors in a Portfolio, there
can be no assurance that any issue that receives a majority of the votes cast by
a Fund's shareholders will receive a majority of votes cast by all investors in
the Portfolio; indeed, other investors holding a majority interest in a
Portfolio could have voting control of the Portfolio.
A Fund may withdraw its entire investment from a Portfolio at any time, if the
Board determines that it is in the best interests of the Fund and its
shareholders to do so. A Fund might withdraw, for example, if there were other
investors in the Portfolio with power to, and who did by a vote of all investors
(including the Fund), change the investment objective or policies of the
Portfolio in a manner not acceptable to the Board. A withdrawal could result in
a distribution in kind of portfolio securities (as opposed to a cash
distribution) by the Portfolio. That distribution could result in a less
diversified portfolio of investments for the Fund and could affect adversely the
liquidity of the Fund's portfolio. If the Fund decided to convert those
securities to cash, it would incur brokerage fees or other transaction costs. If
the Fund withdrew its investment from the Portfolio, the Board would consider
what action might be taken, including the management of the Fund's assets
directly by the Adviser or the investment of the Fund's assets in another pooled
investment entity. The inability of the Fund to find a suitable replacement
investment, in the event the Board decided not to permit the Adviser to manage
the Fund's assets directly, could have a significant impact on shareholders of
the Fund.
BANKING LAW MATTERS
Federal banking rules generally permit a bank or bank affiliate to act as
investment adviser, transfer agent, and custodian to an investment company and
to purchase shares of the investment company as agent for and upon the order of
a customer and, in connection therewith, to retain a sales charge or similar
payment. Forum believes that Norwest and any bank or other bank affiliate that
may also perform transfer agency 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.
SHAREHOLDINGS
Table 7 to Appendix B lists the persons who owned of record 5% or more of the
outstanding shares of a class of shares of a Fund as of
September 1, 1999.
FINANCIAL STATEMENTS
The financial statements of each Fund for the fiscal year ended May 31, 1999
(which include statements of assets and liabilities, statements of operations,
statements of changes in net assets, notes to financial statements, financial
highlights and portfolios of investments) are included in the Annual Report to
Shareholders of the Trust delivered along with this SAI and are incorporated
herein by reference.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered hereby, certain portions of which have been
omitted pursuant to the rules and regulations of the SEC. The registration
statement, including the exhibits filed therewith, may be examined at the
offices of the SEC in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other documents filed as
exhibits to the registration statement.
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APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
MUNICIPAL AND CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Moody's rates municipal and corporate bond issues, including convertible issues,
as follows:
Bonds which are rated Aaa are judged by Moody's to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Bonds which are rated Baa are considered as medium-grade obligations, (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate, and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Note: Those bonds in the Aa, A, Baa, Ba or B groups which Moody's ranks in the
higher end of its generic rating category are designated by the symbols Aa1, A1,
Baa1, Ba1 and B1.
A-1
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STANDARD & POOR'S ("S&P")
S&P rates corporate bond issues, including convertible debt issues, as follows:
Bonds rated AAA have the highest rating assigned by S&P. The capacity to meet
the financial commitment on the obligation is extremely strong.
Bonds rated AA have a very strong capacity to meet the financial commitment on
the obligation and differ from the highest-rated issues only in small degree.
Bonds rated A have a strong capacity to meet the financial commitment on the
obligation, although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations rated in
higher-rated categories.
Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to meet the financial commitment on the obligation than in
higher-rated categories.
Bonds rated BB, B, CCC, CC and C are regarded, as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions. Bonds rated BB have less vulnerability to
nonpayment than other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet the financial commitment on the
obligation.
Bonds rated B are more vulnerable to nonpayment then bonds rated BB, but
currently have the capacity to meet the financial commitment on the obligation.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to meet the financial commitment on the obligation.
Bonds rated CCC are currently vulnerable to nonpayment, and are dependent upon
favorable business, financial, and economic conditions to meet the financial
commitment on the obligation. In the event of adverse business, financial, or
economic conditions, they are not likely to have the capacity to meet the
financial commitment on the obligation.
Bonds rated CC are currently highly vulnerable to nonpayment.
The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action taken, but payments are being continued.
Bonds are rated D when the issue is in payment default. The D rating category is
used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will made during such grace period. The D rating will also be used upon the
filing of the bankruptcy petition or the taking of a similar action if payments
on the obligation are jeopardized.
Note: The ratings from AA to CCC may be modified by the addition of a plus (+)
or minus (-) sign to show the relative standing within the major rating
categories.
A-2
<PAGE>
FITCH INVESTORS SERVICE, INC. ("FITCH")
Fitch rates corporate bond issues, including convertible debt issues, as
follows:
AAA Bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and/or
dividends and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA Bonds are considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and/or dividends and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rate F-1+.
A Bonds are considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and/or dividends and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB Bonds are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest or dividends and repay principal
is considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds
and, therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB Bonds are considered speculative. The obligor's ability to pay interest or
dividends and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements or paying dividends, the probability
of continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics that if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA, DDD, DD or D categories.
A-3
<PAGE>
PREFERRED STOCK
MOODY'S
Moody's rates preferred stock as follows:
An issue rated aaa is considered to be a top-quality preferred stock. This
rating indicates good asset protection and the least risk of dividend impairment
within the universe of preferred stock.
An issue rated aa is considered a high-grade preferred stock. This rating
indicates that there is a reasonable assurance the earnings and asset protection
will remain relatively well-maintained in the foreseeable future.
An issue rated a is considered to be an upper-medium grade preferred stock.
While risks are judged to be somewhat greater than in the aaa and aa
classification, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.
An issue rated baa is considered to be a medium-grade preferred stock, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
An issue rated ba is considered to have speculative elements and its future
cannot be considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.
An issue which is rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small.
An issue which is rated caa is likely to be in arrears on dividend payments.
This rating designation does not purport to indicate the future status of
payments.
An issue which is rated ca is speculative in a high degree and is likely to be
in arrears on dividends with little likelihood of eventual payment.
An issue which is rated c can be regarded as having extremely poor prospects of
ever attaining any real investment standing. This is the lowest rated class of
preferred or preference stock.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issuer ranks in the lower end of its
generic rating category.
S&P
S&P rates preferred stock as follows:
AAA is the highest rating that is assigned by S&P to a preferred stock issue and
indicates an extremely strong capacity to pay the preferred stock obligations.
A preferred stock issue rated AA also qualifies as a high-quality, fixed income
security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated AAA.
An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
An issue rated BBB is regarded as backed by an adequate capacity to pay the
preferred stock obligations. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
A-4
<PAGE>
likely to lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the A category.
Preferred stock rated BB, B, and CCC are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay preferred stock
obligations. BB indicates the lowest degree of speculation and CCC the highest
degree of speculation. While such issues will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
The rating CC is reserved for a preferred stock issue in arrears on dividends or
sinking fund payments but that is currently paying.
A preferred stock rated C is a non-paying issue.
A preferred stock rated D is a non-paying issue with the issuer in default on
debt instruments.
To provide more detailed indications of preferred stock quality, the ratings
from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign
to show relative standing within the major rating categories.
FITCH
Fitch utilizes the same ratings criteria in rating preferred stock as it does in
rating corporate bond issues, as described earlier in this Appendix.
A-5
<PAGE>
SHORT TERM MUNICIPAL LOANS
MOODY'S. Moody's highest rating for short-term municipal loans is MIG 1/VMIG 1.
A rating of MIG 1/VMIG 1 denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing. Loans bearing the MIG 2/VMIG 2
designation are of high quality. Margins of protection are ample although not so
large as in the MIG 1/VMIG 1 group. A rating of MIG 3/VMIG 3 denotes favorable
quality. All security elements are accounted for but there is lacking the
undeniable strength of the preceding grades. Liquidity and cash flow protection
may be narrow and market access for refinancing is likely to be less well
established. A rating of MIG 4/VMIG 4 denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.
S&P. S&P's highest rating for short-term municipal loans is SP-1. S&P states
that short-term municipal securities bearing the SP-1 designation have very
strong or strong capacity to pay principal and interest. Those issues rated SP-1
which are determined to possess overwhelming safety characteristics will be
given a plus (+) designation. Issues rated SP-2 have satisfactory capacity to
pay principal and interest. Issues rated SP-3 have speculative capacity to pay
principal and interest.
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
Short-term issues rated F-1+ are regarded as having the strongest degree of
assurance for timely payment. Issues assigned a rating of F-1 reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
Issues assigned a rating of F-2 have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for issues assigned
F-1+ or F-1.
SHORT TERM DEBT (INCLUDING COMMERCIAL PAPER)
MOODY'S
Moody's two highest ratings for short-term debt, including commercial paper, are
Prime-1 and Prime-2. Both are judged investment grade, to indicate the relative
repayment capacity of rated issuers.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be evidenced by
the following characteristics: Leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1 but to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions.
Ample alternate liquidity is maintained.
S&P
A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market. An A-1
designation indicates the highest category and that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
A-6
<PAGE>
strong safety characteristics are denoted with a plus (+) sign designation. The
capacity for timely payment on issues with an A-2 designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1. Issues carrying an A-3 designation have an adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
FITCH
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+. Exceptionally strong credit quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1. Very strong credit quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2. Good credit quality. Issues assigned this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as for
issues assigned F-1+ or F-1 rating.
F-3. Fair credit quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate; however,
near-term adverse changes could cause these securities to be rated below
investment grade.
F-5. Weak credit quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are vulnerable
to near-term adverse changes in financial and economic conditions.
D. Default. Issues assigned this rating are in actual or imminent payment
default.
LOC. The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
A-7
<PAGE>
APPENDIX B - MISCELLANEOUS TABLES
TABLE 1 - INVESTMENT ADVISORY FEES
The following Table shows the dollar amount of fees payable under the Investment
Advisory Agreements between Norwest and the Trust with respect to each Fund, the
amount of fee that was waived by Norwest, if any, and the actual fee received by
Norwest. That table also shows the dollar amount of fees payable under the
investment advisory agreements between Schroder and Core Trust with respect to
each applicable portfolio the amount of fee that was waived by Schroder, if any,
and the actual fee received by Schroder. The data is for the past three fiscal
years or shorter period if the Fund/Portfolio has been in operation for a
shorter period.
<TABLE>
<S> <C> <C> <C>
Advisory Fee Advisory Fee Advisory Fee
Payable Waived Retained
Cash Investment Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 8,604,888 640,532 7,964,356
Year Ended May 31, 1997 2,805,919 0 2,805,919
Ready Cash Investment Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 3,344,445 0 3,344,445
Year Ended May 31, 1997 6,267,045 50,148 6,216,897
U.S. Government Fund
Year Ended May 31, 1999 3,827,097 0 3,827,097
Year Ended May 31, 1998 3,114,327 0 3,114,327
Year Ended May 31, 1997 2,538,240 0 2,538,240
Treasury Fund
Year Ended May 31, 1999 2,328,016 0 2,328,016
Year Ended May 31, 1998 1,836,567 0 1,836,567
Year Ended May 31, 1997 1,548,275 0 1,548,275
Municipal Money Market Fund
Year Ended May 31, 1999 3,911,866 0 3,911,866
Year Ended May 31, 1998 2,961,387 165,379 2,796,008
Year Ended May 31, 1997 2,394,475 369,405 2,025,070
Stable Income Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 406,937 0 406,937
Year Ended May 31, 1997 334,768 0 334,768
B-1
<PAGE>
Advisory Fee Advisory Fee Advisory Fee
Payable Waived Retained
Limited Term Government Income Fund
Year Ended May 31, 1999 242,027 45,680 196,347
Year Ended May 31, 1998 141,185 119,793 21,392
Intermediate Government Income Fund
Year Ended May 31, 1999 1,470,878 0 1,470,878
Year Ended May 31, 1998 1,315,676 0 1,315,676
Year Ended May 31, 1997 1,355,907 0 1,355,907
Diversified Bond Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 928,687 376,973 551,714
Year Ended May 31, 1997 598,019 0 598,019
Income Fund
Year Ended May 31, 1999 1,735,605 0 1,735,605
Year Ended May 31, 1998 1,404,711 90,387 1,314,324
Year Ended May 31, 1997 1,385,988 277,198 1,108,790
Total Return Bond Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 524,944 0 524,944
Year Ended May 31, 1997 651,181 357,998 293,183
Limited Term Tax-Free Fund
Year Ended May 31, 1999 344,741 29,395 315,346
Year Ended May 31, 1998 242,621 89,967 152,654
Year Ended May 31, 1997 88,741 63,145 25,596
Tax-Free Income Fund
Year Ended May 31, 1999 1,808,783 19,399 1,789,384
Year Ended May 31, 1998 1,566,676 488,601 1,078,075
Year Ended May 31, 1997 1,537,966 1,236,539 301,427
Colorado Tax-Free Fund
Year Ended May 31, 1999 442,396 70,194 372,202
Year Ended May 31, 1998 332,299 137,295 195,005
Year Ended May 31, 1997 299,582 238,690 60,892
Minnesota Intermediate Tax-Free Fund
Year Ended May 31, 1999 540,960 0 540,960
Year Ended May 31, 1998 348,564 0 348,564
B-2
<PAGE>
Advisory Fee Advisory Fee Advisory Fee
Payable Waived Retained
Minnesota Tax-Free Fund
Year Ended May 31, 1999 394,355 81,990 312,365
Year Ended May 31, 1998 298,301 163,748 134,553
Year Ended May 31, 1997 212,616 190,702 21,914
Strategic Income Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 1,096,749 289,099 807,650
Year Ended May 31, 1997 589,365 0 589,365
Moderate Balanced Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 2,851,253 561,191 2,290,062
Year Ended May 31, 1997 2,185,490 0 2,185,490
Growth Balanced Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 4,082,857 713,392 3,369,466
Year Ended May 31, 1997 2,688,223 0 2,688,223
Aggressive Balanced-Equity Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 17,317 6,163 11,154
Income Equity Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 5,115,544 0 5,115,544
Year Ended May 31, 1997 1,906,693 0 1,906,693
Index Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 915,590 0 915,590
Year Ended May 31, 1997 563,081 212,327 350,754
ValuGrowth Stock Fund
Year Ended May 31, 1999 3,347,114 203 3,346,911
Year Ended May 31, 1998 4,141,066 25,276 4,115,790
Year Ended May 31, 1997 1,475,664 18,446 1,457,218
B-3
<PAGE>
Advisory Fee Advisory Fee Advisory Fee
Payable Waived Retained
Diversified Equity Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 11,044,445 1,443,556 9,600,889
Year Ended May 31, 1997 6,874,776 0 6,874,776
Growth Equity Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 9,442,925 410,824 9,032,101
Year Ended May 31, 1997 7,205,405 0 7,205,405
Large Company Growth Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 1,153,835 0 1,153,835
Year Ended May 31, 1997 651,110 0 651,110
Small Company Stock Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 1,679,232 0 1,679,232
Year Ended May 31, 1997 1,481,914 419,413 1,062,501
Small Company Growth Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 6,198,447 0 6,198,447
Year Ended May 31, 1997 3,513,581 0 3,513,581
Diversified Small Cap Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 24,811 5,712 19,099
Year Ended May 31, 1997 N/A N/A N/A
Small Cap Opportunities Fund
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 1,161,941 0 1,161,941
Year Ended May 31, 1997 N/A N/A N/A
International Fund*
Year Ended May 31, 1999 0 0 0
Year Ended May 31, 1998 1,550,535 75,568 1,474,967
Year Ended May 31, 1997 812,485 0 812,485
</TABLE>
* Represents investment advisory fees paid to Schroder Capital Management Inc.
by International Portfolio of Core Trust.
B-4
<PAGE>
Table 2 - Management Fees
The following table shows the dollar amount of fees payable to: (1) Forum for
its management services with respect to each Fund (or class thereof for those
periods when multiple classes were outstanding); (2) Norwest for its
administrative services with respect to Small Cap Opportunities Fund and
International Fund; and (3) Forum with respect to its administrative securities
with respect to each applicable Portfolio. Also shown are the amount of fees
that were waived by Forum and Norwest, if any, and the actual fees received by
Forum and Norwest. The data is for the past three fiscal years or shorter period
if the Fund has been in operation for a shorter period.
(i) Management Fees to Forum
<TABLE>
<S> <C> <C> <C>
Management Management Management
Fee Fee Fee
Payable Waived Retained
Cash Investment Fund
Year Ended May 31, 1999 1,385,002 986,018 398,984
Year Ended May 31, 1998 3,708,842 2,416,284 1,292,558
Year Ended May 31, 1997 1,252,466 127,192 1,125,274
U.S. Government Fund
Year Ended May 31, 1999 1,427,957 0 1,427,957
Year Ended May 31, 1998 2,134,700 281,603 1,853,097
Year Ended May 31, 1997 1,140,934 12,114 1,128,820
Treasury Fund
Year Ended May 31, 1999 803,340 247,242 556,098
Year Ended May 31, 1998 1,154,681 854,503 300,178
Year Ended May 31, 1997 728,447 595,668 132,779
Ready Cash Investment Fund
Investor Shares
Year Ended May 31, 1999 640,686 0 640,686
Year Ended May 31, 1998 1,181,535 0 1,181,535
Year Ended May 31, 1997 1,070,654 14,082 1,056,572
Exchange Shares
Year Ended May 31, 1999 818 818 0
Year Ended May 31, 1998 643 511 132
Year Ended May 31, 1997 850 850 0
B-5
<PAGE>
Management Management Management
Fee Fee Fee
Payable Waived Retained
Municipal Money Market Fund
Investor Shares
Year Ended May 31, 1999 42,530 31,903 10,627
Year Ended May 31, 1998 90,303 54,201 36,102
Year Ended May 31, 1997 121,330 78,834 42,496
Institutional Shares
Year Ended May 31, 1999 568,213 482,532 85,681
Year Ended May 31, 1998 806,431 581,515 224,915
Year Ended May 31, 1997 1,275,270 1,017,363 257,907
Stable Income Fund
A Shares
Year Ended May 31, 1999 2,191 2,191 0
Year Ended May 31, 1998 10,850 10,698 152
Year Ended May 31, 1997 12,730 12,730 0
B Shares
Year Ended May 31, 1999 518 518 0
Year Ended May 31, 1998 1,632 1,608 24
Year Ended May 31, 1997 799 799 0
I Shares
Year Ended May 31, 1999 41,464 0 41,464
Year Ended May 31, 1998 143,795 135,804 7,991
Year Ended May 31, 1997 98,060 98,060 0
Limited Term Government Income Fund
I Shares
Year Ended May 31, 1999 36,671 32,298 4,373
Year Ended May 31, 1998 42,783 35,705 7,078
Intermediate Government Income Fund
A Shares
Year Ended May 31, 1999 8,600 8,600 0
Year Ended May 31, 1998 12,708 12,708 0
Year Ended May 31, 1997 14,471 14,471 0
B Shares
Year Ended May 31, 1999 4,378 4,378 0
Year Ended May 31, 1998 8,527 8,527 0
Year Ended May 31, 1997 9,953 9,953 0
I Shares
Year Ended May 31, 1999 209,982 0 209,982
Year Ended May 31, 1998 373,544 169,833 203,711
Year Ended May 31, 1997 386,457 151,928 234,529
B-6
<PAGE>
Management Management Management
Fee Fee Fee
Payable Waived Retained
Diversified Bond Fund
I Shares
Year Ended May 31, 1999 39,369 36,238 3,131
Year Ended May 31, 1998 175,669 143,270 32,399
Year Ended May 31, 1997 170,862 110,901 59,961
Income Fund
A Shares
>
Year Ended May 31, 1999 5,384 5,384 0
Year Ended May 31, 1998 5,783 5,783 0
Year Ended May 31, 1997 10,585 10,585 0
B Shares
Year Ended May 31, 1999 3,236 3,236 0
Year Ended May 31, 1998 3,966 3,966 0
Year Ended May 31, 1997 6,826 6,826 0
I Shares
Year Ended May 31, 1999 164,941 0 164,941
Year Ended May 31, 1998 271,193 155,655 115,539
Year Ended May 31, 1997 536,985 436,300 100,685
Total Return Bond Fund
A Shares
Year Ended May 31, 1999 496 496 0
Year Ended May 31, 1998 3,833 3,557 275
Year Ended May 31, 1997 5,187 5,187 0
B Shares
Year Ended May 31, 1999 745 745 0
Year Ended May 31, 1998 2,996 2,890 107
Year Ended May 31, 1997 4508 4508 0
I Shares
Year Ended May 31, 1999 25,270 0 25,270
Year Ended May 31, 1998 149,374 108,471 40,903
Year Ended May 31, 1997 250,777 24,127 226,650
Limited Term Tax-Free Fund
I Shares
Year Ended May 31, 1999
Year Ended May 31, 1998 48,524 2,408 46,116
Year Ended May 31, 1997 17,748 17,748 0
B-7
<PAGE>
Management Management Management
Fee Fee Fee
Payable Waived Retained
Tax-Free Income Fund
A Shares
Year Ended May 31, 1999 21,483 20,406 1,077
Year Ended May 31, 1998 30,973 21,230 9,743
Year Ended May 31, 1997 58,862 42,638 16,224
B Shares
Year Ended May 31, 1999 6,812 6,812 0
Year Ended May 31, 1998 9,109 9,109 0
Year Ended May 31, 1997 13,295 13,295 0
I Shares
Year Ended May 31, 1999 152,583 39,056 113,527
Year Ended May 31, 1998 273,202 13,953 259,249
Year Ended May 31, 1997 543,029 288,245 254,784
Colorado Tax-Free Fund
A Shares
Year Ended May 31, 1999 19,380 15,723 3,657
Year Ended May 31, 1998 30,680 13,964 16,715
Year Ended May 31, 1997 54,902 49,840 5,062
B Shares
>
Year Ended May 31, 1999 4,886 4,296 590
Year Ended May 31, 1998 7,903 3,625 4,279
Year Ended May 31, 1997 13,532 13,115 417
I Shares
Year Ended May 31, 1999 19,973 6,616 13,357
Year Ended May 31, 1998 27,877 2,466 25,411
Year Ended May 31, 1997 51,399 44,432 6,967
Minnesota Intermediate Tax-Free Fund
I Shares
Year Ended May 31, 1999 108,192 68,549 39,643
Year Ended May 31, 1998 139,426 97,043 42,382
Minnesota Tax-Free Fund
A Shares
Year Ended May 31, 1999 18,116 11,044 7,072
Year Ended May 31, 1998 30,180 13,327 16,853
Year Ended May 31, 1997 51,795 33,434 18,361
B Shares
Year Ended May 31, 1999 9,838 7,060 2,778
Year Ended May 31, 1998 13,523 6,377 7,146
Year Ended May 31, 1997 20,364 14,581 5,783
I Shares
Year Ended May 31, 1999 11,481 1,109 10,372
Year Ended May 31, 1998 15,957 2,320 13,637
Year Ended May 31, 1997 12,888 10,362 2,526
B-8
<PAGE>
Management Management Management
Fee Fee Fee
Payable Waived Retained
Strategic Income Fund
Year Ended May 31, 1999 63,195 54,653 8,542
Year Ended May 31, 1998 205,059 175,249 29,810
Year Ended May 31, 1997 130,970 115,223 15,747
Moderate Balanced Fund
Year Ended May 31, 1999 122,700 104,728 17,972
Year Ended May 31, 1998 515,913 362,625 153,288
Year Ended May 31, 1997 412,357 278,998 133,359
Growth Balanced Fund
Year Ended May 31, 1999 185,436 127,099 58,337
Year Ended May 31, 1998 706,519 467,784 238,734
Year Ended May 31, 1997 463,486 303,389 160,097
Aggressive Balanced-Equity Fund
I Shares
Year Ended May 31, 1999 4,155 1,874 2,281
Year Ended May 31, 1998 2,799 2,363 436
Income Equity Fund
A Shares
Year Ended May 31, 1999 21,865 15,865 6,000
Year Ended May 31, 1998 63,767 57,043 6,724
Year Ended May 31, 1997 37,101 30,944 6,157
B Shares
Year Ended May 31, 1999 20,922 17,546 3,376
Year Ended May 31, 1998 53,134 49,294 3,840
Year Ended May 31, 1997 23,583 23,583 0
C Shares
Year Ended May 31, 1999 50 50 0
I Shares
Year Ended May 31, 1999 330,695 0 330,695
Year Ended May 31, 1998 998,134 508,066 490,067
Year Ended May 31, 1997 320,654 168,477 152,177
Index Fund
Year Ended May 31, 1999 234,899 181,337 53,562
Year Ended May 31, 1998 688,118 460,858 227,260
Year Ended May 31, 1997 375,387 213,759 161,628
B-9
<PAGE>
Management Management Management
Fee Fee Fee
Payable Waived Retained
ValuGrowth Stock Fund
A Shares
Year Ended May 31, 1999 11,065 9,909 1,156
Year Ended May 31, 1998 22,896 13,687 9,209
Year Ended May 31, 1997 33,232 29,323 3,909
B Shares
Year Ended May 31, 1999 4,149 4,116 33
Year Ended May 31, 1998 7,763 7,763 0
Year Ended May 31, 1997 11,318 11,318 0
I Shares
Year Ended May 31, 1999 197,355 112,588 84,767
Year Ended May 31, 1998 499,641 22,453 477,188
Year Ended May 31, 1997 324,366 194,534 129,832
Diversified Equity Fund
A Shares
Year Ended May 31, 1999 15,455 15,455 0
Year Ended May 31, 1998 48,577 39,759 8,818
Year Ended May 31, 1997 14,322 14,322 0
B Shares
Year Ended May 31, 1999 23,851 23,720 131
Year Ended May 31, 1998 68,828 55,455 13,373
Year Ended May 31, 1997 15,913 15,913 0
C Shares
Year Ended May 31, 1999 42 42 0
I Shares
Year Ended May 31, 1999 384,354 160,439 223,915
Year Ended May 31, 1998 1,699,994 938,395 761,599
Year Ended May 31, 1997 1,027,423 723,040 304,383
Growth Equity Fund
A Shares
Year Ended May 31, 1999 4,637 4,637 0
Year Ended May 31, 1998 25,645 17,603 8,042
Year Ended May 31, 1997 10,336 10,336 0
B Shares
Year Ended May 31, 1999 4,386 4,386 0
Year Ended May 31, 1998 16,845 11,552 5,292
Year Ended May 31, 1997 4,347 4,347 0
C Shares
Year Ended May 31, 1999 7 7 0
I Shares
Year Ended May 31, 1999 233,527 121,908 111,619
Year Ended May 31, 1998 1,342,900 788,748 554,152
Year Ended May 31, 1997 785,917 545,815 240,102
Large Company Growth Fund
Year Ended May 31, 1999 133,226 60,044 73,182
Year Ended May 31, 1998 204,037 127,981 76,056
Year Ended May 31, 1997 100,171 87,896 12,275
B-10
<PAGE>
Management Management Management
Fee Fee Fee
Payable Waived Retained
Diversified Small Cap Fund
I Shares
Year Ended May 31, 1999 8,357 3,723 4,634
Year Ended May 31, 1998 2,430 2,294 136
Small Company Stock Fund
A Shares
Year Ended May 31, 1999 1,564 1,564 0
Year Ended May 31, 1998 10,418 10,094 324
Year Ended May 31, 1997 11,966 10,318 1,648
B Shares
Year Ended May 31, 1999 1,002 1,002 0
Year Ended May 31, 1998 6,721 6,646 75
Year Ended May 31, 1997 8,329 8,329 0
I Shares
Year Ended May 31, 1999 14,191 14,191 0
Year Ended May 31, 1998 200,997 124,654 76,342
Year Ended May 31, 1997 276,089 90,214 185,875
Small Company Growth Fund
Year Ended May 31, 1999 146,508 95,340 51,168
Year Ended May 31, 1998 766,560 383,589 382,971
Year Ended May 31, 1997 390,398 185,644 204,754
Small Cap Opportunities Fund
A Shares
Year Ended May 31, 1999 1,413 1,413 0
Year Ended May 31, 1998 4,015 1,641 2,374
Year Ended May 31, 1997 122 122 0
B Shares
Year Ended May 31, 1999 1,220 1,220 0
Year Ended May 31, 1998 2,836 1,147 1,689
Year Ended May 31, 1997 44 44 0
I Shares
Year Ended May 31, 1999 57,875 32,948 24,927
Year Ended May 31, 1998 243,348 39,205 204,143
Year Ended May 31, 1997 26,560 26,560 0
International Fund
A Shares
Year Ended May 31, 1999 1,643 1,643 0
Year Ended May 31, 1998 6,976 1,907 5,069
Year Ended May 31, 1997 1,494 1,494 0
B Shares
Year Ended May 31, 1999 1,011 1,011 0
Year Ended May 31, 1998 4,704 1,709 2,995
Year Ended May 31, 1997 1,247 1,247 0
I Shares
Year Ended May 31, 1999 133,377 0 133,377
Year Ended May 31, 1998 601,498 850 600,649
Year Ended May 31, 1997 177,707 4,264 173,443
B-11
<PAGE>
(ii) Administrative Fees to Norwest
Administrative Administrative Administrative
Fee Fee Fee
Payable Waived Retained
Small Cap Opportunities Fund
A Shares
Year Ended May 31, 1999 14,131 0 14,131
Year Ended May 31, 1998 7,924 0 7,924
B Shares
Year Ended May 31, 1999 12,198 0 12,198
Year Ended May 31, 1998 5,640 0 5,640
I Shares
Year Ended May 31, 1999 578,754 0 578,754
Year Ended May 31, 1998 471,297 0 471,297
International Fund
A Shares
Year Ended May 31, 1999 8,216 0 8,216
Year Ended May 31, 1998 7,230 0 7,230
B Shares
Year Ended May 31, 1999 5,053 0 5,053
Year Ended May 31, 1998 4,875 0 4,875
I Shares
Year Ended May 31, 1999 666,885 0 666,885
Year Ended May 31, 1998 623,325 0 623,325
Year Ended May 31, 1997 451,118 0 451,118
</TABLE>
B-12
<PAGE>
Table 3 - Distribution Fees
The following table shows the dollar amount of fees payable to Forum for its
distribution services with respect to each Fund (or class thereof), the amount
of fee that was waived by Forum, if any, and the actual fee received by Forum.
All maintenance fees were waived by Forum during the fiscal year ended May 31,
1999. The data is for the past three fiscal years or shorter period if the Fund
has been in operation for a shorter period. Only Exchange Shares and B Shares
incur distribution fees.
<TABLE>
<S> <C> <C> <C>
Distribution Distribution Distribution
Fee Fee Fee
Payable Waived Retained
Ready Cash Investment Fund
Exchange Shares
Year Ended May 31, 1999 10,904 0 10,904
Year Ended May 31, 1998 3,759 940 2,819
Year Ended May 31, 1997 4,249 1,062 3,187
Stable Income Fund
B Shares
Year Ended May 31, 1999 20,728 0 20,728
Year Ended May 31, 1998 14,253 3,563 10,690
Year Ended May 31, 1997 7,992 1,998 5,994
Intermediate Government Income Fund
B Shares
Year Ended May 31, 1999 87,552 0 87,552
Year Ended May 31, 1998 86,167 21,542 64,625
Year Ended May 31, 1997 99,968 24,882 75,086
Income Fund
B Shares
Year Ended May 31, 1999 64,717 0 64,717
Year Ended May 31, 1998 39,664 9,916 29,748
Year Ended May 31, 1997 34,127 8,532 25,595
Total Return Bond Fund
B Shares
Year Ended May 31, 1999 29,816 0 29,816
Year Ended May 31, 1998 24,563 6,141 18,422
Year Ended May 31, 1997 22,540 5,635 16,905
Tax-Free Income Fund
B Shares
Year Ended May 31, 1999 136,247 0 136,247
Year Ended May 31, 1998 91,107 22,777 68,330
Year Ended May 31, 1997 66,476 16,619 49,857
Colorado Tax-Free Fund
B Shares
Year Ended May 31, 1999 97,729 0 97,729
Year Ended May 31, 1998 79,031 19,758 59,273
Year Ended May 31, 1997 67,660 16,915 50,745
B-13
<PAGE>
Distribution Distribution Distribution
Fee Fee Fee
Payable Waived Retained
Minnesota Tax-Free Fund
B Shares
Year Ended May 31, 1999 196,769 0 196,769
Year Ended May 31, 1998 135,230 33,808 101,423
Year Ended May 31, 1997 101,817 25,454 76,363
Income Equity Fund
B Shares
Year Ended May 31, 1999 836,884 0 836,884
Year Ended May 31, 1998 481,065 120,266 360,799
Year Ended May 31, 1997 235,827 58,957 176,872
ValuGrowth Stock Fund
B Shares
Year Ended May 31, 1999 82,971 0 82,971
Year Ended May 31, 1998 77,628 19,407 58,221
Year Ended May 31, 1997 56,592 14,148 42,444
Diversified Equity Fund
B Shares
Year Ended May 31, 1999 954,051 0 954,051
Year Ended May 31, 1998 567,355 141,839 425,516
Year Ended May 31, 1997 159,132 39,783 119,349
Growth Equity Fund
B Shares
Year Ended May 31, 1999 175,451 0 175,451
Year Ended May 31, 1998 124,429 31,107 93,322
Year Ended May 31, 1997 43,471 10,868 32,603
Small Company Stock Fund
B Shares
Year Ended May 31, 1999 40,099 0 40,099
Year Ended May 31, 1998 57,698 14,424 43,273
Year Ended May 31, 1997 41,641 10,410 31,231
Small Cap Opportunities Fund
B Shares
Year Ended May 31, 1999 48,792 0 48,792
Year Ended May 31, 1998 22,558 5,640 16,919
Year Ended May 31, 1997 431 108 323
International Fund
B Shares
Year Ended May 31, 1999 20,211 0 20,211
Year Ended May 31, 1998 19,501 4,875 14,626
Year Ended May 31, 1997 12,465 3,116 9,349
</TABLE>
B-14
<PAGE>
Table 4 - Sales Charges
The following table shows: (1) the dollar amount of sales charges payable to
Forum with respect to sales of A Shares (or of the respective Funds prior to the
offering of multiple classes of shares); (2) the amount of sales charge retained
by Forum and not reallowed to other persons; and (3) the amount of contingent
deferred sales charge ("CDSL") paid to Forum. The data is for the past three
fiscal years or shorter period if the Fund has been in operation for a shorter
period.
