WILLIAM BLAIR MUTUAL FUNDS INC, 485APOS, 2000-03-01

WILLIAM BLAIR MUTUAL FUNDS INC
485APOS, 2000-03-01

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<PAGE> 1
<TABLE>
<CAPTION>
<S> <C>
As filed with the Securities and Exchange Commission on or about March 1, 2000 Registration No. 33-17463 and 811-5344
=================================================================================================================================
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No. ____

Post-Effective Amendment No. 24 [X]

and/or

REGISTRATION STATEMENT
Under the Investment Company Act of 1940

Amendment No. 25 [X]

WILLIAM BLAIR FUNDS
(Exact Name of Registrant as Specified in Charter)

222 WEST ADAMS STREET
CHICAGO, ILLINOIS 60606
(Address of Principal Executive Offices, including Zip Code)

Registrant's Telephone Number, Including Area Code: (312) 364-8000

Copy to:

MARCO HANIG CATHY G. O'KELLY
222 WEST ADAMS STREET VEDDER, PRICE, KAUFMAN & KAMMHOLZ
CHICAGO, ILLINOIS 60606 222 NORTH LASALLE STREET
(Name and Address of Agent for Service) CHICAGO, ILLINOIS 60601

It is proposed that this filing will become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b); or

[ ] on (date) pursuant to paragraph (b); or

[ ] 60 days after filing pursuant to paragraph (a)(1); or

[X] on May 1, 2000 pursuant to paragraph (a)(1); or

[ ] 75 days after filing pursuant to paragraph (a)(2); or

[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

================================================================================
<PAGE> 2

May 1, 2000

WILLIAM BLAIR FUNDS

CLASS N SHARES PROSPECTUS

GROWTH FUND
INTERNATIONAL GROWTH FUND
VALUE DISCOVERY FUND
INCOME FUND
READY RESERVES FUND

This prospectus contains important information about each Fund, including their
investment objectives. For your benefit and protection, please read it before
you invest and keep it for future reference. This prospectus relates only to the
Class N Shares of each Fund.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

WILLIAM BLAIR FUNDS
222 West Adams Street
Chicago, Illinois 60606

<PAGE> 3

TABLE OF CONTENTS

SUMMARY........................................................... 1
Growth Fund.............................................. 1
International Growth Fund................................ 3
Value Discovery Fund..................................... 5
Income Fund.............................................. 7
Ready Reserves Fund...................................... 9

INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES......... 11
Growth Fund.............................................. 12
International Growth Fund................................ 14
Value Discovery Fund..................................... 16
Income Fund.............................................. 18
Ready Reserves Fund...................................... 20

INVESTMENT RISKS.................................................. 22

MANAGEMENT OF THE FUNDS........................................... 25

YOUR ACCOUNT...................................................... 26
Class N Shares........................................... 26
How to Buy Shares........................................ 26
How to Sell Shares....................................... 28
How to Exchange Shares................................... 30
Dividends and Distributions.............................. 30
Taxes.................................................... 31

DETERMINATION OF NET ASSET VALUE.................................. 33

SHAREHOLDER SERVICES AND ACCOUNT POLICIES......................... 34

INVESTMENT GLOSSARY............................................... 36

FINANCIAL HIGHLIGHTS.............................................. 40

FOR MORE INFORMATION.............................................. Back Cover

<PAGE> 4

WILLIAM BLAIR GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Growth Fund seeks long-term capital
appreciation.

MAIN INVESTMENT STRATEGIES: The Fund invests primarily in a diversified
portfolio of common stocks of domestic growth companies. The Adviser seeks
growth opportunities by investing in large, medium and small companies in
varying proportions.

LARGE, high quality growth companies that have demonstrated sustained
growth over a long period of time;

MEDIUM-sized growth companies of recognized investment quality whose
records of sales and earnings growth may not be as well established;
and

SMALL emerging, rapid growth companies of high quality that have had
especially vigorous growth in revenues and earnings.

MAIN RISKS OF INVESTING: Since the Fund invests most of its assets in common
stocks, the primary risk is that the value of the stocks it holds might decrease
in response to the activities of an individual company or general economic and
market conditions. Thus, the Fund's returns will vary, and you could lose money
by investing in the Fund. The securities of small and medium-sized companies may
be more volatile and more speculative than the securities of large companies. In
addition, small and medium-sized companies may be traded in low volumes, which
can increase volatility. Of course, for all mutual funds there is the risk that
a strategy used by the Adviser may fail to produce its intended result. The Fund
is designed for long-term investors.

FUND PERFORMANCE HISTORY

ANNUAL TOTAL RETURNS. The bar chart below provides an illustration of how the
Fund's performance has varied in each of the last 10 calendar years. The
information below provides some indication of the risks of investing in the Fund
by showing changes in the Fund's performance from year to year and by showing
how the Fund's average annual returns for the years indicated compare with those
of a broad measure of market performance. The Fund's past performance does not
necessarily indicate how it will perform in the future.

<TABLE>
<CAPTION>
HIGHEST QUARTERLY LOWEST QUARTERLY
RETURN RETURN
------ ------
<S> <C>
23.69% (4Q98) -14.91% (3Q90)
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Fund's average
annual total returns for the periods ended December 31, 1999, to a broad-based
market benchmark.

<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
<S> <C> <C> <C>
Growth Fund 19.98% 22.77% 17.97%
S&P 500* 21.04% 28.55% 18.21%
</TABLE>

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

* The Standard and Poor's 500 Stock Index is an unmanaged index that
generally represents broad larger capitalization equity market
performance. Expenses are not included.

<PAGE> 5

FEES AND EXPENSES: This section describes the fees and expenses that you may pay
if you buy and hold Class N shares of the Fund. Class N shares are no-load
investments, so you will not pay shareholder fees to buy shares, reinvest
dividends in additional shares or exchange into the Class N shares of another
Fund. However, the Fund may charge a redemption fee of 1.00% of the value of the
shares sold within 180 days of their purchase, in order to compensate the Fund
for expenses directly related to the redemption of Fund shares and to discourage
short-term investments in the Fund. This redemption fee will be retained by the
Fund.

SHAREHOLDER FEES are fees paid directly from your investment.

<TABLE>
<CAPTION>
<S> <C>
Redemption fee on shares held less than 180 days.................. 1.00%
Redemption fee on shares held 180 days or more.................... None

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

Management Fee.................................................... 75%
Distribution (Rule 12b-1) Fee..................................... 25%
Other Expenses.................................................... 11%
-----
Total Annual Fund Operating Expenses............................. 1.11%
</TABLE>

EXAMPLE: This example is intended to help you compare the cost of investing in
Class N shares of the Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund, redeem all of your shares
at the end of the periods shown, earn a 5% return each year and incur the same
operating expenses as shown above:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$113 $353 $612 $1,352
</TABLE>

2
<PAGE> 6

WILLIAM BLAIR INTERNATIONAL GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair International Growth Fund seeks
long-term capital appreciation.

MAIN INVESTMENT STRATEGIES: The Fund invests primarily in a diversified
portfolio of common stocks of foreign companies of all sizes. In choosing
investments, the Adviser performs fundamental company analysis. The Adviser
generally seeks common stocks of companies that historically have had and are
expected to maintain superior growth, profitability and quality relative to
local markets and relative to companies within the same industry worldwide.
Following stock selection, country selection and industry allocation are the
next most important investment criteria. The Adviser will vary the geographic
diversification and types of securities in which the Fund invests based upon its
continuous evaluation of economic, market and political trends throughout the
world. The Adviser normally will allocate the Fund's investments among at least
six different countries. Normally, the Fund's investments will be divided among
Continental Europe, the United Kingdom, Canada, Japan and the markets of the
Pacific Basin. However, selective investments may also be made in Latin America
and in other parts of the world. The Fund may invest in emerging markets, which
include every country in the world except the United States, Canada, Japan,
Australia, New Zealand, Hong Kong, Singapore and most Western European
countries.

MAIN RISKS OF INVESTING: Because the Fund invests most of its assets in common
stocks of foreign companies, the primary risk is that the value of the stocks it
holds might decrease in response to the activities of those companies or market
and economic conditions. Thus, the Fund's returns will vary, and you could lose
money by investing in the Fund. Foreign investments often involve additional
risks, including political instability, differences in financial reporting
standards, and less stringent regulation of securities markets. These risks are
magnified in less-established, emerging markets. Because the securities held by
the Fund usually will be denominated in currencies other than the U.S. dollar,
changes in foreign currency exchange rates may adversely affect the value of the
Fund's investments. In addition, the Fund may invest in the securities of small
companies, which may be more volatile and less liquid than securities of large
companies. Of course, for all mutual funds there is the risk that a strategy
used by the Adviser may fail to produce its intended result. The Fund is
designed for long-term investors.

FUND PERFORMANCE HISTORY

ANNUAL TOTAL RETURNS. The bar chart below provides an illustration of how the
Fund's performance has varied in each calendar year since the Fund started. The
information below provides some indication of the risks of investing in the Fund
by showing changes in the Fund's performance from year to year and by showing
how the Fund's average annual returns for the years indicated compare with those
of a broad measure of market performance. The Fund's past performance does not
necessarily indicate how it will perform in the future.

<TABLE>
<CAPTION>
HIGHEST QUARTERLY LOWEST QUARTERLY
RETURN RETURN
------ ------
<S> <C>
42.89(4Q99) -16.70% (3Q98)
</TABLE>

3
<PAGE> 7

AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Fund's average
annual total returns for the periods ended December 31, 1999, to a broad-based
securities market index.

<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE OF FUND**
------ ------- --------------
<S> <C> <C> <C>
International Growth Fund 96.25% 22.88% 20.17%
MSCI AC WLDF EX U.S.* 30.91% 14.31% 13.48%
</TABLE>

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

* The Morgan Stanley Capital International All Country World (Free)
except U.S. Index is an unmanaged index that includes developed and
emerging markets. Expenses are not included.

** The Fund's inception was on October 1, 1992.

SHAREHOLDER FEES are fees paid directly from your investment.

<TABLE>
<S> <C>
Redemption fee on shares held less than 180 days........................ 1.00%
Redemption fee on shares held 180 days or more.......................... None

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

Management Fee.......................................................... 1.10%
Distribution (Rule 12b-1) Fee........................................... .25%
Other Expenses.......................................................... .25%
----
Total Annual Fund Operating Expenses................................... 1.60%
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$163 $505 $871 $1,900
</TABLE>

4
<PAGE> 8

WILLIAM BLAIR VALUE DISCOVERY FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Value Discovery Fund seeks long-term
capital appreciation.

MAIN INVESTMENT STRATEGIES: The Fund invests primarily in a diversified
portfolio of equity securities (including common stocks and other forms of
equity investments) of small companies that the Adviser believes offer a
long-term investment value. In implementing its value discipline, the Adviser
evaluates the extent to which a company meets the following criteria: (a)
whether the company's current market value reflects a material discount from the
Adviser's estimate of the company's value, (b) whether the company has a
reasonable expectation of improving its level of profitability over a three-year
investment horizon, (c) whether the company has a capable and skilled management
team, (d) whether the company has a relatively strong capital structure, and (e)
whether there is a likelihood that the company will undergo a positive corporate
change within a three-year investment horizon. The weight that the Adviser gives
to each of the investment criteria depends upon the circumstances, and some of
the Fund's investments will not meet all of the criteria.

MAIN RISKS OF INVESTING: Since the Fund invests most of its assets in equity
securities, the primary risk is that the value of the securities it holds might
decrease in response to the activities of an individual company or general
economic and market conditions. Thus, the Fund's returns will vary, and you
could lose money by investing in the Fund. The securities of smaller companies
may be more volatile and more speculative than the securities of larger, more
established issuers, which may cause the Fund's share price to be more volatile.
In addition, small companies may be traded in low volumes. This can increase
volatility and increase the risk that the Fund will not be able to sell the
security on short notice at a reasonable price. Of course, for all mutual funds
there is the risk that a strategy used by the Adviser may fail to produce its
intended result. The Fund is designed for long-term investors.

FUND PERFORMANCE HISTORY

ANNUAL TOTAL RETURNS. The bar chart below provides an illustration of how the
Fund's performance has varied in each of the calendar years since the Fund
started. The information below provides some indication of the risks of
investing in the Fund by showing changes in the Fund's performance from year to
year and by showing how the Fund's average annual returns for the years
indicated compare with those of a broad measure of market performance. The
Fund's past performance does not necessarily indicate how it will perform in the
future.

<TABLE>
<CAPTION>
HIGHEST QUARTERLY LOWEST QUARTERLY
RETURN RETURN
------ ------
<S> <C>
26.58% (3Q97) -17.59% (3Q98)
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Fund's average
annual total returns for the periods ended December 31, 1999, to a broad-based
securities market index.

<TABLE>
<CAPTION>
1 YEAR LIFE OF FUND**
------ --------------
<S> <C> <C>
Value Discovery Fund 6.10% 12.54%
Russell 2000 Index* 21.26% 13.08%
</TABLE>

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

* The Russell 2000 Index is an unmanaged composite of the smallest 2000
stocks of the Russell 3000 Index, which consists of the largest 3000
stocks in the U.S. market as determined by market capitalization.
Expenses are not included.

** The Fund's inception was on December 23, 1996.

<PAGE> 9

FEES AND EXPENSES: This section describes the fees and expenses that you may pay
if you buy and hold Class N shares of the Fund. Class N shares are no-load
investments, so you will not pay shareholder fees to buy shares, reinvest
dividends in additional shares or exchange into the Class N shares of another
Fund. However, the Fund may charge a redemption fee of 1.00% of the value of the
shares sold within 180 days of their purchase, in order to compensate the Fund
for expenses directly related to the redemption of Fund shares. This redemption
fee will be retained by the Fund. The Fund discourages short-term investments in
the Fund because they have a negative impact on remaining shareholders.

SHAREHOLDER FEES are fees paid directly from your investment.

<TABLE>
<CAPTION>
<S> <C>
Redemption fee on shares held less than 180 days...................... 1.00%
Redemption fee on shares held 180 days or more........................ None

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets.

Management Fee........................................................ 1.15%
Distribution (Rule 12b-1) Fee......................................... 25%
Other Expenses........................................................ 23%
---
Total Annual Fund Operating Expenses................................. 1.63%(1)
Adviser's Expense Waiver............................................. 03%
---
Net Expenses (with waiver)........................................ 1.60%
</TABLE>

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

(1) The Adviser has entered an agreement with the Fund to cap the Fund's
expense ratio at 1.64% until at least April 30, 2001; the Adviser may
continue to waive fees voluntarily thereafter.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$167 $524 $904 $1,974
</TABLE>

6
<PAGE> 10

WILLIAM BLAIR INCOME FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Income Fund seeks a high level of
current income with relative stability of principal.

MAIN INVESTMENT STRATEGIES: The Fund invests primarily in a diversified
portfolio of intermediate-term income-producing securities, including government
securities, U.S. dollar-denominated corporate bonds and notes, collateralized
obligations and money market instruments that are rated in one of the top three
categories. The Fund's investments are subject to certain maturity and duration
restrictions, by which the Fund seeks to approximate the total returns of an
intermediate-term debt index while also providing investors with the additional
security of shorter-term obligations. The Adviser continually considers the
Fund's exposure to interest rate risk.

MAIN RISKS OF INVESTING: The primary risk of investing in the Fund is interest
rate risk. The yield paid by the Fund will vary with changes in interest rates.
Changes in interest rates may cause changes in the Fund's yield, net asset value
and total return. Investments with longer maturities, which typically provide
higher yield than securities with shorter maturities, may subject the Fund to
increased price changes resulting from market yield fluctuations. The Fund is
also subject to credit risk. The Fund's net asset value and total return may be
adversely affected by the inability of the issuers of the Fund's securities to
make payment at maturity. Thus, the Fund's returns will vary, and you could lose
money by investing in the Fund. Of course, for all mutual funds there is the
risk that a strategy used by the Adviser may fail to produce its intended
result.

FUND PERFORMANCE HISTORY

<TABLE>
<CAPTION>
HIGHEST QUARTERLY LOWEST QUARTERLY
RETURN RETURN
------ ------
<S> <C>
5.44% (4Q91) -1.30% (4Q92)
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Fund's average
annual total returns for the periods ended December 31, 1999, to a broad-based
securities market index.

<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE OF FUND**
------ ------- --------------
<S> <C> <C> <C>
Income Fund .34% 6.45% 7.06%
Lehman Intermediate Gov't/Corp. Index* .39% 7.10% 7.32%
</TABLE>

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

* The Lehman Intermediate Government/Corporate Index is an unmanaged index
that represents broad intermediate government/corporate bond market
performance. Expenses are not included.

** The Fund's inception was on September 25, 1990.

YIELD: You may obtain the most current yield information for the Fund by calling
1-800-742-7272.

7
<PAGE> 11

SHAREHOLDER FEES are fees paid directly from your investment.

<TABLE>
<S> <C>
Redemption fee on shares held less than 180 days........................ 1.00%
Redemption fee on shares held 180 days or more.......................... None

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

Management Fee.......................................................... .59%
Distribution (Rule 12b-1) Fee........................................... .15%
Other Expenses.......................................................... .11%
---
Total Annual Fund Operating Expenses................................... .85%
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$87 $271 $471 $1,049
</TABLE>

8
<PAGE> 12

WILLIAM BLAIR READY RESERVES FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Ready Reserves Fund seeks current
income, a stable share price and daily liquidity.

MAIN INVESTMENT STRATEGIES: The Fund invests primarily in short-term U.S.
dollar-denominated domestic money market instruments, which include securities
issued by domestic corporations; the U.S. Government, its agencies and
instrumentalities; and U.S. banks. The Fund invests exclusively in securities
that are high-quality, which means that they are rated in the top 2 categories.
These instruments are considered to be among the safest investments available
because of their short maturities, liquidity and high-quality ratings. The Fund
is designed to be highly liquid and seeks to maintain a net asset value of $1.00
per share. The Fund is designed for investors who seek to obtain the maximum
current income consistent with the preservation of capital.

MAIN RISKS OF INVESTING: Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Fund. As with any money market fund, there is a low risk that the issuers or
guarantors of securities will default on the payment of principal or interest or
the obligation to repurchase securities from the Fund. An investment in the Fund
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Of course, for all mutual funds there is the risk that
a strategy used by the Adviser may fail to produce its intended result.

FUND PERFORMANCE HISTORY

<TABLE>
<CAPTION>
HIGHEST QUARTERLY LOWEST QUARTERLY
RETURN RETURN
------ ------
<S> <C>
1.25% (4Q99) 0.64% (2Q93)
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Fund's average
annual total returns for the periods ended December 31, 1999, to a broad-based
securities market index.

<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
<S> <C> <C> <C>
Ready Reserves Fund 4.63% 4.99% 4.78%
S&P-rated AAA* 4.62% 4.98% 4.76%
</TABLE>

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

* The Standard and Poor's-rated AAA Money Market Funds Index is an
unmanaged index that includes money market mutual funds rated AAA by
Standard and Poor's. Expenses are not included.

YIELD: You may obtain the most current yield information for the Fund by calling
1-800-742-7272.

9
<PAGE> 13

SHAREHOLDER FEES are fees paid directly from your investment.

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

<TABLE>
<S> <C>
Management Fee.......................................................... .24%
Distribution (Rule 12b-1) Fee........................................... .35%(1)
Other Expenses.......................................................... .13%
---
Total Annual Fund Operating Expenses................................... .72%
---
</TABLE>

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

(1) Long-term shareholders may pay more than the equivalent of the maximum
permitted front-end sales charge.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$74 $230 $401 $895
</TABLE>

10
<PAGE> 14

INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------

Each Fund is a series of William Blair Funds, an open-end management investment
company. William Blair & Company, L.L.C. (the "Adviser") provides management and
investment advisory services to the Funds.

The following section takes a closer look at the investment objectives of each
Fund, its principal investment strategies and certain related investment risks.
Each Fund's secondary strategies or investments are described in the Investment
Glossary at the end of this prospectus. In addition, the Statement of Additional
Information contains more detailed information about certain of these practices,
the potential risks and/or the limitations adopted by each Fund to help manage
such risks.

All investments, including those in mutual funds, have risks. No investment is
suitable for all investors. The Growth Fund, International Growth Fund and Value
Discovery Fund are intended for long-term investors. In addition, the
International Growth Fund is intended for investors who can accept the risks
entailed in investing in foreign securities. Of course, there can be no
assurance that a Fund will achieve its objective.

11
<PAGE> 15

WILLIAM BLAIR GROWTH FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

The William Blair Growth Fund seeks long-term capital appreciation. The Fund
invests primarily in a diversified portfolio of the common stocks of domestic
growth companies with sustainable, above-average growth from one business cycle
to the next. The Fund generally does not invest in cyclical industries, but may
do so when the Adviser expects a multi-year period of sustained growth.

The Adviser seeks growth opportunities by investing in large, medium and small
companies in varying proportions:

LARGE, high quality growth companies that have demonstrated sustained
growth over a long period of time;

MEDIUM-sized companies of recognized investment quality whose records
of sales and earnings growth may not be as well established; and

SMALL, emerging, rapid-growth companies that have had especially
vigorous growth in revenues and earnings.

INVESTMENT PROCESS

The Adviser utilizes an investment process that relies on thorough, in-depth
fundamental research of a company, its competitors, its suppliers and its
customers. The Adviser will invest in companies that it believes are
well-managed considering some or all of the following investment criteria:

A LEADER IN THE FIELD. The company should be, or clearly have the
expectation of becoming, a significant provider in the primary markets
it serves.

UNIQUE OR SPECIALTY COMPANY. The company should have some distinctive
attribute that cannot easily be duplicated by present or potential
competitors. This may take the form of proprietary products or
processes, a unique distribution system, an entrenched brand name or an
especially strong financial position.

QUALITY PRODUCTS OR SERVICES. The company's products or services should
be regarded as being of superior quality, which should enable the
company to obtain a premium price and to command greater customer
loyalty.

MARKETING CAPABILITY. The company should have a distinctive capability
in sales, service or distribution.

VALUE TO CUSTOMER. The prices of the company's products or services
should be based upon their value to the customer, rather than their
production cost.

RETURN ON EQUITY. The company should have achieved, or have the
potential to achieve, an above-average return on equity through
efficient use of assets and adequate margins, rather than excessive
financial leverage. Such companies should be able to finance most or
all of their growth internally and translate revenue and income growth
into rising per share earnings and dividends.

CONSERVATIVE FINANCIAL POLICIES AND ACCOUNTING PRACTICES. The company
should have a relatively simple, clean financial structure and adhere
to conservative and straightforward accounting practices.

ADDITIONAL STRATEGIES

12
<PAGE> 16

preferred stocks, convertible securities and warrants which are described in the
Statement of Additional Information. The Investment Glossary also describes the
Fund's policies with regard to borrowing, concentration, diversification and
portfolio turnover. The Fund may invest to a limited extent in warrants, which
are described in the Statement of Additional Information.

PORTFOLIO MANAGEMENT

The Growth Fund is co-managed by Rocky Barber, Mark A. Fuller, III and Gretchen
S. Lash.

Rocky Barber, a principal of William Blair & Company, L.L.C., has co-managed the
Fund since 1992. He joined the firm in 1986 as a portfolio manager and manager
of the Investment Management Department. In addition to his management
responsibilities, he is a member of the department's Growth Team. Previously, he
was an equity and fixed-income manager with Alliance Capital Management for nine
years and president of the Alliance Capital Bond Fund, a group of fixed-income
mutual funds. Rocky is Chief Executive Officer of William Blair Funds and a past
Chairman of the Board of Trustees of the Stanford Business School Trust. He
currently serves on the Board of the LaRabida Children's Hospital Foundation and
is a member of the Investment Analysts Society of Chicago. Education: B.A., M.S.
and M.B.A., Stanford University; and CFA.

Mark A. Fuller, III, a principal of William Blair & Company, L.L.C., has
co-managed the Fund since 1992. He has been with the firm since 1983. He is a
portfolio manager for numerous accounts and is a member of the Investment
Management Department's Small Cap Team. He began his career in Institutional
Sales, developing long-standing relationships with each of the firm's research
analysts. Prior to joining William Blair, he was a sales representative with IBM
Corporation. Education: B.A., Northwestern University; M.B.A., Northwestern
University Kellogg Graduate School of Management.

Gretchen S. Lash, a principal with William Blair & Company, L.L.C., has
co-managed the Fund since 1999. She joined the firm in 1997 as a portfolio
manager. Previously, she was a partner at Lincoln Capital Asset Management where
she was part of a nine person team managing $17 billion in institutional, large
cap growth equities. Prior to that, she was a consumer analyst and then a
portfolio manager of several growth mutual funds with total assets of $2.6
billion at American Capital. Education: B.A., Cornell University; M.B.A., Rice
University; and CFA.

13
<PAGE> 17

WILLIAM BLAIR INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

The William Blair International Growth Fund seeks long-term capital
appreciation. Current income is not an investment objective, although it is
anticipated that capital appreciation will normally be accompanied by modest
investment income, which may vary depending on the allocation of the
investments.

The Fund's assets normally will be allocated among not fewer than six different
countries and will not concentrate investments in any particular industry.
However, the Fund may have more than 25% of its assets invested in any major
industrial or developed country. No more than 50% of the Fund's equity
securities may be invested in securities of issuers of any one country at any
given time. The Fund ordinarily will invest at least 80% of its total assets in
a diversified portfolio of common stocks with above-average growth,
profitability and quality characteristics, issued by companies domiciled outside
the U.S., and in securities convertible into, exchangeable for or having the
right to buy such common stocks.

INVESTMENT PROCESS

Stock Selection. In selecting companies for investment, fundamental company
analysis and stock selection are the Adviser's primary investment criteria. The
Adviser seeks companies that historically have had superior growth,
profitability and quality relative to local markets and relative to companies
within the same industry worldwide, and that are expected to continue such
performance. Such companies generally will exhibit superior business
fundamentals, including leadership in their field, quality products or services,
distinctive marketing and distribution, pricing flexibility and revenue from
products or services consumed on a steady, recurring basis. These business
characteristics should be accompanied by management that is shareholder
return-oriented and uses conservative accounting policies. Companies with
above-average returns on equity, strong balance sheets and consistent,
above-average earnings growth at reasonable valuation levels will be the primary
focus. Stock selection will take into account both local and global comparisons.

Country Allocation. In pursuing the Fund's investment objective, the Adviser
will vary the geographic diversification and types of securities based upon the
Adviser's continuous evaluation of economic, market and political trends
throughout the world. The investment of the Fund's assets in various
international securities markets tends to decrease the degree to which events in
any one country can affect the entire Fund. In making decisions regarding the
country allocation, the Adviser will consider such factors as the conditions and
growth potential of various economies and securities markets, currency exchange
rates, technological developments in the various countries and other pertinent
financial, social, national and political factors. Normally, the Fund's
investments will be spread throughout the world (excluding the United States).
The Adviser intends to maintain approximately 10 to 20 percent of the Fund's
assets in emerging markets, although that allocation will vary over time.
Emerging market companies are (i) companies organized under the laws of an
emerging market country or having securities which are traded principally on an
exchange or over-the-counter in an emerging market country; or (ii) companies
which, regardless of where organized or traded, have a significant amount of
assets (at least 50%) located in and/or derive a significant amount of their
revenues (at least 50%) from goods purchased or sold, investments made or
services performed in or with emerging market countries. Currently, emerging
markets include every country in the world other than the United States, Canada,
Japan, Australia, New Zealand, Hong Kong, Singapore and most Western European
countries. The Adviser will seek investment opportunities in companies at
different stages of development ranging from large, well-established companies
to smaller companies at an earlier stage of development.

14
<PAGE> 18

ADDITIONAL STRATEGIES

For liquidity purposes, up to 20% of the Fund's assets may be held in cash (U.S.
dollars and foreign currencies) or in short-term securities, such as repurchase
agreements, and domestic and foreign money market instruments, such as
government obligations, certificates of deposit, bankers' acceptances, time
deposits, commercial paper and short-term corporate debt securities. The Fund
does not have specific rating requirements for its short-term securities;
however, the Adviser presently does not intend to invest more than 5% of the
Fund's net assets in securities rated lower than investment grade.

The Fund may enter into forward foreign currency transactions in an effort to
protect against changes in foreign exchange rates. To a limited extent, the Fund
may also invest in depository receipts, foreign currency futures, forward
foreign currency transactions, illiquid securities, investment companies,
repurchase agreements and when-issued and delayed-delivery securities, which are
described in the Investment Glossary at the end of this prospectus. The
Investment Glossary also describes the Fund's policies with regard to borrowing,
concentration, diversification, and portfolio turnover. The Fund may invest to a
very limited extent in warrants, which are described in the Statement of
Additional Information.

PORTFOLIO MANAGEMENT

The International Growth Fund is managed by W. George Greig.

W. George Greig, a principal of William Blair & Company, L.L.C., has managed the
Fund since 1996 when he joined the Investment Management Department as an
international portfolio manager. He headed international equities for PNC Bank
in Philadelphia from 1995 to 1996 and, prior to that, he was a founding partner
of Pilgrim Baxter & Associates, where he was an analyst, research director and
portfolio manager for over ten years. He also served as chief investment officer
of Framlington Group plc during its association with Pilgrim Baxter and founded
and managed a joint venture between the two firms. Education: B.S.,
Massachusetts Institute of Technology; M.B.A., Wharton School of the University
of Pennsylvania.

15
<PAGE> 19

WILLIAM BLAIR VALUE DISCOVERY FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

The William Blair Value Discovery Fund seeks long-term capital appreciation. The
Fund pursues its objective by investing with a value discipline primarily in a
diversified portfolio of the equity securities of small companies.

INVESTMENT PROCESS

In selecting companies for investment, the Adviser evaluates the extent to which
a company meets the investment criteria set forth below. The weight given to a
particular investment criterion will depend upon the circumstances, and some
Fund holdings may not meet all of the following criteria, which are described
more fully in the Statement of Additional Information:

MATERIAL PRICE/VALUE DISPARITY--whether the company's current market
value reflects a material discount from the Adviser's estimate of the
company's intrinsic value.

PROBABLE EXPANSION IN PROFITABILITY--whether the company has a
reasonable expectation of improving its level of profitability over a
three-year investment horizon.

SKILLED AND COMMITTED MANAGEMENT--whether the company has a capable and
skilled management team and a clearly articulated and logical business
strategy with a reasonable probability of successful execution.

STRONG CAPITAL STRUCTURE--whether the company has a relatively simple,
clean financial structure without excessive use of financial leverage.
In addition, the company should adhere to conservative and
straightforward accounting practices.

POSITIVE CATALYST--the likelihood that the company will undergo a
positive corporate change within a three-year investment horizon.

ADDITIONAL STRATEGIES

The Fund may also hold debentures and preferred stocks if they are convertible
into common stocks that meet the Fund's investment criteria. The Fund may invest
up to 15% of its net assets in foreign securities, which may include American
Depository Receipts or substantially similar investments; however, the Fund may
invest only up to 5% of its net assets directly in foreign securities. To a
limited extent, the Fund may invest in depository receipts, foreign securities,
illiquid securities, investment companies, real estate investment trusts,
repurchase agreements and when-issued and delayed delivery securities which are
described in the Investment Glossary at the end of this prospectus. The
Investment Glossary also describes the Fund's policies with regard to borrowing,
concentration, diversification and portfolio turnover. The Fund may invest to a
limited extent in warrants and futures, which are described in the Statement of
Additional Information.

16
<PAGE> 20

PORTFOLIO MANAGEMENT

The Value Discovery Fund is co-managed by Glen A. Kleczka, David S. Mitchell and
Capucine E. Price.

Glen Kleczka joined William Blair & Company, L.L.C. in 1996 to lead the Fund's
portfolio management team. For the previous 7 years, he was a partner in the
Private Markets and U.S. Equity groups of Brinson Partners, Inc. and co-managed
the Post-Venture Fund, whose assets totaled more than $900 million. He was also
a member of the Private Markets Committee which approved all venture capital and
partnership investments. Previously, he spent two years at CNA Financial Corp.
as a manager of their Variable Annuity Trust equity portfolio. While at the
University of Wisconsin he was a participant at the Center for Applied Security
Analysis, a nationally recognized investment management program. He is a member
of the Investment Analyst Society of Chicago. Education: B.S., Marquette
University; M.B.A., University of Wisconsin.

David Mitchell joined William Blair & Company, L.L.C. in 1996 as a portfolio
manager for the Fund. In 1996, he was a partner in the U.S. Equity group of
Brinson Partners, Inc. and a member of the Post-Venture Fund management team,
whose assets totaled more than $900 million. Prior to joining Brinson, he spent
four years as a co-manager of Thomas Paine Investors, L.P., a private small-cap
fund. Before joining Thomas Paine, he was a Senior Equity Analyst on NBD's
small-cap Woodward Opportunity Fund and with Connecticut National Bank as an
equity analyst and portfolio manager. Prior to graduate studies he worked as an
equity trader and a money market portfolio manager. Education: B.A., Knox
College; M.M., Northwestern University.

