COMMON SENSE TRUST, 497, 1996-12-10

COMMON SENSE TRUST
497, 1996-12-10

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MAY 20, 1996,
[LOGO] AS SUPPLEMENTED ON DECEMBER 6, 1996.

Common Sense(R) Trust (the "Trust") is a diversified open-end management
investment company which offers shares in a number of separate Funds, seven of
which are described in this Prospectus. The goals of such Funds are as follows:

Common Sense(R) Emerging Growth Fund, formerly known as Common Sense
II Emerging Growth Fund (the "Emerging Growth Fund"), seeks capital
appreciation by investing in a portfolio of securities consisting
principally of common stocks of small and medium sized companies considered
by Van Kampen American Capital Asset Management, Inc. (the "Adviser") to be
emerging growth companies.

Common Sense(R) International Equity Fund, formerly known as Common
Sense II International Equity Fund (the "International Equity Fund"), seeks
total return on its assets from growth of capital and income. The Fund
seeks to achieve its goal by investing at least 65% of its assets in a
diversified portfolio of equity securities of established non-United States
issuers.

Common Sense(R) Growth Fund (the "Growth Fund") seeks capital
appreciation through investments in common stocks and options on common
stocks. Any income realized on its investments will be purely incidental to
its goal of capital appreciation.

Common Sense(R) Growth and Income Fund (the "Growth and Income Fund")
seeks reasonable growth and income through investments in equity securities
that provide dividend or interest income, including common and preferred
stocks and securities convertible into common or preferred stocks.

Common Sense(R) Government Fund (the "Government Fund") seeks high
current return consistent with preservation of capital by investing in debt
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.

Common Sense(R) Municipal Bond Fund (the "Municipal Bond Fund") seeks
as high a level of current interest income exempt from federal income tax
as is consistent with the preservation of capital.

Common Sense(R) Money Market Fund (the "Money Market Fund") seeks
protection of capital and a high level of current income through
investments in money market securities.

INVESTMENTS IN THE MONEY MARKET FUND ARE NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. ALTHOUGH THE MONEY MARKET FUND SEEKS TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE THERE IS NO ASSURANCE
THAT IT WILL BE ABLE TO DO SO.

In seeking their respective goals, each Fund, except the Money Market
Fund, may engage in portfolio management strategies and techniques
involving options, futures contracts and options on futures. See "Goals and
Investment Policies."

There is no assurance that each Fund will be successful in achieving
its goals.

EACH FUND, EXCEPT THE INTERNATIONAL EQUITY FUND, WILL NOT PURCHASE ANY
SECURITIES ISSUED BY COMPANIES PRIMARILY ENGAGED IN THE MANUFACTURE OF
ALCOHOL OR TOBACCO.

This Prospectus tells investors briefly the information they should know
before investing in a Fund. Investors should read and retain this Prospectus for
future reference.

A Statement of Additional Information dated the same date as this
Prospectus has been filed with the Securities and Exchange Commission ("SEC")
and contains further information about the Funds. A copy of the Statement of
Additional Information may be obtained without charge by writing PFS
Distributors, Inc., 3100 Breckinridge Blvd., Bldg. 200, Duluth, Georgia
30199-0001. The Statement of Additional Information is hereby incorporated by
reference into this Prospectus. Please call Customer Service at (800) 544-5445
for information on the Funds.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR STATE REGULATORS NOR HAS THE COMMISSION OR STATE
REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 2

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COMMON SENSE(R) TRUST
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<TABLE>
<S> <C>
CUSTODIAN: INVESTMENT ADVISER:
State Street Bank and Trust Company Van Kampen American Capital
225 Franklin Street Asset Management, Inc.
Boston, Massachusetts 02110 One Parkview Plaza
Oakbrook Terrace, Illinois 60181

TRANSFER AGENT: INVESTMENT SUBADVISER:
PFS Shareholder Services (International Equity Fund)
3100 Breckinridge Blvd., Bldg. 200 Smith Barney Mutual Funds Management, Inc.
Duluth, Georgia 30199-0062 388 Greenwich Street
(800) 544-5445 New York, New York 10013
(800) 544-7278 Spanish-speaking Representatives
(800) 824-1721 TDD Service for Hearing Impaired

DISTRIBUTOR:
PFS Distributors, Inc.
3100 Breckinridge Blvd., Bldg. 200
Duluth, Georgia 30199-0001
</TABLE>

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TABLE OF CONTENTS
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<TABLE>
<S> <C>
Prospectus Summary................... 2
Expense Synopsis..................... 6
Financial Highlights................. 14
Introduction......................... 20
Goals and Investment Policies........ 20
Investment Practices and Risks....... 27
The Trust and Its Management......... 35
Alternative Sales Arrangements....... 37
Purchase of Shares................... 39
Distribution Plans................... 44
Shareholder Services................. 45
Redemption of Shares................. 48
Dividends, Distributions and Taxes... 49
Performance Information.............. 51
Additional Information............... 53
</TABLE>

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NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION.
- --------------------------------------------------------------------------------

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PROSPECTUS SUMMARY

TYPE OF COMPANY. The Trust is a diversified, open-end management investment
company which offers shares of beneficial interest in a number of separate
Funds, seven of which are described in this Prospectus: the Emerging Growth
Fund, the International Equity Fund, the Growth Fund, the Growth and Income
Fund, the Government Fund, the Money Market Fund and the Municipal Bond Fund.

MINIMUM PURCHASE. $250 minimum initial investment and $25 for each subsequent
investment (or less as described under "Purchase of Shares").

GOALS. The Emerging Growth Fund seeks capital appreciation; the International
Equity Fund seeks total return on its assets from growth of capital and income;
the Growth Fund seeks capital appreciation; the Growth and Income Fund seeks
reasonable growth and income; the Government Fund seeks high current return
consistent with preservation of capital; the Money Market Fund seeks protection
of capital and a high level of current income; and the Municipal Bond Fund seeks
current interest income exempt from federal income tax. There is, however, no
assurance that each Fund will be successful in achieving its goals.

INVESTMENT POLICIES AND RISKS. The Emerging Growth Fund invests at least 65% of
its total assets in common stocks of small and medium sized companies (less than
$2 billion of market capitalization or annual sales), both domestic and foreign,
considered by the Adviser to be emerging growth companies. The companies in
which the Fund invests may offer greater opportunities for growth of capital
than larger, more established companies, but investments in such companies may
involve special risks. See "Goals and Investment Policies -- Emerging Growth
Fund" and "Investment Practices and Risks -- Foreign Securities." The use of
options, futures contracts and related options may include additional risks. See
"Investment Practices and Risks -- Options, Futures Contracts and Related
Options" and the Statement of Additional Information for a discussion of risk
factors relating to options and futures strategies.

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2
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The International Equity Fund invests at least 65% of its assets in a
diversified portfolio of equity securities of established non-United States
issuers. Investing in equity securities of non-United States issuers may subject
the Fund to risks of foreign, political, economic and legal conditions and
developments. See "Goals and Investment Policies -- International Equity Fund,"
"Investment Practices and Risks -- Options, Futures Contracts and Related
Options, Currency Transactions, Interest Rate Transactions and Market Index
Transactions" and the Statement of Additional Information, for a discussion of
risk factors relating to these strategies.

The Growth Fund invests principally in common stocks that the investment adviser
believes provide unusually attractive growth opportunities and options on such
common stocks. Any income from these investments will be incidental to the
capital appreciation goal. The Fund may use portfolio management techniques and
strategies involving options, futures contracts and options on futures. The
utilization of options, futures contracts and options on futures contracts may
involve greater than ordinary investment risks and the likelihood of more
volatile price fluctuation. See "Goals and Investment Policies -- Growth Fund,"
"Investment Practices and Risks -- Using Options, Futures Contracts and Related
Options," and the Statement of Additional Information, for a discussion of risk
factors relating to options and futures strategies.

The Growth and Income Fund invests principally in common and preferred stocks,
and in securities convertible into common and preferred stocks, that have
provided dividend or interest income to their security holders during the past
twelve months. The Fund may use portfolio management techniques and strategies
involving options, futures contracts and options on futures. The utilization of
options, futures contracts and options on futures contracts may involve greater
than ordinary investment risks and the likelihood of more volatile price
fluctuation. See "Goals and Investment Policies -- Growth and Income Fund,"
"Investment Practices and Risks -- Using Options, Futures Contracts and Related
Options," and the Statement of Additional Information, for a discussion of risk
factors relating to options and futures strategies.

The Government Fund invests in debt securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. The Fund may sell and purchase
options on U.S. Government securities; and purchase and sell interest rate
futures contracts and options on such contracts since such transactions are
entered into for bona fide hedging purposes. The market prices of debt
securities, including U.S. Government securities, generally fluctuate with
changes in interest rates so that the Fund's net asset value can be expected to
decrease as interest rates rise. See "Goals and Investment
Policies -- Government Fund." The Fund may also purchase or sell U.S. Government
securities on a forward commitment basis. See "Investment Practices and
Risks -- Options, Futures Contracts and Related Options" and "Forward
Commitments" and the Statement of Additional Information, for a discussion on
forward commitments and risk factors relating to options and futures strategies.

The Municipal Bond Fund invests in a diversified portfolio of obligations issued
by states, territories or possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, the
interest from which is exempt from federal income tax ("Municipal Bonds"). The
Fund will not purchase any "private activity bonds" subject to the alternative
minimum tax. See "Goals and Investment Policies -- Municipal Bond Fund." The
Fund invests primarily in long-term Municipal Bonds which tend to produce higher
yields and are subject to greater market fluctuations as a result of changes in
interest rates ("market risk") than Municipal Bonds with shorter maturities and
lower yields. At least 75% of the Fund's total assets will be invested in
Municipal Bonds rated "A" or higher. Lower rated securities are subject to
greater market risks and are also subject to the ability of the issuer to meet
its principal and interest obligations ("credit risk"). The Fund may acquire
stand-by commitments. Stand-by commitments involve an element of risk. See
"Investment Practices and Risks -- Stand-by Commitments." The Fund may seek to
hedge interest rate risk through transactions in listed futures contracts
related to U.S. Government securities, Municipal Bonds or to an index of
Municipal Bonds, and options on such contracts. Any net gains from futures and
options transactions are subject to federal income tax and such transactions may
involve certain risks. See "Investment Practices and Risks -- Options, Futures
Contracts and Related Options" and the Statement of Additional Information for
further discussion. The market prices of debt securities, including Municipal
Bonds, generally fluctuate with changes in interest rates so that the Fund's net
asset value can be expected to decrease as long-term interest rates rise and to
increase as long-term interest rates fall.

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3
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The Money Market Fund invests in a diversified portfolio of money market
securities. This Fund seeks to maintain a constant net asset value of $1.00 per
share. There can be no guarantee that the Fund will maintain its net asset value
per share at $1.00.

Under certain market conditions, all Funds except the Money Market Fund may
experience a high rate of portfolio turnover. Higher portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs. See
"Investment Practices and Risks -- Portfolio Turnover."

INVESTMENT ADVISER. The Adviser serves as the investment adviser to the Trust.
Smith Barney Mutual Funds Management, Inc. (the "Subadviser") provides advisory
services to the Adviser with respect to the International Equity Fund. See "The
Trust and Its Management."

DISTRIBUTOR. PFS Distributors, Inc. (the "Distributor").

ALTERNATIVE SALES ARRANGEMENTS. Each Fund (other than the Money Market Fund)
offers two classes of shares to the general public, each with its own sales
charge structure: Class A shares and Class B shares. Each class has distinct
advantages and disadvantages for different investors, and investors may choose
the class of shares that best suits their circumstances and objectives. The per
share dividends on Class A and Class B shares will be lower than the per share
dividends on Class 1 shares. As of May 20, 1996, all of the previously
outstanding shares of the Growth Fund, the Growth and Income Fund, the
Government Fund, the Money Market Fund and the Municipal Bond Fund were
redesignated as Class 1 shares without any other changes, and Class A and Class
B shares were authorized for issuance. With respect to the Emerging Growth Fund
and the International Equity Fund, as of May 20, 1996, Class 1 shares were
authorized for issuance. Each Fund offers Class 1 shares only to accounts of
previously established shareholders or members of a family unit comprising of
husband, wife and minor children, and Class 1 shareholders of other Common Sense
Funds exchanging their Class 1 shares for Class 1 shares of the Fund. Each class
of shares represents an interest in the same portfolio of investments of a Fund.
See "Alternative Sales Arrangements -- Factors for Consideration." For
information on redeeming shares see "Redemption of Shares."

Class A Shares. Class A shares of the Emerging Growth Fund, the International
Equity Fund, the Growth Fund and the Growth and Income Fund are offered at net
asset value per share plus a maximum initial sales charge of 5.50% of the
offering price. Class A shares of the Government Fund and Municipal Bond Fund
are offered at net asset value per share plus a maximum initial sales charge of
4.75% and 4.50%, respectively, of the offering price. Investments of $1 million
or more are not subject to any sales charge at the time of purchase, but a
contingent deferred sales charge of one percent may be imposed on certain
redemptions made within one year of the purchase. Class A shares of the Money
Market Fund are sold at net asset value. Each Fund pays an annual service fee at
the rate of 0.25% of its average daily net assets (0.10% for Money Market Fund)
attributable to such class of shares. See "Purchase of Shares -- Class A Shares"
and "Distribution Plans."

Class B Shares. Class B shares of the Emerging Growth Fund, the International
Equity Fund, the Growth Fund and the Growth and Income Fund are offered at net
asset value per share and are subject to a maximum contingent deferred sales
charge of 5% of redemption proceeds during the first year, declining each year
thereafter to 0% after the fifth year. Class B shares of the Government Fund and
the Municipal Bond Fund are offered at net asset value per share and are subject
to a maximum contingent deferred sales charge of 4% of redemption proceeds
during the first and second year, declining each year thereafter to 0% after the
fifth year. See "Redemption of Shares." Each Fund (other than Money Market Fund)
pays a combined annual distribution fee and service fee at the rate of 1% of its
average daily net assets attributable to such class of shares. Class B shares of
the Money Market Fund are available only through exchanges by Class B
shareholders of another Common Sense Fund and remain subject to the contingent
deferred sales charge imposed by the original fund. The Money Market Fund pays a
distribution fee at the rate of 0.75% of its average daily net assets
attributable to Class B shares. See "Purchase of Shares -- Class B Shares" and
"Distribution Plans." Class B shares will convert automatically to Class A
shares six years after the shareholder's order to purchase was accepted. See
"Alternative Sales Arrangements -- Conversion Feature."

Class 1 Shares. Class 1 shares are offered to the persons described above.
Class 1 shares of the Emerging Growth Fund, the International Equity Fund, the
Growth and Income Fund and the Growth Fund are offered at a sales charge of
8.50% of offering price; Class 1 shares of the Government Fund are offered at a
sales charge of 6.75% of offering price; and Class 1 shares of the Municipal
Bond Fund are offered at a sales charge of 4.75% of offering price. The sales
charge is reduced on investments of $10,000 or more for the

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<PAGE> 5
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Emerging Growth Fund, the International Equity Fund, the Growth Fund and the
Growth and Income Fund, $25,000 or more for the Government Fund, and $100,000 or
more for the Municipal Bond Fund. Shares of the Money Market Fund are sold
without a sales charge. See "Purchase of Shares -- Class 1 Shares."

DIVIDENDS AND DISTRIBUTIONS. The Emerging Growth Fund, the International Equity
Fund and the Growth Fund may declare and pay dividends and capital gain
distributions annually. The Growth and Income Fund may declare and pay dividends
quarterly and capital gain distributions annually. Income dividends are declared
each business day and paid monthly for the Government Fund, the Municipal Bond
Fund and the Money Market Fund; any net short-term or long-term capital gains
are distributed at least annually. All dividends and distributions are
automatically reinvested in shares of a Fund at net asset value per share
(without a sales charge) unless payment in cash is requested. See "Dividends,
Distributions and Taxes."

ONLY CLASS 1 SHARES OF THE GROWTH FUND, THE GROWTH AND INCOME FUND, THE
GOVERNMENT FUND, THE MONEY MARKET FUND AND THE MUNICIPAL BOND FUND ARE AVAILABLE
TO THE GENERAL PUBLIC THROUGH THIS PROSPECTUS. UPON THE COMPLETION OF THE
REORGANIZATIONS OF COMMON SENSE II GROWTH FUND, COMMON SENSE II GROWTH AND
INCOME FUND AND COMMON SENSE II GOVERNMENT FUND CURRENTLY ANTICIPATED ON OR
BEFORE JULY 31, 1996, CLASS A AND CLASS B SHARES OF EACH OF THE ABOVE REFERENCED
FUNDS INCLUDING THE EMERGING GROWTH FUND AND THE INTERNATIONAL EQUITY FUND WILL
BE AVAILABLE FOR SALE TO THE GENERAL PUBLIC THROUGH THIS PROSPECTUS. IN
ADDITION, EACH FUND WILL THEN SUSPEND SALES TO THE PUBLIC OF CLASS 1 SHARES
EXCEPT TO ACCOUNTS OF PREVIOUSLY ESTABLISHED SHAREHOLDERS OR MEMBERS OF A FAMILY
UNIT COMPRISING HUSBAND, WIFE AND MINOR CHILDREN, AND CLASS 1 SHAREHOLDERS OF
OTHER COMMON SENSE FUNDS EXCHANGING THEIR CLASS 1 SHARES FOR CLASS 1 SHARES OF
THE FUND.

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<PAGE> 6

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EXPENSE SYNOPSIS
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<TABLE>
<CAPTION>
EMERGING GROWTH(b)
------------------------------------------------
CLASS 1 CLASS A CLASS B
SHARES(f) SHARES SHARES
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales load imposed on purchases
(as a percentage of offering price)...... 8.50% 5.50% None
Maximum sales charge on reinvestment of
dividends................................ None None None
Deferred sales charge (as a percentage of
the lesser of original purchase price or
redemption value)........................ None None Year 1 - 5%
Year 2 - 4%
Year 3 - 3%
Year 4 - 2.5%
Year 5 - 1.5%
After - None (a)
Redemption fee............................. None None None
Exchange fee............................... None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees............................ 0.03%(g) 0.03%(g) 0.03%(g)
12b-1 fees(c).............................. 0.00% 0.25% 1.00%(e)
Other expenses(d).......................... 2.47% 2.47% 2.46%
Total fund operating expenses.............. 2.50%(g) 2.75%(g) 3.49%(g)
</TABLE>

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(a) See "Purchase of Shares -- Class B Shares."

(b) Most recent fiscal period on an annualized basis.

(d) See "The Trust and Its Management."

(e) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by NASD Rules.

(f) Based on estimated amounts for the first year of operation on an
annualized basis.

(g) After expense reimbursement. In the absence of such expense reimbursement,
management fees for all Classes would be 0.65% and total fund operating
expenses would be 3.12%, 3.35%, and 4.11%, for Class 1, A, and B shares,
respectively.

6
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EXPENSE SYNOPSIS
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<TABLE>
<CAPTION>
INTERNATIONAL EQUITY(b)
--------------------------------------------
CLASS 1 CLASS A CLASS B
SHARES(f) SHARES SHARES
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales load imposed on purchases
(as a percentage of offering price)......... 8.50% 5.50% None
Maximum sales charge on reinvestment of
dividends................................... None None None
Deferred sales charge (as a percentage of the
lesser of original purchase price or
redemption value)........................... None None Year 1 - 5%
Year 2 - 4%
Year 3 - 3%
Year 4 - 2.5%
Year 5 - 1.5%
After - None (a)
Redemption fee................................ None None None
Exchange fee.................................. None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees............................... 0.00%(g) 0.00%(g) 0.00%(g)
12b-1 fees(c)................................. 0.00% 0.25% 1.00%(e)
Other expenses(d)............................. 2.50%(g) 2.50%(g) 2.50%(g)
Total fund operating expenses................. 2.50%(g) 2.75%(g) 3.50%(g)
</TABLE>

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(a) See "Purchase of Shares -- Class B Shares."

(b) Most recent fiscal period on an annualized basis.

(d) See "The Trust and Its Management."

(e) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by NASD Rules.

(f) Based on estimated amounts for the first year of operation on an
annualized basis.

(g) After expense reimbursement. In the absence of such expense reimbursement,
management fees for all Classes would be 1.00%; other expenses would be
4.72%, 4.72%, 4.72%, for Class 1, A, and B shares, respectively; and total
fund operating expenses would be 5.72%, 5.97%, and 6.67%, for Class 1, A,
and B shares, respectively.

7
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EXPENSE SYNOPSIS
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<TABLE>
<CAPTION>
GROWTH
----------------------------------------------
CLASS 1 CLASS A CLASS B
SHARES SHARES(e) SHARES(e)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales load imposed on purchases
(as a percentage of offering price)...... 8.50% 5.50% None
Maximum sales charge on reinvestment of
dividends................................ None None None
Deferred sales charge (as a percentage of
the lesser of original purchase price or
redemption value)........................ None None Year 1 - 5%
Year 2 - 4%
Year 3 - 3%
Year 4 - 2.5%
Year 5 - 1.5%
After - None (a)
Redemption fee............................. None None None
Exchange fee............................... None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees............................ 0.61% 0.61% 0.61%
12b-1 fees(b).............................. 0.00% 0.25% 1.00%(d)
Other expenses(c).......................... 0.39% 0.39% 0.39%
Total fund operating expenses.............. 1.00% 1.25% 2.00%
</TABLE>

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(a) See "Purchase of Shares -- Class B Shares."

(b) 0.25% for Class A shares and 1% for Class B shares. See "Distribution
Plans."

(d) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by NASD Rules.

(e) Based on estimated amounts for the first year of operation on an
annualized basis.

8
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EXPENSE SYNOPSIS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GROWTH & INCOME
----------------------------------------------
CLASS 1 CLASS A CLASS B
SHARES SHARES(e) SHARES(e)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales load imposed on purchases
(as a percentage of offering price)...... 8.50% 5.50% None
Maximum sales charge on reinvestment of
dividends................................ None None None
Deferred sales charge (as a percentage of
the lesser of original purchase price or
redemption value)........................ None None Year 1 - 5%
Year 2 - 4%
Year 3 - 3%
Year 4 - 2.5%
Year 5 - 1.5%
After - None (a)
Redemption fee............................. None None None
Exchange fee............................... None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees............................ 0.65% 0.65% 0.65%
12b-1 fees(b).............................. 0.00% 0.25% 1.00%(d)
Other expenses(c).......................... 0.31% 0.31% 0.31%
Total fund operating expenses.............. 0.96% 1.21% 1.96%
</TABLE>

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(a) See "Purchase of Shares -- Class B Shares."

(b) 0.25% for Class A shares and 1% for Class B shares. See "Distribution
Plans."

(d) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by NASD Rules.

(e) Based on estimated amounts for the first year of operation on an
annualized basis.

9
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- --------------------------------------------------------------------------------
EXPENSE SYNOPSIS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GOVERNMENT
-----------------------------------------------
CLASS 1 CLASS A CLASS B
SHARES SHARES(e) SHARES(e)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales load imposed on purchases
(as a percentage of offering price)....... 6.75% 4.75% None
Maximum sales charge on reinvestment of
dividends................................. None None None
Deferred sales charge (as a percentage of
the lesser of original purchase price or
redemption value)......................... None None Year 1 - 4%
Year 2 - 4%
Year 3 - 3%
Year 4 - 2.5%
Year 5 - 1.5%
After - None (a)
Redemption fee.............................. None None None
Exchange fee................................ None None None

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees............................. 0.60% 0.60% 0.60%
12b-1 fees(b)............................... 0.00% 0.25% 1.00%(d)
Other expenses(c)........................... 0.23% 0.23% 0.23%
Total fund operating expenses............... 0.83% 1.08% 1.83%
</TABLE>

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

(a) See "Purchase of Shares -- Class B Shares."

(b) 0.25% for Class A shares and 1% for Class B shares. See "Distribution
Plans."

(d) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by NASD Rules.

(e) Based on estimated amounts for the first year of operation on an
annualized basis.

10
<PAGE> 11

- --------------------------------------------------------------------------------
EXPENSE SYNOPSIS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MUNICIPAL BOND
----------------------------------------------
CLASS 1 CLASS A CLASS B
SHARES SHARES(e) SHARES(e)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales load imposed on purchases
(as a percentage of offering price)...... 4.75% 4.50% None
Maximum sales charge on reinvestment of
dividends................................ None None None
Deferred sales charge (as a percentage of
the lesser of original purchase price or
redemption value)........................ None None Year 1 - 4%
Year 2 - 4%
Year 3 - 3%
Year 4 - 2.5%
Year 5 - 1.5%
After - None (a)
Redemption fee............................. None None None
Exchange fee............................... None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees............................. 0.60% 0.60% 0.60%
12b-1 fees(b)............................... 0.00% 0.25% 1.00%(d)
Other expenses(c)........................... 0.36% 0.36% 0.36%
Total fund operating expenses............... 0.96% 1.21% 1.96%
</TABLE>

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

(a) See "Purchase of Shares -- Class B Shares."

(b) 0.25% for Class A shares and 1% for Class B shares. See "Distribution
Plans."

(d) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by NASD Rules.

(e) Based on estimated amounts for the first year of operation on an
annualized basis.

11
<PAGE> 12

- --------------------------------------------------------------------------------
EXPENSE SYNOPSIS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MONEY MARKET
--------------------------------------------------
CLASS 1 CLASS A CLASS B
SHARES SHARES(f) SHARES(f)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales load imposed on purchases
(as a percentage of offering price)... None None None
Maximum sales charge on reinvestment of
dividends............................. None None None
Deferred sales charge (as a percentage
of the lesser of original purchase
price or redemption value)............ None None Year 1 - 4% or 5% (b)
Year 2 - 4%
Year 3 - 3%
Year 4 - 2.5%
Year 5 - 1.5%
After - None (a)
Redemption fee.......................... None None None
Exchange fee............................ None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees......................... 0.00%(g) 0.00%(g) 0.00%(g)
12b-1 fees(c)........................... 0.00% 0.10% 0.75%(e)
Other expenses(d)....................... 1.00%(g) 1.00%(g) 1.00%(g)
Total fund operating expenses........... 1.00%(g) 1.10%(g) 1.75%(g)
</TABLE>

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

(a) See "Purchase of Shares -- Class B Shares."