<TABLE>
<S> <C> <C> <C>
Sales Retained CDSL
Charges Amount Paid
Stable Income Fund
A Shares
Year Ended May 31, 1999 9,000 0 --
Year Ended May 31, 1998 1,000 1,000 --
Year Ended May 31, 1997 3,200 320 --
B Shares
Year Ended May 31, 1999 -- -- 1,000
Year Ended May 31, 1998 -- -- 1,000
Year Ended May 31, 1997 -- -- 6,526
Intermediate Government Income Fund
A Shares
Year Ended May 31, 1999 44,000 0 --
Year Ended May 31, 1998 26,000 0 --
Year Ended May 31, 1997 13,182 1,187 --
B Shares
Year Ended May 31, 1999 -- -- 7,000
Year Ended May 31, 1998 -- -- 14,000
Year Ended May 31, 1997 -- -- 31,694
Income Fund
A Shares
Year Ended May 31, 1999 115,000 16,000 --
Year Ended May 31, 1998 68,000 8,000 --
Year Ended May 31, 1997 11,979 1,121 --
B Shares
Year Ended May 31, 1999 -- -- 6,000
Year Ended May 31, 1998 -- -- 6,000
Year Ended May 31, 1997 -- -- 11,887
Total Return Bond Fund
A Shares
Year Ended May 31, 1999 8,000 1,000 --
Year Ended May 31, 1998 8,000 1,000 --
Year Ended May 31, 1997 3,908 363 --
B Shares
Year Ended May 31, 1999 -- -- 7,000
Year Ended May 31, 1998 -- -- 4,000
Year Ended May 31, 1997 -- -- 7,505
B-15
<PAGE>
Sales Retained CDSL
Charges Amount Paid
Tax-Free Income Fund
A Shares
Year Ended May 31, 1999 204,000 0 --
Year Ended May 31, 1998 132,000 2,000 --
Year Ended May 31, 1997 74,101 6,646 --
B Shares
Year Ended May 31, 1999 -- -- 6,000
Year Ended May 31, 1998 -- -- 9,000
Year Ended May 31, 1997 -- -- 15,724
Colorado Tax-Free Fund
A Shares
Year Ended May 31, 1999 128,000 2,000 --
Year Ended May 31, 1998 127,000 4,000 --
Year Ended May 31, 1997 38,085 3,321 --
B Shares
Year Ended May 31, 1999 -- -- 11,000
Year Ended May 31, 1998 -- -- 12,000
Year Ended May 31, 1997 -- -- 11,889
Minnesota Tax-Free Fund
A Shares
Year Ended May 31, 1999 141,000 3,000 --
Year Ended May 31, 1998 139,000 6,000 --
Year Ended May 31, 1997 53,290 4,744 --
B Shares
Year Ended May 31, 1999 -- -- 30,000
Year Ended May 31, 1998 -- -- 9,000
Year Ended May 31, 1997 -- -- 13,097
Growth Balanced Fund
A Shares
Year Ended May 31, 1999 101,000 11,000 --
Year Ended May 31, 1998 N/A N/A --
Year Ended May 31, 1997 N/A N/A --
B Shares
Year Ended May 31, 1999 -- -- 0
Year Ended May 31, 1998 -- -- N/A
Year Ended May 31, 1997 -- -- N/A
Income Equity Fund
A Shares
Year Ended May 31, 1999 720,000 44,000 --
Year Ended May 31, 1998 692,000 69,000 --
Year Ended May 31, 1997 320,385 1,121 --
B Shares
Year Ended May 31, 1999 -- -- 129,000
Year Ended May 31, 1998 -- -- 62,000
Year Ended May 31, 1997 -- -- 38,812
B-16
<PAGE>
ValuGrowth Stock Fund
A Shares
Year Ended May 31, 1999 39,000 2,000 --
Year Ended May 31, 1998 92,000 9,000 --
Year Ended May 31, 1997 38,540 3,759 --
B Shares
Year Ended May 31, 1999 -- -- 14,000
Year Ended May 31, 1998 -- -- 9,000
Year Ended May 31, 1997 -- -- 10,770
Diversified Equity Fund
A Shares
Year Ended May 31, 1999 611,000 0 --
Year Ended May 31, 1998 853,000 70,000 --
Year Ended May 31, 1997 485,324 8,286 --
B Shares
Year Ended May 31, 1999 -- -- 174,000
Year Ended May 31, 1998 -- -- 87,000
Year Ended May 31, 1997 -- -- 23,510
Large Company Growth Fund
A Shares
Year Ended May 31, 1999 2,227,000 142,000 --
Year Ended May 31, 1998 N/A N/A --
Year Ended May 31, 1997 N/A N/A --
B Shares
Year Ended May 31, 1999 -- -- 70,000
Year Ended May 31, 1998 -- -- N/A
Year Ended May 31, 1997 -- -- N/A
Diversified Small Cap Fund
A Shares
Year Ended May 31, 1999 10,000 0 --
Year Ended May 31, 1998 N/A N/A --
Year Ended May 31, 1997 N/A N/A --
B Shares
Year Ended May 31, 1999 -- -- 0
Year Ended May 31, 1998 -- -- N/A
Year Ended May 31, 1997 -- -- N/A
Growth Equity Fund
A Shares
Year Ended May 31, 1999 66,000 4,000 --
Year Ended May 31, 1998 173,000 17,000 --
Year Ended May 31, 1997 175,495 5,347 --
B Shares
Year Ended May 31, 1999 -- -- 32,000
Year Ended May 31, 1998 -- -- 25,000
Year Ended May 31, 1997 -- -- 6,972
B-17
<PAGE>
Sales Retained CDSL
Charges Amount Paid
Small Company Stock Fund
A Shares
Year Ended May 31, 1999 23,000 2,000 --
Year Ended May 31, 1998 28,000 3,000 --
Year Ended May 31, 1997 23,419 2,335 --
B Shares
Year Ended May 31, 1999 -- -- 14,000
Year Ended May 31, 1998 -- -- 7,000
Year Ended May 31, 1997 -- -- 6,411
Small Cap Opportunities Fund
A Shares
Year Ended May 31, 1999 21,000 0 --
Year Ended May 31, 1998 148,000 12,000 --
Year Ended May 31, 1997 11,604 1,178 --
B Shares
Year Ended May 31, 1999 -- -- 19,000
Year Ended May 31, 1998 -- -- 5,000
Year Ended May 31, 1997 -- -- --
International Fund
A Shares
Year Ended May 31, 1999 15,000 1,000 --
Year Ended May 31, 1998 12,000 1,000 --
Year Ended May 31, 1997 8,728 874
B Shares
Year Ended May 31, 1999 -- -- 4,000
Year Ended May 31, 1998 -- -- 3,000
Year Ended May 31, 1997 -- -- 2,086
</TABLE>
B-18
<PAGE>
Table 5 - Accounting Fees
The following table shows the dollar amount of fees payable to FAcS for its
accounting services with respect to each Fund, the amount of fee that was waived
by FAcS, if any, and the actual fee received by FAcS. The table also shows
similar information with respect to each applicable Portfolio. The data is for
the past three fiscal years or shorter period if the Fund has been in operation
for a shorter period.
<TABLE>
<S> <C> <C> <C>
Fee Fee Fee
Payable Waived Retained
Cash Investment Fund
Year Ended May 31, 1999 13,000 0 13,000
Year Ended May 31, 1998 151,975 0 151,975
Year Ended May 31, 1997 65,000 0 65,000
U.S. Government Fund
Year Ended May 31, 1999 64,750 0 64,750
Year Ended May 31, 1998 65,500 0 65,500
Year Ended May 31, 1997 60,000 0 60,000
Treasury Fund
Year Ended May 31, 1999 61,750 0 61,750
Year Ended May 31, 1998 63,000 0 63,000
Year Ended May 31, 1997 54,500 0 54,500
Ready Cash Investment Fund
Year Ended May 31, 1999 34,000 0 34,000
Year Ended May 31, 1998 61,678 0 61,678
Year Ended May 31, 1997 86,000 0 86,000
Municipal Money Market Fund
Year Ended May 31, 1999 97,750 0 97,750
Year Ended May 31, 1998 95,000 0 95,000
Year Ended May 31, 1997 90,000 0 90,000
Stable Income Fund
Year Ended May 31, 1999 37,500 0 37,500
Year Ended May 31, 1998 93,585 0 93,585
Year Ended May 31, 1997 92,500 26,041 66,459
Limited Term Government Income Fund
I Shares
Year Ended May 31, 1999 39,250 0 39,250
Year Ended May 31, 1998 33,000 0 33,000
Intermediate Government Income Fund
Year Ended May 31, 1999 87,250 0 87,250
Year Ended May 31, 1998 84,000 0 84,000
Year Ended May 31, 1997 85,500 24,146 61,354
Diversified Bond Fund
Year Ended May 31, 1999 13,500 0 13,500
Year Ended May 31, 1998 60,241 0 60,241
Year Ended May 31, 1997 54,000 15,223 38,777
B-19
<PAGE>
Fee Fee Fee
Payable Waived Retained
Income Fund
Year Ended May 31, 1999 85,250 0 85,250
Year Ended May 31, 1998 89,000 0 89,000
Year Ended May 31, 1997 93,000 0 93,000
Total Return Bond Fund
Year Ended May 31, 1999 37,500 0 37,500
Year Ended May 31, 1998 77,536 0 77,536
Year Ended May 31, 1997 66,000 0 66,000
Limited Term Tax-Free Fund
Year Ended May 31, 1999 42,250 0 42,250
Year Ended May 31, 1998 38,000 0 38,000
Year Ended May 31, 1997 24,000 0 24,000
Tax-Free Income Fund
Year Ended May 31, 1999 58,250 0 85,250
Year Ended May 31, 1998 91,000 0 91,000
Year Ended May 31, 1997 91,000 0 91,000
Colorado Tax-Free Fund
Year Ended May 31, 1999 63,250 0 63,250
Year Ended May 31, 1998 62,000 0 62,000
Year Ended May 31, 1997 66,000 0 66,000
Minnesota Intermediate Tax-Free Fund
I Shares
Year Ended May 31, 1999 56,250 0 56,250
Year Ended May 31, 1998 39,000 0 39,000
Minnesota Tax-Free Fund
Year Ended May 31, 1999 62,250 0 62,250
Year Ended May 31, 1998 64,000 0 64,000
Year Ended May 31, 1997 64,000 0 64,000
Strategic Income Fund
Year Ended May 31, 1999 13,500 0 13,500
Year Ended May 31, 1998 61,046 0 61,046
Year Ended May 31, 1997 60,000 17,019 42,981
Moderate Balanced Fund
Year Ended May 31, 1999 13,500 0 13,500
Year Ended May 31, 1998 123,798 0 123,798
Year Ended May 31, 1997 62,000 17,546 44,454
B-20
<PAGE>
Fee Fee Fee
Payable Waived Retained
Growth Balanced Fund
Year Ended May 31, 1999 37,501 0 37,501
Year Ended May 31, 1998 131,371 0 131,371
Year Ended May 31, 1997 61,000 17,237 43,763
Aggressive Balanced-Equity Fund
I Shares
Year Ended May 31, 1999 13,500 0 13,500
Year Ended May 31, 1998 9,943 9,468 475
Income Equity Fund
Year Ended May 31, 1999 45,500 0 45,500
Year Ended May 31, 1998 88,615 0 88,615
Year Ended May 31, 1997 71,500 20,160 51,340
ValuGrowth Stock Fund
Year Ended May 31, 1999 78,249 0 78,249
Year Ended May 31, 1998 77,500 0 77,500
Year Ended May 31, 1997 66,000 0 66,000
Index Fund
Year Ended May 31, 1999 13,500 0 13,500
Year Ended May 31, 1998 89,560 0 89,560
Year Ended May 31, 1997 60,000 8,393 51,607
Diversified Equity Fund
Year Ended May 31, 1999 45,500 0 45,500
Year Ended May 31, 1998 253,735 0 253,735
Year Ended May 31, 1997 81,500 22,995 58,505
Growth Equity Fund
Year Ended May 31, 1999 45,500 0 45,500
Year Ended May 31, 1998 242,383 0 242,383
Year Ended May 31, 1997 79,000 22,311 56,689
Large Company Growth Fund
Year Ended May 31, 1999 29,499 0 29,499
Year Ended May 31, 1998 27,725 0 27,725
Year Ended May 31, 1997 38,000 10,750 27,250
Diversified Small Cap Fund
I Shares
Year Ended May 31, 1999 29,500 0 29,500
Year Ended May 31, 1998 8,779 7,694 1,085
Small Company Stock Fund
Year Ended May 31, 1999 37,500 0 37,500
Year Ended May 31, 1998 79,136 0 79,136
Year Ended May 31, 1997 76,000 0 76,000
B-21
<PAGE>
Fee Fee Fee
Payable Waived Retained
Small Company Growth Fund
Year Ended May 31, 1999 13,500 0 13,500
Year Ended May 31, 1998 75,865 0 75,865
Year Ended May 31, 1997 55,000 5,536 49,464
Small Cap Opportunities Fund
Year Ended May 31, 1999 37,501 0 37,501
Year Ended May 31, 1998 70,244 0 70,244
Year Ended May 31, 1997 26,057 26,057 0
International Fund
Year Ended May 31, 1999 37,500 0 37,500
Year Ended May 31, 1998 84,830 0 84,830
Year Ended May 31, 1997 36,000 10,148 25,852
</TABLE>
B-22
<PAGE>
Table 6 - Commissions
The following table shows the aggregate brokerage commissions with respect to
each Fund that incurred brokerage costs. The data is for the past three fiscal
years or shorter period if the Fund has been in operation for a shorter period.
Aggregate
Commissions Paid
Diversified Bond Fund*
Year Ended May 31, 1999 N/A
Year Ended May 31, 1998 N/A
Year Ended May 31, 1997 N/A
Strategic Income Fund*
Year Ended May 31, 1999 N/A
Year Ended May 31, 1998 N/A
Year Ended May 31, 1997 14,867
Moderate Balanced Fund*
Year Ended May 31, 1999 N/A
Year Ended May 31, 1998 N/A
Year Ended May 31, 1997 50,414
Growth Balanced Fund*
Year Ended May 31, 1999 N/A
Year Ended May 31, 1998 N/A
Year Ended May 31, 1997 83,720
Income Equity Fund*
Year Ended May 31, 1999 N/A
Year Ended May 31, 1998 N/A
Year Ended May 31, 1997 301,308
Index Fund*
Year Ended May 31, 1999 N/A
Year Ended May 31, 1998 N/A
Year Ended May 31, 1997 157,319
ValuGrowth Stock Fund
Year Ended May 31, 1999 1,034,773
Year Ended May 31, 1998 1,011,840
Year Ended May 31, 1997 502,785
B-23
<PAGE>
Aggregate
Commissions Paid
Diversified Equity Fund*
Year Ended May 31, 1999 N/A
Year Ended May 31, 1998 N/A
Year Ended May 31, 1997 226,652
Growth Equity Fund*
Year Ended May 31, 1999 N/A
Year Ended May 31, 1998 N/A
Year Ended May 31, 1997 130,483
Large Company Growth Fund*
Year Ended May 31, 1999 N/A
Year Ended May 31, 1998 N/A
Year Ended May 31, 1997 59,924
Small Company Stock Fund*
Year Ended May 31, 1999 N/A
Year Ended May 31, 1998 N/A
Year Ended May 31, 1997 458,447
Small Company Growth Fund
Year Ended May 31, 1999 N/A
Year Ended May 31, 1998 N/A
Year Ended May 31, 1997 1,365,750
Small Cap Opportunities Fund*
Year Ended May 31, 1998 N/A
Year Ended May 31, 1997 N/A
International Fund*
Year Ended May 31, 1999 N/A
Year Ended May 31, 1998 N/A
Year Ended May 31, 1997 N/A
* Reflects commission paid by the Portfolio(s) in which the Fund invests, the
Funds paid no commissions directly during either year.
B-24
<PAGE>
Table 7 - 5% Shareholders
The following table lists the persons who owned of record 5% or more of the
outstanding shares of a class of shares of a Fund as of September 1, 1999, as
well as their percentage holding of all shares of the Fund. Certain persons own
shares of the Funds of record only, including Alpine & Co., BHC Securities,
Inc., EMSEG & Co., First Stock Co., Norwest Bank Minnesota, N.A. and Stout & Co.
<TABLE>
<S> <C> <C> <C> <C>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Cash Investment Fund
Norwest Investment Services 3,013,901,823.980 51.05 51.05
c/o Alex OConnor
608 2nd Ave S 8th Floor
MS 0130
Minneapolis, MN 55402-1916
Norwest Bank Minnesota NA 1,856,813,747.010 31.45 31.45
VP4500022
Attn Cash Sweep Processing
510 Marquette Ave 4th Floor
Minneapolis, MN 55402-1110
Dentru & Co 302,289,855.620 5.12 5.12
Non Discretionary
1740 Broadway MS 8751
Denver, CO 80274
Ready Cash Investment Fund
Investor Shares
Norwest Investment Services 986,080,720.560 99.68 94.24
c/o Alex OConnor
608 2nd Ave S 8th Floor MS 0130
Minneapolis, MN 55402-1916
Exchange Shares Norwest Investment Services 55,493,822.630 99.89 5.30
c/o Alex Connor
608 2nd Ave S 8th Floor MS 0130
Minneapolis, MN 55402-1916
Public Entities Shares Randy E Brehmer 94,710.180 6.33 0.01
And Elizabeth J Brehmer
6740 Country Oaks Rd
Excelsior, MN 55331-7731
Norwest Bank Cust IRA Acct of 152,919.620 10.21 0.01
Mark Vukelich
3728 Evergreen Circle
White Bear, MN 55110-5768
B-25
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Ready Cash Investment Fund
Public Entities Shares Norwest Bank Cust IRA Acct of 132,287.850 8.84 0.01
(cont) Norwest Bank MN NA IRA C/F
Cust Mary G Koerber
611 S Mississippi
Mason City, IA 50401-5414
Dean Witter Reynolds Cust for 85,325.780 5.70 0.01
Stephen Jude Johnson
PO Box 250 Church Street Station
New York, NY 10008-0250
U.S. Government Fund
Alpine & Co 201,153,802.94 6.12 6.12
Non Discretionary
1740 Broadway MS 8751
Denver, CO 80274
Norwest Bank Minnesota NA AMS 2,601,314,145.130 79.15 79.15
Collective Trust Funds Clearing Acct
Attn Cash Sweep Processing
510 Marquette Ave 4th Fl
Minneapolis, MN 55402-1110
Norwest Investment Services 383,404,554.060 11.67 11.67
c/o Alex OConnor
608 2nd Ave S 8th Fl MS 0130
Minneapolis, MN 55402-1916
Treasury Plus Fund
EMSEG & Co 104,211,344.010 96.00 96.00
VP4530003
Attn Cash Sweep Processing
510 Marquette Ave 4th Floor
Minneapolis, MN 55402-1110
Treasury Fund
Norwest Bank Minnesota NA AMS 1,049,340,336.030 62.31 62.31
Collective Trust Funds Clearing Acct
Attn Cash Sweep Processing
510 Marquette Ave 4th Fl
Minneapolis, MN 55402-1110
Norwest Bank Investment Services 356,487,793.080 21.17 21.17
c/o Alex OConnor
608 2nd Ave S 8th Fl MS 0130
Minneapolis, MN 55402-1916
B-26
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Treasury Fund (cont)
Alpine & Co 135,122,434.000 8.02 8.02
Discretionary
1740 Broadway MS 8751
Denver, CO 80274
Municipal Money Market Fund
Investor Shares Norwest Bank Investment Services 39,863,602.300 98.14 3.93
c/o Alex OConnor
608 2nd Ave S 8th Fl MS 0130
Minneapolis, MN 55402-1916
Norwest Bank Investment Services 129,803,272.420 13.33 12.80
Institutional Shares c/o Alex OConnor
608 2nd Ave S 8th Fl MS 0130
Minneapolis, MN 55402-1916
Norwest Bank Minnesota NA AMS 416,271,696.140 42.75 41.04
Collective Trust Funds Clearing Acct
Attn Cash Sweep Processing
510 Marquette Ave 4th Fl
Minneapolis, MN 55402-1110
Norwest Bank Minnesota NA AMS 338,535,391.250 34.77 33.38
Collective Trust Funds Clearing Acct
Attn Cash Sweep Processing
510 Marquette Ave 4th Fl
Minneapolis, MN 55402-1110
Stable Income Fund
A Shares Norwest Investment Services Inc. 90,810.627 10.18 0.47
FBO 021219031
Northstar Building East - 8th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
Norwest Investment Services Inc. 45,360.579 5.08 0.24
FBO 021263911
Northstar Building East - 8th Floor
608 Second Avenue South
Minneapolis, MN 55479-0162
Norwest Investment Services Inc. 198,480.150 22.25 1.03
FBO 021453811
Northstar Building East - 8th Floor
608 Second Avenue South
Minneapolis, MN 55479-0162
B-27
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Stable Income Fund (cont)
A Shares (cont) Norwest Investment Services Inc. 80,064.119 8.97 7.51
FBO 705734561
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
B Shares Norwest Investment Services Inc. 17,989.051 7.21 0.09
FBO 101114091
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
Norwest Investment Services Inc. 20,372.268 8.16 0.11
FBO 102953761
Northstar Building East - 8th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
Norwest Investment Services Inc. 29,486.432 11.81 0.15
FBO 731186551
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
Norwest Investment Services Inc. 19,998.841 8.01 0.10
FBO 708238851
Norwest Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55479-0162
I Shares EMSEG & Co 1,785,841.320 9.89 9.30
Stable Income Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 12,511,072.515 69.30 65.18
Stable Income Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Limited Term Government
Income Fund
EMSEG & Co 541,236.421 6.42 6.42
Limited Term Government Income Fund
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
B-28
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Limited Term Government
Income Fund (cont)
EMSEG & Co 1,640,624.621 19.47 19.47
Limited Term Government Income Fund
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 5,325,360.186 63.20 63.20
Limited Term Government Income Fund
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Intermediate Government
Income Fund
A Shares WealthBuilder II Growth Balanced 287,677.225 16.81 0.67
Intermediate US Govt Fund
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Norwest Investment Services, Inc. 95,956.084 5.61 0.22
FBO 106727721
Northstar Building East - 8th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
I Shares Dentru & Co 4,903,505.176 12.95 11.39
1740 Broadway Mail 8676
Denver, Co 80274-0001
EMSEG & Co 18,185,958.261 48.02 42.45
Intermediate U.S. Government Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 8,329,259.905 21.99 19.35
Intermediate U.S. Government Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55480-8477
EMSEG & Co 4,525,661.865 11.95 10.51
Intermediate U.S. Government Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55480-8477
B-30
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Diversified Bond Fund
Seret & Co 623,066.760 8.93 8.93
Attn Jill Siekmeier
C/O Norwest Bank Colorado NA
1740 Broadway MS 8676
Denver, CO 80274-0001
Kiwils & Co 380,654.169 5.45 5.45
1740 Broadway MS 8676
Denver, CO 80274-0001
EMSEG & Co 4,790,205.338 68.62 68.62
Diversified Bond Fund I
C/O Mutual Fund Processing
PO Box 8477
Minneapolis, MN 55485-1450
Income Fund
A Shares WealthBuilder II Growth Balanced Income 312,602.032 20.95 0.79
Bond Fund Class A
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
I Shares Dentru & Co 6,498,980.932 17.47 16.42
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver, CO 80274-0001
EMSEG & Co 12,118,118.998 32.57 30.61
Income Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 11,713,338.428 31.49 29.59
Income Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Total Return Bond Fund
A Shares Norwest Investment Services Inc 12,017.793 8.83 0.12
FBO 701867211
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
B-31
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Total Return Bond Fund
(cont)
A Shares (cont) Norwest Investment Services Inc 12,548.346 9.22 0.13
FBO 700019041
Northstar Building East - 8th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
Dean Witter Reynolds Cust For 9,882.592 7.26 0.10
Darald D Landsiedel
PO Box 250 Church Street Station
New York, NY 10008-0250
B Shares Norwest Investment Services Inc 22,752.581 7.60 0.23
FBO 102391501
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
I Shares Dentru & Co 2,196,417.147 23.63 22.58
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver, CO 80274
Kiwils & Co 643,270.715 6.92 6.61
Discretionary Reinvest
1700 Broadway MS 0076
Denver, CO 80274
Seret & Co 3,700,838.5560 39.82 38.04
Discretionary Reinvest
1740 Broadway MS 8751
Denver, CO 80274
EMSEG & Co 767,240.717 8.26 7.89
Total Return Bond Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55480-0477
EMSEG & Co 855,053.515 9.20 8.79
Total Return Bond Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55480-8477
Strategic Income Fund
EMSEG & Co 11,961,166.280 89.95 89.95
Strategic Income Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
B-32
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Limited Term Tax-Free Fund
I Shares Victoria & Co 703,728.734 9.10 9.10
c/o Regional Mutual Funds
PO Box 6000
San Antonio, TX 78286-6000
EMSEG & Co 1,837,410.468 23.75 23.75
Limited Term Tax Free Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 2,442,181.101 31.57 31.57
Limited Term Tax Free Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55480-8477
EMSEG & Co 2,422,262.231 31.31 31.31
Limited Term Tax Free Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55480-8477
Tax-Free Income Fund
A Shares Norwest WealthBuilder
Reinvest Account
733 Marquette Ave
Minneapolis, MN 55479-0040
I Shares Dentru & Co 7,775,464.057 26.24 23.32
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver, CO 80274
EMSEG & Co 2,167,379.045 7.31 9.12
Tax Free Income I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 5,819,367.747 19.64 37.02
Tax Free Income Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
B-33
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Tax-Free Income Fund (cont)
I Shares (cont) EMSEG & Co 12,292,011.375 41.47 6.38
Tax Free Income Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Colorado Tax-Free Fund
A Shares Norwest Investment Services, Inc. 603,732.522 16.30 6.27
FBO 017357991
Northstar Building East - 8th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
I Shares Dentru & Co 4,127,020.629 84.42 42.84
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver, CO 80274
EMSEG & Co 318,821.027 6.55 3.31
Colorado Tax Free Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 305,793.570 6.28 3.17
Colorado Tax Free Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Minnesota Intermediate
Tax-Free Fund
EMSEG & Co 17,972,907.123 80.80 80.80
Minnesota Intermediate Tax-Free Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 1,208,756.039 5.43 5.43
Minnesota Intermediate Tax-Free Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
B-34
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Minnesota Intermediate
Tax-Free Fund (cont)
EMSEG & Co 2,823,813.761 12.70 12.70
Minnesota Intermediate Tax-Free Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Minnesota Tax-Free Fund
I Shares EMSEG & Co 498,295.452 19.64 6.29
Minnesota Tax Free I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 565,888.143 22.30 7.15
Minnesota Tax Free I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 1,350,117.033 53.21 17.05
Minnesota Tax Free I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Moderate Balanced Fund
EMSEG & Co 20,055,179.975 88.71 88.71
Moderate Balanced Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Growth Balanced Fund
A Shares Colorado State Bank & Trust 40,155.0370 21.36 0.13
Custodian for the IRA of
Harley G Higie Jr
1600 Broadway
Denver, CO 80202-4927
C Shares EMJAYCO 3,624.725 7.22 0.01
Omnibus Account
17909 PO Box
Milwaukee, WI 53217-0909
B-35
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Growth Balanced Fund (cont)
C Shares (cont) Norwest Investment Services Inc 6,903.175 13.74 0.02
FBO 705690741
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
Norwest Investment Services Inc 3,436.989 6.84 0.01
FBO 709008811
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
I Shares EMSEG & Co 25,667,338.3720 89.13 87.29
Growth Balanced Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Aggressive Balanced Equity
Fund
EMSEG & Co 4,935,688.31 98.45 98.45
Aggressive Balanced Equity Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Index Fund
EMSEG & Co 1,156,333.520 7.73 7.73
Index Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 10,659,593.281 71.26 71.26
Index Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Income Equity Fund
C Shares EMJAYCO 3,578.724 9.21 0.01
Omnibus Account
17909 PO Box
Milwaukee, WI 53217-0909
Norwest Investment Services Inc 2,245.292 5.78 0.01
FBO 100835581
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
B-36
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Income Equity Fund (cont)
C Shares (cont) Norwest Investment Services Inc 2,302.759 5.93 0.01
FBO 108877681
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
Norwest Investment Services Inc 2,087.247 5.37 0.01
FBO 800113721
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
I Shares Dentru & Co 3,033,903.750 9.17 7.97
1740 Broadway
Denver, CO 80274-0001
EMSEG & Co 12,088,752.340 36.54 31.75
Income Equity Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 6,808,408.104 20.58 17.88
Income Equity Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 8,068,388.913 24.39 21.19
Income Equity Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
ValuGrowthSM Stock Fund
I Shares Dentru & Co 1,671,630.301 21.33 18.48
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver, CO 80274
EMSEG & Co 1,426,921.149 18.21 15.77
ValuGrowth Stock Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
B-37
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
ValuGrowthSM Stock Fund
(cont)
I Shares (cont) EMSEG & Co 3,882,403.844 49.54 42.92
ValuGrowth Stock Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Diversified Equity Fund
C Shares Norwest Investment Services Inc 2,138.123 5.26 0.00
FBO 100835581
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
Norwest Investment Services Inc 2,289.078 5.63 0.00
FBO 707318151
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
Norwest Investment Services Inc 3,198.536 7.87 0.01
FBO 703505091
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
Norwest Investment Services Inc 20,588.841 50.64 0.05
FBO 112609161
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
I Shares Kiwils & Co 2,333,217.052 5.80 5.29
1740 Broadway MS 8676
Denver, CO 80274-0001
EMSEG & Co 33,877,576.989 84.26 76.83
Diversified Equity Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Growth Equity Fund
A Shares Norwest WealthBuilder 82,477.692 15.12 0.44
Reinvest Account
733 Marquette Ave
Minneapolis, MN 55402-2903
B-38
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Growth Equity Fund (cont)
A Shares (cont) Koch Industries Inc 85,480.032 15.67 0.46
C/O Wilshire Asset Management
1299 Ocean Avenue Suite 700
Santa Monica, CA 90401-1036
C Shares EMJAYCO 6,389.092 77.06 0.02
Omnibus Account
17909 PO Box
Milwaukee, WI 53217-0909
Norwest Investment Services Inc 1,159.418 13.98 0.00
FBO 707211391
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
Dean Witter for the benefit of 470.697 5.68 0.00
Timber Harvesting Inc
PO Box 250 Church Street Station
New York, NY 10008-0250
I Shares EMSEG & Co 15,389,046.104 87.63 82.52
Growth Equity Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Large Company Growth Fund
A Shares Merrill Lynch Trust Co TTEE 1,633,953.024 50.61 7.73
FBO Qualified Retirement Plans
Attn Philb Kolb
265 Davidson Ave 4th Floor
Santa Monica, CA 90401-1036
I Shares EMSEG & Co 1,212,428.991 8.39 5.74
Large Company Growth Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 9,499,038.065 65.75 44.96
Large Company Growth Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
B-39
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Diversified Small Cap Fund
A Shares Norwest WealthBuilder 102,070.239 71.84 1.36
Reinvest Account
733 Marquette Ave
Minneapolis, MN 55402-2309
B Shares Norwest Investment Services Inc 3,644.456 5.88 0.00
FBO 710307871
Northstar Building East - 9th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
I Shares Kiwils & Co 389,179.343 5.31 5.17
Discretionary Reinvest
1740 Broadway MS 8751
Denver CO 80274-0001
Dentru & Co 588,342.893 8.03 7.82
1740 Broadway Mail 8676
Denver, CO 80274-0001
EMSEG & Co 547,974.544 7.48 7.28
Diversified Small Cap Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 4,567,191.400 62.36 60.67
Large Company Growth Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 557,958.443 7.62 7.41
Large Company Growth Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Small Company Stock Fund
A Shares Norwest WealthBuilder 93,343.454 21.23 3.15
Reinvest Account
733 Marquette Ave
Minneapolis, MN 55402-2309
I Shares Dentru & Co 187,615.967 8.58 6.33
Non-Discretionary Cash
1740 Broadway Mail 8676
Denver, CO 80274-0001
B-40
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Small Company Stock Fund
(cont)
I Shares (cont) EMSEG & Co 951,896.385 43.55 32.13
Small Company Stock Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 245,264.248 11.22 8.28
Small Company Stock Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 567,293.065 25.95 19.15
Small Company Stock Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Small Cap Opportunities
Fund
A Shares WealthBuilder II Growth Balanced Fund 84,393.521 22.34 0.83
Class A #13357300
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
WealthBuilder II Growth Balanced Fund 51,260.116 13.57 0.50
Class A #13357200
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
WealthBuilder II Growth Balanced Fund 20,269.840 5.37 0.20
Class A #13357100
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
I Shares Dentru & Co 667,748.762 6.93 6.53
1740 Broadway Mail 8676
Denver, CO 80274-0001
Seret & Co 731,319.470 7.59 7.16
Attn Jill Siekmeier
C/O Norwest Bank Colorado NA
1740 Broadway MS 8676
Denver, CO 80274-0001
B-41
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
Small Cap Opportunities
Fund (cont)
I Shares (cont) EMSEG & Co 822,464.613 8.54 8.05
Small Cap Opportunities Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 5,991,335.064 62.18 58.63
Small Cap Opportunities Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
Small Company Growth Fund
Vanguard Fiduciary Trust Co 1,157,752.706 6.01 6.01
FBO Burlington Northern
VM 613 Attn Specialized Services
PO Box 2900
Valley Forge, PA 19482-2900
EMSEG & Co 2,275,363.038 11.81 11.81
Small Company Growth Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 14,559,219.075 75.56 75.56
Small Company Growth Fund I
c/o Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
International Fund
A Shares Norwest WealthBuilder 32,501.091 28.42 0.28
Reinvest Account
733 Marquette Ave
Minneapolis, MN 55479-0040
B Shares Norwest Investment Services, Inc. 4,895.554 6.15 0.04
FBO 012957081
Northstar Building East - 8th Floor
608 Second Avenue South
Minneapolis, MN 55402-1916
I Shares Dentru & Co 1,021,860.940 8.83 8.68
1740 Broadway Mail 8676
Denver, CO 80274-0001
B-42
<PAGE>
SHARE BALANCE % OF % OF FUND
NAME AND ADDRESS CLASS
International Fund (cont)
I Shares (cont) EMSEG & Co 8,107,822.161 70.06 68.90
International Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
EMSEG & Co 1,188,517.656 10.27 10.10
International Fund I
C/O Mutual Fund Processing
PO Box 1450 NW 8477
Minneapolis, MN 55485-1450
</TABLE>
B-43
<PAGE>
APPENDIX C - PERFORMANCE DATA
Table 1 - Money Market Fund Yields
As of May 31, 1999, the seven day yield, seven day effective yield and, for
Municipal Money Market Fund, the seven day tax equivalent yield, of each class
of the Money Market Funds was as follows. For the tax-equivalent yield
quotations, the assumed federal income tax rate is 39.6%.
<TABLE>
<S> <C> <C> <C> <C>
7 Day 7 Day Effective 7 Day Tax-Equiv 7 DayTax-Equiv
Yield Yield Yield Effective Yield
Cash Investment Fund 5.24% 5.37% N/A N/A
Ready Cash Investment Fund
Investor Shares 4.86% 4.97% N/A N/A
Exchange Shares 4.11% 4.19% N/A N/A
U.S. Government Fund 5.05% 5.18% N/A N/A
Treasury Plus Fund N/A N/A N/A N/A
Treasury Fund 4.77% 4.89% N/A N/A
Municipal Money Market Fund
Investor Shares 3.21% 3.26% 5.31% 5.40%
Institutional Shares 3.41% 3.47% 5.65% 5.75%
</TABLE>
Table 2 - Yields
For the 30-day period ended May 31, 1999 the annualized yield and, where
applicable, the tax equivalent yield of each class of the Fixed Income Funds,
Balanced Funds and Equity Funds was as follows. For the tax-equivalent yield
quotations, the assumed Federal income tax rate is 39.6%. In addition, for the
tax-equivalent yields of the Colorado and Minnesota Tax-Free Funds, the assumed
Colorado and Minnesota income tax rates are 5% and 8.5%, respectively.
<TABLE>
<S> <C> <C>
Tax Equivalent
Yield Yield
Stable Income Fund
A Shares 5.60% N/A
B Shares 4.88% N/A
I Shares 5.69% N/A
Limited Term Government Income Fund
I Shares 5.65% N/A
Intermediate Government Income Fund
A Shares 5.27% N/A
B Shares 4.75% N/A
I Shares 5.50% N/A
Diversified Bond Fund
I Shares 5.67% N/A
C-1
<PAGE>
Tax Equivalent
Yield Yield
Income Fund
A Shares 5.40% N/A
B Shares 4.89% N/A
I Shares 5.64% N/A
Total Return Bond Fund
A Shares 5.42% N/A
B Shares 4.88% N/A
I Shares 5.64% N/A
Limited Term Tax-Free Fund
I Shares 4.11% N/A
Tax-Free Income Fund
A Shares 4.98% 8.25%
B Shares 4.44% 7.35%
I Shares 5.19% 8.60%
Colorado Tax-Free Fund
A Shares 4.63% 8.07%
B Shares 4.07% 7.10%
I Shares 4.83% 8.42%
Minnesota Intermediate Tax-Free Fund
I Shares 4.14% 7.49%
Minnesota Tax-Free Fund
A Shares 4.47% 8.09%
B Shares 3.91% 7.08%
I Shares 4.66% 8.43%
Strategic Income Fund
I Shares N/A N/A
Moderate Balanced Fund
I Shares N/A N/A
Growth Balanced Fund
I Shares N/A N/A
Aggressive Balanced-Equity Fund
I Shares 0.19% N/A
Diversified Equity Fund
A Shares N/A N/A
B Shares N/A N/A
I Shares N/A N/A
Growth Equity Fund
A Shares N/A N/A
B Shares N/A N/A
I Shares N/A N/A
C-2
<PAGE>
Tax Equivalent
Yield Yield
Index Fund
I Shares 1.61% N/A
ValuGrowth Stock Fund
A Shares 0.66% N/A
B Shares -0.04% N/A
I Shares 0.68% N/A
Income Equity Fund
A Shares 1.53% N/A
B Shares 0.87% N/A
I Shares 1.63% N/A
Large Company Growth Fund
I Shares -0.33% N/A
Diversified Small Cap Fund
I Shares -0.42% N/A
Small Company Stock Fund
A Shares -0.49% N/A
B Shares -1.27% N/A
I Shares -0.51% N/A
Small Company Growth Fund
I Shares -0.96% N/A
Small Cap Opportunities Fund
A Shares N/A N/A
B Shares N/A N/A
I Shares N/A N/A
Contrarian Stock Fund
I Shares 0.88% N/A
International Fund
A Shares N/A N/A
B Shares N/A N/A
I Shares N/A N/A
</TABLE>
C-3
<PAGE>
Table 3 - Total Returns
The average annual total return of each class of each Fund for the periods ended
May 31, 1999 was as follows. For the money market funds, the yields shown in
Table 1 more closely reflect the current earnings of each fund than the total
return quotation. The actual dates of the commencement of each Fund's
operations, or the commencement of the offering of each class' shares, is listed
in the Fund's financial statements. The performance of the Funds marked with an
asterisk (*) includes the performance of a collective investment fund or a
common trust fund prior to its conversion into the Fund. (See "Performance and
Advertising Data -- Multiclass, Collective Investment Fund, Common Trust Fund
and Core-Gateway Performance.") Prior to 1989, the collective investment funds
and common trust fund were valued on the calendar quarter; therefore the
following chart does not reflect a Since Inception figure as of the fiscal year
end for those funds adopting collective investment or common trust fund
performance. Calendar quarter performance is available from the adviser.