Capucine "Cappy" Price joined William Blair & Company, L.L.C. in 1996 as a
portfolio manager for the Fund. For the previous 3 years, she was a partner in
the Private Markets and U.S. Equity groups of Brinson Partners, Inc. and a
member of the Post-Venture Fund management team, whose assets totaled more than
$900 million. Previously, she was an equity analyst for the First National Bank
of Chicago. While attending Northwestern University she was a participant in
First Chicago's First Scholar program. Education: B.A., University of Michigan;
M.A., University of Chicago; M.M., Northwestern University.

17
<PAGE> 21

WILLIAM BLAIR INCOME FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

The William Blair Income Fund seeks a high level of current income relative to
stability of principal. The Fund invests primarily in a diversified portfolio of
high-grade intermediate-term debt securities.

As a matter of fundamental policy, under normal conditions at least 90% of the
Fund's assets will be invested in the following:

U.S. DOLLAR-DENOMINATED CORPORATE DEBT SECURITIES (domestic or foreign)
with long-term ratings of "A-" or better, or an equivalent rating, by
at least one of the following four nationally recognized statistical
rating organizations ("Rating Organizations"): Duff & Phelps, Inc.,
Fitch Investors Service, Inc., Moody's Investors Service, Inc. and
Standard & Poor's Corporation;

OBLIGATIONS OF OR GUARANTEED BY THE UNITED STATES GOVERNMENT, its
agencies or instrumentalities. These securities include direct
obligations of the U.S. Treasury, which differ only in their interest
rates, maturities and time of issuance and obligations issued or
guaranteed by U.S. Government agencies or instrumentalities, which
differ in the degree of support provided by the U.S. Government.
Although these securities are subject to the market risks resulting
from fluctuation in interest rates, they are expected to be paid in
full if held to maturity;

COLLATERALIZED OBLIGATIONS, which are debt securities issued by a
corporation, trust or custodian, or by a U.S. Government agency or
instrumentality, that are collateralized by a portfolio or pool of
assets, such as mortgages, mortgage-backed securities, debit balances
on credit card accounts or U.S. Government securities. The issuer's
obligation to make interest and/or principal payments is secured by the
underlying pool or portfolio of securities. The Income Fund may invest
in collateralized obligations that are not guaranteed by a U.S.
Government agency or instrumentality only if the collateralized
obligations are rated A- or better, or an equivalent rating, by one of
the Rating Organizations; and

COMMERCIAL PAPER obligations rated within the highest grade by one of
the four Rating Organizations.

The anticipated dollar-weighted average maturity of the Fund is three to seven
years. The anticipated weighted average modified duration for the Fund is two to
five years, with a maximum duration on any instrument of eight years. The
Adviser will not continue to hold a security whose duration has moved above
eight years.

The duration of an instrument is different from the maturity of an instrument in
that duration measures the average period remaining until the discounted value
of the amounts due (principal and interest) under the instrument are to be paid,
rather than by the instrument's stated final maturity. For example, a portfolio
duration of five years means that if interest rates increased by one percent,
the value of the portfolio would decrease by approximately five percent.
Modified duration adjusts duration to take into account the yield to maturity
and the number of coupons received each year. For purposes of calculating
duration, instruments allowing prepayment will be assigned a maturity schedule
by the Adviser based upon industry experience.

INVESTMENT PROCESS

The Adviser seeks to outperform the total return of an index of broad
intermediate-term government and corporate high-grade debt through an actively
managed diversified portfolio of debt securities. The Adviser's investment
philosophy emphasizes shifts in the Fund's portfolio among various sectors of
the debt market, subject to the Fund's credit quality constraints for its
portfolio. The Adviser also actively manages the Fund based upon the average
duration and yield to maturity of the Fund's portfolio and the Adviser's
perceived trends in interest rates.

18
<PAGE> 22

ADDITIONAL STRATEGIES

Up to 10% of the Fund's total assets may be invested in a combination of: (1)
unrated debt securities, provided that the Adviser deems such securities to be
of at least "A-" quality and provided that the comparable debt of the issuer has
a rating of at least "A-" or its equivalent by one of the four Ratings
Organizations; and (2) debt securities which are rated "BBB-" (or its
equivalent) or better by each Rating Organization by which such securities are
rated, so long as the Fund does not invest more than 3% of its total net assets
in securities of any single issuer whose securities are rated "BBB-" and, in the
event that a security held by the Fund is downgraded below "BBB-" (or its
equivalent) by a Rating Organization, the Fund will sell the security within 90
days. Although considered to be investment grade, debt securities rated "BBB"
may have speculative characteristics, and changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case for higher grade bonds.

To a limited extent, the Fund may invest in illiquid securities, repurchase
agreements and when-issued and delayed delivery securities, which are described
in the Investment Glossary at the end of this prospectus. The Investment
Glossary also describes the Fund's policies with regard to borrowing,
concentration, diversification and portfolio turnover. In addition, the Fund's
policy regarding lending portfolio securities is described in the Statement of
Additional Information.

PORTFOLIO MANAGEMENT

The Income Fund is co-managed by Jim Kaplan and Bentley Myer.

Jim Kaplan, an associate of William Blair & Company, L.L.C., has co-managed the
Fund since 1999. He joined the firm's Investment Management Department in 1994
as a fixed-income portfolio manager. Prior to that he was with First Union
National Bank for twelve years. While at First Union, he traded risk positions
in mortgage-backed securities and municipal bonds. In addition, he co-managed
the mortgage-backed securities portion of the bank's investment portfolio. He is
a member of the Investment Analysts Society of Chicago. Education: B.A.,
Washington & Lee University and CFA.

Bentley Myer, a principal of William Blair & Company, L.L.C., has managed the
Fund since 1992. He joined the firm in 1991 as a fixed-income portfolio manager.
From 1983 to 1991, he was associated with LaSalle National Trust, first as head
of fixed-income investments and later as chief investment officer. Prior to that
he was head of the municipal investment section of the trust department of
Harris Trust and Savings Bank. He is currently a Trustee of Delnor Community
Hospital, as well as a member of the Investment Analysts Society of Chicago.
Education: B.A., Middlebury College; M.B.A., Wharton School of the University of
Pennsylvania.

19
<PAGE> 23

WILLIAM BLAIR READY RESERVES FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

The William Blair Ready Reserves Fund seeks current income, a stable share price
and daily liquidity. The Fund invests exclusively in high-quality money market
instruments. These instruments are considered to be among the safest investments
available because of their short maturities, liquidity and high-quality ratings.
The Fund seeks to maintain a net asset value of $1.00 per share. Nevertheless,
there is no guarantee that the objective of the Fund will be achieved or that
the net asset value of $1.00 per share of the Fund will be maintained.

ADDITIONAL STRATEGIES AND RISKS

The Fund will invest exclusively in U.S. dollar-denominated money market
instruments, including, but not limited to, those issued by:

- Corporations;
- the U.S. Government, its agencies and instrumentalities;
- U.S. and foreign banks;
- Municipalities;
- Foreign governments; and
- Multinational organizations, such as the World Bank.

The yield paid by the Ready Reserves Fund will vary with changes in interest
rates. While the Fund seeks to maintain its $1.00 share price, there is no
guarantee that it will be able to do so. The Fund has adopted certain investment
policies designed to limit the market and financial risks of the Fund. The Fund
complies with the requirements of Rule 2a-7 under the Investment Company Act of
1940, which governs the maturity and credit quality of money market funds. The
Fund may only invest in securities that, based on their short-term ratings, are
deemed to be the highest grade, or if unrated, are of equivalent quality in the
judgment of the Adviser, subject to the supervision of the Board of Trustees.
However, the Fund may invest up to 5% of its total assets in securities deemed
within the second highest grade, or if unrated, are of equivalent quality. In
addition, portfolio investments will be limited to instruments that the Adviser,
under the supervision of the Board of Trustees, has determined present minimal
credit risks. Securities are deemed to be highest grade if they are rated
high-quality by two Rating Organizations, or, if only rated by one Rating
Organization, rated high-quality by that Rating Organization. For example,
commercial paper rated "Duff 1 minus," "Fitch 1," "Prime 1" and "A-1" by Duff &
Phelps, Inc., Fitch Investors Service, Inc., Moody's Investors Service, Inc.,
and Standard & Poor's Corporation, respectively, would be considered high
quality. Obligations that are unrated are not necessarily of lower quality than
those that are rated, but may be less marketable and, consequently, may provide
higher yields. Further, the Fund may invest in other corporate obligations
maturing in thirteen months or less, such as publicly traded bonds, debentures
and notes, if they are rated within the two highest grades by a Rating
Organization. For a description of these ratings, see Appendix B to the
Statement of Additional Information.

To the extent the Fund invests in short-term U.S. dollar-denominated foreign
money market instruments, investing in foreign securities may involve a greater
degree of risk than investing in domestic securities due to the possibility of,
but not limited to, less publicly available information, more volatile markets,
less securities regulation, less favorable tax provisions, war and
expropriation.

To a limited extent, the Fund may invest in repurchase agreements, Section 4(2)
commercial paper, when-issued and delayed delivery securities and variable rate
securities, which are more fully described in the Investment Glossary at the end
of this prospectus. The Investment Glossary also describes the Fund's policies
with regard to borrowing, concentration and diversification.

20
<PAGE> 24

PORTFOLIO MANAGEMENT

The Ready Reserves Fund is co-managed by Jim Kaplan and Bentley Myer.

Bentley Myer, a principal with William Blair & Company, L.L.C., has managed the
Fund since 1992. He joined the firm in 1991 as a fixed-income portfolio manager.
From 1983 to 1991 he was associated with LaSalle National Trust, first as head
of fixed-income investments and later as chief investment officer. Prior to that
he was head of the municipal investment section of the trust department of
Harris Trust and Savings Bank. He is currently a Trustee of Delnor Community
Hospital as well as a member of the Investment Analysts Society of Chicago.
Education: B.A., Middlebury College; M.B.A., Wharton School of the University of
Pennsylvania.

21
<PAGE> 25

INVESTMENT RISKS
- --------------------------------------------------------------------------------

The following table summarizes the types of risks described below that
each Fund may experience.

<TABLE>
<CAPTION>
TEMPORARY
SMALLER COUNTRY EMERGING OPERATING DEFENSE INTEREST
STOCKS ALLOCATION MARKETS EXPENSES POSITION RATE CREDIT
------ ---------- ------- -------- -------- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Growth Fund X X
International Growth Fund X X X X
Value Discovery Fund X X
Income Fund X X X
</TABLE>

EQUITY FUNDS

General. Because each equity Fund invests substantially all of its assets in
common stocks, the main risk is that the value of the stocks it holds may
decrease in response to the activities of an individual company or in response
to general market, business and economic conditions. If this occurs, the Fund's
share price may also decrease.

Smaller Stocks. Stocks of smaller companies involve greater risk than those of
larger, more established companies. This is because smaller companies may be in
earlier stages of development, may be dependent on a small number of products or
services, may lack substantial capital reserves and/or do not have proven track
records. Smaller companies may be more adversely affected by poor economic or
market conditions, and may be traded in low volumes, which may increase
volatility and liquidity risks. From time to time, the Growth Fund and the Value
Discovery Fund may invest in the equity securities of very small companies,
often referred to as "micro-cap" companies. The considerations noted above are
generally intensified for these investments. Any convertible debentures issued
by small companies are likely to be lower-rated or non-rated securities, which
generally involve more credit risk than debentures in the higher rating
categories and generally include some speculative characteristics, including
uncertainties or exposure to adverse business, financial or economic conditions
which could lead to inadequate capacity to meet timely interest and principal
payments.

Country Allocation. The International Growth Fund seeks to invest in companies
and governments of countries having stable or improving political environments;
however, there is the possibility of expropriation or confiscatory taxation,
seizure or nationalization of foreign bank deposits or other assets,
establishment of exchange controls, the adoption of foreign government
restrictions and other adverse political, social or diplomatic developments that
could affect investments in these nations.

The risks of investing in securities of foreign issuers may include less
publicly available information, less governmental regulation and supervision of
foreign stock exchanges, brokers and issuers, a lack of uniform accounting,
auditing and financial reporting standards, practices and requirements, the
possibility of expropriation, nationalization, confiscatory taxation, adverse
changes in investment or exchange control regulations, political instability,
restrictions on the flow of international capital and difficulty in obtaining
and enforcing judgments against foreign entities. Securities of some foreign
issuers are less liquid and their prices more volatile than the securities of
U.S. companies. In addition, the time period for settlement of transactions in
foreign securities generally is longer than for domestic securities.

Emerging Markets. Country allocation risks are typically intensified in emerging
markets, which are the less developed and developing nations. Certain of these
countries have in the past failed to recognize private property rights and have
at times nationalized and expropriated the assets of private companies.
Investments in emerging markets companies are speculative and subject to special
risks. Political and economic structures in many of these countries may be in
their infancy and developing rapidly. Such countries may also lack the social,
political and economic characteristics of more developed countries. The
currencies of certain emerging market countries have experienced a steady
devaluation relative to the U.S. dollar, and continued devaluations may
adversely affect the value of a fund's assets denominated in such currencies.
Many emerging market countries have experienced substantial rates of inflation
for many years, and continued inflation may adversely affect the economies and
securities markets of such countries.

22
<PAGE> 26

In addition, unanticipated political or social developments may affect the
values of a Fund's investments in emerging market countries and the availability
to the Fund of additional investments in these countries. The small size,
limited trading volume and relative inexperience of the securities markets in
these countries may make a Fund's investments in such countries illiquid and
more volatile than investments in more developed countries, and the Fund may be
required to establish special custodial or other arrangements before making
investments in these countries. There may be little financial or accounting
information available with respect to issuers located in these countries, and it
may be difficult as a result to assess the value or prospects of an investment
in such issuers.

In many foreign countries there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the U.S. There is an increased risk, therefore, of uninsured loss due to
lost, stolen, or counterfeit stock certificates. Prior governmental approval of
non-domestic investments may be required under certain circumstances in some
developing countries, and the extent of foreign investment in domestic companies
may be subject to limitation in other developing countries. Foreign ownership
limitations also may be imposed by the charters of individual companies in
developing countries to prevent, among other concerns, violation of foreign
investment limitations. Repatriation of investment income, capital and proceeds
of sales by foreign investors may require governmental registration and/or
approval in some developing countries. A Fund could be adversely affected by
delays in or a refusal to grant any required governmental registration or
approval for such repatriation.

Further, the economies of certain developing countries may be dependent upon
international trade and, accordingly, have been and may continue to be adversely
affected by trade barriers, exchange controls, managed adjustments in relative
currency values and other protectionist measures imposed or negotiated by the
countries with which they trade. These economies also have been and may continue
to be adversely affected by economic conditions in the countries with which they
trade.

The securities held by the International Growth Fund usually will be denominated
in currencies other than the U.S. dollar. Therefore, changes in foreign exchange
rates will affect the value of the securities held in the Fund either
beneficially or adversely. Fluctuations in foreign currency exchange rates will
also affect the dollar value of dividends and interest earned, gains and losses
realized on the sale of securities and net investment income and gains, if any,
available for distribution to shareholders.

Operating Expenses. The International Growth Fund is expected to incur operating
expenses that are higher than those of mutual funds investing exclusively in
U.S. equity securities, since expenses such as custodial fees related to foreign
investments are usually higher than those associated with investments in U.S.
securities. Similarly, brokerage commissions on purchases and sales of foreign
securities are generally higher than on domestic securities. In addition,
dividends and interest from foreign securities may be subject to foreign
withholding taxes. (For more information, see "Your Account --Taxes.")

Temporary Defensive Position. Each Fund may significantly alter its make-up as a
temporary defensive strategy. A defensive strategy will be employed only if, in
the judgment of the Adviser, investments in a Fund's usual markets or types of
securities become decidedly unattractive because of current or anticipated
adverse economic, financial, political and social factors. Generally, the Growth
Fund and Value Discovery Fund will remain fully invested, and the Adviser will
not attempt to time the market. However, if a significant adverse market action
is anticipated, investment-grade debt securities may be held without limit as a
temporary defensive measure. Normally, the Funds do not purchase any stocks with
a view to quick turnover for capital gains. For the International Growth Fund,
the types of securities that might be acquired and held for defensive purposes
could include fixed-income securities and securities issued by the U.S. or
foreign governments as well as domestic or foreign money market instruments and
non-convertible preferred stock, each of which would be of investment-grade. At
such time as the Adviser determines that the Fund's defensive strategy is no
longer warranted, the Fund will adjust its Fund back to its normal complement
securities as soon as practicable. When a Fund is invested defensively, it may
not meet its investment objective.

23
<PAGE> 27

INCOME FUND

Interest Rate Risk. The Income Fund's investments are subject to price
fluctuations resulting from various factors, including rising or declining
interest rates (interest rate risk). The value of the portfolio's investments
(other than an interest-only class of a collateralized obligation) tends to
decrease when interest rates rise and tends to increase when interest rates
fall. In addition, investments with longer maturities, which typically provide
better yields, may subject the Fund to increased price changes resulting from
market yield fluctuations.

Credit Risk. The value of the Fund's securities is subject to the ability of the
issuers of such securities to make payment at maturity (credit risk). However,
in the opinion of the Adviser, the risk of loss of principal should be reduced
due to the relatively high quality of the investments in which the Fund
primarily will invest. Obligations that are unrated are not necessarily of lower
quality than those that are rated, but may be less marketable and, consequently,
provide higher yields. Not all securities issued or guaranteed by agencies or
instrumentalities of the U.S. Government are backed by the full faith and credit
of the United States. Such securities involve different degrees of government
backing. Some obligations issued or guaranteed by U.S. Government agencies or
instrumentalities in which the Fund may invest are backed by the full faith and
credit of the United States, such as modified pass-through certificates issued
by the Government National Mortgage Association, while others are backed
exclusively by the agency or instrumentality with limited rights of the issuer
to borrow from the U.S. Treasury (such as obligations of the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation). Others are
backed only by the credit of the issuer itself (such as obligations of the
Student Loan Marketing Association). For a description of ratings, see Appendix
B in the Statement of Additional Information.

Temporary Defensive Position. Generally the Fund will remain fully invested.
However, for temporary defensive purposes, the Fund may invest up to 100% of its
assets in other types of securities, including high-quality commercial paper,
obligations of banks and savings institutions, U.S. Government securities,
government agency securities and repurchase agreements, or it may retain funds
in cash. The Fund does not invest in equity securities.

24
<PAGE> 28

MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------

TRUSTEES, OFFICERS AND ADVISER. The Board of Trustees of the William Blair Funds
(the "Trust") has overall management responsibility. The duties of the trustees
and officers of the Trust include supervising the business affairs of the Trust,
monitoring investment activities and practices and considering and acting upon
future plans for the Trust. The Statement of Additional Information has the
names of and additional information about the trustees and officers of the
Trust. The Adviser, William Blair & Company, L.L.C., 222 West Adams Street,
Chicago, Illinois 60606, is responsible for providing investment advisory and
management services to the Funds, subject to the direction of the Board of
Trustees. The Adviser is also the principal underwriter and distributor of the
Trust and acts as agent of the Trust in the sale of its shares (the
"Distributor"). William Blair & Company, L.L.C. was founded 65 years ago by
William McCormick Blair. Today, the firm has 150 principals and 850 employees.
The main office in Chicago houses all research and investment management
services.

The Investment Management Department oversees the assets of the William Blair
Funds, along with corporate pension plans, endowments and foundations and
individual accounts. The department currently manages approximately $12 billion
in equities, fixed-income securities and cash equivalents.

The Adviser firmly believes that clients are best served when portfolio managers
are encouraged to draw on their experience and develop new ideas. This
philosophy has helped build a hard-working, results-oriented team of over 30
portfolio managers, supported by over 40 analysts, with an exceptionally low
turnover rate. William Blair portfolio managers generally average more than ten
years with William Blair and more than two decades of experience in the
investment industry. The Adviser is registered as an investment adviser under
the Investment Advisers Act of 1940.

Each Fund pays the Adviser a monthly investment management fee based upon the
percentage of the Fund's average net assets as shown below:

<TABLE>
<CAPTION>
FEE AS A % OF
FUND AVERAGE NET ASSETS
- ---- ------------------
<S> <C>
Growth Fund 0.75%
International Growth Fund 1.10%
Value Discovery Fund 1.15%
Income Fund 0.59%
Ready Reserves Fund 0.24%
</TABLE>

CUSTODIAN. The Custodian is Investors Bank and Trust Company, 200 Clarendon
Street, Boston, Massachusetts 02117. The Custodian is responsible for custody of
portfolio securities, fund accounting and the calculation of the Fund's net
asset value. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, may serve as the Custodian for Individual Retirement
Accounts ("IRAs").

TRANSFER AGENT AND DIVIDEND PAYING AGENT. The Transfer Agent and Dividend Paying
Agent is State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110.

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<PAGE> 29

YOUR ACCOUNT
- --------------------------------------------------------------------------------

CLASS N SHARES

The Class N shares offered herein are offered only to investors who acquire the
shares directly through the Trust's distributor or through a select number of
financial intermediaries with whom the distributor has entered into selling
agreements specifically authorizing them to sell Class N shares.

William Blair Funds has adopted a plan under Rule 12b-1 of the Investment
Company Act that provides for fees payable to compensate the Distributor for
distribution and other services provided to shareholders of Class N. Because
12b-1 fees are paid out of Fund assets on an ongoing basis, they will, over
time, increase the cost of investment and may cost more than other types of
sales charges. Long-term shareholders may pay more than the economic equivalent
of the maximum initial sales charge permitted by the National Association of
Securities Dealers.

HOW TO BUY SHARES (By Mail, by Wire or by Telephone)

MINIMUM INVESTMENTS. To open an account, the minimum initial investment for
regular accounts is $5,000, and the minimum initial investment for Individual
Retirement Accounts ("IRAs") is $2,000. To add to an account, the minimum
subsequent investment is generally $1,000 for all Funds, except the Ready
Reserves Fund, for which the subsequent minimum investment is $1.00. The Funds
may accept smaller amounts under a group payroll deduction or similar plan.
These minimum amounts may be changed at any time and may be waived for trustees,
principals, officers or employees of the Trust or the Adviser.

PURCHASE PRICE. All Class N shares are sold at their public offering price,
which is the net asset value per share that is next computed after receipt of
your order in proper form by the Distributor, the Transfer Agent or a designated
agent thereof. The net asset value per share of the Ready Reserves Fund normally
will be $1.00. (For more information, see "Determination of Net Asset Value.")
If you fail to pay for your order, you will be liable for any loss to the Funds
and, if you are a current shareholder, the Funds may redeem some or all of your
shares to cover such loss.

NOTE: All purchases made by check should be in U.S. dollars and made payable to
William Blair Funds, or in the case of a retirement account, the custodian or
trustee of such account. Third party checks will not be accepted. When purchases
are made by check or periodic account investment, the Funds may delay sending
redemption proceeds until they determine that collected funds have been received
for the purchase of such shares, which may be up to 15 calendar days.

RIGHT TO REJECT YOUR PURCHASE ORDER. The Trust reserves the right to decline
your purchase order (including exchanges) upon receipt for any reason, including
excessive, short-term (market-timing) or other abusive trading practices which
may disrupt portfolio management strategies and harm Fund performance. The Trust
also reserves the right to delay delivery of redemption proceeds -- up to seven
days -- or to honor certain redemptions with securities, rather than cash.

BY MAIL

OPENING AN ACCOUNT. To open a new account by mail (except for the Ready Reserves
Fund), make out a check for the amount of your investment, payable to "William
Blair Funds." Complete the account application included with this Prospectus and
mail the completed application and the check to the Transfer Agent, State Street
Bank and Trust Company ("State Street"), P.O. Box 8506, Boston, Massachusetts
02266-8506.

For the Ready Reserves Fund, send your check and completed application to the
Distributor, William Blair Funds, 222 West Adams Street, Chicago, Illinois
60606.

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<PAGE> 30

ADDING TO AN ACCOUNT. To purchase additional shares, make out a check for the
amount of your investment, payable to "William Blair Funds." Except for the
Ready Reserves Fund, mail the check, together with a letter that specifies the
portfolio name, the account number and the name(s) in which the account is
registered, to State Street Bank and Trust Company, P.O. Box 8506, Boston,
Massachusetts 02266-8506.

For the Ready Reserves Fund, send your check and letter to the Distributor,
William Blair Funds, 222 West Adams Street, Chicago, Illinois 60606.

BY WIRE

OPENING AN ACCOUNT. First, call State Street at 1-800-635-2886 (in
Massachusetts, 1-800-635-2840) for an account number. Then instruct your bank to
wire federal funds to:

State Street Bank and Trust Co.
ABA # 011000028
DDA # 99029340
Attn: Custody & Shareholder Services
225 Franklin Street
Boston, Massachusetts 02110

Include the name of the portfolio in which you are investing, your assigned
account number and the name(s) in which the account is registered. Finally,
complete the account application, indicate the account number assigned to you by
State Street and mail it to William Blair Funds, 222 West Adams Street, Chicago,
Illinois 60606.

ADDING TO AN ACCOUNT. To add to your account by wire, instruct your bank to wire
federal funds to:

State Street Bank and Trust Co.
ABA # 011000028
DDA # 99029340
Attn: Custody & Shareholder Services
225 Franklin Street
Boston, Massachusetts 02110

In your request, specify the portfolio name in which you are investing, your
account number, and the name(s) in which the account is registered.

To add to an existing account by wire transfer of funds, you must have selected
this option on your account application.

BY TELEPHONE

OPENING AN ACCOUNT. See "By Wire."

ADDING TO AN ACCOUNT. Call State Street at 1-800-635-2886 (in Massachusetts,
1-800-635-2840). For the Ready Reserves Fund only, call your William Blair
account executive.

Tell your account executive the Fund name, your account number and the name(s)
in which the account is registered. You may then pay for your new shares by mail
or by wire.

To add to an existing account by telephone, you must have selected this option
on your account application.

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<PAGE> 31

HOW TO SELL SHARES (By Mail, by Wire or by Telephone)

BY MAIL

For all Funds except the Ready Reserves Fund, to redeem shares by mail, send a
written redemption request signed by all account owners to State Street Bank and
Trust Company, P.O. Box 8506, Boston, Massachusetts 02266-8506.

For the Ready Reserves Fund, send your redemption request signed by all account
owners to the Distributor, William Blair & Company, L.L.C., 222 West Adams
Street, Chicago, Illinois 60606, to the attention of your account executive.
Amounts redeemed will be placed in your William Blair brokerage account.

FOR ALL FUNDS, WRITTEN REDEMPTION REQUESTS MUST INCLUDE:

- a letter that contains your name, the Fund's name and the
dollar amount or number of shares to be redeemed; and
- any other necessary documents, such as an inheritance tax
consent or evidence of authority (for example, letters
testamentary), dated not more than 60 days prior to receipt
thereof by State Street or the Distributor.

BY WIRE

To redeem some or all of your shares in any Funds by wire, you may contact the
Transfer Agent, or the Distributor in the case of the Ready Reserves Fund, by
mail or telephone, as explained herein. To redeem by wire, you must have elected
this option on your account application and attached to the application a
voided, unsigned check or deposit slip for your bank account.

BY TELEPHONE

TO REDEEM SHARES BY TELEPHONE, YOU MUST HAVE ELECTED THIS OPTION ON YOUR ACCOUNT
APPLICATION. For all Funds except the Ready Reserves Fund, contact the Transfer
Agent at 1-800-635-2886 (in Massachusetts, 1-800-635-2840).

For the Ready Reserves Fund, you may redeem some or all of your shares by
telephone by calling your William Blair account executive. Amounts redeemed will
be placed in your brokerage account.

NOTE: Redemption requests should NOT be sent to the Trust or to the Distributor
(except in the case of the Ready Reserves Fund).

SIGNATURE GUARANTEES. Signature guarantees must be obtained from a bank that is
a member of the FDIC, from a brokerage firm that is a member of the NASD, or
from an eligible guarantor who is a member of, or a participant in, a signature
guarantee program. Your redemption request must include a signature guarantee if
any of the following situations apply:

- You wish to redeem shares having a value of $5,000 or more in
a single transaction;
- Your account registration has changed; or
- You want a check in the amount of your redemption to be mailed
to a different address than the one on your account
application (address of record).

SIGNATURE GUARANTEES, IF REQUIRED, MUST APPEAR ON THE WRITTEN REDEMPTION REQUEST
AND ON ANY ENDORSED STOCK CERTIFICATE OR STOCK POWER.

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<PAGE> 32

redemption request in proper order by the Distributor, the Transfer Agent or a
designated agent thereof. For the Ready Reserves Fund, the net asset value
normally will be $1.00.

PAYMENT FOR REDEEMED SHARES. Payment normally will be mailed to you at the
address of record for your account by the third business day after receipt by
State Street (or, in the case of the Ready Reserves Fund, the Distributor) of a
redemption request and any other required documentation and after any checks in
payment for your shares have cleared.

For the Ready Reserves Fund, if the Distributor receives notice of your request
to redeem shares by 9:30 a.m., Chicago time, the redemption will be effected as
of that date and proceeds normally will be paid that day. If notice of your
redemption request is received after that time, proceeds normally will not be
paid until the next business day.

DELAYED PROCEEDS. The Trust reserves the right to delay delivery of your
redemption proceeds -- up to seven days -- or to honor certain redemptions with
securities, rather than cash, as described in the next section. In addition,
redemption of shares from a Fund, other than the Ready Reserves Fund, within 180
days of purchase may be subject to a 1.00% redemption fee.

REDEMPTIONS IN KIND. If the Adviser determines that existing conditions make
cash payments undesirable, redemption payments may be made in whole or in part
in securities or other financial assets, valued for this purpose as they are
valued in computing the NAV for each of the Fund's shares. Shareholders
receiving securities or other financial assets on redemption may realize a gain
or loss for tax purposes, and will incur any costs of sale, as well as the
associated inconveniences. Notwithstanding the above, each of the Funds are
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1.00%
of the net asset value of such Fund during any 90-day period for any one
shareholder of record.

AUTOMATIC REDEMPTION OF SMALL ACCOUNTS. Because of the relatively high cost of
maintaining small accounts, the Trust reserves the right to redeem your shares
in any account that, following a redemption, is below a specified amount.
Currently, the MINIMUM IS $5,000 PER ACCOUNT. Before the redemption is
processed, you will be notified that the value of your account has fallen below
the minimum and allowed to make an additional investment.

SPECIAL REDEMPTION METHODS FOR THE READY RESERVES FUND. In addition to the above
methods, shares of the Ready Reserves Fund can be redeemed by two other methods
unique to this Fund. Redemption requests will be processed after the next daily
dividend declaration at the net asset value next determined upon receipt by the
Distributor of a proper redemption request. In this way, you will receive the
net asset value of your shares and all declared but unpaid dividends on your
shares through the date of redemption.

1. REDEMPTION BY CHECK. To redeem shares by check, you must fill out
the appropriate section of your account application. If your application for the
check-writing privilege is approved, you will be provided with checks that may
be made payable to any person IN AN AMOUNT NOT LESS THAN $500 NOR MORE THAN $9
MILLION. There currently is no charge for this service and no limit on the
number of checks that you may write; however, these provisions are subject to
change.

The payee of the check may cash or deposit it like any other check
drawn on a bank. When the check is presented for payment, a sufficient number of
full and fractional shares from your account will be redeemed at their
next-determined net asset value per share, usually $1.00, to cover the amount of
the check. This enables you to continue earning daily dividends until the check
clears. Canceled checks will be returned to you by State Street. For joint
accounts, unless a single signer has been authorized on your account
application, checks must be signed by all joint account owners.

The Trust may refuse to honor checks whenever the right of redemption
has been suspended or postponed or whenever your account is otherwise impaired.
For instance, your account would be considered to be impaired when (1) there are
insufficient assets to cover the check, (2) a "stop order" has been placed on
the check, and (3) in other situations, such as where there is a dispute over
ownership of your account. A $25 SERVICE FEE may be charged when a check is
presented to redeem shares in excess of the value of your account or for an
amount less than $500.

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<PAGE> 33

2. AUTOMATIC REDEMPTION. The Distributor has instituted an automatic
redemption procedure available to Ready Reserve Fund shareholders who maintain
certain brokerage accounts with it. The Distributor may use this procedure to
satisfy amounts due it by you as a result of purchases of securities or other
transactions in your brokerage account. Under this procedure, if you so elect,
your brokerage account will be scanned at the opening of business each day and,
after application of any cash balances in the brokerage account, a sufficient
number of shares will be redeemed, effective that day at the next-determined net
asset value, to satisfy any amounts which you are obligated to pay to the
Distributor. You will receive all dividends declared but unpaid through the date
of redemption.