(b) Class B shares acquired in exchange for Class B shares of another Common
Sense Fund remain subject to the contingent deferred sales charge of the
original fund.

(d) See "The Trust and Its Management."

(e) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by NASD Rules.

(f) Based on estimated amounts for the first year of operation on an
annualized basis.

(g) After expense reimbursement. In the absence of such expense reimbursement,
management fees and other expenses would be 0.50% and 1.21%, respectively,
for all Classes of shares; total fund operating expenses would be 1.71%,
1.81%, and 2.46%, for Class 1, A, and B shares, respectively.

12
<PAGE> 13
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH GROWTH GROWTH & INCOME GOVERNMENT
------------------------- ------------------------- ------------------------- ------------------
ONE THREE FIVE TEN ONE THREE FIVE TEN ONE THREE FIVE TEN ONE THREE FIVE
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EXAMPLE
An investor would pay the
following expenses on a
$1,000 investment, assuming
(i) total fund operating
expenses as reflected in the
synopsis, and (ii) a 5%
annual return and (iii)
redemption at the end of
each time period:
Class 1................... 108 156 207 314 94 114 136 197 94 113 134 193 75 92 110
Class A................... 81 136 192 346 67 92 120 198 67 91 118 194 58 80 104
Class B................... 86 138 197 345* 72 96 125 196* 71 94 123 191* 60 91 117
An investor would pay the
following expenses on the
same $1,000 investment
assuming no redemption at
the end of each time period:
Class 1................... 108 156 207 344 94 114 136 197 94 113 134 193 75 92 110
Class A................... 81 136 192 346 67 92 120 198 67 91 118 194 58 80 104
Class B................... 35 107 181 345* 20 63 108 196* 20 62 106 191* 19 58 99

<CAPTION>
GOVERNMENT INTERNATIONAL EQUITY MONEY MARKET** MUNICIPAL BOND
----------- --------------------------- -------------------------- -------------------------
TEN ONE THREE FIVE TEN ONE THREE FIVE TEN ONE THREE FIVE TEN
YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EXAMPLE
An investor would pay the
following expenses on a
$1,000 investment, assuming
(i) total fund operating
expenses as reflected in the
synopsis, and (ii) a 5%
annual return and (iii)
redemption at the end of
each time period:
Class 1................... 163 108 156 207 344 10 32 55 122 57 77 98 160
Class A................... 173 81 136 192 346 11 35 61 134 57 82 108 185
Class B................... 177* 86 139 198 345* 69 88 112 173* 61 94 123 191*
An investor would pay the
following expenses on the
same $1,000 investment
assuming no redemption at
the end of each time period:
Class 1................... 163 108 156 207 344 10 32 55 122 57 77 98 160
Class A................... 173 81 136 192 346 11 35 61 134 57 82 108 185
Class B................... 177* 35 107 182 345* 18 55 95 173* 20 62 106 191*
</TABLE>

- ---------------
* Based on conversion to Class A shares after six years.
** Based on the higher contingent deferred sales charge in year one.
- --------------------------------------------------------------------------------
The purpose of the foregoing tables is to assist the investor in
understanding the various costs and expenses that an investor in any Fund will
bear directly or indirectly. The "Example" reflects expenses based on the
"Annual Fund Operating Expenses" table as shown herein carried out to future
years and is included to provide a means for the investor to compare expense
levels of funds with different fee structures over varying investment periods.
To facilitate such comparison, all funds are required to utilize a five percent
annual return assumption. Class B shares acquired through the exchange privilege
are subject to the contingent deferred sales charge schedule relating to the
Class B shares of the Fund from which the purchase of Class B shares was
originally made. Accordingly, future expenses as projected could be lower than
those determined in the tables herein if the investor's Class B shares were
exchanged from a fund with a lower contingent deferred sales charge. THE
INFORMATION CONTAINED IN THE ABOVE TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. For a more complete description of such costs and
expenses, see "Purchase of Shares," "The Trust and Its Management" and
"Redemption of Shares."

13
<PAGE> 14

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

(For a share of beneficial interest outstanding throughout the period)

The following information through October 31, 1995 has been audited by the
Trust's independent auditors, Ernst & Young LLP, whose report thereon was
unqualified. This information should be read in conjunction with the related
financial statements and notes thereto included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
-------------------------------------------------------------------------------
GROWTH FUND -- CLASS 1 SHARES 1995 1994 1993 1992 1991 1990
- ----------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.............. $15.31 $16.26 $16.02 $15.47 $11.26 $13.15
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Investment income............................... .32 .29 .281 .30 .36 .38
Expenses........................................ (.16) (.16) (.165) (.17) (.17) (.175)
--------- --------- --------- --------- --------- ---------
Net investment income............................. .16 .13 .116 .13 .19 .205
Net realized and unrealized gain or loss on
securities...................................... 3.18 .2075 2.0065 1.3925 4.2425 (1.25)
--------- --------- --------- --------- --------- ---------
Total from investment operations.................. 3.34 .3375 2.1225 1.5225 4.4325 (1.045)
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS FROM
Net investment income........................... (.155) (.1125) (.115) (.17) (.2225) (.2025)
Net realized gain on securities................. (1.035) (1.175) (1.3996) (.8025) -- (.6425)
Excess of book-basis net realized gain on
securities.................................... -- -- (.3679) -- -- --
--------- --------- --------- --------- --------- ---------
Total distributions............................... (1.19) (1.2875) (1.8825) (.9725) (.2225) (.845)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period.................... $17.46 $15.31 $16.26 $16.02 $15.47 $11.26
======== ======== ======== ======== ======== ========
TOTAL RETURN(3)................................... 24.01% 2.04% 14.27% 9.83% 39.90% (8.73%)
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (in millions)......... $2,611.5 $2,169.9 $2,065.7 $1,648.0 $1,311.5 $866.1
Ratios to average net assets (annualized)
Expenses........................................ 1.00% 1.09% 1.14% 1.18% 1.26% 1.53%
Net investment income (loss).................... 1.04% .89% .80% .91% 1.44% 1.79%
Portfolio turnover rate........................... 230% 164% 166% 134% 100% 99%

YEAR ENDED OCTOBER 31
----------------------------------
<CAPTION>

GROWTH FUND -- CLASS 1 SHARES 1989 1988 1987(1)
--------- ------- -------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.............. $10.81 $9.37 $11.44(2)
--------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Investment income............................... .36 .24 .16
Expenses........................................ (.17) (.14) (.16)
--------- ------- -------
Net investment income............................. .19 .10 --
Net realized and unrealized gain or loss on
securities...................................... 2.26 1.435 (2.07)
--------- ------- -------
Total from investment operations.................. 2.45 1.535 (2.07)
--------- ------- -------
LESS DISTRIBUTIONS FROM
Net investment income........................... (.11) -- --
Net realized gain on securities................. -- (.095) --
Excess of book-basis net realized gain on
securities.................................... -- -- --
--------- ------- -------
Total distributions............................... (.11) (.095) --
--------- ------- -------
Net asset value, end of period.................... $13.15 $10.81 $9.37
======== ======= =======
TOTAL RETURN(3)................................... 22.90% 16.51% (18.09%)
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (in millions)......... $767.8 $492.2 $196.3
Ratios to average net assets (annualized)
Expenses........................................ 1.63% 1.93% 2.82%
Net investment income (loss).................... 1.75% 1.30% (.09%)
Portfolio turnover rate........................... 101% 63% 17%
</TABLE>

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

(1) Based on average month-end shares outstanding.

(2) The net asset value on April 14, 1987, the date the Fund commenced
operations.

(3) Total returns for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.

14
<PAGE> 15

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

(For a share of beneficial interest outstanding throughout the period)

The following information through October 31, 1995 has been audited by the
Trust's independent auditors, Ernst & Young LLP, whose report thereon was
unqualified. This information should be read in conjunction with the related
financial statements and notes thereto included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND -- CLASS 1 SHARES YEAR ENDED OCTOBER 31
- ---------------------------------------- -------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.............. $15.77 $17.13 $15.54 $14.70 $11.49 $12.51
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Investment income............................... .51 .45 .46 .435 .46 .47
Expenses........................................ (.15) (.16) (.17) (.16) (.155) (.165)
--------- --------- --------- --------- --------- ---------
Net investment income............................. .36 .29 .29 .275 .305 .305
Net realized or unrealized gain or loss on
securities...................................... 2.715 (.2125) 1.8775 1.2875 3.2225 (.9975)
--------- --------- --------- --------- --------- ---------
Total from investment operations.................. 3.075 .0775 2.1675 1.5625 3.5275 (.6925)
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS FROM
Net investment income........................... (.30) (.275) (.2775) (.295) (.3175) (.325)
Net realized gain on securities................. (1.595) (1.1625) (.30) (.4275) -- (.0025)
--------- --------- --------- --------- --------- ---------
Total distributions............................... (1.895) (1.4375) (.5775) (.7225) (.3175) (.3275)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period.................... $16.95 $15.77 $17.13 $15.54 $14.70 $11.49
======== ======== ======== ======== ======== ========
TOTAL RETURN(3)................................... 22.45% .51% 14.13% 10.85% 31.68% (5.84%)
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (in millions)......... $828.3 $712.9 $712.4 $591.0 $499.6 $366.6
Ratios to average net assets (annualized)
Expenses........................................ .96% 1.02% 1.05% 1.09% 1.14% 1.37%
Net investment income........................... 2.27% 1.84% 1.76% 1.84% 2.29% 2.55%
Portfolio turnover rate........................... 117% 88% 51% 32% 42% 48%

<CAPTION>
YEAR ENDED OCTOBER 31
-----------------------------------

GROWTH AND INCOME FUND -- CLASS 1 SHARES 1989 1988 1987(1)
- ---------------------------------------- --------- ------- --------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.............. $10.49 $9.84 $11.44(2)
--------- ------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment income............................... .46 .40 .29
Expenses........................................ (.15) (.13) (.14)
--------- ------- --------
Net investment income............................. .31 .27 .15
Net realized or unrealized gain or loss on
securities...................................... 2.00 .655 (1.685)
--------- ------- --------
Total from investment operations.................. 2.31 .925 (1.535)
--------- ------- --------
LESS DISTRIBUTIONS FROM
Net investment income........................... (.29) (.24) (.065)
Net realized gain on securities................. -- (.035) --
--------- ------- --------
Total distributions............................... (.29) (.275) (.065)
--------- ------- --------
Net asset value, end of period.................... $12.51 $10.49 $9.84
======== ======= =======
TOTAL RETURN(3)................................... 22.38% 9.55% (13.48%)
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (in millions)......... $278.4 $168.0 $72.8
Ratios to average net assets (annualized)
Expenses........................................ 1.39% 1.57% 2.38%
Net investment income........................... 2.81% 3.04% 2.64%
Portfolio turnover rate........................... 26% 64% 4%
</TABLE>

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

(1) Based on average month-end shares outstanding.

(2) The net asset value on April 14, 1987, the date the Fund commenced
operations.

(3) Total returns for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.

15
<PAGE> 16

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

(For a share of beneficial interest outstanding throughout the period)

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
GOVERNMENT FUND -- CLASS 1 SHARES ------------------------------------------------------------------------------
- --------------------------------- 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.............. $9.99 $11.80 $11.56 $11.47 $10.79 $11.46
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment income............................... .79 .78 .8536 .97 1.012 1.073
Expenses........................................ (.09) (.09) (.092) (.11) (.107) (.118)
--------- -------- -------- -------- -------- --------
Net investment income............................. .70 .69 .7616 .86 .905 .955
Net realized and unrealized gain or loss on
securities...................................... .6779 (1.358) .4249 .1639 .6788 (.4421)
--------- -------- -------- -------- -------- --------
Total from investment operations.................. 1.3779 (.668) 1.1865 1.0239 1.5838 .5129
--------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS FROM
Net investment income........................... (.6979) (.6878) (.7615) (.8639) (.9038) (.9579)
Net realized gain on securities................. -- -- (.185) (.07) -- (.225)
Excess of book-basis net realized gains on
securities.................................... -- (.4542) -- -- -- --
---------- -------- -------- -------- -------- --------
Total distributions............................... (.6979) (1.142) (.9465) (.9339) (.9038) (1.1829)
---------- -------- -------- -------- -------- --------
Net asset value, end of period.................... $10.67 $9.99 $11.80 $11.56 $11.47 $10.79
========== ======== ======== ======== ======== ========
TOTAL RETURN(3)................................... 14.27% (5.45%) 10.55% 9.32% 15.16% 4.94%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)........... $329.0 $335.0 $370.2 $282.0 $189.0 $140.9
Ratios to average net assets (annualized)
Expenses........................................ .83% .89% .89% .95% .96% 1.09%
Net investment income........................... 6.84% 7.06% 7.35% 7.46% 8.15% 8.78%
Portfolio turnover rate........................... 214% 256% 218% 112% 39% 28%

<CAPTION>
YEAR ENDED OCTOBER 31
GOVERNMENT FUND -- CLASS 1 SHARES -------------------------------------
- --------------------------------- 1989 1988 1987(1)
--------- -------- --------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.............. $11.13 $11.08 $11.66(2)
---------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS
Investment income............................... 1.16 1.09 .52
Expenses........................................ (.13) (.15) (.12)
---------- -------- ---------
Net investment income............................. 1.03 .94 .40
Net realized and unrealized gain or loss on
securities...................................... .3274 .0436 (.58)
---------- -------- ---------
Total from investment operations.................. 1.3574 .9836 (.18)
---------- -------- ---------
LESS DISTRIBUTIONS FROM
Net investment income........................... (1.0274) (.9336) (.40)
Net realized gain on securities................. -- -- --
Excess of book-basis net realized gains on
securities.................................... -- -- --
---------- -------- ---------
Total distributions............................... (1.0274) (.9336) (.40)
---------- -------- ---------
Net asset value, end of period.................... $11.46 $11.13 $11.08
========== ======== ========
TOTAL RETURN(3)................................... 12.87% 9.20% (1.56%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)........... $101.0 $70.6 $21.6
Ratios to average net assets (annualized)
Expenses........................................ 1.20% 1.44% 2.12%
Net investment income........................... 9.29% 8.55% 7.13%
Portfolio turnover rate........................... 29% 51% 52%
</TABLE>

- --------------------------------------------------------------------------------
(1) Based on average month-end shares outstanding.

(2) The net asset value on April 14, 1987, the date the Fund commenced
operations.

(3) Total returns for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.

16
<PAGE> 17

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

(For a share of beneficial interest outstanding throughout the period)

MUNICIPAL BOND FUND -- CLASS 1 SHARES
- -------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
-------------------------------------------------
1995 1994 1993 1992
--------- --------- -------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period................................ $12.89 $14.07 $13.03 $12.84
--------- --------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment income................................................. .87 .84 .859 .875
Expenses.......................................................... (.13) (.13) (.141) (.15)
Expense reimbursement............................................. -- -- .01 --
--------- --------- -------- --------
Net investment income............................................... .74 .71 .728 .725
Net realized and unrealized gain or loss on securities.............. .867 (1.182) 1.038 .2175
--------- --------- -------- --------
Total from investment operations.................................... 1.607 (.472) 1.766 .9425
--------- --------- -------- --------
DISTRIBUTIONS FROM NET INVESTMENT INCOME............................ (.727) (.708) (.726) (.7525)
--------- --------- -------- --------
Net asset value, end of period...................................... $13.77 $12.89 $14.07 $13.03
========= ========= ======== ========
TOTAL RETURN(3)..................................................... 12.72% (3.38%) 13.84% 7.57%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)............................. 119.1 $112.1 $95.9 $60.3
Ratios to average net assets (annualized)
Expenses.......................................................... .96% .99% .96% 1.14%
Expenses, without expense reimbursement........................... -- -- 1.04% --
Net investment income............................................. 5.58% 5.27% 5.29% 5.56%
Net investment income, without expense reimbursement.............. -- -- 5.21% --
Portfolio turnover rate............................................. 49% 4% 4% 6%

<CAPTION>
YEAR ENDED OCTOBER 31
---------------------------------------------
1991 1990 1989 1988
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period................................ $12.18 $12.37 $12.26 $11.91(1)
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment income................................................. .905 .91 .92 .25
Expenses.......................................................... (.145) (.16) (.23) (.07)
Expense reimbursement............................................. -- .01 .08 .01
-------- -------- -------- --------
Net investment income............................................... .76 .76 .77 .19
Net realized and unrealized gain or loss on securities.............. .648 (.185) .10 .315
-------- -------- -------- --------
Total from investment operations.................................... 1.408 .575 .87 .505
-------- -------- -------- --------
DISTRIBUTIONS FROM NET INVESTMENT INCOME............................ (.748) (.765) (.76) (.155)
-------- -------- -------- --------
Net asset value, end of period...................................... $12.84 $12.18 $12.37 $12.26
======== ======== ======== =========
TOTAL RETURN(3)..................................................... 11.79% 4.77% 7.31% 4.26%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)............................. $42.5 $37.1 $24.7 $6.4
Ratios to average net assets (annualized)
Expenses.......................................................... 1.15% 1.25% 1.25% 1.91%
Expenses, without expense reimbursement........................... -- 1.28% 1.93% 2.22%
Net investment income............................................. 6.08% 6.21% 6.28% 5.55%
Net investment income, without expense reimbursement.............. -- 6.18% 5.60% 5.24%
Portfolio turnover rate............................................. 1% 4% 0% 5%
</TABLE>

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

(1) The net asset value on July 13, 1988, the date the Fund commenced
operations.

(2) The net asset value on December 15, 1987, the date the Fund commenced
operations.

(3) Total returns for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.

17
<PAGE> 18

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

(For a share of beneficial interest outstanding throughout the period)

MONEY MARKET FUND -- CLASS 1 SHARES
- -----------------------------------

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
--------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.............................. $1.00 $1.00 $1.00 $1.00 $1.00
--------- --------- --------- --------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment income............................................... .0593 .0388 .033 .0424 .0647
Expenses........................................................ (.0172) (.0184) (.0174) (.016) (.014)
Expense reimbursement........................................... .0071 .0084 .0074 .006 .0041
--------- --------- --------- --------- --------
Net investment income............................................. .0492 .0288 .023 .0324 .0548
Net realized and unrealized gain or loss on securities............ -- -- -- -- --
--------- --------- --------- --------- --------
Total from investment operations.................................. .0492 .0288 .023 .0324 .0548
--------- --------- --------- --------- --------
DISTRIBUTIONS FROM NET INVESTMENT INCOME.......................... (.0492) (.0288) (.023) (.0324) (.0548)
--------- --------- --------- --------- --------
Net asset value, end of period.................................... $1.00 $1.00 $1.00 $1.00 $1.00
========= ========= ========= ========= ========
TOTAL RETURN(3)................................................... 5.01% 2.91% 2.31% 3.29% 5.65%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)........................... $60.3 $56.4 $59.2 $72.5 $84.8
Ratios to average net assets (annualized)
Expenses........................................................ 1.00% 1.00% 1.00% 1.00% 1.00%
Expenses, without expense reimbursement......................... 1.71% 1.84% 1.74% 1.60% 1.41%
Net investment income........................................... 4.89% 2.87% 2.30% 3.27% 5.53%
Net investment income, without expense reimbursement............ 4.18% 2.03% 1.56% 2.67% 5.12%

<CAPTION>
YEAR ENDED OCTOBER 31
---------------------------------
1990 1989 1988
-------- -------- ---------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.............................. $1.00 $1.00 $1.00(2)
-------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS
Investment income............................................... .0839 .0946 .068
Expenses........................................................ (.014) (.012) (.015)
Expense reimbursement........................................... .004 .002 .007
-------- -------- ---------
Net investment income............................................. .0739 .0846 .06
Net realized and unrealized gain or loss on securities............ -- -- (.0037)
-------- -------- ---------
Total from investment operations.................................. .0739 .0846 .0563
-------- -------- ---------
DISTRIBUTIONS FROM NET INVESTMENT INCOME.......................... (.0739) (.0846) (.0563)
-------- -------- ---------
Net asset value, end of period.................................... $1.00 $1.00 $1.00
======== ======== ========
TOTAL RETURN(3)................................................... 7.61% 8.80% 5.82%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)........................... $95.7 $66.2 $21.1
Ratios to average net assets (annualized)
Expenses........................................................ 1.00% 1.00% .94%
Expenses, without expense reimbursement......................... 1.36% 1.18% 1.76%
Net investment income........................................... 7.37% 8.51% 7.10%
Net investment income, without expense reimbursement............ 7.01% 8.33% 6.28%
</TABLE>

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

(1) The net asset value on July 13, 1988, the date the Fund commenced
operations.

(2) The net asset value on December 15, 1987, the date the Fund commenced
operations.

(3) Total returns for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.

18
<PAGE> 19

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For a share of beneficial interest outstanding throughout the period)

The following information for the period May 3, 1994 through October 31,
1995 has been audited by the Trust's independent auditors, Ernst & Young LLP,
whose report thereon was unqualified. This information should be read in
conjunction with the related financial statements and notes thereto included in
the Statement of Additional Information.

<TABLE>
<CAPTION>
GROWTH GROWTH & INCOME
--------------------------------------------- -----------------------------------------------
CLASS A(2) CLASS B(2) CLASS A(2) CLASS B(2)
-------------------- ----------------------- --------------------- -----------------------
MAY 3, MAY 3, MAY 3, MAY 3,
YEAR- 1994(1) YEAR- 1994(1) YEAR- 1994(1) YEAR- 1994(1)
ENDED THROUGH ENDED THROUGH ENDED THROUGH ENDED THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994 1995 1994 1995 1994
---------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period........................ $11.89 $11.81 $11.85 $11.81 $11.71 $11.81 $11.70 $11.81
------ ------ ------ ------ ------- ------ ------ -------
INCOME FROM INVESTMENT
OPERATIONS
Investment income............. .28 .29 .27 .28 .41 .42 .42 .42
Expenses...................... (.37) (.29) (.46) (.32) (.31) (.21) (.41) (.25)
------ ------ -------- ------ ------- ------ ------ -------
Net investment income (loss)... (.09) 0 (.19) (.04) .10 .21 .01 .17
Net realized and unrealized
gains or losses on
securities.................... 2.77 .08 2.75 .08 2.255 (.26) 2.234 (.251)
------ ------ ------- ------ ------- ------ ------- -------
Total from investment
operations.................... 2.68 .08 2.56 .04 2.355 (.05) 2.244 (.081)
------ ------ ------- ------ ------- ------ ------- -------
Less Distributions from
net investment income......... -- -- -- -- (.10) (.05) (.01) (.029)
Excess of book-basis net
investment income............. -- -- -- -- (.045) -- (.054) --
------ ------ ------- ------ ------- ------ ------- -------
Total distributions............ -- -- -- -- (.145) (.05) (.064) (.029)
------ ------ ------- ------ ------- ------ ------- -------
Net asset value, end of
period........................ $14.57 $11.89 $14.41 $11.85 $13.92 $11.71 $13.88 $11.70
======= ======= ======== ======= ======== ======= ======= =======
TOTAL RETURN(3)................ 22.44% .76% 21.50% .42% 20.20% (.42%) 19.19% (.68%)

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions).................... $21.1 $ 4.4 $33.3 $ 5.8 $13.5 $ 3.5 $21.2 $ 3.6
Ratios to average net assets
(annualized)
Expenses...................... 2.75% 4.89% 3.50% 5.79% 2.44% 3.37% 3.15% 4.42%
Expenses, without expense
reimbursement............... 2.90% -- 3.65% -- 2.59% 3.40% 3.30% 4.45%
Net investment income
(loss)...................... (.68%) (.05%) (1.45%) (.78%) .81% 3.38% .05% 3.00%
Net investment income (loss),
without expense
reimbursement............... (.83%) -- (1.60%) -- .66% 3.35% (.10%) 2.97%
Portfolio turnover rate........ 193% 151% 193% 151% 108% 215% 108% 215%

<CAPTION>
INTERNATIONAL
GOVERNMENT EMERGING GROWTH EQUITY
------------------------------------------------ ------------------------- -------------------
CLASS A(2) CLASS B(2) CLASS A(2) CLASS B(2) CLASS A(2) CLASS(2)
---------------------- ---------------------- ----------- ----------- ---------- --------
MAY 3, MAY 3, FEBRUARY 21, FEBRUARY 21, FEBRUARY 21, FEBRUARY 21,
YEAR- 1994(1) YEAR- 1994(1) 1995(1) 1995(1) 1995(1) 1995(1)
ENDED THROUGH ENDED THROUGH THROUGH THROUGH THROUGH THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994 1995 1995 1995 1995
---------- ---------- ----------- ---------- ---------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning
of period.................... $11.54 $11.91 $11.54 $11.91 $11.81 $11.81 $11.81 $11.81
-------- ------ -------- ------ ------ ------ ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Investment income............ .93 .38 .93 .38 .15 .15 .19 .19

Expenses..................... (.32) (.15) (.42) (.18) (.39) (.50) (.33) (.40)
-------- ------- -------- ------- ------- ------- ------- -------
Net investment income (loss).. .61 .23 .51 .20 (.24) (.35) (.14) (.21)
Net realized and unrealized
gains or losses on
securities................... .6366 (.40) .6523 (.41) 3.55 3.58 2.19 2.19
--------- ------- -------- ------- ------- ------- ------- -------
Total from investment
operations................... 1.2466 (.17) 1.1623 (.21) 3.31 3.23 2.05 1.98
--------- ------- -------- ------- ------- ------- ------- -------
Less Distributions from
net investment income........ (.61) (.20) (.51) (.16) -- -- -- --
Excess of book-basis net
investment income............ (.0366) -- (.0523) -- -- -- -- --
--------- ------- -------- ------- ------- ------ ------- -------
Total distributions........... (.6466) (.20) (.5623) (.16) -- -- -- --
--------- ------- -------- ------- ------- ------- ------- -------
Net asset value, end of
period....................... $12.14 $11.54 $12.14 $11.54 $15.12 $15.04 $13.86 $13.79
========= ======= ========= ======= ======= ======= ======= =======
TOTAL RETURN(3)............... 11.20% (1.53%) 10.42% (1.83%) 28.11% 27.43% 16.28%(4) 15.69%(4)

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions)................... $ 9.8 $ 4.6 $ 9.5 $2.8 $15.9 $10.8 $ 6.6 $ 2.7
Ratios to average net assets
(annualized)
Expenses..................... 2.74% 2.32% 3.48% 3.25% 2.75% 3.49% 3.64% 4.33%
Expenses, without expense
reimbursement.............. -- -- -- -- 3.37% 4.11% 5.97% 6.67%
Net investment income
(loss)..................... 5.11% 3.54% 4.32% 3.49% (1.65%) (2.45%) (1.40%) (2.80%)
Net investment income (loss),
without expense
reimbursement.............. -- -- -- -- (2.27%) (3.07%) (3.73%) (5.13%)
Portfolio turnover rate....... 113% 155% 113% 155% 83% 83% 17% 17%
</TABLE>

(1) Commencement of operations.
(2) Based on average shares outstanding.
(3) Total return for periods of less than one year have not been annualized.
Total return does not consider the effect of sales charges.
(4) Total return from March 17, 1995 (date the Fund's investment strategy was
implemented) through October 31, 1995.