SEC STANDARDIZED RETURNS
<TABLE>
<S> <C> <C> <C> <C>
Since
One Year Five Years Ten Years Inception
Cash Investment Fund 5.04% 5.23% 5.38% 5.73%
Ready Cash Investment Fund
Investor Shares 4.68% 4.88% 5.03% 5.36%
Exchange Shares 3.90% 4.10% N/A 4.09%
U.S. Government Fund 4.81% 5.03% 5.15% 5.49%
Treasury Fund 4.49% 4.81% N/A 4.46%
Municipal Money Market Fund
Investor Shares 2.76% 3.09% 3.37% 3.60%
Institutional Shares 2.97% 3.30% 3.49% 3.71%
Stable Income Fund
A Shares 3.17% N/A N/A 5.69%
B Shares 3.32% N/A N/A 5.25%
I Shares 4.95% N/A N/A 6.07%
Limited Term Government Income
Fund
I Shares 4.63% N/A N/A 5.46%
Intermediate Government Income
Fund*
A Shares (0.48)% 5.51% 6.35% 7.25%
B Shares (0.41)% 5.67% 6.06% 6.76%
I Shares 4.30% 6.50% 6.85% 7.56%
Diversified Bond Fund*
I Shares 4.15% 6.75% 7.07% 8.26%
Income Fund
A Shares (1.82)% 5.59% 7.17% 7.24%
B Shares (1.84)% 5.59% 6.83% 6.84%
I Shares 2.81% 6.57% 7.65% 7.64%
Total Return Bond Fund
A Shares (1.39)% 5.47% N/A 4.66%
B Shares (1.32)% 5.53% N/A 4.67%
I Shares 3.26% 6.47% N/A 5.58%
Limited Term Tax-Free Fund
I Shares 3.97% N/A N/A 6.64%
Tax-Free Income Fund
A Shares (0.64)% 6.30% N/A 6.24%
B Shares (0.70)% 6.32% N/A 5.96%
I Shares 4.04% 7.28% N/A 6.74%
Colorado Tax-Free Fund
A Shares (0.88)% 6.11% N/A 5.42%
B Shares (1.02)% 6.13% N/A 5.33%
I Shares 3.79% 7.09% N/A 6.23%
C-4
<PAGE>
SEC STANDARDIZED RETURNS (continued)
Since
One Year Five Years Ten Years Inception
Minnesota Intermediate Tax-Free
Fund*
I Shares 3.95% 5.91% 6.40% 6.20%
Minnesota Tax-Free Fund
A Shares (0.72)% 5.83% 6.19% 6.33%
B Shares (0.79)% 5.85% 5.86% 5.95%
I Shares 3.96% 6.79% 6.68% 6.76%
Strategic Income Fund*
I Shares 8.45% 10.21% 9.30% 9.42%
Moderate Balanced Fund*
I Shares 12.02% 12.98% 11.83% 11.38%
Growth Balanced Fund*
I Shares 16.38% 17.03% 13.66% 13.71%
Aggressive Balanced
Equity Fund
I Shares 17.98% N/A N/A 19.47%
Income Equity Fund*
A Shares 8.15% 22.13% 15.98% 16.76%
B Shares 9.90% 22.59% 15.80% 16.57%
I Shares 14.75% 23.58% 16.67% 17.44%
Index Fund*
I Shares 20.57% 25.24% 17.45% 16.02%
ValuGrowth Stock Fund
A Shares (5.90)% 13.63% 12.18% 12.42%
B Shares (4.15)% 14.00% 12.00% 12.16%
I Shares (0.16)% 14.98% 12.83% 12.99%
Diversified Equity Fund*
A Shares 8.46% 19.81% 15.75% 16.67%
B Shares 10.24% 20.25% 15.58% 16.45%
I Shares 15.08% 21.24% 16.44% 17.33%
Growth Equity Fund*
A Shares 1.39% 15.35% 14.88% 15.09%
B Shares 2.78% 15.75% 14.70% 14.93%
I Shares 7.60% 16.72% 15.55% 15.77%
Large Company Growth Fund*
I Shares 39.96% 27.89% 20.45% 17.48%
Diversified Small Cap Fund
I Shares (14.54)% N/A N/A (7.25)%
Small Company Stock Fund
A Shares (31.43)% 3.72% N/A 3.28%
B Shares (30.74)% 4.01% N/A 3.47%
I Shares (27.24)% 4.96% N/A 4.34%
Small Company Growth Fund*
I Shares (10.72)% 14.67% 16.97% 16.26%
Small Cap Opportunities Fund
A Shares (18.03)% 15.74% N/A 15.83%
B Shares (17.19)% 16.14% N/A 16.06%
I Shares (13.02)% 17.13% N/A 17.03%
International Fund*
A Shares (7.03)% 6.57% 8.27% 7.35%
B Shares (5.90)% 6.71% 8.02% 7.01%
I Shares (1.32)% 7.67% 8.83% 7.81%
</TABLE>
C-5
<PAGE>
NON STANDARDIZED RETURNS (without a sales load)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar
One Month Three Year to One Year Three Five Ten Years Since
Months Date Years Years Inception
Cash Investment Fund 0.38% 1.15% 1.93% 5.04% 5.22% 5.23% 5.38% 5.73%
Ready Cash Investment Fund
Investor Shares 0.35% 1.06% 2.19% 4.68% 4.88% 4.88% 5.03% 5.36%
Exchange Shares 0.29% 0.87% 1.47% 3.90% 4.09% 4.10% N/A 4.09%
U.S. Government Fund 0.37% 1.12% 1.86% 4.81% 5.02% 5.03% 5.15% 5.49%
Treasury Fund 0.36% 1.06% 1.74% 4.49% 4.78% 4.81% N/A 4.46%
Municipal Money Market Fund
Investor Shares 0.24% 0.66% 1.04% 2.76% 3.01% 3.09% 3.37% 3.60%
Institutional Shares 0.25% 0.71% 1.13% 2.97% 321% 3.30% 3.49% 3.71%
Stable Income Fund
A Shares (0.01)% 0.95% 1.14% 4.74% 5.78% N/A N/A 6.05%
B Shares (0.07)% 0.76% 0.95% 4.07% 5.00% N/A N/A 5.25%
I Shares 0.09% 1.05% 1.34% 4.95% 5.82% N/A N/A 6.07%
Limited Term Government
Income Fund
I Shares (0.66)% 0.25% 0.52% 4.63% N/A N/A N/A 5.46%
Intermediate Government
Income Fund*
A Shares (1.33)% (0.44)% (2.32)% 4.21% 6.89% 6.48% 6.84% 7.55%
B Shares (1.30)% (0.62)% (2.52)% 3.53% 6.11% 5.70% 6.06% 6.76%
I Shares (1.24)% (0.44)% (2.23)% 4.30% 6.92% 6.50% 6.85% 7.56%
Diversified Bond Fund*
I Shares (0.65)% 0.15% (1.62)% 4.15% 7.53% 6.75% 7.07% 8.26%
Income Fund
A Shares 1.35% 2.00% 3.04% 12.47% 7.20% 5.64% 8.26% 8.10%
B Shares 1.19% 1.81% 2.72% 11.52% 6.42% N/A N/A 4.63%
I Shares 1.35% 2.01% 3.04% 12.35% 7.20% 5.62% 8.26% 8.09%
Total Return Bond Fund
A Shares (1.33)% (0.52)% (2.79)% 2.81% 7.28% 6.56% 7.66% 7.65%
B Shares (1.50)% (0.82)% (3.20)% 2.03% 6.46% 5.75% 6.83% 6.84%
I Shares (1.43)% (0.52)% (2.80)% 2.81% 7.28% 6.57% 7.65% 7.64%
Limited Term Tax-Free Fund
I Shares (0.31)% (0.10)% 0.58% 3.97% N/A N/A N/A 6.64%
Tax-Free Income Fund
A Shares (0.82)% (0.49)% (0.10)% 4.04% 7.57% 7.28% N/A 6.74%
B Shares (0.97)% (0.68)% (0.41)% 3.26% 6.77% 6.48% N/A 5.96%
I Shares (0.91)% (0.48)% (0.19)% 4.04% 7.57% 7.28% N/A 6.74%
Colorado Tax-Free Fund
A Shares (0.63)% (0.39)% (0.20)% 3.79% 7.55% 7.09% N/A 6.23%
B Shares (0.79)% (0.67)% (0.51)% 2.92% 6.75% 6.29% N/A 5.46%
I Shares (0.72)% (0.39)% (0.20)% 3.79% 7.55% 7.09% N/A 6.23%
C-6
<PAGE>
NON STANDARDIZED RETURNS (without a sales load) (continued)
Calendar
One Month Three Year to One Year Three Five Ten Years Since
Months Date Years Years Inception
Minnesota Intermediate
Tax-Free Fund*
I Shares (0.49)% (0.18)% 0.40% 3.95% 6.05% 5.91% 6.40% 6.20%
Minnesota Tax-Free Fund
A Shares (0.60)% (0.29)% 0.18% 3.96% 7.19% 6.81% 6.68% 6.76%
B Shares (0.67)% (0.47)% (0.04)% 3.18% 6.39% 6.01% 5.86% 5.95%
I Shares (0.60)% (0.29)% 0.18% 3.96% 7.19% 6.81% 6.68% 6.76%
Strategic Income Fund*
I Shares (0.60)% 1.83% 1.16% 8.45% 10.70% 10.21% 9.30% 9.42%
Moderate Balanced Fund*
I Shares (0.94)% 2.85% 2.46% 12.02% 13.68% 12.98% 11.23% 11.38%
Growth Balanced Fund*
I Shares (1.25)% 3.83% 3.65% 16.38% 17.84% 17.03% 13.66% 13.71%
Income Equity Fund*
A Shares (0.26)% 8.98% 8.93% 14.74% 21.79% 23.58% 16.67% 17.44%
B Shares (0.32)% 8.77% 8.59% 13.90% 20.89% 22.68% 15.80% 16.57%
I Shares (0.28)% 8.98% 8.91% 14.75% 21.79% 23.58% 16.67% 17.44%
Index Fund*
I Shares (2.40)% 5.36% 6.16% 20.57% 26.56% 25.24% 17.45% 16.02%
ValuGrowth Stock Fund
A Shares (3.21)% 2.96% 0.83% (0.16)% 14.26% 14.98% 12.85% 13.01%
B Shares (3.27)% 2.78% 0.53% (0.90)% 13.40% 14.12% 12.00% 12.16%
I Shares (3.22)% 3.01% 0.83% (0.16)% 14.26% 14.98% 12.83% 12.99%
Diversified Equity Fund*
A Shares (1.59)% 5.70% 5.60% 15.08% 20.55% 21.24% 16.44% 17.33%
B Shares (1.65)% 5.51% 5.28% 14.24% 19.66% 20.34% 15.58% 16.45%
I Shares (1.59)% 5.70% 5.60% 15.08% 20.57% 21.24% 16.44% 17.33%
Growth Equity Fund*
A Shares (1.12)% 5.05% 2.84% 7.57% 14.58% 16.72% 15.56% 15.77%
B Shares (1.17)% 4.86% 2.52% 6.78% 13.73% 15.86% 14.70% 14.93%%
I Shares (1.12)% 5.05% 2.84% 7.60% 14.58% 16.72% 15.55% 15.77%
Large Company Growth Fund*
I Shares (3.49)% 2.92% 6.63% 39.84% 31.14% 27.86% 20.44% 17.48%
Small Company Stock Fund
A Shares (0.34)% 2.22% (10.28)% (27.52)% (5.79)% 4.96% N/A 4.41%
B Shares (0.36)% 1.83% (10.61)% (27.85)% (6.54)% 4.15% N/A 3.60%
I Shares (0.23)% 2.12)% (10.24)% (27.24)% (5.79)% 4.96% N/A 4.34%
Small Company Growth Fund*
I Shares 4.18% 11.00% 2.05% (10.72)% 4.90% 14.67% 16.97% 16.26%
Small Cap Opportunities Fund
A Shares 3.43% 10.33% 1.18% (13.03)% 5.71% 17.12% N/A 17.02%
B Shares 3.40% 10.08% 0.85% (13.74)% 4.92% 16.25% N/A 16.15%
I Shares 3.43% 10.39% 1.23% (13.02)% 5.73% 17.13% N/A 17.03%
International Fund*
A Shares (3.43)% 2.20% 2.57% (1.36)% 6.57% 7.84% 8.91% 7.88%
B Shares (3.49)% 2.03% 2.30% (2.08)% 5.76% 6.86% 8.02% 7.01%
I Shares (3.43)% 2.20% 2.61% (1.32)% 6.56% 7.67% 8.83% 7.81%
</TABLE>
C-7
<PAGE>
APPENDIX D - Other Advertisement Matters
From time to time, the sales material for the Funds may include a discussion of,
and commentary by senior management of the Adviser on, the following.
The Trust may compare the Fund family against other bank-managed mutual funds or
other investment companies based on asset size. The Adviser believes the Funds'
growth may be attributed to three things: disciplined investment process,
utilizing talented people and focusing on customer needs.
The Funds utilize a disciplined process which relies heavily upon its investment
managers and an experienced investment research team. This approach maximizes
consistency by ensuring that no individual manager's style unduly influences a
fund's style.
The Large Company Growth Fund's investment policy of seeking to invest in
companies whose long term earnings are expected to grow 50% faster than the
market, as a measure by the earnings of S&P 500 Index stocks.
<PAGE>
NORWEST CORPORATION
1929 Northwestern National Bank and several upper midwest banks form a holding
company called Northwestern National Bancorporation. "Banco" acquires 90
banks in its first year.
1932 At its peak, Banco owns a total of 139 affiliate banks.
1982 Banco enters the consumer finance business by acquiring Dial Finance
Company.
1983 The 87 affiliates of Banco are reborn as "Norwest Corporation."
1989 Norwest consolidates its operations in the new 57-story Norwest Center in
downtown Minneapolis.
1997 Norwest reaches $50 billion in assets under management, including $19
billion in mutual funds.
NORWEST ADVANTAGE FUNDS
1946 Inception of the Common Trust Funds, the company's first pooled investment
vehicles.
1987 Norwest introduces two new open-ended registered investment company funds
(commonly known as mutual funds), called the Prime Value Funds. In less
than one year, assets under management reach $500 million.
1992 The Norwest mutual fund family expands to 11 mutual funds. Assets under
management grow to $3.2 billion.
1994 Conversion to Norwest Collective Funds (bank collective investment funds)
into Norwest Advantage Funds (mutual funds).
1998 Norwest Advantage Funds family includes 41 mutual funds with over $20
billion in assets under management.
D-1
<PAGE>
Part C
Other Information
Item 23. Exhibits
(a) Trust Instrument of Registrant as amended and restated August 4, 1997 (see
Note 1).
(b) By-Laws of Registrant as now in effect (see Note 2).
(c) Specimen Certificate for shares of beneficial interest of each class of
each portfolio of Registrant. Except for the names of the classes of shares
and CUSIP numbers, the certificate of each class of each portfolio of
Registrant is substantially the same as the specimen certificate, and
therefore, is omitted pursuant to Rule 483(d)(2) under the 1933 Act (see
Note 2).
(d) (1) Form of Investment Advisory Agreement between Registrant and
Norwest Investment Management, Inc. relating to Cash Investment Fund,
Ready Cash Investment Fund, U.S. Government Fund, Treasury Fund,
Treasury Plus Fund, Municipal Money Market Fund - Institutional
Shares, Municipal Money Market Fund - Investor Shares, Intermediate
Government Income Fund, Diversified Bond Fund, Stable Income Fund,
Income Fund, Total Return Bond Fund, Limited Term Tax-Free Fund,
Limited Term Government Income Fund, Tax-Free Income Fund, Colorado
Tax-Free Fund, Minnesota Intermediate Tax-Free Fund, Minnesota
Tax-Free Fund, Strategic Income Fund, Moderate Balanced Fund, Growth
Balanced Fund, Aggressive Balanced-Equity Fund, Income Equity Fund,
Index Fund, ValuGrowth SM Stock Fund, Diversified Equity Fund, Growth
Equity Fund, Large Company Growth Fund, Diversified Small Cap Fund,
Small Company Stock Fund, Small Company Growth Fund, Small Cap
Opportunities Fund, International Fund, Performa Strategic Value Bond
Fund, Performa Disciplined Growth Fund, Performa Small Cap Value Fund
and Performa Global Growth Fund dated as of June 1, 1997, as amended
December 1, 1998. Except for the names of each series of Registrant,
the Investment Advisory Agreement of each series of the Registrant is
substantially the same as the Investment Advisory Agreement, and
therefore, is omitted pursuant to Rule 483(d)(2) under the 1933 Act
(filed herewith).
(2) Form of Investment Subadvisory Agreement between Registrant and
Schroder Capital Management International Inc. relating to Small Cap
Opportunities Fund, Strategic Income Fund, Moderate Balanced Fund,
Growth Balanced Fund, Aggressive Balanced Equity Fund, Diversified
Equity Fund, Growth Equity Fund and International Fund dated as of
April 28, 1996 as amended July 29, 1997 (see Note 3).
(3) Form of Investment Subadvisory Agreement among Registrant, Norwest
Investment Management, Inc. and Galliard Capital Management Inc.
relating to Stable Income Funds, Total Return Bond Fund, Performa
Strategic Value Bond Fund, Diversified Bond Fund, Strategic Income
Fund, Moderate Balanced Fund, Growth Balanced Fund and Aggressive
Balanced-Equity Fund dated as of October 1, 1997 as amended July 28,
1998 (see Note 4).
(4) Form of Investment Subadvisory Agreement among Registrant, Norwest
Investment Management, Inc. and Peregrine Capital Management
International Inc. relating to Diversified Bond Fund, Strategic Income
Fund, Moderate Balanced Fund, Growth Balanced Fund, Aggressive
Balanced-Equity Fund, Diversified Equity Fund, Growth Equity Fund,
Large Company Growth Fund, Small Company Growth Fund and Diversified
Small Cap Fund dated as of June 1, 1997, as amended July 28, 1998 (see
Note 4).
(5) Form of Investment Subadvisory Agreement between Registrant and Smith
Asset Management, LP relating to Strategic Income Fund, Moderate
Balanced Fund, Growth Balanced Fund, Aggressive Balanced-Equity Fund,
Diversified Equity Fund, Growth Equity Fund, Diversified Small Cap
Fund, Performa Disciplined Growth Fund and Performa Small Cap Value
Fund dated as of October 1, 1997, as amended March 25, 1999 (filed
herewith).
(e) Form of Distribution Services Agreement between Registrant and Forum
Financial Services, Inc. relating to each series of Registrant dated as of
October 1, 1995, as amended April 26, 1999 (filed herewith).
(f) Not Applicable.
1
<PAGE>
(g) (1) Form of Custodian Agreement between Registrant and Norwest Bank
Minnesota, N.A., relating to each series of Registrant dated as of
August 1, 1993, as amended July 28, 1998 (see Note 4).
(2) Form of Transfer Agency Agreement between Registrant and Norwest Bank
Minnesota, N.A. relating to each series of Registrant dated as of
August 1, 1993, as amended July 28, 1998 (see Note 4).
(h) (1) Form of Management Agreement between Registrant and Forum
Financial Services, Inc. relating to each series of Registrant dated
as August 1, 1997, as amended June 1, 1999 (filed herewith).
(2) Form of Fund Accounting Agreement between Registrant and Forum
Accounting Services, LLC relating to each series of Registrant dated
as of June 1, 1997, as amended July 28, 1998 (see Note 4).
(3) Form of Administration Services Agreement between Registrant and
Norwest Bank Minnesota, N.A. relating to Small Cap Opportunities Fund,
International Fund and Performa Global Growth Fund dated as of
November 11, 1994, as amended July 28, 1998 (see Note 4).
(4) Form of Administration Agreement between Registrant and Forum
Administrative Services, LLC relating to Cash Investment Fund, Ready
Cash Investment Fund, U.S. Government Fund, Treasury Fund, Treasury
Plus Fund, Municipal Money Market Fund - Institutional Shares,
Municipal Money Market Fund - Investor Shares, Intermediate Government
Income Fund, Diversified Bond Fund, Stable Income Fund, Income Fund,
Total Return Bond Fund, Limited Term Tax-Free Fund, Limited Term
Government Income Fund, Tax-Free Income Fund, Colorado Tax-Free Fund,
Minnesota Intermediate Tax-Free Fund, Minnesota Tax-Free Fund,
Strategic Income Fund, Moderate Balanced Fund, Growth Balanced Fund,
Aggressive Balanced-Equity Fund, Income Equity Fund, Index Fund,
ValuGrowthSM Stock Fund, Diversified Equity Fund, Growth Equity Fund,
Large Company Growth Fund, Diversified Small Cap Fund, Small Company
Stock Fund, Small Company Growth Fund, Small Cap Opportunities Fund,
International Fund, Performa Strategic Value Bond Fund, Disciplined
Growth Fund, Performa Small Cap Value Fund, Performa Global Growth
Fund, Norwest WealthBuilder II Growth Portfolio, Norwest WealthBuilder
II Growth and Income Portfolio and Norwest WealthBuilder II Growth
Balanced Portfolio dated as of October 1, 1996, as amended June 1,
1999 (filed herewith).
(5) Shareholder Servicing Agreement dated as of September 25, 1998 (filed
herewith).
(6) Shareholder Servicing Plan (filed herewith).
(i) (1) Opinion of Seward & Kissel (filed herewith).
(2) Opinion of Seward & Kissel (see Note 2).
(j) Not Applicable.
(k) Not Applicable.
(l) Investment Representation letter of John Y. Keffer as original purchaser of
shares of stock of Registrant (filed herewith).
(m) (1) Rule 12b-1 Plan adopted by Registrant relating to Exchange Shares of
Ready Cash Investment Fund, Investor B Shares of Stable Income Fund,
Intermediate Government Income Fund, Income Fund, Total Return Bond
Fund, Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota Tax-Free
Fund, Growth Balanced Fund, Income Equity Fund, ValuGrowthSM Stock
Fund, Diversified Equity Fund, Growth Equity Fund, Large Company
Growth Fund, Diversified Small Cap Fund, Small Company Stock Fund,
Small Company Growth Fund, Small Cap Opportunities Fund and
International Fund and Investor C Shares of Norwest WealthBuilder II
Growth Balanced Fund, Norwest WealthBuilder II Growth and Income Fund
and Norwest WealthBuilder II Growth Fund dated as of August 1, 1993,
as amended April 26, 1999 (filed herewith).
(2) Rule 12b-1 Plan adopted by Registrant relating to C Shares of Growth
Balanced Fund, Income Equity Fund, Diversified Equity Fund and Growth
Equity Fund dated as of July 28, 1998 (see Note 4).
(3) Rule 12b-1 Plan adopted by Registrant relating to A Shares of Large
Company Growth Fund, Growth Balanced Fund and Diversified Small Cap
Fund dated as of October 5, 1998 (filed herewith).
(n) Financial Data Schedules (to be filed by amendment).
(o) Multiclass (Rule 18f-3) Plan adopted by Registrant (see Note 5).
Other Exhibits
(A) Power of Attorney from James C. Harris, Trustee of Registrant (see Note 2).
(B) Power of Attorney from Richard M. Leach, Trustee of Registrant (see Note
2).
(C) Power of Attorney from Robert C. Brown, Trustee of Registrant (see Note 2).
2
<PAGE>
(D) Power of Attorney from Donald H. Burkhardt, Trustee of Registrant (see Note
2).
(E) Power of Attorney from John Y. Keffer, Trustee of Registrant (see Note 2).
(F) Power of Attorney from Donald C. Willeke, Trustee of Registrant (see Note
2).
(G) Power of Attorney from Timothy J. Penny, Trustee of Registrant (see Note
2).
(H) Power of Attorney from John S. McCune, Trustee of Registrant (see Note 1).
- ---------------
Note:
(1) Exhibit incorporated by reference as filed in Post-Effective Amendment No.
46 via EDGAR on September 30, 1997, accession number 0000912057-97-032214.
(2) Exhibit incorporated by reference as filed in Post-Effective Amendment No.
35 via EDGAR on March 8, 1996, accession number 0000912057-96-004243.
(3) Exhibit incorporated by reference as filed in Post-Effective Amendment No.
54 via EDGAR on May 6, 1998, accession number 0001004402-98-000281.
(4) Exhibit incorporated by reference as filed in Post-Effective Amendment No
57 via EDGAR on September 30, 1998, accession number 0001004402-98-000533.
(5) Exhibit incorporated by reference as filed in Post-Effective Amendment No.
55 via EDGAR on July 31, 1998, accession number 0001004402-98-000418.
Item 24. Persons Controlled by Or Under Common Control with Registrant
None.
Item 25. Indemnification
The general effect of Section 10.02 of Registrant's Trust Instrument is
to indemnify existing or former trustees and officers of the Trust to
the fullest extent permitted by law against liability and expenses.
There is no indemnification if, among other things, any such person is
adjudicated liable to Registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. This description
is modified in its entirety by the provisions of Section 10.02 of
Registrant's Trust Instrument contained in this Registration Statement
as Exhibit 1 and incorporated herein by reference.
Registrant's Investment Advisory Agreements, Investment Subadvisory
Agreements and Distribution Services Agreements provide that
Registrant's investment advisers and principal underwriter are
protected against liability to the extent permitted by Section 17(i) of
the Investment Company Act of 1940. Similar provisions are contained in
the Management Agreement and Transfer Agency and Fund Accounting
Agreement. Registrant's principal underwriter is also provided with
indemnification against various liabilities and expenses under the
Management and Distribution Agreements and Distribution Services
Agreements between Registrant and the principal underwriter; provided,
however, that in no event shall the indemnification provision be
construed as to protect the principal underwriter against any liability
to Registrant or its security holders to which the principal
underwriter would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and
duties under those agreements. Registrant's transfer agent and fund
accountant and certain related individuals are also provided with
indemnification against various liabilities and expenses under the
Transfer Agency and Fund Accounting Agreements between Registrant and
the transfer agent and fund accountant; provided, however, that in no
event shall the transfer agent, fund accountant or such persons be
indemnified against any liability or expense that is the direct result
of willful misfeasance, bad faith or gross negligence by the transfer
agent or such persons.
The preceding paragraph is modified in its entirety by the provisions
of the Investment Advisory Agreements, Investment Subadvisory
Agreements, Distribution Services Agreements, Management Agreements,
Transfer Agency Agreement and Fund Accounting Agreement of Registrant
filed as Exhibits (d)(1), (d)(2), (d)(3), (d)(4), (d)(5), (e), (g)(2)
and (h)(1) to Registrant's Registration Statement and incorporated
herein by reference.
3
<PAGE>
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling
persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by a
trustee, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such trustee,
officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser
(a) Norwest Investment Management, Inc.
The description of Norwest Investment Management, Inc. ("NIM"), under
the caption "Management-Advisor" or Management of the Funds-Norwest
Investment Management" in each Prospectus and under the caption
"Management-Adviser" or "Management -Investment Advisory
Services-Norwest Investment Management" in each Statement of Additional
Information constituting Parts A and B, respectively, of this
Registration Statement is incorporated by reference herein.
The following are the directors and principal executive officers of
NIM, including their business connections which are of a substantial
nature. The address of Norwest Corporation, the parent of Norwest Bank
Minnesota, N.A. ("Norwest Bank"), which is the parent of NIM, is
Norwest Center, Sixth Street and Marquette Avenue, Minneapolis, MN
55479. Unless otherwise indicated below, the principal business address
of any company with which the directors and principal executive
officers are connected is also Sixth Street and Marquette Avenue,
Minneapolis, MN 55479.
<TABLE>
<S> <C> <C>
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
P. Jay Kiedrowski Chairman, Chief Executive Officer, Norwest Investment Management,
President Inc.
------------------------------------ ----------------------------------
Executive Vice President, Employee Norwest Bank Minnesota, N.A.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Crestone Capital Management, Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Galliard Capital Management, Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
James W. Paulsen Senior Vice President, Chief Norwest Investment Management,
Investment Officer Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Stephen P. Gianoli Senior Vice President, Chief Norwest Investment Management,
Executive Officer Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Crestone Capital Management, Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
David S. Lunt Vice President, Senior Portfolio Norwest Investment Management,
Manager Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Richard C. Villars Vice President, Senior Portfolio Norwest Investment Management,
Manager Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Lee K. Chase Senior Vice President Norwest Investment Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
4
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Andrew Owen Vice President Norwest Investment Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Eileen A. Kuhry Investment Compliance Specialist Norwest Investment Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
</TABLE>
(b) Schroder Investment Management North America Inc.
The description of Schroder Investment Management North America Inc.
("SIMNA") under the caption "Management of the Funds-Investment
Advisory Services-Schroder Investment Management North America Inc." in
the Prospectus and "Management-Investment Advisory Services" in the
Statement of Additional Information relating to International Fund
constituting certain of Parts A and B, respectively, of the
Registration Statement, is incorporated by reference herein.
The following are the directors and principal officers of SIMNA,
including their business connections of a substantial nature. The
address of each company listed, unless otherwise noted, is 787 Seventh
Avenue, 34th Floor, New York, NY 10019. Schroder Capital Management
International Limited ("Schroder Ltd.") is a United Kingdom affiliate
of SIMNA which provides investment management services to international
clients located principally in the United States.
<TABLE>
<S> <C> <C>
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
David M. Salisbury Chairman, Director SIMNA
------------------------------------ ----------------------------------
Chief Executive, Director Schroder Ltd.*
------------------------------------ ----------------------------------
Director Schroders plc.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Schroder Series Trust II
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Richard R. Foulkes Deputy Chairman, Director SIMNA
------------------------------------ ----------------------------------
Deputy Chairman Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SIMNA and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
John A. Troiano Chief Executive, Director SIMNA
------------------------------------
----------------------------------
Chief Executive, Director Schroder Ltd.*
------------------------------------ ----------------------------------
----------------------------------
Officer Certain open end management
investment companies for which
SIMNA and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Sharon L. Haugh Executive Vice President, Director SIMNA
----------------------------------
------------------------------------ ----------------------------------
Director, Chairman Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
Director Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman, Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee Certain open end management
investment companies for which
SIMNA and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Gavin D. L. Ralston Senior Vice President, Managing SIMNA
Director
------------------------------------ ----------------------------------
Director Schroder Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
5
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Mark J. Smith Senior Vice President, Director SIMNA
------------------------------------ ----------------------------------
Senior Vice President, Director Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Certain open end management
investment companies for which
SIMNA and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Robert G. Davy Senior Vice President, Director SIMNA
------------------------------------ ----------------------------------
Director Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SIMNA and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jane P. Lucas Senior Vice President, Director SIMNA
------------------------------------ ----------------------------------
Director Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SIMNA and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
David R. Robertson Group Vice President SIMNA
------------------------------------ ----------------------------------
Senior Vice President Schroder Fund Advisors Inc.
----------------------------------
------------------------------------
Director of Institutional Business Oppenheimer Funds, Inc.
resigned 2/98
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Michael M. Perelstein Senior Vice President, Director SIMNA
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Senior Vice President, Director Schroder Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Louise Croset First Vice President, Director SIMNA
------------------------------------ ----------------------------------
First Vice President Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Schroder Series Trust II
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Ellen B. Sullivan Group Vice President, Director SIMNA
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Catherine A. Mazza Group Vice President SIMNA
------------------------------------ ----------------------------------
President, Director Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Certain open-end management
investment companies for which
SIMNA and/or its affiliates
provide investment services.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Heather Crighton First Vice President, Director SIMNA
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
6
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Fariba Talebi Group Vice President SIMNA
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open-end management
investment companies for which
SIMNA and/or its affiliates
provide investment services.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Ira Unschuld Group Vice President SIMNA
------------------------------------ ----------------------------------
Officer Certain open-end management
investment companies for which
SIMNA and/or its affiliates
provide investment services.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Paul M. Morris Senior Vice President SIMNA
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Susan B. Kenneally First Vice President, Director SIMNA
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jennifer A. Bonathan First Vice President, Director SIMNA
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
</TABLE>
*Schroder Ltd and Schroders plc. are located at 31 Gresham St., London EC2V 7QA,
United Kingdom.
(c) Peregrine Capital Management, Inc.
The description of Peregrine Capital Management, Inc. ("Peregrine")
under the caption "Management-SubAdviser" in the Prospectus and
"Management-Adviser-SubAdviser-Diversified Bond Fund, Strategic Income
Fund, Moderate Balanced Fund, Growth Balanced Fund, Diversified Equity
Fund, Growth Equity Fund, Large Company Growth Fund and Small Company
Growth Fund in the Statement of Additional Information relating to
Diversified Bond Fund, Strategic Income Fund, Moderate Balanced Fund,
Growth Balanced Fund, Diversified Equity Fund, Growth Equity Fund,
Large Company Growth Fund and Small Company Growth Fund, constituting
certain of Parts A and B, respectively, of the Registration Statement,
is incorporated by reference herein.
The following are the directors and principal executive officers of
Peregrine, including their business connections which are of a
substantial nature. The address of Peregrine is LaSalle Plaza, 800
LaSalle Avenue, Suite 1850, Minneapolis, Minnesota 55402 and, unless
otherwise indicated below, that address is the principal business
address of any company with which the directors and principal executive
officers are connected.
<TABLE>
<S> <C> <C>
------------------------------------ ------------------------------------ ----------------------------------
Name (Address if Different) Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
James R. Campbell Director Peregrine Capital Management,
Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Sixth and Marquette Ave., President, Chief Executive Norwest Bank
Minneapolis, MN 55479-0116 Officer, Director
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Patricia D. Burns Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Tasso H. Coin Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
7
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
John S. Dale Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Julie M. Gerend Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
William D. Giese Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Daniel J. Hagen Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Ronald G. Hoffman Senior Vice President, Secretary Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Frank T. Matthews Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jeannine McCormick Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Barbara K. McFadden Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Robert B. Mersky Chairman, President, Chief Peregrine Capital Management,
Executive Officer Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Gary E. Nussbaum Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
James P. Ross Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jonathan L. Scharlau Assistant Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jay H. Strohmaier Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Paul E. von Kuster Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Janelle M. Walter Assistant Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Paul R. Wurm Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
J. Daniel Vendermark Vice President Peregrine Capital Management,
Sixth and Marquette Avenue Inc.
Minneapolis, MN 55479-1013
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Albert J. Edwards Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Douglas G. Pugh Senior Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Colin Sharp Vice President Peregrine Capital Management,
Inc.
------------------------------------ ------------------------------------ ----------------------------------
</TABLE>
8
<PAGE>
(d) Galliard Capital Management, Inc.
The description of Galliard Capital Management, Inc. ("Galliard") under
the caption "Management-SubAdviser" in the Prospectus and
"Management-Adviser-SubAdviser-Stable Income Fund, Diversified Bond
Fund, Strategic Income Fund, Moderate Balanced Fund and Growth Balanced
Fund" in the Statement of Additional Information relating to the Stable
Income Fund, Diversified Bond Fund, Strategic Income Fund, Moderate
Balanced Fund and Growth Balanced Fund", constituting certain of Parts
A and B, respectively, of the Registration Statement, is incorporated
by reference herein.
The following are the directors and principal executive officers of
Galliard, including their business connections which are of a
substantial nature. The address of Galliard is LaSalle Plaza, Suite
2060, 800 LaSalle Avenue, Minneapolis, Minnesota 55479 and, unless
otherwise indicated below, that address is the principal business
address of any company with which the directors and principal executive
officers are connected.
<TABLE>
<S> <C> <C>
------------------------------------ ------------------------------------ ----------------------------------
Name (Address if Different) Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
P. Jay Kiedrowski Chairman Galliard Capital Management, Inc.
------------------------------------ ----------------------------------
Sixth and Marquette Ave., Chairman, Chief Executive Officer, Norwest Investment Management,
Minneapolis, MN 55479 President Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Executive Vice President, Employee Norwest Bank Minnesota, N.A.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Crestone Capital Management, Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Richard Merriam Principal, Senior Portfolio Manager Galliard Capital Management, Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
John Caswell Principal, Senior Portfolio Manager Galliard Capital Management, Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Karl Tourville Principal, Senior Portfolio Manager Galliard Capital Management, Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Laura Gideon Senior Vice President of Marketing Galliard Capital Management, Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Leela Scattum Vice President of Operations Galliard Capital Management, Inc.
------------------------------------ ------------------------------------ ----------------------------------
</TABLE>
(e) Smith Asset Management, L.P.
The description of Smith Asset Management, L.P. ("Smith") under the
caption "Management-SubAdviser" in the Prospectus and
"Management-Adviser-SubAdviser-Performa Disciplined Growth Fund and
Performa Small Cap Value Fund" in the Statement of Additional
Information relating to Performa Disciplined Growth Fund and Performa
Small Cap Value Fund", constituting certain of Parts A and B,
respectively, of the Registration Statement, is incorporated by
reference herein.