HOW TO EXCHANGE SHARES (By Mail or by Telephone)

Subject to the following limitations, you may exchange shares of Class N shares
of each Fund into either Class N shares of another Fund or into shares of the
Ready Reserves Fund at their relative net asset values so long as the shares to
be acquired are available for sale in your state of residence. Only four (4)
exchanges from a Fund are allowed within any 12-month period. Exchanges will be
effected by redeeming your shares and purchasing shares of the other Fund or
Funds requested. Shares of a William Blair Fund with a value in excess of
$1,000,000 acquired by exchange from another William Blair Fund may not be
exchanged thereafter until they have been owned for 15 days (the "15 Day Hold
Policy").

BY MAIL

You may request an exchange of your shares by writing to William Blair Funds,
Attention: Exchange Department, P.O. Box 8506, Boston, Massachusetts 02266-8506.

BY TELEPHONE

You may also exchange your shares by telephone by completing the appropriate
section on your account application. Once your telephone authorization is on
file, State Street will honor your requests to redeem shares by telephone at
1-800-635-2886 (in Massachusetts, 1-800-635-2840).

Neither the Trust nor State Street will be liable for any loss, expense or cost
arising out of any telephone request pursuant to the telephone exchange
privilege, including any fraudulent or unauthorized request, and you will bear
the risk of loss, so long as the Trust or the Transfer Agent reasonably
believes, based upon reasonable verification procedures, that the telephonic
instructions are genuine. The verification procedures include (1) recording
instructions, (2) requiring certain identifying information before acting upon
instructions and (3) sending written confirmations.

DIVIDENDS AND DISTRIBUTIONS

INCOME DIVIDENDS. Each Fund earns dividends from stocks and interest from bond,
money market, and other investments, which are passed along to shareholders as
income dividends as long as expenses do not exceed income.

CAPITAL GAIN DISTRIBUTIONS. Each Fund realizes capital gains whenever it sells
securities for a higher price than it paid for them, which are passed along to
shareholders as capital gain distributions.

As a shareholder, you are entitled to your portion of the Fund's net income and
gains on its investments. Each Fund passes its earnings along to you as
distributions. Each Fund's policy is to distribute substantially all net
investment income, if any, and all net realized capital gain, if any. All
distributions of income and capital gain and any return of capital have the
effect of immediately thereafter decreasing net asset value per share. Income
dividends and capital gain distributions will be automatically reinvested in
additional shares at net asset value on the reinvestment date, unless you
specifically request otherwise (see "Shareholder Services and Account Policies
- -- Dividend Options"). Cash payments are made by the Dividend Paying Agent,
State Street Bank and Trust Company, shortly following the reinvestment date.

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<PAGE> 34

WHEN DIVIDENDS ARE PAID

- For the Growth Fund, International Growth Fund and Value Discovery
Fund, all income dividends, if any, and capital gain
distributions, if any, generally will be paid in December and/or
January.

- For the Income Fund, income dividends are normally paid the
fifteenth day of each month, if a business day, with net-realized
long-term capital gain distributions, if any, generally paid in
December and/or January. The Income Fund attempts to maintain
relatively level monthly dividends and, from time to time, may
distribute or retain net investment income and capital gain or
make a return of capital distribution in order to pursue that
goal.
- For the Ready Reserves Fund, the Fund's net investment income will
be declared at the close of the New York Stock Exchange on each
day that the Fund is open for business, which is generally 3:00
p.m., Chicago time, as a dividend to shareholders who were of
record prior to the declaration.

The Funds may vary these dividend practices at any time. Income dividends and
any capital gain distributions on all Funds will vary from year to year.
Dividends and distributions may be subject to withholding, as required by the
Internal Revenue Service (see "Your Account -- Taxes").

TAXES

As with any investment, you should consider how your investment in a Fund will
be taxed. If your account is not a tax-deferred retirement account, you should
be aware of these tax implications.

TAXES ON DISTRIBUTIONS. Each Fund's distributions are subject to Federal income
tax and may also be subject to state or local taxes. Distributions may be
taxable at different rates depending upon the length of time the Fund holds the
security. Your distributions are taxable when they are paid, whether you take
them in cash or reinvest them in additional shares. However, dividends declared
in October, November or December to shareholders of record as of a date in one
of those months and paid before the following February 1 are treated as having
been paid on December 31 of the calendar year declared for Federal income tax
purposes. The Funds will inform you of the amount and nature of distributions
paid.

Under the Federal tax laws, income dividends and short-term capital gains
distributions are taxed as ordinary income. Long-term capital gain distributions
are taxed as long-term capital gains. It is anticipated that a portion of the
ordinary income dividends for the Growth Fund and Value Discovery Fund will be
eligible for the dividends-received deduction available for corporate
shareholders. The ordinary income dividends of International Growth Fund, Income
Fund and Ready Reserves Fund are not eligible for the dividends-received
deduction available to corporate shareholders.

TAXES ON TRANSACTIONS. Redemptions of Fund shares and exchanges for shares of
other Funds are treated as sales and are subject to capital gains taxation. A
capital gain or loss is the difference between the price that you paid for your
shares and the price that you receive when you sell (or exchange) them. For the
Ready Reserves Fund, so long as a net asset value of $1.00 is maintained, the
sale or redemption of your shares will not result in a capital gain or loss. Any
loss recognized on the redemption of shares held six months or less will be
treated as a long-term capital loss to the extent you have received any
long-term capital gain dividends on such shares. A shareholder who redeems
shares normally will recognize a capital gain or loss for Federal income tax
purposes. If you realize a loss on the redemption of Fund shares within 30 days
before or after an acquisition of shares of the same Fund, the two transactions
may be subject to the wash sale rules of the Internal Revenue Code, resulting in
a postponement of the recognition of such loss for Federal income tax purposes.

"BUYING A DIVIDEND." If you buy shares before a Fund deducts a distribution from
its net asset value, you will pay the full price for the shares and then receive
a portion of the price back in the form of a taxable distribution. See "Your
Account --Dividends and Distributions" for payment schedules, and call the
Distributor if you have further questions.

31
<PAGE> 35

exemptions from tax. Accordingly, the International Growth Fund will operate so
as to qualify for such reduced tax rates or tax exemptions whenever practicable.

For a more detailed discussion of taxes, see the Statement of Additional
Information.

32
<PAGE> 36

DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------

WHEN AND HOW NET ASSET VALUE ("NAV") IS DETERMINED

A Fund's net asset value is the market value of its total assets, minus
liabilities, divided by the number of shares outstanding. The value of a single
share is called its share value or share price.

The net asset value per share shall be determined as of the close of trading on
the New York Stock Exchange, which is generally 3:00 p.m., Chicago time (4:00
p.m. Eastern time), on each day when the Exchange is open. In addition, the
Ready Reserves Fund does not price its shares on the observance of Columbus Day
and Veterans Day.

When net asset value is computed, quotations of foreign securities in foreign
currencies are converted into the United States dollar equivalents at the
prevailing market rates as computed by Investors Bank & Trust Company, the
custodian. Trading in securities on exchanges and over-the-counter markets in
Europe and the Far East is normally completed at various times prior to 3:00
p.m., Chicago time, the current closing time of the New York Stock Exchange.
Trading on foreign exchanges may not take place on every day that the New York
Stock Exchange is open. Conversely, trading in various foreign markets may take
place on days when the New York Stock Exchange is not open and on other days
when net asset value is not calculated. Consequently, calculation of the net
asset value for the International Growth Fund may not occur at the same time as
determination of the most current market prices of the securities included in
the calculation, and the value of the net assets held by the International
Growth Fund may be significantly affected on days when shares are not available
for purchase or redemption.

HOW THE MARKET VALUE OF FUND SECURITIES IS DETERMINED

DOMESTIC EQUITY SECURITIES. The market value of domestic equity securities is
determined by valuing securities traded on national securities markets at the
last sale price or, in the absence of a recent sale on the date of
determination, at the latest bid price. Securities traded only on the
over-the-counter market are valued at the latest bid price.

FOREIGN EQUITY SECURITIES. The value of a foreign equity security is determined
based upon the last sale price on the foreign exchange or market on which it is
primarily traded and in the currency of that market, as of the close of the
appropriate exchange or, if there have been no sales during that day, at the
latest bid price.

FIXED-INCOME SECURITIES. Fixed-income securities are valued by using market
quotations or independent pricing services that use either prices provided by
market-makers or matrixes that produce estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics.

OTHER SECURITIES AND ASSETS. Other securities, and all other assets, including
securities for which a market price is not available, are valued at a fair value
as determined in good faith by, or under the direction of, the Board of Trustees
and in accordance with the Trust's pricing procedures.

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<PAGE> 37

SHAREHOLDER SERVICES AND ACCOUNT POLICIES
- --------------------------------------------------------------------------------

The Funds provide a variety of services to help you manage your account.

AUTOMATIC SWEEP PROGRAM. You can purchase shares of the Ready Reserves Fund
through an automatic sweep program if you establish a brokerage account with the
Distributor, provided that you meet the current minimum brokerage account size
requirements. The automatic sweep program helps you to make convenient,
efficient use of free credit balances in your William Blair brokerage account.

To purchase shares of the Ready Reserves Fund through the automatic sweep
program, you must have a free credit balance in your brokerage account with the
Distributor. Currently, free credit balances are used automatically to purchase
shares. If you have a FREE CREDIT BALANCE OF AT LEAST $1,000, the Distributor
will effect on your behalf an investment in shares on an expedited basis.

- If you have a free credit balance resulting from securities
transactions in your brokerage account at the opening of business
of the Distributor, it generally will be invested in shares on
that same day, but in no event later than the next business day.
- If you have a free credit balance resulting from a deposit made
prior to 2:00 p.m., Chicago time, or a receipt of income (by check
or wire), then it will be invested in shares no later than the
next business day.
- If you have a free credit balance of at least $1 and less than
$1,000, it will be invested in shares within a maximum of five
business days from the day when the free credit balance is
created.

DIVIDEND OPTIONS. You may choose to have your distributions reinvested in
additional shares automatically or paid in cash by making the appropriate
election on your account application. You may change your election at any time
by providing written notice to State Street.

1. AUTOMATIC DIVIDEND REINVESTMENT PLAN. The Funds automatically
reinvest all income dividends and capital gain distributions in additional
shares of stock at net asset value on the reinvestment date. (For more
information, see "Dividend and Distribution Policy.")

2. CASH-DIVIDEND PLAN. You may choose to have all of your income
dividends paid in cash and/or have your capital gain distributions paid in cash.
Any distributions you do not elect to have paid in cash will be reinvested
automatically in additional shares at net asset value.

3. AUTOMATIC DEPOSIT OF DIVIDENDS. You may elect to have all income
dividends and capital gain distributions automatically deposited in a previously
established bank account.

AUTOMATIC INVESTMENT PLAN. On your account application, you may authorize State
Street to automatically withdraw an amount of money (MINIMUM $250) from your
bank account on the fifth or twentieth day of each month. This amount will be
invested in additional shares. You may change your election at any time by
providing written notice to State Street.

SYSTEMATIC WITHDRAWAL PLAN. You may establish this plan with shares presently
held or through a new investment, which should be at least $5,000. Under this
plan, you specify a dollar amount to be paid monthly, quarterly or annually.
Shares corresponding to the specified dollar amount are automatically redeemed
from your account on the fifth business day preceding the end of the month,
quarter or year. While this plan is in effect, all income dividends and capital
gain distributions on shares in your account will be reinvested at net asset
value in additional shares. There is no charge for withdrawals, but the MINIMUM
WITHDRAWAL IS $250 PER MONTH. Depending upon the size of payments requested, and
fluctuations in the net asset value of the shares redeemed, redemptions under
this plan may reduce or even exhaust your account.

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<PAGE> 38

Pension Plans ("SEPs") and other qualified retirement plans. Additional
information concerning such plans is available from the Funds.

The minimum initial retirement plan investment is $2,000 and the minimum
subsequent investment is $1,000. State Street serves as custodian for IRAs.
State Street charges a $5 plan establishment fee, an annual $15 custodial fee
and a $10 fee for each lump sum distribution from a plan. These fees may be
waived under certain circumstances.

With regard to retirement plans:

- participation is voluntary;
- you may terminate or change a plan at any time without penalty
or charge from the Funds;
- the Funds will pay any additional expenses that they incur in
connection with such plans;
- on your account application, you may select a plan or plans in
which to invest;
- additional forms and further information may be obtained by
writing or calling the Funds;
- the Funds reserve the right to change the minimum amounts for
initial and subsequent investments or to terminate any of the
plans;
- the Funds reserve the right to waive investment minimums at
the discretion of the Distributor; and
- the Funds require a copy of the trust agreement when shares
are to be held in trust.

WRITTEN CONFIRMATIONS. Each purchase, exchange or redemption transaction is
confirmed in writing to the address of record by giving details of the purchase
or redemption.

USE OF INTERMEDIARIES. If you purchase or redeem shares through an investment
dealer, bank or other institution, that institution may impose charges for its
services. These charges would reduce your yield or return. You may purchase or
redeem shares directly from the Fund or with the Transfer Agent, State Street
Bank, without any such charges.

TRANSFER OF SHARES. Fund shares may be transferred by a written request
addressed to the Trust and delivered to State Street, giving the name and social
security or taxpayer identification number of the transferee and accompanied by
the same signature guarantees and documents as would be required for a
redemption, together with specimen signatures of all transferees.

SUSPENSION OF OFFERING. The Trust reserves the right to withdraw all or any part
of the offering made by this Prospectus, and the Trust or the Distributor may
reject purchase orders. From time to time, the Trust may temporarily suspend the
offering of shares to new investors. During the period of such suspension,
persons who are already shareholders of a Fund may be permitted to continue to
purchase additional shares of the Fund, to have dividends reinvested and to make
redemptions.

CONSULTATION WITH A PROFESSIONAL TAX ADVISER IS RECOMMENDED, both because of the
complexity of Federal tax laws and because various tax penalties are imposed for
excess contributions to, and late or premature distributions from, IRAs or other
qualified retirement plans. Termination of a plan shortly after its adoption may
have adverse tax consequences.

SHAREHOLDER RIGHTS. All shares of each Fund have equal rights with respect to
dividends, assets and liquidation of a Fund and equal, noncumulative voting
rights. Noncumulative voting rights allow the holder or holders of a majority of
shares, voting together for the election of trustees, to elect all the trustees.
All shares of each Fund will be voted in the aggregate, except when a separate
vote by Fund is required under the Investment Company Act of 1940 (the "1940
Act"). Shares are fully paid and nonassessable when issued, are transferable
without restriction, and have no preemptive or conversion rights. Under Delaware
law, the Trust is not required to hold shareholder meetings on an annual basis.
As required by law, the Funds will, however, hold shareholder meetings when a
sufficient number of shareholders request a meeting, or as deemed desirable by
the Board of Trustees, for such purposes as electing or removing trustees,
changing fundamental policies or approving an investment management agreement.
(For additional information about shareholder voting rights, see the Statement
of Additional Information.)

35
<PAGE> 39

INVESTMENT GLOSSARY
- --------------------------------------------------------------------------------

The following glossary explains some of the types of securities in which the
Funds may invest, investment techniques they may employ, and some of the related
risks. For more information, please see the Statement of Additional Information.

BORROWING. Each Fund may borrow money from banks for limited purposes to the
extent allowable under the 1940 Act. Most borrowing is intended only as a
temporary measure for extraordinary or emergency purposes, such as to help meet
redemption requests, and not for leverage purposes.

COLLATERALIZED OBLIGATIONS. The Income Fund may invest in collateralized
obligations (debt securities issued by a corporation, trust or custodian or by a
U.S. Government agency or instrumentality), that are collateralized by a
portfolio or pool of assets, such as mortgages, mortgage-backed securities,
debit balances on credit card accounts or U.S. Government securities. The
issuer's obligation to make interest and/or principal payments is secured by the
underlying pool or portfolio of securities.

A variety of types of collateralized obligations are available currently, and
others may become available in the future. Some obligations are for the
guaranteed payment of only principal (the principal-only or "PO" class) or only
interest (the interest-only or "IO" class), while others are for the guaranteed
payment of both, or some variation thereof. The yields to maturity on PO and IO
class obligations are more sensitive than other obligations, with the IO class
obligations being extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying assets. The Fund will invest
only in PO and IO class mortgage obligations collateralized by securities
guaranteed by the U.S. Government. Some types of collateralized obligations may
be less liquid than other types of securities. Investments in collateralized
obligations that are deemed to be illiquid, which includes some PO and IO class
mortgage obligations, will be subject to the 15% limitation on illiquid assets.

The mortgage-backed collateralized obligations in which the Fund may invest
include pools of mortgage loans assembled for sale to investors by various
governmental agencies, such as the Government National Mortgage Association
("GNMA") and government-related organizations such as the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). Payments of principal and/or interest on such mortgages, including
prepayments, are guaranteed by the agency or instrumentality. The agencies and
instrumentalities are subject to varying degrees of support by the U.S.
Government. The effective credit quality of collateralized obligations is the
credit quality of the collateral. The requirements as to collateralization are
determined by the issuer or sponsor of the collateralized obligation in order to
satisfy rating agencies. These collateralized obligations generally have excess
collateral, but typically, any guarantee is limited to a specified percentage of
the pool of assets.

The potential for appreciation in the event of a decline in interest rates may
be limited or negated by increased principal prepayments by certain
mortgage-backed securities, such as GNMA Certificates and other collateralized
obligations. During periods of declining interest rates, mortgages underlying
the security are prone to prepayment, causing the security's effective maturity
to be shortened. Prepayment of high interest rate mortgage-backed securities
during times of declining interest rates will tend to lower the return of the
Fund and may even result in losses to the Fund if the prepaid securities were
acquired at a premium. Because mortgage-backed securities tend to be sensitive
to prepayment rates on the underlying collateral, their value to the Fund is
dependent upon the accuracy of the prepayment projections used, which are a
consensus derived from several major securities dealers. The duration of many
mortgage-backed securities changes substantially in response to changes in
interest rates and prepayment rates.

CONCENTRATION. Each of the Funds intends to invest not more than 25% of its net
assets in any one industry; however, the Ready Reserves Fund may invest more
than 25% of its net assets in the domestic banking industry. These limitations
do not apply to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, or to instruments, such as repurchase agreements,
secured by these instruments or to tax-exempt securities.

36
<PAGE> 40

DEPOSITORY RECEIPTS. All of the Funds except the Income Fund and Ready Reserves
Fund may invest in foreign issuers through sponsored American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") and Global Depository
Receipts ("GDRs"). Generally, an ADR is a dollar-denominated security issued by
a U.S. bank or trust company that represents, and may be converted into, the
underlying foreign security. An EDR represents a similar securities arrangement
but is issued by a European bank, and a GDR is issued by a depository. ADRs,
EDRs and GDRs may be denominated in a currency different from the underlying
securities into which they may be converted. Typically, ADRs, in registered
form, are designed for issuance in U.S. securities markets, and EDRs and GDRs,
in bearer form, are designed for issuance in European securities markets.
Investments in depository receipts entail risks similar to direct investments in
foreign securities. These risks are detailed in the sections on "Investment
Risks" under the "International Growth Fund" above and in the Statement of
Additional Information.

DIVERSIFICATION. The International Growth Fund, the Income Fund, and the Ready
Reserves Fund will not purchase the securities of any issuer if, as a result,
more than 5% of any Fund's total assets would be invested in such issuer. For
the other Funds, that 5% limitation applies only to 75% of each Fund's net
assets. In addition, each Fund will not purchase more than 10% of the
outstanding voting securities of any issuer, except the Value Discovery Fund to
which that limitation only applies to 75% of the portfolio's net assets. These
limitations do not apply to U.S. Government securities or to government agency
or instrumentality securities.

FOREIGN CURRENCY FUTURES. The International Growth Fund may purchase and sell
futures on foreign currencies as a hedge against possible variation in foreign
exchange rates. Foreign currency futures contracts are traded on boards of trade
and futures exchanges. A futures contract on a foreign currency is an agreement
between two parties to buy and sell a specified amount of a particular currency
for a particular price on a future date. To the extent that the Fund engages in
foreign currency futures transactions, but fails to consummate its obligations
under the contract, the net effect to the Fund would be the same as speculating
in the underlying futures contract. Futures contracts entail certain risks. If
the Adviser's judgment about the general direction of rates or markets is wrong,
the Fund's overall performance may be less than if no such contracts had been
entered into. There may also be an imperfect correlation between movements in
prices of futures contracts and the portfolio securities being hedged. In
addition, the market prices of futures contracts may be affected by certain
factors. If participants in the futures market elect to close out their
contracts through offsetting transactions rather than to meet margin
requirements, distortions in the normal relationship between the securities and
futures markets could result. In addition, because margin requirements in the
futures markets are less onerous than margin requirements in the cash market,
increased participation by speculators in the futures market could cause
temporary price distortions. Due to price distortions in the futures market and
an imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of market
trends by the Fund's Adviser may still not result in a successful hedging
transaction. The Fund could also experience losses if it could not close out its
futures position because of an illiquid secondary market, and losses on futures
contracts are not limited to the amount invested in the contract. The above
circumstances could cause the Fund to lose money on the financial futures
contracts and also on the value of its portfolio securities.

To the extent required to comply with the Investment Company Act of 1940 (the
"1940 Act") and the rules and interpretations thereunder, whenever the Fund
enters into a futures contract, the Fund will maintain a segregated account
consisting of either cash or liquid securities equal to the Fund's potential
obligation under such contracts. The segregation of assets places a practical
limit on the extent to which the Fund may engage in futures contracts.

To the extent required to comply with CFTC Rule 4.5 and in order to avoid
"commodity pool operator" status, each Fund will not enter into a financial
futures contract if immediately thereafter the aggregate initial margin and
premiums for such contracts held by the Fund would exceed 5% of the liquidation
value of the Fund's assets. The Fund will not engage in transactions in
financial futures contracts for speculation, but only in an attempt to hedge
against changes in interest rates or market conditions affecting the value of
securities that the Fund holds or intends to purchase.

FORWARD FOREIGN CURRENCY TRANSACTIONS. The International Growth Fund may enter
into forward foreign currency contracts as a means of managing the risks
associated with changes in exchange rates. A forward foreign currency contract
is an agreement to exchange U.S. dollars for foreign currencies at a specified
future date and specified amount which is set by the parties at the time of
entering into the contract. The Adviser will generally use such currency
contracts to fix a definite price for securities they

37
<PAGE> 41

have agreed to buy or sell and may also use such contracts to hedge the Fund's
investments against adverse exchange rate changes. Alternatively, the Funds may
enter into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Adviser believes that the U.S. dollar value of the
currency to be sold pursuant to the forward contract will fall whenever there is
a decline in the U.S. dollar value of the currency in which securities of the
Fund are denominated ("cross-hedge"). The profitability of forward foreign
currency transactions depends upon correctly predicting future changes in
exchange rates between the U.S. dollar and foreign currencies. As a result, a
Fund may incur either a gain or loss on such transactions. While forward foreign
currency transactions may help reduce losses on securities denominated in a
foreign currency, they may also reduce gains on such securities depending on the
actual changes in the currency's exchange value relative to that of the
offsetting currency involved in the transaction. The Funds will not enter into
forward foreign currency transactions for speculative purposes.

ILLIQUID SECURITIES. Each Fund except the Ready Reserves Fund may invest up to
15% of its net assets in illiquid securities. The Ready Reserves Fund may invest
up to 10% of its net assets in illiquid securities. Illiquid securities are
those securities that are not readily marketable, including restricted
securities and repurchase obligations maturing in more than seven days.

INVESTMENT COMPANIES. Subject to the provisions of the 1940 Act, the Growth
Fund, International Growth Fund and Value Discovery Fund may each invest in the
shares of investment companies. Investment in other investment companies may
provide advantages of diversification and increased liquidity; however, there
may be duplicative expenses, such as advisory fees or custodial fees. Several
foreign governments permit investments by non-residents in their markets only
through participation in certain investment companies specifically organized to
participate in such markets. In addition, investments in unit trusts and country
funds permit investments in foreign markets that are smaller than those in which
the Fund would ordinarily invest directly. Investments in such pooled vehicles
should enhance the geographical diversification of the Fund's assets, while
reducing the risks associated with investing in certain smaller foreign markets.
Investments in such vehicles will provide increased liquidity and lower
transaction costs than are normally associated with direct investments in such
markets; however, there may be duplicative expenses, such as advisory fees or
custodial fees.

PORTFOLIO TURNOVER RATE. None of the Funds intend to trade portfolio securities
for the purpose of realizing short-term profits. However, each will adjust its
portfolio as considered advisable in view of prevailing or anticipated market
conditions and the Fund's investment objective, and there is no limitation on
the length of time securities must be held by the Fund prior to being sold. Fund
turnover rate will not be a limiting factor for a Fund. Although each Fund's
turnover rate will vary from year to year, it is anticipated that each Fund's
turnover rate, under normal circumstances, will be less than 100%. A higher
portfolio turnover rate would involve correspondingly higher transaction costs,
which would be borne directly by each Fund.

REAL ESTATE INVESTMENT TRUSTS. Although the Value Discovery Fund currently does
not invest primarily in real estate investment trusts ("REITs"), the Fund may
invest in REITs. REITs are subject to volatility from risks associated with
investments in real estate and investments dependent on income from real estate,
such as fluctuating demand for real estate and sensitivity to adverse economic
conditions. In addition, the failure of a REIT to continue to qualify as a REIT
for tax purposes would have an adverse effect upon the value of an investment in
that REIT.

REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements. Repurchase
agreements are instruments under which a Fund acquires ownership of a security,
and the seller, a broker-dealer or a bank agrees to repurchase the security at a
mutually agreed upon time and price. The repurchase agreement serves to fix the
yield of the security during the Fund's holding period. The Funds currently
intend to enter into repurchase agreements only with member banks of the Federal
Reserve System or with primary dealers in U.S. Government securities. In all
cases, the Adviser, subject to the supervision of the Board of Trustees, must be
satisfied with the creditworthiness of the seller before entering into a
repurchase agreement. In the event of the bankruptcy or other default of the
seller of a repurchase agreement, the Fund could incur expenses and delays
enforcing its rights under the agreement, and experience a decline in the value
of the underlying securities and loss of income. The maturity of a security
subject to repurchase may exceed one year, and, for the Income Fund, the
modified duration of a security subject to repurchase may exceed eight years.
Repurchase agreements maturing in more than seven days, together with any
securities that are restricted as to disposition under the federal securities
laws or are otherwise considered to be

38
<PAGE> 42

illiquid, will not exceed 15% of the net assets of the Growth Fund,
International Growth Fund, Value Discovery Fund and Income Fund and 10% of the
net assets of the Ready Reserves Fund.

SECTION 4(2) PAPER. The Ready Reserves Fund may invest in commercial paper
issued in reliance upon the so-called "private placement" exemption from
registration afforded by Section 4(2) of the Securities Exchange Act of 1933
("Section 4(2) paper"). Section 4(2) paper is restricted as to disposition under
the Federal securities laws, and generally is sold to institutional investors
such as the Fund. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of the issuer or investment dealers who make a market in
the Section 4(2) paper, thus providing liquidity. The Adviser considers the
legally restricted but readily saleable Section 4(2) paper to be liquid;
however, pursuant to the procedures approved by the Fund's Board of Trustees, if
a particular investment in Section 4(2) paper is not determined to be liquid,
that investment will be included within the limitation on illiquid securities.
The Adviser monitors the liquidity of each investment in Section 4(2) paper on a
continuing basis.

VARIABLE RATE SECURITIES. The Ready Reserves Fund may invest in instruments
having rates of interest that are adjusted periodically or that "float"
continuously or periodically according to formulae intended to minimize
fluctuation in values of the instruments ("Variable Rate Securities"). The
interest rate on a Variable Rate Security is ordinarily determined by reference
to, or is a percentage of, an objective standard such as a bank's prime rate,
the 90-day U.S. Treasury Bill rate or the rate of return on commercial paper or
bank certificates of deposit. Generally, the changes in the interest rates on
Variable Rate Securities reduce the fluctuation in the market value of such
securities. Accordingly, as interest rates decrease or increase, the potential
for capital appreciation or depreciation is less than for fixed-rate
obligations. Further, the Fund may invest in Variable Rate Securities that have
a demand feature entitling the Fund to resell the securities to the issuer or a
third party at an amount approximately equal to the principal amount thereof
plus accrued interest ("Variable Rate Demand Securities"). As is the case for
other Variable Rate Securities, the interest rate on Variable Rate Demand
Securities varies according to some objective standard intended to minimize
fluctuation in the values of the instruments. Many of these Variable Rate Demand
Securities are unrated, their transfer is restricted by the issuer, and there is
little if any secondary market for the securities. Thus, any inability of the
issuers of such securities to pay on demand could adversely affect the liquidity
of these securities. The Fund determines the maturity of Variable Rate
Securities in accordance with Securities and Exchange Commission rules, which
allow the Fund to consider certain of such instruments as having maturities
shorter than the maturity date on the face of the instrument if they are
guaranteed by the U.S. Government or its agencies, if they have a stated
maturity date of one year or less, or if they have demand features prior to
maturity.

WARRANTS. Warrants are securities giving the holder the right, but not the
obligation, to buy the stock of an issuer at a given price (generally higher
than the value of the stock at the time of issuance) during a specified period
or perpetually. Warrants may be acquired separately or in connection with the
acquisition of securities. Warrants do not carry with them the right to
dividends or voting rights with respect to the securities that they entitle
their holder to purchase and they do not represent any rights in the assets of
the issuer. As a result, warrants may be considered to have more speculative
characteristics than certain other types of investments. In addition, the value
of a warrant does not necessarily change with the value of the underlying
securities and a warrant ceases to have value if it is not exercised prior to
its expiration date.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. From time to time, in the ordinary
course of business, each Fund may purchase newly issued securities appropriate
for the Fund on a "when-issued" basis, and may purchase or sell securities
appropriate for the Fund on a "delayed delivery" basis. When-issued or delayed
delivery transactions involve a commitment by the Fund to purchase or sell
particular securities, with payment and delivery to take place at a future date.
These transactions allow the Fund to lock in an attractive purchase price or
yield on a security the Fund intends to purchase. Normally, settlement occurs
within one month of the purchase or sale. During the period between purchase and
settlement, no payment is made or received by the Fund and, for delayed delivery
purchases, no interest accrues to the Fund. Because the Fund is required to set
aside cash or liquid securities at least equal in value to its commitments to
purchase when-issued or delayed delivery securities, the Adviser's ability to
manage the Fund's assets may be affected by such commitments. The Fund will only
make commitments to purchase securities on a when-issued or delayed delivery
basis with the intention of actually acquiring the securities, but it reserves
the right to sell them before the settlement date if it is deemed advisable.

39
<PAGE> 43

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

The tables below are intended to help you understand each Fund's financial
performance for the past several years. The total return figures show what an
investor in a Fund would have earned (or lost) assuming reinvestment of all
dividends and distributions. This information has been audited by Ernst & Young
LLP, whose report, along with the Fund's financial statement, is included in the
annual report, which is available upon request (see back cover).

<TABLE>
<CAPTION>
WILLIAM BLAIR GROWTH FUND YEARS ENDED DECEMBER 31
-----------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ............. $ 17.970 $ 15.350 $ 13.480 $ 11.900 $ 9.600
Income from investment operations:
Net investment income (loss) .................. (.013) (.003) (.023) (.010) .034
Net realized and unrealized gain on investments 3.574 4.123 2.694 2.144 2.750
------------ ------------ ------------ ------------ ------------
Total from investment operations ............... 3.561 4.120 2.671 2.134 2.784
Less distributions from:
Net investment income ......................... -- -- -- .010 .030
Net realized gain on investments .............. 1.436 1.500 .801 .544 .454
------------ ------------ ------------ ------------ ------------
Total distributions ............................ 1.436 1.500 .801 .554 .484
------------ ------------ ------------ ------------ ------------
Net asset value, end of year ................... $ 20.095 $ 17.970 $ 15.350 $ 13.480 $ 11.900
============ ============ ============ ============ ============
Total return (%) ............................... 19.98 27.15 20.07 17.99 29.07
Ratios to average net assets (%):
Expenses ...................................... .86 .84 .84 .79 .65
Net investment income (loss) .................. (.11) (.02) (.16) (.08) .34
Supplemental data:
Net assets at end of year (000s) .............. $ 818,443 $ 742,056 $ 591,353 $ 501,774 $ 363,036
Portfolio turnover rate (%) ................... 52 37 34 43 32
</TABLE>

<TABLE>
<CAPTION>
WILLIAM BLAIR INTERNATIONAL GROWTH FUND YEARS ENDED DECEMBER 31
-----------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ............... $ 14.620 $ 13.140 $ 13.950 $ 13.120 $ 12.360
Income from investment operations:
Net investment income ........................... (.035) .074 .072 .029 .105
Net realized and unrealized gain (loss) on
investments, foreign currency and other assets
and liabilities .............................. 13.939 1.431 1.056 1.299 .785
--------- --------- --------- --------- --------
Total from investment operations ................. 13.904 1.505 1.128 1.328 .890
Less distributions from:
Net investment income ........................... -- .024(a) .078(a) .068(a) .130
Net realized gain on investments ................ 4.494 .001 1.860 .430 --
--------- --------- --------- --------- --------
Total distributions .............................. 4.494 .025 1.938 .498 .130
--------- --------- --------- --------- --------
Net asset value, end of year ..................... $ 24.030 $ 14.620 $ 13.140 $ 13.950 $ 13.120
========= ========= ========= ========= ========
Total return (%) ................................. 96.25 11.46 8.39 10.20 7.22
Ratios to average net assets (%):
Expenses ........................................ 1.35 1.36 1.43 1.44 1.48
Net investment income ........................... (.43) .09 .01 .19 .87
Supplemental data:
Net assets at end of year (000s) ................ $ 302,089 $ 139,746 $ 128,747 $ 105,148 $ 89,762
Portfolio turnover rate (%) ..................... 122 98 102 89 77
</TABLE>

- ----------

(a) Includes $.024, $.078 and $.022 in passive foreign investment company
transactions which are treated as ordinary income for Federal income tax
purposes for 1998, 1997 and 1996, respectively.