19
<PAGE> 20

- --------------------------------------------------------------------------------
INTRODUCTION
- --------------------------------------------------------------------------------

The Trust is a duly organized Massachusetts business trust with a number of
separate Funds, seven of which are described in this Prospectus. Each Fund has
separate assets and liabilities and a separate net asset value per share. Shares
of a Fund represent an interest only in the assets of that Fund. Since market
risks are inherent in all securities to varying degrees, assurance cannot be
given that the goal of any of the Funds will be met.

- --------------------------------------------------------------------------------
GOALS AND INVESTMENT POLICIES
- --------------------------------------------------------------------------------

Although each Fund of the Trust has a different goal which it pursues
through separate investment policies described below, each Fund, except the
International Equity Fund, will not purchase any securities issued by any
company primarily engaged in the manufacture of alcohol or tobacco. The
differences in goals and investment policies among the Funds can be expected to
affect the return of each Fund and the degree of market and financial risk to
which each Fund is subject. The goal and investment policies, the percentage
limitations, and the kinds of securities in which each Fund may invest are
generally not fundamental policies and may be changed by the Trustees, unless
expressly governed by those limitations as described under "Investment Practices
and Risks" which can be changed only by action of the shareholders. If there is
a change in the goal of any Fund, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs.

EMERGING GROWTH FUND

The goal of the Emerging Growth Fund is to seek capital appreciation by
investing in a portfolio of securities consisting principally of common stocks
of small and medium sized companies considered by the Adviser to be emerging
growth companies. Any ordinary income received from portfolio securities is
entirely incidental. There can, of course, be no assurance that the objective of
capital appreciation will be realized; therefore, full consideration should be
given to the risks inherent in the investment techniques that the Adviser may
use to achieve such objective.

Under normal conditions, the Fund invests at least 65% of its total assets
in common stocks of small and medium sized companies, both domestic and foreign,
in the early stages of their life cycle that the Adviser believes have the
potential to become major enterprises. Investments in such companies may offer
greater opportunities for growth of capital than larger, more established
companies, but also may involve certain special risks. Emerging growth companies
often have limited product lines, markets, or financial resources, and they may
be dependent upon one or a few key people for management. The securities of such
companies may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general. While the Fund will invest primarily in common stocks, to a limited
extent, it may invest in other securities such as preferred stocks, convertible
securities and warrants.

The Fund does not limit its investment to any single group or type of
security. The Fund may also invest in special situations involving new
management, special products and techniques, unusual developments, mergers or
liquidations. Investments in unseasoned companies and special situations often
involve much greater risks than are inherent in ordinary investments, because
securities of such companies may be more likely to experience unexpected
fluctuations in price.

The Fund's primary approach is to seek what the Adviser believes to be
unusually attractive growth investments on an individual company basis. The Fund
may invest in securities that have above average volatility of price movement.
Because prices of common stocks and other securities fluctuate, the value of an
investment in the Fund will vary based upon the Fund's investment performance.
The Fund attempts to reduce overall exposure to risk from declines in securities
prices by spreading its investments over many different companies in a variety
of industries. There is, however, no assurance that the Fund will be successful
in achieving its objective.

The Fund may hold a portion of its assets in high grade short-term debt
securities and high grade corporate or government bonds in order to provide
liquidity. Such investments may be increased by the Fund up to 100% of its
assets, when deemed appropriate by the Adviser for temporary defensive purposes.
Short-term investments may include repurchase agreements with banks or
broker-dealers. See "Investment Practices and Risks -- Repurchase Agreements."
The Fund may invest up to 20% of its total assets in securities of foreign
issuers. See "Investment Practices and Risks -- Securities of Foreign Issuers."

INTERNATIONAL EQUITY FUND

The goal of the International Equity Fund is to seek total return on its
assets from growth of capital and income. The Fund seeks to achieve its goal by
investing at least 65% of its assets in a diversified portfolio of equity
securities of established non-United States issuers.

20
<PAGE> 21

Under normal market conditions, the Fund invests at least 65% of its total
assets in a diversified portfolio of equity securities consisting of dividend
and non-dividend paying common stock, preferred stock, convertible debt and
rights and warrants to such securities and up to 35% of the Fund's assets in
bonds, notes and debt securities (consisting of securities issued in the
Eurocurrency markets or obligations of the United States or foreign governments
and their political subdivisions) of established non-United States issuers.
Investments may be made for capital appreciation or for income or any
combination of both for the purpose of achieving a higher overall return than
might otherwise be obtained solely from investing for growth of capital or for
income. There is no limitation on the percentage or amount of the Fund's assets
which may be invested for growth or income and, therefore, from time to time the
investment emphasis may be placed solely or primarily on growth of capital or
solely or primarily on income.

In seeking to achieve its goal, the Fund presently expects to invest its
assets primarily in common stocks of established non-United States companies
which in the opinion of the Subadviser have potential for growth of capital.
However, there is no requirement that the Fund invest exclusively in common
stocks or other equity securities and, if deemed advisable, the Fund may invest
up to 35% of its assets in bonds, notes and other debt securities (including
securities issued in the Eurocurrency markets or obligations of the United
States or foreign governments and their political subdivisions). The Fund may
invest in debt securities rated A or higher by Moody's Investors Services, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P") or other nationally
recognized statistical rating agency or in nonrated securities considered by the
Subadviser to be of comparable quality. When the Subadviser believes that the
return on debt securities will equal or exceed the return on common stocks, the
Fund may, in seeking its goal of total return, substantially increase its
holdings (up to a maximum of 35% of its assets) in such debt securities. In
determining whether the Fund will be invested for capital appreciation or for
income or any combination of both, the Subadviser regularly analyzes a broad
range of international equity and fixed income markets in order to assess the
degree of risk and level of return that can be expected from each market.

The Fund will generally invest its assets broadly among countries and will
normally have represented in the portfolio business activities in not less than
three different foreign countries. Except as stated below, the Fund will invest
at least 65% of its assets in companies organized or governments located in any
area of the world other than the United States, such as the Far East (e.g.,
Japan, Hong Kong, Singapore, Malaysia), Western Europe (e.g., United Kingdom,
Germany, The Netherlands, France Italy, Switzerland), Eastern Europe (e.g.,
Hungary, Poland, The Czech Republic and the countries of the former Soviet
Union), Central and South America (e.g., Mexico, Chile and Venezuela),
Australia, Canada and such other areas and countries as the Subadviser may
determine from time to time. However, under unusual economic or market
conditions as determined by the Subadviser, for defensive purposes the Fund may
temporarily invest all or a major portion of its assets in U.S. Government
securities or in United States currency denominated debt issues of foreign
governments or agencies. To the extent the Fund's assets are invested for
temporary defensive purposes, such assets will not be invested in a manner
designed to achieve the Fund's investment goal.

In determining the appropriate distribution of investments among various
countries and geographic regions, the Subadviser ordinarily considers the
following factors: prospects for relative economic growth between countries;
expected levels of inflation; government policies influencing business
conditions; the outlook for currency relationships; and the range of individual
investment opportunities available to international investors. In the future, if
any other relevant factors arise they will also be considered. In analyzing
companies for investment, the Subadviser ordinarily looks for one or more of the
following characteristics: an above-average earnings growth per share; high
return on invested capital; healthy balance sheet; sound financial and
accounting policies and overall financial strength; strong competitive
advantages; effective research and product development and marketing; efficient
service; pricing flexibility; strength of management; and general operating
characteristics which will enable the company to compete successfully in its
market place. Ordinarily, the Subadviser will not view a company as being
sufficiently well established to be considered for inclusion in the Fund's
portfolio's unless the company, together with any predecessors, has been
operating for at least three fiscal years.

It is expected that portfolio securities will ordinarily be traded on a
stock exchange or other market in the country in which the issuer is principally
based, but may also be traded on markets in other countries including, in many
cases, the United States securities exchanges and over-the-counter markets.

To the extent that the Fund's assets are not otherwise invested as
described above, the assets may be held in cash, in any currency, or invested in
United States as well as foreign high quality money market instruments and
equivalents.

21
<PAGE> 22

GROWTH FUND

The goal of the Growth Fund is to seek capital appreciation through
investments in common stocks and options on common stocks. Any income realized
on its investments will be purely incidental to its goal of capital
appreciation.

Portfolio securities are selected by the Adviser using an investment
research process blending traditional security analysis and quantitative
security selection techniques. Such process includes focusing on securities of
companies that the Adviser believes either: (1) experienced above-average and
consistent long-term growth of earnings and have excellent prospects for
outstanding future growth in earnings; (2) are presently experiencing or
expected to have a material increase in profits and sales; (3) are undervalued
either in that such securities are selling at prices that do not reflect the
current market value of its securities and there is reason to expect realization
of this potential in the form of increased equity values or that the potential
improving prospects of the security is not reflected in the price of the
security; (4) will experience a fundamental change in structure that potentially
may result in higher earnings; or (5) will produce new products, new services or
new processes. The Fund may invest in options and other securities that have
above average volatility of price movement. Because prices of common stocks,
options and other investments fluctuate, the value of an investment in the Fund
will vary based upon the Fund's investment performance. The Fund attempts to
reduce overall exposure to risk from declines in securities prices by spreading
its investments over many different companies in a variety of industries and by
using stock index options and stock index futures and options thereon, as
discussed in the Statement of Additional Information. There is no assurance that
the Fund will be successful in achieving its goal.

Certain policies of the Fund, such as purchasing and selling options on
stocks, purchasing options on stock indices and purchasing stock index futures
contracts and options thereon involve inherently greater investment risk and
could result in more volatile price fluctuations. Options, futures contracts and
related options are described in "Investment Practices and Risks -- Options,
Futures Contracts and Related Options" and the Statement of Additional
Information. The Fund may also invest up to 20% of its total assets in
securities of foreign issuers and in investment companies. See "Investment
Practices and Risks -- Securities of Foreign Issuers" and "Investment in
Investment Companies." Since the Fund may take substantial risks in seeking its
goal of capital appreciation, it is not suitable for investors unable or
unwilling to assume such risks.

GROWTH AND INCOME FUND

The goal of Growth and Income Fund is to seek reasonable growth and income
through investments in equity securities that provide dividend or interest
income, including common and preferred stocks and securities convertible into
common and preferred stocks.

Portfolio securities are selected by the Adviser using an investment
research process blending traditional security analysis and quantitative
security selection techniques. Such process includes focusing on securities of
companies that the Adviser believes either: (1) experienced above-average and
consistent long-term growth of earnings and have excellent prospects for
outstanding future growth in earnings; (2) are presently experiencing or
expected to have a material increase in profits and sales; (3) are undervalued
either in that such securities are selling at prices that do not reflect the
current market value of its securities and there is reason to expect realization
of this potential in the form of increased equity values or that the potential
improving prospects of the security is not reflected in the price of the
security; (4) will experience a fundamental change in structure that potentially
may result in higher earnings; or (5) will produce new products, new services or
new processes. In general, the Fund intends to invest primarily in securities
that have yielded a dividend or interest income to security holders within the
past twelve months; however, it may invest in non-income producing investments
held for anticipated increase in value. There is no assurance that the Fund will
be successful in achieving its goal.

Convertible securities rank senior to common stocks in a corporation's
capital structure. They are consequently of higher quality and entail less risk
than the corporation's common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which the convertible
security sells above its value as fixed income security. The Fund may purchase
convertible securities rated Ba or lower by Moody's or BB or lower by S&P or in
non-rated securities considered by the Adviser to be of comparable quality.
Although the Fund selects these securities primarily on the basis of their
equity characteristics, investors should be aware that debt securities rated in
these categories are considered high risk securities; the rating agencies
consider them speculative, and payment of interest and principal is not
considered well assured. To the extent that such convertible securities are
acquired by the Fund, there is a greater risk as to the timely payment of the
principal of, and timely payment of interest or dividends on, such securities
than in the case of higher rated convertible securities.

22
<PAGE> 23

Although the portfolio turnover rate will not be considered a limiting
factor, the Fund does not intend to engage in trading directed at realizing
short-term profits. Nevertheless, changes in the portfolio will be made promptly
when determined to be advisable by reason of developments not foreseen at the
time of the investment decision, and usually without reference to the length of
time the security has been held.

The Fund may hold a portion of its assets in high grade short-term debt
securities and high grade corporate or government bonds in order to provide
liquidity. The amount of assets the Fund may hold for liquidity purposes is
based on market conditions and the need to meet redemption requests. Such
investments may be increased by the Fund, up to 100% of its assets, when deemed
appropriate by the Adviser for temporary defensive purposes. Short-term
investments may include repurchase agreements with banks or broker-dealers. See
"Investment Practices and Risks -- Repurchase Agreements." The Fund may also
invest up to 20% of its total assets in securities of foreign issuers and in
investment companies. See "Investment Practices and Risks -- Securities of
Foreign Issuers" and "Investment in Investment Companies." The Fund may engage
in portfolio management strategies and techniques involving options, futures
contracts and options on futures. Options, futures contracts and related options
are described in "Investment Practices and Risks -- Options, Futures Contracts
and Related Options" and the Statement of Additional Information.

GOVERNMENT FUND

The goal of the Government Fund is to seek high current return consistent
with preservation of capital. The Fund invests primarily in debt securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
In order to hedge against changes in interest rates, the Fund may purchase or
sell options on U.S. Government securities and engage in transactions involving
interest rate futures contracts and options on such contracts. See "Investment
Practices and Risks -- Options, Futures Contracts and Related Options" and the
Statement of Additional Information for further discussion. The Fund may invest
in repurchase agreements fully collateralized by U.S. Government securities. The
Fund may also purchase or sell U.S. Government securities on a forward
commitment basis. See "Investment Practices and Risks -- Repurchase Agreements"
and "Forward Commitments." The Fund is not designed for investors seeking
long-term capital appreciation. Shares of the Fund are not insured or guaranteed
by the U.S. Government, its agencies or instrumentalities or by any other person
or entity. There is no assurance that the Fund will be successful in achieving
its goal.

The Fund may also engage in transactions involving obligations issued or
guaranteed by U.S. Government agencies and instrumentalities which are supported
by any of the following: (a) the full faith and credit of the U.S. Government
(such as Government National Mortgage Association ("GNMA" Certificates), (b) the
right of the issuer to borrow an amount limited to a specific line of credit
from the U.S. Government, (c) discretionary authority of the U.S. Government
agency or instrumentality, or (d) the credit of the instrumentality. Agencies
and instrumentalities include, but are not limited to: Federal Land Banks,
Farmers Home Administration, Central Bank for Cooperatives, Federal Intermediate
Credit Banks, Federal Home Loan Banks and Federal National Mortgage Association.
The Fund expects in any event that at all times at least 80% of its assets will
be invested in U.S. Government securities.

Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities include: (1) U.S. Treasury obligations, which differ in their
interest rates, maturities and times of issuance: U.S. Treasury bills (maturity
of one year or less), U.S. Treasury notes (maturity of one to ten years), and
U.S. Treasury bonds (generally maturities of greater than ten years), including
the principal components or the interest components issued by the U.S.
Government under the Separate Trading of Registered Interest and Principal of
Securities program (i.e., "STRIPS"), all of which are backed by the full faith
and credit of the United States; and (2) obligations issued or guaranteed by
U.S. Government agencies or instrumentalities, including government guaranteed
mortgage-related securities, some of which are backed by the full faith and
credit of the U.S. Treasury, some of which are supported by the right of the
issue to borrow from the U.S. Government and some of which are backed only by
the credit of the issuer itself.

Mortgage loans made by banks, savings and loan institutions, and other
lenders are often assembled into pools, which are issued or guaranteed by an
agency or instrumentality of the U.S. Government, though not necessarily by the
U.S. Government itself. Interests in such pools are what this Prospectus calls
"mortgage-related securities."

Mortgage-related securities include, but are not limited to, obligations
issued or guaranteed by the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). GNMA is a wholly owned corporate instrumentality
of the United States whose securities and guarantees are backed by the full
faith and credit of the United States. FNMA, a federally chartered and
privately-owned corporation, and FHLMC, a federal corporation, are
instrumentalities of the United States. The securities and guarantees of FNMA
and FHLMC are not backed, directly or indirectly, by the full faith and credit
of the United States. Although the Secretary of the Treasury of the United
States has discretionary authority to lend FNMA up to $2.25 billion outstanding
at any time, neither the United States nor any agency thereof is obligated to
finance FNMA's or FHLMC's operations or to assist FNMA or FHLMC in any other
manner. Securities of FNMA and FHLMC include those issued in principal only or
interest only components.

23
<PAGE> 24

Mortgage-related securities are characterized by monthly payments to the
holder, reflecting the monthly payments made by the borrowers who received the
underlying mortgage loans. The payments to the securityholders (such as the
Fund), like the payments on the underlying loans, represent both principal and
interest. Although the underlying mortgage loans are for specified periods of
time, such as 20 or 30 years, the borrowers can, and typically do, pay them off
sooner. Thus, the securityholders frequently receive prepayments of principal,
in addition to the principal which is part of the regular monthly payment. A
borrower is more likely to prepay a mortgage which bears a relatively high rate
of interest. This means that in times of declining interest rates, some of the
Fund's higher yielding securities might be converted to cash, and the Fund will
be forced to accept lower interest rates when that cash is used to purchase
additional securities. The increased likelihood of prepayment when interest
rates decline also limits market price appreciation of mortgage-related
securities. If the Fund buys mortgage-related securities at a premium, mortgage
foreclosures or mortgage prepayments may result in a loss to the Fund of up to
the amount of the premium paid since only timely payment of principal and
interest is guaranteed.

In general, the prices of debt securities vary inversely with interest
rates. If interest rates rise, debt security prices generally fall; if interest
rates fall, debt security prices generally rise. In addition, for a given change
in interest rates, longer-maturity debt securities fluctuate more in price
(gaining or losing more in value) than shorter-maturity debt securities, and
generally offer higher yields than shorter-maturity debt securities, all other
factors, including credit quality, being equal. This potential for a decline in
prices of debt securities due to rising interest rates is referred to herein as
"market risk." While the Fund has no policy limiting the maturities of the debt
securities in which it may invest, the Adviser seeks to moderate market risk by
generally maintaining a portfolio duration within a range of approximately four
to six years. Duration is a measure of the expected life of a debt security that
was developed as a more precise alternative to the concept of "term to
maturity." Duration incorporates a debt security's yield, coupon interest
payments, final maturity and call features into one measure.

Traditionally a debt security's "term to maturity" has been used as a proxy
for the sensitivity of the security's price to changes in interest rates (which
is the "interest rate risk" or "price volatility" of the security). However,
"term to maturity" measures only the time until a debt security provides its
final payment taking no account of the pattern of the security's payments of
interest or principal prior to maturity. Duration measures the length of the
time interval between the present and the time when the interest and principal
payments are scheduled to be received (or in the case of a callable bond,
expected to be received), weighing them by the present value of the cash to be
received at each future point in time. In general, the lower the coupon rate of
interest or the longer the maturity, or the lower the yield-to-maturity of a
debt security, the longer its duration; conversely, the higher the coupon rate
of interest, the shorter the maturity or the higher the yield-to-maturity of a
debt security, the shorter its duration.

With respect to some securities, there are some situations where even the
standard duration calculation does not properly reflect the interest rate
exposure of a security. In these and other similar situations, the Adviser will
use more sophisticated analytical techniques that incorporate the economic life
of a security into the determination of its interest rate exposure. At October
31, 1995, the average maturity of the debt securities owned by the Fund, as
adjusted for investments in options, futures contracts and related options, was
approximately 6.3 years and the duration of the portfolio was approximately 4.8
years. The duration is likely to vary from time to time as the Adviser pursues
its strategy of striving to maintain an active balance between seeking to
maximize income and endeavoring to maintain the value of the Fund's capital.
Thus, the objective of providing high current return consistent with
preservation of capital to shareholders is tempered by seeking to avoid undue
market risk and thus provide reasonable total return as well as high distributed
return. There is, of course, no assurance that the Adviser will be successful in
achieving such results for the Fund.

The Fund generally purchases debt securities at a premium over the
principal or face value in order to obtain higher current income. The amount of
any premium declines during the term of the security to zero at maturity. Such
decline generally is reflected in the market price of the security and thus in
the Fund's net asset value. Any such decline is realized for accounting purposes
as a capital loss at maturity or upon resale. Prior to maturity or resale, such
decline in value could be offset, in whole or part, or increased by changes in
the value of the security due to changes in interest rate levels.

The principal reason for selling call or put options is to obtain, through
the receipt of premiums, a greater return than would be realized on the
underlying securities alone. By selling options, the Fund reduces its potential
for capital appreciation on debt securities if interest rates decline. Thus, if
market prices of debt securities increase, the Fund would receive a lower total
return from its optioned positions than it would have received if the options
had not been sold. The purpose of selling options is intended to improve the
Fund's total return and not to "enhance" monthly distributions. During periods
when the Fund has capital loss carry forwards any capital gains generated from
such transactions will be retained in the Fund. See "Investment Practices and
Risks -- Options, Futures Contracts and Related Options," "Dividends,
Distributions and Taxes" and the Statement of Additional Information for further
discussion.

The purchase and sale of options may result in a high portfolio turnover
rate. The Fund's turnover rate is shown in the table of Financial Highlights.
See "Investment Practices and Risks -- Portfolio Turnover."

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MUNICIPAL BOND FUND

The goal of the Municipal Bond Fund is to seek as high a level of current
interest income exempt from federal income tax as is consistent with the
preservation of capital. Because the value of and yield on Municipal Bonds
fluctuate, there can be no assurance that the Fund's goal will be achieved.

The Fund seeks to achieve its objective by investing in a diversified
portfolio of obligations issued by or on behalf of states, territories or
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest from which,
in the opinion of bond counsel for the issuer, is exempt from federal income
tax. See "Municipal Bonds." It is a fundamental policy of the Fund under normal
conditions to invest at least 80% of its assets in Municipal Bonds which are
considered tax-exempt. The Fund does not independently evaluate the tax-exempt
status of the Municipal Bonds in which it invests. The Fund invests principally
in Municipal Bonds rated at the time of purchase within the three highest grades
assigned by Moody's or S&P. Ratings at the time of purchase determine which
securities may be acquired, and a subsequent reduction in rating does not
require the Fund to dispose of a security. At least 75% of the Fund's total
assets will be invested in Municipal Bonds rated "A" or higher. The Fund may
invest up to 25% of its total assets in Municipal Bonds rated "Baa" by Moody's
or "BBB" by S&P or any non-rated Municipal Bonds having characteristics similar
to Municipal Bonds rated "Baa" or "BBB." Municipal Bonds rated BBB or Baa may
have speculative characteristics so that changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case of higher grade Municipal Bonds. The
market prices of Municipal Bonds generally fluctuate with changes in interest
rates so that the value of investments in such securities can be expected to
decrease as interest rates rise and increase as interest rates fall. Because
investment in lower rated securities involves greater investment risks,
achievement of the Fund's goal may be more dependent on the Adviser's credit
analysis than would be the case if the Fund invested only in higher rated
securities. Non-rated Municipal Bonds are not necessarily of lower quality than
rated Municipal Bonds, but the market for rated Municipal Bonds is often
broader. The Fund may seek to hedge against changes in interest rates through
transactions in listed futures contracts related to U.S. Government securities,
Municipal Bonds or to an index of Municipal Bonds, and options on such
contracts. See the Statement of Additional Information for discussion of futures
contracts and options.

On a temporary basis, due to market conditions or pending investment in
Municipal Bonds, the Fund may invest up to 100% of its assets in "Temporary
Investments" consisting of short-term municipal notes rated MIG 1 through MIG 4
by Moody's or SP-1 or SP-2 by S&P; tax-exempt commercial paper rated P-1 or P-2
in the case of Moody's or A-1 or A-2 by S&P; securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities; corporate bonds and
debentures; certificates of deposit and bankers' acceptances of domestic banks
with assets of $500 million or more and having deposits insured by the Federal
Deposit Insurance Corporation; commercial paper and repurchase agreements. The
income on corporate bonds and debentures, certificates of deposit and bankers'
acceptances, commercial paper and repurchase agreements is taxable. See the
Appendix in the Statement of Additional Information for discussion of ratings of
commercial paper and bonds.

The Fund may invest up to 10% of its net assets in illiquid securities
which include Municipal Bonds issued in limited placements under which the Fund
represents that it is purchasing for investment purposes only, repurchase
agreements maturing in more than seven days and other securities subject to
legal or contractual restrictions on resale. Municipal Bonds acquired in limited
placements generally may be resold only in a privately negotiated transaction to
one or more other institutional investors. Restricted securities are generally
purchased at a discount from the market price of unrestricted securities of the
same issuer. Investments in restricted securities are not readily marketable
without some time delay. A Fund position in restricted securities might
adversely affect the liquidity and marketability of such securities. Such
limitation could result in the Fund's inability to realize a favorable price
upon disposition, and in some cases might make disposition of such securities at
the time desired by the Fund impossible. The 10% limitation applies at the time
the purchase commitment is made. See "Investment Practices and
Risks -- Repurchase Agreements."