The following are the directors and principal executive officers of
Smith, including their business connections which are of a substantial
nature. The address of Smith is 300 Crescent Court, Suite 750, Dallas,
Texas 75201 and, unless otherwise indicated below, that address is the
principal business address of any company with which the directors and
principal executive officers are connected.
<TABLE>
<S> <C> <C>
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Stephen S. Smith President, Chief Executive Officer Smith
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Partner Discovery Management
------------------------------------ ------------------------------------ ----------------------------------
9
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Stephen J. Summers Chief Operating Officer Smith
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Partner Discovery Management
------------------------------------ ------------------------------------ ----------------------------------
</TABLE>
(f) Wells Fargo Bank, N.A.
The description of Wells Fargo Bank, N.A. ("Wells Fargo Bank") in
Parts A and B of this Registration Statement is incorporated by
reference herein.
The following are the directors and principal executive officers of
Wells Fargo Bank, including their business connections, which are of a
substantial nature. The address of Wells Fargo Bank is 420 Montgomery
Street, San Francisco, California 94105 and, unless otherwise
indicated below, that address is the principal business address of any
company with which the directors and principal executive officers are
connected.
<TABLE>
<S> <C> <C>
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
H. Jesse Arnelle Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
455 Market Senior Partner Arnelle, Hastie, McGee, Willis &
Street San Francisco, CA 94105 Greene
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Armstrong World Industries, Inc.
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Eastman Chemical Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director FPL Group, Inc.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Michael R. Bowlin Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Highway 150 Chairman of the Board of Directors, Atlantic Richfield Co. (ARCO)
Santa Paula, CA 93060 Chief Executive Officer, Chief
Operating Officer and President
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Edward Carson Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
633 West Fifth Street Chairman of the Board and Chief First Interstate Bancorp
Los Angeles, CA 90071 Executive Officer
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Aztar Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Castle & Cook, Inc.
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Terra Industries, Inc.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
William S. Davilla Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
618 Michillinda Ave. President (Emeritus) and Director The Vons Companies, Inc.
Arcadia, CA 91007
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Pacific Gas & Electric Company
----------------------------------- ------------------------------------- ----------------------------------
10
<PAGE>
----------------------------------- ------------------------------------- ----------------------------------
Rayburn S. Dezember Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
3200 San Fernando Road Director CalMat Co.
Los Angeles, CA 90065
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Tejon Ranch Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director The Bakersfield Californian
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Trustee Whittier College
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Paul Hazen Chairman of the Board of Directors Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Chairman of the Board of Directors Wells Fargo & Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Phelps Dodge Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Safeway, Inc.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Robert K. Jaedicke Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Graduate School of Business Professor (Emeritus) Graduate School of Business
Stanford University Stanford University
Stanford, CA 94305
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Bailard Biehl & Kaiser Real
Estate Investment Trust, Inc.
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Boise Cascade Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director California Water Service Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Enron Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director GenCorp, Inc.
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Homestake Mining Company
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Thomas L. Lee Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
10302 Avenue 7 1/2 Chairman and Chief Executive Officer The Newhall Land and Farming
Firebaugh, CA 93622 Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director CalMat Co.
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director First Interstate Bancorp
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Ellen Newman Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
323 Geary Street President Ellen Newman Associates
Suite 507
San Francisco, CA 94102
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Chair (Emeritus) of the Board of University of California at San
Trustees Francisco Foundation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director California Chamber of Commerce
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Philip J. Quigley Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
130 Kearney Street Rm. 3700 San Chairman, President and Chief Pacific Telesis Group
Francisco, CA 94108 Executive Officer
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Carl E. Reichardt Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Columbia/HCA Healthcare
Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Ford Motor Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Newhall Management Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Pacific Gas and Electric Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Retired Chairman of the Board of Wells Fargo & Company
Directors and Chief Executive
Officer
----------------------------------- ------------------------------------- ----------------------------------
11
<PAGE>
----------------------------------- ------------------------------------- ----------------------------------
Donald B. Rice Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
2049 Century Park East President and Chief Executive Teledyne, Inc.
Los Angeles, CA 90067 Officer
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Retired Secretary The United States Air Force
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Vulcan Materials Company
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Richard J. Stegemeier Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Chairman (Emeritus) Unocal Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Foundation Health Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Halliburton Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Northrop Grumman Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Outboard Marine Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Pacific Enterprises
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director First Interstate Bancorp
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Susan G. Swenson Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
651 Gateway Blvd. President and Chief Executive Cellular One
San Francisco, CA 94080 Officer
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
David M. Tellep Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Retired Chairman of the Board and Martin Lockheed Corporation
Chief Executive Officer
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Edison International and
Southern California Edison
Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director First Interstate Bancorp
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Chang-Lin Tien Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Chancellor University of California at
Berkeley
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Raychem Corporation
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
John A. Young Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
3000 Hanover Street President, Chief Executive Officer Hewlett-Packard Company
Palo Alto, CA 9434 and Director
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Chevron Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Lucent Technologies
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Novell, Inc.
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Shaman Pharmaceuticals Inc.
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
William F. Zuendt Director Wells Fargo Bank
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
President Wells Fargo & Company
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director 3Com Corporation
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director California Chamber of Commerce
----------------------------------- ------------------------------------- ----------------------------------
</TABLE>
12
<PAGE>
(g) Wells Capital Management
The description of Wells Capital Management ("WCM") in Parts A and B of
this Registration Statement is incorporated by reference herein.
The following are the directors and principal executive officers of
WCM, including their business connections, which are of a substantial
nature. The address of WCM is 525 Market Street, San Francisco,
California 94105 and, unless otherwise indicated below, that address is
the principal business address of any company with which the directors
and principal executive officers are connected.
<TABLE>
<S> <C> <C>
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connection
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Allen J. Ayvazian Chief Equity Officer WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Robert Willis President and Chief Investment WCM
Officer
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Brigid Breen Chief Compliance Officer WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
John Burgess Investment Portfolio Manager WCM
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Financial Investment Adviser Independent Financial Adviser
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jose Casas Chief Operating Officer WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Larry Fernandes Principal WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jacqueline Anne Flippin Principal WCM
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Vice President and Investment McMorgan & Company (until 1/98)
Portfolio Manager
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Stephen Galiani Senior Principal WCM
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Qualivest Capital Management,
Inc. (until 5/97)
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Madeleine Gish Senior Principal WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Frank Greene Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Daniel Kokoska Investment Portfolio Manager WCM
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Assistant Portfolio Manager Bradford & Marzac, Inc. (until
2/98)
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
David Klug Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Kelli Ann Lee Managing Director WCM
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Group Human Resource Manager Wells Fargo Bank, N.A. (until
11/97)
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Kenneth Lee Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Melvin Lindsey Managing Director WCM
------------------------------------ ------------------------------------ ----------------------------------
13
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Clark Messman Chief Legal Officer WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Laura Milner Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Brian Mulligan Managing Director WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Michael Neitzke Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Thomas O'Malley Managing Director WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Clyde Ostler Director WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Guy Rounsaville Director WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Katherine Schapiro Senior Principal WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Gary Schlossberg Economist WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Paul Single Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Scott Smith Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Cynthia Tusan Performance Analyst/Investment WCM
Portfolio Manager
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Mary Walton Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Rex Wardlaw Senior Principal WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jeffrey Weaver Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Allen Wisniewski Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Thomas Zeifang Investment Portfolio Manager WCM
------------------------------------ ------------------------------------ ----------------------------------
</TABLE>
Item 27. Principal Underwriters
(a) Forum Fund Services, LLC, Registrant's underwriter, or its affiliate,
Forum Financial Services, Inc., serve as underwriter for the following
investment companies registered under the Investment Company Act of
1940, as amended:
The Cutler Trust Monarch Funds
Forum Funds Norwest Advantage Funds
Memorial Funds Norwest Select Funds
Sound Shore Fund, Inc.
(b) The following directors and officers of Forum Financial Services, Inc.
hold the following positions with Registrant. Their business address is
Two Portland Square, Portland, Maine 04101:
<TABLE>
<S> <C> <C>
------------------------------ ---------------------------------- -------------------------------------
Name Position with Underwriter Position with Registrant
------------------------------ ---------------------------------- -------------------------------------
------------------------------ ---------------------------------- -------------------------------------
John Y. Keffer President Chairman, President
------------------------------ ---------------------------------- -------------------------------------
David I. Goldstein Secretary Vice President and Secretary
------------------------------ ---------------------------------- -------------------------------------
Sara M. Morris Treasurer Vice President and Treasurer
------------------------------ ---------------------------------- -------------------------------------
</TABLE>
(c) Not Applicable.
14
<PAGE>
Item 28. Location of Accounts and Records
The majority of accounts, books and other documents required to be
maintained by 31(a) of the Investment Company Act of 1940 and the Rules
thereunder are maintained at the offices of Forum Financial Services,
Inc. at Two Portland Square, Portland, Maine 04101, at Forum
Shareholder Services, LLC, Two Portland Square, Portland, Maine 04101
and Forum Administrative Services, LLC, Two Portland Square, Portland,
Maine 04101. The records required to be maintained under Rule
31a-1(b)(1) with respect to journals of receipts and deliveries of
securities and receipts and disbursements of cash are maintained at the
offices of Registrant's custodian. The records required to be
maintained under Rule 31a-1(b)(5), (6) and (9) are maintained at the
offices of Registrant's investment advisers as indicated in the various
prospectuses constituting Part A of this Registration Statement.
Additional records are maintained at the offices of Norwest Bank
Minnesota, N.A., 733 Marquette Avenue, Minneapolis, MN 55479-0040,
Registrant's custodian and transfer agent and at the offices of Norwest
Investment Management, Inc., Norwest Center, Sixth Street and Marquette
Avenue, Minneapolis, MN 55479, Registrant's investment adviser.
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to
shareholders relating to the portfolio or class thereof to which the
prospectus relates upon request and without charge.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
post-effective amendment number 58 to Registrant's registration statement to be
signed on its behalf by the undersigned, duly authorized in the City of
Portland, State of Maine on September 14, 1999.
Norwest Advantage Funds
By:/s/John Y. Keffer
John Y. Keffer
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the following persons on
September 14, 1999.
(a) Principal Executive Officer
/s/ John Y. Keffer
John Y. Keffer
Chairman and President
(b) Principal Financial Officer
/s/ Sara M. Morris
Sara M. Morris
Treasurer
(c) A majority of the Trustees
/s/ John Y. Keffer
John Y. Keffer
Chairman
Robert C. Brown, Trustee
Donald H. Burkhardt, Trustee
James C. Harris, Trustee
Richard M. Leach, Trustee
Donald C. Willeke, Trustee
Timothy J. Penny, Trustee
John C. McCune, Trustee
By: /s/John Y. Keffer
John Y. Keffer
Attorney in Fact*
* Pursuant to powers of attorney filed as Other Exhibits A, B, C, D, E,
and F to this Registration Statement.
16
<PAGE>
SIGNATURES
On behalf of Core Trust (Delaware), being duly authorized, I have duly caused
this amendment to the Registration Statement of Norwest Advantage Funds to be
signed in the City of Portland, State of Maine on September 14, 1999.
Core Trust (Delaware)
By:/s/ John Y. Keffer
John Y. Keffer
President
17
<PAGE>
Index To Exhibits
Exhibit
(d)(1) Form of Investment Advisory Agreement between Registrant and Norwest
Investment Management, Inc. relating to Cash Investment Fund, Ready Cash
Investment Fund, U.S. Government Fund, Treasury Fund, Treasury Plus Fund,
Municipal Money Market Fund - Institutional Shares, Municipal Money Market
Fund - Investor Shares, Intermediate Government Income Fund, Diversified
Bond Fund, Stable Income Fund, Income Fund, Total Return Bond Fund, Limited
Term Tax-Free Fund, Limited Term Government Income Fund, Tax-Free Income
Fund, Colorado Tax-Free Fund, Minnesota Intermediate Tax-Free Fund,
Minnesota Tax-Free Fund, Strategic Income Fund, Moderate Balanced Fund,
Growth Balanced Fund, Aggressive Balanced-Equity Fund, Income Equity Fund,
Index Fund, ValuGrowth SM Stock Fund, Diversified Equity Fund, Growth
Equity Fund, Large Company Growth Fund, Diversified Small Cap Fund, Small
Company Stock Fund, Small Company Growth Fund, Small Cap Opportunities
Fund, International Fund, Performa Strategic Value Bond Fund, Performa
Disciplined Growth Fund, Performa Small Cap Value Fund and Performa Global
Growth Fund dated as of June 1, 1997, as amended December 1, 1998.
(d) (5) Form of Investment Subadvisory Agreement between Registrant and Smith
Asset Management, LP relating to Strategic Income Fund, Moderate Balanced
Fund, Growth Balanced Fund, Aggressive Balanced-Equity Fund, Diversified
Equity Fund, Growth Equity Fund, Diversified Small Cap Fund, Performa
Disciplined Growth Fund and Performa Small Cap Value Fund dated as of
October 1, 1997, as amended March 25, 1999.
(e) Form of Distribution Services Agreement between Registrant and Forum
Financial Services, Inc. relating to each series of Registrant dated as of
October 1, 1995, as amended April 26, 1999.
(h)(1) Form of Management Agreement between Registrant and Forum Financial
Services, Inc. relating to each series of Registrant dated as August 1,
1997, as amended June 1, 1999.
(h)(4) Form of Administration Agreement between Registrant and Forum
Administrative Services, LLC relating to Cash Investment Fund, Ready Cash
Investment Fund, U.S. Government Fund, Treasury Fund, Treasury Plus Fund,
Municipal Money Market Fund - Institutional Shares, Municipal Money Market
Fund - Investor Shares, Intermediate Government Income Fund, Diversified
Bond Fund, Stable Income Fund, Income Fund, Total Return Bond Fund, Limited
Term Tax-Free Fund, Limited Term Government Income Fund, Tax-Free Income
Fund, Colorado Tax-Free Fund, Minnesota Intermediate Tax-Free Fund,
Minnesota Tax-Free Fund, Strategic Income Fund, Moderate Balanced Fund,
Growth Balanced Fund, Aggressive Balanced-Equity Fund, Income Equity Fund,
Index Fund, ValuGrowthSM Stock Fund, Diversified Equity Fund, Growth Equity
Fund, Large Company Growth Fund, Diversified Small Cap Fund, Small Company
Stock Fund, Small Company Growth Fund, Small Cap Opportunities Fund,
International Fund, Performa Strategic Value Bond Fund, Disciplined Growth
Fund, Performa Small Cap Value Fund, Performa Global Growth Fund, Norwest
WealthBuilder II Growth Portfolio, Norwest WealthBuilder II Growth and
Income Portfolio and Norwest WealthBuilder II Growth Balanced Portfolio
dated as of October 1, 1996, as amended June 1, 1999.
(h)(5) Shareholder Servicing Agreement dated as of September 25, 1998.
(h)(6) Shareholder Servicing Plan.
(i)(1) Opinion of Seward & Kissel.
(l) Investment Representation letter of John Y. Keffer as original
purchaser of shares of stock of Registrant.
(m)(1) Rule 12b-1 Plan adopted by Registrant relating to Exchange Shares of
Ready Cash Investment Fund, Investor B Shares of Stable Income Fund,
Intermediate Government Income Fund, Income Fund, Total Return Bond Fund,
Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota Tax-Free Fund,
Growth Balanced Fund, Income Equity Fund, ValuGrowthSM Stock Fund,
Diversified Equity Fund, Growth Equity Fund, Large Company Growth Fund,
Diversified Small Cap Fund, Small Company Stock Fund, Small Company Growth
Fund, Small Cap Opportunities Fund and International Fund and Investor C
Shares of Norwest WealthBuilder II Growth Balanced Fund, Norwest
WealthBuilder II Growth and Income Fund and Norwest WealthBuilder II Growth
Fund dated as of August 1, 1993, as amended April 26, 1999.
(m)(3) Rule 12b-1 Plan adopted by Registrant relating to A Shares of Large
Company Growth Fund, Growth Balanced Fund and Diversified Small Cap Fund
dated as of October 5, 1998.
18
<PAGE>
Exhibit (d)(1)
NORWEST ADVANTAGE FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 1st day of June, 1997, as amended the 1st day
of December, 1998, between Norwest Advantage Funds (the "Trust"), a business
trust organized under the laws of the State of Delaware with its principal place
of business at Two Portland Square, Portland, Maine 04101 and Norwest Investment
Management, Inc. (the "Adviser"), a corporation organized under the laws of the
State of Minnesota with its principal place of business at Sixth Street and
Marquette, Minneapolis, Minnesota 55479.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended, (the "Act") as an open-end management investment company and
is authorized to issue interests (as defined in the Trust's Trust Instrument),
in separate series;
WHEREAS, the Trust desires that the Adviser perform investment advisory
services for each series of the Trust as listed in Appendix A hereto (each a
"Fund" and collectively the "Funds"), and the Adviser is willing to provide
those services on the terms and conditions set forth in this Agreement;
NOW THEREFORE, the Trust and the Adviser agree as follows:
SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS
The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in its Trust Instrument, By-Laws and Registration Statement filed with
the Securities and Exchange Commission (the "Commission") under the Act and the
Securities Act of 1933 (the "Securities Act"), including any representations
made in the prospectus and statement of additional information relating to the
Funds contained therein and as may be supplemented from time to time, all in
such manner and to such extent as may from time to time be authorized by the
Trust's Board of Trustees (the "Board"). The Trust is currently authorized to
issue thirty-nine series of shares, and the Board is authorized to issue any
unissued shares in any number of additional classes or series. The Trust has
delivered copies of the documents listed in this Section 1 and will from time to
time furnish Adviser with any amendments thereof.
SECTION 2. INVESTMENT ADVISER; APPOINTMENT
The Trust hereby employs Adviser, subject to the direction and control
of the Board, to manage the investment and reinvestment of the assets in the
Funds and, without limiting the generality of the foregoing, to provide other
services specified in Section 3 hereof.
SECTION 3. DUTIES OF THE ADVISER
(a) The Adviser shall make decisions with respect to all purchases and sales of
securities and other investment assets in the Funds. Among other things,
the Adviser shall make all decisions with respect to the allocation of the
Funds' investments in various securities or other assets, in investment
styles and, if applicable, in other investment companies or pooled vehicles
in which a Fund may invest. To carry out such decisions, the Adviser is
hereby authorized, as agent and attorney-in-fact for the Trust, for the
account of, at the risk of and in the name of the Trust, to place orders
and issue instructions with respect to those transactions of the Funds. In
all purchases, sales and other transactions in securities for the Funds,
the Adviser is authorized to exercise full discretion and act for the Trust
in the same manner and with the same force and effect as the Trust might or
could do with respect to such purchases, sales or other transactions, as
well as with respect to all other things necessary or incidental to the
furtherance or conduct of such purchases, sales or other transactions.
(b) The Adviser will report to the Board at each meeting thereof all changes in
the Funds since the prior report, and will also keep the Board informed of
important developments affecting the Trust, each Fund and the Adviser, and
on its own initiative, will furnish the Board from time to time with such
information as the Adviser may believe appropriate for this purpose,
1
<PAGE>
whether concerning the individual companies whose securities are included
in a Fund's holdings, the industries in which they engage, or the economic,
social or political conditions prevailing in each country in which a Fund
maintains investments. The Adviser will also furnish the Board with such
statistical and analytical information with respect to securities in the
Funds as the Adviser may believe appropriate or as the Board reasonably may
request. In making purchases and sales of securities for the Funds, the
Adviser will bear in mind the policies set from time to time by the Board
as well as the limitations imposed by the Trust's Trust Instrument, By-Laws
and Registration Statement under the Act and the Securities Act, the
limitations in the Act and in the Internal Revenue Code of 1986, as
amended, in respect of regulated investment companies and the investment
objectives, policies and restrictions of each Fund.
(c) The Adviser will from time to time employ or associate with such persons as
the Adviser believes to be particularly fitted to assist in the execution
of the Adviser's duties hereunder, the cost of performance of such duties
to be borne and paid by the Adviser. No obligation may be incurred on the
Trust's behalf in any such respect.
(d) The Adviser shall maintain records relating to portfolio transactions and
the placing and allocation of brokerage orders as are required to be
maintained by the Trust under the Act. The Adviser shall prepare and
maintain, or cause to be prepared and maintained, in such form, for such
periods and in such locations as may be required by applicable law, all
documents and records relating to the services provided by the Adviser
pursuant to this Agreement required to be prepared and maintained by the
Trust pursuant to the rules and regulations of any national, state, or
local government entity with jurisdiction over the Trust, including the
Commission and the Internal Revenue Service. The books and records
pertaining to the Trust which are in possession of the Adviser shall be the
property of the Trust. The Trust, or the Trust's authorized
representatives, shall have access to such books and records at all times
during the Adviser's normal business hours. Upon the reasonable request of
the Trust, copies of any such books and records shall be provided promptly
by the Adviser to the Trust or the Trust's authorized representatives.
(e) With respect to a Fund, the Adviser shall have no duties or obligations
pursuant to this Agreement, including any obligation to reimburse Fund
expenses pursuant to Section 4 hereof, during any period during which the
Fund invests all (or substantially all) of its investment assets in a
registered, open-end management investment company, or separate series
thereof, in accordance with Section 12(d)(1)(E) under the Act.
SECTION 4. EXPENSES
(a) The Adviser shall be responsible for that portion of the net expenses of
the Fund (except interest, taxes, brokerage, fees and other expenses paid
by the fund in accordance with an effective plan pursuant to Rule 12b-1
under the Act and organization expenses, all to the extent such exceptions
are permitted by applicable state law and regulation) incurred by the Fund
during the Fund's fiscal year or portion thereof that this Agreement is in
effect which, as to the Funds, in any such year exceeds the limits
applicable to the Fund under the laws or regulations of any state in which
shares of the Fund are qualified for sale (reduced pro rata for any portion
of less than a year) and which is not assumed by Forum Financial Services,
Inc., the Trust's manager and distributor, or any other person.
(b) The Trust hereby confirms that, subject to the foregoing, the Trust shall
be responsible and shall assume the obligation for payment of all the
Trust's other expenses, including: interest charges, taxes, brokerage fees
and commissions; certain insurance premiums; fees, interest charges and
expenses of the Trust's custodian, transfer agent and dividend disbursing
agent; telecommunications expenses; auditing, legal and compliance
expenses; costs of the Trust's formation and maintaining its existence;
costs of preparing and printing the Trust's prospectuses, statements of
additional information, account application forms and shareholder reports
and delivering them to existing and prospective shareholders; costs of
2
<PAGE>
maintaining books of original entry for portfolio and fund accounting and
other required books and accounts and of calculating the net asset value of
shares in the Trust; costs of reproduction, stationery and supplies;
compensation of the Trust's trustees, officers, employees and other
personnel performing services for the Trust who are not the Adviser's
employees or employees of Forum Financial Services, Inc. or affiliated
persons of either; costs of corporate meetings; registration fees and
related expenses for registration with the Commission and the securities
regulatory authorities of other countries in which the Trust's shares are
sold; state securities law registration fees and related expenses; fees and
out-of-pocket expenses payable to Forum Financial Services, Inc. under any
distribution, management or similar agreement; and all other fees and
expenses paid by the Trust pursuant to any distribution or shareholder
service plan adopted pursuant to Rule 12b-1 under the Act.
SECTION 5. STANDARD OF CARE
The Trust shall expect of the Adviser, and the Adviser will give the
Trust the benefit of, the Adviser's best judgment and efforts in rendering its
services to the Trust, and as an inducement to the Adviser's undertaking these
services the Adviser shall not be liable hereunder for any mistake of judgment
or in any event whatsoever, except for lack of good faith, provided that nothing
herein shall be deemed to protect, or purport to protect, the Adviser against
any liability to the Trust or to the Trust's security holders to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of the Adviser's duties hereunder, or by
reason of the Adviser's reckless disregard of its obligations and duties
hereunder.
SECTION 6. COMPENSATION
(a) In consideration of the foregoing, the Trust shall pay the Adviser, with
respect to each of the Funds, a fee at an annual rate as listed in Appendix
A hereto. Such fees shall be accrued by the Trust daily and shall be
payable monthly in arrears on the first day of each calendar month for
services performed hereunder during the prior calendar month. The Adviser's
reimbursement, if any, of a Fund's expenses as provided in Section 4
hereof, shall be estimated and paid to the Trust monthly in arrears, at the
same time as the Trust's payment to the Adviser for such month. Payment of
the advisory fee will be reduced or postponed, if necessary, with any
adjustments made after the end of the year.
(b) No fee shall be payable hereunder with respect to a Fund during any period
in which the Fund invests all (or substantially all) of its investment
assets in a single registered, open-end management investment company, or
separate series thereof, in accordance with Section 12(d)(1)(E) under the
1940 Act;
(c) The adviser shall receive a fee of 0.25% (0.35% in the case of the
WealthBuilder Portfolios and 0.00% for Cash Investment Fund) for asset
allocation services if a Fund invests some or all (or substantially all) of
its investment assets in two or more registered, open-end management
investment companies, or separate series thereof, in each case, in
accordance with Section 12(d)(1)(h) under the Act, the rules thereunder or
an exemptive order issued by the Commission exempting the Fund from the
provisions of Section 12(d)(1)(A) under the Act (a "Fund of Funds
structure")
(d) To the extent the Board determines that a Fund should invest a portion of
its assets directly in portfolio securities, rather than in a portfolio of
Core Trust (Delaware) or other portfolio, with respect to those assets the
Fund will pay the Adviser the same fee that the portfolio was paying its
adviser (the fees of each portfolio will be disclosed in the proxy
statement and prospectus).
SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund immediately
upon approval by a majority of the outstanding voting securities of that
Fund.
(b) This Agreement shall remain in effect with respect to a Fund for a period
of one year from the date of its effectiveness and shall continue in effect
for successive twelve-month periods (computed from each anniversary date of
the approval) with respect to the Fund; provided that such continuance is
specifically approved at least annually (I) by the Board or by the vote of
a majority of the outstanding voting securities of the Fund, and, in either
case, (ii) by a majority of the Trust's trustees who are not parties to
this Agreement or interested persons of any such party (other than as
trustees of the Trust); provided further, however, that if this Agreement
3
<PAGE>
or the continuation of this Agreement is not approved as to a Fund, the
Adviser may continue to render to that Fund the services described herein
in the manner and to the extent permitted by the Act and the rules and
regulations thereunder.
(c) This Agreement may be terminated with respect to a Fund at any time,
without the payment of any penalty, (I) by the Board or by a vote of a
majority of the outstanding voting securities of the Fund on 60 days'
written notice to the Adviser or (ii) by the Adviser on 60 days' written
notice to the Trust. This Agreement shall terminate upon assignment.
SECTION 8. ACTIVITIES OF THE ADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Adviser's right, or the
right of any of the Adviser's officers, directors or employees who may also be a
trustee, officer or employee of the Trust, or persons otherwise affiliated
persons of the Trust to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
corporation, trust, firm, individual or association.
SECTION 9. SUBADVISERS
At its own expense, the Adviser may carry out any of its obligations
under this Agreement by employing, subject to your supervision, one or more
persons who are registered as investment advisers pursuant to the Investment
Advisers Act of 1940, as amended, or who are exempt from registration thereunder
("Subadvisers"). Each Subadviser's employment will be evidenced by a separate
written agreement approved by the Board and, if required, by the shareholders of
the Fund. The Adviser shall not be liable hereunder for any act or omission of
any Subadviser, except to exercise good faith in the employment of the
Subadviser and except with respect to matters as to which the Adviser assumes
responsibility in writing.
SECTION 10. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the interest holders of the Fund shall
not be liable for any obligations of the Trust or of the Fund under this
Agreement, and the Adviser agrees that, in asserting any rights or claims under
this Agreement, it shall look only to the assets and property of the Trust or
the Fund to which the Adviser's rights or claims relate in settlement of such
rights or claims, and not to the Trustees of the Trust or the interest holders
of the Fund.
SECTION 11. "NORWEST" NAME
If the Adviser ceases to act as investment adviser to the Trust or any
Fund whose name includes the word "Norwest," or if the Adviser requests in
writing, the Trust shall take prompt action to change the name of the Trust any
such Fund to a name that does not include the word "Norwest." The Adviser may
from time to time make available without charge to the Trust for the Trust's use
any marks or symbols owned by the adviser, including marks or symbols containing
the word "Norwest" or any variation thereof, as the Adviser deems appropriate.
Upon the Adviser's request in writing, the Trust shall cease to use any such
mark or symbol at any time. The Trust acknowledges that any rights in or to the
word "Norwest" and any such marks or symbols which may exist on the date of this
Agreement or arise hereafter are, and under any and all circumstances shall
continue to be, the sole property of the Adviser. The Adviser may permit other
parties, including other investment companies, to use the word "Norwest" in
their names without the consent of the Trust. The Trust shall not use the word
"Norwest" in conducting any business other than that of an investment company
registered under the Act without the permission of the Adviser.
SECTION 12. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any manner
except by a written agreement properly authorized and executed by both
parties hereto and, if required by the Act, by a vote of a majority of the
outstanding voting securities of any Fund thereby affected. No amendment to
this Agreement or the termination of this Agreement with respect to a Fund
shall effect this Agreement as it pertains to any other Fund, nor shall any
such amendment require the vote of any of the Fund's shareholders.
4
<PAGE>
(b) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(c) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of Delaware.
(d) The terms "vote of a majority of the outstanding voting securities,"
"interested person," "affiliated person" and "assignment" shall have
the meanings ascribed thereto in the Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed effective as of the day and year first above written.
NORWEST ADVANTAGE FUNDS
By: John Y. Keffer
President
NORWEST INVESTMENT MANAGEMENT, INC.
By: P. Jay Kiedrowski
President
5
<PAGE>
NORWEST ADVANTAGE FUNDS
INVESTMENT ADVISORY AGREEMENT
Appendix A
July 28, 1998
<TABLE>
<S> <C>
P. Investment Advisory Fees
Fee as a % of the Annual
Funds of the Trust Average Daily Net Assets of the Fund
Cash Investment Fund,
Treasury Plus Fund,
Treasury Fund and
U.S. Government Fund 0.20% of the first $300 million of assets
0.16% for next $400 million of assets
0.12% of the remaining net assets
Ready Cash Investment Fund 0.40% of the first $300 million of assets
0.36% for next $400 million of assets
0.32% of the remaining net assets
Municipal Money Market Fund
0.35% of the first
$500 million of assets
0.325% for next $500
million of assets
0.30% of the remaining
net assets
Stable Income Fund 0.30%
Limited Term Government Income Fund 0.33%
Intermediate Government Income Fund 0.33%
Diversified Bond Fund 0.35%
Income Fund 0.50%
Total Return Bond Fund 0.50%
Limited Term Tax-Free Fund 0.50%
Minnesota Intermediate Tax-Free Fund 0.25%
Minnesota Tax-Free Fund and
Colorado Tax-Free Fund 0.50% of the first $300 million of assets
0.46% of next $400 million of assets
0.42% of the remaining net assets
Tax-Free Income Fund 0.50%
Strategic Income Fund 0.45%
Moderate Balanced Fund 0.53%
Growth Balanced Fund 0.58%
Aggressive Balanced-Equity Fund 0.63%
Index Fund 0.15%
Income Equity Fund 0.50%
6
<PAGE>
Fee as a % of the Annual
Funds of the Trust Average Daily Net Assets of the Fund
ValuGrowth Stock Fund 0.80% of the first $300 million of assets
0.76% of the next $400 million of assets
0.72% of the remaining net assets
Diversified Equity Fund 0.65%
Growth Equity Fund 0.90%
Large Company Growth Fund 0.65%
Diversified Small Cap Fund 0.90%
Small Company Stock Fund 0.90%
Small Company Growth Fund 0.90%
Small Cap Opportunities Fund 0.60%
International Fund 0.85%
Performa Strategic Value Bond Fund 0.50%
Performa Disciplined Growth Fund 0.90%
Performa Small Cap Value Fund 0.95%
Performa Global Growth Fund 0.65%
</TABLE>
7
<PAGE>
NORWEST ADVANTAGE FUNDS
INVESTMENT ADVISORY AGREEMENT
Appendix B
December 1, 1998
Norwest Investment Management, Inc.
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0046
November 10, 1998
Mr. John Y. Keffer
President
Norwest Advantage Funds
Two Portland Square
Portland, Maine 04101
Dear Mr. Keffer:
As you are aware, Norwest Advantage Funds (the "Trust"), MasterWorks
Funds Inc. ("Masterworks") and Managed Series Investment Trust ("MSIT") are
parties to the Agreement and Plan of Consolidation, dated as of November 10,
1998 (the "Plan"), by and among MasterWorks, for itself and on behalf of the
Growth Stock Fund (the GS Fund"), MSIT, for itself and on behalf of the Growth
Stock Master Portfolio, and the Trust, for itself and on behalf of the Large
Company Growth Fund (the "LCG Fund"). The Plan provides that the assets and
liabilities of the GS Fund will be conveyed to, and acquired and assumed by, the
LCG Fund, in exchange for shares of equal value of the LCG Fund which will
thereafter promptly be distributed to the shareholders of the GS Fund in
connection with its liquidation as described in the Plan (the "Consolidation"),
under the terms and conditions provided for in the Plan. The Plan provides that,
as a condition to the consummation of the Consolidation, the parties thereto
will receive an opinion of counsel to the Trust to the effect that the
Consolidation should constitute a reorganization within the meaning of Section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended (the
"Reorganization"). As an inducement for the Trust, on behalf of the LCG Fund, to
consummate the Consolidation, Norwest Investment Management, Inc. (the
"Adviser") is agreeing to indemnify the Trust and its Trustees and officers as
set forth below.
Pursuant to Section 12(a) of the Investment Advisory Agreement dated
June 1, 1997 between the Trust and the Adviser (the "Agreement"), the Trust and
the Adviser may amend the Agreement by a written agreement properly authorized
and executed by both parties thereto. The Trust and the Adviser hereby amend the
Agreement to add the following appendix:
Appendix B
(a) The Adviser (the "Indemnitor") hereby agrees to indemnify and hold the
Trust, its affiliates, successors and assigns, and each of their officers,
directors, trustees, and agents (the "Indemnitee(s)"), harmless from and
against any and all obligations, losses, claims, damages, costs, charges or
other expenses of every kind and character (including but not limited to
attorney's fees and litigation costs) ("Losses"), which may accrue or be
sustained by such Indemnitee(s) arising out of or as a result of a claim
that the Consolidation failed to constitute a Reorganization, except to the
extent that such loss is the proximate result of the negligence or willful
misconduct of an Indemnitee. "Losses" shall include all amounts paid in
settlement of any claim, demand, action, suit or proceeding, provided the
settlement is approved by the Indemnitor pursuant to paragraph (b) below,
and shall include all Losses arising from claims by shareholders of the GS
Fund based on a failure of the Consolidation to constitute a
Reorganization.
8
<PAGE>
(b) In the event any action, suit or other proceeding (a "case") is initiated
against any such Indemnitee(s) that may result in a claim against the
Indemnitor under this letter agreement, such Indemnitee(s) shall promptly
notify the Indemnitor in writing of the institution of such case (but the
failure to notify shall not relieve the Indemnitor from any liability it
may have pursuant to this letter agreement, except to the extent that the
Indemnitor is materially and adversely affected by such failure to notify)
and the Indemnitor shall be entitled to promptly assume the defense of such
case, including the employment of counsel reasonably satisfactory to such
Indemnitee(s) and payment of expenses. The Indemnitee(s) shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such Indemnitee(s)
unless (I) the Indemnitor fails to assume or pursue or unreasonably fails
to promptly assume or diligently pursue, the defense of such case; (ii) the
employment of such counsel shall have been authorized in writing by the
Indemnitor in connection with the defense of such case; (iii) the
Indemnitor shall not have promptly employed counsel reasonably satisfactory
to such Indemnitee(s) to have charge of the defense of such case; or (iv)
such Indemnitee(s) shall have been advised by counsel that there may be one
or more legal defenses available to it or them or to other Indemnitee(s)
which are different from or additional to those available to the Indemnitor
and which the Indemnitor will not or is not able to diligently pursue. In
any of these events, such reasonable fees and expenses of the
Indemnitee(s)' defense shall be borne by the Indemnitor and the Indemnitor
shall not have the right to direct the defense of such case on behalf of
the Indemnitee(s), it being understood, however, that the Indemnitor shall
not, in connection with any one such case or separate but substantially
similar or related cases in the same jurisdiction arising out of the same
general allegations or circumstances, be liable to any Indemnitee(s) for
the reasonable fees and expenses of more than one separate firm of
attorneys (in addition to local counsel). Anything in this paragraph to the
contrary notwithstanding, the Indemnitor shall not be liable for any
settlement of any claim, demand or case effected without its written
consent, which shall not be unreasonably withheld.