40
<PAGE> 44

<TABLE>
<CAPTION>
WILLIAM BLAIR VALUE DISCOVERY FUND YEARS ENDED DECEMBER 31
-----------------------
1999 1998 1997 1996(a)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of year ........ $ 12.960 $ 12.970 $ 10.000 $ 10.000
Income from investment operations:
Net investment income .................... .095 .088 .029 --
Net realized and unrealized gain (loss) on
investments ........................... .689 (.005) 3.305 --
----------- ----------- ----------- -----------
Total from investment operations .......... .784 .083 3.334 --
Less distributions from:
Net investment income .................... .087 .093 .020 --
Net realized gain on investments ......... -- -- .344 --
----------- ----------- ----------- -----------
Total distributions ....................... 0.087 .093 .364 --
----------- ----------- ----------- -----------
Net asset value, end of year .............. $ 13.657 $ 12.960 $ 12.970 $ 10.000
=========== =========== =========== ===========
Total return (%) .......................... 6.10 0.66 33.46 --
Ratios to average net assets (%):
Expenses ................................. 1.35(b) 1.52 1.50(b) --
Net investment income .................... .78(b) .76 .29(b) --
Supplemental data:
Net assets at end of year (000s) ......... $ 48,423 $ 44,675 $ 30,354 $ 2
Portfolio turnover rate (%) .............. 65 78 69 --
</TABLE>

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

(a) For the period December 23, 1996 (Commencement of Operations) to
December 31, 1996.

(b) Without the waiver of expenses in 1999, the expense ratio would have
been 1.38% and the net investment income would have been .75%. Without
the waiver of expenses in 1999 and 1997, the expense ratio would have
been 1.38% and 1.78% and the net investment income ratio would have
been .75% and .016%, respectively.

<TABLE>
<CAPTION>
WILLIAM BLAIR INCOME FUND YEARS ENDED DECEMBER 31
-----------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........ $ 10.490 $ 10.410 $ 10.270 $ 10.570 $ 9.850
Income from investment operations:
Net investment income .................... .618 .640 .659 .619 .646
Net realized and unrealized gain (loss) on
investments ........................... (.588) .076 .140 (.309) .732
------------ ------------ ------------ ------------ ------------
Total from investment operations .......... 0.030 .716 .799 .310 1.378
Less distributions from:
Net investment income .................... .604 .636 .659 .610 .658
Net realized gain on investments ......... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total distributions ....................... .604 .636 .659 .610 .658
------------ ------------ ------------ ------------ ------------
Net asset value, end of year .............. $ 9.916 $ 10.490 $ 10.410 $ 10.270 $ 10.570
============ ============ ============ ============ ============
Total return (%) .......................... .34 7.07 8.03 3.07 14.37
Ratios to average net assets (%):
Expenses ................................. .70 .71 .71 .70 .68
Net investment income .................... 6.03 6.81 6.40 5.97 6.24
Supplemental data:
Net assets at end of year (000s) ......... $ 173,375 $ 188,051 $ 160,055 $ 150,006 $ 147,370
Portfolio turnover rate (%) .............. 66 96 83 66 54
</TABLE>

41
<PAGE> 45

<TABLE>
<CAPTION>
WILLIAM BLAIR READY RESERVES FUND YEARS ENDED DECEMBER 31
-----------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income .................... .05 .05 .05 .05 .05
Net realized and unrealized gain (loss) on
investments ........................... -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Total from investment operations .......... .05 .05 .05 .05 .05
Less distributions from:
Net investment income .................... .05 .05 .05 .05 .05
------------- ------------- ------------- ------------- -------------
Total distributions ...................... .05 .05 .05 .05 .05
------------- ------------- ------------- ------------- -------------
Net asset value, end of year .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= ============= ============= =============
Total return (%) .......................... 4.63 4.98 5.04 4.81 5.45
Ratios to average net assets (%):
Expenses ................................. .72 .69 .70 .71 .72
Net investment income .................... 4.52 4.87 4.92 4.78 5.30
Supplemental data:
Net assets at end of year (000s) ......... $ 1,052,803 $ 1,189,051 $ 904,569 $ 760,808 $ 703,993
</TABLE>

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<PAGE> 46

FOR MORE INFORMATION

More information about the Funds is available without charge, upon request,
including the following:

SEMI-ANNUAL/ANNUAL REPORTS

The Semi-Annual and audited Annual Reports to Shareholders include financial
statements, detailed performance information, portfolio holdings and statements
from the Fund managers. In the Annual Report, you will find a discussion of the
market conditions and investment strategies that the Adviser believes
significantly affected the Fund's performance in its last fiscal year.
Shareholder reports are incorporated by reference into this Prospectus, which
means that they are part of this Prospectus for legal purposes.

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI contains more detailed information about the Funds. The current SAI has
been filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus, which means that it is part of this Prospectus
for legal purposes.

TO OBTAIN INFORMATION:

BY TELEPHONE
Call: 1-800-635-2886
(In Massachusetts 1-800-635-2840)

BY MAIL
Write to:
WILLIAM BLAIR FUNDS
222 West Adams Street
Chicago, Illinois 60606

STATE STREET BANK AND TRUST COMPANY
(the Fund's Transfer Agent)
P.O. Box 8506
Boston, MA 02266-8506

ON THE INTERNET

Text-only versions of fund documents can be viewed online or downloaded from the
SEC at http://www.sec.gov

You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, D.C. (1-202-942-8090) or, after paying a duplicating fee, by
electronic request at the following E-mail address: [email protected], or by
writing the SEC's Public Reference Room Section, Washington, D.C. 20549-0102.

No person has been authorized to give any information or to make any
representations not contained in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Trust or its distributor. The Prospectus does not constitute an offering
by the Trust or its distributor in any jurisdiction in which such offering may
not lawfully be made.

WILLIAM BLAIR FUNDS May 1, 2000
Investment Company Act File No.: 811-5344

<PAGE> 47
May 1, 2000

WILLIAM BLAIR FUNDS

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

CLASS N SHARES PROSPECTUS

TAX-MANAGED GROWTH FUND
LARGE CAP GROWTH FUND
SMALL CAP GROWTH FUND
DISCIPLINED LARGE CAP FUND
EMERGING MARKETS GROWTH FUND

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

WILLIAM BLAIR FUNDS
222 West Adams Street
Chicago, Illinois 60606
<PAGE> 48
TABLE OF CONTENTS

<TABLE>
<S> <C>
SUMMARY.......................................................................................................... 1
Tax-managed Growth Fund................................................................................. 1
Large Cap Growth Fund................................................................................... 3
Small Cap Growth Fund................................................................................... 4
Disciplined Large Cap Fund.............................................................................. 5
Emerging Markets Growth Fund............................................................................ 7

INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES........................................................ 9
Tax-managed Growth Fund................................................................................. 10
Large Cap Growth Fund................................................................................... 13
Small Cap Growth Fund................................................................................... 15
Disciplined Large Cap Fund.............................................................................. 17
Emerging Markets Growth Fund............................................................................ 18

INVESTMENT RISKS................................................................................................. 20

MANAGEMENT OF THE FUNDS.......................................................................................... 22

YOUR ACCOUNT..................................................................................................... 25
Class N Shares.......................................................................................... 25
How to Buy Shares....................................................................................... 25
How to Sell Shares...................................................................................... 26
How to Exchange Shares.................................................................................. 28
Dividends and Distributions............................................................................. 28
Taxes ............................................................................................... 29

DETERMINATION OF NET ASSET VALUE................................................................................. 30

SHAREHOLDER SERVICES AND ACCOUNT POLICIES........................................................................ 31

INVESTMENT GLOSSARY.............................................................................................. 33

FOR MORE INFORMATION ............................................................................................ Back Cover
</TABLE>

<PAGE> 49
WILLIAM BLAIR TAX-MANAGED GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Tax-Managed Growth Fund seeks long-term
capital appreciation.

MAIN INVESTMENT STRATEGIES: The Fund invests primarily in a diversified
portfolio of common stocks of domestic growth companies. The Fund employs a
number of techniques designed specifically to enhance the long-term, after-tax
returns for its shareholders. The Adviser seeks growth opportunities by
investing in large, medium and small companies in varying proportions.

LARGE, high quality growth companies that have demonstrated sustained
growth over a long period of time;

MEDIUM-sized growth companies of recognized investment quality whose
records of sales and earnings growth may not be as well established;
and

SMALL emerging, rapid growth companies of high quality that have had
especially vigorous growth in revenues and earnings.

The Adviser seeks high after-tax returns by balancing investment considerations
and tax considerations. The Adviser seeks to achieve returns primarily in the
form of price appreciation and to minimize income distributions and
distributions of realized short-term gains. Among the techniques and strategies
used in the tax-efficient management of the Fund are the following:

- investing primarily in lower-yielding growth stocks;

- employing a long-term, low turnover approach to investing;

- attempting to avoid net realized short-term gains;

- when appropriate, selling stocks trading below cost to realize
losses;

- in selling appreciated stocks, selecting the most tax-favored
share lots; and

- selectively using tax-advantaged hedging techniques, such as
derivative transactions, as an alternative to taxable sales.

The Fund can generally be expected to distribute a smaller percentage of returns
each year than most other equity mutual funds. There can be no assurance,
however, that taxable distributions can always be avoided.

The Fund may engage in derivative transactions to protect against price declines
or as a substitute for purchasing or selling securities. The use of these
techniques is subject to certain limitations and may expose the Fund to
increased risk of principal loss. Of course, for all mutual funds there is the
risk that a strategy used by the Adviser may fail to produce its intended
result. The Fund is designed for long-term investors.

FUND PERFORMANCE HISTORY: The bar chart and table showing the Fund's annual
returns have been omitted because the Fund does not have annual returns for a
full calendar year.

<PAGE> 50
shares, reinvest dividends in additional shares or exchange into the Class N
shares of another Fund. However, the Fund may charge a redemption fee of 1.00%
of the value of the shares sold within 180 days of their purchase, in order to
compensate the Fund for expenses directly related to the redemption of Fund
shares and to discourage short-term investments in the Fund. This redemption fee
will be retained by the Fund.

SHAREHOLDER FEES are fees paid directly from your investment.

<TABLE>
<S> <C>
Redemption fee on shares held less than 180 days......................... 1.00%
Redemption fee on shares held 180 days or more........................... None

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

Management Fee........................................................... .80%
Distribution (Rule 12b-1) Fee............................................ .25%
Other Expenses........................................................... 51%
----
Total Annual Fund Operating Expenses (without waiver)................... 1.56%(1)
Adviser's Expense Waiver................................................ .20%
----
Net Expenses (with waiver)........................................... 1.36%
----
</TABLE>

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

(1) The Adviser has entered into an agreement with the Fund to cap the
Fund's expenses at 1.36% until at least April 30, 2001; the Adviser may
continue to waive fees voluntarily thereafter.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C>
$138 $473
</TABLE>

2
<PAGE> 51
WILLIAM BLAIR LARGE CAP GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Large Cap Growth Fund seeks long-term
capital appreciation.

MAIN INVESTMENT STRATEGIES: The Fund invests primarily in a diversified
portfolio of common stocks issued by large domestic growth companies of high
quality that have demonstrated sustained growth over a long period of time. The
Adviser currently defines large companies as those with market capitalizations
of $10 billion or more at the time of the Fund's investment. The Fund may also
invest in medium-sized growth companies of recognized investment quality whose
records of sales and earnings growth may not be as well established.

MAIN RISKS OF INVESTING: Since the Fund invests most of its assets in common
stocks, the primary risk is that value of the stocks it holds might decrease in
response to the activities of an individual company or general economic and
market conditions. All securities are subject to market, economic and business
risks that may cause their share prices to fluctuate. These fluctuations may not
be related to the fundamental characteristics of the companies issuing the
securities. Instead, for example, if large capitalization growth stocks fall out
of favor generally with investors, the value of the Large Cap Growth Fund may
decline. Thus, the Fund's returns will vary, and you could lose money by
investing in the Fund. The securities of medium-sized companies are more
volatile and more speculative than the securities of large companies. In
addition, medium-sized companies may be traded in low volumes, which can
increase volatility. Of course, for all mutual funds there is the risk that a
strategy used by the Adviser may fail to produce its intended result. The Fund
is designed for long-term investors.

FUND PERFORMANCE HISTORY: The bar chart and table showing the Fund's annual
returns have been omitted because the Fund does not have annual returns for a
full calendar year.

SHAREHOLDER FEES are fees paid directly from your investment.

<TABLE>
<S> <C>
Redemption fee on shares held less than 180 days......................... 1.00%
Redemption fee on shares held 180 days or more........................... None

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

Management Fee........................................................... .80%
Distribution (Rule 12b-1) Fee............................................ .25%
Other Expenses........................................................... .51%
----
Total Annual Fund Operating Expenses (without waiver)................... 1.56%(1)
Adviser's Expense Waiver................................................ .20%
----
Net Expenses (with waiver)........................................... 1.36%
</TABLE>

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

(1) The Adviser has entered into an agreement with the Fund to cap the
Fund's expenses at 1.36% until at least April 30, 2001; the Adviser may
continue to waive fees voluntarily thereafter.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C>
$138 $473
</TABLE>

3
<PAGE> 52
WILLIAM BLAIR SMALL CAP GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Small Cap Growth Fund seeks long-term
capital appreciation.

MAIN INVESTMENT STRATEGIES: The Fund invests primarily in a diversified
portfolio of common stocks of small emerging, rapid growth domestic companies
that are of high quality and that have had especially vigorous growth in
revenues and earnings. The Adviser currently defines small companies as those
with market capitalizations of $2 billion or less at the time of the Fund's
purchase. To a limited extent, the Fund may also purchase stock in companies
with business characteristics and growth prospects similar to small companies,
but which may have market capitalizations above $2 billion.

FUND PERFORMANCE HISTORY: The bar chart and table showing the Fund's annual
returns have been omitted because the Fund does not have annual returns for a
full calendar year.

SHAREHOLDER FEES are fees paid directly from your investment.

<TABLE>
<S> <C>
Redemption fee on shares held less than 180 days......................... 1.00%
Redemption fee on shares held 180 days or more........................... None

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

Management Fee........................................................... 1.10%
Distribution (Rule 12b-1) Fee............................................ .25%
Other Expenses........................................................... .45%
----
Total Annual Fund Operating Expenses (without waiver)................... 1.80%(1)
Adviser's Expense Waiver................................................ .20%
----
Net Expenses (with waiver)........................................... 1.60%
</TABLE>

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

(1) The Adviser has entered into an agreement with the Fund to cap the
Fund's expenses at 1.60% until at least April 30, 2001; the Adviser may
continue to waive fees voluntarily thereafter.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C>
$163 $547
</TABLE>

4
<PAGE> 53
WILLIAM BLAIR DISCIPLINED LARGE CAP FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Disciplined Large Cap Fund seeks
long-term capital appreciation.

MAIN INVESTMENT STRATEGIES: The Fund invests primarily in a diversified
portfolio of large capitalization domestic companies. The Adviser currently
defines large companies as those with market capitalizations of $10 billion or
more at the time of the Fund's investment. The Adviser seeks to outperform the
Standard & Poor's 500 Index through careful selection of portfolio securities.
The Adviser combines bottom-up stock picking with quantitative measures to help
create a portfolio with better value and better earnings growth momentum than
the Standard & Poor's 500 Index, while at the same time controlling relative
risk. Generally, the Fund will hold 90-140 companies.

FUND PERFORMANCE HISTORY: The bar chart and table showing the Fund's annual
returns have been omitted because the Fund does not have annual returns for a
full calendar year.

SHAREHOLDER FEES are fees paid directly from your investment.

<TABLE>
<S> <C>
Redemption fee on shares held less than 180 days......................... 1.00%
Redemption fee on shares held 180 days or more........................... None

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

Management Fee........................................................... .80%
Distribution (Rule 12b-1) Fee............................................ .25%
Other Expenses........................................................... 40%
----
Total Annual Fund Operating Expenses (without waiver)........... 1.45%(1)
----
Adviser's Expense Waiver........................................ .20%
----
Net Expenses (with waiver)............................. 1.25%
</TABLE>

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

(1) The Adviser has entered into an agreement with the Fund to cap the
Fund's expenses at 1.25% until at least April 30, 2001; the Adviser may
continue to waive fees voluntarily thereafter.

5
<PAGE> 54
EXAMPLE: This example is intended to help you compare the cost of investing in
Class N shares of the Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund, redeem all of your shares
at the end of the periods shown, earn a 5% return each year and incur the same
operating expenses as shown above. The figures reflect the expense cap for the
first year.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C>
$127 $439
</TABLE>

6
<PAGE> 55
WILLIAM BLAIR EMERGING MARKETS GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE: The William Blair Emerging Markets Growth Fund seeks
long-term capital appreciation.

MAIN INVESTMENT STRATEGIES: The Fund invests primarily in a diversified
portfolio of equity securities, including common stocks, issued by companies in
emerging markets. In choosing investments, the Adviser first analyzes individual
companies. The Adviser generally seeks well-managed companies with superior
business fundamentals, including global leadership in product quality or cost
competitiveness, dominant or improving market position within a growing local or
regional economy, and sustainable above-average and/or increasing returns on
invested capital. Following stock selection, the Adviser allocates investments
based upon its analysis of the economic strength of various countries and
industries. The Adviser normally will allocate the Fund's investments among at
least six different countries. Currently, emerging markets include every country
in the world other than the United States, Canada, Japan, Australia, New
Zealand, Hong Kong, Singapore and most Western European countries.

MAIN RISKS OF INVESTING: Because the Fund invests most of its assets in equity
securities of companies, the primary risk is that value of the securities it
holds might decrease in response to the activities of those companies or markets
and economic conditions. Thus, the Fund's returns will vary, and you could lose
money by investing in the Fund. Foreign investments often involve additional
risks, such as political instability, differences in financial reporting
standards and less stringent regulation of securities markets. These risks may
be greatly increased in emerging market countries because the securities in
emerging markets may be subject to greater volatility and less liquidity than
companies in more developed markets. Because the securities held by the Fund
usually will be denominated in currencies other than the U.S. dollar, changes in
foreign currency exchange rates may adversely affect the value of the Fund's
investments. The currencies of certain emerging market countries have
experienced a steady devaluation relative to the U.S. dollar, and continued
devaluations may adversely affect the value of the Fund's assets denominated in
such currencies. Many emerging markets have experienced substantial rates of
inflation for many years, and continued inflation may adversely affect the
economies and securities markets of such countries. The Fund also may invest in
the securities of small companies, which may be more volatile and less liquid
than securities of large companies. Of course, for all mutual funds there is the
risk that a strategy used by the Adviser may fail to produce its intended
result. The Fund is designed for long-term investors.

FUND PERFORMANCE HISTORY:

ANNUAL TOTAL RETURNS. The bar chart below provides an illustration of the Fund's
performance in the calendar year since the Fund started. The information below
provides some indication of the risks of investing in the Fund by showing how
the Fund's average annual returns for the year indicated compare with those of a
broad measure of market performance. The Fund's past performance does not
necessarily indicate how it will perform in the future.

<TABLE>

<S> <C>
1999 19.31

</TABLE>

<TABLE>
<CAPTION>
HIGHEST QUARTERLY LOWEST QUARTERLY
RETURN RETURN
----------------- ----------------
<S> <C>
36.54%(2Q99) -4.44%(3Q99)
</TABLE>

7
<PAGE> 56

AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Fund's average
annual total returns for the period ended December 31, 1999, to a broad-based
securities market index.

<TABLE>
<CAPTION>
1 YEAR LIFE OF FUND**
------ --------------
<S> <C> <C>
Emerging Markets Growth Fund 79.31% 20.69%
MSCI EMF Index* 66.41% 10.66%
</TABLE>

- --------------
* The Morgan Stanley Capital International Emerging Markets (Free) Index is
an index that includes emerging markets around the world. Expenses are
not included.

** The Fund's inception was on May 1, 1998.

SHAREHOLDER FEES are fees paid directly from your investment.

<TABLE>
<S> > <C>
Redemption fee on shares held less than 180 days......................... 1.00%
Redemption fee on shares held 180 days or more........................... None

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

Management Fee........................................................... 1.40%
Distribution (Rule 12b-1) Fee............................................ .25%
Other Expenses........................................................... 3.12%
----
Total Annual Fund Operating Expenses (without waiver)................... 4.77%(1)
Adviser's Expense Waiver................................................ 2.77%
Net Expenses (with waiver)........................................... 2.06%
</TABLE>

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

(1) Due to the Adviser voluntarily waiving fees and absorbing expenses, the
Fund's actual total expenses were 2.06% (annualized) during 1999. The
Adviser has entered into an agreement with the Fund to cap the Fund's
expenses at 2.06% until at least April 30, 2001, the Adviser may continue
to waive fees voluntarily thereafter.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$209 $1,193 $2,182 $4,674
</TABLE>

8
<PAGE> 57
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------

All investments, including those in mutual funds, have risks. No investment is
suitable for all investors. The Tax-Managed Growth Fund, Large Cap Growth Fund,
Small Cap Growth Fund, Disciplined Large Cap Fund and Emerging Markets Growth
Fund are intended for long-term investors. In addition, the Emerging Markets
Growth Fund is intended for investors who can accept the risks entailed in
investing in foreign securities. Of course, there can be no assurance that a
Fund will achieve its objective.

9
<PAGE> 58
WILLIAM BLAIR TAX-MANAGED GROWTH FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

The William Blair Tax-Managed Growth Fund seeks long-term capital appreciation.
The Fund employs a number of techniques designed specifically to enhance the
long-term, after-tax returns for its shareholders. The Fund invests primarily in
a diversified portfolio of common stocks of domestic growth companies with
sustainable, above-average growth from one business to the next. The Fund
generally does not invest in cyclical industries, but may do so when the Adviser
expects a multi-year period of sustained growth.

The Adviser seeks growth opportunities by investing in large, medium and small
companies in varying proportions:

LARGE, high quality growth companies that have demonstrated sustained growth
over a long period of time;

MEDIUM-sized companies of recognized investment quality whose records of sales
and earnings growth may not be as well established; and

SMALL, emerging, rapid-growth companies that have had especially vigorous
growth in revenues and earnings.

The Adviser attempts to achieve high after-tax returns by balancing investment
considerations and tax considerations. The Adviser seeks to achieve returns
primarily in the form of price appreciation and to minimize income distributions
and distributions of realized short-term gains. Among the techniques and
strategies used in the tax-efficient management of the Fund are the following:

- investing primarily in lower-yielding stocks;

- employing a long-term, low turnover approach to investing;

- attempting to avoid net realized short-term gains;

- when appropriate, selling stocks trading below cost to realize
losses;

- in selling appreciated stocks, selecting the most tax-favored
share lots; and

- selectively using tax-advantage hedging techniques, such as
derivative transactions, as an alternative to taxable sales.

INVESTMENT PROCESS

The Adviser utilizes an investment process that relies on thorough, in-depth
fundamental research of a company, its competitors, its suppliers and its
customers.

The Adviser will invest in companies that it believes are well-managed
considering some or all of the following investment criteria:

A LEADER IN THE FIELD. The company should be, or clearly have the
expectation of becoming, a significant provider in the primary markets
it serves.

10
<PAGE> 59
MARKETING CAPABILITY. The company should have a distinctive capability
in sales, service or distribution.

VALUE TO CUSTOMER. The prices of the company's products or services
should be based upon their value to the customer, rather than their
production cost.

CONSERVATIVE FINANCIAL POLICIES AND ACCOUNTING PRACTICES. The company
should have a relatively simple, clean financial structure and adhere
to conservative and straightforward accounting practices.

ADDITIONAL STRATEGIES

To protect against price declines in securities holdings with large accumulated
gains, the Fund may use various hedging techniques (such as purchased put
options, equity collars (combining the purchase of a put option and the sale of
a call option), equity swaps, and the purchase or sale of stock index futures
contracts). By using these techniques rather than selling appreciated
securities, the Fund can reduce its exposure to price declines in the securities
without realizing substantial capital gains under current tax law. These
derivative instruments may also be used by the Fund as a substitute for the
purchase or sale of securities. The use of derivatives is highly specialized.
The use of derivative instruments can result in losses that substantially exceed
the initial amount paid or received by the Fund. Equity swaps and
over-the-counter options are private contracts in which there is a risk of loss
in the event of a counterparty's default. Derivative instruments may be
difficult to value, may be illiquid, and may be subject to wide swings in
valuation caused by changes in the value of the underlying security.

The Fund may also invest in depository receipts, illiquid securities, warrants,
investment companies, when-issued and delayed delivery securities and repurchase
agreements which are described in the Investment Glossary at the end of this
prospectus. The Investment Glossary also describes the Fund's policies with
regard to borrowing, concentration, diversification and portfolio turnover.

PORTFOLIO MANAGEMENT

The Tax-Managed Growth Fund is co-managed by John F. Jostrand, Gregory J.
Pusinelli and Michelle R. Seitz.

John Jostrand, a principal of William Blair & Company, L.L.C., has co-managed
the Fund since its inception in 1999. He joined the firm in 1993 as a portfolio
manager and is now a member of the Investment Management Department's
Institutional Growth Team. Previously, he was with TRW, Inc. for ten years as
Director, Investments, equity portfolio manager and venture capital funds
manager. Prior to that he was with Boatmen's National Bank for five years as
Assistant Trust Officer, equity fund manager and research analyst. He is a
member of the Association for Investment Management and Research and past
president of the Pilgrim Village Board of Trustees. Education:
B.A., University of Missouri; M.B.A., University of Michigan; and CFA.

Greg Pusinelli, a principal of William Blair & Company, L.L.C., has co-managed
the Fund since its inception in 1999. He joined the firm in 1995 as a portfolio
manager. In 1996, he became the leader of the Taxable [Group/Team]. Previously,
he was with Stein Roe & Farnham Incorporated for nine years where he was a
senior Vice President and Principal responsible for managing client portfolios
and a team of portfolio managers. He also co-managed the Investment Counsel
Division's Core Portfolio. From 1983 to 1986, he was with the First National
Bank of Chicago, where he became a Vice President. Prior to that he was with
Harris Trust and Savings Bank from 1980 to 1982. He is a past Chairman of the
Board of Trustees of Providence-St. Mel School. Education: B.S., Indiana
University; M.B.A., Northwestern University Kellogg Graduate School of
Management.

11
<PAGE> 60
where she was invited to be a principal in the firm. She managed a team of
investment professionals at Concord and was a member of the investment strategy
team. Prior to that, she was a portfolio manager with NationsBank for five years
and served on NationsBank's asset allocation committee. She is an active member
of the Investment Analysts Society of Chicago. She serves on the Board of
Advisors for Indiana University's Investment Management Academy in the Graduate
School of Business and Northwestern Memorial Foundation's Planned Giving
Professional Council. Education: B.S., Indiana University; and CFA.

12
<PAGE> 61
WILLIAM BLAIR LARGE CAP GROWTH FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

The William Blair Large Cap Growth Fund seeks long-term capital appreciation.
The Fund invests primarily in a diversified portfolio of common stocks of large
domestic growth companies of high quality that have demonstrated sustained
growth over a long period of time. The Adviser currently defines large companies
as those with market capitalizations of $10 billion or more at the time of the
Fund's investment. Under normal market conditions, the Fund will invest at least
65% of its total assets in large cap stocks. The Fund may also invest in
medium-sized growth companies of recognized investment quality whose records of
sales and earnings growth may not be as well established.

The Fund invests primarily in a diversified portfolio of companies with
sustainable, above-average growth from one business cycle to the next. The Fund
generally does not invest in cyclical industries, but may do so when the Adviser
expects a multi-year period of sustained growth.

INVESTMENT PROCESS

A LEADER IN THE FIELD. The company should be, or clearly have the
expectation of becoming, a significant provider in the primary markets
it serves.

MARKETING CAPABILITY. The company should have a distinctive capability
in sales, service or distribution.

VALUE TO CUSTOMER. The prices of the company's products or services
should be based upon their value to the customer, rather than their
production cost.

CONSERVATIVE FINANCIAL POLICIES AND ACCOUNTING PRACTICES. The company
should have a relatively simple, clean financial structure and adhere
to conservative and straightforward accounting practices.

ADDITIONAL STRATEGIES

To a limited extent, the Fund may invest in depository receipts, illiquid
securities, investment companies, when-issued and delayed delivery securities
and repurchase agreements which are described in the Investment Glossary at the
end of this prospectus. From time to time, the Fund may invest in equity related
securities such as preferred stocks, convertible securities and warrants, which
are described in the Statement of Additional Information. The Investment
Glossary also describes the Fund's policies with regard to borrowing,
concentration,

13
<PAGE> 62
diversification and portfolio turnover. The Fund also may use options, futures
and other derivative instruments for hedging and risk management purposes, as
further described in the Statement of Additional Information.

PORTFOLIO MANAGEMENT

The Large Cap Growth Fund is co-managed by John F. Jostrand and Gretchen S.
Lash.

John Jostrand, a principal with William Blair & Company, L.L.C., has co-managed
the Fund since its inception in 1999. He joined the firm in 1993 as a portfolio
manager and now is a member of the Investment Management Department's
Institutional Growth Team. Previously, he was with TRW, Inc. for ten years as
Director, Investments, equity portfolio manager and venture capital funds
manager. Prior to that he was with Boatmen's National Bank for five years as
Assistant Trust Officer, equity fund manager and research analyst. He is a
member of the Association for Investment Management and Research and past
president of the Pilgrim Village Board of Trustees. Education:
B.A., University of Missouri; M.B.A., University of Michigan; and CFA.

Gretchen S. Lash, a principal with William Blair & Company, L.L.C., has
co-managed the Fund since its inception in 1999. She joined the firm in 1997 as
a portfolio manager. Previously, she was a partner at Lincoln Capital Asset
Management where she was part of a nine person team managing $17 billion in
institutional, large cap growth equities. Prior to that, she was a consumer
analyst and then a portfolio manager of several growth mutual funds with total
assets of $2.6 billion at American Capital. Education: B.A., Cornell University;
M.B.A., Rice University; and CFA.

14
<PAGE> 63
WILLIAM BLAIR SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

The William Blair Small Cap Growth Fund seeks long-term capital appreciation.
The Fund invests primarily in a diversified portfolio of common stocks of small
emerging, rapid growth domestic companies that are of high quality and that have
had especially vigorous growth in revenues and earnings. The Adviser currently
defines small companies as those with market capitalizations of $2 billion or
less at the time of the Fund's investment. Under normal market conditions, the
Fund will invest at least 65% of its total assets in small cap stocks. To a
limited extent, the Fund may also invest in companies with business
characteristics and growth prospects similar to small companies, but which may
have market capitalizations above $2 billion.

INVESTMENT PROCESS

A LEADER IN THE FIELD. The company should be, or clearly have the
expectation of becoming, a significant provider in the primary markets
it serves.

MARKETING CAPABILITY. The company should have a distinctive capability
in sales, service or distribution.

VALUE TO CUSTOMER. The prices of the company's products or services
should be based upon their value to the customer, rather than their
production cost.

CONSERVATIVE FINANCIAL POLICIES AND ACCOUNTING PRACTICES. The company
should have a relatively simple, clean financial structure and adhere
to conservative and straightforward accounting practices.