Variations in the quality and maturity of the Fund's portfolio investments
can be expected to affect the Fund's yield and the degree of market and
financial risk to which the Fund is subject. Generally, Municipal Bonds with
longer maturities tend to produce higher yields and are subject to greater
market fluctuations as a result of changes in interest rates than Municipal
Bonds with shorter maturities and lower yields. The market value of Municipal
Bonds generally rises when interest rates decline and falls when interest rates
rise. Generally lower rated Municipal Bonds provide a higher yield than higher
rated Municipal Bonds of similar maturity but are subject to greater market and
financial risk. The Fund is not limited as to the maturities of the Municipal
Bonds in which it invests. Such securities may have remaining maturities of up
to 30 years or more.

MUNICIPAL BONDS. Municipal Bonds include debt obligations of a state,
territory or a possession of the United States and the District of Columbia and
their political subdivisions, agencies and instrumentalities issued to obtain
funds for various public purposes, including the construction of a wide range of
public facilities such as airports, highways, bridges, schools, hospitals,
housing, mass transportation, streets and water and sewer works. Other public
purposes for which Municipal Bonds may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and obtaining funds
to lend to other public institutions and facilities. Certain types of Municipal
Bonds are issued to obtain funding for privately operated facilities.

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<PAGE> 26

Many new issues of Municipal Bonds are sold on a "when issued" basis. While
the Fund has ownership rights to the bonds, the Fund does not have to pay for
them until they are delivered, normally 15 to 45 days later. To meet that
payment obligation, the Fund sets aside with the custodian sufficient cash or
high grade securities equal to the amount that will be due. When the Fund
engages in when-issued and delayed delivery transactions, the Fund relies on the
buyer or seller, as the case may be, to consummate the trade. Failure of the
buyer or seller to do so may result in the Fund missing the opportunity of
obtaining a price considered to be advantageous. See "Investment Practices and
Risks -- Delayed Delivery and When-Issued Securities."

The yields of Municipal Bonds depend on, among other things, general money
market conditions, general conditions of the Municipal Bond market, size of a
particular offering, the maturity of the obligation and rating of the issue. The
ratings of Moody's and S&P represent their opinions of the quality of the
Municipal Bonds they undertake to rate. It should be emphasized, however, that
ratings are general and are not absolute standards of quality. Consequently,
Municipal Bonds with the same maturity, coupon and rating may have different
yields while Municipal Bonds of the same maturity and coupon with different
ratings may have the same yield. A description of the ratings is included in the
Statement of Additional Information.

Among the various types of Municipal Bonds are general obligation bonds,
revenue or special obligation bonds, industrial development bonds, pollution
control bonds, variable rate demand notes, and short-term tax-exempt municipal
obligations such as tax anticipation notes.

General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or
facility -- tolls from a toll-bridge, for example. Industrial development
revenue bonds are a specific type of revenue bond backed by the credit and
security of a private user. The Fund's ability to achieve its goal depends to a
great extent on the ability of these various issuers to meet their scheduled
payments of principal and interest.

The Fund considers investments in Municipal Bonds not to be subject to
concentration policies and may invest a relatively high percentage of its assets
in Municipal Bonds issued by entities having similar characteristics. The
issuers may be located in the same geographic area or may pay their interest
obligations from revenue of similar projects such as hospitals, utility systems
and housing finance agencies. This may make the Fund's investments more
susceptible to similar economic, political or regulatory occurrences. As the
similarity in issuers increases, the potential for fluctuation in the Fund's per
share net asset value also increases. The Fund may invest more than 25% of its
total assets in industrial development revenue bonds, but it does not intend to
invest more than 25% of its assets in industrial development revenue bonds
issued for companies in the same industry or state. Sizeable investments in such
obligations could involve an increased risk to the Fund should any of such
issuers of any such related projects or facilities experience financial
difficulties.

From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on Municipal Bonds. It may be expected that similar proposals may be
introduced in the future. If any such proposals were to be enacted, the ability
of the Fund to pay "exempt-interest" dividends may be adversely affected and the
Fund would re-evaluate its investment objective and policies and consider
changes in its structure.

TAX LEGISLATION. Interest on certain "private-activity bonds" issued after
August 7, 1986, is an item of tax preference subject to the alternative minimum
tax on individuals and corporations. THE TRUST WILL NOT PURCHASE ANY PRIVATE
ACTIVITY BONDS SUBJECT TO THE ALTERNATIVE MINIMUM TAX.

The Omnibus Budget Reconciliation Act of 1993, which was signed into law on
August 10, 1993, included certain provisions intended to prevent the conversion
of ordinary income into capital gain. One such provision affects tax-exempt
securities by requiring that gains on certain debt instruments purchased at a
market discount be treated as ordinary income to the extent of the accrued
market discount. The new law extends this treatment to market discount bonds
issued before July 18, 1984 and to tax-exempt bonds, if the bonds are acquired
after April 30, 1993. Such bonds were exempt from the market discount rules
under prior law.

MONEY MARKET FUND

The Money Market Fund seeks protection of capital and a high level of
current income through investments in money market securities. Such securities
may include obligations of the U.S. Government, its agencies and
instrumentalities, bank obligations, commercial paper and repurchase agreements
secured by obligations of the U.S. Government, its agencies and
instrumentalities. Such securities are described below and repurchase agreements
are described under the caption "Investment Practices and Risks -- Repurchase
Agreements."

The Fund seeks to maintain a constant net asset value of $1.00 per share by
investing in a diversified portfolio of money market instruments maturing within
13 months with a dollar-weighted average maturity of 90 days or less. It seeks
high current income from these short-term investments to the extent consistent
with protection of capital. Of course, there can be no guarantee that the Fund
will achieve its objective or be able at all times to maintain its net asset
value per share at $1.00. In addition, the daily dividend rate paid by the Fund
may be expected to fluctuate. The Fund uses the amortized cost method for
valuing portfolio securities. See "Purchase of Shares."

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<PAGE> 27

OBLIGATIONS OF THE U.S. GOVERNMENT AND ITS AGENCIES. The Fund may invest in
obligations issued or guaranteed as to principal and interest by the U.S.
Government, its agencies, and instrumentalities which are supported by any of
the following: (a) the full faith and credit of the U.S. Government, (b) the
right of the issuer to borrow an amount limited to a specific line of credit
from the U.S. Government, (c) discretionary authority of the U.S. Government
agency or instrumentality, or (d) the credit of the instrumentality. Such
agencies or instrumentalities include, but are not limited to, FNMA, GNMA,
Federal Land Banks, and the Farmer's Home Administration.

BANK OBLIGATIONS. The Fund may invest in negotiable time deposits,
certificates of deposit and bankers' acceptances which are obligations of
domestic banks having total assets in excess of $1 billion as of the date of
their most recently published financial statements. The Fund is also authorized
to invest up to 5% of its total assets in certificates of deposit issued by
domestic banks having total assets of less than $1 billion, provided that the
principal amount of the certificate of deposit acquired by the Fund is insured
in full by the Federal Deposit Insurance Corporation.

COMMERCIAL PAPER. The Fund may invest in short-term obligations of
companies which at the time of investment are (a) rated in the two highest
categories by S&P (A-1 and A-2) or by Moody's (Prime-1 and Prime-2), or (b) if
not rated, are in the opinion of the Adviser, of comparable quality. Commercial
paper consists of short-term (usually from 1 to 270 days) unsecured promissory
notes issued by corporations in order to finance their current operations. (See
the Statement of Additional Information for an explanation of these ratings.)
The Fund's current policy is to limit investments in commercial paper to
obligations rated A-1 or Prime-1.

- --------------------------------------------------------------------------------
INVESTMENT PRACTICES AND RISKS
- --------------------------------------------------------------------------------

REPURCHASE AGREEMENTS (ALL FUNDS). Each Fund may enter into repurchase
agreements with broker-dealers or domestic banks. A repurchase agreement is a
short-term investment in which the purchaser (e.g., the Fund) acquires ownership
of a debt security and the seller agrees to repurchase the obligation at a
future time and set price, thereby determining the yield during the purchaser's
holding period. Repurchase agreements involve certain risks in the event of a
default by the other party. No Fund will invest in repurchase agreements
maturing in more than seven days if any such investment, together with any other
illiquid securities held by such Fund, exceeds in the case of the Growth Fund,
the Growth and Income Fund, the Government Fund, the Municipal Bond Fund and the
Money Market Fund 10% of the value of the Fund's net assets and, in the case of
the Emerging Growth Fund and the International Equity Fund, 15% of the value of
the Fund's net assets. The International Equity Fund may enter into repurchase
agreements of up to 25% of its assets but the Fund currently does not expect
that it will enter into repurchase agreements on more than 5% of its assets. See
the Statement of Additional Information.

For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that substantially all of the funds advised or subadvised by
the Adviser would otherwise invest separately into a joint account. The cash in
the joint account is then invested and the funds that contributed to the joint
account share pro rata in the net revenue generated. The Adviser believes that
the joint account produces greater efficiencies and economies of scale that may
contribute to reduced transaction costs, higher returns, higher quality
investments and greater diversity of investments for a Fund than would be
available to a Fund investing separately. The manner in which the joint account
is managed is subject to conditions set forth in the SEC order authorizing this
practice, which conditions are designed to ensure the fair administration of the
joint account and to protect the amounts in that account.

ADJUSTING INVESTMENT EXPOSURE (ALL FUNDS EXCEPT MONEY MARKET FUND). The
Funds, other than Money Market Fund, can use various techniques to increase or
decrease their exposure to changing security prices, interest rates, commodity
prices, or other factors that affect security values. These techniques may
involve derivative securities such as options, futures contracts, swaps, and
forward commitments, all as discussed more fully below.

OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS (ALL FUNDS EXCEPT MONEY
MARKET FUND). The Funds expect to utilize options, futures contracts and options
thereon in several different ways, depending upon the status of a Fund's
portfolio and the Adviser's or, in the case of the International Equity Fund,
the Subadviser's, expectations concerning the securities markets.

For example, in times of stable or rising security prices, a Fund generally
seeks to obtain maximum exposure to the securities markets, i.e., to be "fully
invested." Nevertheless, even when a Fund is fully invested, prudent management
requires that at least a small portion of assets be available as cash to honor
redemption requests and for other short-term needs. A Fund may also have cash on
hand that has not yet been invested. The portion of a Fund's assets that is
invested in cash equivalents does not fluctuate with security market prices, so
that, in times of rising market prices, a Fund may underperform the market in
proportion to the amount of cash equivalents in its portfolio. By purchasing
futures contracts, however, a Fund can compensate for the cash portion of its
assets and obtain equivalent performance to investing 100% of its assets in
equity securities.

If the Adviser or, in the case of the International Equity Fund, the
Subadviser, forecasts a market decline, a Fund may take a defensive position,
reducing its exposure to the securities markets by increasing its cash position.
By selling futures contracts instead of portfolio securities, a similar result
can be achieved to the extent that the performance of the futures contracts
correlates to the performance of a Fund's portfolio securities. Sale of futures
contracts could frequently be accomplished more

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<PAGE> 28

rapidly and at less cost than the actual sale of securities. Once the desired
hedged position has been effected, a Fund could then liquidate securities in a
more deliberate manner, reducing its futures position simultaneously to maintain
the desired balance, or it could maintain the hedged position.

As an alternative to selling futures contracts, a Fund can purchase puts
(or futures puts) to hedge the portfolio's risk in a declining market. Since the
value of a put increases as the index declines below a specified level, the
portfolio's value is protected against a market decline to the degree the
performance of the index correlates with the performance of a Fund's investment
portfolio. If the market remains stable or advances, a Fund can refrain from
exercising the put and its portfolio will participate in the advance, having
incurred only the premium cost for the put.

In many cases, a Fund could achieve results similar to those available from
options and futures contracts without investing in the options and futures
markets. For example, instead of hedging portfolio securities it owned with
options and futures contracts, the Fund could sell the securities and invest the
proceeds in money market instruments. In other cases, however, the options and
futures markets provide investment or risk management opportunities that are not
available from direct investments in securities. In addition, some strategies
can be implemented with greater ease and at lower cost by utilizing the options
and futures markets.

The International Equity Fund may enter into futures contracts and options
for non-hedging purposes, subject to applicable law. Such transactions may be
considered a form of speculation.

POTENTIAL RISKS OF OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS. The
purchase and sale of options and futures contracts involve risks different from
those involved with direct investments in securities. While utilization of
options, futures contracts and similar instruments may be advantageous to a
Fund, if the Adviser or, in the case of the International Equity Fund, the
Subadviser, is not successful in employing such instruments in managing a Fund's
investments, a Fund's performance will be worse than if a Fund did not make such
investments. In addition, a Fund would pay commissions and other costs in
connection with such investments, which may increase a Fund's expenses and
reduce its return.

Each Fund other than the Money Market Fund and the Municipal Bond Fund may
write or purchase options in privately negotiated transactions ("OTC Options")
as well as listed options. OTC Options can be closed out only by agreement with
the other party to the transaction. Any OTC Option purchased by a Fund will be
considered an illiquid security. Any OTC Option written by a Fund will be with a
qualified dealer pursuant to an agreement under which the Fund may repurchase
the option at a formula price. Such options will be considered illiquid to the
extent that the formula price exceeds the intrinsic value of the option. Each
Fund other than the International Equity Fund may not purchase or sell futures
contracts or related options for which the aggregate initial margin and premiums
exceed five percent of the fair market value of the Fund's assets. The
International Equity Fund may enter into transactions in futures contracts and
options on futures contracts only (i) for bona fide hedging purposes (as defined
in the regulations of the Commodity Futures Trading Commission (the "CFTC")), or
(ii) for non-hedging purposes provided that the aggregate initial margin and
premiums on such non-hedging positions does not exceed 5% of the liquidation
value of the Fund's assets. In order to prevent leverage in connection with the
purchase of futures contracts thereon by the Fund, an amount of cash, cash
equivalents or liquid high grade debt securities equal to the market value of
the obligation under the futures contracts (less any related margin deposits)
will be maintained in a segregated account with the Custodian. The Growth Fund,
the Growth and Income Fund, the Government Fund and the Municipal Bond Fund may
not invest more than 10% of their net assets in illiquid securities and
repurchase agreements which have a maturity of longer than seven days; the
Emerging Growth Fund and the International Equity Fund are limited to 15% of
their net assets. The successful use of futures and options is dependent upon
the ability of the Adviser or Subadviser to predict changes in interest rates.
The daily deposit requirements in futures contracts create an ongoing greater
potential financial risk than do option purchase transactions, where the
exposure is limited to the cost of the premium for the option. Transactions in
futures and options on futures for non-hedging purposes involve greater risks
and could result in losses which are not offset by gains on other portfolio
assets. A more complete discussion of the potential risks involved in
transactions involving options or futures contracts and related options, is
contained in the Statement of Additional Information.

SPECIAL RISKS ASSOCIATED WITH FUTURES TRANSACTIONS (ALL FUNDS EXCEPT MONEY
MARKET FUND). There are several risks connected with the use of futures
contracts as a hedging device. These include the risk of imperfect correlation
between movements in the price of the futures contracts and of the underlying
securities, the risk of market distortion, the illiquidity risk and the risk of
error in anticipating price movement.

CURRENCY TRANSACTIONS (INTERNATIONAL EQUITY FUND). In order to protect the
dollar equivalent value of its portfolio securities against declines resulting
from currency value fluctuations and changes in interest rate or other market
changes, the Fund may enter into the following hedging transactions: forward
foreign currency contracts, interest rate and currency swaps and various futures
contracts and related options contracts. The Fund will enter into various
currency transactions, i.e., forward foreign currency contracts, currency swaps,
foreign currency or currency index futures contracts and put and call options on
such contracts or on currencies. A forward foreign currency contract involves an
obligation to purchase or sell a specific currency for a set price at a future
date. A currency swap is an arrangement whereby each party exchanges one
currency for another on a particular date and agrees to reverse the exchange on
a later date at a specific exchange rate. Forward foreign

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currency contracts and currency swaps are established in the interbank market
conducted directly between currency traders (usually large commercial banks or
other financial institutions) on behalf of their customers. Futures contracts
are similar to forward contracts except that they are traded on an organized
exchange and the obligations thereunder may be offset by taking an equal but
opposite position to the original contract, with profit or loss determined by
the relative prices between the opening and offsetting positions. Each Fund may
enter into these currency contracts and swaps in primarily the following
circumstances to "lock in" the U.S. dollar equivalent price of a security the
Fund is contemplating to buy or sell that is denominated in a non-U.S. currency;
or to protect against a decline against the U.S. dollar of the currency of a
particular country to which the Fund has exposure. The Fund may seek to achieve
the same economic result by using from time to time for such hedging a currency
different from the one of the given portfolio security as long as, in the view
of the Subadviser, such currency is essentially correlated to the currency of
the relevant portfolio security based on historic and expected exchange rate
patterns.

INTEREST RATE TRANSACTIONS (INTERNATIONAL EQUITY FUND). The Fund will enter
into various interest rate transactions (i.e., futures contracts in various
financial instruments and interest rate related indices, put and call options on
such futures contracts and on such financial instruments and interest rate
swaps). The Fund will enter into these transactions primarily to "lock-in" a
return or spread on a particular investment or portion of its portfolio and to
protect against any increase in the price of securities the Fund anticipates
purchasing at a later date. Interest rate swaps involve the exchange by the Fund
with another party of their respective commitment to pay or receive interest
(e.g., an exchange of floating rate payments for fixed rate payments). The Fund
will not enter into an interest rate swap transaction in which its interest
commitment is greater or measured differently than the interest receivable on
specific portfolio securities. Interest rate swaps may be combined with currency
swaps to take advantage of rate differentials in different markets on the same
or similar securities.

MARKET INDEX TRANSACTIONS (INTERNATIONAL EQUITY FUND). The Fund may enter
into various market index contracts (i.e., index futures contracts on particular
non-U.S. securities markets or industry segments and related put and call
options). These contracts are used primarily to protect the value of the Fund's
securities against a decline in a particular market or industry in which it is
invested.

POTENTIAL RISKS OF CURRENCY TRANSACTIONS, INTEREST RATE TRANSACTIONS AND
MARKET INDEX TRANSACTIONS (INTERNATIONAL EQUITY FUND). The Fund will engage in
these transactions primarily as a means to hedge risks associated with
management of its portfolio. All of the foregoing transactions present certain
risks. In particular, the variable degree of correlation between price movements
of futures contracts and dollar equivalent price movements in the currency or
security being hedged creates the possibility that losses on the hedge may be
greater than gains in the value of the Fund's securities. In addition, these
instruments may not be liquid in all circumstances and are generally closed out
by entering into offsetting transactions rather than by disposing of the Fund's
obligations. As a result, in volatile markets, the Fund may not be able to close
out a transaction without incurring losses. Although the contemplated use of
these contracts should tend to minimize the risk of loss due to a decline in the
value of the hedged currency or security, at the same time they tend to limit
any potential gain which might result from an increase in the value of such
currency or security.

With respect to interest rate swaps, the Fund recognizes that such
arrangements are relatively illiquid and will include the principal amount of
the obligations owed to it under a swap as an illiquid security for purposes of
the Fund's investment restrictions except to the extent a third party (such as a
large commercial bank) has guaranteed the Fund's ability to offset the swap at
any time.

SECURITIES OF FOREIGN ISSUERS (ALL FUNDS EXCEPT GOVERNMENT FUND, MUNICIPAL
BOND FUND AND MONEY MARKET FUND). The International Equity Fund invests at least
65% of its total assets in the equity securities of foreign issuers and the
Emerging Growth Fund, the Growth Fund and the Growth and Income Fund may invest
up to 20% of the value of their total assets in securities of foreign
governments and companies of developed and emerging markets countries.

Investments in securities of foreign entities and securities denominated in
foreign currencies involve risks not typically involved in domestic investment,
including fluctuations in foreign exchange rates, future foreign political and
economic developments, and the possible imposition of exchange controls or other
foreign or United States governmental laws or restrictions applicable to such
investments. Since each Fund may invest in securities denominated or quoted in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates may affect the value of investments in the portfolio and the accrued
income and unrealized appreciation or depreciation of investments. Changes in
foreign currency rates relative to the U.S. dollar will affect the U.S. dollar
value of the Fund's assets denominated in that currency and the Fund's yield on
such assets.

Each Fund may also purchase foreign securities in the form of American
Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs") or other
securities representing underlying shares of foreign companies. ADRs are
publicly traded on exchanges or over-the-counter in the United States and are
issued through "sponsored" or "unsponsored" arrangements. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or all of the
depositary's transaction fees, whereas under an unsponsored arrangement, the
foreign issuer assumes no obligation and the depositary's transaction fees are
paid by the ADR holders. In addition, less information is available in the
United States about an unsponsored ADR than about a sponsored ADR, and the
financial information about a company may not be as reliable for an

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unsponsored ADR as it is for a sponsored ADR. Each Fund may invest in ADRs
through both sponsored and unsponsored arrangements. For further information on
ADRs and EDRs, investors should refer to the Statement of Additional
Information.

With respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social instability
or diplomatic developments which could affect investment in those countries.
There may be less publicly available information about a foreign security than
about a United States security, and foreign entities may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to those of United States entities. In addition, certain foreign
investments made by the Fund may be subject to foreign withholding taxes, which
would reduce the Fund's total return on such investments and the amounts
available for distributions by the Fund to its shareholders. See "Dividends,
Distributions and Taxes." Foreign financial markets, while growing in volume,
have, for the most part, substantially less volume than United States markets,
and securities of many foreign companies are less liquid and their prices more
volatile than securities of comparable domestic companies. The foreign markets
also have different clearance and settlement procedures, and in certain markets
there have been times when settlements have been unable to keep pace with the
volume of securities transactions making it difficult to conduct such
transactions. Delays in settlement could result in temporary periods when assets
of the Fund are not invested and no return is earned thereon. The inability of
each Fund to make intended security purchases due to settlement problems could
cause the Fund to miss attractive investment opportunities. Inability to dispose
of portfolio securities due to settlement problems could result either in losses
to the Fund due to subsequent declines in value of the portfolio security or, if
the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser. Costs associated with transactions in
foreign securities, including custodial costs and foreign brokerage commissions,
are generally higher than with transactions in United States securities. In
addition, each Fund will incur cost in connection with conversions between
various currencies. There is generally less government supervision and
regulation of exchanges, financial institutions and issuers in foreign countries
than there are in the United States. These risks may be intensified in the case
of investments in developing or emerging markets. In many developing markets,
there is less government supervision and regulation of business and industry
practices, stock exchanges, brokers and listed companies than in the United
States. The foreign securities markets of many of the countries in which the
Fund may invest may also be smaller, less liquid, and subject to greater price
volatility than those in the United States. Finally, in the event of a default
on any such foreign debt obligations, it may be more difficult for the Fund to
obtain or to enforce a judgment against the issuers of such securities.

The Emerging Growth Fund, the International Equity Fund, the Growth Fund
and the Growth and Income Fund may invest in the securities of developing
countries. A developing country generally is considered to be a country that is
in the initial stages of its industrialization cycle. Investing in the equity
and fixed-income markets of developing countries involves exposure to economic
structures that are generally less diverse and mature, and to political systems
that can be expected to have less stability, than those of developed countries.
Historical experience indicates that the markets of developing countries have
been more volatile than the markets of the more mature economies of developed
countries; however, such markets often have provided higher rates of return to
investors.

One or more of the risks discussed above could affect adversely the economy
of a developing market or a Fund's investments in such a market. In Eastern
Europe, for example, upon the accession to power of Communist regimes in the
past, the governments of a number of Eastern European countries expropriated a
large amount of property. The claims of many property owners against those
governments were never finally settled. There can be no assurance that any
investments that the Fund might make in such emerging markets would not be
expropriated, nationalized or otherwise confiscated at some time in the future.
In such an event, the Fund could lose its entire investment in the market
involved. Moreover, changes in the leadership or policies of such markets could
halt the expansion or reverse the liberalization of foreign investment policies
now occurring in certain of these markets and adversely affect existing
investment opportunities.

FORWARD COMMITMENTS (GOVERNMENT FUND). The Fund may purchase or sell U.S.
Government securities on a "when-issued" or "delayed delivery" basis ("Forward
Commitments"). These transactions occur when securities are purchased or sold by
the Fund with payment and delivery taking place in the future, frequently a
month or more after such transactions. The price is fixed on the date of the
commitment, and the seller continues to accrue interest on the securities
covered by the Forward Commitment until delivery and payment take place. At the
time of settlement, the market value of the securities may be more or less than
the purchase or sale price.

The Fund may either settle a Forward Commitment by taking delivery of the
securities or may either resell or repurchase a Forward Commitment on or before
the settlement date in which event the Fund may reinvest the proceeds in another
Forward Commitment. The Fund's use of Forward Commitments may increase its
overall investment exposure and thus its potential for gain or loss. When
engaging in Forward Commitments, the Fund relies on the other party to complete
the transaction; should the other party fail to do so, the Fund might lose a
purchase or sale opportunity that could be more advantageous than alternative
opportunities at the time of the failure.

The Fund maintains a segregated account (which is marked to market daily)
of cash, U.S. Government securities or the security covered by the Forward
Commitment with the Fund's Custodian in an aggregate amount equal to the amount
of its commitment as long as the obligation to purchase or sell continues.

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LOANS OF PORTFOLIO SECURITIES (ALL FUNDS). Each Fund may lend portfolio
securities to unaffiliated brokers, dealers and financial institutions provided
that (a) immediately after any such loan, the value of the securities loaned
does not exceed 10% of the total value of that Fund's assets (15% in the case of
the Emerging Growth Fund and the International Equity Fund), and (b) any
securities loan is collateralized in accordance with applicable regulatory
requirements. The Adviser or, in the case of the International Equity Fund, the
Subadviser, believes the risk of loss on such transactions is slight, because,
if a borrower was to default for any reason, the collateral should satisfy the
obligation. See the Statement of Additional Information.