(c) If the Indemnitor defends any case, it shall do so at its own cost and
expense, holding the Indemnitee(s) harmless from all costs, fees, expenses,
debts, liabilities, and charges in connection with such defense; shall
diligently defend against such case; and, during the pendency of the case,
shall hold such Indemnitee(s)' business and assets free and harmless from
any attachment, execution, judgement, lien or other legal process.
(d) The rights of the Indemnitee(s) with respect to any claim that the
Consolidation failed to qualify as a Reorganization shall not be limited to
the indemnification described herein, and shall be in addition to, and
shall not be exclusive of, any other rights or remedies at law or in equity
that may accrue to such Indemnitee(s).
(e) It is expressly agreed that all obligations of the Indemnitor set forth in
this Agreement shall be binding upon its successors and assigns and shall
survive the Consolidation.
If the foregoing amendment is satisfactory to you, please sign and return
the enclosed copy of this letter to acknowledge your agreement.
Very truly yours,
- --------------------------------------------------------------------------------
P. Jay Kiedrowski
President
Norwest Investment Management, Inc.
Accepted and agreed to as of November 10, 1998
- --------------------------------------------------------------------------------
John Y. Keffer
President
Norwest Advantage Funds
cc: Donald Burkhardt
Vice Chairman of the Board of Trustees of
Norwest Advantage Funds and Chairman of
the Audit Committee
9
<PAGE>
Exhibit (d)(5)
NORWEST ADVANTAGE FUNDS
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of October, 1997, as amended on the
258th day of JulyMarch, 19998, among Norwest Advantage Funds (the "Trust"), a
business trust organized under the laws of the State of Delaware with its
principal place of business at Two Portland Square, Portland, Maine 04101,
Norwest Investment Management, Inc. (the "Adviser"), a corporation organized
under the laws of the State of Minnesota with its principal place of business at
Sixth Street and Marquette, Minneapolis, Minnesota 55479, and Smith Asset
Management, LP (the "Subadviser"), a limited partnership with its principal
place of business at 300 Crescent Court, Suite 750, Dallas, Texas 75201.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "Act") as an open-end management investment company and is
authorized to issue its shares of beneficial interest, no par value, in separate
series and classes; and
WHEREAS, the Trust and the Adviser desire that the Subadviser perform
investment advisory services for each series of the Trust as listed in Appendix
A hereto (each a "Fund" and collectively the "Funds"), and the Subadviser is
willing to provide those services on the terms and conditions set forth in this
Agreement;
NOW THEREFORE, the Trust, the Adviser and the Subadviser agree as
follows:
SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS
The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in its Trust Instrument, By-Laws and Registration Statement filed with
the Securities and Exchange Commission (the "Commission") under the Act and the
Securities Act of 1933 (the "Securities Act"), including any representations
made in the prospectus and statement of additional information relating to the
Funds contained therein and as may be supplemented from time to time, all in
such manner and to such extent as may from time to time be authorized by the
Trust's Board of Trustees (the "Board"). The Trust is currently authorized to
issue thirty-nine series of shares, and the Board is authorized to issue any
unissued shares in any number of additional classes or series. The Trust has
delivered copies of the documents listed in this Section 1 and will from time to
time furnish Subadviser with any amendments thereof.
SECTION 2. INVESTMENT ADVISER; APPOINTMENT
Subject to the direction and control of the Board, the Adviser manages
the investment and reinvestment of the assets of each Fund and provides for
certain management and services as specified in the Investment Advisory
Agreement between the Trust and the Adviser with respect to the Funds.
1
<PAGE>
Subject to the direction and control of the Board, the Subadviser shall
manage the investment and reinvestment of the assets of each Fund and, without
limiting the generality of the foregoing, shall provide the management and other
services specified below, all in such manner and to such extent as may be
directed from time to time by the Adviser.
SECTION 3. DUTIES OF THE SUBADVISER
(a) The Subadviser shall make decisions with respect to all purchases and sales
of securities and other investment assets in each Fund. To carry out such
decisions, the Subadviser is hereby authorized, as agent and
attorney-in-fact for the Trust, for the account of, at the risk of and in
the name of the Trust, to place orders and issue instructions with respect
to those transactions of the Funds. In all purchases, sales and other
transactions in securities for the Funds, the Subadviser is authorized to
exercise full discretion and act for the Trust in the same manner and with
the same force and effect as the Trust might or could do with respect to
such purchases, sales or other transactions, as well as with respect to all
other things necessary or incidental to the furtherance or conduct of such
purchases, sales or other transactions.
(b) The Subadviser will report to the Board at each meeting thereof all changes
in each Fund since the prior report, and will also keep the Board informed
of important developments affecting the Trust, the Funds and the
Subadviser, and on its own initiative, will furnish the Board from time to
time with such information as the Subadviser may believe appropriate for
this purpose, whether concerning the individual companies whose securities
are included in each Fund's holdings, the industries in which they engage,
or the economic, social or political conditions prevailing in each country
in which the Funds maintains investments. The Subadviser will also furnish
the Board with such statistical and analytical information with respect to
securities in the Funds as the Subadviser may believe appropriate or as the
Board reasonably may request. In making purchases and sales of securities
for the Funds, the Subadviser will bear in mind the policies set from time
to time by the Board as well as the limitations imposed by the Trust's
Trust Instrument, By-Laws, Registration Statement under the Act and the
Securities Act, the limitations in the Act and in the Internal Revenue Code
of 1986, as amended in respect of regulated investment companies and the
investment objectives, policies and restrictions of the Funds.
(c) The Subadviser may from time to time employ or associate with such persons
as the Subadviser believes to be particularly fitted to assist in the
execution of the Subadviser's duties hereunder, the cost of performance of
such duties to be borne and paid by the Subadviser. No obligation may be
incurred on the Trust's behalf in any such respect.
(d) The Subadviser shall maintain records relating to portfolio transactions
and the placing and allocation of brokerage orders as are required to be
maintained by the Trust under the Act. The Subadviser shall prepare and
maintain, or cause to be prepared and maintained, in such form, for such
periods and in such locations as may be required by applicable law, all
documents and records relating to the services provided by the Subadviser
pursuant to this Agreement required to be prepared and maintained by the
Trust pursuant to the rules and regulations of any national, state, or
local government entity with jurisdiction over the Trust, including the
Securities and Exchange Commission and the Internal Revenue Service. The
2
<PAGE>
books and records pertaining to the Trust that are in possession of the
Subadviser shall be the property of the Trust. The Trust, or the Trust's
authorized representatives, shall have access to such books and records at
all times during the Subadviser's normal business hours. Upon the
reasonable request of the Trust, copies of any such books and records shall
be provided promptly by the Subadviser to the Trust or the Trust's
authorized representatives.
SECTION 4. EXPENSES
Subject to any expense reimbursement arrangements between the Adviser
or others and the Trust, the Trust shall be responsible and shall assume the
obligation for payment of all of the Trust's expenses.
SECTION 5. STANDARD OF CARE
The Trust shall expect of the Subadviser, and the Subadviser will give
the Trust the benefit of, the Subadviser's best judgment and efforts in
rendering its services to the Trust, and as an inducement to the Subadviser's
undertaking these services the Subadviser shall not be liable hereunder for any
mistake of judgment or in any event whatsoever, except for lack of good faith,
provided that nothing herein shall be deemed to protect, or purport to protect,
the Subadviser against any liability to the Trust or to the Trust's security
holders to which the Subadviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the
Subadviser's duties hereunder, or by reason of the Subadviser's reckless
disregard of its obligations and duties hereunder.
SECTION 6. COMPENSATION
In consideration of the foregoing, the Adviser and not the Trust shall
pay the Subadviser a fee as shall be determined from time to time in writing
between the Adviser and the Subadviser.
SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective on the date first above written.
(b) This Agreement shall remain in effect for a period of one year from the
date of its effectiveness and shall continue in effect for successive
one-year periods; provided that such continuance is specifically approved
at least annually (I) by the Board or by the vote of a majority of the
outstanding voting securities of each Fund, and, in either case, (ii) by a
majority of the Trust's trustees who are not parties to this Agreement or
interested persons of any such party (other than as trustees of the Trust);
provided further, however, that if this Agreement or the continuation of
this Agreement is not approved, the Subadviser may continue to render the
services described herein in the manner and to the extent permitted by the
Act and the rules and regulations thereunder.
(c) This Agreement may be terminated at any time, without the payment of any
penalty, (I) by the Board or by a vote of a majority of the outstanding
3
<PAGE>
voting securities of each Fund on 60 days' written notice to the Subadviser
or (ii) by the Subadviser on 60 days' written notice to the Trust. This
Agreement shall terminate upon assignment unless prior approval of the
Board is obtained.
SECTION 8. ACTIVITIES OF THE SUBADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Subadviser's right, or
the right of any of the Subadviser's officers, directors or employees who may
also be a trustee, officer or employee of the Trust, or persons otherwise
affiliated persons of the Trust to engage in any other business or to devote
time and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any kind to
any other corporation, trust, firm, individual or association.
SECTION 9. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of the Funds shall not
be liable for any obligations of the Trust or of the Funds under this Agreement,
and the Subadviser agrees that, in asserting any rights or claims under this
Agreement, it shall look only to the assets and property of the Trust or the
Fund to which the Subadviser's rights or claims relate in settlement of such
rights or claims, and not to the Trustees of the Trust or the shareholders of
the Funds.
SECTION 10. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by both parties hereto and, if required by the Act, by a vote of a
majority of the outstanding voting securities of each Fund thereby
affected.
(b) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(c) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of Delaware.
(d) The terms "vote of a majority of the outstanding voting securities",
"interested person", "affiliated person" and "assignment" shall have
the meanings ascribed thereto in the Act.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed effective as of the day and year first above written.
NORWEST ADVANTAGE FUNDS
By: John Y. Keffer
President
NORWEST INVESTMENT MANAGEMENT, INC.
By: P. Jay Kiedrowski
President
SMITH ASSET MANAGEMENT, LP
By: Stephen S. Smith
Principal
5
<PAGE>
NORWEST ADVANTAGE FUNDS
INVESTMENT SUBADVISORY AGREEMENT
Appendix A
MarchJuly 258, 19998
Strategic Income Fund
Moderate Balanced Fund
Growth Balanced Fund
Aggressive Balanced-Equity Fund
Diversified Equity Fund
Growth Equity Fund
Diversified Small Cap Fund
Performa Disciplined Growth Fund
Performa Small Cap Value Fund
6
<PAGE>
NORWEST ADVANTAGE FUNDS
INVESTMENT SUBADVISORY AGREEMENT
FEE AGREEMENT
October 1, 1997, as amended JulyMarch 258, 19998
This fee agreement is made as of the 1st day of October, 1997, as
amended on the 258th day of JulyMarch, 19989, by and between Norwest Investment
Management, Inc. (the "Adviser") and Smith Asset Management, LP (the
"Subadviser") and
WHEREAS, the parties and Norwest Advantage Funds (the "Trust") have
entered into an Investment Subadvisory Agreement ("Subadvisory Agreement")
whereby the Subadviser provides investment management advice to each series of
the Trust as listed in Appendix A to the Subadvisory Agreement (each a "Fund"
and collectively the "Funds")
WHEREAS, the Subadvisory Agreement provides that the fees to be paid to
the Subadviser are to be as agreed upon in writing by the parties.
NOW THEREFORE, the parties agree that the fees to be paid to the
Subadviser under the Subadvisory Agreement shall be calculated as follows on a
monthly basis by applying the following annual rates per Fund:
for assets formerly invested in Disciplined Growth Portfolio- 0.35%:
0.35% on the first $175,000,000 0.00% on the next $50,000,000 0.25% on
the next $275,000,000 0.20% on all sums in excess of $500,000,000
for assets formerly invested in Small Cap Value Portfolio- 0.45%:
0.45% on the first $110,000,000 0.00% on the next $40,000,000 0.30% on
the next $150,000,000 0.25% on all sums in excess of $300,000,000
provided, that no fee shall be payable hereunder with respect to a Fund during
any period in which the Fund invests all (or substantially all) of its
investment assets in a registered, open-end, management investment company, or
separate series thereof, in accordance with and reliance upon Section
12(d)(1)(E) under the Act.
The net assets under management against which the foregoing fees are to
be applied are the net assets as of the last business day of each month. If this
fee agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this agreement is in effect shall be subject to a pro rata adjustment
7
<PAGE>
based on the number of days elapsed in the current month as a percentage of the
total number of days in such month. During any period when the determination of
net asset value is suspended, the net asset value for the last day prior to such
suspension shall for this purpose be deemed to be the month-end net assets.
The foregoing fee schedule shall remain in effect until changed in
writing by the parties.
NORWEST INVESTMENT MANAGEMENT, INC.
- --------------------------------------------------------------------------------
By: P. Jay Kiedrowski
President
SMITH ASSET MANAGEMENT, LP
- --------------------------------------------------------------------------------
By: Stephen S. Smith
Principal
8
<PAGE>
Exhibit (e)
NORWEST ADVANTAGE FUNDS
DISTRIBUTION SERVICES AGREEMENT
October 1, 1995
Amended April 26, 1999
AGREEMENT made the 1st day of October, 1995 as amended on the 26th day
of April 1999 between Norwest Advantage Funds (the "Trust"), a business trust
organized under the laws of the State of Delaware with its principal place of
business at Two Portland Square, Portland, Maine 04101 and Forum Financial
Services, Inc. ("Forum"), a corporation organized under the laws of State of
Delaware with its principal place of business at Two Portland Square, Portland,
Maine 04101.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
offers for sale continuously shares of beneficial interest, no par value, in
separate series and classes;
WHEREAS, Forum is a registered broker-dealer engaged in the business of
selling shares of registered investment companies either directly to purchasers
or through other securities dealers;
WHEREAS, the Trust desires that Forum, as principal underwriter, offer
the shares of each series of the Trust (each a Fund) and of each class thereof
as listed in Appendix A hereto (referred to as the "Shares") and Forum is
willing to so act as principal underwriter on the terms and conditions set forth
in this Agreement in order to promote the growth of the Funds and facilitate the
distribution of their Shares;
NOW, THEREFORE, the parties agree as follows:
SECTION 1. DELIVERY OF DOCUMENTS AND APPOINTMENT
(a) The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in the Trust's Trust Instrument, By-Laws and registration
statement filed with the Securities and Exchange Commission (the "SEC"),
under the Act and the Securities Act of 1933, as amended (the "Securities
Act"), including any representations made in a prospectus ("Prospectus") or
statement of additional information ("SAI") relating to a Fund contained
therein and as may be supplemented from time to time, all in such manner
and to such extent as may from time to time be authorized by the Trust's
Board of Trustees (the "Board"). The Trust is currently authorized to issue
the Shares and the Board is authorized to issue any unissued shares in any
number of additional series or classes. The Trust has delivered to Forum
copies of the documents listed in this Section and will from time to time
furnish Forum with any amendments thereof.
1
<PAGE>
(b) The Trust hereby appoints Forum as the principal underwriter and
distributor of the Funds to sell the Shares of the Funds to the public and
hereby agrees during the term of this Agreement to sell Shares of the Funds
to Forum upon the terms and conditions herein set forth.
SECTION 2. EXCLUSIVE NATURE OF DUTIES
Forum shall be the exclusive representative of the Trust to act as
principal underwriter and distributor of the Funds except that the rights given
under this Agreement to Forum shall not apply to Shares issued in connection
with the merger or consolidation of any other investment company with a Fund; a
Fund's acquisition by purchase or otherwise of all or substantially all of the
assets or stock of any other investment company; or the reinvestment in Shares
by a Fund's shareholders of dividends or other distributions or any other
offering by the Trust of securities to its stockholders.
SECTION 3. PURCHASE OF SHARES FROM THE TRUST; OFFERING OF SHARES
(a) Forum shall have the right to buy from the Trust the Shares needed to fill
unconditional orders for unsold Shares of the Funds as shall then be
effectively registered under the Securities Act placed with Forum by
investors or securities dealers or depository institutions or other
financial intermediaries acting as agent for their customers.
Alternatively, Forum may act as the Trust's agent, to offer, and to solicit
offers to subscribe to, unsold Shares of the Funds as shall then be
effectively registered under the Securities Act. Forum will promptly
forward all orders and subscriptions to the Trust. The price which Forum
shall pay for Shares purchased from the Trust and the price that Forum
shall offer Shares shall be the net asset value, determined as set forth in
Section 3(c) hereof, used in determining the public offering price on which
such orders are based. Shares purchased by Forum are to be resold by Forum
to investors at the public offering price, as set forth in Section 3(b)
hereof, or to securities dealers, depository institutions or other
financial intermediaries acting as agent for their customers that have
entered into agreements with Forum pursuant to Section 9 hereof. The Trust
reserves the right to sell Shares of the Funds directly to investors
through subscriptions received by the Trust, but no such direct sales shall
affect the sales charges due to Forum hereunder.
(b) The public offering price of the Shares of a Fund, i.e., the price per
Share at which Forum or selected dealers or selected agents (each as
defined in Section 9 hereof) may sell Shares to the public (or, in the case
of Exchange Shares of Ready Cash Investment Fund ("RCIF"), to shareholders
of B Shares or such other classes of Shares of a Fund as may from time to
time be permissible), shall be the public offering price determined in
accordance with the then currently effective Prospectus and SAI of the Fund
or class thereof under the Securities Act, relating to such Shares, but not
to exceed the net asset value at which Forum, when acting as principal, is
to purchase such Shares, plus, in the case of Shares for which an initial
sales charge is assessed, an initial charge equal to a specified percentage
or percentages of the public offering price of the Shares as set forth in
the current Prospectus relating to the Shares. In the case of Shares for
which an initial sales charge may be assessed, Shares may be sold to
certain classes of persons at reduced sales charges or without any sales
charge as from time to time set forth in the current Prospectus and SAI
2
<PAGE>
relating to the Shares. The Trust will advise Forum of the net asset value
per Share on any date requested by Forum and at such other times as it
shall have been determined by the Trust.
(c) The net asset value of Shares of the Funds shall be determined by the
Trust, or any agent of the Trust, as of the close of the New York Stock
Exchange on each Fund business day in accordance with the method set forth
in the Prospectus and SAI and guidelines established by the Board.
(d) The Trust reserves the right to suspend the offering of Shares of a Fund or
of any class thereof at any time in the absolute discretion of the Board,
and upon notice of such suspension Forum shall cease to offer Shares of the
Funds specified in the notice.
(e) The Trust, or any agent of the Trust designated in writing to Forum by the
Trust, shall be promptly advised by Forum of all purchase orders for Shares
received by Forum and all subscriptions for Shares obtained by Forum as
agent shall be directed to the Trust for acceptance and shall not be
binding until accepted by the Trust. Any order or subscription may be
rejected by the Trust; provided, however, that the Trust will not
arbitrarily or without reasonable cause refuse to accept or confirm orders
or subscriptions for the purchase of Shares. The Trust (or its agent) will
confirm orders and subscriptions upon their receipt, will make appropriate
book entries and, upon receipt by the Trust (or its agent) of payment
thereof, will issue such Shares in certificated or uncertificated form
pursuant to the instructions of Forum. Forum agrees to cause such payment
and such instructions to be delivered promptly to the Trust (or its agent).
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES BY THE TRUST
(a) Any of the outstanding Shares of a Fund or class thereof may be tendered
for redemption at any time, and the Trust agrees to redeem or repurchase
the Shares so tendered in accordance with its obligations as set forth in
the Trust's Trust Instrument and in accordance with the applicable
provisions set forth in the Prospectus and SAI relating to the Shares of
the Fund. The price to be paid to redeem or repurchase the Shares of a Fund
shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(b) hereof less, in the case of Shares for which a
deferred sales charge is assessed, a deferred sales charge equal to a
specified percentage or percentages of the net asset value of those Shares
as from time to time set forth in the Prospectus relating to those Shares
(or, in the case of Exchange Shares of RCIF, relating to Exchange Shares
and the original B Shares) or their cost (or, in the case of Exchange
Shares of RCIF, the cost of the B Shares of a Fund that were first
purchased by the shareholder and then exchanged, either directly or
indirectly through a series of exchanges, for the Exchange Shares (the
"Original B Shares")), whichever is less. Shares of a Fund or class thereof
for which a deferred sales charge may be assessed and that have been
outstanding for a specified period of time may be redeemed without payment
of a deferred sales charge as from time to time set forth in the Prospectus
relating to those Shares (or, in the case of Exchange Shares of RCIF,
3
<PAGE>
relating to the Original B Shares). All payments by the Trust hereunder
shall be made in the manner set forth below.
(b) The Trust (or its agent) shall pay the total amount of the redemption price
consisting of the redemption price less any applicable deferred sales
charge to the redeeming shareholder or its agent, and, except as may be
otherwise required by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD") and any
interpretations thereof, the deferred sales charges, if any, as defined in
the above paragraph pursuant to the instructions of Forum, in each case in
New York Clearing House funds on or before the seventh business day
subsequent to the Trust or its agent having received the notice of
redemption in proper form. Notwithstanding the termination of this
Agreement, Forum shall be entitled to receive its Allocable Portion (as
defined in Appendix B hereto) of all contingent deferred sales charges
("CDSCs") paid or payable with respect to the Shares in accordance with
Section 4(b) hereof.
(c) Redemption of Shares or payment may be suspended at times when the New York
Stock Exchange is closed for any reason other than its customary weekend or
holiday closings, when trading thereon is restricted, when an emergency
exists as a result of which disposal by the Trust of securities owned by a
Fund is not reasonably practicable or it is not reasonably practicable for
the Trust fairly to determine the value of a Fund's net assets, or during
any other period when the SEC, by order, so permits.
SECTION 5. COMPENSATION
(a) The Trust will pay Forum in consideration of its services in connection
with the distribution of Shares of each Fund its allocable portion
("Allocable Portion") (as determined in accordance with Appendix B to this
Agreement) of the distribution servicing fees allowable under the NASD
Rules of Fair Practice as in effect from time to time (the "NASD Rules") in
respect of such Shares of such Fund, which fee (the "Distribution Fee")
shall accrue daily and be paid monthly as promptly as possible after the
last day of each calendar month but in any event prior to the tenth (10th)
day of the following calendar month, at an annual rate set forth in the
distribution plan dated August 1, 1995 as amended July 28, 1998 (the
"Plan"), together with a separate interest fee thereon, as determined in
accordance with Section 3(c) of the Plan.
Forum will be deemed to have fully earned its Allocable Portion of the
Distribution Fee payable in respect of Shares of each Fund upon the sale of the
"Commission Shares" (as defined in Appendix B to this Agreement) of such Fund
taken into account in determining Forum's Allocable Portion of such Distribution
Fee.
(b) The Trust shall cause its transfer agent (the "Transfer Agent") to
withhold, from redemption proceeds payable to holders of Shares of the
Funds, all CDSCs properly payable by such holders in accordance with the
terms of the Prospectus relating to such Shares and shall cause the
Transfer Agent to pay such amounts over as promptly as possible after the
settlement date for each redemption of such Shares. Forum's Allocable
Portion of CDSC shall be payable to Forum (or to persons to whom Forum
directs the Trust to make payments).
4
<PAGE>
(c) Forum may direct the Trust to pay any part or all of the Distribution Fee
or CDSCs payable to Forum in respect of any Shares of any Fund directly to
persons providing funds to Forum to cover or otherwise enable the incurring
of expenses associated with distribution services, and the Trust agrees to
accept and to comply with such direction. Forum shall, at its own expense
and not the expense of the Trust or any Fund, provide the Trust with any
necessary calculations of Forum's Allocable Portion of any Distribution Fee
or CDSCs, and the Trust shall be entitled to rely conclusively on such
calculations, without prejudice to any claim it may have concerning the
accuracy of such calculations.
(d) Notwithstanding anything to the contrary contained in this Agreement or in
any relevant Plan, (a) the amount of asset-based sales charges and CDSCs
paid to Forum by any class of Shares of any Fund shall not exceed the
amount permitted by the NASD Rules, as in effect from time to time, and (b)
the aggregate amount of asset-based sales charges and CDSCs paid to Forum
by any class of Shares of any Fund shall not exceed six and one-quarter
percent (6 1/4%) of the total issue price of such Shares plus interest
thereon from the date of issuance through the date of payment at the prime
rate (determined in accordance with the NASD Rules in effect from time to
time) plus one percent (1%) per annum.
(e) The Trust will pay to Forum each month a maintenance fee with respect to
each Fund or class thereof in the amounts, for the periods, and at the
annual rates set forth in the Prospectus relating to the Shares of the
Fund.
(f) Except as provided in clauses (a), (b) and (e) of Section 5 hereof, Forum
shall be entitled to no compensation for its services hereunder.
SECTION 6. ASSIGNMENT
(a) Forum may, from time to time, assign, transfer or pledge ("Transfer") to
one or more designees (each an "Assignee"), its rights to all or a
designated portion of (I) the Forum's Allocable Portion of the Distribution
Fees (but not Forum's duties and obligations pursuant hereto or pursuant to
the Plan), and (ii) Forum's Allocable Portion of CDSCs, free and clear of
any offsets or claims the Trust may have against Forum. Each such
Assignee's interest in a designated portion of a Forum's Allocable Portion
of the Distribution Fees and a Forum's Allocable Portion of CDSCs is
hereinafter referred to as an "Assignee's 12b-1 Portion" and an "Assignee's
CDSC Portion," respectively. A Transfer pursuant to this Section 6(a) shall
not reduce or extinguish any claim of the Trust against Forum.
(b) Forum shall promptly notify the Trust in writing of each Transfer pursuant
to Section 6(a) hereof by providing the Trust with the name and address of
each such Assignee.
5
<PAGE>
(c) In connection with a Transfer Forum may direct the Trust to pay all of such
Distributor's Allocable Portion of the Distribution Fees and the
Distributor's Allocable Portion of CDSCs from time to time to a depository
or collection agent designated by any Assignee, which depository or
collection agent may be delegated the duty of dividing the Distributor's
Allocable Portion of the Distribution Fees and the Distributor's Allocable
Portion of CDSC between the Assignee's 12b-1 Portion and Assignee's CDSC
Portion and the balance of Distributor's Allocable Portion (such balance,
when distributed to Forum by the depository or collection agent,
"Distributor's 12b-1 Share") and of the Distributor's Allocable Portion of
CDSCs (such balance, when distributed to Forum by the depository or
collection agent, the "Distributor's Earned CDSC Portion"), in which case
only Distributor's 12b-1 Share and the Distributor's Forum's Earned CDSC
Portion may be subject to offsets or claims the Trust may have against
Forum.
(d) The Trust shall not amend the Plan to reduce the amount payable to Forum or
any Assignee under Section 5(a) hereof with respect to the B Shares for any
B Shares which have been issued prior to the date of such amendment.
SECTION 7. DUTIES AND REPRESENTATIONS OF THE TRUST
(a) The Trust shall furnish to Forum copies of all information, financial
statements and other papers which Forum may reasonably request for use in
connection with the distribution of Shares of the Funds, including, upon
request by Forum, one certified copy of all financial statements prepared
for the Funds by independent public accountants. The Trust shall make
available to Forum such number of copies of the Funds' Prospectuses and
SAIs as Forum shall reasonably request.
(b) The Trust shall take, from time to time, subject to the approval of its
Trustees and any required approval of its shareholders, all action
necessary to fix the number of authorized shares of the Funds (if such
number is not limited) and to register the Shares under the Securities Act,
to the end that there will be available for sale such number of Shares as
Forum reasonably may be expected to sell.
(c) The Trust and Forum will cooperate with each other in taking such action as
may be necessary to qualify Shares for sale under the securities laws of
such states and other jurisdictions as the Trust may designate; provided
that Forum shall not be required to register as a broker-dealer or file a
consent to service of process in such states. Any such qualification may be
withheld, terminated or withdrawn by the Trust at any time in its
discretion. Forum shall furnish such information and other material
relating to its affairs and activities as may be required by the Trust in
connection with such qualification. The Trust will pay all fees and
expenses of registering Shares under the Securities Act and of
qualification and the maintenance of qualification of Shares and its
qualification under applicable state securities laws. Forum shall pay all
expenses relating to Forum's broker-dealer qualification.
6
<PAGE>
(d) The Trust will furnish, in reasonable quantities upon request by Forum,
copies of annual and interim reports of the Funds.
(e) The Trust represents that its Registration Statement under the Securities
Act and the Trust's Prospectuses included therein (as in effect from time
to time) have been or will be, as the case may be, carefully prepared in
conformity with the requirements of the Securities Act and the rules and
regulations of the SEC thereunder. The Trust represents and warrants that
its Registration Statement and Prospectuses contain or will contain all
statements required to be stated therein in accordance with the Securities
Act and the rules and regulations of the SEC, and that all statements of
fact contained or to be contained therein are or will be true and correct
at the time indicated or on the effective date as the case may be; that
neither its Registration Statement nor its Prospectuses, when they shall
become effective or be authorized for use, will include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading to a
purchaser of Shares. The Trust will from time to time file such amendment
or amendments to its Registration Statement and Prospectuses as, in the
light of future developments, shall, in the opinion of its counsel, be
necessary in order to have its Registration Statement and Prospectuses at
all times contain all material facts required to be stated therein or
necessary to make any statements therein not misleading to a purchaser of
Shares, but, if the Trust shall not file such amendment or amendments
within fifteen days following receipt of a written request from Forum to do
so, Forum may, at its option, terminate this agreement immediately. The
Trust shall not file any amendment to its Registration Statement or
Prospectuses without giving Forum reasonable notice thereof in advance;
provided, however, that nothing contained in this agreement shall in any
way limit the Trust's right to file at any time such amendments to its
Registration Statement or Prospectuses, of whatever character, as the Trust
may deem advisable, such right being in all respects absolute and
unconditional. The Trust represents and warrants that any amendment to its
Registration Statement or Prospectuses hereafter filed will, when they
becomes effective, contain all statements required to be stated therein in
accordance with the Act and the rules and regulations of the SEC, that all
statements of fact contained therein will, when the same shall become
effective, be true and correct and that no such amendment, when it becomes
effective, will include an untrue statement of a material fact or will omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading to a purchaser of the Shares.
SECTION 8. DUTIES OF FORUM
(a) Forum shall use its best efforts to sell Shares of the Funds upon the terms
and conditions contained herein and in the then current Prospectus. Forum
shall devote reasonable time and effort to effect sales of Shares of the
Funds, but shall not be obligated to sell any specific number of Shares.
The services of Forum to the Trust hereunder are not to be deemed exclusive
and nothing herein contained shall prevent Forum from entering into like
arrangements with other investment companies so long as the performance of
its obligations hereunder is not impaired thereby.
7
<PAGE>
(b) In selling Shares of the Funds, Forum shall use its best efforts in all
material respects duly to conform with the requirements of all federal and
state laws relating to the sale of such securities. None of Forum, any
selected dealer, any selected agent, or any other person is authorized by
the Trust to give any information or to make any representations other than
as is contained in a Fund's Prospectus and SAI, as from time to time in
effect, or any sales literature specifically approved in writing by the
Trust.
(c) Forum shall adopt and follow procedures, as approved by the officers of the
Trust, for the confirmation of sales to investors and selected dealers or
selected agents, the collection of amounts payable by investors and
selected dealers or selected agents on such sales, and the cancellation of
unsettled transactions, as may be necessary to comply with the requirements
of the NASD as may from time to time exist.
SECTION 9. SELECTED DEALER AND SELECTED AGENT AGREEMENTS
Forum shall have the right to enter into selected dealer agreements
with securities dealers of its choice ("selected dealers") and selected agent
agreements with depository institutions and other financial intermediaries of
its choice ("selected agents") for the sale of Shares of the Funds and to fix
therein the portion of the sales charge that may be allocated to the selected
dealers or selected agents; provided, that the Trust shall approve the forms of
agreements with selected dealers or selected agents and the compensation set
forth therein. Shares of each Fund shall be resold by selected dealers or
selected agents only at the public offering price(s) set forth in the Prospectus
and SAI relating to the Shares of the Fund. Within the United States, Forum
shall offer and sell Shares of the Funds only to such selected dealers as are
members in good standing of the NASD.
SECTION 10. PAYMENT OF EXPENSES
(a) The Trust shall bear all costs and expenses of the Funds, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of its Registration Statement and Prospectuses and
SAIs and all amendments and supplements thereto and the preparing and
mailing of annual and interim reports and proxy materials to shareholders
(including but not limited to the expense of setting in type any
registration statements, prospectuses, annual or interim reports or proxy
materials).
(b) The Trust shall bear the cost and expenses of the qualification of Shares
of the Funds for sale, and, if necessary or advisable in connection
therewith, of qualifying the Trust (but not Forum) as an issuer or as a
broker or dealer, in such states of the United States or other
jurisdictions as shall be selected by the Trust and Forum pursuant to
Section 7(c) hereof and the costs and expenses payable to each state or
jurisdiction for continuing qualification therein until the Trust decides
to discontinue qualification pursuant to Section 7(c) hereof.
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<PAGE>
SECTION 11. INDEMNIFICATION OF FORUM
The Trust agrees to indemnify, defend and hold Forum, and any person
who controls Forum within the meaning of Section 15 of the Securities Act, free
and harmless from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending such claims, demands
or liabilities and any counsel fees incurred in connection therewith) which
Forum or any such controlling person may incur, under the Securities Act, or
under common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Trust's Registration Statement or
the Prospectuses or SAIs in effect from time to time under the Securities Act or
arising out of or based upon any alleged omission to state a material fact
required to be stated in any one thereof or necessary to make the statements in
any one thereof not misleading; provided, however, that in no event shall
anything herein contained be so construed as to protect Forum against any
liability to the Trust or its security holders to which Forum would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of Forum's reckless disregard of its
obligations and duties under this Agreement. The Trust's agreement to indemnify
Forum and any such controlling person as aforesaid is expressly conditioned upon
the Trust's being notified of the commencement of any action brought against
Forum or any such controlling person, such notification to be given by letter or
by telegram addressed to the Trust at its principal office in New York, New
York, and sent to the Trust by the person against whom such action is brought
within ten days after the summons or other first legal process shall have been
served. The Trust will be entitled to assume the defense of any suit brought to
enforce any such claim and to retain counsel of good standing chosen by the
Trust and approved by Forum. In the event the Trust elects to assume the defense
of any such suit and retain counsel of good standing approved by Forum, the
defendants in the suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case the Trust does not elect to assume
the defense of the suit or in case Forum does not approve of counsel chosen by
the Trust, the Trust will reimburse Forum or the controlling person or persons
named defendant or defendants in the suit for the fees and expenses of any
counsel retained by Forum or such persons. The indemnification agreement
contained in this Section shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of Forum or any controlling
person and shall survive the sale of any of a Fund's Shares made pursuant to
subscriptions obtained by Forum. This agreement of indemnity will inure
exclusively to the benefit of Forum, to the benefit of its successors and
assigns, and to the benefit of any controlling persons and their successors and
assigns. The Trust agrees promptly to notify Forum of the commencement of any
litigation or proceeding against the Trust in connection with the issue and sale
of any of the Shares of the Funds. The failure to notify the Trust of the
commencement of any such action shall not relieve the Trust from any liability
which it may have to the person against whom the action is brought by reason of
any alleged untrue statement or omission otherwise than on account of the
indemnity agreement contained in this Section.
SECTION 12. INDEMNIFICATION OF THE TRUST
Forum agrees to indemnify, defend and hold the Trust, its several
officers and trustees, and any person who controls the Trust within the meaning
of Section 15 of the Securities Act, free and harmless from and against any and
all claims, demands, liabilities, and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or
trustees, or any such controlling person may incur under the Securities Act or
under common law or otherwise, but only to the extent that such liability or
expense incurred by the Trust, its officers and trustees or controlling person
resulting from such claims or demands shall arise out of or be based upon (I)
9
<PAGE>
any alleged untrue statement of a material fact contained in information
furnished in writing by Forum to the Trust for use in its Registration Statement
insofar as it relates to a Fund or the Prospectuses or SAIs relating to a Fund
in effect from time to time under the Securities Act, (ii) any alleged omission
to state a material fact in connection with such information required to be
stated in the Registration Statement, a Prospectus or a SAI or necessary to make
the information not misleading or (iii) willful misfeasance, bad faith or gross
negligence in the performance by Forum of its duties, or by reason of Forum's
reckless disregard of its obligations and duties under this Agreement. Forum's
agreement to indemnify the Trust, its officers and trustees and any controlling
person as aforesaid is expressly conditioned upon Forum being notified of the
commencement of any action brought against the Trust, its officers or trustees
or any controlling person, such notification to be given by letter or telegram
addressed to Forum at its principal office in New York, New York, and sent to
Forum by the person against whom the action is brought, within ten days after
the summons or other first legal process shall have been served. Forum will be
entitled to assume the defense of the action, with counsel in good standing of
its own choosing approved by the Trust, if the action is based solely upon
alleged misstatement, omission or action described in clauses (I), (ii) or
(iii), above and in any other event Forum and the Trust, and their officers and
trustees or controlling persons, shall each have the right to participate in the
defense or preparation of the defense of any such action. In the event Forum
elects to assume the defense of any such suit and retain counsel of good
standing approved by the Trust, the defendants in the suit shall bear the fees
and expenses of any additional counsel retained by any of them; but in case
Forum does not elect to assume the defense of the suit or in case the Trust does
not approve of counsel chosen by Forum, Forum will reimburse the Trust or the
controlling person or persons named defendant or defendants in the suit for the
fees and expenses of any counsel retained by the Trust or such persons. The
indemnification agreement contained in this Section shall remain operative and
in full force and effect regardless of any investigation made by or on behalf of
the Trust or any controlling person and shall survive the sale of any of the
Shares made pursuant to orders or subscriptions obtained by Forum. This
agreement of indemnity will inure exclusively to the benefit of the Trust, to
the benefit of its successors and assigns, and to the benefit of any controlling
persons and their successors and assigns. Forum agrees promptly to notify the
Trust of the commencement of any litigation or proceeding against Forum in
connection with the issue and sale of any of the Shares. The failure to notify
Forum of the commencement of any action shall not relieve Forum from any
liability which it may have to the Trust, to its officers and trustees, or to
controlling persons by reason of any untrue statement or omission on the part of
or action by Forum otherwise than on account of the indemnity agreement
contained in this Section.