ADDITIONAL STRATEGIES

To a limited extent, the Fund may invest in depository receipts, illiquid
securities, investment companies, when-issued and delayed delivery securities
and repurchase agreements which are described in the Investment Glossary at the
end of this prospectus. The Investment Glossary also describes the Fund's
policies with regard to borrowing, concentration, diversification and portfolio
turnover. The Fund may invest in warrants, which are described in the Statement
of Additional Information. The Fund also may use options, futures and other
derivative instruments for hedging and risk management purposes, as further
described in the Statement of Additional Information.

15
<PAGE> 64
PORTFOLIO MANAGEMENT

The Small Cap Growth Fund is co-managed by Michael P. Balkin, Karl W. Brewer and
Mark A. Fuller III.

Michael Balkin, a principal of William Blair & Company, L.L.C., has co-managed
the Fund since its inception in 1999. He has been with the firm since 1990 and
is now a member of the Investment Management Department's Small Cap Team. He
began his career with the firm in Institutional Sales, where he specialized in
working with small- to mid-capitalization growth companies. Education: B.A.,
Northwestern University.

Karl W. Brewer has co-managed the Fund since its inception in 1999. He has been
with William Blair & Company, L.L.C. since 1996. He is an analyst and portfolio
manager, and a member of the Investment Management Department's Small Cap Team.
Previously, he spent six years at Lehman Brothers Inc. in the Mergers &
Acquisitions and Los Angeles Corporate Finance Departments. Education: B.A.,
Washington & Lee University; M.B.A., Northwestern University Kellogg Graduate
School of Management.

Mark A. Fuller, III, a principal of William Blair & Company, L.L.C., has
co-managed the Fund since its inception in 1999. He has been with the firm since
1983. He is a portfolio manager for numerous accounts and is a member of the
Investment Management Department's Small Cap Team. He began his career in
Institutional Sales, developing long-standing relationships with each of the
firm's research analysts. Prior to joining the firm, he was a sales
representative with IBM Corporation. Education: B.A., Northwestern University;
M.B.A., Northwestern University Kellogg Graduate School of Management.

16
<PAGE> 65
WILLIAM BLAIR DISCIPLINED LARGE CAP FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

The William Blair Disciplined Large Cap Fund seeks long-term capital
appreciation. The Fund invests primarily in a diversified portfolio of common
stocks and related equity securities of large capitalization domestic companies.
The Adviser defines large companies as those with market capitalizations of $10
billion or more at the time of the Fund's investment. Under normal market
conditions, the Fund will invest at least 65% of its total assets in large cap
stocks.

INVESTMENT PROCESS

The Disciplined Large Cap Fund seeks to consistently outperform the Standard &
Poor's 500 Stock Index by utilizing a disciplined investment process that
combines bottom-up stock picking with quantitative measures to help create a
portfolio with better value and better earnings growth momentum than the
Standard & Poor's 500 Index, while at the same time controlling relative risk.
The portfolio generally will hold the securities of 90-140 companies. The
Adviser uses quantitative models to help determine the present value of each
stock and to help forecast growth rate momentum.

ADDITIONAL STRATEGIES

To a limited extent, the Fund may invest in depository receipts, illiquid
securities, investment companies, when-issued and delayed delivery securities
and repurchase agreements which are described in the Investment Glossary at the
end of this prospectus. The Fund may also invest to a limited extent in S&P
Futures contracts. The Investment Glossary also describes the Fund's policies
with regard to borrowing, concentration, diversification and portfolio turnover.
The Fund may invest in warrants, which are described in the Statement of
Additional Information. The Fund also may use options, futures and other
derivative instruments for hedging and risk management purposes, as further
described in the Statement of Additional Information.

PORTFOLIO MANAGEMENT

The Disciplined Large Cap Fund is managed by Stan Kirtman.

Stan Kirtman joined William Blair & Company, L.L.C. as a portfolio manager for
the Fund in 1999. Previously, he served as President and CIO for Nikko Global
Asset Management (USA), Inc from April 1987 to June 1999. From January 1975 to
April 1987, he was director of Pension & Profit Sharing at Thomas J. Lipton,
Inc., Senior Investment Officer with Gerard Bank, and Assistant Vice President
at Provident National Bank. He is a member of the New York Society of Security
Analysts and the Market Technicians Association. Education: B.A., Hunter
College.

17
<PAGE> 66
WILLIAM BLAIR EMERGING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

The William Blair Emerging Markets Growth Fund seeks long-term capital
appreciation. The Fund pursues its objective by investing in a diversified
portfolio of equity securities issued by companies in emerging economies
worldwide. Emerging market companies are (i) companies organized under the laws
of an emerging market country or having securities which are traded principally
on an exchange or over-the-counter in an emerging market country; or (ii)
companies which, regardless of where organized or traded, have a significant
amount of assets (at least 50%) located in and/or derive a significant amount of
their revenues (at least 50%) from goods purchased or sold, investments made or
services performed in or with emerging market countries. Currently, emerging
markets include every country in the world other than the United States, Canada,
Japan, Australia, New Zealand, Hong Kong, Singapore and most Western European
countries.

The Fund normally will allocate its investments among not less than six
different countries and will not concentrate investments in any particular
industry. No more than 50% of the Fund's equity securities will be invested in
securities of issuers in one country at any given time. The Fund ordinarily will
invest at least 65% of its total assets in equity securities issued by emerging
market companies. Equity securities include securities convertible into,
exchangeable for or having the right to buy common stocks.

INVESTMENT PROCESS

The Adviser seeks well-managed, high quality growth companies. Such companies
will generally exhibit superior business fundamentals, including one or more of
the following characteristics:

REGIONAL LEADERSHIP in product quality or cost competitiveness;

DOMINANT OR IMPROVING MARKET POSITION, generally associated with a
competitive advantage in distribution, pricing or business franchise,
within a growing local or regional economy; and

SUSTAINABLE ABOVE-AVERAGE AND/OR INCREASING RETURNS on invested capital
generated from the efficient utilization of assets, increasing profit
margins or sound financial management, including improvements that may
arise from the process of privatization or restructuring of corporate
assets.

The research approach used in stock selection will focus intensively on the
soundness of corporate management, taking into account management's orientation
toward outside shareholders, incentives and ability to execute successful
strategies, commitment to transparent and conservative financial reporting
policies, and general integrity. Current income is not an investment objective,
although it is anticipated that capital appreciation will normally be
accompanied by modest investment income, which may vary depending upon the
allocation of the investments.

In pursuing the Fund's investment objective, the Adviser will vary the Fund's
geographic diversification and types of securities based upon the Adviser's
continuous evaluation of economic, market and political trends throughout the
world. The investment of the Fund's assets in various international securities
markets tends to decrease the degree to which events in any one country can
affect the entire Fund. In making decisions regarding the country allocation,
the Adviser will consider such factors as the conditions and growth potential of
various economies and securities markets, currency exchange rates, technological
developments in the various countries and other pertinent financial, social,
national and political factors. In addition, the Adviser will seek investment
opportunities in companies at different stages of development ranging from
large, well-established companies to smaller companies at an earlier stage of
development.

ADDITIONAL STRATEGIES

18
<PAGE> 67
short-term corporate debt securities. The Fund does not have specific rating
requirements for its short-term securities; however, the Adviser presently does
not intend to invest more than 5% of the Fund's net assets in securities rated
below investment grade.

The Fund may enter into forward foreign currency transactions in an effort to
protect against changes in foreign exchange rates. To a limited extent, the Fund
may also invest in depository receipts, foreign currency futures, illiquid
securities, investment companies, repurchase agreements and when-issued and
delayed delivery securities which are described in the Investment Glossary at
the end of this prospectus. The Investment Glossary also describes the Fund's
policies with regard to borrowing, concentration, diversification and portfolio
turnover. The Fund intends to invest to a very limited extent in warrants, which
are described in the Statement of Additional Information.

PORTFOLIO MANAGEMENT

The Emerging Markets Growth Fund is co-managed by W. George Greig and Jeffrey A.
Urbina.

W. George Greig, a principal of William Blair & Company, L.L.C., has co-managed
the Fund since its inception in 1998. He joined the Investment Management
Department in 1996 as an international portfolio manager. He headed
international equities for PNC Bank in Philadelphia from 1995 to 1996 and, prior
to that, he was a founding partner of Pilgrim Baxter & Associates, where he was
an analyst, research director and portfolio manager for over ten years. He also
served as chief investment officer of Framlington Group plc during its
association with Pilgrim Baxter and founded and managed a joint venture between
the two firms. Education: B.S., Massachusetts Institute of Technology; M.B.A.,
Wharton School of the University of Pennsylvania.

Jeffrey A. Urbina joined William Blair & Company, L.L.C. in 1996 and has
co-managed the Fund since its inception in 1998. In addition to the Emerging
Market Growth Fund, he is responsible for emerging market research for the
William Blair International Growth Fund. From 1991 to 1996, he was Senior Vice
President/Director of Emerging Market Research and a Portfolio Manager for the
Van Kampen American Capital Navigator Fund, an emerging market equity fund
listed in Luxembourg. During his five years at Van Kampen American Capital, he
also served as Director of Fixed Income Research and was a member of the
Investment Policy Committee. Before joining Van Kampen American Capital, he
spent ten years at Citicorp in various capacities, including as a Vice President
in the commercial real estate group in Chicago and as a commercial lending
officer in the bank's Denver office. He began his banking career at Harris Bank
in Chicago, where he was an International Banking Officer. Education: B.A.,
Northwestern University; M.B.A., Northwestern University Kellogg Graduate School
of Management.

19
<PAGE> 68
INVESTMENT RISKS
- --------------------------------------------------------------------------------

EQUITY FUNDS

Smaller Stocks. Stocks of smaller companies involve greater risk than those of
larger, more established companies. This is because smaller companies may be in
earlier stages of development, may be dependent on a small number of products or
services, may lack substantial capital reserves and/or do not have proven track
records. Smaller companies may be more adversely affected by poor economic or
market conditions, and may be traded in low volumes, which may increase
volatility and liquidity risks. From time to time, the Small Cap Growth Fund and
Emerging Markets Growth Fund may invest in the equity securities of very small
companies, often referred to as "micro-cap" companies. The considerations noted
above are generally intensified for these investments. Any convertible
debentures issued by small companies are likely to be lower-rated or non-rated
securities, which generally involve more credit risk than debentures in the
higher rating categories and generally include some speculative characteristics,
including uncertainties or exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet timely interest and
principal payments.

Country Allocation. The Emerging Markets Growth Fund seeks to invest in
companies and governments of countries having stable or improving political
environments; however, there is the possibility of expropriation or confiscatory
taxation, seizure or nationalization of foreign bank deposits or other assets,
establishment of exchange controls, the adoption of foreign government
restrictions and other adverse political, social or diplomatic developments that
could affect investments in these nations.

20
<PAGE> 69
In many foreign countries there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the U.S. There is an increased risk, therefore, of uninsured loss due to
lost, stolen, or counterfeit stock certificates. Prior governmental approval of
non-domestic investments may be required under certain circumstances in some
developing countries, and the extent of foreign investment in domestic companies
may be subject to limitation in other developing countries. Foreign ownership
limitations also may be imposed by the charters of individual companies in
developing countries to prevent, among other concerns, violation of foreign
investment limitations. Repatriation of investment income, capital and proceeds
of sales by foreign investors may require governmental registration and/or
approval in some developing countries. A Fund could be adversely affected by
delays in or a refusal to grant any required governmental registration or
approval for such repatriation.

The securities held by the Emerging Markets Growth Fund usually will be
denominated in currencies other than the U.S. dollar. Therefore, changes in
foreign exchange rates will affect the value of the securities held in the Fund
either beneficially or adversely. Fluctuations in foreign currency exchange
rates will also affect the dollar value of dividends and interest earned, gains
and losses realized on the sale of securities and net investment income and
gains, if any, available for distribution to shareholders.

The Emerging Markets Growth Fund may invest in Russian securities. Russian
securities involve additional significant risks, including political and social
uncertainty (for example, regional conflicts and risk of war), currency exchange
rate volatility, pervasiveness of corruption and crime in the Russian economic,
social and legal systems, delays in settling Fund transactions and risk of loss
arising out of Russia's system of share registration and custody. Russia's
system of share registration and custody creates certain risks of loss
(including the risk of total loss) that are not normally associated with
investments in other securities markets.

Operating Expenses. The Emerging Markets Growth Fund is expected to incur
operating expenses that are higher than those of mutual funds investing
exclusively in U.S. equity securities, since expenses such as custodial fees
related to foreign investments are usually higher than those associated with
investments in U.S. securities. Similarly, brokerage commissions on purchases
and sales of foreign securities are generally higher than on domestic
securities. In addition, dividends and interest from foreign securities may be
subject to foreign withholding taxes. (For more information, see "Your Account
- --Taxes.")

Temporary Defensive Position. Each Fund may significantly alter its make-up as a
temporary defensive strategy. A defensive strategy will be employed only if, in
the judgment of the Adviser, investments in a Fund's usual markets or types of
securities become decidedly unattractive because of current or anticipated
adverse economic, financial, political and social factors. Generally, the
Tax-Managed Growth Fund, Large Cap Growth Fund, Small Cap Growth Fund,
Disciplined Large Cap Fund and Emerging Markets Growth Fund will remain fully
invested, and the Adviser will not attempt to time the market. However, if a
significant adverse market action is anticipated, investment-grade debt
securities may be held without limit as a temporary defensive measure. Normally,
the Funds do not purchase any stocks with a view to quick turnover for capital
gains. At such time as the Adviser determines that the Fund's defensive strategy
is no longer warranted, the Fund will adjust its Fund back to its normal
complement securities as soon as practicable. When a Fund is invested
defensively, it may not meet its investment objective.

21
<PAGE> 70
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------

Each Fund pays the Adviser a monthly investment management fee based upon the
percentage of the Fund's average net assets as shown below:

<TABLE>
<CAPTION>
FEE AS A % OF
FUND AVERAGE NET ASSETS
- ---- ------------------
<S> <C>
Tax-Managed Growth Fund................. .80%
Large Cap Growth Fund................... .80%
Small Cap Growth Fund................... 1.10%
Disciplined Large Cap Fund.............. .80%
Emerging Markets Growth Fund............ 1.40%
</TABLE>

TRANSFER AGENT AND DIVIDEND PAYING AGENT. The Transfer Agent and Dividend Paying
Agent is State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110.

HISTORICAL PERFORMANCE INFORMATION OF THE INVESTMENT ADVISER. The tables below
set forth performance information relating to the William Blair Tax-Managed
Growth Composite, William Blair Large Cap Growth Composite and William Blair
Disciplined Large Cap Composite. The performance data for the Composites is
included to provide investors with the performance record for composite accounts
managed in a substantially similar manner as certain related Funds. Performance
information from the S&P 500 Index ("S&P 500 Index") and the Russell 1000 Growth
Index ("Russell 1000 Growth Index") has been included for comparison. Each
Composite is a composite of all the accounts managed by William Blair that have
investment objectives, policies, strategies and risks substantially similar to
those of the related Funds. The Composites are not registered under the 1940
Act, and thus, were not subject to certain investment and operational
restrictions imposed by the 1940 Act. If the products had been registered under
the 1940 Act or subject to certain restrictions imposed by the Internal Revenue
Code, the performance noted below might have been lower. The Composites are
composed of accounts with investment objectives, policies, strategies and risks
substantially similar to those of the related Funds--the William Blair
Tax-

22
<PAGE> 71
Managed Growth Fund and the William Blair Large Cap Growth Fund. However, the
Funds differ from the accounts in the Composites in certain ways, none of which
the Adviser believes would cause a material change in investment results. In
addition, the last table set forth below relates to the William Blair
Disciplined Large Cap Composite, which was managed by Stan Kirtman, who was
employed by Nikko Global Asset Management (USA), Inc. for the period from March
1987 to June 1999. For the period from December 31, 1992 to December 31, 1998,
Mr. Kirtman has managed 5 accounts.

The Composite performance data does not represent the past, present or future
performance of the Composite or of any William Blair Fund; past performance is
no guarantee of future results. Share prices and investment returns will
fluctuate reflecting market conditions and cash flows, as well as changes in
company-specific fundamentals of Composite securities. Consequently, investments
in either the Composites or the Funds may be worth more or less than their
original cost at the time of redemption.

The performance of each Composite, which is unaudited, has otherwise been
computed in accordance with the standards formulated by the Association for
Investment Management and Research ("AIMR"). This method of calculating
performance differs from the standardized methodology used by mutual funds to
calculate performance and results in a total return different from that derived
from the standardized methodology. Each Composite's performance includes
commissions but excludes investment management fees, fund expenses and sales
loads; if it had, performance would have been lower.

WILLIAM BLAIR TAX-MANAGED GROWTH COMPOSITE
AVERAGE TOTAL RETURNS: PERIODS ENDED 12/31/98

<TABLE>
<CAPTION>
S&P 500
COMPOSITE INDEX(1)
--------- --------
<S> <C> <C>
One Year....................................................
From Inception 12/31/95.....................................
</TABLE>

WILLIAM BLAIR LARGE CAP GROWTH COMPOSITE(2)
AVERAGE TOTAL RETURNS: PERIODS ENDED 12/31/98

<TABLE>
<CAPTION>
RUSSELL 1000
GROWTH
COMPOSITE INDEX(3)
--------- --------
<S> <C> <C>
One Year....................................................
Five Years..................................................
From Inception 7/1/93.......................................
</TABLE>

WILLIAM BLAIR DISCIPLINED LARGE CAP COMPOSITE
AVERAGE TOTAL RETURNS: PERIODS ENDED 12/31/98

<TABLE>
<CAPTION>
S&P 500
COMPOSITE INDEX(1)
--------- --------
<S> <C> <C>
One Year....................................................
Five Years..................................................
From Inception 12/31/92.....................................
</TABLE>

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

(1) Total return data is presented for each period. The S&P 500 Index is an
unmanaged capitalization weighted measure of the performance of a
representative sample of leading U.S. companies in leading industries.
The S&P 500 Index is commonly used as a measure of U.S. stock market
performance. The S&P 500 Index returns assume dividends reinvested net
of withholding tax, and unlike Fund returns, do not reflect fees or
expenses. Returns reflect the investment of income dividends and capital
gain distributions, if any, but does not reflect fees, brokerage
commissions or other expenses of investing. Investment cannot be made
directly into the S&P 500 Index.

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<PAGE> 72
(2) The William Blair Large Cap Growth Composite include the large cap
portion of the Growth Fund. The cash portion of the Growth Fund is
allocated on a pro-rata basis between the large cap portion and the
small cap portion of the Growth Fund each day, based on the percentage
of assets in each of the two portions of the Growth Fund. The portfolio
managers make discrete asset allocation shifts of cash from time to
time.

(3) Total return data is presented for each period. The Russell 1000 Growth
Index is an unmanaged capitalization weighted measure of performance of
those Russell 1000 companies with higher price-to-book ratios and higher
forecasted growth values. The companies in the Russell 1000 Growth Index
represent the largest 1000 U.S. companies based on total market
capitalization. The Russell 1000 Growth Index returns assume dividends
reinvested net of withholding tax, and unlike Fund returns, do not
reflect fees or expenses. Returns reflect the investment of income
dividends and capital gain distributions, if any, but does not reflect
fees, brokerage commissions or other expenses of investing. Investment
cannot be made directly into the Russell 1000 Growth Index.

24
<PAGE> 73
YOUR ACCOUNT

CLASS N SHARES

HOW TO BUY SHARES (By Mail, by Wire or by Telephone)

MINIMUM INVESTMENTS. To open an account, the minimum initial investment for
regular accounts is $5,000, and the minimum initial investment for Individual
Retirement Accounts ("IRAs") is $2,000. To add to an account, the minimum
subsequent investment is generally $1,000 for all Funds. The Funds may accept
smaller amounts under a group payroll deduction or similar plan. These minimum
amounts may be changed at any time and may be waived for trustees, principals,
officers or employees of the Trust or the Adviser.

PURCHASE PRICE. All Class N shares are sold at their public offering price,
which is the net asset value per share that is next computed after receipt of
your order in proper form by the Distributor, the Transfer Agent or a designated
agent thereof. (For more information, see "Determination of Net Asset Value.")
If you fail to pay for your order, you will be liable for any loss to the Funds
and, if you are a current shareholder, the Funds may redeem some or all of your
shares to cover such loss.

BY MAIL

OPENING AN ACCOUNT. To open a new account by mail, make out a check for the
amount of your investment, payable to "William Blair Funds." Complete the
account application included with this Prospectus and mail the completed
application and the check to the Transfer Agent, State Street Bank and Trust
Company ("State Street"), P.O. Box 8506, Boston, Massachusetts 02266-8506.

ADDING TO AN ACCOUNT. To purchase additional shares, make out a check for the
amount of your investment, payable to "William Blair Funds." Mail the check,
together with a letter that specifies the portfolio name, the account number and
the name(s) in which the account is registered, to State Street Bank and Trust
Company, P.O. Box 8506, Boston, Massachusetts 02266-8506.

25
<PAGE> 74
BY WIRE

OPENING AN ACCOUNT. First, call State Street at 1-800-635-2886 (in
Massachusetts, 1-800-635-2840) for an account number. Then instruct your bank to
wire federal funds to:

State Street Bank and Trust Co.
ABA # 011000028
DDA # 99029340
Attn: Custody & Shareholder Services
225 Franklin Street
Boston, Massachusetts 02110

ADDING TO AN ACCOUNT. To add to your account by wire, instruct your bank to wire
federal funds to:

State Street Bank and Trust Co.
ABA # 011000028
DDA # 99029340
Attn: Custody & Shareholder Services
225 Franklin Street
Boston, Massachusetts 02110

In your request, specify the portfolio name in which you are investing, your
account number, and the name(s) in which the account is registered.

To add to an existing account by wire transfer of funds, you must have selected
this option on your account application.

BY TELEPHONE

OPENING AN ACCOUNT. See "By Wire."

ADDING TO AN ACCOUNT. Call State Street at 1-800-635-2886 (in Massachusetts,
1-800-635-2840).

Tell your account executive the Fund name, your account number and the name(s)
in which the account is registered. You may then pay for your new shares by mail
or by wire.

To add to an existing account by telephone, you must have selected this option
on your account application.

HOW TO SELL SHARES (By Mail, by Wire or by Telephone)

BY MAIL

To redeem shares by mail, send a written redemption request signed by all
account owners to State Street Bank and Trust Company, P.O. Box 8506, Boston,
Massachusetts 02266-8506.

26
<PAGE> 75
FOR ALL FUNDS, WRITTEN REDEMPTION REQUESTS MUST INCLUDE:

-- a letter that contains your name, the Fund's name and the
dollar amount or number of shares to be redeemed; and

-- any other necessary documents, such as an inheritance tax
consent or evidence of authority (for example, letters
testamentary), dated not more than 60 days prior to receipt
thereof by State Street or the Distributor.

BY WIRE

To redeem some or all of your shares in any Funds by wire, you may contact the
Transfer Agent, by mail or telephone, as explained herein. To redeem by wire,
you must have elected this option on your account application and attached to
the application a voided, unsigned check or deposit slip for your bank account.

BY TELEPHONE

TO REDEEM SHARES BY TELEPHONE, YOU MUST HAVE ELECTED THIS OPTION ON YOUR ACCOUNT
APPLICATION. Contact the Transfer Agent at 1-800-635-2886 (in Massachusetts,
1-800-635-2840).

NOTE: Redemption requests should NOT be sent to the Trust or to the Distributor.

-- You wish to redeem shares having a value of $5,000 or more in
a single transaction;

-- Your account registration has changed; or

-- You want a check in the amount of your redemption to be mailed
to a different address than the one on your account
application (address of record).

SIGNATURE GUARANTEES, IF REQUIRED, MUST APPEAR ON THE WRITTEN REDEMPTION REQUEST
AND ON ANY ENDORSED STOCK CERTIFICATE OR STOCK POWER.

REDEMPTION PRICE. The redemption price that you receive for your shares may be
more or less than the amount that you originally paid for them, depending upon
their net asset value next calculated after receipt of your redemption request
in proper order by the Distributor, the Transfer Agent or a designated agent
thereof.

PAYMENT FOR REDEEMED SHARES. Payment normally will be mailed to you at the
address of record for your account by the third business day after receipt by
State Street of a redemption request and any other required documentation and
after any checks in payment for your shares have cleared.

DELAYED PROCEEDS. The Trust reserves the right to delay delivery of your
redemption proceeds -- up to seven days -- or to honor certain redemptions with
securities, rather than cash, as described in the next section. In addition,
redemption of shares from a Fund within 180 days of purchase may be subject to a
1.00% redemption fee.

27
<PAGE> 76
amount. Currently, the MINIMUM IS $5,000 PER ACCOUNT. Before the redemption is
processed, you will be notified that the value of your account has fallen below
the minimum and allowed to make an additional investment.

HOW TO EXCHANGE SHARES (By Mail or by Telephone)

Subject to the following limitations, you may exchange shares of Class N shares
of each Fund into either Class N shares of another Fund at their relative net
asset values so long as the shares to be acquired are available for sale in your
state of residence. Only four (4) exchanges from a Fund are allowed within any
12-month period. Exchanges will be effected by redeeming your shares and
purchasing shares of the other Fund or Funds requested. Shares of a William
Blair Fund with a value in excess of $1,000,000 acquired by exchange from
another William Blair Fund may not be exchanged thereafter until they have been
owned for 15 days (the "15 Day Hold Policy").

BY MAIL

You may request an exchange of your shares by writing to William Blair Funds,
Attention: Exchange Department, P.O. Box 8506, Boston, Massachusetts 02266-8506.

BY TELEPHONE

DIVIDENDS AND DISTRIBUTIONS

WHEN DIVIDENDS ARE PAID

For the Tax-Managed Growth Fund, Large Cap Growth Fund, Small Cap Growth Fund,
Disciplined Large Cap Fund and Emerging Markets Growth Fund, all income
dividends, if any, and capital gain distributions, if any, generally will be
paid in December and/or January.

28
<PAGE> 77
TAXES

As with any investment, you should consider how your investment in a Fund will
be taxed. If your account is not a tax-deferred retirement account, you should
be aware of these tax implications.

Under the Federal tax laws, income dividends and short-term capital gains
distributions are taxed as ordinary income. Long-term capital gain distributions
are taxed as long-term capital gains. It is anticipated that a portion of the
ordinary income dividends for the Tax-Managed Growth Fund, Large Cap Growth
Fund, Small Cap Growth Fund and Disciplined Large Cap Fund will be eligible for
the dividends-received deduction available for corporate shareholders. The
ordinary income dividends of the Emerging Markets Growth Fund are not eligible
for the dividends-received deduction available to corporate shareholders.

TAXES ON TRANSACTIONS. Redemptions of Fund shares and exchanges for shares of
other Funds are treated as sales and are subject to capital gains taxation. A
capital gain or loss is the difference between the price that you paid for your
shares and the price that you receive when you sell (or exchange) them. Any loss
recognized on the redemption of shares held six months or less will be treated
as a long-term capital loss to the extent you have received any long-term
capital gain dividends on such shares. A shareholder who redeems shares normally
will recognize a capital gain or loss for Federal income tax purposes. If you
realize a loss on the redemption of Fund shares within 30 days before or after
an acquisition of shares of the same Fund, the two transactions may be subject
to the wash sale rules of the Internal Revenue Code, resulting in a postponement
of the recognition of such loss for Federal income tax purposes.

"BUYING A DIVIDEND." If you buy shares before a Fund deducts a distribution from
its net asset value, you will pay the full price for the shares and then receive
a portion of the price back in the form of a taxable distribution. See "Your
Account -- Dividends and Distributions" for payment schedules, and call the
Distributor if you have further questions.

EFFECT OF FOREIGN TAXES. Investment income received from sources within foreign
countries may be subject to foreign income taxes, which generally will reduce a
Fund's distributions. However, the United States has entered into tax treaties
with many foreign countries that entitle certain investors to a reduced rate of
tax or to certain exemptions from tax. Accordingly, the Emerging Markets Growth
Fund will operate so as to qualify for such reduced tax rates or tax exemptions
whenever practicable.

For a more detailed discussion of taxes, see the Statement of Additional
Information.

29
<PAGE> 78
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------

WHEN AND HOW NET ASSET VALUE ("NAV") IS DETERMINED

A Fund's net asset value is the market value of its total assets, minus
liabilities, divided by the number of shares outstanding. The value of a single
share is called its share value or share price.

When net asset value is computed, quotations of foreign securities in foreign
currencies are converted into the United States dollar equivalents at the
prevailing market rates as computed by Investors Bank & Trust Company, the
custodian. Trading in securities on exchanges and over-the-counter markets in
Europe and the Far East is normally completed at various times prior to 3:00
p.m., Chicago time, the current closing time of the New York Stock Exchange.
Trading on foreign exchanges may not take place on every day that the New York
Stock Exchange is open. Conversely, trading in various foreign markets may take
place on days when the New York Stock Exchange is not open and on other days
when net asset value is not calculated. Consequently, calculation of the net
asset value for the Emerging Markets Growth Fund may not occur at the same time
as determination of the most current market prices of the securities included in
the calculation, and the value of the net assets held by the Emerging Markets
Growth Fund may be significantly affected on days when shares are not available
for purchase or redemption.

HOW THE MARKET VALUE OF FUND SECURITIES IS DETERMINED

30
<PAGE> 79
SHAREHOLDER SERVICES AND ACCOUNT POLICIES
- --------------------------------------------------------------------------------

The Funds provide a variety of services to help you manage your account.

1. AUTOMATIC DIVIDEND REINVESTMENT PLAN. The Funds automatically
reinvest all income dividends and capital gain distributions in additional
shares of stock at net asset value on the reinvestment date.
(For more information, see "Dividend and Distribution Policy.")

3. AUTOMATIC DEPOSIT OF DIVIDENDS. You may elect to have all income
dividends and capital gain distributions automatically deposited in a previously
established bank account.

RETIREMENT PLANS. The Funds offer a variety of qualified retirement plans,
including several types of Individual Retirement Accounts ("IRAs") (e.g.
traditional IRAs, Roth IRAs and education IRAs), Simplified Employee Pension
Plans ("SEPs") and other qualified retirement plans. Additional information
concerning such plans is available from the Funds.

With regard to retirement plans:

-- participation is voluntary;

-- you may terminate or change a plan at any time without penalty
or charge from the Funds;

-- the Funds will pay any additional expenses that they incur in
connection with such plans;

-- on your account application, you may select a plan or plans in
which to invest;

-- additional forms and further information may be obtained by
writing or calling the Funds;

-- the Funds reserve the right to change the minimum amounts for
initial and subsequent investments or to terminate any of the
plans;

-- the Funds reserve the right to waive investment minimums at
the discretion of the Distributor; and

31
<PAGE> 80
-- the Funds require a copy of the trust agreement when shares
are to be held in trust.

WRITTEN CONFIRMATIONS. Each purchase, exchange or redemption transaction is
confirmed in writing to the address of record by giving details of the purchase
or redemption.

32
<PAGE> 81
INVESTMENT GLOSSARY
- --------------------------------------------------------------------------------

CONCENTRATION. Each of the Funds intends to invest not more than 25% of its net
assets in any one industry. These limitations do not apply to obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, or to
instruments, such as repurchase agreements, secured by these instruments or to
tax-exempt securities.

DEPOSITORY RECEIPTS. All of the Funds may invest in foreign issuers through
sponsored American Depository Receipts ("ADRs"), European Depository Receipts
("EDRs") and Global Depository Receipts ("GDRs"). Generally, an ADR is a
dollar-denominated security issued by a U.S. bank or trust company that
represents, and may be converted into, the underlying foreign security. An EDR
represents a similar securities arrangement but is issued by a European bank,
and a GDR is issued by a depository. ADRs, EDRs and GDRs may be denominated in a
currency different from the underlying securities into which they may be
converted. Typically, ADRs, in registered form, are designed for issuance in
U.S. securities markets, and EDRs and GDRs, in bearer form, are designed for
issuance in European securities markets. Investments in depository receipts
entail risks similar to direct investments in foreign securities. These risks
are detailed in the section on "Investment Risks" under the "Emerging Markets
Growth Fund" above and in the statement of additional information.

DIVERSIFICATION. The Funds will not purchase the securities of any issuer if, as
a result, more than 5% of 75% of each Fund's net assets would be invested in
such issuer. In addition, each Fund will not purchase more than 10% of the
outstanding voting securities of any issuer, except the Emerging Markets Growth
Fund to which that limitation only applies to 75% of the portfolio's net assets.
These limitations do not apply to U.S. Government securities or to government
agency or instrumentality securities.