VARIABLE RATE DEMAND NOTES (MUNICIPAL BOND FUND). The Fund may invest in
variable rate demand notes ("VRDNs") which are tax-exempt obligations which
contain a floating or variable interest rate adjustment formula and which are
subject to an unconditional right of demand to receive payment of the principal
balance plus accrued interest either at any time or at specified intervals not
exceeding one year and in either case upon no more than seven days' notice. The
interest rates are adjustable at intervals ranging from daily ("floating rate")
to up to one year to some prevailing market rate for similar investments, such
adjustment formula being calculated to maintain the market value of the VRDN at
approximately the par value of the VRDN upon the adjustment date. The
adjustments are typically based upon the prime rate of a bank or some other
appropriate interest rate adjustment index.

The Fund may also invest in VRDNs in the form of participation interests
("Participating VRDNs") in variable rate tax-exempt obligations held by a
financial institution, typically a commercial bank ("institution").
Participating VRDNs provide the Fund with a specified undivided interest (up to
100%) in the underlying obligation and the right to demand payment of the unpaid
principal balance plus accrued interest on the Participating VRDNs from the
institution upon a specified number of days' notice, not to exceed seven days.
The Fund has an undivided interest in the underlying obligation and thus
participates on the same basis as the institution in such obligation except that
the institution typically retains fees out of the interest paid on the
obligation for servicing the obligation and issuing the repurchase commitment.

STAND-BY COMMITMENTS (MUNICIPAL BOND FUND). The Fund may acquire stand-by
commitments with respect to Municipal Bonds held by it. Under a stand-by
commitment, a bank or dealer from which Municipal Bonds are acquired agrees to
purchase from the Fund, at the Fund's option, the Municipal Bonds at a specified
price. Such commitments are sometimes called "liquidity puts."

The amount payable to the Fund upon its exercise of a stand-by commitment
is normally (i) the Fund's acquisition cost of the Municipal Bonds (excluding
any accrued interest which the Fund paid on their acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Fund owned the securities, plus (ii) all interest accrued
on the securities since the last interest payment date during that period.
Stand-by commitments generally can be acquired when the remaining maturity of
the underlying Municipal Bonds is not greater than one year, and are exercisable
by the Fund at any time before the maturity of such obligations.

The Fund's right to exercise stand-by commitments is unconditional and
unqualified. A stand-by commitment generally is not transferable by the Fund,
although the Fund can sell the underlying Municipal Bonds to a third party at
any time.

The Fund expects that stand-by commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding stand-by commitments held in the Fund will not exceed
one-half of one percent of the value of the Fund's total assets calculated
immediately after each stand-by commitment is acquired. The Fund intends to
enter into stand-by commitments only with banks and dealers which, in the
Adviser's opinion, present minimal credit risks.

The Fund would acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The acquisition of a stand-by commitment would not affect the
valuation of the underlying Municipal Bonds which would continue to be valued in
accordance with the method of valuation employed by the Fund. Stand-by
commitments acquired by the Fund would be valued at zero in determining net
asset value. Where the Fund paid any consideration directly or indirectly for a
stand-by commitment, the cost would be reflected as unrealized depreciation for
the period during which the commitment was held by the Fund.

DELAYED DELIVERY AND WHEN-ISSUED SECURITIES (MUNICIPAL BOND
FUND). Municipal Bonds may at times be purchased or sold on a "delayed
delivery" or a "when-issued" basis. These transactions arise when securities are
purchased or sold by the Fund with payment and delivery taking place in the
future, often a month or more after the purchase. The payment obligation and the
interest rate are each fixed at the time the Fund enters into the commitment.
The Fund will only make commitments to purchase such securities with the
intention of actually acquiring the securities, but the Fund may sell these
securities prior to settlement date if it is deemed advisable. Purchasing
Municipal Bonds on a when-issued basis involves the risk that the yields
available in the market when the delivery takes place may actually be higher
than those obtained in the transaction itself; if yields so increase, the value
of the when-issued obligation will generally decrease. The Fund maintains a
separate account at its custodian bank consisting of cash or liquid high grade
debt obligations (valued on a daily basis) equal at all times to the amount of
any when-issued commitment.

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RESTRICTED SECURITIES (ALL FUNDS). The Growth Fund, the Growth and Income
Fund, the Government Fund, the Money Market Fund and the Municipal Bond Fund may
each invest up to 5% of their net assets and the Emerging Growth Fund and the
International Equity Fund may each invest up to 15% of their net assets in
restricted securities and other illiquid assets. As used herein, restricted
securities are those that have been sold in the United States without
registration under the Securities Act of 1933 and are thus subject to
restrictions on resale. Excluded from the limitation, however, are any
restricted securities which are eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 and which have been determined to be liquid by the
Trustees or by the Adviser pursuant to board-approved guidelines. The
determination of liquidity is based on the volume of reported trading in the
institutional secondary market for each security. Since it is not possible to
predict with assurance how the markets for restricted securities sold and
offered under Rule 144A will develop, the Trustees will carefully monitor each
Fund's investment in these securities focusing on such factors, among others, as
valuation, liquidity and availability of information. This investment practice
could have the effect of increasing the level of illiquidity in each Fund to the
extent that qualified institutional buyers become for a time uninterested in
purchasing these restricted securities. These difficulties and delays could
result in a Fund's inability to realize a favorable price upon disposition of
restricted securities, and in some cases might make disposition of such
securities at the time desired by the Fund impossible. Since market quotations
are not readily available for restricted securities, such securities will be
valued by a method that the Trustees believe accurately reflects fair value.

Notwithstanding the foregoing, due to various state regulations, the
Emerging Growth Fund and the International Equity Fund will not invest more than
10% of each Fund's net assets in restricted securities; restricted securities
eligible for resale pursuant to Rule 144A are not included within this
limitation. In the event that the Funds' shares cease to be qualified under the
laws of such states or if such regulations are amended or otherwise cease to be
operative, the Funds would not be subject to this 10% restriction.

PORTFOLIO TURNOVER (ALL FUNDS). Each Fund may purchase or sell securities
without regard to the length of time the security has been held and thus may
experience a high rate of portfolio turnover. A 100% turnover rate would occur,
for example, if all the securities in a portfolio were replaced in a period of
one year. Under certain market conditions, the Growth Fund and the Government
Fund may experience a high rate of portfolio turnover. This may occur, for
example, if the Fund writes a substantial number of covered call options and the
market prices of the underlying securities appreciate. The rate of portfolio
turnover is not a limiting factor when the Adviser or, in the case of the
International Equity Fund, the Subadviser, deems it desirable to purchase or
sell securities or to engage in options transactions. The annual turnover rates
of the Growth Fund, the Government Fund and the Municipal Bond Fund are not
expected to exceed 400%; and the annual turnover rates of the Emerging Growth
Fund, the Growth and Income Fund and the International Equity Fund are not
expected to exceed 100%. High portfolio turnover involves correspondingly
greater transaction costs, including any brokerage commissions, which are borne
directly by the respective Fund and may increase the recognition of short-term,
rather than long-term, capital gains. See "Dividends, Distributions and Taxes."

PORTFOLIO TRANSACTIONS AND BROKERAGE PRACTICES (ALL FUNDS). The Adviser or,
in the case of the International Equity Fund, the Subadviser, is responsible for
the placement of orders for the purchase and sale of portfolio securities for
the Trust and the negotiation of brokerage commissions on such transactions.
Brokerage firms are selected on the basis of their professional capability for
the type of transaction and the value and quality of execution services rendered
on a continuous basis. Brokerage firms are selected on the basis of their
professional capability for the type of transaction and the value and quality of
execution services rendered on a continuing basis. The Trust also executes
transactions through Alex Brown & Sons, Inc., a director of which is also a
Trustee of the Trust. Orders may be directed to any broker including, to the
extent and in the manner permitted by applicable law, Smith Barney, Inc. ("Smith
Barney") and Robinson Humphrey, Inc. ("Robinson Humphrey"). Smith Barney and
Robinson Humphrey may be considered affiliated persons of the Distributor
because they are each an indirect subsidiary of Travelers Group Inc.
("Travelers"). With respect to the International Equity Fund, Smith Barney and
Robinson Humphrey are subject to SEC regulations which state that to effect any
such transaction, the commissions, fees or other remuneration received by Smith
Barney and Robinson Humphrey must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities, futures or options on
futures being purchased or sold on an exchange during a comparable period of
time. This standard would allow Smith Barney and Robinson Humphrey to receive no
more than the remuneration that would be expected to be received by an
unaffiliated broker in a commensurate arms-length transaction. Furthermore, the
Trustees of the Trust, including a majority of the Trustees who are not
"interested" Trustees, has adopted procedures that are reasonably designed to
provide that any commissions, fees or other remuneration paid to Smith Barney
and Robinson Humphrey on behalf of the International Equity Fund are consistent
with the foregoing standard. Brokerage transactions with Smith Barney and
Robinson Humphrey are also subject to such fiduciary standards as may be imposed
upon Smith Barney and Robinson Humphrey by applicable law. U.S. Government
securities in which the Trust invests are traded in the over-the-counter market.
Such securities are generally traded on a net basis with a dealer acting as
principal for its own account without a stated commission, although the prices
of the securities usually include a profit to the dealer. Most transactions made
by the Money Market Fund are principal transactions at net prices which incur
little or no brokerage costs. It is the policy of the Trust to seek to obtain
the best net results taking into account such factors as price (including the
applicable dealer spread), the size, type and difficulty of

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the transaction involved, the firm's general execution and operational
facilities, the firm's risk in positioning the securities involved, and the
provision of supplemental investment research by the firm. While the Trust seeks
reasonably competitive spreads, the Trust will not necessarily be paying the
lowest spread available. Brokerage commissions are paid on transactions in
listed options, futures contracts and options thereon. The Adviser or, in the
case of the International Equity Fund, the Subadviser, is authorized to place
portfolio transactions with broker-dealers participating in the distribution of
shares of the Trust if it reasonably believes that the quality of the execution
and any commission are comparable to that available from other qualified firms.
The Adviser or, in the case of the International Equity Fund, the Subadviser, is
authorized to pay higher commissions to brokerage firms that provide it with
investment and research information than to firms which do not provide such
service if they determine that such commissions are reasonable in relation to
the overall services provided. The information received may be used by the
Adviser in managing the assets of other advisory accounts managed by the Adviser
as well as in the management of the assets of the Trust.

INVESTMENT IN INVESTMENT COMPANIES (INTERNATIONAL EQUITY FUND, GROWTH FUND
AND GROWTH AND INCOME FUND). The Growth Fund, the Growth and Income Fund and the
International Equity Fund, may invest in a separate investment company, Van
Kampen American Capital Small Capitalization Fund ("Small Cap Fund"), that
invests in a broad selection of small capitalization securities. The shares of
the Small Cap Fund are available only to investment companies advised by the
Adviser. The Adviser believes that the use of the Small Cap Fund provides the
Funds with the most effective exposure to the performance of the small
capitalization sector of the stock market while at the same time minimizing
costs. The Adviser charges no advisory fee for managing the Small Cap Fund, nor
are there any sales load or other charges associated with distribution of its
shares. Other expenses incurred by the Small Cap Fund are borne by it, and thus
indirectly by the Funds and the Van Kampen American Capital funds that invest in
it. With respect to such other expenses, the Adviser anticipates that the
efficiencies resulting from use of the Small Cap Fund will result in cost
savings for the Funds and the Van Kampen American Capital funds that invest in
the Small Cap Fund. In large part, these savings will be attributable to the
fact that administrative actions that would have to be performed multiple times
if each Fund held its own portfolio of small capitalization stocks will need to
be performed only once. The Adviser expects that the Small Cap Fund will
experience trading costs that will be substantially less than the trading costs
that would be incurred if small capitalization stocks were purchased separately
for the Funds and the Van Kampen American Capital funds.

The securities of small and medium sized companies that the Small Cap Fund
may invest in may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general. In addition, small capitalization companies typically are subject to a
greater degree of change in earnings and business prospects than are larger,
more established companies. In light of these characteristics of small
capitalization companies and their securities, the Small Cap Fund may be subject
to greater investment risk than that assumed through investment in the equity
securities of larger capitalization companies.

Each Fund will be deemed to own a pro rata portion of each investment of
the Small Cap Fund. For example, if a Fund's investment in the Small Cap Fund
were $10 million, and the Small Cap Fund had five percent of its assets invested
in the electronics industry, the Fund would be considered to have an investment
of $500,000 in the electronics industry.

SHORT SALES AGAINST THE BOX (EMERGING GROWTH FUND, INTERNATIONAL EQUITY
FUND, GROWTH FUND AND GROWTH AND INCOME FUND). Each Fund may from time to time
make short sales of securities it owns or has the right to acquire through
conversion or exchange of other securities it owns. A short sale is "against the
box" to the extent that the Fund contemporaneously owns or has the right to
obtain at no added cost securities identical to those sold short. In a short
sale, the Fund does not immediately deliver the securities sold and does not
receive the proceeds from the sale. The Fund is said to have a short position in
the securities sold until it delivers the securities sold, at which time it
receives the proceeds of the sale. The Fund may not make short sales or maintain
a short position if to do so would cause more than 25% of its total assets,
taken at market value, to be held as collateral for such sales.

To secure its obligation to deliver the securities sold short, the Fund
will deposit in escrow in a separate account with its Custodian an equal amount
of the securities sold short or securities convertible into or exchangeable for
such securities. The Fund may close out a short position by purchasing and
delivering an equal amount of the securities sold short, rather than by
delivering securities already held by the Fund, because the Fund may want to
continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short. However, the Fund
will not purchase and deliver new securities to satisfy its short order if such
purchase and sale would cause the Fund to derive more than 30% of its gross
income from the sale of securities held for less than three months.

LEVERAGE (INTERNATIONAL EQUITY FUND). The Fund may borrow from banks, on a
secured or unsecured basis, up to 25% of the value of its assets. If the Fund
borrows and uses the proceeds to make additional investments, income and
appreciation from such investments will improve its performance if they exceed
the associated borrowing costs but impair its performance if they are less than
such borrowing costs. This speculative factor is known as "leverage."

Leverage creates an opportunity for increased returns to shareholders of
the Fund but, at the same time, creates special risk considerations. For
example, leverage may exaggerate changes in the net asset value of the Fund's
shares and in the Fund's

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yield. Although the principal or stated value of such borrowings will be fixed,
the Fund's assets may change in value during the time the borrowing is
outstanding. Leverage will create interest or dividend expenses for the Fund
which can exceed the income from the assets retained. To the extent the income
or other gain derived from securities purchased with borrowed funds exceed the
interest or dividends the Fund will have to pay in respect thereof, the Fund's
net income or other gain will be greater than if leverage had not been used.
Conversely, if the income or other gain from the incremental assets is not
sufficient to cover the cost of leverage, the net income or other gain of the
Fund will be less than if leverage had not been used. If the amount of income
from the incremental securities is insufficient to cover the cost of borrowing,
securities might have to be liquidated to obtain required funds. Depending on
market or other conditions, such liquidations could be disadvantageous to the
Fund.

INVESTMENT RESTRICTIONS

RESTRICTIONS APPLICABLE TO ALL OF THE FUNDS. Each Fund has adopted a number
of investment restrictions which may not be changed without the approval of the
holders of a majority (as defined by the 1940 Act) of the shares of such Fund.
The percentage limitations need only be met at the time the investment is made
or other relevant action taken. These restrictions provide, among other things,
that a Fund may not:

1. With respect to 75% of its assets, invest more than 5% of its assets in
the securities of any one issuer (except obligations of the U.S. Government, its
agencies or instrumentalities and repurchase agreements secured thereby), or
purchase more than 10% of the outstanding voting securities of any one issuer.
Neither limitation shall apply to the acquisition of shares of other open-end
investment companies by the Emerging Growth Fund, the International Equity Fund,
the Growth Fund and the Growth and Income Fund to the extent permitted by rule
or order of the SEC exempting them from the limitations imposed by Section
12(d)(1) of the 1940 Act;

2. Invest more than 25% of the value of its total assets in securities of
issuers in any particular industry; provided, however, that with respect to the
Emerging Growth Fund, the International Equity Fund, the Growth Fund and the
Growth and Income Fund, this limitation shall exclude shares of other open-end
investment companies owned by the Fund but include the Fund's pro rata portion
of the securities and other assets owned by any such company. (This does not
restrict any of the Funds from investing in obligations of the U.S. Government
and repurchase agreements secured thereby.);

3. With respect to all Funds other than the Emerging Growth Fund and the
International Equity Fund, borrow in excess of 10% of the market or other fair
value of its total assets, or pledge its assets to an extent greater than 5% of
the market or other fair value of its total assets, provided that so long as any
borrowing exceeds 5% of the value of the Fund's total assets, the Fund shall not
purchase portfolio securities. Any such borrowings shall be from banks and shall
be undertaken only as a temporary measure for extraordinary or emergency
purposes. With respect to the Emerging Growth Fund, borrow money except
temporarily from banks to facilitate payment of redemption requests and then
only in amounts not exceeding 33 1/3% of its net assets, or pledge more than 10%
of its net assets in connection with permissible borrowings or purchase
additional securities when money borrowed exceeds 5% of its net assets. With
respect to the International Equity Fund, borrow money from banks on a secured
or unsecured basis, in excess of 25% of the value of its total assets. (See
"Leverage".) Deposits in escrow in connection with the writing of covered call
or secured put options, or in connection with the purchase or sale of forward
contracts, futures contracts, foreign currency futures and related options, are
not deemed to be a pledge or other encumbrance. This restriction shall not
prevent the International Equity Fund from entering into reverse repurchase
agreements, provided that reverse repurchase agreements and any transactions
constituting borrowing by the Fund may not exceed 33 1/3% of the Fund's total
assets. The International Equity Fund may not mortgage or pledge its assets
except to secure borrowings permitted under this restriction;

4. Lend money except by the purchase of bonds or other debt obligations of
types commonly offered publicly or privately and purchased by financial
institutions, including investments in repurchase agreements. A Fund will not
invest in repurchase agreements maturing in more than seven days (unless subject
to a demand feature) if any such investment, together with any illiquid
securities (including securities which are subject to legal or contractual
restrictions on resale) held by the Fund, exceeds 10% (or in the case of the
Emerging Growth Fund and the International Equity Fund, 15%) of the market or
other fair value of its total net assets; provided, however, that with respect
to the Emerging Growth Fund, the International Equity Fund, the Growth Fund and
the Growth and Income Fund, illiquid securities shall exclude shares of other
open-end investment companies owned by the Fund but include the Fund's pro rata
portion of the securities and other assets owned by any such company. See
"Investment Practices and Risks -- Repurchase Agreements";

5. Underwrite securities of other companies, except insofar as a Fund might
be deemed to be an underwriter for purposes of the Securities Act of 1933 in the
resale of any securities owned by the Fund; and

6. Lend its portfolio securities in excess of 10% (15% in the case of the
Emerging Growth Fund and the International Equity Fund) of its total assets,
both taken at market value provided that any loans shall be in accordance with
the guidelines established for such loans by the Trustees as described under
"Loans of Portfolio Securities," including the maintenance of collateral from
the borrower equal at all times to the current market value of the securities
loaned.

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Each state and each political subdivision, agency or instrumentality of
such state, and each multi-state agency of which a state is a member is a
separate "issuer" as that term is used in this Prospectus. The non-government
user of facilities financed by industrial development or pollution control bonds
is also considered as a separate issuer. In certain circumstances, the guarantor
of a guaranteed security may also be considered to be an issuer in connection
with such guarantee.

The Emerging Growth Fund retains the right to invest up to 25% of the value
of its total assets in one company, but intends to do so only if a particular
company is believed to afford better than average prospects in market
appreciation at a time when general business conditions and trends in the market
as a whole are considered to make greater diversification less desirable.

In addition to the foregoing, the Trust has adopted additional investment
restrictions, which may be changed by the Trustees without a vote of
shareholders, as follows:

FOREIGN INVESTMENTS FOR FUNDS OTHER THAN THE INTERNATIONAL EQUITY FUND. The
Emerging Growth Fund, the Growth Fund and the Growth and Income Fund may not
invest in the securities of a foreign issuer if, at the time of acquisition,
more than 20% of the value of a Fund's total assets would be invested in such
securities.

FUTURES CONTRACTS AND OPTIONS. In addition, the Growth and Income Fund and
the Growth Fund may not write, purchase or sell puts, calls or combinations
thereof, except that each Fund may (a) write covered call options with respect
to any part or all of its portfolio securities, write secured put options, or
enter into closing purchase transactions with respect to such options, (b)
purchase and sell put and call options to the extent that the premiums paid for
all such options do not exceed 10% of its total assets and only if the Fund owns
the securities covered by the put option at the time of purchase, and (c) engage
in futures contracts and related options transactions as described in the
Statement of Additional Information.

The Emerging Growth Fund, the International Equity Fund, the Growth Fund
and the Growth and Income Fund may purchase put and call options which are
purchased on an exchange or over-the-counter in other markets, or currencies
and, as developed from time to time, various futures contracts on market indices
and other instruments. Purchasing options may increase investment flexibility
and improve total return, but also risks loss of the option premium if an asset
the Fund has the option to buy declines in value.

The Government Fund may not write, purchase or sell puts, calls or
combinations thereof, except that the Fund may (a) write covered or fully
collateralized call options, write secured put options, and enter into closing
or offsetting purchase transactions with respect to such options, (b) purchase
and sell options to the extent that the premiums paid for all such options owned
at any time do not exceed 10% of its total assets, and (c) engage in futures
contracts and related options transactions as described in the Statement of
Additional Information.

The Municipal Bond Fund may engage in futures contracts and related options
as described in the Statement of Additional Information.

ALCOHOL OR TOBACCO. Each Fund, except the International Equity Fund, may
not purchase any security issued by any company deriving more than 25% of its
gross revenues from the manufacture of alcohol or tobacco.

- --------------------------------------------------------------------------------
THE TRUST AND ITS MANAGEMENT
- --------------------------------------------------------------------------------

The Trust is a diversified, open-end management investment company,
generally known as a mutual fund, organized as a Massachusetts business trust on
January 29, 1987. A mutual fund provides, for those who have similar investment
goals, a practical and convenient way to invest in a diversified portfolio of
securities by combining their resources in an effort to achieve such goals.

The Trustees have the responsibility for overseeing the affairs of the
Trust. The Adviser, One Parkview Plaza, Oakbrook Terrace, Illinois 60181,
determines the investment of the Trust's assets, provides administrative
services and manages the Trust's business and affairs. The Adviser is a wholly
owned subsidiary of Van Kampen American Capital, Inc. ("Van Kampen American
Capital"). Van Kampen American Capital is a diversified asset management company
with more than two million retail investor accounts, extensive capabilities for
managing institutional portfolios, and more than $50 billion under management or
supervision. Van Kampen American Capital's more than 40 open-end and 38
closed-end funds and more than 2,800 unit investment trusts are professionally
distributed by leading financial advisers nationwide. Van Kampen American
Capital is a wholly-owned subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc.
is controlled through the ownership of a substantial majority of its common
stock, by The Clayton & Dubilier Private Equity Fund IV Limited Partnership (the
"C&D L.P."), a Connecticut limited partnership. C&D L.P. is managed by Clayton,
Dubilier & Rice, Inc., a New York private investment firm. The general partner
of C&D L.P. is Clayton & Dubilier Associates IV Limited Partnership ("C&D
Associates L.P."). The general partners of C&D Associates L.P. are Joseph L.
Rice, III, B. Charles Ames, William A. Barbe, Alberto Cribiore, Donald J. Gogel,
Leon J. Hendrix, Jr., Hubbard C. Howe and Andrall E. Pearson, each of whom is a
principal of Clayton, Dubilier & Rice, Inc. In addition certain officers,
directors and employees of Van Kampen American Capital own, in the aggregate,
not more than seven percent of the common stock of VK/AC Holding, Inc. and have
the right to acquire, upon

35
<PAGE> 36

the exercise of options, approximately an additional 13% of the common stock of
VK/AC Holding, Inc. Presently, and after giving effect to the exercise of such
options, no officer or trustee of the Trust owns or would own five percent or
more of the common stock of VK/AC Holding, Inc. The Adviser, together with its
predecessors, has been in the investment advisory business since 1926.

The Subadviser is located at 388 Greenwich Street, New York, New York
10013. The Subadviser is an indirect wholly-owned subsidiary of Travelers, a
financial services holding company engaged through its subsidiaries principally
in three business segments -- investment services, consumer finance services and
insurance services. The Subadviser was formed in 1968 and serves as investment
manager to numerous other investment companies having aggregate assets as of the
date of this Prospectus in excess of $65 billion.

The Trust retains the Adviser to manage the investment of its assets and to
place orders for the purchase and sale of its portfolio securities. Under
separate investment advisory agreements with each Fund, the Trust pays the
Adviser an annual fee for the Emerging Growth Fund, the Growth Fund and the
Growth and Income Fund, calculated separately for each Fund at the following
rates: 0.65% of the first $1 billion of the Fund's average daily net assets;
0.60% of the next $1 billion of the Fund's average daily net assets; 0.55% of
the next $1 billion of the Fund's average daily net assets; 0.50% of the next $1
billion of the Fund's average daily net assets; and 0.45% of the Fund's average
daily net assets in excess of $4 billion. The Trust pays the Adviser an annual
fee for the Government Fund of 0.60% of the first $1 billion of the Fund's
average daily net assets; 0.55% of the next $1 billion of the Fund's average
daily net assets; 0.50% of the next $1 billion of the Fund's average daily net
assets; 0.45% of the next $1 billion of the Fund's average daily net assets;
0.40% of the next $1 billion of the Fund's average daily net assets; and 0.35%
of the Fund's average daily net assets in excess of $5 billion. For the
Municipal Bond Fund, the Trust pays the Adviser an annual fee of 0.60% of the
first $1 billion of the Fund's average daily net assets; 0.55% of the next $1
billion of the Fund's average daily net assets; 0.50% of the next $1 billion of
the Fund's average daily net assets; and 0.45% of the Fund's average daily net
assets over $3 billion. For the Money Market Fund, the Trust pays the Adviser an
annual fee of 0.50% of the first $2 billion of the Fund's average daily net
assets; 0.475% of the next $2 billion of the Fund's average daily net assets;
and 0.45% of the Fund's average daily net assets over $4 billion. The Trust pays
the Adviser an annual fee for the International Equity Fund at the rate of 1.00%
of the Fund's average daily net assets. This fee is higher than that charged by
most other mutual funds but the Trust believes it is justified by the special
international nature of the Fund and is not necessarily higher than the fees
charged by certain mutual funds with investment objectives and policies similar
to those of the Fund. The fee is computed daily and payable monthly with respect
to each Fund. Each of the investment advisory agreements described above is
referred to in this Prospectus as an "Advisory Agreement" and together, as the
"Advisory Agreements." The Adviser has entered into a subadvisory agreement (the
"Subadvisory Agreement") with the Subadviser to assist it in performing its
investment advisory functions with respect to the International Equity Fund.
Pursuant to the Subadvisory Agreement, the Subadviser receives on an annual
basis 50% of the compensation received by the Adviser from the International
Equity Fund.