SECTION 13. NOTIFICATION BY THE TRUST
The Trust agrees to advise Forum immediately:
(a) of any request by the SEC for amendments to the Trust's Registration
Statement insofar as it relates to the Funds, a Fund's Prospectus or
SAI or for additional information,
(b) in the event of the issuance by the SEC of any stop order suspending
the effectiveness of the Trust's Registration Statement insofar as it
relates to the Funds, a Fund's Prospectus or SAI or the initiation of
any proceeding for that purpose,
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<PAGE>
(c) of the happening of any material event which makes untrue any statement
made in the Trust's Registration Statement insofar as it relates to the
Funds or any Fund's Prospectus or SAI or which requires the making of a
change in either thereof in order to make the statements therein not
misleading, and
(d) of all actions of the SEC with respect to any amendments to the Trust's
Registration Statement insofar as it relates to the Funds, a Fund's
Prospectus or SAI which may from time to time be filed with the SEC under
the Securities Act.
SECTION 14. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to each Fund on the date
hereof. Upon effectiveness of this Agreement, it shall supersede all
previous agreements between the parties hereto covering the subject matter
hereof insofar as such Agreement may have been deemed to relate to the
Funds.
(b) This Agreement shall continue in effect with respect to a Fund for a period
of one year from the date of its effectiveness and shall continue in effect
for successive one-year periods with respect to the Fund; provided,
however, that continuance is specifically approved at least annually (I) by
the Board or by a vote of a majority of the outstanding voting securities
of the Fund and (ii) by a vote of a majority of Trustees of the Trust (I)
who are not parties to this Agreement or interested persons of any such
party (other than as Trustees of the Trust) and (II) with respect to each
class of a Fund for which there is an effective plan of distribution
adopted pursuant to Rule 12b-1 under the Act, who do not have any direct or
indirect financial interest in any such plan applicable to the class or in
any agreements related to the plan, cast in person at a meeting called for
the purpose of voting on such approval; provided further, however, that if
the continuation of this Agreement is not approved as to a Fund, Forum may
continue to render to the Fund the services described herein in the manner
and to the extent permitted by the Act and the rules and regulations
thereunder.
(c) This Agreement may be terminated at any time with respect to a Fund,
without the payment of any penalty, (I) by the Board or by a vote of a
majority of the outstanding voting securities of the Fund or, with respect
to each class of a Fund for which there is an effective plan of
distribution adopted pursuant to Rule 12b-1 under the Act, a majority of
Trustees of the Trust who do not have any direct or indirect financial
interest in any such plan or in any agreements related to the plan, on 60
days' written notice to Forum or (ii) by Forum on 60 days' written notice
to the Trust.
(d) This Agreement shall also automatically terminate in the event of its
assignment, the term "assignment" having the meaning set forth in Section
2(a)(4) of the Act; provided, that the Transfer of Forum's rights to the
Distributor's 12b-1 Portion or the Distributor's Earned CDSC shall not
cause a termination of this Agreement or be deemed to be an assignment for
purposes of this Section 14(d).
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(e) Subject to the provisions of the following sentence, if this Agreement is
terminated for any reason other than a Complete Termination (as defined in
Section 10 of the Plan), the obligations of the Trust and Forum pursuant to
Sections 5(a)-(d) and 6(a)-(d) of this Agreement will continue and survive
any such termination. A termination of the Plan (including a Complete
Termination as defined in Section 10 of the Plan) with respect to any or
all Shares of any or all Funds shall not affect the obligations of the
Trust with respect to payments of the Distributor's Allocable Portion of
CDSC or Assignee's Allocable Portion of CDSC or of the obligations of Forum
in respect of CDSC's pursuant to Sections 5 and 6 of this Agreement.
SECTION 15. NOTICES
Any notice required or permitted to be given hereunder by either party
to the other shall be deemed sufficiently given if personally delivered or sent
by telegram or registered, certified or overnight mail, postage prepaid,
addressed by the party giving such notice to the other party at the last address
furnished by the other party to the party giving such notice, and unless and
until changed pursuant to the foregoing provisions hereof each such notice shall
be addressed to the Trust or Forum, as the case may be.
SECTION 16. ACTIVITIES OF FORUM
Except to the extent necessary to perform Forum's obligations
hereunder, nothing herein shall be deemed to limit or restrict Forum's right, or
the right of any of Forum's officers, directors or employees who may also be a
trustee, officer or employee of the Trust, or persons otherwise affiliated with
the Trust to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
trust, firm, individual or association.
SECTION 17. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Fund shall not
be liable for any obligations of the Trust or of the Funds under this Agreement,
and Forum agrees that, in asserting any rights or claims under this Agreement,
it shall look only to the assets and property of the Trust or the Fund to which
Forum's rights or claims relate in settlement of such rights or claims, and not
to the Trustees of the Trust or the shareholders of the Funds.
SECTION 18. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by both parties hereto.
(b) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
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<PAGE>
(c) The provisions of this Agreement shall be, to the extent applicable,
construed and interpreted in accordance with the laws of the State of
New York.
(d) The terms "vote of a majority of the outstanding voting securities,"
"interested person," "affiliated person" and "assignment" shall have
the meanings ascribed thereto in the Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
NORWEST ADVANTAGE FUNDS
By:__________________________
Donald H. Burkhardt
Trustee
FORUM FINANCIAL SERVICES, INC.
By:________________________
David I. Goldstein
Secretary
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NORWEST ADVANTAGE FUNDS
DISTRIBUTION SERVICES AGREEMENT
Appendix A
Funds and Classes of the Trust
as of July 27, 1999
<TABLE>
<S> <C>
Funds Classes
- ----- -------
Cash Investment Fund Single existing class
Ready Cash Investment Fund Public Entities Shares, Investor Shares and
Exchange Shares
U.S. Government Fund Single existing class
Treasury Plus Fund Single existing class
Treasury Fund Single existing class
Municipal Money Market Fund Institutional Shares and Investor Shares
Stable Income Fund A Shares, B Shares and I Shares
Limited Term Government Income Fund I Shares
Intermediate Government Income Fund A Shares, B Shares and I Shares
Diversified Bond Fund I Shares
Income Fund A Shares, B Shares and I Shares
Total Return Bond Fund A Shares, B Shares and I Shares
Limited Term Tax-Free Fund I Shares
Tax-Free Income Fund A Shares, B Shares and I Shares
Colorado Tax-Free Fund A Shares, B Shares and I Shares
Minnesota Intermediate Tax-Free Fund I Shares
Minnesota Tax-Free Fund A Shares, B Shares and I Shares
Strategic Income Fund I Shares
Moderate Balanced Fund I Shares
Growth Balanced Fund A Shares, B Shares, C Shares and I Shares
Aggressive Balanced-Equity Fund I Shares
Index Fund I Shares
Income Equity Fund A Shares, B Shares, C Shares and I Shares
ValuGrowth Stock Fund A Shares, B Shares and I Shares
Diversified Equity Fund A Shares, B Shares, C Shares and I Shares
Growth Equity Fund A Shares, B Shares, C Shares and I Shares
Large Company Growth Fund A Shares, B Shares and I Shares
Diversified Small Cap Fund A Shares, B Shares and I Shares
Small Company Stock Fund A Shares, B Shares and I Shares
Small Company Growth Fund I Shares
Small Cap Opportunities Fund A Shares, B Shares and I Shares
International Fund A Shares, B Shares and I Shares
Performa Strategic Value Bond Fund Single existing class
Performa Disciplined Growth Fund Single existing class
Performa Small Cap Value Fund Single existing class
Performa Global Growth Fund Single existing class
Norwest WealthBuilder II Growth Portfolio C Shares
Norwest WealthBuilder II Growth and Income Portfolio C Shares
Norwest WealthBuilder II Growth Balanced Portfolio C Shares
</TABLE>
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NORWEST ADVANTAGE FUNDS
DISTRIBUTION SERVICES AGREEMENT
October 1, 1995
Amended April 26, 1999
Appendix B
Forum's "Allocable Portion" of the CDSCs and Distribution Fees in
respect of a Fund shall be 100 percent until such time as Forum shall cease to
serve as exclusive distributor of such Shares and thereafter shall be recomputed
first on the date of any termination of Forum's services as exclusive
distributor of Shares of any Fund and thereafter periodically (but not less than
monthly), in accordance with Parts B & C below based upon the number of
representing the Shares of such Fund outstanding on each such computation date
allocated to Forum in accordance with Part A below:
For Purposes of this Appendix B defined terms used herein shall have
the meaning assigned to such terms in the Distribution Agreement and the
following terms shall have the following meanings:
"Commission Share" shall mean, in respect of any Fund, each Share of
such Fund which is issued under circumstances which would normally give rise to
an obligation of the holder of such Share to pay a CDSC upon redemption of such
Share, including, without limitation, any Share of such Fund issued in
connection with a Permitted Free Exchange, and any such Share shall not cease to
be a Commission Share prior to the redemption (including a redemption in
connection with a Permitted Free Exchange) or conversion even though the
obligation to pay the CDSC shall have expired or conditions for waivers thereof
shall exist.
"Date of Original Issuance" means in respect of any Commission Share of
any Eligible Fund, the date with reference to which the amount of the CDSC
payable on redemption thereof is computed.
"Free Share" shall mean, in respect of any Fund, each Share of such
Fund other than a Commission Share, including, without limitation, each Share
issued in connection with the reinvestment of dividends.
"Other Distributor" shall mean in respect of the Shares of any Fund,
each entity appointed from time to time as the exclusive distributor for such
Shares of the Fund after Forum ceases to serve in that capacity.
"Permitted Free Exchange" with respect to any Shares of any Fund, shall
mean an exchange of such Share for a Share of another Fund which pursuant to the
terms of the related Prospectus for such Shares, relieves or defers the CDSCs in
respect of such Share.
15
<PAGE>
"Transfer Agent" shall mean, in respect of any Fund, the entity serving
as the transfer agent and who maintains accounts for each record holder of
Shares of such Fund including record holders which are record owners of Omnibus
Accounts.
PART A: ATTRIBUTION OF SHARES
Each class of Shares of each Fund, which are outstanding from time to
time, shall be attributed to either Forum or an Other Distributor in accordance
with the following rules:
(a) Commission Shares: (a) The Commission Shares of each class of Shares of
each Fund outstanding from time to time shall be attributed to Forum or
such Other Distributor based on the Date of Original Issuance of such
Commission Shares, with those having a Date of Original Issuance which
occurs during the period in which Forum was the exclusive distributor
for such Fund in respect of such class of Shares of such Fund being
attributed to Forum.
(b) A Commission Share of a Fund (the "First Fund") issued in consideration
of the investment of proceeds of the redemption of a Commission Share
of another Fund (the "Second Fund") in connection with a Permitted Free
Exchange, is deemed to have a Date of Original Issuance identical to
the Date of Original Issuance of the Commission Share of the Second
Fund which was so redeemed and any such Commission Share will be
attributed to Forum or such Other Distributor based upon such Date of
Original Issuance in accordance with rule (a) above.
(c) A Commission Share of a Fund which is redeemed other than in connection
with a Permitted Free Exchange or is converted to a class A share at
the end of the autoconversion period is deemed to reduce the number of
outstanding Commission Shares attributed to Forum or such Other
Distributor based upon the Date of Original Issuance of such Commission
Share in accordance with rule (a) above.
(d) Free Shares.
(e) Free Shares outstanding on the date of termination of Forum's services
as exclusive distributor will be attributed to Forum or such Other
Distributor in the same proportion that Commission Shares were
attributed to each on such date.
(f) Thereafter Free Shares which are issued during any period in connection
with the reinvestment of dividends or other distributions or in
connection with the reinvestment of proceeds of redemption of Free
Shares of another Fund will be attributed to Forum and such Other
Distributor based upon the percentage of total Free Shares and
Commission Shares of such Fund which were outstanding at the
commencement of such period which were attributed to each at the
commencement of such period under these rules.
16
<PAGE>
(g) Free Shares which are redeemed (whether in connection with the
reinvestment of the proceeds of such redemption in Shares of another
Fund or otherwise) or converted into class A shares of such Fund during
any period after the date of termination of Forum's services will be
deemed to come out of the Free Shares of such Fund attributed to Forum
and such Other Distributor based upon the percentage of total Free
Shares and Commission Shares of such Eligible Fund which were
outstanding at the commencement of such period which was attributed to
each at the commencement of such period under these rules.
PART B: ALLOCATION OF DISTRIBUTION FEES.
The portion of the Distribution Fees accruing in respect of Shares of a
Fund during a particular calendar month are allocated to Forum and Other
Distributor determined by multiplying the total of such Distribution Fees
accruing during a particular calendar month by the following fraction:
((BTS x BNAV) + (ETS x ENAV))/2
- --------------------------------------------------------------------------------
((BPS x BNAV) + (EPS x ENAV))/2
where:
BTS = Total Number of Shares of such Fund attributed to Forum or
such Other Distributor and outstanding at the beginning of
such calendar month
BNAV = Per Share Net Asset Value of Shares of such Fund at the beginning of such
calendar month
ETS = Total Number of Shares of such Fund attributed to Forum or
such Other Distributor and outstanding at the end of such
calendar month
ENAV = Per Share Net Asset Value of Shares of such Fund at the end of such
calendar month
BPS = Total Number of Shares of such Fund outstanding at the beginning of such
calendar month
EPS = Total Number of Shares of such Eligible Fund outstanding at the end of
such calendar month
PART C: ALLOCATION OF CDSCs
CDSCs will be allocated to either Forum or a Other Distributor based
upon whether the Commission Share giving rise to such CDSC was attributed to
Forum or such Other Distributor in accordance with Part A above.
17
<PAGE>
PART D: ALLOCATION PROCEDURES FOR SHARES HELD THROUGH AN
ACCOUNT MAINTAINED IN THE NAME OF AN INTERMEDIARY
In the case of Shares of a Fund held through an account maintained in
the name of a broker-dealer or other intermediary, the allocation procedures
contained in this Appendix B shall be amplified as Forum and the Trust shall
agree to ensure the appropriate attribution of, and allocation of distribution
services fees attributable to those shares.
PART E:
If the Fund transfer agent is one day able to trace each Free Share to
the Commission Share from which such Free Share was derived and the methodology
for allocating Free Shares described above results in significant economic
inequities in the allocation of Distribution Fees as compared to an allocation
method which is based upon a more accurate tracking of such Free Shares, then
the Fund will work in good faith with Forum and any Other Distributor to revise
the allocation procedures described above to remove such inequities.
18
<PAGE>
Exhibit (h)(1)
NORWEST ADVANTAGE FUNDS
MANAGEMENT AGREEMENT
August 1, 1997
Amended June 1, 1999
AGREEMENT made this 1st day of August, 1997, as amended on this 1st day
of June, 1999 between Norwest Advantage Funds (the "Trust"), a business trust
organized under the laws of the State of Delaware with its principal place of
business at Two Portland Square, Portland, Maine 04101, and Forum Financial
Services, Inc. ("Forum"), a corporation organized under the laws of State of
Delaware with its principal place of business at Two Portland Square, Portland,
Maine 04101.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "Act") as an open-end management investment company and
may issue its shares of beneficial interest, no par value, in separate series
and classes; and
WHEREAS, the Trust desires that Forum perform certain management
services for each of the series of the Trust as listed in Appendix A hereto
(each a "Fund" and collectively the "Funds") and Forum is willing to provide
those services on the terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and Forum agree as follows:
SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS
The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in the Trust's Trust Instrument, By-Laws and registration statement
filed with the Securities and Exchange Commission (the "SEC") under the Act and
the Securities Act of 1933 (the "Securities Act"), including any representations
made in a prospectus ("Prospectus") or statement of additional information
("SAI") relating to a Fund contained therein and as may be supplemented from
time to time, all in such manner and to such extent as may from time to time be
authorized by the Trust's Board of Trustees (the "Board"). The Trust is
currently authorized to issue thirty-nine series of shares and the Board is
authorized to issue any unissued shares in any number of additional series or
classes. The Trust has delivered copies of the documents listed in this Section
to Forum and will from time to time furnish Forum with any amendments thereof.
SECTION 2. APPOINTMENT
The Trust hereby employs Forum, subject to the direction and control of
the Board, to manage all aspects of the Trust's operations with respect to each
Fund except those which are the responsibility of Norwest Investment Management,
Inc., each Fund's investment adviser, or any other investment adviser or
investment subadviser to a Fund (each an "Adviser"), or Norwest Bank Minnesota,
1
<PAGE>
N.A. in its capacity as administrator pursuant to an investment administration
or similar agreement.
SECTION 3. MANAGEMENT DUTIES
(a) On behalf of the Trust and with respect to each Fund, Forum will
(b) oversee (A) the preparation and maintenance by the Advisers and the Trust's
administrator, custodian, transfer agent, dividend disbursing agent and
fund accountant (or if appropriate, prepare and maintain) in such form, for
such periods and in such locations as may be required by applicable law, of
all documents and records relating to the operation of the Trust required
to be prepared or maintained by the Trust or its agents pursuant to
applicable law; (B) the reconciliation of account information and balances
among the Advisers and the Trust's custodian, transfer agent, dividend
disbursing agent and fund accountant; (C) the transmission of purchase and
redemption orders for Shares; (D) the notification of the Advisers of
available funds for investment; and (E) the performance of fund accounting,
including the calculation of the net asset value per Share;
(c) oversee the Trust's receipt of the services of persons competent to perform
such legal, administrative and clerical functions not otherwise described
in this Section 3(a) as are necessary to provide effective operation of the
Trust;
(d) oversee the performance of administrative and professional services
rendered to the Trust by others, including its administrator, custodian,
transfer agent, dividend disbursing agent and fund accountant, as well as
accounting, auditing, legal and other services performed for the Trust;
(e) provide the Trust with adequate general office space and facilities and
provide, at the Trust's request and expense, persons suitable to the Board
to serve as officers of the Trust;
(f) oversee the preparation and the printing of the periodic updating of the
Trust's registration statement, Prospectuses and SAIs, the Trust's tax
returns, and reports to its shareholders, the SEC and state and other
securities administrators;
(g) oversee the preparation of proxy and information statements and any other
communications to shareholders;
(h) with the cooperation of the Trust's counsel, Advisers and other relevant
parties, oversee the preparation and dissemination of materials for
meetings of the Board;
2
<PAGE>
(i) oversee the preparation, filing and maintenance of the Trust's governing
documents, including the Trust Instrument, Bylaws and minutes of meetings
of Trustees, Board committees and shareholders;
(j) oversee registration and sale of Fund shares, to ensure that such shares
are properly and duly registered with the SEC and applicable state and
other securities commissions;
(k) oversee the calculation of performance data for dissemination to
information services covering the investment company industry, for sales
literature of the Trust and other appropriate purposes;
(l) oversee the determination of the amount of and supervise the declaration of
dividends and other distributions to shareholders as necessary to, among
other things, maintain the qualification of each Fund as a regulated
investment company under the Internal Revenue Code of 1986, as amended, and
oversee the preparation and distribution to appropriate parties of notices
announcing the declaration of dividends and other distributions to
shareholders;
(m) review and negotiate on behalf of the Trust normal course of business
contracts and agreements;
(n) maintain and review periodically the Trust's fidelity bond and errors and
omission insurance coverage; and
(o) advise the Trust and the Board on matters concerning the Trust and its
affairs.
(p) Forum shall maintain records relating to its services, such as journals,
ledger accounts and other records, as are required to be maintained by
Forum and the Trust under the Act and Rule 31a-1 under the Act. The books
and records pertaining to the Trust which are in possession of Forum shall
be the property of the Trust. The Trust, or the Trust's authorized
representatives, shall have access to such books and records at all times
during Forum's normal business hours. Upon the reasonable request of the
Trust, copies of any such books and records shall be provided promptly by
Forum to the Trust or the Trust's authorized representatives.
SECTION 4. STANDARD OF CARE
The Trust shall expect of Forum, and Forum will give the Trust the
benefit of, Forum's best judgment and efforts in rendering these services to the
Trust, and the Trust agrees as an inducement to Forum's undertaking these
services that Forum shall not be liable under this Agreement for any mistake of
judgment or in any event whatsoever, except for lack of good faith, provided
3
<PAGE>
that nothing herein shall be deemed to protect, or purport to protect, Forum
against any liability to the Trust or to its security holders to which Forum
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of Forum's duties under this Agreement, or by
reason of Forum's reckless disregard of its obligations and duties under this
Agreement.
SECTION 5. COMPENSATION; EXPENSES
(a) In consideration of the management services performed by Forum as described
herein, the Trust will pay Forum, with respect to each class of Shares of
each Fund, a fee at the annual rate as listed in Appendix A hereto. Forum's
fees shall be accrued by the Trust daily and shall be payable monthly in
arrears on the first day of each calendar month for services performed
under the Agreement during the prior calendar month.
(b) Notwithstanding that other persons may, in investment advisory agreements
or otherwise, agree to assume certain expenses of the Trust or of any Fund
or class of Shares thereof, the Trust shall be responsible and hereby
assumes the obligation for payment of all the Trust's expenses, including
(I) payment of the fee payable to Forum under this Section 5 hereof and the
fee payable to the Advisers of each Fund pursuant to any investment
advisory or similar agreement between the Adviser and the Trust; (ii)
interest charges, taxes, brokerage fees and commissions; (iii) insurance
and fidelity bond premiums; (iv) fees, interest charges and expenses of the
Trust's administrator, custodian, transfer agent, dividend disbursing agent
and fund accountant and providers of pricing, credit analysis and dividend
services; (v) telecommunications expenses; (vi) auditing, legal and
compliance expenses; (vii) costs of forming the Trust and maintaining its
existence; (viii) costs of preparing and printing the Trust's Prospectuses,
SAIs, subscription application forms and stockholder reports and their
delivery to existing and prospective stockholders; (ix) costs of
maintaining books of original entry for portfolio and fund accounting and
other required books and accounts and of calculating the net asset value of
the Trust's shares; (x) costs of reproduction, stationery and supplies;
(xi) compensation of the Trust's trustees, officers and employees and costs
of other personnel performing services for the Trust, whether or not any
such persons are affiliated persons of Forum or any Adviser of the Trust;
(xii) costs of Board, Board committee, shareholder and other corporate
meetings; (xiii) SEC registration fees and related expenses; (xiv) state
and other jurisdiction securities laws registration fees and related
expenses, including costs of personnel to perform such securities
registration; and (xv) all costs borne by the Trust pursuant to any
distribution plan adopted by the Trust pursuant to Rule 12b-1 under the
Act, shareholder service or similar plan.
SECTION 6. EFFECTIVENESS, DURATION; TERMINATION AND
ASSIGNMENT
(a) This Agreement shall become effective with respect to each Fund on the date
hereof or, with respect to additional series of the Trust to which this
agreement shall apply by amendment of Appendix A, upon the date of such
amendment. Upon effectiveness of this Agreement, it shall supersede all
previous agreements between the parties hereto covering the subject matter
hereof insofar as such Agreement may have been deemed to relate to the
Funds.
4
<PAGE>
(b) This Agreement shall continue in effect with respect to a Fund for a period
of one year from its effectiveness and shall continue in effect for
successive one year periods; provided, however, that continuance is
specifically approved at least annually (I) by the Board or by a vote of a
majority of the outstanding voting securities of the Fund and (ii) by a
vote of a majority of Trustees of the Trust who are not parties to this
agreement or interested persons of any such party (other than as Trustees
of the Trust); provided further, however, that if the continuation of this
agreement is not approved as to a Fund, Forum may continue to render to the
Fund the services described herein in the manner and to the extent
permitted by the Act and the rules and regulations thereunder.
(c) This Agreement may be terminated with respect to a Fund at any time,
without the payment of any penalty, (I) by the Board on 60 days' written
notice to Forum or (ii) by Forum on 60 days' written notice to the Trust.
(d) This Agreement and the rights and duties under this Agreement otherwise
shall not be assignable by either Forum or the Trust except by the specific
written consent of the other party. All terms and provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto.
SECTION 7. ACTIVITIES OF FORUM
(a) Except to the extent necessary to perform Forum's obligations under this
Agreement, nothing herein shall be deemed to limit or restrict Forum's
right, or the right of any of Forum's officers, directors or employees who
also may be a trustee, officer or employee of the Trust, or persons
otherwise affiliated persons of the Trust to engage in any other business
or to devote time and attention to the management or other aspects of any
other business, whether of a similar or dissimilar nature, or to render
services of any kind to any other corporation, trust, firm, individual or
association.
(b) Forum may subcontract any or all of its functions or responsibilities
pursuant to this Agreement to one or more corporations, trusts, firms,
individuals or associations, which may be affiliates of Forum, who agree to
comply with the terms of this Agreement. Forum may pay those persons for
their services, but no such payment will increase Forum's compensation from
the Trust.
SECTION 8. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Fund shall not
be liable for any obligations of the Trust or of the Funds under this Agreement,
and Forum agrees that, in asserting any rights or claims under this Agreement,
it shall look only to the assets and property of the Trust or the Fund to which
Forum's rights or claims relate in settlement of such rights or claims, and not
to the Trustees of the Trust or the shareholders of the Funds.
5
<PAGE>
SECTION 9. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by both parties hereto.
(b) If any part, term or provision of this Agreement is held to be illegal,
in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the
rights and obligations of the parties shall be construed and enforced
as if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid.
(c) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(d) Notices, requests, instructions and communications received by the
parties at their respective principal addresses, or at such other
address as a party may have designated in writing, shall be deemed to
have been properly given.
(e) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of New York.
(f) The terms "vote of a majority of the outstanding voting securities,"
"interested person," and "assignment" shall have the meanings ascribed
thereto in the Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
NORWEST ADVANTAGE FUNDS
By: __________________________
Donald H. Burkhardt
Trustee
FORUM FINANCIAL SERVICES, INC.
By:________________________
David I. Goldstein
Secretary
6
<PAGE>
NORWEST ADVANTAGE FUNDS
MANAGEMENT AGREEMENT
Appendix A
June 1, 1999
<TABLE>
<S> <C>
Fee as a % of
the Annual Average Daily
Funds of the Trust Net Assets of each Class of the Fund
- ------------------ ------------------------------------
Cash Investment Fund 0.025%
Ready Cash Investment Fund 0.075%
U.S. Government Fund 0.05%
Treasury Plus Fund 0.05%
Treasury Fund 0.05%
Municipal Money Market Fund, Institutional Shares 0.05%
Municipal Money Market Fund, Investor Shares 0.10%
Stable Income Fund 0.025%
Limited Term Government Income Fund 0.05%
Intermediate Government Income Fund 0.05%
Diversified Bond Fund 0.025%
Income Fund 0.05%
Total Return Bond Fund 0.025%
Strategic Income Fund 0.025%
Limited Term Tax-Free Fund 0.05%
Tax-Free Income Fund 0.05%
Colorado Tax-Free Fund 0.05%
Minnesota Intermediate Tax-Free Fund 0.05%
Minnesota Tax-Free Fund 0.05%
Moderate Balanced Fund 0.025%
Growth Balanced Fund 0.025%
Aggressive Balanced-Equity Fund 0.025%
Index Fund 0.025%
Income Equity Fund 0.025%
ValuGrowth Stock Fund 0.05%
Diversified Equity Fund 0.025%
Growth Equity Fund 0.025%
Large Company Growth Fund 0.025%
Diversified Small Cap Fund 0.025%
Small Company Stock Fund 0.025%
Small Cap Opportunities Fund 0.05%
Small Company Growth Fund 0.025%
International Fund 0.05%
Performa Strategic Value Bond Fund 0.025%
Performa Disciplined Growth Fund 0.025%
Performa Small Cap Value Fund 0.025%
Performa Global Growth Fund 0.025%
Norwest WealthBuilder II Growth Portfolio 0.05%
Norwest WealthBuilder II Growth and Income Portfolio 0.05%
Norwest WealthBuilder II Growth Balanced Portfolio 0.05%
</TABLE>
7
<PAGE>
Exhibit (h)(4)
NORWEST ADVANTAGE FUNDS
ADMINISTRATION AGREEMENT
October 1, 1997
Amended June 1, 1999
AGREEMENT made this 1st day of October 1997, as amended on the 1st day
of June 1999, between Norwest Advantage Funds (the "Trust"), a business trust
organized under the laws of the State of Delaware with its principal place of
business at Two Portland Square, Portland, Maine 04101, and Forum Administrative
Services, LLC ("Forum"), a Delaware limited liability company with its principal
office and place of business at Two Portland Square, Portland, Maine 04101.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
and may issue its shares of beneficial interest, no par value (the "Shares"), in
separate series and classes; and
WHEREAS, the Trust offers shares in various series as listed in
Appendix A hereto (each such series, together with all other series subsequently
established by the Trust and made subject to this Agreement in accordance with
Section 6, being herein referred to as a "Fund," and collectively as the
"Funds") and the Trust offers shares of various classes of each Fund as listed
in Appendix A hereto (each such class together with all other classes
subsequently established by the Trust in a Fund being herein referred to as a
"Class," and collectively as the "Classes"); and
WHEREAS, the Trust desires that Forum perform certain administrative
services for each Fund and Class thereof and Forum is willing to provide those
services on the terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and Forum hereby agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
Appendix B The Trust hereby appoints Forum, and Forum hereby agrees,
to act as administrator of the Trust for the period and on the
terms set forth in this Agreement.
Appendix B In connection therewith, the Trust has delivered to Forum
copies of (I) the Trust's Trust Instrument and Bylaws
(collectively, as amended from time to time, "Organic
Documents"), (ii) the Trust's Registration Statement and all
amendments thereto filed with the U.S. Securities and Exchange
Commission ("SEC") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), or the 1940 Act (the
"Registration Statement"), (iii) the Trust's current Prospectus
and Statement of Additional Information of each Fund
(collectively, as currently in effect and as amended or
supplemented, the "Prospectus"), (iv) each current plan of
distribution or similar document adopted by the Trust under Rule
1
<PAGE>
12b-1 under the 1940 Act ("Plan") and each current shareholder
service plan or similar document adopted by the Trust ("Service
Plan"), and (v) all procedures adopted by the Trust with respect
to the Funds (i.e., repurchase agreement procedures), and shall
promptly furnish Forum with all amendments of or supplements to
the foregoing. The Trust shall deliver to Forum a certified copy
of the resolution of the Board of Trustees of the Trust (the
"Board") appointing Forum and authorizing the execution and
delivery of this Agreement.
SECTION 2. DUTIES OF FORUM AND THE TRUST
Appendix B Subject to the direction and control of the Board, Forum
shall manage all aspects of the Trust's operations with respect
to the Funds except those that are the responsibility of any
other service provider hired by the Trust, all in such manner and
to such extent as may be authorized by the Board.
Appendix B With respect to the Trust or each Fund, as applicable,
Forum shall:
Appendix B at the Trust's expense, provide the Trust with, or arrange
for the provision of, the services of persons competent to
perform such legal, administrative and clerical functions not
otherwise described in this Section 2(b) as are necessary to
provide effective operation of the Trust;
Appendix B oversee (A) the preparation and maintenance by the Trust's
custodian, transfer agent, dividend disbursing agent and fund
accountant in such form, for such periods and in such locations
as may be required by applicable United States law, of all
documents and records relating to the operation of the Trust
required to be prepared or maintained by the Trust or its agents
pursuant to applicable law; (B) the reconciliation of account
information and balances among the Trust's custodian, transfer
agent, dividend disbursing agent and fund accountant; (C) the
transmission of purchase and redemption orders for Shares; and
(D) the performance of fund accounting, including the calculation
of the net asset value of the Shares;
Appendix B oversee the performance of administrative and professional
services rendered to the Trust by others, including its
custodian, transfer agent and dividend disbursing agent as well
as legal, auditing, shareholder servicing and other services
performed for the Funds;
Appendix B file or oversee the filing of each document required to be
filed by the Trust in either written or, if required, electronic
format (e.g., electronic data gathering analysis and retrieval
system or "EDGAR") with the SEC;
Appendix B assist in and oversee the preparation, filing and printing
and the periodic updating of the Registration Statement and
Prospectuses;
Appendix B oversee the preparation and filing of the Trust's tax
returns;
2
<PAGE>
Appendix B oversee the preparation of financial statements and
related reports to the Trust's shareholders, the SEC and
state and other securities administrators;
Appendix B assist in and oversee the preparation and printing of proxy
and information statements and any other communications to
shareholders;
Appendix B provide the Trust with adequate general office space and
facilities and provide persons suitable to the Board to serve as
officers of the Trust;
Appendix B assist the investment advisers in monitoring Fund holdings
for compliance with Prospectus investment restrictions and assist
in preparation of periodic compliance reports, as applicable;
Appendix B prepare, file and maintain the Trust's Organic Documents
and minutes of meetings of Trustees, Board committees and
shareholders;
Appendix B with the cooperation of the Trust's counsel, investment
advisers, the officers of the Trust and other relevant parties,
prepare and disseminate materials for meetings of the Board, as
applicable;
Appendix B maintain the Trust's existence and good standing under
applicable state law;
Appendix B monitor sales of Shares, ensure that the Shares are
properly and duly registered with the SEC and register, or
prepare applicable filings with respect to, the Shares with the
various state and other securities commissions;
Appendix B oversee the calculation of performance data for
dissemination to information services covering the investment
company industry, for sales literature of the Trust and other
appropriate purposes;
Appendix B oversee the determination of the amount of and supervise
the declaration of dividends and other distributions to
shareholders as necessary to, among other things, maintain the
qualification of each Fund as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"),
and prepare and distribute to appropriate parties notices
announcing the declaration of dividends and other distributions
to shareholders;
Appendix B advise the Trust and the Board on matters concerning the
Trust and its affairs;
Appendix B calculate, review and account for Fund expenses and report
on Fund expenses on a periodic basis;
Appendix B authorize the payment of Trust expenses and pay, from Trust
assets, all bills of the Trust;
3
<PAGE>
Appendix B prepare Fund budgets, pro-forma financial statements,
expense and profit/loss projections and fee waiver/expense
reimbursement projections on a periodic basis;
Appendix B prepare financial statement expense information;
Appendix B assist the Trust in the selection of other service
providers, such as independent accountants, law firms and proxy
solicitors; and
Appendix B perform such other recordkeeping, reporting and other tasks
as may be specified from time to time in the procedures adopted
by the Board; provided, that Forum need not begin performing any
such task except upon 65 days' notice and pursuant to mutually
acceptable compensation agreements.
Appendix B Forum shall provide such other services and assistance
relating to the affairs of the Trust as the Trust may, from time
to time, reasonably request pursuant to mutually acceptable
compensation agreements.
Appendix B Forum shall maintain records relating to its services, such
as journals, ledger accounts and other records, as are required
to be maintained under the 1940 Act and Rule 31a-1 thereunder.
The books and records pertaining to the Trust that are in
possession of Forum shall be the property of the Trust. The
Trust, or the Trust's authorized representatives, shall have
access to such books and records at all times during Forum's
normal business hours. Upon the reasonable request of the Trust,
copies of any such books and records shall be provided promptly
by Forum to the Trust or the Trust's authorized representatives.
In the event the Trust designates a successor that assumes any of
Forum's obligations hereunder, Forum shall, at the expense and
direction of the Trust, transfer to such successor all relevant
books, records and other data established or maintained by Forum
under this Agreement.
Appendix B Nothing contained herein shall be construed to require
Forum to perform any service that could cause Forum to be deemed
an investment adviser for purposes of the 1940 Act or the
Investment Advisers Act of 1940, as amended, or that could cause
a Fund to act in contravention of the Fund's Prospectus or any
provision of the 1940 Act. Except with respect to Forum's duties
as set forth in this Section 2 and except as otherwise
specifically provided herein, the Trust assumes all
responsibility for ensuring that the Trust complies with all
applicable requirements of the Securities Act, the 1940 Act and
any laws, rules and regulations of governmental authorities with
jurisdiction over the Trust. All references to any law in this
Agreement shall be deemed to include reference to the applicable
rules and regulations promulgated under authority of the law and
all official interpretations of such law or rules or regulations.