FOREIGN CURRENCY FUTURES. The Emerging Markets Growth Fund may purchase and sell
futures on foreign currencies as a hedge against possible variation in foreign
exchange rates. Foreign currency futures contracts are traded on boards of trade
and futures exchanges. A futures contract on a foreign currency is an agreement
between two parties to buy and sell a specified amount of a particular currency
for a particular price on a future date. To the extent that the Fund engages in
foreign currency futures transactions, but fails to consummate its obligations
under the contract, the net effect to the Fund would be the same as speculating
in the underlying futures contract. Futures contracts entail certain risks. If
the Adviser's judgment about the general direction of rates or markets is wrong,
the Fund's overall performance may be less than if no such contracts had been
entered into. There may also be an imperfect correlation between movements in
prices of futures contracts and the portfolio securities being hedged. In
addition, the market prices of futures contracts may be affected by certain
factors. If participants in the futures market elect to close out their
contracts through offsetting transactions rather than to meet margin
requirements, distortions in the normal relationship between the securities and
futures markets could result. In addition, because margin requirements in the
futures markets are less onerous than margin requirements in the cash market,
increased participation by speculators in the futures market could cause
temporary price distortions. Due to price distortions in the futures market and
an imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of market
trends by the Fund's Adviser may still not result in a successful hedging
transaction. The Fund could also experience losses if it could not close out its
futures position because of an illiquid secondary market, and losses on futures
contracts are not limited to the amount invested in the contract. The above
circumstances could cause the Fund to lose money on the financial futures
contracts and also on the value of its portfolio securities.

33
<PAGE> 82
account consisting of either cash or liquid securities equal to the Fund's
potential obligation under such contracts. The segregation of assets places a
practical limit on the extent to which the Fund may engage in futures contracts.

FORWARD FOREIGN CURRENCY TRANSACTIONS. The Emerging Markets Growth Fund may
enter into forward foreign currency contracts as a means of managing the risks
associated with changes in exchange rates. A forward foreign currency contract
is an agreement to exchange U.S. dollars for foreign currencies at a specified
future date and specified amount which is set by the parties at the time of
entering into the contract. The Adviser will generally use such currency
contracts to fix a definite price for securities they have agreed to buy or sell
and may also use such contracts to hedge the Fund's investments against adverse
exchange rate changes. Alternatively, the Funds may enter into a forward
contract to sell a different foreign currency for a fixed U.S. dollar amount
where the Adviser believes that the U.S. dollar value of the currency to be sold
pursuant to the forward contract will fall whenever there is a decline in the
U.S. dollar value of the currency in which securities of the Fund are
denominated ("cross-hedge"). The profitability of forward foreign currency
transactions depends upon correctly predicting future changes in exchange rates
between the U.S. dollar and foreign currencies. As a result, a Fund may incur
either a gain or loss on such transactions. While forward foreign currency
transactions may help reduce losses on securities denominated in a foreign
currency, they may also reduce gains on such securities depending on the actual
changes in the currency's exchange value relative to that of the offsetting
currency involved in the transaction. The Funds will not enter into forward
foreign currency transactions for speculative purposes.

ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
illiquid securities. Illiquid securities are those securities that are not
readily marketable, including restricted securities and repurchase obligations
maturing in more than seven days.

INVESTMENT COMPANIES. Subject to the provisions of the 1940 Act, the Funds may
each invest in the shares of investment companies. Investment in other
investment companies may provide advantages of diversification and increased
liquidity; however, there may be duplicative expenses, such as advisory fees or
custodial fees. Several foreign governments permit investments by non-residents
in their markets only through participation in certain investment companies
specifically organized to participate in such markets. In addition, investments
in unit trusts and country funds permit investments in foreign markets that are
smaller than those in which the Fund would ordinarily invest directly.
Investments in such pooled vehicles should enhance the geographical
diversification of the Fund's assets, while reducing the risks associated with
investing in certain smaller foreign markets. Investments in such vehicles will
provide increased liquidity and lower transaction costs than are normally
associated with direct investments in such markets; however, there may be
duplicative expenses, such as advisory fees or custodial fees.

34
<PAGE> 83

default of the seller of a repurchase agreement, the Fund could incur expenses
and delays enforcing its rights under the agreement, and experience a decline in
the value of the underlying securities and loss of income. The maturity of a
security subject to repurchase may exceed one year, and, for the Income Fund,
the modified duration of a security subject to repurchase may exceed eight
years. Repurchase agreements maturing in more than seven days, together with any
securities that are restricted as to disposition under the federal securities
laws or are otherwise considered to be illiquid, will not exceed 15% of the net
assets of the Tax-Managed Growth Fund, Large Cap Growth Fund, Small Cap Growth
Fund, Disciplined Large Cap Fund and Emerging Markets Growth Fund.

35
<PAGE> 84
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
WILLIAM BLAIR TAX-MANAGED GROWTH FUND PERIOD ENDED
DECEMBER 31, 1999(a)
--------------------
CLASS N
-------
<S> <C>
Net asset value, beginning of year..................... $10.000
Income from investment operations:
Net investment income......................... 0.001
Net realized and unrealized gain
(loss) on investments................ 0.180
-------
Total from investment operations....................... 0.181
Less distributions from:
Net investment income......................... --
Net realized capital gains.................... --
-------
Total distributions........................... --
-------
Net asset value, end of period......................... $10.181
=======

Total return (%)(b).................................... 1.80
Ratios to average net assets (%):
Expenses ..................................... 1.36
Net investment income......................... 0.75
Supplemental data:
Net assets at end of year (in
thousands)........................... $1,018
Portfolio turnover rate (%)................... --
</TABLE>

- --------------
(a) For the period December 27, 1999 (Commencement of Operations) to
December 31, 1999.

(b) Total return is not annualized for periods that are less than a full
year.

36
<PAGE> 85
WILLIAM BLAIR LARGE CAP GROWTH FUND

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1999(a)
--------------------
CLASS N
-------
<S> <C>
Net asset value, beginning of year..................... $10.000
Income from investment operations:
Net investment loss........................... (0.001)
Net realized and unrealized gain
(loss) on investments................ 0.142
-------
Total from investment operations....................... 0.141
Less distributions from:
Net investment income......................... --
Net realized capital gains.................... --
-------
Total distributions........................... --
-------
Net asset value, end of period......................... $10.141
=======

Total return (%)(b).................................... 1.40
Ratios to average net assets (%):
Expenses ..................................... 1.36
Net investment income......................... (0.66)
Supplemental data:
Net assets at end of year (in
thousands)........................... $1,153
Portfolio turnover rate (%)................... --
</TABLE>

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

(a) For the period December 27, 1999 (Commencement of Operations) to
December 31, 1999.

(b) Total return is not annualized for periods that are less than a full
year.

37
<PAGE> 86
WILLIAM BLAIR SMALL CAP GROWTH FUND

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1999(a)
--------------------
CLASS N
-------
<S> <C>
Net asset value, beginning of year..................... $10.000
Income from investment operations:
Net investment loss........................... (0.001)
Net realized and unrealized gain
(loss) on investments................ 0.192
-------
Total from investment operations....................... 0.190
Less distributions from:
Net investment income......................... --
Net realized capital gains.................... --
-------
Total distributions........................... --
-------
Net asset value, end of period......................... $10.190
=======

Total return (%)(b).................................... 1.90
Ratios to average net assets (%):
Expenses ..................................... 1.60
Net investment loss........................... (1.60)
Supplemental data:
Net assets at end of year (in
thousands)........................... $6,346
Portfolio turnover rate (%)................... --
</TABLE>

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

(a) For the period December 27, 1999 (Commencement of Operations) to
December 31, 1999.

(b) Total return is not annualized for periods that are less than a full
year.

38
<PAGE> 87
WILLIAM BLAIR DISCIPLINED LARGE CAP FUND

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1999(a)
--------------------
CLASS N
-------
<S> <C>
Net asset value, beginning of year..................... $10.000
Income from investment operations:
Net investment income......................... --
Net realized and unrealized gain
(loss) on investments................ 0.123
-------
Total from investment operations....................... 0.123
Less distributions from:
Net investment income......................... --
Net realized capital gains.................... --
-------
Total distributions........................... --
-------
Net asset value, end of period......................... $10.123
=======

Total return (%)(b).................................... 1.20
Ratios to average net assets (%):
Expenses ..................................... 1.25
Net investment income......................... (0.21)
Supplemental data:
Net assets at end of year (in
thousands)........................... $1,518
Portfolio turnover rate (%)................... 0.5
</TABLE>

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

(a) For the period December 27, 1999 (Commencement of Operations) to
December 31, 1999.

(b) Total return is not annualized for periods that are less than a full
year.

39
<PAGE> 88
WILLIAM BLAIR EMERGING MARKETS GROWTH FUND

<TABLE>
<CAPTION>
(CLASS N) YEARS ENDED DECEMBER 31,
-------------------------------
1999 1998(a)(b)
-------------- --------------
<S> <C> <C>
Net asset value, beginning of period ......... $ 7.630 $ 10.000
Income from investment operations:
Net investment income ..................... (1.117) .002
Net realized and unrealized gain (loss) on
investments, foreign currency and other
assets and liabilities ................. 7.169 (2.372)
-------------- --------------
Total from investment operations ............. 6.052 (2.370)
Less distributions from:
Net investment income ..................... -- --
Net realized gain on investments .......... 0.039 --
-------------- --------------
Total distributions .......................... 0.039 --
-------------- --------------
Net asset value, end of year ................. $ 13.643 $ 7.630
============== ==============
Total return (%) ............................. 79.31 (23.70)
Ratios to average net assets (%):
Expenses(c) ............................... 2.06 2.25
Net investment income(c) .................. (0.63) .04
Supplemental data:
Net assets at end of year (000s) .......... $ 6,028 $ 3,754
Portfolio turnover rate (%) ............... 201 226
</TABLE>

- ----------

(a) For the period May 1, 1998 (Commencement of Operations) to December 31,
1998.

(b) Rates are annualized, except total returns for periods less than one
year.

(c) Without the waiver of expenses in 1999, the expense rate would have
been 4.53% and the net investment loss ratio would have been 1.83% and
4.06% respectively. Without the waiver of expenses in 1998, the expense
ratio would have been 6.35% and the net investment loss ratio would
have been 4.06%.

40
<PAGE> 89
FOR MORE INFORMATION

More information about the Funds is available without charge, upon request,
including the following:

SEMI-ANNUAL/ANNUAL REPORTS

STATEMENT OF ADDITIONAL INFORMATION (SAI)

TO OBTAIN INFORMATION:

BY TELEPHONE
Call: 1-800-635-2886
(In Massachusetts 1-800-635-2840)

BY MAIL
Write to:
WILLIAM BLAIR FUNDS
222 West Adams Street
Chicago, Illinois 60606

STATE STREET BANK AND TRUST COMPANY
(the Fund's Transfer Agent)
P.O. Box 8506
Boston, MA 02266-8506

ON THE INTERNET

Text-only versions of fund documents can be viewed online or downloaded from the
SEC at http://www.sec.gov

WILLIAM BLAIR FUNDS May 1, 2000
Investment Company Act File No.: 811-5344

41
<PAGE> 90
May 1, 2000

WILLIAM BLAIR FUNDS

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

CLASS A, B, C AND I SHARES PROSPECTUS

GROWTH FUND
INTERNATIONAL GROWTH FUND
VALUE DISCOVERY FUND
INCOME FUND

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

CLASS N SHARES

READY RESERVES FUND

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

WILLIAM BLAIR FUNDS
222 West Adams Street
Chicago, Illinois 60606

<PAGE> 91
TABLE OF CONTENTS

<TABLE>
<S> <C>
SUMMARY.......................................................................................................... 1
Growth Fund............................................................................................. 1
International Growth Fund............................................................................... 3
Value Discovery Fund.................................................................................... 5
Income Fund............................................................................................. 8
Ready Reserves Fund..................................................................................... 11

Investment Objectives and Principal Investment Strategies........................................................ 13
Growth Fund............................................................................................. 14
International Growth Fund............................................................................... 16
Value Discovery Fund.................................................................................... 18
Income Fund............................................................................................. 20
Ready Reserves Fund..................................................................................... 22

INVESTMENT RISKS................................................................................................. 24

MANAGEMENT OF THE FUNDS.......................................................................................... 27

CHOOSING A SHARE CLASS........................................................................................... 28
Class a Shares.......................................................................................... 29
Class B Shares.......................................................................................... 32
Class C Shares.......................................................................................... 33
Class I Shares.......................................................................................... 34

YOUR ACCOUNT..................................................................................................... 35
How to Buy Shares....................................................................................... 35
How to Sell Shares...................................................................................... 36
How to Exchange Shares.................................................................................. 38
Dividends and Distributions............................................................................. 39
Taxes ............................................................................................... 40

DETERMINATION OF NET ASSET VALUE................................................................................. 41

SHAREHOLDER SERVICES AND ACCOUNT POLICIES........................................................................ 42

INVESTMENT GLOSSARY.............................................................................................. 44

FINANCIAL HIGHLIGHTS............................................................................................. 48

FOR MORE INFORMATION............................................................................................. Back Cover
</TABLE>

<PAGE> 92
WILLIAM BLAIR GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Growth Fund seeks long-term capital
appreciation.

LARGE, high quality growth companies that have demonstrated sustained
growth over a long period of time;

MEDIUM-sized growth companies of recognized investment quality whose
records of sales and earnings growth may not be as well established;
and

SMALL emerging, rapid growth companies of high quality that have had
especially vigorous growth in revenues and earnings.

FUND PERFORMANCE HISTORY

ANNUAL TOTAL RETURNS (CLASS N SHARES)(1)

[BAR CHART]

1990 - -2.02%
1991 - 44.37
1992 - 7.61
1993 - 15.51
1994 - 6.45
1995 - 29.07
1996 - 17.99
1997 - 20.07
1998 - 27.15
1999 - 19.98

<TABLE>
<CAPTION>
HIGHEST QUARTERLY LOWEST QUARTERLY
RETURN RETURN
----------------- ----------------
<S> <C>
23.69% (4Q98) --14.91% (3Q90)
</TABLE>

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

(1) The Class A, Class B, Class C and Class I shares do not have a full
calendar year of performance. The Class N shares of the Fund are
offered in a separate prospectus. The returns for the Class A, Class B,
Class C and Class I shares will be substantially similar to those of
the Class N shares shown in the chart because all shares of the Fund
are invested in the same portfolio of securities. The annual returns of
the different Classes of shares will differ only to the extent that the
expenses of the Classes differ.

Class A, B and C share sales loads are not reflected in the chart below. If
sales loads were reflected, the Fund's returns would be less than those shown.
Class I has no sales loads.

1
<PAGE> 93

AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Fund's Class N
average annual total returns for the periods ended December 31, 1999, to a
broad-based market benchmark.

<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
<S> <C> <C> <C>
Growth Fund Class N Shares 19.98% 22.77% 17.97%
S&P 500* 21.04% 28.55% 18.21%
</TABLE>

- --------------
* The Standard and Poor's 500 Stock Index is an unmanaged index that
generally represents broad larger capitalization equity market
performance. Expenses are not included.

FEES AND EXPENSES: This section describes the fees and expenses that you may pay
if you buy and hold shares of the Fund.

SHAREHOLDER FEES are fees paid directly from your investment.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on 5.75% None None None
Purchases (as % of offering price)
Maximum Deferred Sales Charge (Load) (as % None(1) 5.00% 1.00% None
of redemption proceeds)
Maximum Sales Charge (Load) Imposed on None None None None
Reinvested Dividends/Distributions
Redemption Fee (as % of amount redeemed)
Shares held less than 180 days None None None 1.00%
Shares held 180 days or more None None None None
Exchange Fee None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fee....................................... .75% .75% .75% .75%
Distribution (Rule 12b-1) and/or Service Fees........ .25% 1.00% 1.00%(2) None
Other Expenses....................................... .31% .28% .26% .11%
---- ---- ---- ----
Total Annual Fund Operating Expenses................ 1.31% 2.03% 2.01% .86%
</TABLE>

- --------------
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent
deferred sales charge of 1.00% during the first year and 0.50% during the
second year. For more information about the Large Order NAV Purchase
Privilege see "Choosing a Share Class--Special Features" below.

(2) Long-term shareholders may indirectly pay more than the equivalent of the
maximum permitted front-end sales charge.

EXAMPLE: This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the Fund, redeem all of your shares at the end of the
periods shown, earn a 5% return each year and incur the same operating expenses
as shown above:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year.............................. $ 701 $ 706 $ 304 $ 88
3 Years............................. 966 937 631 274
5 Years............................. 1,252 1,293 1,083 477
10 Years............................ 2,063 2,087 2,338 1,061
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year.............................. $ 701 $ 206 $ 204 $ 88
3 Years............................. 966 637 631 274
5 Years............................. 1,252 1,093 1,083 477
10 Years............................ 2063 2,087 2,338 1,061
</TABLE>

2
<PAGE> 94
WILLIAM BLAIR INTERNATIONAL GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair International Growth Fund seeks
long-term capital appreciation.

FUND PERFORMANCE HISTORY

ANNUAL TOTAL RETURNS (CLASS N SHARES)(1)

[BAR CHART]

1993 - 33.65%
1994 - -0.04
1995 - 7.22
1996 - 10.20
1997 - 8.39
1998 - 11.46
1999 - 96.25

<TABLE>
<CAPTION>
HIGHEST QUARTERLY LOWEST QUARTERLY
RETURN RETURN
----------------- ----------------
<S> <C>
42.89% (4Q99) -16.70% (3Q98)
</TABLE>

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

(1) The Class A, Class B, Class C and Class I shares do not have a full calendar
year of performance. The Class N shares of the Fund are offered in a
separate prospectus. The returns for the Class A, Class B, Class C and Class
I shares will be substantially similar to those of the Class N shares shown
in the chart because all shares of the Fund are invested in the same
portfolio of securities. The annual returns of the different Classes of
shares will differ only to the extent that the expenses of the Classes
differ.

Class A, B and C share sales loads are not reflected in the above chart. If
sales loads were reflected, the Fund's returns would be less than those shown.
Class I has no sales loads.

3
<PAGE> 95

AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Fund's Class N
average annual total returns for the periods ended December 31, 1999, to a
broad-based securities market index.

<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE OF FUND**
------ ------- --------------
<S> <C> <C> <C>
International Growth Fund Class N Shares 96.25% 22.88% 20.17%
MSCI AC WLDF EX U.S.* 30.91% 14.31% 13.48%
</TABLE>

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

* The Morgan Stanley Capital International All Country World (Free)
except U.S. Index is an unmanaged index that includes developed and
emerging markets. Expenses are not included.

** The Fund's inception was on October 1, 1992.

FEES AND EXPENSES: This section describes the fees and expenses that you may pay
if you buy and hold shares of the Fund.

SHAREHOLDER FEES are paid directly from your investment:

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fee .............................. 1.10% 1.10% 1.10% 1.10%
Distribution (Rule 12b-1) and/or Service Fees .25% 1.00% 1.00%(2) None
Other Expenses .............................. .25% .25% .25% .25%
---- ---- ---- ----
Total Annual Fund Operating Expenses ....... 1.60% 2.35% 2.35% 1.35%
</TABLE>

(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent
deferred sales charge of 1.00% during the first year and 0.50% during
the second year. For more information about the Large Order NAV
Purchase Privilege see "Choosing a Share Class--Special Features"
below.

(2) Long-term shareholders may indirectly pay more than the equivalent of
the maximum permitted front-end sales charge.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year ........ $ 728 $ 738 $ 338 $ 137
3 Years ....... 1,051 1,033 733 428
5 Years ....... 1,396 1,455 1,255 739
10 Years ...... 2,366 2,412 2,686 1,624
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year............................... $ 728 $ 238 $ 238 $ 137
3 Years.............................. 1,051 733 733 428
5 Years.............................. 1,396 1,255 1,255 739
10 Years............................. 2,366 2,412 2,686 1,624
</TABLE>

4
<PAGE> 96
WILLIAM BLAIR VALUE DISCOVERY FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Value Discovery Fund seeks long-term
capital appreciation.

FUND PERFORMANCE HISTORY

ANNUAL TOTAL RETURNS (CLASS N SHARES) (1)

[BAR CHART]

1997 - 33.46%
1998 - 0.66
1999 - 6.10

<TABLE>
<CAPTION>
HIGHEST QUARTERLY LOWEST QUARTERLY
RETURN RETURN
----------------- ----------------
<S> <C>
26.58% (3Q97) -17.59% (3Q98)
</TABLE>

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

(1) The Class A, Class B, Class C and Class I shares do not have a full
calendar year of performance. The Class N shares of the Fund are offered
in a separate prospectus. The returns for the Class A, Class B, Class C
and Class I shares will be substantially similar to those of the Class N
shares shown in the chart because all shares of the Fund are invested in
the same portfolio of securities. The annual returns of the different
Classes of shares will differ only to the extent that the expenses of the
Classes differ.

Class A, B and C share sales loads are not reflected in the above chart. If
sales loads were reflected, the Fund's returns would be less than those shown.
Class I has no sales loads.

5
<PAGE> 97

AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Fund's Class N
average annual total returns for the periods ended December 31, 1999, to a
broad-based securities market index.

<TABLE>
<CAPTION>
1 YEAR LIFE OF FUND**
------ --------------
<S> <C> <C>
Value Discovery Fund Class N Shares 6.10% 12.54%
Russell 2000 Index* 21.26% 13.08%
</TABLE>

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

** The Fund's inception was on December 23, 1996.

FEES AND EXPENSES: This section describes the fees and expenses that you may pay
if you buy and hold shares of the Fund.

SHAREHOLDER FEES are paid directly from your investment:

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fee....................................... 1.15% 1.15% 1.15% 1.15%
Distribution (Rule12b-1) and/or Service Fees......... .25% 1.00% 1.00%(2) None
Other Expenses....................................... .37% .37% .37% .23%
---- ---- ---- ----
Total Annual Fund Operating Expenses................ 1.67% 2.42% 2.42% 1.38%(3)
Adviser's Expense Waiver............................ .03% .03% .03% .03%
---- ---- ---- ----
Net Expenses (with waiver)....................... 1.64% 2.39% 2.39% 1.35%
</TABLE>

(2) Long-term shareholders may indirectly pay more than the equivalent of the
maximum permitted front-end sales charge.

(3) The Adviser has entered an agreement with the Fund to cap the expenses
for the Fund's Class I shares at 1.39% until at least April 30, 2001; the
Adviser may continue to waive fees voluntarily thereafter. For the Fund's
Class A, B and C shares, the expenses will be capped at 1.39% plus any
distribution and/or shareholder servicing fees.

6
<PAGE> 98

EXAMPLE: This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The example assumes
that you invest $10,000 in the Fund; redeem all of your shares at the end of the
periods shown, earn a 5% return each year and incur the same operating expenses
as shown above (the first year in each example reflects the fee waiver noted
above):

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year.............................. $ 732 $ 742 $ 342 $ 167
3 Years............................. 1,068 1,052 752 524
5 Years............................. 1,428 1,488 1,288 905
10 Years............................ 2,435 2,481 2,754 1,974
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year............................... $ 732 $ 242 $ 242 $ 167
3 Years.............................. 1,068 752 752 524
5 Years.............................. 1,428 1,288 1,288 905
10 Years............................. 2,435 2,481 2,754 1,974
</TABLE>

7
<PAGE> 99
WILLIAM BLAIR INCOME FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Income Fund seeks a high a level of
current income with relative stability of principal.

FUND PERFORMANCE HISTORY

ANNUAL TOTAL RETURNS. The bar chart below provides an illustration of how the
Fund's performance has varied in each year since the Fund started. The
information below provides some indication of the risks of investing in the Fund
by showing changes in the Fund's performance from year to year and by showing
how the Fund's average annual returns for the years indicated compare with those
of a broad measure of market performance. The Fund's past performance does not
necessarily indicate how it will perform in the future.

ANNUAL TOTAL RETURNS (CLASS N SHARES) (1)

[BAR CHART]

1991 - 16.47%
1992 - 7.17
1993 - 7.82
1994 - -0.74
1995 - 14.37
1996 - 3.07
1997 - 8.03
1998 - 7.07
1999 - 0.34

<TABLE>
<CAPTION>
HIGHEST QUARTERLY LOWEST QUARTERLY
RETURN RETURN
----------------- ----------------
<S> <C>
5.44% (4Q91) -1.30% (4Q92)
</TABLE>

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

(1) The Class A, Class B, Class C and Class I shares do not have a full
calendar year of performance. The Class N shares of the Fund are offered
in a separate prospectus. The returns for the Class A, Class B, Class C
and Class I shares will be substantially similar to those of the Class N
shares shown in the chart because all shares of the Fund are invested in
the same portfolio of securities. The annual returns of the different
Classes of shares will differ only to the extent that the expenses of the
Classes differ.

Class A, B and C share sales loads are not reflected in the above chart. If
sales loads were reflected, the Fund's returns would be less than those shown.
Class I has no sales loads.

8
<PAGE> 100

AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Fund's average
annual total returns for the periods ended December 31, 1999, to a broad-based
securities market index.

<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE OF FUND**
------ ------- ---------------
<S> <C> <C> <C>
Income Fund Class N Shares .34% 6.45% 7.06%
Lehman Intermediate Gov't/Corp. Index* .39% 7.10% 7.32%
</TABLE>

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

* The Lehman Intermediate Government/Corporate Index is an unmanaged index
that represents broad intermediate government/corporate bond market
performance. Expenses are not included.

** The Fund's inception was on September 25, 1990.

YIELD: You may obtain the most current yield information for the Fund by calling
1-800-742-7272.

FEES AND EXPENSES: This section describes the fees and expenses that you may pay
if you buy and hold shares of the Fund.

SHAREHOLDER FEES are fees paid directly from your investment:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on 2.00% None None None
Purchases (as % of offering price)
Maximum Deferred Sales Charge (Load) (as % None(1) 2.00% 1.00% None
of redemption proceeds)
Maximum Sales Charge (Load) Imposed on None None None None
Reinvested Dividends/Distributions
Redemption Fee (as % of amount redeemed)
Shares held less than 180 days None None None 1.00%
Shares held 180 days or more None None None None
Exchange Fee None None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fee........................................ .59% .59% .59% .59%
Distribution (Rule 12b-1) and/or Service Fees......... .25% 1.00% 1.00%(2) None
Other Expenses........................................ .15% .18% .12% .11%
---- ---- ---- ----
Total Annual Fund Operating Expenses................. .99% 1.77% 1.71% .70%
</TABLE>

- --------------
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent
deferred sales charge of .25% during the first year. For more information
about the Large Order NAV Purchase Privilege see "Choosing a Share
Class--Special Features" below.

(2) Long-term shareholders may indirectly pay more than the equivalent of the
maximum permitted front-end sales charge.

9
<PAGE> 101

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year.............................. $ 299 $ 380 $ 274 $ 72
3 Years............................. 509 557 539 224
5 Years............................. 736 962 928 390
10 Years............................ 1,389 1,708 2,019 871
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year.............................. $ 299 $ 180 $ 174 $ 72
3 Years............................. 509 557 539 224
5 Years............................. 736 962 928 390
10 Years............................ 1,389 1,708 2,019 871
</TABLE>

10
<PAGE> 102
WILLIAM BLAIR READY RESERVES FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Ready Reserves Fund seeks current
income, a stable share price and daily liquidity.

FUND PERFORMANCE HISTORY

ANNUAL TOTAL RETURNS. (CLASS N SHARES)

[BAR CHART]

1990 - 7.81%
1991 - 5.64
1992 - 3.32
1993 - 2.64
1994 - 3.67
1995 - 5.45
1996 - 4.81
1997 - 5.04
1998 - 4.98
1999 - 4.63

<TABLE>
<CAPTION>
HIGHEST QUARTERLY LOWEST QUARTERLY
RETURN RETURN
----------------- ----------------
<S> <C>
1.25% (4Q99) 0.64% (2Q93)
</TABLE>

Average Annual Total Returns. The following table compares the Fund's average
annual total returns for the periods ended December 31, 1999, to a broad-based
securities market index.

<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
<S> <C> <C> <C>
Ready Reserves Fund 4.63% 4.99% 4.78%
S&P-rated AAA* 4.62% 4.98% 4.76%
</TABLE>

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

* The Standard and Poor's-rated AAA Money Market Funds Index is an
unmanaged index that includes money market mutual funds rated AAA by
Standard and Poor's. Expenses are not included.

YIELD: You may obtain the most current yield information for the Fund by calling
1-800-742-7272.

11
<PAGE> 103
FEES AND EXPENSES: This section describes the fees and expenses that you may pay
if you buy and hold Class N shares of the Fund. Class N shares are no-load
investments, so you will not pay any shareholder fees to buy shares, reinvest
dividends in additional shares or exchange into the Class N shares of another
Fund.

SHAREHOLDER FEES are fees paid directly from your investment.

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

<TABLE>
<S> <C>
Management Fee................................................................... .24%
Distribution (Rule 12b-1) Fee.................................................... .35%(1)
Other Expenses................................................................... .13%
----
Total Annual Fund Operating Expenses............................................ .72%
</TABLE>

- --------------
(1) Long-term shareholders may pay more than the equivalent of the maximum
permitted front-end sales charge.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$74 $230 $401 $895
</TABLE>

12
<PAGE> 104
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES

13
<PAGE> 105
WILLIAM BLAIR GROWTH FUND

GOAL AND PRINCIPAL STRATEGIES

The Adviser seeks growth opportunities by investing in large, medium and small
companies in varying proportions:

LARGE, high quality growth companies that have demonstrated sustained
growth over a long period of time;

MEDIUM-sized companies of recognized investment quality whose records
of sales and earnings growth may not be as well established; and

SMALL, emerging, rapid-growth companies that have had especially
vigorous growth in revenues and earnings.

INVESTMENT PROCESS

A LEADER IN THE FIELD. The company should be, or clearly have the
expectation of becoming, a significant provider in the primary markets
it serves.

MARKETING CAPABILITY. The company should have a distinctive capability
in sales, service or distribution.

VALUE TO CUSTOMER. The prices of the company's products or services
should be based upon their value to the customer, rather than their
production cost.

CONSERVATIVE FINANCIAL POLICIES AND ACCOUNTING PRACTICES. The company
should have a relatively simple, clean financial structure and adhere
to conservative and straightforward accounting practices.

ADDITIONAL STRATEGIES

To a limited extent, the Fund may invest in depository receipts, illiquid
securities, investment companies, when-issued and delayed delivery securities
and repurchase agreements which are described in the Investment Glossary at the
end of this prospectus. From time to time, the Fund may invest in related equity
securities such as preferred stocks, convertible securities and warrants which
are described in the Statement of Additional Information. The Investment
Glossary also describes the Fund's policies with regard to borrowing,
concentration, diversification and portfolio turnover. The Fund may invest to a
limited extent in warrants, which are described in the Statement of Additional
Information.

14
<PAGE> 106
PORTFOLIO MANAGEMENT

The Growth Fund is co-managed by Rocky Barber, Mark A. Fuller, III. and Gretchen
S. Lash.

15
<PAGE> 107
WILLIAM BLAIR INTERNATIONAL GROWTH FUND

GOAL AND PRINCIPAL STRATEGIES

INVESTMENT PROCESS

16
<PAGE> 108
ADDITIONAL STRATEGIES

PORTFOLIO MANAGEMENT

The International Growth Fund is managed by W. George Greig.

17
<PAGE> 109
WILLIAM BLAIR VALUE DISCOVERY FUND

GOAL AND PRINCIPAL STRATEGIES

INVESTMENT PROCESS

MATERIAL PRICE/VALUE DISPARITY--whether the company's current market
value reflects a material discount from the Adviser's estimate of the
company's intrinsic value.

PROBABLE EXPANSION IN PROFITABILITY--whether the company has a
reasonable expectation of improving its level of profitability over a
three-year investment horizon.

POSITIVE CATALYST--the likelihood that the company will undergo a
positive corporate change within a three-year investment horizon.

ADDITIONAL STRATEGIES

18
<PAGE> 110
PORTFOLIO MANAGEMENT

The Value Discovery Fund is co-managed by Glen A. Kleczka, David S. Mitchell and
Capucine E. Price.

19
<PAGE> 111
WILLIAM BLAIR INCOME FUND

GOAL AND PRINCIPAL STRATEGIES

As a matter of fundamental policy, under normal conditions at least 90% of the
Fund's assets will be invested in the following:

COMMERCIAL PAPER obligations rated within the highest grade by one of
the four Rating Organizations.

INVESTMENT PROCESS

ADDITIONAL STRATEGIES

20
<PAGE> 112

equivalent) by a Rating Organization, the Fund will sell the security within 90
days. Although considered to be investment grade, debt securities rated "BBB"
may have speculative characteristics, and changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case for higher grade bonds.

PORTFOLIO MANAGEMENT

The Income Fund is co-managed by Jim Kaplan and Bentley Myer.