Under the Advisory Agreement with the International Equity Fund, the
Adviser is responsible for furnishing or causing to be furnished to the Fund
advice and assistance with respect to the acquisition, holding or disposal of
investments and recommendations with respect to other aspects and affairs of the
International Equity Fund, bookkeeping, accounting and administrative services,
office space and equipment, and the services of the officers and employees of
the Fund. Pursuant to the Subadvisory Agreement, the Subadviser is responsible
for the day to day operations and investment decisions for the International
Equity Fund and is authorized, in its discretion and without prior consultation
with the Adviser, to: (a) manage the Fund's assets in accordance with its
investment goal and policies; (b) make investment decisions; (c) place purchase
and sale orders for portfolio transactions; and (d) employ professional
portfolio managers and securities analysts who provide research services.

Under each of the foregoing Advisory Agreements, the Trust also reimburses
the Adviser for the actual cost of the Trust's accounting services, which
include maintaining its financial books and records and calculating the daily
net asset value of each Fund. Operating expenses paid by the Trust include
transfer agency fees, custodian fees, legal and auditing fees, trustees' fees,
the cost of registration of its shares under federal laws and state blue sky
laws, the cost of reports and proxies to shareholders, and all other ordinary
business expenses not specifically assumed by the Adviser or any other party.
For the last fiscal year, advisory fees plus the cost of accounting services
paid by the Growth Fund, Growth and Income Fund, Government Fund, Municipal Bond
Fund and Money Market Fund equaled .63%, .67%, .63%, .69% and .10%,
respectively, of each Fund's average net assets. For the same period, the total
operating expenses of the Growth Fund, Growth and Income Fund, Government Fund,
Municipal Bond Fund and Money Market Fund were .46%, .35%, .26%, .30% and .90%,
respectively, of average net assets. The Emerging Growth Fund and the
International Equity Fund have not been in operation for a complete fiscal year.

The Adviser and, in the case of the International Equity Fund, the
Subadviser may, from time to time, agree to waive their respective investment
advisory fees or any portion thereof or elect to reimburse a Fund for ordinary
business expenses in excess of an agreed upon amount.

PERSONAL INVESTING POLICIES. The Trust and the Adviser have adopted Codes
of Ethics designed to recognize the fiduciary relationship between the Fund and
the Adviser and its employees. The Codes permit directors/trustees, officers and
employees

36
<PAGE> 37

to buy and sell securities for their personal accounts subject to certain
restrictions. Persons with access to certain sensitive information are subject
to pre-clearance and other procedures designed to prevent conflicts of interest.

PORTFOLIO MANAGEMENT. Stephen Boyd has been primarily responsible for the
day-to-day management of Growth Fund's investment portfolio since 1989. Mr. Boyd
is Senior Vice President -- Portfolio Manager of the Adviser. James Gilligan has
been primarily responsible for the day-to-day management of Growth and Income
Fund's investment portfolio since July 11, 1994. Mr. Gilligan is Vice
President -- Portfolio Manager of the Adviser. John Reynoldson has been
primarily responsible for the day-to-day management of Government Fund's
investment portfolio since 1988. Mr. Reynoldson is Senior Vice
President -- Portfolio Manager of the Adviser. David Troth has been primarily
responsible for the day-to-day management of Money Market Fund's investment
portfolio since its inception. Mr. Troth is Senior Investment Vice President of
the Adviser. Mr. Troth was formerly Investment Vice President of the Adviser
from March, 1978 to July, 1991. David Johnson has been primarily responsible for
the day-to-day management of Municipal Bond Fund's investment portfolio since
June 13, 1995. Mr. Johnson is Vice President of the Adviser. Mr. Johnson has
been employed by Van Kampen American Capital Investment Advisory Corp., an
affiliate of the Adviser, for the last five years. Gary M. Lewis has been
primarily responsible for the day-to-day management of the Emerging Growth
Fund's investment portfolio since its inception. Mr. Lewis is Vice President --
Portfolio Manager of the Adviser.

The International Equity Fund is co-managed by Jeffrey Russell and James
Conheady of the Subadviser. Mr. Russell and Mr. Conheady, Managing Directors of
Smith Barney, are members of the international equity team. Together, Messrs.
Conheady and Russell currently manage in excess of $2.2 billion of global equity
assets for other investment companies and managed accounts.

- --------------------------------------------------------------------------------
ALTERNATIVE SALES ARRANGEMENTS
- --------------------------------------------------------------------------------

The Alternative Sales Arrangements permit an investor to choose the method
of purchasing shares of each Fund that is most beneficial given the amount of
the purchase and the length of time the investor expects to hold the shares.

CLASS A SHARES. Class A shares of the Emerging Growth Fund, the
International Equity Fund, the Growth Fund and the Growth and Income Fund are
sold at net asset value plus an initial maximum sales charge of up to 5.50% of
the offering price. Class A shares of the Government Fund and Municipal Bond
Fund are sold at net asset value plus an initial maximum sales charge of up to
4.75% or 4.50%, respectively, of the offering price. Investments of $1 million
or more are not subject to any sales charge at the time of purchase, but a
contingent deferred sales charge of one percent may be imposed on certain
redemptions made within one year of the purchase. Class A shares of the Money
Market Fund are sold at net asset value. Class A shares of each Fund are subject
to an ongoing service fee at an annual rate of 0.25% of each Fund's aggregate
average daily net assets (0.10% for the Money Market Fund) attributable to the
Class A shares. Certain purchases of Class A shares qualify for reduced initial
sales charges. See "Purchase of Shares -- Class A Shares."

CLASS B SHARES. Class B shares of each Fund (other than Money Market Fund)
are sold at net asset value and are subject to a contingent deferred sales
charge if they are redeemed within five years of purchase. Class B shares of
each Fund (other than Money Market Fund) are subject to an ongoing service fee
at an annual rate of 0.25% of each Fund's aggregate average daily net assets
attributable to the Class B shares and an ongoing distribution fee at an annual
rate of 0.75% of each Fund's aggregate average daily net assets attributable to
the Class B shares. Class B shares of the Money Market Fund are available only
through exchanges by Class B shareholders of another Common Sense Fund and
remain subject to the contingent deferred sales charge imposed by the original
fund. The Money Market Fund pays a distribution fee at the rate of 0.75% of its
average daily net assets attributable to Class B shares. The ongoing
distribution fee paid by Class B shares will cause such shares to have a higher
expense ratio and to pay lower dividends than those related to Class A or Class
1 shares. See "Purchase of Shares -- Class B Shares." Class B shares of each
Fund will automatically convert to Class A shares six years after the
shareholder's order to purchase was accepted. See "Conversion Feature" herein
for discussion on applicability of the conversion feature to Class B shares.

CLASS 1 SHARES. Upon the completion of the reorganization of Common Sense
II Growth Fund, Common Sense II Growth and Income Fund and Common Sense II
Government Fund, each Fund will suspend sales of Class 1 shares to the general
public. Class 1 shares will then be available only to accounts of previously
established shareholders or members of a family unit comprising husband, wife
and minor children, and Class 1 shareholders of other Common Sense Funds
exchanging their Class 1 shares for Class 1 shares of the Fund. Class 1 shares
of each Fund (other than Money Market Fund) are sold at net asset value plus an
initial maximum sales charge. See "Purchase of Shares -- Class 1 Shares."

CONVERSION FEATURE. Class B shares of each Fund will automatically convert
to Class A shares six years after the shares were purchased and will no longer
be subject to the distribution fee. Such conversion will be on the basis of the
relative net asset values per share, without the imposition of any sales load,
fee or other charge. The purpose of the conversion feature is to relieve the
holders of the Class B shares of each Fund that have been outstanding for a
period of time sufficient for the Distributor to

37
<PAGE> 38

have been substantially compensated for distribution expenses related to the
Class B shares as the case may be, from the burden of the ongoing distribution
fee.

For purposes of conversion to Class A, shares purchased of each Fund
through the reinvestment of dividends and distributions paid on Class B shares
in a shareholder's Fund account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's Fund account
(other than those in the sub-account) convert to Class A, an equal pro rata
portion of the Class B shares in the sub-account will also convert to Class A.

The conversion of Class B shares to Class A shares is subject to a private
letter ruling to the effect that (i) the assessment of the distribution fee and
incremental transfer agency costs, if any, with respect to Class B shares does
not result in a Fund's dividends or distributions constituting "preferential
dividends" under the Internal Revenue Code, as amended (the "Code"), and (ii)
the conversion of shares does not constitute a taxable event under federal
income tax law. The conversion of Class B shares may be suspended if such a
private letter ruling is no longer available. In that event, no further
conversions of Class B shares would occur, and shares might continue to be
subject to the distribution fee for an indefinite period which may extend beyond
the period ending six years after the shareholder's order to purchase was
accepted.

FACTORS FOR CONSIDERATION. In deciding which class of shares to purchase,
investors should take into consideration their investment goals, present and
anticipated purchase amounts, time horizons and temperaments. Investors should
consider whether, during the anticipated life of their investment in each Fund,
the accumulated distribution fees and contingent deferred sales charges on Class
B shares prior to conversion would be less than the initial sales charge on
Class A or Class 1 shares, if any, purchased at the same time, and to what
extent such differential would be offset by the higher dividends per share on
Class A or Class 1 shares. To assist investors in making this determination, the
table under the caption "Expense Synopsis" sets forth examples of the charges
applicable to each class of shares. In this regard, Class A or Class 1 shares
may be more beneficial to the investor who qualifies for reduced initial sales
charges, as described herein under "Purchase of Shares -- Class A Shares --
Class 1 Shares." For these reasons, the Distributor will reject any order of
$500,000 or more for Class B shares.

Class A and Class 1 shares of each Fund are not subject to an ongoing
distribution fee and, accordingly, receive correspondingly higher dividends per
share than Class B shares. However, because initial sales charges, if any, are
deducted at the time of purchase, investors in Class A or Class 1 shares of all
Funds other than the Money Market Fund do not have all their funds invested
initially and, therefore, initially own fewer shares. Other investors might
determine that it is more advantageous to purchase Class B shares and have all
their funds invested initially, although remaining subject to ongoing
distribution fees and, for a five-year period being subject to a contingent
deferred sales charge. Ongoing distribution fees on Class B shares will be
offset to the extent of the additional funds originally invested and any return
realized on those funds. There can, of course, be no assurance as to the return,
if any, which will be realized on such additional funds.

Class A or Class 1 shares of all Funds other than the Money Market Fund may
be appropriate for investors who prefer to pay the sales charge up front, want
to take advantage of the reduced sales charges available on larger investments,
wish to maximize their current income from the start and/or prefer not to pay
redemption charges. Class B shares may be appropriate for investors who wish to
avoid a front-end sales charge and/or put 100% of their investment dollars to
work immediately.

The distribution expenses incurred by the Distributor in connection with
the sale of the shares of each Fund other than the Money Market Fund will be
reimbursed, in the case of Class A or Class 1 shares, from the proceeds of the
initial sales charge and, in the case of Class B shares, from the proceeds of
the ongoing distribution fee and any contingent deferred sales charge incurred
upon redemption within five years, of purchase. Registered representations of
PFS Investments Inc. ("PFS Investments") distributing each Fund's shares may
receive differing compensation for selling Class A, Class B or Class 1 shares of
such Fund. INVESTORS SHOULD UNDERSTAND THAT THE PURPOSE AND FUNCTION OF THE
CONTINGENT DEFERRED SALES CHARGE AND ONGOING DISTRIBUTION FEE WITH RESPECT TO
THE CLASS B SHARES OF EACH FUND ARE THE SAME AS THOSE OF THE INITIAL SALES
CHARGE WITH RESPECT TO CLASS A OR CLASS 1 SHARES. See "Distribution Plans."

GENERAL. Dividends paid by each Fund with respect to Class A, Class B and
Class 1 shares will be calculated in the same manner at the same time on the
same day, except that the distribution fees and any incremental transfer agency
costs relating to Class B shares will be borne by the respective class. See
"Dividends, Distributions and Taxes." Shares of a Fund may be exchanged, subject
to certain limitations, for shares of the same class of the other Funds offered
in this Prospectus. See "Shareholder Services -- Exchange Privilege."

The Trustees of the Trust have determined that currently no conflict of
interest exists between the classes of shares of each Fund. On an ongoing basis,
the Trustees, pursuant to their fiduciary duties under the Investment Company
Act of 1940 (the "1940 Act") and state laws, will seek to ensure that no such
conflict arises.

38
<PAGE> 39

- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------

GENERAL

Each Fund, other than the Money Market Fund, offers two classes of shares
to the general public on a continuous basis through the Distributor, an indirect
subsidiary of Travelers, 65 East 55th Street, New York, New York 10022. As of
May 20, 1996, all of the previously outstanding shares of the Growth Fund, the
Growth and Income Fund, the Government Fund, the Money Market Fund and the
Municipal Bond Fund were redesignated as Class 1 shares without any other
changes, and Class A and Class B shares were authorized for issuance. With
respect to the Emerging Growth Fund and the International Equity Fund, as of May
20, 1996, Class 1 shares were authorized for issuance. Each Fund offers Class 1
shares only to accounts of previously established shareholders or members of a
family unit comprising husband, wife and minor children, and Class 1
shareholders of other Common Sense Funds exchanging their Class 1 shares for
Class 1 shares of the Fund. Each class of shares represents an interest in the
same portfolio of investments of a Fund.

ONLY CLASS 1 SHARES OF THE GROWTH FUND, THE GROWTH AND INCOME FUND, THE
GOVERNMENT FUND, THE MONEY MARKET FUND AND THE MUNICIPAL BOND FUND ARE AVAILABLE
TO THE GENERAL PUBLIC THROUGH THIS PROSPECTUS. UPON THE COMPLETION OF THE
REORGANIZATIONS OF COMMON SENSE II GROWTH FUND, COMMON SENSE II GROWTH AND
INCOME FUND AND COMMON SENSE II GOVERNMENT FUND CURRENTLY ANTICIPATED ON OR
BEFORE JULY 31, 1996, CLASS A AND CLASS B SHARES OF EACH OF THE ABOVE REFERENCED
FUNDS INCLUDING THE EMERGING GROWTH FUND AND THE INTERNATIONAL EQUITY FUND WILL
BE AVAILABLE FOR SALE TO THE GENERAL PUBLIC THROUGH THIS PROSPECTUS. IN
ADDITION, EACH FUND WILL SUSPEND SALES TO THE PUBLIC OF CLASS 1 SHARES EXCEPT TO
ACCOUNTS OF PREVIOUSLY ESTABLISHED SHAREHOLDERS OR MEMBERS OF A FAMILY UNIT
COMPRISING HUSBAND, WIFE AND MINOR CHILDREN, AND CLASS 1 SHAREHOLDERS OF OTHER
COMMON SENSE FUNDS EXCHANGING THEIR CLASS 1 SHARES OF THE FUND.

Shares of beneficial interest in each Fund are available through PFS
Investments, an affiliate of Travelers. Initial investments in a Fund must be at
least $250 and subsequent investments must be at least $25. The Distributor may
waive the minimum amount for initial investment for shares involving periodic
investments. The Trust reserves the right to suspend the sale of any Fund's
shares to the public in response to conditions in the securities markets or for
other reasons and to refuse any order for the purchase of shares.

Shares may be purchased on any business day by completing the application
included in this Prospectus and forwarding the application through PFS
Investments to PFS Shareholder Services (the "Transfer Agent"), 3100
Breckinridge Blvd., Bldg. 200, Duluth, Georgia 30199-0062. Checks drawn on
foreign banks must be payable in U.S. dollars and have the routing number of the
U.S. bank encoded on the check.

Additionally, investments of $25,000 or more may be made by having your
bank wire federal funds (funds of the Federal Reserve System) to the Transfer
Agent's bank. Wire transfers will only be accepted on days your bank, the
Transfer Agent, the Trust, and Bank South of Atlanta ("Bank South") are open for
business. Your wired funds must be received by 4:00 p.m. Eastern time by Bank
South to be credited to your account that day. Otherwise, your wire purchase
will be processed the next business day. The wire purchase will not be
considered made until the wired amount is received and the purchase is accepted
by the Trust. If the wire purchase does not contain the information stated
below, the Trust may reject it. Any delays that may occur in wiring funds,
including delays in processing by the banks, are not the responsibility of the
Trust or Transfer Agent.

You must pay any charge assessed by your bank for the wire service. If a
wire transfer is rejected, all money received by the Trust, less any costs
incurred by the Trust or Transfer Agent in rejecting it, will be returned
promptly.

To insure the proper handling of your investment, the following procedures
should be observed:

New Account Procedures -- If the wire transfer is for a new account,
you and your PFS Investments representative should call the Transfer
Agent's Customer Service Department at (800) 544-5445 and ask for the Wire
Purchase Desk. They will assist you in establishing your account and
processing your wire purchase.

Existing Account Procedures -- If the wire transfer is for an existing
account, the wire must be sent to Bank South, Routing Number 061000078,
Atlanta, Georgia. It should state the following:

"Credit PFS Account #6380344
For Further Credit to CST Account # ______________ (your account
number)
For ____________________________ (your name)"

39
<PAGE> 40

Upon executing your wire transfer, you or your PFS Investments
representative should contact the Transfer Agent's Wire Purchase Desk to notify
them of your name, your Trust account number and the name of the bank
transmitting the federal funds.

Shares are offered at the next determined net asset value per share, with
or without a front-end or contingent deferred sales charge depending on the
method of purchasing shares chosen by the investor, as shown in tables herein.
Net asset value per share of each Fund is computed as of the close of trading on
the New York Stock Exchange ("Exchange") (currently 4:00 p.m. Eastern time) on
each day the Exchange is open for trading, except in the case of the Money
Market Fund, for which net asset value is computed as of 12:00 noon New York
time on each such day. Net asset value per share of each class of each Fund is
determined by dividing the value of all the portfolio securities held by such
Fund, cash, and other assets (including accrued interest) attributable to each
class less all liabilities (including accrued expenses) attributable to each
class by the total number of shares of the class outstanding of the Fund. The
Money Market Fund's assets are valued on the basis of amortized cost, which
involves valuing a portfolio security at its cost and, thereafter, assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the security. While
this method provides for certainty in valuation it may result in periods in
which value as determined by amortized cost is higher or lower than the price
the Fund would receive if it sold the security.

Shares of the Money Market Fund are offered at the next determined net
asset value after a purchase order becomes effective, which is when the check
payment is converted into federal funds. A check payment is normally converted
into federal funds on the second business day following receipt of payment by
the Transfer Agent. With respect to the other Funds, the price paid for shares
purchased is based on the net asset value next computed after an order is
received by the Transfer Agent. For a discussion of the methods used to value
the portfolio securities of each Fund, see the Statement of Additional
Information.

Generally, the net asset values per share of the Class A, Class B and Class
1 shares of a Fund are expected to be substantially the same. Under certain
circumstances, however, the per share net asset values of the Class A, Class B
and Class 1 shares may differ from one another, reflecting the daily expense
accruals of the distribution and incremental transfer agency fees, if any,
applicable with respect to the Class B shares and the differential in the
dividends paid on the classes of shares. The price paid for shares purchased is
based on the next calculation of net asset value after an order in proper form
is received by the Transfer Agent plus applicable Class A or Class 1 sales
charges.

Each class of shares of each Fund represents an interest in the same
portfolio of investments of such Fund, has the same rights and is identical in
all respects, except that (i) Class B shares bear the expenses of the contingent
deferred sales arrangement and any expenses (including the distribution fee and
any incremental transfer agency costs) resulting from such sales arrangement,
(ii) each class has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan pursuant to which its distribution fee and/or
service fee is paid which relate to a specific class, and (iii) Class B shares
are subject to a conversion feature. Each class has different exchange
privileges and certain different shareholder service options available. See
"Distribution Plans" and "Shareholder Services -- Exchange Privilege." The net
income attributable to Class B shares and the dividends payable on Class B
shares will be reduced by the amount of the distribution fee and incremental
expenses, if any, associated with such distribution fee. Registered
representatives of PFS Investments distributing each Fund's shares may receive
differing compensation for selling Class A, Class B or Class 1 shares.

CLASS A SHARES

For each Fund other than the Money Market Fund the public offering price of
Class A shares is the next determined net asset value plus a sales charge, as
set forth herein. Class A shares of the Money Market Fund are offered at net
asset value without sales charge.

SALES CHARGE TABLES

EMERGING GROWTH FUND, INTERNATIONAL EQUITY FUND, GROWTH FUND AND GROWTH AND
INCOME FUND

<TABLE>
<CAPTION>
REALLOWED
TO PFS
AS % OF INVESTMENTS
NET AS % OF (AS A % OF
SIZE OF AMOUNT OFFERING OFFERING
INVESTMENT INVESTED PRICE PRICE)*
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000............................................................... 5.82% 5.50% 4.75%
$50,000 but less than $100,000.................................................. 4.99% 4.75% 4.00%
$100,000 but less than $250,000................................................. 3.90% 3.75% 3.25%
$250,000 but less than $500,000................................................. 3.09% 3.00% 2.50%
$500,000 but less than $1,000,000............................................... 2.04% 2.00% 1.75%
$1,000,000 or more.............................................................. ** ** **
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

40
<PAGE> 41

GOVERNMENT FUND

<TABLE>
<CAPTION>
REALLOWED
TO PFS
AS % OF INVESTMENTS
NET AS % OF (AS A % OF
SIZE OF AMOUNT OFFERING OFFERING
INVESTMENT INVESTED PRICE PRICE)*
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000.............................................................. 4.99% 4.75% 4.00%
$100,000 but less than $250,000................................................. 3.90% 3.75% 3.25%
$250,000 but less than $500,000................................................. 3.09% 3.00% 2.50%
$500,000 but less than $1,000,000............................................... 2.04% 2.00% 1.75%
$1,000,000 or more.............................................................. ** ** **
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

MUNICIPAL BOND FUND

<TABLE>
<CAPTION>
REALLOWED
TO PFS
AS % OF INVESTMENTS
NET AS % OF (AS A % OF
SIZE OF AMOUNT OFFERING OFFERING
INVESTMENT INVESTED PRICE PRICE)*
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000.............................................................. 4.71% 4.50% 3.75%
$100,000 but less than $250,000................................................. 3.90% 3.75% 3.25%
$250,000 but less than $500,000................................................. 3.09% 3.00% 2.50%
$500,000 but less than $1,000,000............................................... 2.04% 2.00% 1.75%
$1,000,000 or more.............................................................. ** ** **
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*Additionally, the Distributor will pay to PFS Investments a promotional fee
calculated as a percentage of the sales charge reallowed to PFS Investments.
The percentage used in the calculation is 3%.

**Purchases of Class A shares, which when combined with current holdings of
Class A shares offered with a sales charge, equal or exceed $1 million in the
aggregate, will be made at net asset value without any initial sales charge,
but will be subject to a contingent deferred sales charge of 1.00% on
redemptions made within 12 months of purchase. The contingent deferred sales
charge on Class A shares is payable to the Distributor, which in turn pays PFS
Investments to compensate its PFS Investment representatives whose clients
make purchases of $1 million or more. The contingent deferred sales charge is
waived in the same circumstances in which the contingent deferred sales charge
applicable to Class B shares is waived. See "Purchase of Shares -- Class B
Shares."

Class A shares of the Funds may be purchased at net asset value by the PFS
Primerica Corporation Savings and Retirement Plan (the "Primerica Plan") for its
participants, subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended. Class A shares so purchased are purchased for
investment purposes and may not be resold except by redemption or repurchase by
or on behalf of the Primerica Plan. Class A shares are also offered at net asset
value to accounts opened for shareholders by PFS Investments representatives
where the amounts invested represent the redemption proceeds from investment
companies, if such redemption has occurred no more than 60 days prior to the
purchase of shares of the Trust, and the shareholder paid an initial sales
charge and was not subject to a deferred sales charge on the redeemed account.
Class A shares are offered at net asset value to such persons because of
anticipated economies in sales efforts and sales related expenses. The Trust may
terminate, or amend the terms of, offering shares of the Trust at net asset
value to such persons at any time. The Distributor may pay PFS Investments
representatives through whom purchases are made at net asset value an amount
equal to 0.40% of the amount invested if the purchase represents redemption
proceeds from an investment company distributed by an entity other than the
Distributor. Contact the Transfer Agent at (800) 544-5445 for further
information and appropriate forms.

PFS Investments may be deemed to be an underwriter for purposes of the
Securities Act of 1933. From time to time, the Distributor or its affiliates may
also pay for certain non-cash sales incentives provided to PFS Investments
representatives. Such incentives do not have any effect on the net amount
invested. In addition to the reallowances from the applicable public offering
price described above, the Distributor may, from time to time, pay or allow
additional reallowances or promotional incentives, in the form of cash or other
compensation to PFS Investments representatives that sell shares of the Trust.

Investors purchasing Class A shares may under certain circumstances be
entitled to pay reduced sales charges. The circumstances under which such
investors may pay reduced sales charges are described herein.