Appendix B In order for Forum to perform the services required by this
Section 2, the Trust (I) shall cause all service providers to the
Trust to furnish any and all information to Forum, and assist
Forum as may be required and (ii) shall ensure that Forum has
4
<PAGE>
access to all records and documents maintained by the Trust or
any service provider to the Trust.
SECTION 3. STANDARD OF CARE AND RELIANCE
Appendix B Forum shall be under no duty to take any action except as
specifically set forth herein or as may be specifically agreed to
by Forum in writing. Forum shall use its best judgment and
efforts in rendering the services described in this Agreement.
Forum shall not be liable to the Trust or any of the Trust's
shareholders for any action or inaction of Forum relating to any
event whatsoever in the absence of bad faith, willful misfeasance
or gross negligence in the performance of Forum's duties or
obligations under this Agreement or by reason of Forum's reckless
disregard of its duties and obligations under this Agreement.
Appendix B The Trust agrees to indemnify and hold harmless Forum, its
employees, agents, directors, officers and managers and any
person who controls Forum within the meaning of section 15 of the
Securities Act or section 20 of the Securities Exchange Act of
1934, as amended, ("Forum Indemnitees") against and from any and
all claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and
other expenses of every nature and character arising out of or in
any way related to Forum's actions taken or failures to act with
respect to a Fund that are consistent with the standard of care
set forth in Section 3(a) or based, if applicable, on good faith
reliance upon an item described in Section 3(d) (a "Claim"). The
Trust shall not be required to indemnify any Forum Indemnitee if,
prior to confessing any Claim against the Forum Indemnitee, Forum
or the Forum Indemnitee does not give the Trust written notice of
and reasonable opportunity to defend against the claim in its own
name or in the name of the Forum Indemnitee.
Appendix B Forum agrees to indemnify and hold harmless the Trust, its
employees, agents, trustees and officers against and from any and
all claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and
other expenses of every nature and character arising out of
Forum's actions taken or failures to act with respect to a Fund
that are not consistent with the standard of care set forth in
Section 3(a). Forum shall not be required to indemnify the Trust
if, prior to confessing any Claim against the Trust, the Trust
does not give Forum written notice of and reasonable opportunity
to defend against the claim in its own name or in the name of the
Trust.
Appendix B A Forum Indemnitee shall not be liable for any action taken
or failure to act in good faith reliance upon:
Appendix B the advice of the Trust or of counsel, who may be counsel
to the Trust or counsel to Forum, and upon statements of
accountants, brokers and other persons reasonably believed in
good faith by Forum to be experts in the matter upon which they
are consulted;
5
<PAGE>
Appendix B any oral instruction which it receives and which it
reasonably believes in good faith was transmitted by the person
or persons authorized by the Board to give such oral instruction.
Forum shall have no duty or obligation to make any inquiry or
effort of certification of such oral instruction;
Appendix B any written instruction or certified copy of any resolution
of the Board, and Forum may rely upon the genuineness of any such
document or copy thereof reasonably believed in good faith by
Forum to have been validly executed; or
Appendix B any signature, instruction, request, letter of transmittal,
certificate, opinion of counsel, statement, instrument, report,
notice, consent, order, or other document reasonably believed in
good faith by Forum to be genuine and to have been signed or
presented by the Trust or other proper party or parties;
and no Forum Indemnitee shall be under any duty or obligation to inquire into
the validity or invalidity or authority or lack thereof of any statement, oral
or written instruction, resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice, consent, order, or
any other document or instrument which Forum reasonably believes in good faith
to be genuine.
Appendix B Forum shall not be liable for the errors of other service
providers to the Trust including the errors of printing services
(other than to pursue all reasonable claims against the pricing
service based on the pricing services' standard contracts entered
into by Forum) and errors in information provided by an
investment adviser (including prices and pricing formulas and the
untimely transmission of trade information), custodian or
transfer agent to the Trust.
SECTION 4. COMPENSATION AND EXPENSES
Appendix B In consideration of the administrative services provided by
Forum pursuant to this Agreement, the Trust shall pay Forum, with
respect to each Class of each of the Funds, the fees set forth in
Appendix A hereto. These fees shall be accrued by the Trust daily
and shall be payable monthly in arrears on the first day of each
calendar month for services performed under this Agreement during
the prior calendar month. In the event that any of the legal
services identified in Appendix B hereto are provided to the
Trust by personnel of the legal department of Forum, they will be
provided at no additional charge to the Trust except those
matters designated as Special Legal Services, as to which Forum
may charge, and the Trust shall pay an additional amount as
reimbursement of the cost of Forum providing such services.
Reimbursement shall be payable monthly in arrears on the first
day of each calendar month for services performed under this
Agreement during the prior calendar month. Nothing in this
Agreement shall require Forum to provide any of the services
listed in Appendix B hereto, as such services may be performed by
an outside vendor if appropriate in the judgment of Forum.
6
<PAGE>
If fees begin to accrue in the middle of a month or if this Agreement
terminates before the end of any month, all fees for the period from that date
to the end of that month or from the beginning of that month to the date of
termination, as the case may be, shall be prorated according to the proportion
that the period bears to the full month in which the effectiveness or
termination occurs. Upon the termination of this Agreement with respect to a
Fund, the Trust shall pay to Forum such compensation as shall be payable prior
to the effective date of termination.
Appendix B Notwithstanding anything in this Agreement to the contrary,
Forum and its affiliated persons may receive compensation or
reimbursement from the Trust with respect to (I) the provision of
services on behalf of the Funds in accordance with any Plan or
Service Plan, (ii) the provision of shareholder support or other
services, (iii) service as a trustee or officer of the Trust and
(iv) services to the Trust, which may include the types of
services described in this Agreement, with respect to the
creation of any Fund and the start-up of the Fund's operations.
Appendix B The Trust shall be responsible for and assumes the
obligation for payment of all of its expenses, including: (I) the
fee payable under this Agreement; (ii) the fees payable to each
investment adviser under an agreement between the investment
adviser and the Trust; (iii) expenses of issue, repurchase and
redemption of Shares; (iv) interest charges, taxes and brokerage
fees and commissions; (v) premiums of insurance for the Trust,
its trustees and officers and fidelity bond premiums; (vi) fees,
interest charges and expenses of third parties, including the
Trust's independent accountant, custodian, transfer agent,
dividend disbursing agent and fund accountant; (vii) fees of
pricing, interest, dividend, credit and other reporting services;
(viii) costs of membership in trade associations; (ix)
telecommunications expenses; (x) funds transmission expenses;
(xi) auditing, legal and compliance expenses; (xii) costs of
forming the Trust and maintaining its existence; (xiii) costs of
preparing, filing and printing the Trust's Prospectuses,
subscription application forms and shareholder reports and other
communications and delivering them to existing shareholders,
whether of record or beneficial; (xiv) expenses of meetings of
shareholders and proxy solicitations therefor; (xv) costs of
maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, of calculating
the net asset value of Shares and of preparing tax returns; (xvi)
costs of reproduction, stationery, supplies and postage; (xvii)
fees and expenses of the Trust's trustees; (xviii) compensation
of the Trust's officers and employees and costs of other
personnel (who may be employees of the investment adviser, Forum
or their respective affiliated persons) performing services for
the Trust; (xix) costs of Board, Board committee, shareholder and
other corporate meetings; (xx) SEC registration fees and related
expenses; (xxi) state, territory or foreign securities laws
registration fees and related expenses; and (xxii) all fees and
expenses paid by the Trust in accordance with any Plan or Service
Plan or agreement related to similar manners.
Appendix B Should the Trust exercise its right to terminate this
Agreement, the Trust, on behalf of the applicable Fund, shall
reimburse Forum for all out-of-pocket expenses and employee time
7
<PAGE>
(at 150% of salary) associated with the copying and movement of
records and material to any successor person and providing
assistance to any successor person in the establishment of the
accounts and records necessary to carry out the successor's
responsibilities.
SECTION 5. EFFECTIVENESS, DURATION, TERMINATION AND ASSIGNMENT
Appendix B This Agreement shall become effective with respect to each
Fund on July 28, 1998. Upon effectiveness of this Agreement, it
shall supersede all previous agreements between the parties
hereto covering the subject matter hereof insofar as such
Agreement may have been deemed to relate to the Funds.
Appendix B This Agreement shall continue in effect with respect to a
Fund until terminated; provided, that continuance is specifically
approved at least annually (I) by the Board or by a vote of a
majority of the outstanding voting securities of the Fund and
(ii) by a vote of a majority of Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party
(other than as Trustees of the Trust).
Appendix B This Agreement may be terminated with respect to a Fund at
any time, without the payment of any penalty (I) by the Board on
60 days' written notice to Forum or (ii) by Forum on 60 days'
written notice to the Trust. The obligations of Sections 3 and 4
shall survive any termination of this Agreement.
Appendix B This Agreement and the rights and duties under this
Agreement otherwise shall not be assignable by either Forum or
the Trust except by the specific written consent of the other
party. All terms and provisions of this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto.
SECTION 6. ADDITIONAL FUNDS AND CLASSES
In the event that the Trust establishes one or more series of Shares or
one or more classes of Shares after the effectiveness of this Agreement, such
series of Shares or classes of Shares, as the case may be, shall become Funds
and Classes under this Agreement. Forum or the Trust may elect not to make any
such series or classes subject to this Agreement.
SECTION 7. CONFIDENTIALITY
Forum agrees to treat all records and other information related to the
Trust as proprietary information of the Trust and, on behalf of itself and its
employees, to keep confidential all such information, except that Forum may
Appendix B prepare or assist in the preparation of periodic reports to
shareholders and regulatory bodies such as the SEC;
8
<PAGE>
Appendix B provide information typically supplied in the investment
company industry to companies that track or report price,
performance or other information regarding investment companies;
and
Appendix B release such other information as approved in writing by
the Trust, which approval shall not be unreasonably withheld and
may not be withheld where Forum may be exposed to civil or
criminal contempt proceedings for failure to release the
information, when requested to divulge such information by duly
constituted authorities or when so requested by the Trust.
SECTION 8. FORCE MAJEURE
Forum shall not be responsible or liable for any failure or delay in
performance of its obligations under this Agreement arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control
including, without limitation, acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdowns, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
SECTION 9. ACTIVITIES OF FORUM
Appendix B Except to the extent necessary to perform Forum's
obligations under this Agreement, nothing herein shall be deemed
to limit or restrict Forum's right, or the right of any of
Forum's managers, officers or employees who also may be a
trustee, officer or employee of the Trust, or persons who are
otherwise affiliated persons of the Trust to engage in any other
business or to devote time and attention to the management or
other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other
corporation, trust, firm, individual or association.
Appendix B Forum may subcontract any or all of its responsibilities
pursuant to this Agreement to one or more corporations, trusts,
firms, individuals or associations, which may be affiliated
persons of Forum, who agree to comply with the terms of this
Agreement; provided, that any such subcontracting shall not
relieve Forum of its responsibilities hereunder. Forum may pay
those persons for their services, but no such payment will
increase Forum's compensation from the Trust.
Appendix B Without limiting the generality of the Sections 9(a) and
(b), the Trust acknowledges that certain legal services may be
rendered to it by lawyers who are employed by Forum or its
affiliates and who render services to Forum and its affiliates. A
lawyer who renders such services to the Trust, and any lawyer who
supervises such lawyer, although employed generally by Forum or
its affiliates, will have a direct professional attorney/client
relationship with the Trust. Those services for which such a
direct relationship will exist are listed in Appendix C hereto.
Each of Forum and the Trust hereby consents to the simultaneous
representation by such lawyers of both Forum and the Trust, and
waives any conflict of interest existing in such simultaneous
representation. Furthermore, the Trust agrees that, in the event
such lawyer ceases to represent the Trust, whether at the request
9
<PAGE>
of the Trust or otherwise, the lawyer may continue thereafter to
represent Forum, and the Trust expressly consents to such
continued representation.
SECTION 10. COOPERATION WITH INDEPENDENT ACCOUNTANTS
Forum shall cooperate, if applicable, with each Fund's independent
public accountants and shall take reasonable action to make all necessary
information available to the accountants for the performance of the accountants'
duties.
SECTION 11. SERVICE DAYS
Nothing contained in this Agreement is intended to or shall require
Forum, in any capacity under this Agreement, to perform any functions or duties
on any day other than a business day of the Trust or of a Fund. Functions or
duties normally scheduled to be performed on any day which is not a business day
of the Trust or of a Fund shall be performed on, and as of, the next business
day, unless otherwise required by law.
SECTION 12. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The trustees of the Trust and the shareholders of each Fund shall not
be liable for any obligations of the Trust or of the Funds under this Agreement,
and Forum agrees that, in asserting any rights or claims under this Agreement,
it shall look only to the assets and property of the Trust or the Fund to which
Forum's rights or claims relate in settlement of such rights or claims, and not
to the trustees of the Trust or the shareholders of the Funds.
SECTION 13. MISCELLANEOUS
Appendix B Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this
Agreement.
Appendix B Except for Appendix A to add new Funds and Classes in
accordance with Section 6, no provisions of this Agreement may be
amended or modified in any manner except by a written agreement
properly authorized and executed by both parties hereto.
Appendix B This Agreement shall be governed by, and the provisions of
this Agreement shall be construed and interpreted under and in
accordance with, the laws of the State of Delaware.
Appendix B This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to
the subject matter hereof, whether oral or written.
Appendix B This Agreement may be executed by the parties hereto on any
number of counterparts, and all of the counterparts taken
together shall be deemed to constitute one and the same
instrument.
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<PAGE>
Appendix B If any part, term or provision of this Agreement is held to
be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and
not be affected, and the rights and obligations of the parties
shall be construed and enforced as if the Agreement did not
contain the particular part, term or provision held to be illegal
or invalid.
Appendix B Section headings in this Agreement are included for
convenience only and are not to be used to construe or interpret
this Agreement.
Appendix B Notices, requests, instructions and communications received
by the parties at their respective principal places of business,
or at such other address as a party may have designated in
writing, shall be deemed to have been properly given.
Appendix B Notwithstanding any other provision of this Agreement, the
parties agree that the assets and liabilities of each Fund of the
Trust are separate and distinct from the assets and liabilities
of each other Fund and that no Fund shall be liable or shall be
charged for any debt, obligation or liability of any other Fund,
whether arising under this Agreement or otherwise.
Appendix B No affiliated person, employee, agent, director, officer or
manager of Forum shall be liable at law or in equity for Forum's
obligations under this Agreement.
Appendix B Each of the undersigned warrants and represents that they
have full power and authority to sign this Agreement on behalf of
the party indicated and that their signature will bind the party
indicated to the terms hereof and each party hereto warrants and
represents that this Agreement, when executed and delivered, will
constitute a legal, valid and binding obligation of the party,
enforceable against the party in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting the rights and
remedies of creditors and secured parties.
Appendix B The terms "vote of a majority of the outstanding voting
securities," "interested person," and "affiliated person" shall
have the meanings ascribed thereto in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
persons, as of the day and year first above written.
11
<PAGE>
NORWEST ADVANTAGE FUNDS
By: __________________________
Donald H. Burkhardt
Trustee
FORUM ADMINISTRATIVE SERVICES, LLC
By: __________________________
David I. Goldstein
Managing Director
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<PAGE>
NORWEST ADVANTAGE FUNDS
ADMINISTRATION AGREEMENT
Appendix A
June 1, 1999
<TABLE>
<S> <C>
Fee as a % of
the Annual Average Daily
Funds of the Trust Net Assets of each Class of the Fund
- ------------------ ------------------------------------
Cash Investment Fund 0.025%
Ready Cash Investment Fund 0.075%
U.S. Government Fund 0.05%
Treasury Plus Fund 0.05%
Treasury Fund 0.05%
Municipal Money Market Fund, Institutional Shares 0.05%
Municipal Money Market Fund, Investor Shares 0.10%
Stable Income Fund 0.025%
Limited Term Government Income Fund 0.05%
Intermediate Government Income Fund 0.05%
Diversified Bond Fund 0.025%
Income Fund 0.05%
Total Return Bond Fund 0.025%
Strategic Income Fund 0.025%
Limited Term Tax-Free Fund 0.05%
Tax-Free Income Fund 0.05%
Colorado Tax-Free Fund 0.05%
Minnesota Intermediate Tax-Free Fund 0.05%
Minnesota Tax-Free Fund 0.05%
Moderate Balanced Fund 0.025%
Growth Balanced Fund 0.025%
Aggressive Balanced-Equity Fund 0.025%
Index Fund 0.025%
Income Equity Fund 0.025%
ValuGrowth Stock Fund 0.05%
Diversified Equity Fund 0.025%
Growth Equity Fund 0.025%
Large Company Growth Fund 0.025%
Diversified Small Cap Fund 0.025%
Small Company Stock Fund 0.025%
Small Cap Opportunities Fund 0.05%
Small Company Growth Fund 0.025%
International Fund 0.05%
Performa Strategic Value Bond Fund 0.025%
Performa Disciplined Growth Fund 0.025%
Performa Small Cap Value Fund 0.025%
Performa Global Growth Fund 0.025%
Norwest WealthBuilder II Growth Portfolio 0.05%
Norwest WealthBuilder II Growth and Income Portfolio 0.05%
Norwest WealthBuilder II Growth Balanced Portfolio 0.05%
</TABLE>
13
<PAGE>
NORWEST ADVANTAGE FUNDS
ADMINISTRATION AGREEMENT
Appendix B
Legal Services
1. Advise the Trust on compliance with applicable U.S. laws and regulations
with respect to matters that are within the ordinary course of the Trust's
business.
2. Advise the Trust on compliance with applicable U.S. laws and regulations
with respect to matters that are outside the ordinary course of the Trust's
business(*).
3. Liaison with the SEC.
4. Draft correspondences to SEC and respond to SEC comments.
5. Liaison with the Trust's outside counsel.
6. Provide attorney letters to the Trust's auditors.
7. Assist Trust's outside counsel in the preparation of exemptive
applications, no-action letters, prospectuses, registration statements and
proxy statements and related material.
8. Prepare exemptive applications, no-action letters, prospectuses,
registration statements and proxy statements and related material, and
draft correspondences to SEC and respond to SEC comments with respect
thereto(*).
9. Prepare prospectus supplements.
10. Review and authorize Section 24 filings.
11. Prepare and/or review agendas and minutes for and respond to inquiries at
board and shareholder meetings regarding applicable U.S. laws and
regulations.
12. Prepare and/or review agreements between the Trust and any third parties.
Note: Items designated with an (*) are Special Legal Services.
14
<PAGE>
Exhibit (h)(5)
SHAREHOLDER SERVICING AGREEMENT FOR
NORWEST ADVANTAGE FUNDS
THIS SHAREHOLDER SERVICING AGREEMENT ("Agreement"), dated as of
September 25, 1998, is made among Norwest Advantage Funds (the "Trust"), a
Massachusetts business trust, having its principal place of business at Two
Portland Square, Portland, Maine 04101, on behalf of the classes of shares of
the Funds of the Trust listed in the attached Appendix, as amended from time to
time, (each a "Class" and a "Fund" and, collectively, the "Classes" and the
"Funds"), and Norwest Bank Minnesota, N.A. as shareholder servicing agent
hereunder ("Shareholder Servicing Agent");
W I T N E S S E T H:
WHEREAS, shares of beneficial interest of a Fund of the Trust
(hereinafter the "Shares") may be purchased or redeemed through a broker/dealer
or financial institution which has entered into a shareholder servicing
agreement with the Trust on behalf of its respective Funds; and
WHEREAS, the Shareholder Servicing Agent wishes to facilitate
purchases and redemptions of Shares by its customers (the "Customers") and
wishes to act as the Customers' agent in performing certain administrative
functions in connection with transactions in Shares from time to time for the
account of the Customers and to provide related services to the Customers in
connection with their investments in a Fund; and
WHEREAS, it is in the best interests of the Funds to make the
services of the Shareholder Servicing Agent available to the Customers who, from
time to time, become shareholders of a Fund;
NOW THEREFORE, the Trust, on behalf of its respective Funds, and
the Shareholder Servicing Agent hereby agree as follows:
1. Appointment. The Shareholder Servicing Agent hereby agrees to
perform certain services for Customers as hereinafter set forth. The Shareholder
Servicing Agent's appointment hereunder is not exclusive, and the Shareholder
Servicing Agent shall not be entitled to notice of or a right to consent to the
execution of a shareholder servicing agreement with any other person.
2. Services to be Performed.
2.1 Types of Services. The Shareholder Servicing Agent shall
be responsible for performing shareholder administrative and
liaison services, which shall include, without limitation:
(a) answering Customer inquiries regarding account status
and history, and the manner in which purchases, exchanges and
redemptions of Shares may be effected;
(b) assisting Customers in designating and changing dividend
options, account designations and addresses;
(c) providing necessary personnel and facilities to
establish and maintain Customer accounts and records;
(d) assisting in aggregating and transmitting purchase,
redemption and exchange transactions;
(e) arranging for the wiring of money;
(f) transferring money in connection with Customer orders to
purchase or redeem shares;
(g) verifying and guaranteeing Customer signatures in
connection with redemption and exchange orders and transfers and
changes in Customer accounts with a bank which is designated in
the Fund Account Application and which is approved by a Fund's
Transfer Agent;
(h) furnishing (either separately or on an integrated basis
with other reports sent to a Customer by the Shareholder
Servicing Agent) monthly and year-end statements and
confirmations of purchases, redemptions and exchanges;
(i) furnishing, on behalf of the Shares of a Fund, proxy
statements, annual reports, updated prospectuses and other
communications to Customers;
(j) receiving, tabulating and sending to a Fund, proxies
executed by Customers; and
(k) providing such other related services, and necessary
personnel and facilities to provide all of the shareholder
services contemplated hereby, in each case, as the Trust, or a
Customer may reasonably request.
2.2 Standard of Services. All services to be rendered by the
Shareholder Servicing Agent hereunder shall be performed in a
professional, competent and timely manner. Any detailed operating
standards and procedures to be followed by the Shareholder
Servicing Agent in performing the services described above shall
be determined from time to time by agreement between the
Shareholder Servicing Agent and the Trust. The Trust acknowledges
that the Shareholder Servicing Agent's ability to perform on a
timely basis certain of its obligations under this Agreement
depends upon a Fund's timely delivery of certain materials and/or
information to the Shareholder Servicing Agent. The Trust agrees
to use its best efforts to provide, or cause to be provided, such
materials to the Shareholder Servicing Agent in a timely manner.
2.3 Investments through Distributor. The Trust and the
Shareholder Servicing Agent each hereby agrees that all purchases
of Shares effected by the Shareholder Servicing Agent on behalf
of its Customers shall be effected by it through Forum Financial
Services, Inc. ("Distributor") in its capacity as the Funds'
principal underwriter.
3. Fees.
3.1 Fees from the Funds. In consideration of the services
described in Section 2 hereof ------------------- and the
incurring of expenses in connection therewith, the Shareholder
Servicing Agent shall receive a fee, from each of the Classes of
Shares of the Funds identified in the attached Appendix, which
shall be paid in arrears periodically or on a periodic basis to
be agreed between the Trust and the Shareholder Servicing Agent,
from time to time (but in no event less frequently than
semi-annually) determined by a formula based upon the number of
accounts of the particular Class in a particular Fund serviced by
the Shareholder Servicing Agent during the period for which
payment is being made, the level of assets or activity in such
accounts during such period, and/or the expenses incurred by the
Shareholder Servicing Agent. In no event will the fees charged to
a Class of Shares of a Fund exceed the amount set forth opposite
such Class of Shares of such Fund in the Appendix attached
hereto. In addition, all fees paid by Classes of Shares of the
Funds hereunder shall be calculated based on the average daily
net assets of the particular Class of Shares of such Fund owned
of record by the Shareholder Servicing Agent on behalf of the
Customers during the period for which payment is being made. For
purposes of determining the fees payable to the Shareholder
Servicing Agent hereunder, the per share value of a Class of a
Fund shall be computed in the manner specified in the Fund's
then-current prospectus. Notwithstanding the foregoing, if
applicable laws, regulations or rules impose a maximum fee amount
(a "cap") with respect to shareholder servicing fees and/or fees
for distribution-related services that may be paid by the Shares
of a Fund, the amount payable hereunder shall be reduced to an
amount which, when considered in conjunction with the fees
payable by a Fund for the Shares' distribution-related
activities, is the maximum amount payable to the Shareholder
Servicing Agent under applicable laws, regulations or rules.
Notwithstanding anything herein to the contrary, the Trust shall
not be obligated to make any payments under this Agreement that
exceed the maximum amounts payable under Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc. The
above fee constitutes all fees to be paid to the Shareholder
Servicing Agent by a Class of Shares of a Fund of the Trust with
respect to the shareholder services contemplated hereby.
3.2 Fees from Customers. It is agreed that the Shareholder
Servicing Agent may impose certain conditions on Customers,
subject to the terms of the relevant Fund's then-current
prospectus, in addition to or different from those imposed by the
Fund, such as requiring a minimum initial investment or the
payment of additional fees directly by the Customer for
additional services offered by the Shareholder Servicing Agent to
the Customer; provided, however, that the Shareholder Servicing
Agent may not charge Customers any direct fee which would
constitute a "sales load" within the meaning of Section 2(a)(35)
of the Investment Company Act of 1940, as amended (the "1940
Act"). The Shareholder Servicing Agent shall bill Customers
directly for any such additional fees. In the event the
Shareholder Servicing Agent charges Customers such additional
fees, it shall notify the Trust in advance and make appropriate
prior written disclosure (such disclosure to be in accordance
with all applicable laws) to Customers of any such additional
fees charged directly to the Customer. To the extent required by
applicable rules and regulations of the Securities and Exchange
Commission ("SEC"), the Trust shall make written disclosure of
the fees paid or to be paid by a Fund to the Shareholder
Servicing Agent pursuant to Section 3.1 of this Agreement. In no
event shall the Shareholder Servicing Agent have recourse or
access, as Shareholder Servicing Agent or otherwise, to the
assets in the Customer's account, except to the extent expressly
authorized by law or by such Customer, or to any assets of a
Fund, the Trust, for payment of any additional direct fees
referred to in this Section 3.2.
4. Information Pertaining to the Shares. The Shareholder Servicing
Agent and its officers, employees and agents are not authorized to make any
representations concerning the Trust, a Fund or the Shares of any Class thereof
to Customers or prospective Customers, excepting only accurate communication of
any information provided by or on behalf of any administrator of the Trust or
the Distributor of information contained in the relevant Fund's then-current
prospectus. In furnishing such information regarding the Trust, a Fund or the
Shares, the Shareholder Servicing Agent shall act as agent for the Customer only
and shall have no authority to act as agent for the the Trust, a Fund or the
Shares. Advance copies or proofs of all materials which are proposed to be
circulated or disseminated by the Shareholder Servicing Agent to Customers or
prospective Customers and which identify or describe the Trust, a Fund or the
Shares shall be provided to the Trust, at least 10 days prior to such
circulation or dissemination (unless the Trust consents in writing to a shorter
period), and such materials shall not be circulated or disseminated or further
circulated or disseminated at any time after the Trust, shall have given written
notice to the Shareholder Servicing Agent of any objection thereto.
Nothing in this Section 4 shall be construed to make the Trust
liable for the use (as opposed to the accuracy) of any information about, the
Trust, a Fund or the Shares which is disseminated by the Shareholder Servicing
Agent.
5. Use of the Shareholder Servicing Agent's Name. The Trust not
use the name of the Shareholder Servicing Agent, or any of its affiliates or
subsidiaries, in any prospectus, sales literature or other materials relating
to, the Trust, a Fund or the Shares in a manner not approved by the Shareholder
Servicing Agent prior thereto in writing; provided, however, that the approval
of the Shareholder Servicing Agent shall not be required for any use of its name
which merely refers in accurate and factual terms to its appointment hereunder
or which is required by the SEC or any state securities authority or any other
appropriate regulatory, governmental or judicial authority; provided, further,
that in no event shall such approval be unreasonably withheld or delayed.
6. Use of the Name of the Trust or a Fund. The Shareholder
Servicing Agent shall not use the name of, the Trust, a Fund or any Class of
Shares on any checks, bank drafts, bank statements or forms for other than
internal use in a manner not approved by Trust, prior thereto in writing;
provided, however, that the approval of the Trust, shall not be required for (i)
the use of the Trust's name, or the name of a Fund, in connection with
communications permitted by Section 4 hereof, or (ii) (subject to Section 4, to
the extent the same may be applicable) for any use of the Trust's name or a
Fund's name which merely identifies the Trust or a Fund, in connection with the
Shareholder Servicing Agent's role hereunder or which is required by the SEC or
any state securities authority or any other appropriate regulatory, governmental
or judicial authority; provided, further, that in no event shall such approval
be unreasonably withheld or delayed.
7. Security. The Shareholder Servicing Agent represents and
warrants that to the best of its knowledge, the various procedures and systems
which it has implemented (including provision for twenty-four hours a day
restricted access) with regard to safeguarding from loss or damage attributable
to fire, theft or any other cause the Trust records and other data within its
possession or control and the Shareholder Servicing Agent's records, data,
equipment, facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as in its judgment are required for the secure performance of
its obligations hereunder. The parties shall review such systems and procedures
on a periodic basis, and the Trust shall, from time to time, specify the types
of records and other data of the Trust, respectively, to be safeguarded in
accordance with this Section 7.
8. Compliance with Laws. The Shareholder Servicing Agent shall
comply with all applicable federal and state laws and regulations, including
securities laws. The Shareholder Servicing Agent represents and warrants to the
Trust, that the performance of all its obligations hereunder will comply with
all applicable laws and regulations, the provisions of its charter documents and
by-laws and all material contractual obligations binding upon the Shareholder
Servicing Agent. The Shareholder Servicing Agent furthermore undertakes that it
will promptly, after the Shareholder Servicing Agent becomes so aware, inform
the Trust of any change in applicable laws or regulations (or interpretations
thereof) or in its charter or by-laws or material contracts which would prevent
or impair full performance of any of its obligations hereunder.
9. Reports. To the extent requested by the Trust from time to
time, but at least quarterly, the Shareholder Servicing Agent will provide the
Treasurer of the Trust with a written report of the amounts expended by the
Shareholder Servicing Agent pursuant to this Agreement and the purposes for
which such expenditures were made. Such written reports shall be in a form
satisfactory to the Trust and shall supply all information necessary for the
Trust to discharge its responsibilities under applicable laws and regulations.
In addition, the Shareholder Servicing Agent shall have a duty to furnish to the
Trust's Board of Trustees such information as may reasonably be necessary to an
informed determination of whether this Agreement should be implemented or
continued pursuant to Section 16.
10. Recordkeeping.
10.1 Each party shall maintain and preserve records as
required by law to be maintained and preserved by it in
connection with providing the services contemplated by this
Agreement. The Shareholder Servicing Agent's recordkeeping
responsibilities shall include those relating to establishing and
maintaining sub-accounts and records on behalf of Customers, and
recording Customers' sub-account balances and changes thereto.
10.2. Upon the request of the Trust, the Shareholder Servicing
Agent shall provide copies of all records relating to the transactions
between the Funds and the Customers as are maintained by the
Shareholder Servicing Agent in the ordinary course of its business and
in compliance with laws and regulations as may reasonably be requested
to enable the Trust to comply with any applicable laws or regulations
or request of a governmental body or self-regulatory organization.
10.3. The recordkeeping and access obligations imposed in this
Section 10 shall survive the termination of this Agreement for the
shorter of a period of six years or that minimum period required by
applicable rules or regulations of the SEC.
11. Force Majeure. The Shareholder Servicing Agent shall not be
liable or responsible for delays or errors by reason of circumstances beyond its
reasonable control, including, but not limited to, acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical breakdown,
flood or catastrophe, acts of God, insurrection, war, riots or failure of
communication systems or power supply.
12. Indemnification.
12.1 Indemnification of the Shareholder Servicing Agent by the
Trust. The Trust will indemnify and hold the Shareholder Servicing
Agent harmless from all losses, claims, damages, liabilities or
expenses (including reasonable counsel fees and expenses) from any
claim, demand, action or suit (collectively, "Claims") (a) arising in
connection with misstatements or omissions in the Funds' prospectus,
actions or inactions by the Trust or any of its agents or contractors
or the performance of the Shareholder Servicing Agent's obligations
hereunder and (b) not resulting from (i) the bad faith or negligence
of the Shareholder Servicing Agent, its officers, employees or agents,
or (ii) any breach of applicable law by the Shareholder Servicing
Agent, its officers, employees or agents, or (iii) any action of the
Shareholder Servicing Agent, its officers, employees or agents which
exceeds the legal authority of the Shareholder Servicing Agent or its
authority hereunder, or (iv) any error or omission of the Shareholder
Servicing Agent, its officers, employees or agents with respect to the
purchase, redemption and transfer of Customers' Shares or the
Shareholder Servicing Agent's verification or guarantee of any
Customer signature. Notwithstanding anything herein to the contrary,
the Trust will indemnify and hold the Shareholder Servicing Agent
harmless from any and all losses, claims, damages, liabilities or
expenses (including reasonable counsel fees and expenses) resulting
from any Claim as a result of its acting in accordance with any
written instructions reasonably believed by the Shareholder Servicing
Agent to have been executed by any person duly authorized by the Trust
or as a result of acting in reliance upon any instrument or stock
certificate reasonably believed by the Shareholder Servicing Agent to
have been genuine and signed, countersigned or executed by a person
duly authorized by the Trust excepting only the gross negligence or
bad faith of the Shareholder Servicing Agent.
In any case in which the Trust may be asked to indemnify or hold
the Shareholder Servicing Agent harmless, the Trust shall be advised of all
pertinent facts concerning the situation in question and the Shareholder
Servicing Agent shall use reasonable care to identify and notify the Trust
promptly concerning any situation which presents or appears likely to present a
claim for indemnification against the Trust. The Trust shall have the option to
defend the Shareholder Servicing Agent against any Claim which may be the
subject of indemnification hereunder. In the event that the Trust may be, elects
to defend against such Claim, the defense shall be conducted by counsel chosen
by the Trust and reasonably satisfactory to the Shareholder Servicing Agent. The
Shareholder Servicing Agent may retain additional counsel at its expense. Except
with the prior written consent of the Trust the Shareholder Servicing Agent
shall not confess any Claim or make any compromise in any case in which the
Trust will be asked to indemnify the Shareholder Servicing Agent.
12.2 Indemnification of the Trust by the Shareholder Servicing
Agent. Without limiting the rights of the Trust under applicable law,
the Shareholder Servicing Agent will indemnify and hold the Trust
harmless from all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) from any Claim (a)
resulting from (i) the bad faith or negligence of the Shareholder
Servicing Agent, its officers, employees or agents, or (ii) any breach
of applicable law by the Shareholder Servicing Agent, its officers,
employees or agents, or (iii) any action of the Shareholder Servicing
Agent, its officers, employees or agents which exceeds the legal
authority of the Shareholder Servicing Agent or its authority
hereunder, or (iv) any error or omission of the Shareholder Servicing
Agent, its officers, employees or agents with respect to the purchase,
redemption and transfer of Customers' Shares or the Shareholder
Servicing Agent's verification or guarantee of any Customer signature,
and (b) not resulting from the Shareholder Servicing Agent's actions
in accordance with written instructions reasonably believed by the
Shareholder Servicing Agent to have been executed by any person duly
authorized by the Trust or in reliance upon any instrument or stock
certificate reasonably believed by the Shareholder Servicing Agent to
have been genuine and signed, countersigned or executed by a person
duly authorized by the Trust.
In any case in which the Shareholder Servicing Agent may be asked
to indemnify or hold the Trust harmless, the Shareholder Servicing Agent shall
be advised of all pertinent facts concerning the situation in question and the
Trust shall use reasonable care to identify and notify the Shareholder Servicing
Agent promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Shareholder Servicing Agent. The
Shareholder Servicing Agent shall have the option to defend the Trust against
any Claim which may be the subject of indemnification hereunder. In the event
that the Shareholder Servicing Agent elects to defend against such Claim, the
defense shall be conducted by counsel chosen by the Shareholder Servicing Agent
and satisfactory to the Trust. The Trust may retain additional counsel at its
expense. Except with the prior written consent of the Shareholder Servicing
Agent, the Trust shall not confess any Claim or make any compromise in any case
in which the Shareholder Servicing Agent will be asked to indemnify the Trust.
12.3 Survival of Indemnities. The indemnities granted by the
parties in this Section 12 ----------------------- shall survive the
termination of this Agreement.
13. Insurance. The Shareholder Servicing Agent shall maintain
reasonable insurance coverage against any and all liabilities which may arise in
connection with the performance of its duties hereunder.