21
<PAGE> 113
WILLIAM BLAIR READY RESERVES FUND

GOAL AND PRINCIPAL STRATEGIES

ADDITIONAL STRATEGIES AND RISKS

The Fund will invest exclusively in U.S. dollar-denominated money market
instruments, including, but not limited to, those issued by:

-- Corporations;

-- the U.S. Government, its agencies and instrumentalities;

-- U.S. and foreign banks;

-- Municipalities;

-- Foreign governments; and

-- Multinational organizations, such as the World Bank.

22
<PAGE> 114
PORTFOLIO MANAGEMENT

The Ready Reserves Fund is co-managed by Jim Kaplan and Bentley Myer.

23
<PAGE> 115
INVESTMENT RISKS

The following table summarizes the types of risks described below that
each Fund may experience:

EQUITY FUNDS

24
<PAGE> 116
Fund's investments in such countries illiquid and more volatile than investments
in more developed countries, and the Fund may be required to establish special
custodial or other arrangements before making investments in these countries.
There may be little financial or accounting information available with respect
to issuers located in these countries, and it may be difficult as a result to
assess the value or prospects of an investment in such issuers.

INCOME FUND

25
<PAGE> 117
consequently, provide higher yields. Not all securities issued or guaranteed by
agencies or instrumentalities of the U.S. Government are backed by the full
faith and credit of the United States. Such securities involve different degrees
of government backing. Some obligations issued or guaranteed by U.S. Government
agencies or instrumentalities in which the Fund may invest are backed by the
full faith and credit of the United States, such as modified pass-through
certificates issued by the Government National Mortgage Association, while
others are backed exclusively by the agency or instrumentality with limited
rights of the issuer to borrow from the U.S. Treasury (such as obligations of
the Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation). Others are backed only by the credit of the issuer itself (such as
obligations of the Student Loan Marketing Association). For a description of
ratings, see Appendix B in the Statement of Additional Information.

26
<PAGE> 118
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------

Each Fund pays the Adviser a monthly investment management fee based upon the
percentage of the Fund's average net assets as shown below:

<TABLE>
<CAPTION>
FEE AS A % OF
FUND AVERAGE NET ASSETS
- ---- ------------------
<S> <C>
Growth Fund................................ 0.75%
International Growth Fund.................. 1.10%
Value Discovery Fund....................... 1.15%
Income Fund................................ 0.59%
Ready Reserves Fund........................ 0.24%
</TABLE>

TRANSFER AGENT AND DIVIDEND PAYING AGENT. The Transfer Agent and Dividend Paying
Agent is State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110.

27
<PAGE> 119
CHOOSING A SHARE CLASS
- --------------------------------------------------------------------------------
CLASS A SHARES Offered at net asset value plus a maximum sales
charge of 5.75% (2.00% for the Income Fund) of the
offering price, subject to a 0.25% shareholder
services fee. Reduced sales charges apply to
purchases of $50,000 or more.

CLASS B SHARES Offered at net asset value without an initial sales
charge, but subject to a 0.75% Rule 12b-1
distribution fee, a 0.25% shareholder services fee
and a contingent deferred sales charge that
declines from 5.00% to zero on certain redemptions
made within seven years of purchase (for the Income
Fund, 2.00% to zero on certain redemptions made
within two years of purchase) within three years of
purchase. Class B shares automatically convert into
Class A shares (which have lower ongoing expenses)
at the end of the seventh year after purchase
(third year for the Income Fund).

CLASS C SHARES Offered at net asset value without an initial sales
charge, but subject to a 0.75% Rule 12b-1
distribution fee, a 0.25% shareholder services fee,
and a 1.00% contingent deferred sales charge on
redemptions made within one year of purchase. Class
C shares do not convert into another class.

CLASS I SHARES Offered at net asset value without an initial sales
charge, Rule 12b-1 distribution fee or shareholder
services fee. Certain eligibility requirements
apply.
- --------------------------------------------------------------------------------

When placing purchase orders, investors must specify whether the order is for
Class A, Class B, Class C or Class I shares. Each class of shares represents
interest in the same portfolio of investments of a Fund. The Ready Reserves Fund
currently does not offer Class A, Class B or Class C shares. The Ready Reserves
Fund offers Class N shares via this prospectus and Class I shares via another
prospectus. Each other Fund offers Class N shares through a separate prospectus.
Class N shares, which are offered without a sales charge, are offered only to
investors who acquire the shares directly through the Fund's distributor or
through a select number of financial intermediaries with whom the Distributor
has entered into selling agreements specifically authorizing them to sell Class
N shares.

The decision as to which class to choose depends on a number of factors,
including the amount and intended length of the investment. Investors that
qualify for reduced sales charges might consider Class A shares. Investors who
prefer not to pay an initial sales charge and who plan to hold their investment
for more than seven years might consider Class B shares. Investors who prefer
not to pay an initial sales charge but who plan to redeem their shares within
seven years might consider Class C shares. Investors who qualify for Class I
shares will not pay sales charges. For more information about the three sales
arrangements, consult your financial representative and the Statement of
Additional Information. Financial services firms may receive different
compensation depending upon which class of shares they sell.

RULE 12b-1 PLAN

William Blair Funds has adopted plans under Rule 12b-1 of the Investment Company
Act of 1940 that provide for fees payable to compensate the Distributor for
distribution and other services provided to shareholders of Class B, Class C and
Class N shares. Because 12b-1 fees are paid out of Fund assets on an ongoing
basis, they will, over time, increase the cost of investment and may cost more
than other types of sales charges. Long-term shareholders of Class B and Class C
shares and Class N shares of the Ready Reserves Fund may pay more than the
economic equivalent of the maximum initial sales charges permitted by the
National Association of Securities Dealers, although the Distributor believes
that it is unlikely, in the case of Class B Shares, because of the automatic
conversion feature of those shares.

SHAREHOLDER SERVICES AGREEMENT

Each Fund has entered into a Shareholder Services Agreement with the Distributor
that provides for fees as an expense of the Class A, Class B and Class C shares
that are used by the Distributor to pay for shareholder services provided to
shareholders of these classes.

28
<PAGE> 120
SPECIAL FEATURES

CLASS A SHARES -- COMBINED PURCHASES. Each Fund's Class A shares (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of William Blair
Funds.

CLASS A SHARES -- LETTER OF INTENT. The same reduced sales charges for Class A
shares also apply to the aggregate amount of purchases made by any purchaser
within a 12-month period under a written Letter of Intent ("Letter") provided by
the Distributor. The Letter, which imposes no obligation to purchase or sell
additional Class A shares, provides for a price adjustment depending upon the
actual amount purchased within such period.

CLASS A SHARES -- CUMULATIVE DISCOUNT. Class A shares of a Fund may also be
purchased at the rate applicable to the discount bracket attained by adding to
the cost of shares of a Fund being purchased, the value of all Class A shares of
the above mentioned William Blair Funds (computed at the maximum offering price
at the time of the purchase for which the discount is applicable) already owned
by the investor.

CLASS A SHARES -- LARGE ORDER NAV PURCHASE PRIVILEGE. Class A shares of a Fund
may be purchased at net asset value by any purchaser provided that the amount
invested in such Fund or other William Blair Funds totals at least $1,000,000
including purchases of Class A shares pursuant to the "Combined Purchase,"
"Letter of Intent" and "Discount" features described above (the "Large Order NAV
Purchase Privilege").

EXCHANGE PRIVILEGE -- GENERAL. Shareholders of Class A, Class B, Class C and
Class I shares may exchange their shares for shares of the corresponding class
of a Fund. For purposes of determining whether the 15-Day Hold Policy applies to
a particular exchange, the value of the shares to be exchanged is computed by
aggregating the value of shares being exchanged for all accounts under common
control, direction or advice, including without limitation accounts administered
by a financial services firm offering market timing, asset allocation or similar
services.

For purposes of determining any contingent deferred sales charge that may be
imposed upon the redemption of the shares received on exchange, amounts
exchanged retain their original cost and purchase date.

CLASS A SHARES

PUBLIC OFFERING PRICE: Net asset value per
share plus the following sales charge:

<TABLE>
<CAPTION>
EQUITY FUNDS
SALES CHARGE DEALER REALLOWANCE
------------ ------------------
AS A % OF AS A % OF NET AS A % OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED* OFFERING PRICE
- ------------------ ----------------------- ----------------------- -------------------
<S> <C> <C> <C>
$0 - $49,999 5.75% 6.10% 5.00%
$50,000 - $99,999 4.50% 4.71% 3.75%
$100,000 - $249,999 3.50% 3.63% 2.75%
$250,000 - $499,999 2.50% 2.56% 2.00%
$500,000 - $999,999 2.00% 2.04% 1.75%
$1 million and over** 0.00% 0.00% 1.00%

- --------------
* Rounded to the nearest one hundredth percent.

** Redemption of shares may be subject to a contingent deferred sales
charge as discussed below.
</TABLE>

29
<PAGE> 121

<TABLE>
<CAPTION>
INCOME FUND
SALES CHARGE DEALER REALLOWANCE
------------ ------------------
AS A % OF AS A % OF NET AS A % OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED* OFFERING PRICE
- ------------------ ----------------------- ----------------------- -------------------
<S> <C> <C> <C>
$0 - $49,999 2.00% 2.04% 1.75%
$50,000 - $99,999 2.00% 2.04% 1.75%
$100,000 - $249,999 1.50% 1.52% 1.25%
$250,000 - $499,999 1.50% 1.52% 1.25%
$500,000 - $999,999 1.00% 1.01% 0.75%
$1 million and over** 0.00% 0.00% 0.50%

- --------------
* Rounded to the nearest one hundredth percent.

** Redemption of shares may be subject to a contingent deferred sales
charge as discussed below.
</TABLE>

NAV PURCHASES: Class A shares of a Fund may be purchased at net asset value by:

- - shareholders in connection with the investment or reinvestment of
income dividends and capital gain distributions;

- - a participant-directed qualified retirement plan or a
participant-directed non-qualified deferred compensation plan or a
participant-directed qualified retirement plan, provided in each case
that such plan has not less than 200 eligible employees;

- - any purchaser with investment totals in the Funds of at least
$1,000,000;

- - in connection with the acquisition of the assets of or merger or
consolidation with another investment company; and

- - certain investment advisers registered under the Investment Advisers
Act of 1940 and other financial services firms, acting solely as agent
for their clients, that adhere to certain standards established by the
Distributor.

CONTINGENT DEFERRED SALES CHARGE: A contingent deferred sales charge may be
imposed upon redemption of Class A shares purchased under the Large Order NAV
Purchase Privilege as follows: for all Funds (except the Income Fund), 1.00% if
they are redeemed within one year of purchase and 0.50% if they are redeemed
during the second year following purchase; for the Income Fund, 0.50% if they
are redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed, excluding amounts not subject to the
charge. The contingent deferred sales charge will be waived in the event of:

- - redemptions to satisfy required minimum distributions after age 70 1/2
from an IRA account (with the maximum amount subject to this waiver
being based only upon the shareholder's William Blair IRA accounts);

- - redemptions made pursuant to any IRA systematic withdrawal based on the
shareholder's life expectancy including, but not limited to,
substantially equal periodic payments described in Code; Section
72(t)(2)(A)(iv) prior to age 59 1/2;

- - redemptions under a Fund's Systematic Withdrawal Plan at the maximum of
10% per year of the net asset value of the account;

- - the redemption of shares of a shareholder (including a registered joint
owner) who has died;

- - redemption of shares of a shareholder (including a registered joint
owner) who after purchase of the shares being redeemed becomes totally
disabled (as evidenced by a determination by the federal Social
Security Administration);

- - redemptions by a participant-directed qualified retirement plan or a
participant-directed non-qualified deferred compensation plan, provided
in each case that such plan has not less than 200 eligible employees;
and

- - the redemption of shares whose dealer of record at the time of the
investment notifies the Distributor that the dealer waives the
commission applicable to such Large Order NAV Purchase Privilege.

30
<PAGE> 122
DISTRIBUTION (RULE 12b-1) FEE: None

SHAREHOLDER SERVICES FEE: 0.25%

EXCHANGE PRIVILEGE

Class A shares of a Fund may be exchanged for the Class A shares of another Fund
at their relative net asset values.

Class A shares purchased under the Large Order NAV Purchase Privilege may be
exchanged for Class A shares of any William Blair Fund without paying any
contingent deferred sales charge. If the Class A shares received on exchange are
redeemed thereafter, a contingent deferred sales charge may be imposed.

31
<PAGE> 123
CLASS B SHARES

PUBLIC OFFERING PRICE: Net asset value per share without any sales charge at the
time of purchase.

CONTINGENT DEFERRED SALES CHARGE: A contingent deferred sales charge may be
imposed upon redemption of Class B shares. There is no such charge upon
redemption of any share appreciation or reinvested dividends. The sales charge
is applied to the value of the shares redeemed, excluding amounts not subject to
the charge. The charge is computed at the following rates applied to the value
of the shares redeemed excluding amounts not subject to the charge.

<TABLE>
<CAPTION>
EQUITY FUNDS:

YEAR OF REDEMPTION
AFTER PURCHASE: FIRST SECOND THIRD FOURTH FIFTH SIXTH SEVENTH
- -------------- ----- ------ ----- ------ ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Contingent Deferred Sales Charge: 5.00% 4.00% 3.00% 3.00% 2.00% 1.00% 0.00%
</TABLE>

<TABLE>
<CAPTION>
INCOME FUND:

The contingent deferred sales charge will be waived in the event of:

- - redemptions to satisfy required minimum distributions after age 70 1/2
from an IRA account (with the maximum amount subject to this waiver being
based only upon the shareholder's William Blair IRA accounts);

- - redemptions made pursuant to any IRA systematic withdrawal based on the
shareholder's life expectancy including, but not limited to, substantially
equal periodic payments described in Code; Section 72(t)(2)(A)(iv) prior to
age 59 1/2;

- - redemptions made pursuant to a Fund's Systematic Withdrawal Plan for up to
10% per year of the net asset value per year of the account;

- - the total disability (as evidenced by a determination by the federal Social
Security Administration) of the shareholder (including a registered joint
owner) occurring after the purchase of the shares being redeemed; and

- - the redemption of shares of a shareholder (including a registered joint
owner) who has died.

DISTRIBUTION (RULE 12b-1) FEE: 0.75%

SHAREHOLDER SERVICES FEE: 0.25%

CONVERSION FEATURE: Class B shares of a Fund will automatically convert to Class
A shares of the same Fund at the end of the seventh year after purchase for
equity funds and at the end of the third year after purchase for the Income Fund
after issuance on the basis of the relative net asset value per share. Shares
purchased through the reinvestment of dividends and other distributions paid
with respect to Class B shares in a shareholder's account will be converted to
Class A shares on a pro rata basis.

EXCHANGE PRIVILEGE: Class B shares of a Fund may be exchanged for Class B Shares
of another Fund at their relative net asset values without a contingent deferred
sales charge. However, for shares exchanged from the Income Fund into an equity
fund, the shares will be treated according to the equity fund schedule based
upon the date purchased into the Income Fund.

32
<PAGE> 124
CLASS C SHARES

PUBLIC OFFERING PRICE: Net asset value per share without any sales charge at the
time of purchase.

CONTINGENT DEFERRED SALES CHARGE: A contingent deferred sales charge of 1.00%
may be imposed upon redemption of Class C shares redeemed within one year of
purchase. The charge will not be imposed upon redemption of reinvested dividends
or share appreciation. The charge is applied to the value of the shares
redeemed, excluding amounts not subject to the charge. The contingent deferred
sales charge will be waived in the event of:

- - redemptions by a participant-directed qualified retirement plan described
in Code Section 401(a) or a participant-directed non-qualified deferred
compensation plan described in Code Section 457;

- - the redemption of shares of a shareholder (including a registered joint
owner) who has died;

- - the redemption of shares of a shareholder (including a registered joint
owner) who after purchase of the shares being redeemed becomes totally
disabled (as evidenced by a determination by the federal Social Security
Administration);

- - redemptions under a Fund's Systematic Withdrawal Plan at a maximum of 10%
per year of the net asset value of the account;

- - the redemption of shares by an employer sponsored employee benefit plan
that offers funds in addition to William Blair Funds and whose dealer of
record has waived the advance of the first year administrative service and
distribution fees applicable to such shares and agrees to receive such fees
quarterly; and

- - the redemption of shares purchased through a dealer-sponsored asset
allocation program maintained on an omnibus record-keeping system provided
the dealer of record has waived the advance of the first year
administrative services and distribution fees applicable to such shares and
has agreed to receive such fees quarterly.

DISTRIBUTION (RULE 12b-1) FEE: 0.75%

SHAREHOLDER SERVICES FEE: 0.25%

CONVERSION FEATURE: None

EXCHANGE PRIVILEGE: Class C shares of a Fund may be exchanged for the Class C
shares of another Fund at their relative net sales values without a contingent
deferred sales charge. However, for shares exchanged from the Income Fund into
an equity fund, the shares will be treated according to the equity fund schedule
based upon the date purchased into the Income Fund.

33
<PAGE> 125
CLASS I SHARES

PUBLIC OFFERING PRICE: Net asset value per share without any sales change at the
time of purchase.

CONTINGENT DEFERRED SALES CHARGE: None

DISTRIBUTION (RULE 12b-1) FEE: None

SHAREHOLDER SERVICES FEE: None

EXCHANGE PRIVILEGE: Class I shares of a Fund may be exchanged for the Class I
share of another Fund at their relative net asset value.

ELIGIBILITY: Class I shares are available for purchase exclusively by the
following categories of institutional investors:

- - institutional investors (such as qualified retirement plans, wrap fee plans
and other programs charging asset-based fees) with $500,000 or more
invested in the William Blair Funds. Purchases may be aggregated but must
be in an omnibus account;

- - clients of William Blair & Company, L.L.C. with $2 million in aggregate
assets under management with William Blair & Company, L.L.C.; and

- - clients of William Blair & Company, L.L.C. who opened an equity or income
fund account prior to September 30, 1999.

34
<PAGE> 126
YOUR ACCOUNT
- --------------------------------------------------------------------------------

HOW TO BUY SHARES (By Mail, by Wire or by Telephone)

PURCHASE PRICE. All Funds are sold at their public offering price, which is the
net asset value per share that is next computed after receipt of your order in
proper form by the Distributor, the Transfer Agent or a designated agent thereof
plus, with regard to the Class A shares of each Fund, an initial sales charge.
The net asset value per share of the Ready Reserves Fund normally will be $1.00.
(For more information, see "Determination of Net Asset Value.") If you fail to
pay for your order, you will be liable for any loss to the Funds and, if you are
a current shareholder, the Funds may redeem some or all of your shares to cover
such loss.

CLASS A, B AND C SHARES. You may open a new account and purchase additional
shares by contacting the securities dealer or other financial services firm from
whom you received the prospectus.

CLASS I SHARES. For those who are eligible to purchase Class I shares, you may
open a new account and purchase additional shares by contacting the securities
dealer or other financial services firm from whom you received this prospectus
or you may purchase shares directly from the Company by mail, by wire or by
telephone as described below.

CLASS N SHARES OF READY RESERVES FUND. The Class N shares of the Ready Reserves
Fund offered herein are offered only to investors who acquire the shares
directly through the Fund's distributor or through a select number of financial
intermediaries with whom the distributor has entered into selling agreements
specifically authorizing them to sell Class N shares. You may purchase shares by
mail, by wire or by telephone as described below.

BY MAIL

OPENING AN ACCOUNT. To open a new account for Class I shares of the Funds by
mail, make out a check for the amount of your investment, payable to "William
Blair Funds." Complete the account application included with this Prospectus and
mail the completed application and the check to the Transfer Agent, State Street
Bank and Trust Company ("State Street"), P.O. Box 8506, Boston, Massachusetts
02266-8506.

For the Ready Reserves Fund, send your check and completed application to the
Distributor, William Blair Funds, 222 West Adams Street, Chicago, Illinois
60606.

ADDING TO AN ACCOUNT. To purchase additional Class I shares, make out a check
for the amount of your investment, payable to "William Blair Funds." Except for
the Ready Reserves Fund, mail the check, together with a letter that specifies
the portfolio name, the account number and the name(s) in which the account is
registered, to State Street Bank and Trust Company, P.O. Box 8506, Boston,
Massachusetts 02266-8506.

For the Ready Reserves Fund, send your check and letter to the Distributor,
William Blair Funds, 222 West Adams Street, Chicago, Illinois 60606.

35
<PAGE> 127
BY WIRE

OPENING AN ACCOUNT. For Class I shares of the Funds and Class N of the Ready
Reserves Fund, first, call State Street at 1-800-635-2886 (in Massachusetts,
1-800-635-2840) for an account number. Then instruct your bank to wire federal
funds to:

State Street Bank and Trust Co.
ABA # 011000028
DDA # 99029340
Attn: Custody & Shareholder Services
225 Franklin Street
Boston, Massachusetts 02110

ADDING TO AN ACCOUNT. To add to your Class I share account or Ready Reserves
Fund Class N share account by wire, instruct your bank to wire federal funds to:

State Street Bank and Trust Co.
ABA # 011000028
DDA # 99029340
Attn: Custody & Shareholder Services
225 Franklin Street
Boston, Massachusetts 02110

In your request, specify the portfolio name in which you are investing, your
account number, and the name(s) in which the account is registered. To add to an
existing account by wire transfer of funds, you must have selected this option
on your account application.

BY TELEPHONE

OPENING AN ACCOUNT. See "By Wire."

ADDING TO AN ACCOUNT. Call State Street at 1-800-635-2886 (in Massachusetts,
1-800-635-2840). For the Ready Reserves Fund only, call your William Blair
account executive. Tell your account executive the Fund name, your account
number and the name(s) in which the account is registered. You may then pay for
your new shares by mail or by wire. To add to an existing account by telephone,
you must have selected this option on your account application.

HOW TO SELL SHARES (By Mail, by Wire or by Telephone)

CLASS A, B AND C SHARES. Contact your securities dealer or other financial
services firm to arrange for share redemption.

Any shareholder may require a fund to redeem his or her shares. When shares are
held for the account of a shareholder by the funds' transfer agent, the
shareholder may redeem them by sending a written request with signatures
guaranteed to the Transfer Agent, State Street Bank and Trust Company, P.O. Box
8506, Boston, Massachusetts.

CLASS I SHARES. Contact your securities dealer or other financial services firm
to arrange for share redemption or you may give instructions to redeem your
shares directly to the Company by mail, by wire or by telephoned, as described
below.

CLASS N SHARES OF READY RESERVES FUND. Class N shareholders of the Ready
Reserves Fund may redeem shares by mail, by wire or by telephone, as described
below.

36
<PAGE> 128
BY MAIL

To redeem Class I shares by mail, send a written redemption request signed by
all account owners to State Street Bank and Trust Company, P.O. Box 8506,
Boston, Massachusetts 02266-8506.

FOR ALL FUNDS, WRITTEN REDEMPTION REQUESTS MUST INCLUDE:

-- a letter that contains your name, the Fund's name and the dollar
amount or number of shares to be redeemed; and

-- any other necessary documents, such as an inheritance tax consent or
evidence of authority (for example, letters testamentary), dated not
more than 60 days prior to receipt thereof by State Street or the
Distributor.

BY WIRE

To redeem some or all of your Class I shares in any Funds or Class N shares of
the Ready Reserves Fund by wire, you may contact the Transfer Agent, or the
Distributor in the case of the Ready Reserves Fund; by mail or telephone, as
explained herein. To redeem by wire, you must have elected this option on your
account application and attached to the application a voided, unsigned check or
deposit slip for your bank account.

BY TELEPHONE

TO REDEEM SHARES BY TELEPHONE, YOU MUST HAVE ELECTED THIS OPTION ON YOUR ACCOUNT
APPLICATION. For Class I shares, contact the Transfer Agent at 1-800-635-2886
(in Massachusetts, 1-800-635-2840).

For the Ready Reserves Fund, you may redeem some or all of your shares by
telephone by calling your William Blair account executive. Amounts redeemed will
be placed in your brokerage account.

NOTE: Redemption requests should NOT be sent to the Trust or to the Distributor
(except in the case of the Ready Reserves Fund).

-- You wish to redeem shares having a value of $5,000 or more in a single
transaction;

-- Your account registration has changed; or

-- You want a check in the amount of your redemption to be mailed to a
different address than the one on your account application (address of
record).

SIGNATURE GUARANTEES, IF REQUIRED, MUST APPEAR ON THE WRITTEN REDEMPTION REQUEST
AND ON ANY ENDORSED STOCK CERTIFICATE OR STOCK POWER.

37
<PAGE> 129
DELAYED PROCEEDS. The Trust reserves the right to delay delivery of your
redemption proceeds--up to seven days--or to honor certain redemptions with
securities, rather than cash, as described in the next section. In addition,
redemption of shares from a Fund, other than the Ready Reserves Fund, within 180
days of purchase may be subject to a 1.00% redemption fee.

AUTOMATIC REDEMPTION OF SMALL ACCOUNTS. Because of the relatively high cost of
maintaining small accounts, the Trust reserves the right to redeem your shares
in any account that, following a redemption, is below a specified amount.
Currently, THE MINIMUM IS $5,000 PER ACCOUNT. Before the redemption is
processed, you will be notified that the value of your account has fallen below
the minimum and allowed to make an additional investment.

HOW TO EXCHANGE SHARES (By Mail or by Telephone)

Subject to the following limitations, you may exchange shares of all Class A, B,
C and I shares into either shares of each corresponding Class A, B, C and I
shares of another Fund at their relative net asset values so long as the shares
to be acquired are available for sale in your state of residence. Class N shares
of the Ready Reserve Fund may be exchanged for Class N shares of each Fund which
are offered in a separate prospectus at their relative net asset value so long
as the shares to be acquired are available for sale in your state of residence.
Only four (4) exchanges from a Fund are allowed within any 12-month period.
Exchanges will be effected by redeeming your shares and

38
<PAGE> 130
purchasing shares of the other Fund or Funds requested. Shares of a William
Blair Fund with a value in excess of $1,000,000 acquired by exchange from
another William Blair Fund may not be exchanged thereafter until they have been
owned for 15 days (the "15 Day Hold Policy").

CLASS A, B AND C. Contact your securities dealer or other financial services
firm to arrange for share exchanges.

CLASS I. Contact your securities dealer or other financial services firm to
arrange for share exchange or contact the Company directly by mail or telephone
as described below.

CLASS N SHARES OF THE READY RESERVES FUND. You may exchange shares by mail or
telephone as described below.

BY MAIL

You may request an exchange of your shares by writing to William Blair Funds,
Attention: Exchange Department, P.O. Box 8506, Boston, Massachusetts 02266-8506.

BY TELEPHONE

You may also exchange your Class I shares of each Fund and Class N shares of the
Ready Reserves Fund by telephone by completing the appropriate section on your
account application. Once your telephone authorization is on file, State Street
will honor your requests to redeem shares by telephone at 1-800-635-2886 (in
Massachusetts, 1-800-635-2840).

DIVIDENDS AND DISTRIBUTIONS

WHEN DIVIDENDS ARE PAID

-- For the Growth Fund, International Growth Fund and Value Discovery
Fund, all income dividends, if any, and capital gain
distributions, if any, generally will be paid in December and/or
January.

-- For the Income Fund, income dividends are normally paid the
fifteenth day of each month, if a business day, with net-realized
long-term capital gain distributions, if any, generally paid in
December and/or January. The Income Fund attempts to maintain
relatively level monthly dividends and, from time to time, may
distribute or retain net investment income and capital gain or
make a return of capital distribution in order to pursue that
goal.

-- For the Ready Reserves Fund, the Fund's net investment income will
be declared at the close of the New York Stock Exchange on each
day that the Fund is open for business, which is generally 3:00
p.m., Chicago time, as a dividend to shareholders who were of
record prior to the declaration.

39
<PAGE> 131
The Funds may vary these dividend practices at any time. Income dividends and
any capital gain distributions on all Funds will vary from year to year.
Dividends and distributions may be subject to withholding, as required by the
Internal Revenue Service (see "Your Account -- Taxes").

TAXES

As with any investment, you should consider how your investment in a Fund will
be taxed. If your account is not a tax-deferred retirement account, you should
be aware of these tax implications.

"BUYING A DIVIDEND." If you buy shares before a Fund deducts a distribution from
its net asset value, you will pay the full price for the shares and then receive
a portion of the price back in the form of a taxable distribution. See "Your
Account -- Dividends and Distributions" for payment schedules, and call the
Distributor if you have further questions.

EFFECT OF FOREIGN TAXES. Investment income received from sources within foreign
countries may be subject to foreign income taxes, which generally will reduce a
Fund's distributions. However, the United States has entered into tax treaties
with many foreign countries that entitle certain investors to a reduced rate of
tax or to certain exemptions from tax. Accordingly, the International Growth
Fund will operate so as to qualify for such reduced tax rates or tax exemptions
whenever practicable.

For a more detailed discussion of taxes, see the Statement of Additional
Information.

40
<PAGE> 132
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------

WHEN AND HOW NET ASSET VALUE ("NAV") IS DETERMINED

A Fund's net asset value is the market value of its total assets, minus
liabilities, divided by the number of shares outstanding. The value of a single
share is called its share value or share price.

HOW THE MARKET VALUE OF FUND SECURITIES IS DETERMINED

41
<PAGE> 133
SHAREHOLDER SERVICES AND ACCOUNT POLICIES

The Funds provide a variety of services to help you manage your account.

-- If you have a free credit balance resulting from securities
transactions in your brokerage account at the opening of business
of the Distributor, it generally will be invested in shares on
that same day, but in no event later than the next business day.

-- If you have a free credit balance resulting from a deposit made
prior to 2:00 p.m., Chicago time, or a receipt of income (by check
or wire), then it will be invested in shares no later than the
next business day.

-- If you have a free credit balance of at least $1 and less than
$1,000, it will be invested in shares within a maximum of five
business days from the day when the free credit balance is
created.

1. AUTOMATIC DIVIDEND REINVESTMENT PLAN. The Funds automatically
reinvest all income dividends and capital gain distributions in additional
shares of stock at net asset value on the reinvestment date.
(For more information, see "Dividend and Distribution Policy.")

3. AUTOMATIC DEPOSIT OF DIVIDENDS. You may elect to have all income
dividends and capital gain distributions automatically deposited in a previously
established bank account.

42
<PAGE> 134
The minimum initial retirement plan investment is $2,000 and the minimum
subsequent investment is $1,000. State Street serves as custodian for IRAs.
State Street charges a $5 plan establishment fee, an annual $15 custodial fee
and a $10 fee for each lump sum distribution from a plan. These fees may be
waived under certain circumstances.

With regard to retirement plans:

-- participation is voluntary;

-- you may terminate or change a plan at any time without penalty
or charge from the Funds;

-- the Funds will pay any additional expenses that they incur in
connection with such plans;

-- on your account application, you may select a plan or plans in
which to invest;

-- additional forms and further information may be obtained by
writing or calling the Funds;

-- the Funds reserve the right to change the minimum amounts for
initial and subsequent investments or to terminate any of the
plans;

-- the Funds reserve the right to waive investment minimums at
the discretion of the Distributor; and

-- the Funds require a copy of the trust agreement when shares
are to be held in trust.

WRITTEN CONFIRMATIONS. Each purchase, exchange or redemption transaction is
confirmed in writing to the address of record by giving details of the purchase
or redemption.

43
<PAGE> 135
INVESTMENT GLOSSARY
- --------------------------------------------------------------------------------

44
<PAGE> 136

converted. Typically, ADRs, in registered form, are designed for issuance in
U.S. securities markets, and EDRs and GDRs, in bearer form, are designed for
issuance in European securities markets. Investments in depository receipts
entail risks similar to direct investments in foreign securities. These risks
are detailed in the sections on "Investment Risks" under the "International
Growth Fund" above and in the Statement of Additional Information.

FORWARD FOREIGN CURRENCY TRANSACTIONS. The International Growth Fund may enter
into forward foreign currency contracts as a means of managing the risks
associated with changes in

45
<PAGE> 137

exchange rates. A forward foreign currency contract is an agreement to exchange
U.S. dollars for foreign currencies at a specified future date and specified
amount which is set by the parties at the time of entering into the contract.
The Adviser will generally use such currency contracts to fix a definite price
for securities they have agreed to buy or sell and may also use such contracts
to hedge the Fund's investments against adverse exchange rate changes.
Alternatively, the Funds may enter into a forward contract to sell a different
foreign currency for a fixed U.S. dollar amount where the Adviser believes that
the U.S. dollar value of the currency to be sold pursuant to the forward
contract will fall whenever there is a decline in the U.S. dollar value of the
currency in which securities of the Fund are denominated ("cross-hedge"). The
profitability of forward foreign currency transactions depends upon correctly
predicting future changes in exchange rates between the U.S. dollar and foreign
currencies. As a result, a Fund may incur either a gain or loss on such
transactions. While forward foreign currency transactions may help reduce losses
on securities denominated in a foreign currency, they may also reduce gains on
such securities depending on the actual changes in the currency's exchange value
relative to that of the offsetting currency involved in the transaction. The
Funds will not enter into forward foreign currency transactions for speculative
purposes.