Volume Discounts. The size of the investment shown in the preceding tables
applies to the total amount being invested by any person in shares of the
indicated Fund alone, or in any combination of shares of the Fund and shares of
other Funds (except Money Market Fund). A person eligible for a volume discount
includes an individual; members of a family unit comprising husband, wife and
minor children; a trustee or other fiduciary purchasing for a single fiduciary
account including pension, profit-sharing and other employee benefit trusts
qualified under Section 401(a) of the Code, or multiple custodial accounts where
more than one beneficiary is involved if purchases are made by salary reduction
and/or payroll deduction for qualified and nonqualified accounts and transmitted
by a common employer entity. Employer entity for payroll deduction accounts may
include trade and craft associations and any other similar organizations.

41
<PAGE> 42

Cumulative Purchase Discount. The size of investment shown in the preceding
tables may also be determined by combining the amount being invested in shares
of the indicated Fund plus the current offering price of all shares of other
Funds (except Money Market Fund) which have been previously purchased and are
still owned. Shares previously purchased are only taken into account, however,
if the Transfer Agent is notified by the shareholder at the time an order is
placed for a purchase which would qualify for a reduced sales load on the basis
of the current value of previous purchases and if sufficient information is
furnished to permit confirmation of such purchases.

Letter of Intent. A Letter of Intent provides an opportunity for an
investor to obtain a reduced sales charge by aggregating all investments over a
13-month period to determine the sales load as outlined in the preceding tables.
Each investment made during the period will receive the reduced sales charge
applicable to the amount represented by the goal as if it were a single
investment. The size of investment shown in the preceding tables also includes
purchases of shares of any other Common Sense Fund (except Money Market Fund)
over a 13-month period, based on the total amount of intended purchases plus the
value of all shares at the offering price of such Funds previously purchased and
still owned. An investor may elect to compute the 13-month period starting up to
90 days before the date of execution of a Letter of Intent. Each investment made
during the period receives the reduced sales charge applicable to the total
amount of the investment goal. If the goal is not achieved within the period,
the investor must pay the difference between the charge applicable to the
aggregate purchases made and the sales charge previously paid. The initial
purchase must be for an amount equal to at least five percent of the minimum
total purchase amount of the level selected. If trades not initially made under
a Letter of Intent subsequently qualify for a lower sales charge through the
90-day back-dating provisions, an adjustment will be made at the expiration of
the Letter of Intent to give effect to the lower charge. Such adjustment in
sales charge will be used to purchase additional shares for the shareholder at
the applicable discount category. Additional information is contained in the
application form included in this Prospectus.

CLASS B SHARES

For each Fund, other than Money Market Fund, Class B shares are offered at
the next determined net asset value. Class B shares which are redeemed within
five years of purchase are subject to a contingent deferred sales charge at the
rates set forth in the following tables charged as a percentage of the dollar
amount subject thereto. The charge is assessed on an amount equal to the lesser
of the then current market value or the cost of the shares being redeemed.
Accordingly, no sales charge is imposed on increases in net asset value above
the initial purchase price. In addition, no charge is assessed on shares derived
from reinvestment of dividends or capital gains distributions. With respect to
Money Market Fund, Class B shares acquired in exchange for Class B shares of
another Common Sense Fund remain subject to the contingent deferred sales charge
of the original fund.

The amount of the contingent deferred sales charge, if any, varies
depending on the number of years from the time of payment for the purchase of
Class B shares until the time of redemption of such shares.

<TABLE>
<CAPTION>
EMERGING GROWTH FUND, INTERNATIONAL EQUITY FUND, GROWTH FUND AND GROWTH AND INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF
YEAR SINCE PURCHASE DOLLAR AMOUNT SUBJECT TO CHARGE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
First............................................................................................ 5%
Second........................................................................................... 4%
Third............................................................................................ 3%
Fourth........................................................................................... 2.5%
Fifth............................................................................................ 1.5%
Sixth............................................................................................ None
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
GOVERNMENT FUND AND MUNICIPAL BOND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF
YEAR SINCE PURCHASE DOLLAR AMOUNT SUBJECT TO CHARGE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
First............................................................................................ 4%
Second........................................................................................... 4%
Third............................................................................................ 3%
Fourth........................................................................................... 2.5%
Fifth............................................................................................ 1.5%
Sixth............................................................................................ None
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

In determining whether a contingent deferred sales charge is applicable to
a redemption, the calculation is determined in the manner that results in the
lowest possible rate being charged. Therefore, it is assumed that the redemption
is first of any shares acquired pursuant to reinvestment of dividends or
distributions, second, of shares held for over five years and third, of

42
<PAGE> 43

shares held for less than five years. The charge is not applied to dollar
amounts representing an increase in the net asset value since the time of
purchase.

To provide an example, assume an investor purchased 100 shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired ten
additional shares upon dividend reinvestment. If at such time the investor makes
his or her first redemption of 50 shares (proceeds of $600), ten shares will not
be subject to charge because of dividend reinvestment. With respect to the
remaining 40 shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds is subject to a deferred sales charge at a
rate of 4% (the applicable rate in the second year after purchase).

A commission or transaction fee of 4% of the purchase amount will be paid
to PFS Investments at the time of purchase. Additionally, the Distributor may,
from time to time, pay additional promotional incentives in the form of cash or
other compensation, to PFS Investments representatives that sell Class B shares
of the Fund.

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge is waived on redemptions of Class B
shares (i) following the death or disability (as defined in the Code) of a
shareholder, (ii) in connection with certain distributions from an IRA or other
retirement plan, (iii) pursuant to the Trust's systematic withdrawal plan but
limited to 12% annually of the initial value of the account, and (iv) effected
pursuant to the right of the Trust to liquidate a shareholder's account as
described herein under "Redemption of Shares." See the Statement of Additional
Information for further discussion of waiver provisions.

CLASS 1 SHARES

Class 1 shares are only offered to accounts of previously established
shareholders or members of a family unit comprising husband, wife and minor
children, and Class 1 shareholders of other Common Sense Funds exchanging their
Class 1 shares for Class 1 shares of the Fund. Class 1 shares are offered to the
limited group of investors described above at the next determined net asset
value plus a sales charge, as set forth herein.

SALES CHARGE TABLES

<TABLE>
<CAPTION>
EMERGING GROWTH FUND, GROWTH FUND AND GROWTH AND INCOME FUND AND INTERNATIONAL EQUITY FUND

REALLOWED
TO PFS
INVESTMENTS
AS % OF AS % OF (AS A % OF
SIZE OF NET AMOUNT OFFERING OFFERING
INVESTMENT INVESTED PRICE PRICE)*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $10,000.................................................................... 9.29% 8.50% 7.00%
$10,000 but less than $25,000........................................................ 8.40% 7.75% 6.25%
$25,000 but less than $50,000........................................................ 6.38% 6.00% 5.00%
$50,000 but less than $100,000....................................................... 4.71% 4.50% 3.75%
$100,000 but less than $250,000...................................................... 3.63% 3.50% 3.00%
$250,000 but less than $400,000...................................................... 2.56% 2.50% 2.00%
$400,000 but less than $600,000...................................................... 2.04% 2.00% 1.60%
$600,000 but less than $5,000,000.................................................... 1.01% 1.00% 0.75%
$5,000,000 or more................................................................... 0.25% 0.25% 0.20%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

GOVERNMENT FUND

<TABLE>
<CAPTION>
REALLOWED
TO PFS
INVESTMENTS
AS % OF AS % OF (AS A % OF
SIZE OF NET AMOUNT OFFERING OFFERING
INVESTMENT INVESTED PRICE PRICE)*
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000.................................................................... 7.24% 6.75% 6.00%
$25,000 but less than $50,000........................................................ 6.10% 5.75% 5.00%
$50,000 but less than $100,000....................................................... 4.44% 4.25% 3.50%
$100,000 but less than $250,000...................................................... 3.63% 3.50% 2.75%
$250,000 but less than $500,000...................................................... 2.56% 2.50% 2.00%
$500,000 but less than $1,000,000.................................................... 2.04% 2.00% 1.60%
$1,000,000 but less than $2,500,000.................................................. 1.01% 1.00% 0.75%
$2,500,000 but less than $5,000,000.................................................. 0.50% 0.50% 0.40%
$5,000,000 or more................................................................... 0.25% 0.25% 0.20%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

43
<PAGE> 44

MUNICIPAL BOND FUND

<TABLE>
<CAPTION>
REALLOWED
TO PFS
INVESTMENTS
AS % OF AS % OF (AS A % OF
SIZE OF NET AMOUNT OFFERING OFFERING
INVESTMENT INVESTED PRICE PRICE)*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000................................................................... 4.99% 4.75% 4.25%
$100,000 but less than $250,000...................................................... 3.90% 3.75% 3.25%
$250,000 but less than $500,000...................................................... 3.09% 3.00% 2.50%
$500,000 but less than $1,000,000.................................................... 2.04% 2.00% 1.60%
$1,000,000 but less than $2,500,000.................................................. 1.01% 1.00% .75%
$2,500,000 but less than $5,000,000.................................................. .50% .50% .40%
$5,000,000 or more................................................................... .25% .25% .20%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Additionally, the Distributor will pay to PFS Investments a promotional fee
calculated as a percentage of the sales charge reallowed to PFS Investments.
The percentage used in the calculation is 3%.

Class 1 Shares of the Trust may be purchased at net asset value by the
Primerica Plan for its participants, subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended. Shares so purchased are
purchased for investment purposes and may not be resold except by redemption or
repurchase by or on behalf of the Primerica Plan. Class 1 Shares are also
offered at net asset value to accounts opened for shareholders by PFS
Investments representatives where the amounts invested represent the redemption
proceeds from investment companies if such redemption has occurred no more than
60 days prior to the purchase of shares of the Trust and the shareholder paid an
initial sales charge and was not subject to a deferred sales charge on the
redeemed account. Shares are offered at net asset value to such persons because
of anticipated economies in sales efforts and sales related expenses. The Trust
may terminate, or amend the terms of, offering shares of the Trust at net asset
value to such persons at any time. The Distributor may pay PFS Investment
representatives through whom purchases are made at net asset value an amount
equal to 0.40% of the amount invested if the purchase represents redemption
proceeds from an investment company distributed by an entity other than the
Distributor. Contact the Transfer Agent at (800) 544-5445 for further
information and appropriate forms.

Investors purchasing Class 1 shares may under certain circumstances be
entitled to reduced sales charges. The circumstances under which such investors
may pay reduced sales charges are described herein under "Purchases of Shares --
Class A Shares -- Volume Discounts, Cumulative Purchase Discount and Letter of
Intent."

- --------------------------------------------------------------------------------
DISTRIBUTION PLANS
- --------------------------------------------------------------------------------

Rule 12b-1 adopted by the SEC under the 1940 Act permits an investment
company to directly or indirectly pay expenses associated with the distribution
of its shares ("distribution expenses") and servicing its shareholders in
accordance with a plan adopted by the investment company's board of directors
and approved by its shareholders. Pursuant to such Rule, the Trustees of the
Trust, and the shareholders of Class A and Class B of each Fund have adopted two
Distribution Plans hereinafter referred to as the "Class A Plan" and the "Class
B Plan." Each Distribution Plan is in compliance with the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. ("NASD Rules")
applicable to mutual fund sales charges. The NASD Rules limit the annual
distribution costs and service fees that a mutual fund may impose on a class of
shares. The NASD Rules also limit the aggregate amount which the Fund may pay
for such distribution costs. Under the Class A Plan, a Fund pays 0.25% per annum
of its average daily net assets attributable (0.10% for Money Market Fund) to
such class of shares to the Distributor as a service fee. The service fee is
intended to cover personal services provided to Class A shareholders of a Fund
by representatives of PFS Investments and the maintenance of their accounts.

Under the Class B Plan, Class B shares of each Fund other than the Money
Market Fund are subject to a combined annual distribution fee and service fee at
the rate of 1% of a Fund's aggregate average daily net assets attributable to
such class of shares. Payments by each Fund, other than Money Market Fund, to
the Distributor under the Class B Plan are used to make service fee payments to
PFS Investments of 0.25% per annum of average daily net assets. With respect to
Money Market Fund, Class B shares are subject only to an annual distribution fee
at the rate of 0.75% of the Fund's aggregate average daily net assets
attributable to such class of shares. Each Fund pays the Distributor 0.75% of
the aggregate average daily net assets of Class B shares, as compensation for
providing sales and promotional activities and services. Such activities and
services relate to the sale, promotion and marketing of the Class B shares. The
expenditures of the Distributor may consist of sales commissions to PFS
Investments for selling Class B shares, compensation, sales incentives and
payments to sales and marketing personnel, and

44
<PAGE> 45

the payment of expenses incurred in its sales and promotional activities,
including advertising expenditures related to the Class B shares of a Fund and
the costs of preparing and distributing promotional materials with respect to
such Class B shares.

The Distributor receives the proceeds of the initial sales charge, if any,
paid upon the purchase of Class A shares and the contingent deferred sales
charge paid upon certain redemptions of Class B shares, and may use these
proceeds for any of the distribution and/or service expenses described above.

During the period they are in effect, the Class A Plan and the Class B Plan
obligate each Fund to pay service fees and distribution fees or, in the case of
the Class B Plan for Money Market Fund, distribution fees only, to the
Distributor as compensation for its service and distribution activities, not as
reimbursement for specific expenses incurred. Thus, even if the Distributor's
expenses exceed its service or distribution fees for any Fund, the Fund will not
be obligated to pay more than those fees and, if the Distributor's expenses are
less than such fees, it will retain its full fees and realize a profit. Each
Fund will pay the service fees and distribution fees to the Distributor until
either the applicable Plan is terminated or not renewed. In that event, the
Distributor's expenses in excess of service fees and distribution fees received
or accrued through the termination date will be the Distributor's sole
responsibility and not obligations of a Fund. In their annual consideration of
the continuation of each Fund's Plans, the Trustees will review each Plan and
the Distributor's corresponding expenses for each class separately.

In adopting the Class A Plan and the Class B Plan, the Trustees of the
Trust determined that there was a reasonable likelihood that such Plans would
benefit each Fund and its shareholders. Information with respect to distribution
and service revenues and expenses is presented to the Trustees each year for
their consideration in connection with their deliberations as to the continuance
of the Distribution Plans. In their review of the Distribution Plans, the
Trustees are asked to take into consideration expenses incurred in connection
with the distribution and servicing of each class of shares separately. The
sales charge and distribution fee, if any, of a particular class will not be
used to subsidize the sale of shares of the other classes.

Actual distribution expenditures paid by the Distributor with respect to
Class B shares for any given year are expected to exceed the fees received
pursuant to the Class B Plan and payments received pursuant to contingent
deferred sales charges. Such excess will be carried forward without interest
charges, unless permitted under SEC regulations, and may be reimbursed by the
Fund or its shareholders from payments received through contingent deferred
sales charges in future years and from payments under the Class B Plan so long
as such Plan is in effect. For example, if in a fiscal year the Distributor
incurred distribution expenses under the Class B Plan of $1 million, of which
$500,000 was recovered in the form of contingent deferred sales charges paid by
investors and $400,000 was reimbursed in the form of payments made by the Fund
to the Distributor under the Class B Plan, the balance of $100,000, would be
subject to recovery in future fiscal years from such sources. For the period
July 1, 1994 through June 30, 1995, the unreimbursed expenses incurred by the
Distributor under the Class B Plan and carried forward for the Growth Fund, the
Growth and Income Fund, the Government Fund, the Emerging Growth Fund and the
International Equity Fund were approximately $841,000 or 6.60%, $494,000 or
6.98%, $275,000 or 6.23%, $124,000 or 12% and $40,000 or 4.22%, respectively of
the Class B shares' average net assets.

If the Class B Plan was terminated or not continued, the Fund would not be
contractually obligated and has no liability to pay the Distributor for any
expenses not previously reimbursed by the Fund or recovered through contingent
deferred sales charges.

- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------

The Trust offers a number of shareholder services designed to facilitate
investment in its shares at little or no extra cost to the investor. Below is a
description of such services. A CST Shareholder Service Form should be completed
to effect a change or cancel any Common Sense Trust account option. The CST
Shareholder Service Form is provided in the CST New Account Welcome Package.
Additional CST Shareholder Service Forms may be obtained from the Transfer
Agent. Customer Service representatives are available from 9:00 a.m. to 6:00
p.m. Monday through Friday (Eastern time) to assist you. If you prefer a
Spanish-speaking representative, please call (800) 544-7278 (Monday through
Friday). TDD service is available for the hearing impaired at (800) 824-1721.

SHAREHOLDER SERVICES APPLICABLE TO ALL CLASSES

INVESTMENT ACCOUNT. Each shareholder of record has an investment account
under which shares are held by the Transfer Agent. The Trust recommends that
shares be left on deposit with the Transfer Agent. If a share certificate is
desired, it is issued only for full shares (preferably 100 shares or more) and
must be requested in writing from the Transfer Agent for each transaction.
Except as described below, after each share transaction in an account, the
shareholder will receive a report showing the activity in the account. A
quarterly report will be sent to shareholders utilizing the pre-authorized check
plan. Additions to an investment account may be made at any time by mailing a
check directly to the Transfer Agent.

45
<PAGE> 46

REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of a
Fund. Such shares are acquired at net asset value (without a sales charge). This
reinvestment is automatic unless the shareholder instructs otherwise. The
investor may, on the CST Additional New Account Options Form found in the
Prospectus, instruct that dividends and/or capital gains distributions be paid
in cash or be credited to another account of a Fund described in this
Prospectus. If you are changing this option after your account has been
established, you should complete a CST Shareholder Service Form and mail it to
the Transfer Agent.

PRE-AUTHORIZED CHECK PLAN. A pre-authorized check plan is available under
which a shareholder can authorize the Transfer Agent to draw on a bank account
on a regular basis to invest pre-determined amounts in shares of a Fund. To
establish or change an existing pre-authorized check plan, a shareholder should
give the Transfer Agent ten days prior notice before drawing on such bank
account. You may choose to have your draft on any day of the month and the
Transfer Agent will submit the draft to your bank on that day. Additionally, the
Transfer Agent will purchase shares in your Common Sense Trust account on the
day indicated for the amount of the draft. If the draft is returned to the
Transfer Agent from the depository bank, it may attempt to redeposit the draft
in an effort to collect the proceeds before cancelling the shares bought with
the draft. A shareholder may designate in the application to increase the amount
of the pre-authorized check on an automatic basis. Additional information is
contained in the application included in this Prospectus. There is no charge for
establishing a pre-authorized check plan. Standard Pre-Authorized Check Plan
minimum draft amount is $25. A charge of $25 will be imposed on a shareholder's
account for any check returned for insufficient funds.

RETIREMENT PLAN. Eligible investors may establish individual retirement
accounts ("IRAs"). PFS Investments, Inc., 3100 Breckinridge Blvd., Bldg. 200,
Duluth, Georgia 30199-0062 serves as custodian under IRA, SEP and 403(b)(7)
plans. Details regarding fees, as well as plan administration, and other details
regarding this Retirement Plan is available from PFS Investments' registered
representatives.

EXCHANGE PRIVILEGE. Shares of any Fund may be exchanged for shares of the
same class of any of the other Funds described in this Prospectus upon payment
of the excess, if any, of the sales charge applicable to the Fund being acquired
over the sales charge paid on the purchase. Shares of the Money Market Fund may
be exchanged for shares of the other Funds upon payment of the sales charge
applicable to shares of the Fund being acquired unless a sales charge previously
has been paid.

Class B shareholders of a Fund have the ability to exchange their shares
("original shares") for the same class of shares of any other Fund described in
this Prospectus that offers such class of shares ("new shares") in an amount
equal to the aggregate net asset value of the original shares without the
payment of any contingent deferred sales charge otherwise due upon redemption of
the original shares. For purposes of computing the contingent deferred sales
charge payable upon a redemption of the new shares, the holding period for the
original shares is added to the holding period of the new shares. Class B
shareholders would remain subject to the contingent deferred sales charge
imposed by the original fund upon the redemption from the Common Sense family of
funds.

Shares of the fund to be acquired must be registered for sale in the
investor's state. Exchanges of shares are sales and may result in a gain or loss
for federal income tax purposes, although if the shares exchanged have been held
for less than 91 days, the sales charge paid on such shares is not included in
the tax basis of the exchanged shares, but is carried over and included in the
tax basis of the shares acquired. A Fund reserves the right to reject any order
to acquire its shares through exchange, or otherwise modify, restrict or
terminate the exchange privilege at any time on 60 days' notice to its
shareholders of any termination or material amendment. See the Statement of
Additional Information.

A shareholder wishing to make an exchange may do so by completing a CST
Exchange Form and sending it to the Transfer Agent. A signature guarantee and
other documentary evidence may be required for certain registrations other than
individual accounts (e.g., corporation, trust, etc.). Exchanges are effected at
the net asset value next calculated after the request is received in good order.
See "Purchase of Shares" and "Redemption of Shares." If the exchanging
shareholder does not have an account in the Fund whose shares are being
acquired, a new account will be established with the same registration, dividend
and capital gain options as the account from which shares are exchanged, unless
otherwise specified by the shareholder. In order to establish a systematic
withdrawal plan or a pre-authorized bank draft for the new account, however, an
exchanging shareholder must file a specific written request.

A shareholder may utilize the Transfer Agent's Facsimile Transaction Line
("FAX") to effect an exchange as long as a signature guarantee or other
documentary evidence is not required. Exchange requests should be properly
signed by all owners of the account and faxed to the Transfer Agent at (800)
554-2374. Facsimile exchanges may not be available if the shareholder cannot
reach the Transfer Agent by FAX, whether because all telephone lines are busy or
for any other reason; in such case, a shareholder would have to use the Fund's
regular exchange procedure described above. Facsimile exchanges received by the

46
<PAGE> 47

Transfer Agent prior to 4:00 p.m. Eastern time on a regular business day will be
processed at the net asset value per share determined that day.

An investor considering an exchange should refer to the prospectus for
additional information regarding such fund prior to investing.

SYSTEMATIC EXCHANGE. A shareholder has the option to systematically
exchange a dollar or share amount on a monthly basis. You may automatically
exchange shares from one CST account for shares in another CST account on a
regular schedule (e.g., monthly or quarterly). The accounts must have identical
registrations and the originating account must have a minimum balance of $5,000.
The minimum exchange amount is $50. You may add this service to your account by
completing the CST Additional New Account Options Form found in the Prospectus,
and submitting it with your initial application. If you are selecting this
option after your account has been established, you should complete a CST
Shareholder Service Form and mail it to the Transfer Agent.

SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $5,000 or more at the offering price next computed after receipt of
instructions may establish a withdrawal plan. This plan provides for the orderly
use of the entire account, not only the income but also the capital, if
necessary. Each withdrawal constitutes a redemption of shares on which any
capital gain or loss will be recognized. The planholder may arrange for monthly,
quarterly, semiannual or annual checks in any amount not less than $50, in
multiples of $5, unless specifically authorized by the Distributor.

Class B shareholders who establish a withdrawal plan may redeem up to 12%
annually of the shareholder's Initial Account Balance without incurring a
contingent deferred sales charge. Initial Account Balance means the amount of
the shareholder's investment in a Fund at the time the election to participate
in the plan is made. See "Purchase of Shares -- Waiver of Contingent Deferred
Sales Charge" and the Statement of Additional Information.

Under the plan, sufficient shares of a Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gain
distributions on shares held under the plan are reinvested in additional shares
at the next determined net asset value. If periodic withdrawals continuously
exceed reinvested dividends and capital gains distributions, the shareholder's
original investment will be correspondingly reduced and ultimately exhausted.
Withdrawals made concurrently with purchase of additional shares ordinarily will
be disadvantageous to the shareholder because of the duplication of sales
charges. There is no charge for establishing a systematic withdrawal plan. You
may add this service to your account by completing the CST Additional New
Account Options Form found in the Prospectus and submitting it with your initial
application. If you are selecting this option after your account has been
established, you should complete a CST Shareholder Service Form and mail it to
the Transfer Agent.

DOLLAR COST AVERAGING. Special services are available that enable investors
to take advantage of dollar cost averaging through automatic monthly
investments. Dollar cost averaging involves the investment of a fixed dollar
amount in investment vehicles such as the Funds at pre-set intervals. This
practice will result in more shares being purchased when a Fund's net asset
value is relatively low, and fewer shares being purchased when a Fund's net
asset value is relatively high. Therefore, the investor's overall cost of shares
purchased is lower than it would be if the investor purchased a fixed number of
shares at pre-set intervals.

Investors may purchase shares of any of the Funds by using pre-authorized
checks drawn on the investor's bank account. See "Pre-Authorized Check Plan."
Further information on automatic investing and the advantages of dollar cost
averaging is set forth in the Statement of Additional Information.

ACCOUNT STATEMENTS/REPORTS. A client will receive several statements and
reports as a Common Sense Trust shareholder. Each time a financial transaction
occurs, a confirmation statement identifying the shares bought or sold will be
mailed. On an annual basis, each January, a year-end statement detailing the
previous year's transactions will be provided. Information required for
income-tax reporting will also be distributed to shareholders, usually in
January.

In addition to the above shareholder activity statements, a Semi-Annual and
Annual Financial Report will be distributed which includes a Statement of Net
Assets identifying each security the Fund is invested in.

Also available at the shareholder's request, is an Account Transcript
identifying every financial transaction in an account since it was opened. To
defray administrative expenses involved with providing multiple years worth of
information, there is a $10 charge for each Account Transcript requested.

Additional information regarding the Trust's services may be obtained by
contacting the Client Services Department at (800) 544-5445.