14. Notices. All notices or other communications hereunder shall
be in writing and shall be deemed sufficient if mailed to the other party at the
address of such party set forth in the preamble of this Agreement or at such
other address as such party may have designated by written notice to the other.
15. Further Assurances. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.
16. Implementation and Duration of Agreement. This Agreement is
effective upon the date first written above and shall continue in effect with
respect to a Class of Shares of a Fund of the Trust for a period of more than
one year from the date hereof so long as the Servicing Plan adopted for such
Class and related form of agreement or this Agreement is not specifically
terminated by a vote of the Board of Trustees and of the Trustees who are not
"interested persons" of the Trust (as defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of the relevant Servicing
Plan (the "Plan") pursuant to which the fees are paid, this Agreement, or any
other agreement related to such Plan, cast in person at a meeting called for the
purpose of voting on this Agreement.
17. Termination. This Agreement may be terminated with respect to
the Trust, or one or more Funds of the Trust, by the Trust without the payment
of any penalty, at any time upon not more than 60 days' nor less than 30 days'
notice, by a vote of a majority of the Board of Trustees who are not "interested
persons" of the Trust (as defined in the 1940 Act) and have no direct or
indirect financial interest in the operation of the relevant Plan, this
Agreement or any other agreement related to such Plan, including the Amended
Distribution Agreement, or by "a vote of a majority of the outstanding voting
securities" (as defined in the 1940 Act) of the relevant class of shares of the
Fund. The Shareholder Servicing Agent may terminate this Agreement with respect
to either the Trust upon not more than 60 days' nor less than 30 days' notice to
the Trust. The Trust or the Shareholder Servicing Agent may assign this
Agreement provided that such assigning party obtains the prior written consent
of the other party hereto. Upon termination hereof, a Fund shall pay such
compensation as may be due the Shareholder Servicing Agent as of the date of
such termination.
18. Changes; Amendments. Except as otherwise provided in this
Section 18, this Agreement may be supplemented or amended only by written
instrument signed by all parties, but may not be amended to increase materially
the maximum amount payable by a Class of Shares of a Fund without the approval
of "a vote of a majority of the outstanding voting securities" (as defined in
the 1940 Act) of such Class of Shares of such Fund, and all material amendments
must be approved in the manner described in Section 16. From time to time, the
Trust may, by written notice to the Shareholder Servicing Agent, amend the
Appendix attached hereto to add or delete Funds and/or classes of Shares as
available investment options hereunder. Any such notice shall be effective upon
receipt by the Shareholder Servicing Agent.
19. Limitation of Liability. The Shareholder Servicing Agent
hereby agrees that obligations assumed by the Trust pursuant to this Agreement
shall be limited in all cases to the Funds and their assets and that the
Shareholder Servicing Agent shall not seek satisfaction of any such obligations
from the Board of Trustees or any individual Trustee of the Trust. The
Shareholder Servicing Agent further agrees that all obligations of a Fund
hereunder shall be solely the obligations of such Fund and that in no case will
any Fund of the Trust be liable for the obligations of any other Fund of the
Trust.
20. Subcontracting by Shareholder Servicing Agent. The Shareholder
Servicing Agent may, with the written approval of the Trust (such approval not
to be unreasonably withheld or delayed), subcontract for the performance of the
Shareholder Servicing Agent's obligations hereunder with any one or more
persons, including but not limited to any one or more persons which is an
affiliate of the Shareholder Servicing Agent; provided, however, that the
Shareholder Servicing Agent shall be as fully responsible to the Trust for the
acts and omissions of any subcontractor as it would be for its own acts or
omissions.
21. Authority to Vote. The Trust hereby confirms that nothing
contained in its Declaration of Trust would preclude the Shareholder Servicing
Agent, at any meeting of shareholders of the Trust or of a Fund, from voting any
Shares held in accounts serviced by the Shareholder Servicing Agent and which
are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all Shares
otherwise represented at the meeting in person or by proxy and held in accounts
serviced by the Shareholder Servicing Agent.
22. Compliance with Laws and Policies; Cooperation. The Trust
hereby agrees that it will comply with all laws and regulations applicable to
operations of Funds thereof and the Shareholder Servicing Agent agrees that it
will comply with all laws and regulations applicable to providing the services
contemplated hereby.
23. Miscellaneous. This Agreement shall be construed and enforced
in accordance with and governed by the laws of the State of __________. The
captions in this Agreement are included for convenience of reference only and in
no way define or limit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed simultaneously in three
or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
Norwest Advantage Funds on behalf of the classes of
shares of the Funds listed in the attached Appendix
By: ________________________________________________
Name: ______________________________________________
Title: ____________________________________________
Norwest Bank Minnesota, N.A.
By: ______________________________________
Name: _____________________________________
Title: __________________________________
By: ______________________________________
Name: ______________________________________
Title: ___________________________________
<PAGE>
APPENDIX
__________________ Maximum
Annual
Fund and Share Class(es)___ Fee Rate
Growth Balanced Fund
Class A .25%
Large Company Growth Fund
Class A .25%
Diversified Small Cap Fund
Class A .25%
Approved: September 25, 1998
<PAGE>
Exhibit (h)(6)
NORWEST ADVANTAGE FUNDS
SERVICING PLAN
Section 1. Each of the proper officers of Norwest Advantage Funds (the
"Trust") is authorized to execute and deliver, in the name and on behalf of the
Trust, written agreements the form of which has been duly approved by the
Trust's Board of Trustees ("Agreements") with broker/dealers, banks and other
financial institutions that are dealers of record or holders of record or which
have a servicing relationship with the beneficial owners ("Servicing Agents") of
the various classes of shares (each a "Class") of the portfolios of the Trust
(each a "Fund") listed on the attached Appendix, as amended from time to time.
Pursuant to such Agreements, Servicing Agents shall provide support services as
set forth therein to their clients who beneficially own shares of the particular
Class of the particular Fund in consideration of a fee, computed monthly in the
manner set forth in the Fund's then current prospectus, at the annual rates set
forth on the attached Appendix. The Trust's distributor, administrator and
adviser and their respective affiliates are eligible to become Servicing Agents
and to receive fees under this Servicing Plan. All expenses incurred by a
particular Fund in connection with the Agreements and the implementation of this
Servicing Plan shall be borne entirely by the holders of the particular Class of
the particular Fund involved.
Section 2. The Trust's administrator shall monitor the arrangements
pertaining to the Trust's Agreements with Servicing Agents. The Trust's
administrator shall not, however, be obligated by this Servicing Plan to
recommend, and the Trust shall not be obligated to execute, any Agreement with
any qualifying Servicing Agents.
Section 3. So long as this Servicing Plan is in effect, the Trust's
administrator shall provide to the Trust's Board of Trustees, and the Trustees
shall review, at least quarterly, a written report of the amounts expended
pursuant to this Servicing Plan and the purposes for which such expenditures
were made.
Section 4. The Plan shall be effective on the date upon which it is
approved by "vote of a majority of the outstanding voting securities," as
defined in the Investment Company Act of 1940, as amended, and rules and
regulations thereunder, of the particular Class of the Fund and a majority of
the Trustees of the Trust, including a majority of the Trustees who are not
"interested persons," as defined in the Investment Company Act of 1940, of the
Trust and have no direct or indirect financial interest in the operation of this
Servicing Plan or in any Agreement related to this Servicing Plan (the
"Disinterested Trustees"), pursuant to a vote cast in person at a meeting or
meetings called for the purpose of voting on the approval of the Plan, or on the
date the Fund commences operations, if such date is later.
Section 5. Unless sooner terminated, this Servicing Plan (and each
related agreement) shall continue in effect for a period of one year from its
date of approval and shall continue thereafter for successive annual periods,
provided that such Plan is not specifically terminated by a majority of the
Board of Trustees, including a majority of the Disinterested Trustees cast in
person at a meeting called for the purpose of voting on such approval.
Section 6. This Servicing Plan may be amended at any time with respect
to the Fund by the Trust's Board of Trustees, provided that any material
amendment of the terms of this Servicing Plan (including a material increase of
the fee payable hereunder) shall become effective only upon the approvals set
forth in Section 5.
Section 7. This Servicing Plan is terminable at any time with respect
to the Fund by vote of a majority of the Disinterested Trustees.
Section 8. While this Servicing Plan is in effect, the selection and
nomination of the Disinterested Trustees shall be committed to the discretion of
such Disinterested Trustees.
Section 9. Notwithstanding anything herein to the contrary, the Fund
shall not be obligated to make any payments under this Plan that exceed the
maximum amounts payable under Article III, Section 26 of the Conduct Rules of
the National Association of Securities Dealers, Inc.
Section 10. The Trust will preserve copies of this Servicing Plan,
Agreements, and any written reports regarding this Servicing Plan presented to
the Board of Trustees for a period of not less than six years.
Approved: September 25, 1998
<PAGE>
APPENDIX
Fees are expressed as a percentage of the average daily net
asset value of the particular Class of the particular Fund beneficially owned by
or attributable to such clients of the Servicing Agent.
Maximum
Annual
Fund and Share Class(es) Fee Rate
Growth Balanced Fund
Class A .25%
Large Company Growth Fund
Class A .25%
Diversified Small Cap Fund
Class A .25%
Approved: September 25, 1998
<PAGE>
Exhibit (i)(1)
Seward & Kissel
WALL STREET PLAZA
NEW YORK, N.Y. 10005
212 412-4100
December 30, 1986
Prime Value Funds, Inc.
61 Broadway
New York, New York 10006
Dear Sirs:
We have acted as counsel for Prime Value Funds, Inc., a Maryland
corporation (the "Company"), in connection with the organization of the Company,
the registration of the Company under the Investment Act of 1940 and the
registration of an indefinite number of shares of its tax Exempt Fund Common
Stock, Cash Investment Fund Common Stock and Treasury Fund Common Stock (the
"Common Stock") (each with par value of $.001 per share) of the Company under
the Securities Act of 1933.
As Counsel for the Company we have participated in the preparation of
the Registration Statement on Form N-1A relating to such shares and have
examined and relied upon such corporate records of the Company and such other
documents and certificates as to factual matters as we have deemed to be
necessary to render the opinion expressed herein.
Based on such examination, we are of the opinion that:
1. The Company is a duly organized and validly existing corporation in good
standing under the laws of the State of Maryland.
2. The 100,000 shares of presently issued and outstanding Common Stock of the
Company have been validly and legally issued and are fully paid and
nonassessable shares of Common Stock of the Company.
3. The Shares of Common Stock of the Company to be offered for sale pursuant to
the Prospectus contained in said Registration Statement are, to the extent of
the number of shares authorized to be issued by the Company in its Articles of
Incorporation, duly authorized and unissued shares and when such shares have
been duly sold, issued and paid for as contemplated in the Prospectus, such
shares will be fully paid and non-assessable shares of Common Stock of the
Company under the laws of the State of Maryland (assuming that the sale price of
each share is not less than the par value thereof).
As to matters of Maryland law contained in the foregoing opinion we
have relied on the opinion of Messrs. Venable, Baetjer and Howard of Baltimore,
Maryland, dated December 30, 1986, a copy of which is attached hereto.
Prime Value Funds, Inc. -2- December 30, 1986
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
reference of our firm under the captions "Banking Law Matters" in the prospectus
and "Counsel and Auditors" in the related Statement of Additional Information
included therein.
Very truly yours,
/s/ Seward & Kissel
<PAGE>
Exhibit (l)
JOHN Y. KEFFER
c/o Keffer Capital Management Inc.
61 Broadway
New York, New York 10006
December 29, 1986
Prime Value Funds, Inc.
61 Broadway
New York, New York 10006
Gentlemen:
In connection with my purchase of 100,000 shares of Tax Exempt Fund Common
Stock for a cash consideration of $1.00 per share, this will confirm
that I am buying such shares for investment for my account only, and
not with a view to reselling or otherwise distributing them.
Very truly yours,
/s/ John Y. Keffer
John Y. Keffer
<PAGE>
Exhibit (m)(1)
NORWEST ADVANTAGE FUNDS
DISTRIBUTION PLAN
August 1, 1993
As Amended April 26, 1999
This Distribution Plan (the "Plan") is adopted by Norwest Advantage
Funds (the "Trust") with respect to the shares of each class (the "Shares") of
each of the Funds identified in Appendix A attached hereto (individually a
"Fund" and collectively the "Funds") in accordance with the provisions of Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act").
SECTION 1. DISTRIBUTION RELATED SERVICES
Each entity selected from time to time to act as principal agent for
the Trust for the distribution of Shares of a Fund (each, a "Distributor" and
collectively, the "Distributors") will provide the Funds with
distribution-related services that are primarily intended to result in the sale
of Shares, including, but not limited to, compensation of employees of each such
Distributor, compensation and expenses, including overhead and telephone and
other communication expenses, of each such Distributor and other broker-dealers,
banks and other financial intermediaries that engage in or support the
distribution of Shares, the preparation, printing and distribution of
prospectuses, statements of additional information, sales literature and
advertising materials relating to the Shares, and such other promotional
activities in such amounts as each such Distributor deems necessary or
appropriate.
SECTION 2. COMPENSATION
Each Fund will pay to or on the order of, each entity, that has served
from time to time as Distributor, a distribution services fee composed of (i) a
sales commission equal to such percentage as may be determined from time to time
by the Trustees (such determination to be evidenced by the distribution
servicing agreement between such Distributor and the Trust (each a "Distribution
Agreement")) not in excess of the percentage permitted by law of the amount
received by the Fund for each Share sold (excluding reinvestment of dividends
and distributions) prior to the termination of the Distribution Agreement and
(ii) a separate interest fee (calculated in accordance with Section 3(c) hereof)
to be paid in the manner set forth in, and subject to the terms of, this Plan.
The amount of the sales commission with respect to a Fund shall be established
from time to time by vote or other action of a majority of (i) the Trustees and
(ii) those Trustees of the Trust who are not interested persons of the Trust and
have no direct or indirect financial interest in the operation of this Plan or
any agreements related to it (the "Rule 12b-1 Trustees"). All sales commissions
paid hereunder with respect to a Fund shall, unless otherwise expressly required
by an applicable rule or regulation of the Securities and Exchange Commission
("Commission"), be charged to the capital of the Fund attributable to the
Shares. The separate interest fee paid hereunder with respect to a Fund shall,
unless otherwise expressly required by an applicable rule or regulation of the
Commission, be charged to the operating expenses of the Fund attributable to the
Shares. All distribution services fees are being paid to each Distributor in
consideration for the distribution services furnished by each such Distributor
1
<PAGE>
in connection with the distribution of shares of a Fund, including the payment
of compensation to broker-dealers, banks and other financial intermediaries
selling Shares of such Fund.
SECTION 3. PAYMENT TO THE DISTRIBUTOR
(a) Subject to the provisions of Sections 9 and 11 hereof, the amount
of the distribution services fee payable pursuant to Section 2 in respect of
Shares of each Fund shall be paid by the Trust in respect of such Fund to the
Distributor in respect of such Shares or, if more than one institution has acted
or is acting as Distributor in respect of such Shares, then the amount of the
distribution services fee payable pursuant to Section 2 in respect of such
Shares shall be paid to each such Distributor in proportion to the number of
such Shares sold by or attributable to such Distributor's distribution efforts
in respect of such Shares in accordance with allocation provisions (the
"Allocation Procedures") set forth in such Distributor's Distribution Agreement
(the "Allocable Portion") notwithstanding that such Distributor's Distribution
Agreement with the Trust may have been terminated. A Distributor shall be deemed
to have fully earned its Allocable Portion of distribution services fees upon
the sale of each Commission Shares (as defined in the Allocation Procedures)
taken into account in computing its Allocable Portion.
(b) Payment of the distribution services fee by the Trust in respect of
each Fund shall be spread over a period of time, and the aggregate amount of all
such payments during any fiscal year of the Trust shall not exceed 0.75% of the
average daily net assets of the Fund attributable to the Shares for such year,
computed in accordance with the governing documents of the Trust and applicable
votes and determinations of the Trustees of the Trust. Accordingly, each Fund
shall accrue distribution services fees on a daily basis at the rate of 0.75%
per annum of the daily net assets of the Fund attributable to the Shares. The
amount of such distribution services fees in respect of a Fund shall be
determined daily with respect to such Fund, but Distributors for such Fund shall
not be entitled to any amount with respect to any day on which there exist no
outstanding Uncovered Distribution Charges, as defined below, attributable to
such Fund. The amount of such Uncovered Distribution Charges shall be calculated
daily. Subject to such limitations, the Trust shall pay each Distributor its
Allocable Portion of the accrued and unpaid distribution services fee at least
monthly and no later than the 10th day following the end of the calendar month
of accrual.
(c) For purposes of calculating Uncovered Distribution Charges in
respect of any Fund, Distribution Charges attributable to such Fund shall be the
aggregate of (i) all sales commissions attributable to the Fund that each
Distributor is entitled to be paid pursuant to Section 2 hereof since inception
of this Plan through and including the day next preceding the date of
calculation and (ii) an amount equal to the aggregate of all separate interest
fees referred to below that are attributable to such Fund that each Distributor
is entitled to be paid pursuant to Section 2 hereof since inception of this Plan
through and including the day next preceding the date of calculation. From
Distribution Charges attributable to such Fund as so computed there shall be
subtracted with respect to each Fund (i) an amount equal to the aggregate amount
of distribution services fees paid pursuant to this Section 3 in respect of such
Fund since inception of this Plan through and including the day next preceding
the date of calculation and (ii) an amount equal to the aggregate amount of all
contingent deferred sales charges paid by such Fund to each Distributor since
inception of this Plan through and including the day next preceding the date of
calculation. If the result of such subtraction is a positive amount, a separate
interest fee (computed at the rate of 1% per annum above the prime rate (being
the base rate on corporate loans at large U.S. money center commercial banks)
2
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then being reported in the Eastern Edition of the Wall Street Journal or if such
prime rate is not so reported such other rate as may be designated from time to
time by vote or other action of a majority of (i) the Trustees and (ii) the Rule
12b-1 Trustees shall be computed on such amount and added to such amount, with
the resulting sum constituting the amount of outstanding Uncovered Distribution
Charges attributable to such Fund with respect to such day for all purposes of
this Plan. The amount of distribution services fee to be accrued or paid in
respect of a Fund to the Distributors with respect to any day shall be the
lesser of the Uncovered Distribution Charges attributable to such Fund with
respect to that day and the maximum distribution services fee payable to the
Distributors by such Fund with respect to that day. The amount of such
distribution services fees, as so determined, shall first be applied and charged
to all unpaid sales commissions attributable to such Fund, and the balance, if
any, shall then be applied and charged to all unpaid interest fees attributable
to such Fund.
SECTION 4. ASSIGNMENT
(a) Any Distributor may assign, transfer or pledge ("Transfer") to one
or more designees (each an "Assignee"), its rights to all or a designated
portion of its Allocable Portion of the distribution services fee relating to
any Fund from time to time (but not such Distributor's duties and obligations
pursuant hereto or pursuant to any Distribution Agreement), free and clear of
any offsets or claims the Trust may have against such Distributor. Each such
Assignee's interest in a specific designated portion of a Distributor's
Allocable Portion of the distribution services fee relating to any Fund
transferred in a Transfer is hereafter referred to as an "Assignee's Portion." A
Transfer pursuant to this Section 4(a) shall not reduce or extinguish any claims
of the Trust against the Distributor.
(b) Each Distributor shall promptly notify the Trust in writing of each
such Transfer by providing the Trust with the name and address of each such
Assignee and request the Trust to pay such Assignee's Portion to such Assignee.
In accordance with such request, the Trust shall pay to such Assignee such
Assignee's portion.
(c) Alternatively, in connection with a Transfer, a Distributor may
direct the Trust to pay all of such Distributor's Allocable Portion of the
distribution services fee relating to any Fund from time to time to a depository
or collection agent designated by any Assignee, which depository or collection
agent may be delegated the duty of dividing such Distributor's Allocable Portion
of the distribution services fee relating to any Fund between the Assignee's
Portion and the balance of such Distributor's Allocable Portion (such balance,
when distributed to such Distributor by the depository or collection agent, the
"Distributor's Share"), in which case no portion of the Distributor's Share may
be subject to offsets or claims the Trust may have against such Distributor,
until and unless such Distributor's Share has been paid to such Distributor by
such depository.
SECTION 5. CONTINGENT DEFERRED SALES CHARGES
Each Distributor shall be entitled to receive all contingent deferred
sales charges imposed with respect to any early redemption of the Shares of any
Fund that are sold while this Plan or the Distribution Agreement between such
Distributor and the Trust is in effect. If there exist no Uncovered Distribution
Charges attributable to a Fund on the day on which any such contingent deferred
sales charge is imposed on Shares of that Fund and either this Plan or the
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Distribution Agreement is in effect, the amount of such contingent deferred
sales charge shall be used to reduce any distribution services fees which may
otherwise be payable by the Fund to Distributors in the future pursuant to the
Plan.
SECTION 6. MAINTENANCE FEES
In addition to the payments of distribution services fees to the
Distributor as provided for in Section 3 hereof, each Fund will pay to the
Distributor each month for providing services to shareholder accounts a
maintenance fee with respect to the Shares of the Fund in an amount equal to, on
an annualized basis, 0.25% of the average daily net assets attributable to the
Shares of the Fund.
SECTION 7. ASSUMPTION OF UNCOVERED DISTRIBUTION CHARGES
With respect to the Shares of each Fund identified in Appendix B
attached hereto, upon approval of the Rule 12b-1 Trustees, a Fund may assume and
pay to the Distributors or their Assignees, as appropriate, the Uncovered
Distribution Charges of any other registered investment company or series
thereof, or any other amounts expended for distribution on behalf of such
registered investment company or series and not reimbursed or paid by such
registered investment company or series, upon the merger or combination with or
acquisition of substantially all of the assets of that registered investment
company or series by the Fund. Payments by a Fund pursuant to this Section 7 are
subject to all of the terms and conditions of this Plan.
SECTION 8. NO OTHER PAYMENTS
No Fund is obligated to pay any expense of distribution or maintenance
of shareholder accounts in excess of the distribution services fee and
maintenance fee described in Sections 3 and Section 6, respectively, hereof. The
amount of distribution services fees, maintenance fees and contingent deferred
sales charges payable to any Distributor with respect to Shares of a Fund is not
related directly to the amount of expenses incurred by such Distributor in
connection with providing distribution services and personal services to the
Shares of the Fund, which expenses may be greater or less than those fees and
charges. The Fund will not be obligated to reimburse any Distributor for those
expenses.
SECTION 9. AGREEMENTS BY THE DISTRIBUTOR
Payments to broker-dealers, depository institutions and other financial
intermediaries for the purposes set forth in Section 1 hereof are subject to the
terms and conditions of the written agreements between the Distributor and each
broker-dealer, depository institution or other financial intermediary. These
agreements will be in a form satisfactory to the Trust's Board of Trustees (the
"Board").
SECTION 10. REVIEW AND RECORDS
(a) The Trust and the Distributor will prepare and furnish to the
Board, and the Board will review, at least quarterly, written reports complying
with the requirements of Rule 12b-1 setting forth all amounts expended hereunder
and identifying the amounts paid to agents upon issuance of the Shares.
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<PAGE>
(b) The Trust shall preserve copies of the Plan, each agreement related
to the Plan and each report prepared and furnished pursuant to this Section in
accordance with Rule 12b-1 under the Act.
SECTION 11. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Plan will become effective on the date hereof and, with
respect to any Fund created subsequent to the date hereof, on the date the Board
adopts this Plan with respect to that Fund.
(b) This Plan will remain in effect with respect to each Fund for a
period of one year from the date of its effectiveness, unless earlier terminated
in accordance with its terms and shall continue in effect thereafter, provided
that such continuance is specifically approved at least annually by a majority
of the Board, including a majority of the Rule 12b-1 Trustees, pursuant to a
vote cast in person at a meeting called for the purpose of voting on the
approval of the Plan.
(c) The Plan may be terminated without penalty at any time with respect
to a Fund by (i) a vote of a majority of the Rule 12b-1 Trustees or (ii) by a
vote of a majority of the outstanding voting securities of the Fund. This Plan
may remain in effect for the Shares of any particular Fund even if the Plan has
been terminated for Shares of one or more other Funds. A termination of this
Plan with respect to any or all Shares of any or all Funds shall not affect the
obligation of the Trust to withhold and pay to any Distributor contingent
deferred sales charges to which such Distributor is entitled pursuant to any
Distribution Agreement.
(d) Notwithstanding anything to the contrary contained herein, the
Trust may agree with any Distributor that, so long as no Complete Termination
(as defined in Section 11(e) hereof) of this Plan has occurred and is
continuing, payments of such Distributor's Allocable Portion of the distribution
services fees will continue to be made to or at the direction of such
Distributor notwithstanding either the termination of the Distribution Agreement
with such Distributor, the termination of the role of such Distributor as
Distributor hereunder or the termination of this Plan.
(e) For purposes of this Section 11 a "Complete Termination" of this
Plan in respect of any Fund shall mean a termination of this Plan in respect to
such Fund so long as: (i) the 12b-1 Trustees of the Trust shall have acted in
good faith and shall have determined that such termination is in the best
interest of the Trust and the shareholders of such Fund; (ii) the Trust does not
alter the terms of the contingent deferred sales charges applicable to Shares
outstanding at the time of such termination; (iii) the Trust shall not, in
respect of such Fund, pay to any person or entity, other than such Distributor
or its Assignee, either the asset based sales charge or the service fee (or any
similar fee) in respect of Shares taken into account in computing such
Distributor's Allocable Portion; and (iv) this Plan is terminated for such
Shares and such Fund has not adopted a distribution plan relating to any
"Similar Class" of shares of such Fund. For purposes of determining whether any
termination of this Plan for the Shares of a Fund is a Complete Termination, a
"Similar Class" is any class of shares of such Fund that has a sales load
structure substantially similar to that of the class for which this Plan was
terminated taking into account the total sales load borne directly or indirectly
by holders of such class of shares including commissions paid directly by such
holders to brokers on issuance of shares of such class, asset based sales
charges paid by the Fund and allocated to shares of such class, contingent
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deferred sales charges payable by holders of shares of such class, installment
or deferred sales charges payable by holders of shares of such class, and
similar charges borne directly or indirectly by holders of shares of such class.
A class of shares would not be considered substantially similar to the Shares if
(i) a front end sales charge is paid by the purchaser; or (ii)(A) the shares are
purchased at net asset value, (B) any commission to any selling agent(s) on
issuance of the shares does not exceed 1.0% of the purchase amount, (C) the
period during which any contingent deferred sales charge applies does not exceed
12 months from the purchase date, and (D) there is no other sales load feature
borne directly or indirectly by holders of such class of shares.
(f) In the event of a termination of this Plan with respect to any Fund
(other than a Fund listed on Appendix B) that does not constitute a Complete
Termination because the termination does not satisfy clause (ii), (iii) or (iv)
of the definition of Complete Termination set forth in paragraph (e) above, the
Fund shall continue to pay distribution services fees as provided herein until
the earlier of (i) four years after the date of such termination or
discontinuance or (ii) such time as there exist no outstanding Uncovered
Distribution Charges attributable to the Fund.
SECTION 12. AMENDMENTS
The Plan may be amended with respect to a Fund at any time with the
approval of the Board, provided that (i) any material amendments to the terms of
the Plan will become effective only upon approval by a majority of the Board,
including a majority of the Rule 12b-1 Trustees, pursuant to a vote cast in
person at a meeting called for the purpose of voting on the approval of the
Plan, and (ii) any amendment to increase materially the amount expended with
respect to a Fund for sales commissions or distribution services fees pursuant
to the Plan will be effective as to the Fund only upon the additional approval
by a vote of a majority of the outstanding voting securities of such Fund. For
purposes of this Section 11, an amendment to any Distribution Agreement
providing for an increase in the distribution services fees or aggregate fees
with respect to a Fund from an annual rate of 0.75% of the average daily net
assets of the Fund attributable to the Shares will be deemed an amendment to the
Plan which increases materially the amount which may be spent by that Fund
pursuant to the Plan.
SECTION 13. SELECTION OF RULE 12b-1 TRUSTEES
While the Plan is in effect, the selection and nomination of the Rule
12b-1 Trustees will be committed to the discretion of the Rule 12b-1 Trustees.
SECTION 14. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Fund shall not
be liable for any obligations of the Trust or of the Funds under the Plan.
SECTION 15. MISCELLANEOUS
(a) The terms "majority of the outstanding voting securities" and
"interested person" shall have the meanings ascribed thereto in the Act.
(b) If any provision of the Plan shall be held invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not be
affected thereby.
(c) Section headings in this Plan are included for convenience only and
are not to be used to construe or interpret the Plan.
<PAGE> 6
NORWEST ADVANTAGE FUNDS
DISTRIBUTION PLAN
August 1, 1993
As Amended July 28, 1998
APPENDIX A
Shares of Funds Covered Under the Plan
Fund Class
Ready Cash Investment Fund Exchange Shares
Stable Income Fund B Shares
Intermediate Government Income Fund B Shares
Income Fund B Shares
Total Return Bond Fund B Shares
Tax-Free Income Fund B Shares
Colorado Tax-Free Fund B Shares
Minnesota Tax-Free Fund B Shares
Growth Balanced Fund B Shares
Income Equity Fund B Shares
ValuGrowth Stock Fund B Shares
Diversified Equity Fund B Shares
Growth Equity Fund B Shares
Large Company Growth Fund B Shares
Diversified Small Cap Fund B Shares
Small Company Stock Fund B Shares
Small Company Growth Fund B Shares
Small Cap Opportunities Fund B Shares
Contrarian Stock Fund B Shares
International Fund B Shares
Norwest WealthBuilder Growth Balanced Fund C Shares
Norwest WealthBuilder Growth and Income Fund C Shares
Norwest WealthBuilder Growth Fund C Shares
<PAGE>
NORWEST ADVANTAGE FUNDS
DISTRIBUTION PLAN
August 1, 1993
As Amended July 28, 1998
APPENDIX B
Fund Class
Stable Income Fund B Shares
Intermediate Government Income Fund B Shares
Income Equity Fund B Shares
<PAGE>
Exhibit (m)(3)
NORWEST ADVANTAGE FUNDS
DISTRIBUTION PLAN
A Shares
October 5, 1998
This Distribution Plan (the "Plan") is adopted by Norwest Advantage
Funds (the "Trust") with respect to the shares of each class (the "Shares") of
each of the Funds identified in Appendix A attached hereto (individually a
"Fund" and collectively the "Funds") in accordance with the provisions of Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act").
SECTION 1. DISTRIBUTOR AND DISTRIBUTION RELATED SERVICES
Forum Financial Services, Inc. (the "Distributor") serves as each
Fund's principal underwriter. The Distributor will provide the Funds with
distribution-related services that are primarily intended to result in the sale
of Shares, including, but not limited to, compensation of employees of the
Distributor, compensation and expenses, including overhead and telephone and
other communication expenses, of the Distributor and other broker-dealers, banks
and other financial intermediaries that engage in or support the distribution of
Shares, the preparation, printing and distribution of prospectuses, statements
of additional information, sales literature and advertising materials relating
to the Shares, and such other promotional activities in such amounts as each
such Distributor deems necessary or appropriate.
SECTION 2. COMPENSATION
Each Fund will pay to or on the order of, the Distributor, a
distribution services fee at the rate of 0.10% per annum of the daily net assets
of the Fund attributable to the Shares. All distribution services fees paid
hereunder with respect to a Fund shall, unless expressly required by applicable
law, be charged to the operating expenses of the Fund attributable to the
Shares. All distribution services fees are being paid to the Distributor in
consideration for the distribution services furnished by the Distributor in
connection with the distribution of shares of a Fund.
SECTION 3. PAYMENT TO THE DISTRIBUTOR
Each Fund shall accrue distribution services fees on a daily basis. The
amount of distribution services fees in respect of a Fund shall be determined
daily with respect to the Fund. The Trust shall pay the Distributor the accrued
and unpaid distribution services fee at least monthly and no later than the 5th
day following the end of the calendar month of accrual.
SECTION 4. ASSIGNMENT
(a) The Distributor may assign, transfer or pledge ("Transfer") to one
or more designees (each an "Assignee"), its rights to all or a designated
portion of the distribution services fee relating to any Fund from time to time
(but not the Distributor's duties and obligations pursuant hereto or pursuant to
any Distribution Agreement), free and clear of any offsets or claims the Trust
may have against the Distributor. Each such Assignee's interest in a specific
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designated portion of the distribution services fee relating to any Fund
transferred in a Transfer is hereafter referred to as an "Assignee's Portion." A
Transfer pursuant to this Section 4(a) shall not reduce or extinguish any claims
of the Trust against the Distributor.
(b) The Distributor shall promptly notify the Trust in writing of each
such Transfer by providing the Trust with the name and address of each such
Assignee and request the Trust to pay such Assignee's Portion to such Assignee.
In accordance with such request, the Trust shall pay to such Assignee such
Assignee's portion.
(c) Alternatively, the Distributor may direct the Trust to pay all of
the distribution services fee relating to any Fund from time to time to a
depository or collection agent designated by any Assignee.
SECTION 5. NO OTHER PAYMENTS
No Fund is obligated to pay any expense of distribution in excess of
the distribution services fee described herein. The amount of distribution
services fees is not related directly to the amount of expenses incurred by the
Distributor in connection with providing distribution services. The Fund will
not be obligated to reimburse the Distributor for those expenses.
SECTION 6. AGREEMENTS BY THE DISTRIBUTOR
Payments to broker-dealers, depository institutions and other financial
intermediaries for the purposes set forth in Section 1 hereof are subject to the
terms and conditions of the written agreements between the Distributor and each
broker-dealer, depository institution or other financial intermediary. These
agreements will be in a form satisfactory to the Trust's Board of Trustees (the
"Board").
SECTION 7. REVIEW AND RECORDS
(a) The Distributor will prepare and furnish to the Board, and the
Board will review, at least quarterly, written reports complying with the
requirements of Rule 12b-1 setting forth all amounts expended hereunder and
identifying the amounts paid to agents upon issuance of the Shares.
(b) The Trust shall preserve copies of the Plan, each agreement related
to the Plan and each report prepared and furnished pursuant to this Section in
accordance with Rule 12b-1.
SECTION 8. EFFECTIVENESS, DURATION, AMENDMENTS AND TERMINATION
(a) This Plan will become effective on the date hereof and, with
respect to any Fund created subsequent to the date hereof, on the date the Board
adopts this Plan with respect to that Fund.
(b) This Plan will remain in effect with respect to each Fund for a
period of one year from the date of its effectiveness, unless earlier terminated
in accordance with its terms and shall continue in effect thereafter, provided
that such continuance is specifically approved at least annually by a majority
of the Board, including a majority of those Trustees of the Trust who are not
interested persons of the Trust and have no direct or indirect financial
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interest in the operation of this Plan or any agreements related to it (the
"Rule 12b-1 Trustees"), pursuant to a vote cast in person at a meeting called
for the purpose of voting on the approval of the Plan.
(c) The Plan may be amended with respect to a Fund at any time with the
approval of the Board, provided that (i) any material amendments to the terms of
the Plan will become effective only upon approval by a majority of the Board,
including a majority of the Rule 12b-1 Trustees, pursuant to a vote cast in
person at a meeting called for the purpose of voting on the approval of the
Plan, and (ii) any amendment to increase materially the amount expended with
respect to a Fund pursuant to the Plan will be effective as to the Fund only
upon the additional approval by a vote of a majority of the outstanding voting
securities of such Fund. For purposes of this Section 8, an amendment to any
Distribution Agreement providing for an increase in the distribution services
fees with respect to a Fund attributable to the Shares will be deemed an
amendment to the Plan which increases materially the amount which may be spent
by that Fund pursuant to the Plan.
(d) The Plan may be terminated without penalty at any time with respect
to a Fund by (i) a vote of a majority of the Rule 12b-1 Trustees or (ii) by a
vote of a majority of the outstanding voting securities of the Fund. This Plan
may remain in effect for the Shares of any particular Fund even if the Plan has
been terminated for Shares of one or more other Funds.
SECTION 9. SELECTION OF RULE 12b-1 TRUSTEES
While the Plan is in effect, the selection and nomination of the Rule
12b-1 Trustees will be committed to the discretion of the Rule 12b-1 Trustees.
SECTION 10. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Fund shall not
be liable for any obligations of the Trust or of the Funds under the Plan.
SECTION 11. MISCELLANEOUS
(a) The terms "majority of the outstanding voting securities" and
"interested person" shall have the meanings ascribed thereto in the Act.
(b) If any provision of the Plan shall be held invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not be
affected thereby.
(c) Section headings in this Plan are included for convenience only and
are not to be used to construe or interpret the Plan.
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NORWEST ADVANTAGE FUNDS
DISTRIBUTION PLAN
A Shares
October 5, 1998
APPENDIX A
Shares of Funds
Fund Class of Shares
Large Company Growth Fund A Shares
Growth Balanced Fund A Shares
Diversified Small Cap Fund A Shares