SHAREHOLDER SERVICES APPLICABLE TO CLASS A AND CLASS 1 SHAREHOLDERS ONLY

CHECK WRITING PRIVILEGE. A Class A or Class 1 shareholder holding shares of
the Government Fund, Money Market Fund and Municipal Bond Fund for which
certificates have not been issued may appoint the Fund's Transfer Agent as agent
and

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<PAGE> 48

request, on the application form, special forms of drafts payable through
Fidelity National Bank ("Fidelity"). The Transfer Agent issues these drafts on
behalf of the Fund in books of ten drafts, for which there is a charge by the
Fund of $7.50 per book. These drafts may be made payable by the shareholder to
the order of any person in any amount of $250 or more. When a draft is presented
to Fidelity for payment, full and fractional shares required to cover the amount
of the draft will be redeemed from the shareholder's account by the Transfer
Agent at the next determined net asset value. Any gain or loss realized on the
sale of shares is a taxable event. See "Redemption of Shares." Drafts will not
be honored for redemption of shares held less than fifteen (15) days, or until
the Transfer Agent is presented with satisfactory evidence that the purchase
check has cleared. Any shares for which there are outstanding certificates may
not be redeemed by draft. If the amount of the draft is greater than the
proceeds of all uncertificated shares held in the shareholder's account, the
draft will be returned and the shareholder may be subject to additional charges
imposed by banks. A shareholder may not liquidate the entire account by means of
a draft. The check writing privilege may be terminated or suspended at any time
by the Fund or Fidelity. Retirement plans and accounts that are subject to
backup withholding are not eligible for the privilege. A "stop payment" system
is not available on Government Fund, Money Market Fund and Municipal Bond Fund
checks. Fidelity will only honor those drafts authorized by the Trust.
Generally, a properly completed Check Writing Card is all that is required for
the Check Writing Privilege. With certain registrations other than individual or
joint owners, however, other documents and signature guarantees may be
necessary.

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REDEMPTION OF SHARES
- --------------------------------------------------------------------------------

Shareholders may redeem for cash some or all of their shares of any Fund at
any time by sending a written request in proper form directly to the Transfer
Agent at 3100 Breckinridge Blvd., Bldg. 200, Duluth, Georgia 30199-0062. There
is no charge for a redemption. If you should have any questions concerning how
to redeem your account after reviewing the information below, please contact the
Transfer Agent at (800) 544-5445, Spanish-speaking representatives (800)
544-7278 or TDD Line for the Hearing Impaired (800) 824-1721.

As described herein under "Purchase of Shares," redemptions of Class B
shares are subject to a contingent deferred sales charge. In addition, a
contingent deferred sales charge of one percent may be imposed on certain
redemptions of Class A shares made within one year of purchase for investments
of $1 million or more. The contingent deferred sales charge incurred upon
redemption is paid to the Distributor in reimbursement for the
distribution-related expenses. See "Purchase of Shares." A custodian of a
retirement plan account may charge redemption fees based on the custodian's fee
schedule.

The request for redemption must be signed by all persons in whose names the
shares are registered. Signatures must conform exactly to the account
registration. If the proceeds of the redemption exceed $50,000, or if the
proceeds are not to be paid to the record owner(s) at the record address, if the
shareholder(s) has had an address change in the past 45 days, or if the
shareholder(s) is a corporation, sole proprietor, partnership, trust or
fiduciary, signature(s) must be guaranteed by one of the following: a bank or
trust company; a broker-dealer; a credit union; a national securities exchange,
registered securities association or clearing agency; a savings and loan
association; or a federal savings bank.

Generally, a properly completed CST Redemption Form with any required
signature guarantee is all that is required for a redemption. In some cases,
however, other documents may be necessary. For example, in the case of
shareholders holding certificates, the certificates for the shares being
redeemed must accompany the redemption request. Additional documentary evidence
of authority is also required by the Transfer Agent in the event redemption is
requested by a corporation, partnership, trust, fiduciary, executor or
administrator. Additionally, if a shareholder requests a redemption from a
Retirement Plan account (IRA or SEP), such request must state whether or not
federal income tax is to be withheld from the proceeds of the redemption check.
All 403(b)(7) distributions will have the 20% mandatory withholding deducted
unless the proceeds are payable to a new Custodian/Trustee as successor
Custodian/Trustee. A Letter of Acceptance from the successor Custodian/Trustee
is required and must accompany the distribution request.

A shareholder may utilize the Transfer Agent's FAX to redeem their account
as long as a signature guarantee or other documentary evidence is not required.
Redemption requests should be properly signed by all owners of the account and
faxed to the Transfer Agent at (800) 554-2374. Facsimile redemptions may not be
available if the shareholder cannot reach the Transfer Agent by FAX, whether
because all telephone lines are busy or for any other reason; in such case, a
shareholder would have to use the Fund's regular redemption procedure described
above. Facsimile redemptions received by the Transfer Agent prior to 4:00 p.m.
Eastern time on a regular business day will be processed at the net asset value
per share determined that day.

In all cases, the redemption price is the net asset value per share of the
Fund next determined after the request for redemption is received in proper form
by the Transfer Agent. Payment for shares redeemed will be made by check mailed
within seven days after acceptance by the Transfer Agent of the request and any
other necessary documents in proper order.
Such payment may be postponed or the right of redemption suspended as provided
by the rules of the SEC. If the shares to be redeemed have been recently
purchased by check or draft, the Transfer Agent may hold the payment of the
proceeds until the

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<PAGE> 49

purchase check or draft has cleared, usually a period of up to 15 days. Any
taxable gain or loss will be recognized by the shareholder upon redemption of
shares.

After following the above-stated redemption guidelines, a shareholder(s)
may elect to have the redemption proceeds wire-transferred directly to the
shareholder's bank account of record (defined as a currently established
pre-authorized draft on the shareholder's account with no changes within the
previous 45 days), as long as the bank account is registered in the same name(s)
as the account with the Fund. If the proceeds are not to be wired to the bank
account of record, or to the registered owner(s), a signature guarantee will be
required from all shareholder(s). A $25 service fee will be charged by the
Transfer Agent to help defray the administrative expense of executing a wire
redemption. Redemption proceeds will normally be wired to the designated bank
account on the next business day following the redemption, and should ordinarily
be credited to your bank account by your bank within 48 to 72 hours.

The Trust may redeem any shareholder account with a net asset value of less
than $200. Three months advance notice of any such involuntary redemption is
required and the shareholder may purchase prior to such redemption the required
value of additional shares in order to avoid such involuntary redemption. Any
involuntary redemption may only occur if the shareholder's account is less than
the required minimum due to shareholder redemptions or did not reach the
required minimum because the shareholder failed to meet the shareholder's
obligations under a periodic investment arrangement. Any taxable gain or loss
will be recognized by the shareholder upon redemption of shares.

REINSTATEMENT PRIVILEGE. A Class A or Class B shareholder who has redeemed
shares of a Fund may reinvest any portion or all of the proceeds of such
redemption in Class A shares of any Fund. A Class 1 shareholder who has redeemed
shares of a Fund may reinvest proceeds of such redemption in Class 1 shares of
any Fund. Such reinvestment is made at the net asset value (without sales
charge) next determined after the order is received, which must be within 60
days after the date of the redemption. This privilege can be exercised only
once.

- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------

Unless the shareholder instructs otherwise, all dividends and capital gain
distributions of each Fund are automatically reinvested in additional shares of
the same class of such Fund. See "Shareholder Services -- Reinvestment Plan."
Dividends and distributions paid by a Fund have the effect of reducing the net
asset value per share on the record date by the amount of the dividend or
distribution. Therefore, a dividend or distribution paid shortly after a
purchase of shares by an investor would represent, in substance, a return of
capital to the shareholder (to the extent it is paid on the shares so
purchased), even though it would be subject to income taxes, as discussed below.

The per share dividends on Class A and Class B shares will be lower than
the per share dividends on Class 1 shares as a result of the distribution fees
and any incremental transfer agency fees applicable to such class of shares.

DIVIDENDS AND DISTRIBUTIONS OF THE EMERGING GROWTH FUND, THE INTERNATIONAL
EQUITY FUND, THE GROWTH FUND, AND GROWTH INCOME FUND. Dividends from stocks and
interest earned from other investments are the main source of income for the
Emerging Growth Fund, the International Equity Fund, the Growth Fund and the
Growth and Income Fund. When a Fund sells portfolio securities, it may realize
capital gains or losses, depending on whether the prices of the securities sold
are higher or lower than the prices the Fund paid to purchase them. Net realized
capital gains represent the total profit from sales of securities minus total
losses from sales of securities including any losses carried forward from prior
years.

The Emerging Growth Fund, the International Equity Fund and the Growth Fund
distributes substantially all its net investment income, less expenses, and any
net realized capital gains annually, normally in December. The Growth and Income
Fund distributes substantially all its net investment income, less expenses
quarterly, normally in March, June, September and December, and it distributes
any net realized capital gains annually, normally in December. Net long-term
gains realized from both Funds' transactions in options, futures and related
options transactions may be paid out more frequently (with short-term gains) as
may be determined from time to time by the Trustees, but only after appropriate
regulatory approval is first obtained. There is no assurance that such
regulatory approval will be obtained.

DIVIDENDS AND DISTRIBUTIONS OF THE GOVERNMENT FUND. Income dividends are
declared each business day, and paid monthly. Any taxable net realized
short-term capital gains may be distributed quarterly and any net realized
long-term gains are distributed to shareholders annually, normally in December.
Net long-term gains realized from the Fund's transactions in options, futures
and related options transactions may be paid out more frequently (with
short-term gains) as may be determined from time to time by the Trustees, but
only after appropriate regulatory approval is first obtained. There is no
assurance that such regulatory approval will be obtained.

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<PAGE> 50

In computing interest income, the Fund does not amortize debt discount or
premiums resulting from the purchase of debt securities. Thus in the case of
U.S. Government securities purchased at a premium, interest income is greater
than it would be if the premium was amortized.

DIVIDENDS AND DISTRIBUTIONS OF THE MUNICIPAL BOND FUND. Income dividends
are declared each business day, and paid monthly. The daily dividend is a fixed
amount determined at least monthly which is not expected to exceed the net
income of the Fund for the month divided by the number of business days during
the month. The Fund intends to distribute after the end of a fiscal year the net
capital gains, if any, realized during the fiscal year, except to the extent
that such gains are offset by capital loss carryovers of the Fund.

Net long-term gains realized from transactions in futures and related
options transactions may be paid out more frequently (with short-term gains) as
may be determined from time to time by the Trustees, but only after appropriate
regulatory approval is first obtained. There is no assurance that such
regulatory approval will be obtained.

DIVIDENDS OF THE MONEY MARKET FUND. Income dividends are declared each
business day, and paid monthly. Dividends are paid to shareholders of record
immediately prior to the determination of net asset value for that day. Since
shares are issued and redeemed at the time net asset value is determined,
dividends commence on the day following the date shares are issued and are
received for the day shares are redeemed. Shareholders may elect to receive
monthly payments of dividends in cash by written instruction to the Transfer
Agent. Shares purchased as a result of the accrual of daily dividends are
liquidated at the net asset value on the last business day of the month and the
proceeds of such redemption mailed to the shareholder electing cash payment. A
redeeming shareholder receives all dividends accrued through the date of
redemption.

The Fund's net income for dividend purposes is calculated daily and
consists of interest accrued or discount earned, plus or minus any net realized
gains or losses on portfolio securities, less any amortization of premium and
the expenses of the Fund.

TAXES. Each Fund has qualified and intends to qualify as a "regulated
investment company" under the Code. By so qualifying and by distributing all of
its net investment income and net realized capital gains within the time periods
specified in the Code, each Fund would not be required to pay any federal income
tax. Dividends from net investment income and distributions from any net
realized short-term capital gains are taxable to shareholders as ordinary
income. All such dividends are taxable to the shareholder whether or not
reinvested in shares. However, shareholders not subject to tax on their income
will not be required to pay tax on amounts distributed to them.

In addition, the Municipal Bond Fund intends to invest in sufficient
Municipal Bonds to permit payment of "exempt-interest dividends" (as defined in
the Code). Dividends paid by the Fund from the net tax-exempt interest earned
from Municipal Securities qualify as exempt-interest dividends if, at the close
of each quarter of the fiscal year, at least 50% of the value of the total
assets of the Fund consists of Municipal Bonds. See "Federal Tax Information" in
the Statement of Additional Information.

Exempt-interest dividends paid to shareholders are not includable in the
shareholder's gross income for federal income tax purposes. The percentage of
the total dividends paid by the Fund during any taxable year that qualify as
exempt-interest dividends will be the same for all shareholders of the Fund
receiving dividends during such year.

Dividends and interest received by the Emerging Growth Fund, the
International Equity Fund, the Growth Fund and the Growth and Income Fund may
give rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. Investors may be entitled to claim United States foreign
tax credits with respect to such taxes, subject to certain provisions and
limitations contained in the Code.

Income received by a Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the rate of foreign tax in
advance since the amount of a Fund's assets to be invested in various countries
is not known. Such foreign taxes would reduce the income of the Fund distributed
to shareholders.

If, at the end of the International Equity Fund's taxable year, more than
50% of the value of its total assets consists of stock or securities of foreign
corporations, the Fund may make an election pursuant to which foreign income
taxes paid by it will be treated as paid directly by its shareholders. The Fund
will make this election only if it deems the election to be in the best
interests of its shareholders, and will notify shareholders in writing each year
if it makes the election and the amount of foreign taxes to be treated as paid
by the shareholders. If the Fund makes such an election, the amount of such
foreign taxes would be included in the income of shareholders, and a shareholder
other than a foreign corporation or non-resident alien individual could claim
either a credit or, provided the shareholder itemizes deductions, a deduction
for U.S. federal income tax purposes for such foreign taxes. Shareholders who
choose to utilize a credit (rather than a deduction) for foreign taxes will be
subject to the limitation that the credit may not exceed the shareholders' U.S.
tax (determined without regard to the availability of the credit) attributed to
their total foreign source taxable income. For this purpose, the portion of
dividends and distributions paid by the Fund from its foreign source income will
be treated as foreign source income. The Fund's gains and losses from the sale
of securities and from certain foreign currency gains and losses will generally
be treated as derived from U.S. sources. The

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<PAGE> 51

limitation on the foreign tax credit is applied separately to foreign source
"passive income," such as the portion of dividends received from the Fund that
qualifies as foreign source income. In addition, the foreign tax credit is
allowed to offset only 90% of the alternative minimum tax imposed on
corporations and individuals. Because of these limitations, shareholders may be
unable to claim a credit for the full amount of their proportionate share of the
foreign income taxes paid by the Fund.

The foregoing is a brief summary of some of the federal income tax
considerations affecting the Trust and its investors who are U.S. residents or
U.S. corporations. Investors should consult their tax advisors for more detailed
tax advice including state and local tax considerations. Foreign investors
should consult their own counsel for further information as to the U.S. and
their country of residence or citizenship tax consequences of receipt of
dividends and distributions from the Trust.

Shareholders are notified annually of the federal tax status of dividends
and capital gains distributions, including information as to the portion
(including short-term capital gains) taxable as ordinary income, and the portion
taxable as long-term capital gains. TO AVOID BEING SUBJECT TO A 31% FEDERAL
BACKUP WITHHOLDING ON DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS,
SHAREHOLDERS MUST FURNISH THE FUND WITH THEIR CORRECT TAXPAYER IDENTIFICATION
NUMBER. Shareholders are urged to consult their tax advisers with specific
reference to their own tax situation.

STATE AND LOCAL TAXES. The exemption of interest income for federal income
tax purposes may not result in similar exemptions under the laws of a particular
state or local taxing authority. Income distributions may be taxable to
shareholders under state or local law as dividend income even though a portion
of such distributions may be derived from interest on tax-exempt obligations
which, if realized directly, would be exempt from such income taxes. It is
recommended that shareholders consult their tax advisers for information in this
regard. The Municipal Bond Fund will report annually to its shareholders the
percentage and source, on a state-by-state basis, of interest income earned on
Municipal Bonds held by the Fund during the preceding year. Distributions paid
by the Fund from sources other than tax-exempt interest are generally subject to
taxation at the state and local levels.

TAX TREATMENT OF OPTIONS AND FUTURES TRANSACTIONS. Gains or losses on each
Fund's, other than the Money Market Fund's, transactions in certain listed
options (except certain equity options) on securities or indices, futures or
options on futures generally are treated as 60% long-term and 40% short-term,
and positions held by a Fund at the end of its fiscal year generally are
required to be marked to market, with the result that unrealized gains and
losses are treated as though they were realized. Gains and losses realized by a
Fund on transactions in over-the-counter options generally are short-term
capital gains or losses unless the option is exercised in which case the
character of the gain or loss is determined by the holding period of the
underlying security. The Code contains certain "straddle" rules which require
deferral of losses incurred in certain transactions involving hedged positions
to the extent a Fund has unrealized gains in offsetting positions and generally
terminates the holding period of the subject position. Additional information is
set forth in the Statement of Additional Information.

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PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time, each of the Funds, except for the Money Market Fund, may
advertise its total return for prior periods. Any such advertisement would
include at least average annual total return quotations for one year, five years
and for the life of each Fund. Other total return quotations, aggregate or
average, over other time periods may also be included.

The total return of a Fund for a particular period represents the increase
(or decrease) in the value of a hypothetical investment in the Fund from the
beginning to the end of the period. Total return is calculated by subtracting
the value of the initial investment from the ending value and showing the
difference as a percentage of the initial investment; the calculation assumes
the initial investment is made at the maximum public offering price for Class A
and Class 1 shares, if applicable; that all income dividends or capital gains
distributions during the period are reinvested in Fund shares at net asset
value; and that any applicable contingent deferred sales charge has been paid.
Total return will vary depending on market conditions, the securities comprising
a Fund's portfolio, a Fund's operating expenses and unrealized net capital gains
or losses during the period. Total return is based on historical earnings and
asset value fluctuations and is not intended to indicate future performance. No
adjustments are made to reflect any income taxes payable by shareholders on
dividends and distributions paid by the Fund.

Average annual total return quotations for periods of two or more years are
computed by finding the average annual compounded rate of return over the period
that would equate the initial amount invested to the ending redeemable value.

In addition to total return information, the Government Fund and the
Municipal Bond Fund may also advertise their current "yield." Yield figures are
based on historical earnings and are not intended to indicate future
performance. Yield is determined by analyzing the Fund's net income per share
for a 30-day (or one-month) period (which period will be stated in the
advertisement), and dividing by the maximum offering price per share on the last
day of the period. A "bond equivalent" annualization method is used to reflect a
semiannual compounding. The Municipal Bond Fund's "tax-equivalent yield" is

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<PAGE> 52

calculated by determining the rate of return that would have to be achieved on a
fully taxable investment to produce the after-tax equivalent of the Municipal
Bond Fund's yield, assuming certain tax brackets for a Fund shareholder.

For purposes of calculating yield quotations, net income is determined by a
standard formula prescribed by the SEC to facilitate comparison with yields
quoted by other investment companies. Net income computed for this formula
differs from net income reported by a Fund in accordance with generally accepted
accounting principles and from net income computed for federal income tax
reporting purposes. Thus the yield computed for a period may be greater or
lesser than a Fund's then current dividend rate.

A Fund's yield is not fixed and will fluctuate in response to prevailing
interest rates and the market value of portfolio securities, and as a function
of the type of securities owned by a Fund, portfolio maturity and a Fund's
expenses.

Yield quotations should be considered relative to changes in the net asset
value of a Fund's shares, a Fund's investment policies, and the risks of
investing in shares of a Fund. The investment return and principal value of an
investment in a Fund will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.

Yield and total return are calculated separately for each Fund's Class A,
Class B and Class 1 shares. Class A and Class 1 total return figures include the
maximum sales charge applicable; Class B total return figures include any
applicable contingent deferred sales charge. Because of the differences in sales
charges and distribution fees, the total return for each of the classes will
differ.

From time to time the Money Market Fund advertises its "yield" and
"effective yield." Both yield figures are based on historical earnings and are
not intended to indicate future performance. The "yield" of the Fund refers to
the income generated by an investment in the Fund over a seven-day period (which
will be stated in the advertisement). This income is then "annualized." That is,
the amount of income generated by the investment during that week is assumed to
be generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when annualized,
the income earned by an investment in the Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. The current and effective
yields for the seven-day period ending October 31, 1995 and a description of the
method by which the yield was calculated is contained in the Statement of
Additional Information.

To increase the yield of the Money Market Fund, the Adviser, for an
indefinite period has agreed to absorb a certain amount of the ordinary business
expenses. A yield quotation which reflects an expense reimbursement or
subsidization by the Adviser will be higher than a yield quotation without such
expense reimbursement or subsidization. The Adviser may stop absorbing these
expenses at any time without prior notice.

Since yield fluctuates, yield data cannot necessarily be used to compare an
investment in the Fund's shares with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed or guaranteed fixed yield
for a stated period of time. Shareholders should remember that yield is
generally a function of the kind and quality of the instruments held in a
portfolio, portfolio maturity, operating expenses and market conditions.

In reports or other communications to shareholders or in advertising
material, a Fund may compare its performance with that of other mutual funds as
listed in the ratings or rankings prepared by Lipper Analytical Services, Inc.,
Donaghue's Money Market Report, CDA, Ibbotson Associates, Morningstar Mutual
Funds or similar independent services which monitor the performance of mutual
funds or with the Consumer Price Index, Dow Jones Industrial Average, Salomon
Brothers' various indices, Standard & Poor's or NASDAQ, or with other
international indices, or other appropriate indices of investment securities or
with investment or savings vehicles. The performance information may also
include evaluations of a Fund published by nationally recognized ranking
services and by financial publications that are nationally recognized, such as
Business Week, Forbes, Fortune, Financial World, Institutional Investor,
Investor's Business Daily, Kiplinger's Personal Finance Magazine, Money, Mutual
Fund Forecaster, New York Times, Pension World, Stanger's Investment Advisor,
U.S. News & World Report, USA Today and The Wall Street Journal. Such
comparative performance information will be stated in the same terms in which
the comparative data or indices are stated. Any such advertisement would also
include the standard performance information required by the SEC as described
above. For these purposes, the performance of a Fund, as well as the performance
of other mutual funds or indices, do not reflect sales charges, the inclusion of
which would reduce Fund performance.

The Funds, except for the Money Market Fund, may, from time to time,
illustrate the benefits of tax-deferral by comparing taxable investments to
investments made through tax-deferred retirement plans and the Funds may
illustrate in graph or chart form, or otherwise, the benefits of dollar cost
averaging by comparing investments made pursuant to a systematic investment plan
to investments made in a rising market.

The Funds may, from time to time, in reports or other communications to
shareholders or in advertising material, illustrate the benefits of compounding
at various assumed rates of return. Such illustrations may be in the form of
charts or graphs and will not be based on historical returns experienced by the
Funds. The Funds may also utilize performance information in

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<PAGE> 53

hypothetical illustrations provided in narrative form. These hypotheticals will
be accompanied by the standard performance information required by the SEC as
described above.

The Funds may, from time to time, in communications to shareholders or in
advertising material illustrate in graph, chart or narrative form: a) the
importance of investment goals such as owning a home, funding a college
education, or saving money for retirement. These illustrations may depict the
rising costs of college and mortgage payments and the declining number of
workers supporting the Social Security system. Fund communications and
advertisements may also encourage investments in the Funds for purposes of
helping families to achieve their investment goals; b) the benefits and
popularity of purchasing term insurance as opposed to other, more expensive
types of insurance in addition to the possible benefits of investing the savings
in mutual funds; c) the growth of mutual fund assets as reported by industry
publications; and d) the theory of decreasing responsibility, i.e. as
individuals grow older and their assets increase, the need for life insurance
generally decreases.

The Municipal Bond Fund may, from time to time, illustrate the growth
advantage of tax-free income by comparing hypothetical taxable growth
compounding examples to hypothetical tax-free growth compounding examples.

The Trust's Annual Report contains additional performance information with
respect to each Fund discussed in this Prospectus. A copy of the Annual Report
may be obtained without charge by calling or writing the Trust at the telephone
number and address printed on the cover page of this Prospectus.

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ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

ORGANIZATION OF THE TRUST. The Trust was organized under the laws of the
Commonwealth of Massachusetts and is a business entity commonly known as a
"Massachusetts business trust." It is a diversified, open-end management
investment company authorized to issue an unlimited number of Class A, Class B
and Class 1 shares of beneficial interest of $.01 par value, in the Funds.
Shares issued are fully paid, non-assessable and have no preemptive or
conversion rights. In the event of liquidation of any Fund, shareholders of such
Fund are entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.

Shareholders are entitled to one vote for each full share held and to
fractional votes for fractional shares held in the election of Trustees (to the
extent hereafter provided) and on other matters submitted to the vote of
shareholders. Each class of shares represents interest in the assets of each
Fund and has identical voting, dividend, liquidation and other rights on the
same terms and conditions, except that the distribution fees and/or service fees
and any incremental transfer agency fees related to each class of shares of each
Fund are borne solely by that class, and each class of shares of each Fund has
exclusive voting rights with respect to provisions of the Trust's Class A Plan
and Class B Plan which pertain to that class of each Fund. All shares have equal
voting rights, except that only shares of the respective Fund are entitled to
vote on matters concerning only that Fund. There will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees holding office have been elected by
shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Shareholders may, in
accordance with the Declaration of Trust, cause a meeting of shareholders to be
held for the purpose of voting on the removal of Trustees. Except as set forth
above, the Trustees shall continue to hold office and appoint successor
Trustees.

The Declaration of Trust establishing the Trust, dated January 29, 1987, a
copy of which together with all amendments thereto (the "Declaration"), is on
file in the office of the Secretary of the Commonwealth of Massachusetts,
provides that the name "Common Sense Trust" refers to the Trustees under the
Declaration collectively as Trustees, not as individuals or personally; and no
Trustee, officer or shareholder of the Trust shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or liability of any Fund but the assets of the
applicable Fund only shall be liable.

SHAREHOLDER INQUIRIES. Shareholder inquiries should be directed by writing
the Transfer Agent at 3100 Breckinridge Blvd., Bldg. 200, Duluth, Georgia
30199-0062 or calling (800) 544-5445.

TRANSFER AGENT. PFS Shareholder Services, an indirect subsidiary of
Travelers, serves as Transfer Agent for the Fund. See "The Trust and Its
Management."

LEGAL COUNSEL. Sullivan & Worcester LLP, 1025 Connecticut Avenue N.W.,
Washington, D.C. 20036, is legal counsel to the Trust.

INDEPENDENT AUDITORS. Ernst & Young LLP, 1221 McKinney, Suite 2400,
Houston, Texas 77010, are the independent auditors for the Trust.