ILLIQUID SECURITIES. Each Fund, except the Ready Reserves Fund, may invest up to
15% of its net assets in illiquid securities. The Ready Reserves Fund may invest
up to 10% of its net assets in illiquid securities. Illiquid securities are
those securities that are not readily marketable, including restricted
securities and repurchase obligations maturing in more than seven days.

46
<PAGE> 138
SECTION 4(2) PAPER. The Ready Reserves Fund may invest in commercial paper
issued in reliance upon the so-called "private placement" exemption from
registration afforded by Section 4(2) of the Securities Exchange Act of 1933
("Section 4(2) paper"). Section 4(2) paper is restricted as to disposition under
the Federal securities laws, and generally is sold to institutional investors
such as the Fund. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of the issuer or investment dealers who make a market in
the Section 4(2) paper, thus providing liquidity. The Adviser considers the
legally restricted but readily saleable Section 4(2) paper to be liquid;
however, pursuant to the procedures approved by the Fund's Board of Trustees, if
a particular investment in Section 4(2) paper is not determined to be liquid,
that investment will be included within the limitation on illiquid securities.
The Adviser monitors the liquidity of each investment in Section 4(2) paper on a
continuing basis.

47
<PAGE> 139
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
WILLIAM BLAIR GROWTH FUND FOR THE PERIOD ENDED DECEMBER 31, 1999
---------------------------------------------------------------
CLASS A(a) CLASS B(b) CLASS C(b) CLASS I(c)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............. $ 17.480 $ 19.150 $ 19.150 $ 17.980
Income from investment operations:
Net investment (loss) ......................... (0.004) (0.021) (0.026) (0.013)
Net realized and unrealized gain on investments 4.050 2.372 2.370 3.568
----------- ----------- ----------- -----------
Total from investment operations ................. 4.046 2.351 2.344 3.555
Less distributions from:
Net investment income ......................... -- -- -- --
Net realized capital gains .................... 1.436 1.436 1.436 1.436
----------- ----------- ----------- -----------
Total distributions ........................... 1.436 1.436 1.436 1.436
----------- ----------- ----------- -----------
Net asset value, end of period ................... $ 20,090 $ 20.065 $ 20.058 $ 20.099
=========== =========== =========== ===========

Total return (%)(d) .............................. 23.29 12.43 12.38 19.91
Ratios to average daily net assets (%):
Expenses ...................................... 1.31 2.03 2.01 0.86
Net investment loss ........................... (0.23) (1.00) (1.06) (0.11)
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Supplemental data for all classes:
Net assets at end of year (in thousands)......... $818,443 $742,056 $591,353 $501,774 $363,036

Portfolio turnover rate (%)...................... 52 37 34 43 32

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

(a) For the period October 19, 1999 (Commencement of the Class) to December
31, 1999.

(b) For the period November 2, 1999 (Commencement of the Class) to December
31, 1999.

(d) Total return is not annualized for periods that are less than a full
year.
</TABLE>

48
<PAGE> 140

<TABLE>
<CAPTION>
WILLIAM BLAIR INTERNATIONAL GROWTH FUND FOR THE PERIOD ENDED DECEMBER 31, 1999
---------------------------------------------------------------
CLASS A(a) CLASS B(b) CLASS C(b) CLASS I(c)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>

Net asset value, beginning of period ............. $20.610 $21.330 $21.330 $20.250
Income from investment operations:
Net investment loss ........................... (0.025) (0.039) (0.036) (0.037)
Net realized and unrealized gain on investments 7.919 7.185 7.180 8.312
------- ------- ------- -------
Total from investment operations ................. 7.894 7.146 7.144 8.275
Less distributions from:
Net investment income ......................... -- -- -- --
Net realized capital gains .................... 4.494 4.494 4.494 4.494
------- ------- ------- -------
Total distributions ........................... 4.494 4.494 4.494 4.494
------- ------- ------- -------
Net asset value, end of period ................... $24.010 $23.982 $23.980 $24.031
======= ======= ======= =======

Total return (%)(d) .............................. 39.12 34.28 34.28 41.71
Ratios to average daily net assets (%):
Expenses ...................................... 1.60 2.35 2.35 1.35
Net investment loss ........................... (1.25) (1.93) (1.93) (0.43)
</TABLE>

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

(a) For the period October 21, 1999 (Commencement of the Class) to December
31, 1999.

(b) For the period November 2, 1999 (Commencement of the Class) to December
31, 1999.

(d) Total return is not annualized for periods that are less than a full
year.

</TABLE>

49
<PAGE> 141

<TABLE>
<CAPTION>
WILLIAM BLAIR VALUE DISCOVERY FUND FOR THE PERIOD ENDED DECEMBER 31, 1999
---------------------------------------------------------------
CLASS A(a) CLASS B(b) CLASS C(c) CLASS I(d)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............. $12.600 $12.600 $12.670 $12.360
Income from investment operations:
Net investment income ......................... 0.017 0.007 0.016 0.104
Net realized and unrealized gain on investments 1.119 1.115 1.044 1.278
------- ------- ------- -------
Total from investment operations ................. 1.136 1.122 1.060 1.382
Less distributions from:
Net investment income ......................... 0.014 0.007 0.010 0.098
Net realized capital gains .................... -- -- -- --
------- ------- ------- -------
Total distributions ........................... 0.014 0.007 0.010 0.098
------- ------- ------- -------
Net asset value, end of period ................... $13.722 $13.715 $13.720 $13.644
======= ======= ======= =======

Total return (%)(e) .............................. 9.01 8.95 8.37 11.18
Ratios to average daily net assets (%):
Expenses(a) ................................... 1.64 2.39 2.39 1.35
Net investment income(a) ...................... 1.28 0.31 1.53 0.78
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------------------
1999 1998 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Supplemental data for all classes:
Net assets at end of year (in thousands)............ $48,423 $44,675 $30,354 $2
Portfolio turnover rate (%)......................... 65 78 49 --

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

(a) Without the waiver of expenses in 1999, the expense ratio would have
been 1.67%, 2.42%, 2.42% and 1.38% for Classes A, B, C, and I,
respectively. The net investment income ratio would have been 1.25%,
.28%, 1.50% and .75% for Classes A, B, C and I, respectively.

(b) For the period November 2, 1999 (Commencement of the Class) to December
31, 1999.

(d) For the period October 1, 1999 (Commencement of the Class) to December
3, 1999.

(e) Total return is not annualized for periods that are less than a full
year.
</TABLE>

50
<PAGE> 142

<TABLE>
<CAPTION>
WILLIAM BLAIR INCOME FUND FOR THE PERIOD ENDED DECEMBER 31, 1999
---------------------------------------------------------
CLASS A(a) CLASS B(b) CLASS C(b) CLASS I(d)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............. $ 9.950 $10.050 $10.060 $10.050
Income from investment operations:
Net investment income ......................... 0.075 0.060 0.079 0.623
Net realized and unrealized loss on investments (0.009) (0.108) (0.135) (0.155)
------- ------- ------- -------
Total from investment operations ................. 0.066 (0.048) (0.056) 0.468
Less distributions from:
Net investment income ......................... 0.073 0.059 0.077 0.609
Net realized capital gains .................... -- -- -- --
------- ------- ------- -------
Total distributions ........................... 0.073 0.059 0.077 0.609
------- ------- ------- -------
Net asset value, end of period ................... $ 9.943 $ 9.943 $ 9.926 $ 9.909
======= ======= ======= =======

Total return (%)(e) .............................. 0.63 (0.51) (0.53) 0.30
Ratios to average daily net assets (%):
Expenses ...................................... 0.99 1.77 1.71 0.70
Net investment income ......................... 5.78 4.91 5.11 6.03
</TABLE>

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

(a) For the period October 25, 1999 (Commencement of the Class) to December 31, 1999.

(b) For the period November 2, 1999 (Commencement of the Class) to December 31, 1999.

(d) For the period October 1, 1999 (Commencement of the Class) to December 31, 1999.

(e) Total return is not annualized for periods that are less than a full year.
</TABLE>

<PAGE> 143
WILLIAM BLAIR READY RESERVES FUND (CLASS N
SHARES)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>

Net asset value, beginning of year .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income .................... .05 .05 .05 .05 .05
Net realized and unrealized gain (loss) on
investments ........................... -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Total from investment operations ............ .05 .05 .05 .05 .05
Less distributions from:
Net investment income .................... .05 .05 .05 .05 .05
------------- ------------- ------------- ------------- -------------
Total distributions ...................... .05 .05 .05 .05 .05
------------- ------------- ------------- ------------- -------------
Net asset value, end of year ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= ============= ============= =============

Total return (%) ............................ 4.63 4.98 5.04 4.81 5.45
Ratios to average net assets (%): ........... .72 .69 .70 .71 .72
Expenses .................................... 4.52 4.87 4.92 4.78 5.30
Net investment income ....................
Supplemental data:
Net assets at end of year (000s) ......... $ 1,052,803 $ 1,189,051 $ 904,569 $ 760,808 $ 703,993
</TABLE>

52
<PAGE> 144
FOR MORE INFORMATION

More information about the Funds is available without charge, upon request,
including the following:

SEMI-ANNUAL/ANNUAL REPORTS

STATEMENT OF ADDITIONAL INFORMATION (SAI)

TO OBTAIN INFORMATION:

BY TELEPHONE
Call: 1-800-635-2886
(In Massachusetts 1-800-635-2840)

BY MAIL
Write to:
WILLIAM BLAIR FUNDS
222 West Adams Street
Chicago, Illinois 60606

STATE STREET BANK AND TRUST COMPANY
(the Fund's Transfer Agent)
P.O. Box 8506
Boston, MA 02266-8506

ON THE INTERNET

Text-only versions of fund documents can be viewed online or downloaded from the
SEC at http://www.sec.gov

WILLIAM BLAIR FUNDS May 1, 2000
Investment Company Act File No.: 811-5344

<PAGE> 145
May 1, 2000

WILLIAM BLAIR FUNDS

CLASS A, B, C AND I SHARES PROSPECTUS

TAX-MANAGED GROWTH FUND
LARGE CAP GROWTH FUND
SMALL CAP GROWTH FUND
DISCIPLINED LARGE CAP FUND
EMERGING MARKETS GROWTH FUND

WILLIAM BLAIR FUNDS
222 West Adams Street
Chicago, Illinois 60606
<PAGE> 146
TABLE OF CONTENTS

SUMMARY.......................................................................1
Tax-managed Growth Fund..............................................1
Large Cap Growth Fund................................................3
Small Cap Growth Fund................................................5
Disciplined Large Cap Fund...........................................7
Emerging Markets Growth Fund.........................................9
Investment Objectives and Principal Investment Strategies...........12
Tax-managed Growth Fund.............................................13
Large Cap Growth Fund...............................................16
Small Cap Growth Fund...............................................18
Disciplined Large Cap Fund..........................................20
Emerging Markets Growth Fund........................................21

INVESTMENT RISKS.............................................................23

MANAGEMENT OF THE FUNDS......................................................25

CHOOSING A SHARE CLASS.......................................................28
Class a Shares......................................................29
Class B Shares......................................................32
Class C Shares......................................................33
Class I Shares......................................................34

YOUR ACCOUNT.................................................................35
How to Buy Shares...................................................35
How to Sell Shares..................................................36
How to Exchange Shares..............................................38
Dividends and Distributions.........................................38
Taxes ...........................................................39

DETERMINATION OF NET ASSET VALUE.............................................41

SHAREHOLDER SERVICES AND ACCOUNT POLICIES....................................42

INVESTMENT GLOSSARY..........................................................44
Financial Highlights................................................47

FOR MORE INFORMATION.................................................Back Cover

<PAGE> 147
WILLIAM BLAIR TAX-MANAGED GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Tax-Managed Growth Fund seeks long-term
capital appreciation.

LARGE, high quality growth companies that have demonstrated sustained
growth over a long period of time;

MEDIUM-sized growth companies of recognized investment quality whose
records of sales and earnings growth may not be as well established;
and

SMALL emerging, rapid growth companies of high quality that have had
especially vigorous growth in revenues and earnings.

The Adviser seeks high after-tax returns by balancing investment considerations
and tax considerations. The Adviser seeks to achieve returns primarily in the
form of price appreciation, and to minimize income distributions and
distributions of realized short-term gains. Among the techniques and strategies
used in the tax-efficient management of the Fund are the following:

- investing primarily in lower-yielding growth stocks;

- employing a long-term, low turnover approach to investing;

- attempting to avoid net realized short-term gains;

- when appropriate, selling stocks trading below cost to realize
losses;

- in selling appreciated stocks, selecting the most tax-favored
share lots; and

- selectively using tax-advantaged hedging techniques, such as
derivative transactions, as an alternative to taxable sales.

FUND PERFORMANCE HISTORY: The bar chart and table showing the Fund's annual
returns have been omitted because the Fund does not have annual returns for a
full calendar year.

<PAGE> 148
FEES AND EXPENSES: This section describes the fees and expenses that you may pay
if you buy and hold shares of the Fund.

SHAREHOLDER FEES are fees paid directly from your investment.

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fee........................................................ .80% .80% .80% .80%
Distribution (Rule 12b-1) and/or Service Fees......................... .25% 1.00% 1.00%(2) None
Other Expenses........................................................ .51% .51% .51% .51%
----- ----- ----- -----
Total Annual Fund Operating Expenses (without waiver) (3)............ 1.56% 2.31% 2.31% 1.31%
Adviser's Expense Waiver............................................. .20% .20% .20% .20%
----- ----- ----- -----
Net Expenses (with waiver)........................................ 1.36% 2.11% 2.11% 1.11%
</TABLE>

(2) Long-term shareholders may indirectly pay more than the equivalent of the
maximum permitted front-end sales charge.

(3) The Adviser has entered into an agreement with the Fund to cap the
expenses for the Fund's Class I shares at 1.11% at least until April 30,
2001; the Adviser may continue to waive fees voluntarily thereafter. For
the Fund's Class A, B and C shares, the expenses will be capped at 1.11%
plus any distribution and/or shareholder services fees.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year................ $ 706 $ 714 $ 314 $ 113
3 Years............... 1,021 1,002 702 396
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year................ $ 706 $ 214 $ 214 $ 113
3 Years............... 1,021 702 702 396
</TABLE>

2
<PAGE> 149
WILLIAM BLAIR LARGE CAP GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Large Cap Growth Fund seeks long-term
capital appreciation.

MAIN RISKS OF INVESTING: Since the Fund invests most of its assets in common
stocks, the primary risk is that value of the stocks it holds might decrease in
response to the activities of an individual company or general economic and
market conditions. All securities are subject to market, economic and business
risks that may cause their share prices to fluctuate. These fluctuations may not
be related to the fundamental characteristics of the companies issuing the
securities. Instead, for example, if large capitalization growth stocks fall out
of favor generally with investors, the value of the Large Cap Growth Fund may
decline. Thus, the Fund's returns will vary, and you could lose money by
investing in the Fund. The securities of medium-sized companies are more
volatile and more speculative than the securities of large companies. In
addition, medium sized companies may be traded in low volumes, which can
increase volatility. Of course, for all mutual funds there is the risk that a
strategy used by the Adviser may fail to produce its intended result. The Fund
is designed for long-term investors.

FUND PERFORMANCE HISTORY: The bar chart and table showing the Fund's annual
returns have been omitted because the Fund does not have annual returns for a
full calendar year.

FEES AND EXPENSES: This section describes the fees and expenses that you may pay
if you buy and hold shares of the Fund.

SHAREHOLDER FEES are paid directly from your investment:

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fee........................................ .80% .80% .80% .80%
Distribution (Rule 12b-1) and/or Service Fees......... .25% 1.00% 1.00%(2) None
Other Expenses........................................ .51% .51% .51% .51%
----- ----- ----- -----
Total Annual Fund Operating Expenses (without
waiver) (3)....................................... 1.56% 2.31% 2.31% 1.31%
Adviser's Expense Waiver............................. .20% .20% .20% .20%
----- ----- ----- -----
Net Expenses (with waiver) 1.36% 2.11% 2.11% 1.11%
</TABLE>

3
<PAGE> 150
- ----------------------------

(2) Long-term shareholders may indirectly pay more than the equivalent of
the maximum permitted front-end sales charge.

(3) The Adviser has entered into an agreement with the Fund to cap the
expenses for the Fund's Class I shares at 1.11% at least until April
30, 2001; the Adviser may continue to waive fees voluntarily
thereafter. For the Fund's Class A, B and C shares, the expenses will
be capped at 1.11% plus any distribution and/or shareholder services
fees.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year............. $ 706 $ 714 $ 314 $ 113
3 Years............ 1,021 1,002 702 396
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year............. $ 706 $ 214 $ 214 $ 113
3 Years............ 1,021 702 702 396
</TABLE>

4
<PAGE> 151
WILLIAM BLAIR SMALL CAP GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Small Cap Growth Fund seeks long-term
capital appreciation.

FUND PERFORMANCE HISTORY: The bar chart and table showing the Fund's annual
returns have been omitted because the Fund does not have annual returns for a
full calendar year.

FEES AND EXPENSES: This section describes the fees and expenses that you may pay
if you buy and hold shares of the Fund.

SHAREHOLDER FEES are paid directly from your investment:

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fee........................................ 1.10% 1.10% 1.10% 1.10%
Distribution (Rule 12b-1) and/or Service Fees......... .25% 1.00% 1.00%(2) None
Other Expenses........................................ .45% .45% .45% .45%
----- ----- ----- -----
Total Annual Fund Operating Expenses
(without waiver)(3)............................... 1.80% 2.55% 2.55% 1.55%
Adviser's Expense Waiver............................. .20% .20% .20% .20%
----- ----- ----- -----
Net Expenses (with waiver)........................ 1.60% 2.35% 2.35% 1.35%
</TABLE>

5
<PAGE> 152
- ------------------------------

(2) Long-term shareholders may indirectly pay more than the equivalent of
the maximum permitted front-end sales charge.

(3) The Adviser has entered into an agreement with the Fund to cap the
expenses for the Fund's Class I shares at 1.35% at least until April
30, 2001; the Adviser may continue to waive fees voluntarily
thereafter. For the Fund's Class A, B and C shares, the expenses will
be capped at 1.35% plus any distribution and/or shareholders services
fees.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
1 Year............. $ 728 $ 738 $ 338 $ 137
3 Years............ 1,091 1,075 775 470
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
1 Year............. $ 728 $ 238 $ 238 $ 137
3 Years............ 1,091 775 775 470
</TABLE>

6
<PAGE> 153
WILLIAM BLAIR DISCIPLINED LARGE CAP FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Disciplined Large Cap Fund seeks
long-term capital appreciation.

FUND PERFORMANCE HISTORY: The bar chart and table showing the Fund's annual
returns have been omitted because the Fund does not have annual returns for a
full calendar year.

FEES AND EXPENSES: This section describes the fees and expenses that you may pay
if you buy and hold shares of the Fund.

SHAREHOLDER FEES are fees paid directly from your investment:

7
<PAGE> 154
ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fee........................................ .80% .80% .80% .80%
Distribution (Rule 12b-1) and/or Service Fees......... .25% 1.00% 1.00%(2) None
Other Expenses........................................ .40% .40% .40% .40%
----- ----- ----- -----
Total Annual Fund Operating Expenses
(without waiver) (3).............................. 1.45% 2.20% 2.20% 1.20%
Adviser's Expense Waiver............................. .20% .20% .20% .20%
----- ----- ----- -----
Net Expenses (with waiver)........................ 1.25% 2.00% 2.00% 1.00%
</TABLE>

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

(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent
deferred sales charge of 1.00% during the first year and 0.50% during the
second year. For more information about the Large Order NAV Purchase
Privilege see "Choosing a Share Class--Special Features" below.

(2) Long-term shareholders may indirectly pay more than the equivalent of the
maximum permitted front-end sales charge.

(3) The Adviser has entered into an agreement with the Fund to cap the
expenses for the Fund's Class I shares at 1.00% at least until April 30,
2001; the Adviser may continue to waive fees voluntarily thereafter. For
the Fund's Class A, B and C shares, the expenses will be capped at 1.00%
plus any distribution and/or shareholder services fees.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year.............. $ 695 $ 703 $ 303 $ 102
3 Years............. 989 969 669 361
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year.............. $ 695 $ 203 $ 203 $ 102
3 Years............. 989 669 669 361
</TABLE>

8
<PAGE> 155
WILLIAM BLAIR EMERGING MARKETS GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Emerging Markets Growth Fund seeks
long-term capital appreciation.

FUND PERFORMANCE HISTORY:

ANNUAL TOTAL RETURNS (CLASS N SHARES) (1)

<TABLE>
<CAPTION>
HIGHEST QUARTERLY LOWEST QUARTERLY
RETURN RETURN
- ----------------- ----------------
<S> <C>
36.54% (2Q99) -4.44% (3Q99)
</TABLE>

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

9
<PAGE> 156

the same portfolio of securities. The annual returns of the different
Classes of shares will differ only to the extent that the expenses of
the Classes differ.

AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Fund's average
annual total returns for the period ended December 31, 1999, to a broad-based
securities market index.

<TABLE>
<CAPTION>
1 YEAR LIFE OF FUND**
------ --------------
<S> <C> <C>
Emerging Markets Growth Fund 79.31% 20.69%
MSCI EMF Index 66.41% 10.60%
</TABLE>

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

* The Morgan Stanley Capital International Emerging Markets (Free) Index is
an index that includes emerging markets around the world. Expenses are
not included.

** The Fund's inception was on May 1, 1998.

FEES AND EXPENSES: This section describes the fees and expenses that you may pay
if you buy and hold shares of the Fund.

SHAREHOLDER FEES are fees paid directly from your investment.

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management Fee........................................ 1.40% 1.40% 1.40% 1.40%
Distribution (Rule 12b-1) and/or Service Fees......... .25% 1.00% 1.00%(2) None
Other Expenses........................................ 2.81% 2.81% 2.81% 3.12%
---- ---- ---- ----
Total Annual Fund Operating Expenses (without
waiver) (3)....................................... 4.46% 5.21% 5.21% 4.52%
Adviser's Expense Waiver............................. 2.46% 2.46% 2.46% 2.46%
---- ---- ---- ----
Net Expenses (with waiver)........................ 2.00% 2.75% 2.75% 2.06%
</TABLE>

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

(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent
deferred sales charge of 1.00% during the first year and 0.50% during the
second year. For more information about the Large Order NAV Purchase
Privilege see "Choosing a Share Class--Special Features" below.

(2) Long-term shareholders may indirectly pay more than the equivalent of the
maximum permitted front-end sales charge.

(3) Due to the Adviser voluntarily waiving fees and absorbing expenses, the
actual total expenses for the Fund's Class I shares were 2.06%
(annualized) during 1999. The Adviser has entered into an agreement with
the Fund to cap the expenses for the Fund's Class I shares at 1.81% at
least until April 30, 2001; the Adviser may continue to waive fees
voluntarily thereafter. For the Fund's Class A, B and C shares, the
expenses will be capped at 1.81% plus any distribution and/or shareholder
servicing fees.

10
<PAGE> 157

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year.............. $ 766 $ 778 $ 378 $ 219
3 Years............. 1,637 1,641 1,341 1,144
5 Years............. 2,517 2,600 2,400 2,088
10 Years............ 4,759 4,816 5,028 4,488
</TABLE>

You would pay the following expenses if you did not redeem your shares:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
1 Year.............. $ 766 $ 278 $ 278 $ 219
3 Years............. 1,637 1,341 1,341 1,144
5 Years............. 2,517 2,400 2,400 2,088
10 Years............ 4,759 4,816 5,028 4,488
</TABLE>

11
<PAGE> 158
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------

12
<PAGE> 159
WILLIAM BLAIR TAX-MANAGED GROWTH FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

The Adviser seeks growth opportunities by investing in large, medium and small
companies in varying proportions:

LARGE, high quality growth companies that have demonstrated sustained
growth over a long period of time;

MEDIUM-sized companies of recognized investment quality whose records
of sales and earnings growth may not be as well established; and

SMALL, emerging, rapid-growth companies that have had especially
vigorous growth in revenues and earnings.

- investing primarily in lower-yielding stocks;

- employing a long-term, low turnover approach to investing;

- attempting to avoid net realized short-term gains;

- when appropriate, selling stocks trading below cost to realize
losses;

- in selling appreciated stocks, selecting the most tax-favored
share lots; and

- selectively using tax-advantage hedging techniques, such as
derivative transactions, as an alternative to taxable sales.

INVESTMENT PROCESS

The Adviser utilizes an investment process that relies on thorough, in-depth
fundamental research of a company, its competitors, its suppliers and its
customers.

The Adviser will invest in companies that it believes are well-managed
considering some or all of the following investment criteria:

A LEADER IN THE FIELD. The company should be, or clearly have the
expectation of becoming, a significant provider in the primary markets
it serves.

13
<PAGE> 160
QUALITY PRODUCTS OR SERVICES. The company's products or services should
be regarded as being of superior quality, which should enable the
company to obtain a premium price and to command greater customer
loyalty.

MARKETING CAPABILITY. The company should have a distinctive capability
in sales, service or distribution.

VALUE TO CUSTOMER. The prices of the company's products or services
should be based upon their value to the customer, rather than their
production cost.

CONSERVATIVE FINANCIAL POLICIES AND ACCOUNTING PRACTICES. The company
should have a relatively simple, clean financial structure and adhere
to conservative and straightforward accounting practices.

ADDITIONAL STRATEGIES

PORTFOLIO MANAGEMENT

The Tax-Managed Growth Fund is co-managed by John F. Jostrand, Gregory J.
Pusinelli and Michelle R. Seitz.

Greg Pusinelli, a principal of William Blair & Company, L.L.C., has co-managed
the Fund since its inception in 1999. He joined the firm in 1995 as portfolio
manager. In 1996, he became the leader of the Taxable [Group/Team]. Previously,
he was with Stein Roe & Farnham Incorporated for nine years where he was a
senior Vice President and Principal responsible for managing client portfolios
and a team of portfolio managers. He also co-managed the Investment Counsel
Division's Core Portfolio. From 1983 to 1986, he was with the First National
Bank of Chicago, where he became a Vice President. Prior to that he was with
Harris Trust and Savings Bank from

14
<PAGE> 161
1980 to 1982. He is a past Chairman of the Board of Trustees of Providence-St.
Mel School. Education: B.S., Indiana University; M.B.A., Northwestern University
Kellogg Graduate School of Management.

Michelle Seitz, a principal of William Blair & Company, L.L.C., has co-managed
the Fund since its inception in 1999. She joined the firm in 1996 as a portfolio
manager. She has over 12 years of investment experience and is a portfolio
manager and member of the Investment Management Department's Wealth Management
Team. Previously, she was a vice president and senior portfolio manager with
Concord Investment Company for four years where she was invited to be a
principal in the firm. She managed a team of investment professionals at Concord
and was a member of the investment strategy team. Prior to that, she was a
portfolio manager with NationsBank for five years and served on NationsBank's
asset allocation committee. She is an active member of the Investment Analysts
Society of Chicago. She serves on the Board of Advisors for Indiana University's
Investment Management Academy in the Graduate School of Business and
Northwestern Memorial Foundation's Planned Giving Professional Council.
Education: B.S., Indiana University; and CFA.

15
<PAGE> 162
WILLIAM BLAIR LARGE CAP GROWTH FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

INVESTMENT PROCESS

A LEADER IN THE FIELD. The company should be, or clearly have the
expectation of becoming, a significant provider in the primary markets
it serves.

MARKETING CAPABILITY. The company should have a distinctive capability
in sales, service or distribution.

VALUE TO CUSTOMER. The prices of the company's products or services
should be based upon their value to the customer, rather than their
production cost.

CONSERVATIVE FINANCIAL POLICIES AND ACCOUNTING PRACTICES. The company
should have a relatively simple, clean financial structure and adhere
to conservative and straightforward accounting practices.

ADDITIONAL STRATEGIES

16
<PAGE> 163
diversification and portfolio turnover. The Fund also may use options, futures
and other derivative instruments for hedging and risk management purposes, as
further described in the Statement of Additional Information.

PORTFOLIO MANAGEMENT

The Large Cap Growth Fund is co-managed by John F. Jostrand and Gretchen S.
Lash.

17
<PAGE> 164
WILLIAM BLAIR SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

INVESTMENT PROCESS

A LEADER IN THE FIELD. The company should be, or clearly have the
expectation of becoming, a significant provider in the primary markets
it serves.

MARKETING CAPABILITY. The company should have a distinctive capability
in sales, service or distribution.

VALUE TO CUSTOMER. The prices of the company's products or services
should be based upon their value to the customer, rather than their
production cost.

CONSERVATIVE FINANCIAL POLICIES AND ACCOUNTING PRACTICES. The company
should have a relatively simple, clean financial structure and adhere
to conservative and straightforward accounting practices.

ADDITIONAL STRATEGIES

To a limited extent, the Fund may invest in depository receipts, illiquid
securities, investment companies, when-issued and delayed delivery securities
and repurchase agreements which are described in the Investment Glossary at the
end of this prospectus. The Investment Glossary also describes the Fund's
policies with regard to borrowing, concentration, diversification and portfolio
turnover. The Fund may invest in warrants, which are described in the Statement
of Additional Information. The Fund also may use options, futures and other
derivative instruments for hedging and risk management purposes, as further
described in the Statement of Additional Information.

18
<PAGE> 165
PORTFOLIO MANAGEMENT

The Small Cap Growth Fund is co-managed by Michael P. Balkin, Karl W. Brewer and
Mark A. Fuller III.

Michael Balkin, a principal of William Blair & Company, L.L.C., has co-managed
the Fund since its inception in 1999. He has been with the firm since 1990 and
is now a member of the Investment Management Department's Small Cap Team. He
began his career with the firm in Institutional Sales, where he specialized in
working with small to mid-capitalization growth companies. Education: B.A.,
Northwestern University.

19
<PAGE> 166
WILLIAM BLAIR DISCIPLINED LARGE CAP FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

INVESTMENT PROCESS

ADDITIONAL STRATEGIES

To a limited extent, the Fund may invest in depository receipts, illiquid
securities, investment companies, when-issued and delayed delivery securities
and repurchase agreements which are described in the Investment Glossary at the
end of this prospectus. The Fund may also invest to a limited extent in S&P
Futures contracts. The Investment Glossary also describes the Fund's policies
with regard to borrowing, concentration, diversification and portfolio turnover.
The Fund may invest in warrants, which are described in the Statement of
Additional Information. The Fund also may use options, futures and other
derivative instruments for hedging and risk management purposes, as further
described in the Statement of Additional Information.

PORTFOLIO MANAGEMENT

The Disciplined Large Cap Fund is managed by Stan Kirtman.

Stan Kirtman joined William Blair & Company, L.L.C. as a portfolio manager for
the Fund in 1999. Previously, he served as President and CIO for Nikko Global
Asset Management (USA), Inc from April 1987 to June 1999. From January 1975 to
April 1987 he was director of Pension & Profit Sharing at Thomas J. Lipton,
Inc., Senior Investment Officer with Gerard Bank, and Assistant Vice President
at Provident National Bank. He is a member of the New York Society of Security
Analysts and the Market Technicians Association. Education: B.A., Hunter
College.

20
<PAGE> 167
WILLIAM BLAIR EMERGING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------

GOAL AND PRINCIPAL STRATEGIES

INVESTMENT PROCESS

The Adviser seeks well-managed, high quality growth companies. Such companies
will generally exhibit superior business fundamentals, including one or more of
the following characteristics:

REGIONAL LEADERSHIP in product quality or cost competitiveness;

DOMINANT OR IMPROVING MARKET POSITION, generally associated with a
competitive advantage in distribution, pricing or business franchise,
within a growing local or regional economy; and

21
<PAGE> 168
ADDITIONAL STRATEGIES

For liquidity purposes, up to 35% of the Fund's assets may be held in cash (U.S.
dollars and foreign currencies) or in short-term securities, such as repurchase
agreements, and domestic and foreign money market instruments, such as
government obligations, certificates of deposit, bankers' acceptances, time
deposits, commercial paper and short-term corporate debt securities. The Fund
does not have specific rating requirements for its short-term securities;
however, the Adviser presently does not intend to invest more than 5% of the
Fund's net assets in securities rated below investment grade.

The Fund may enter into forward foreign currency transactions in an effort to
protect against changes in foreign exchange rates. To a limited extent, the Fund
may also invest in depository receipts, foreign currency futures, illiquid
securities, investment companies, repurchase agreements and when-issued and
delayed delivery securities which are described in the Investment Glossary at
the end of this prospectus. The Investment Glossary also describes the Fund's
policies with regard to borrowing, concentration, diversification and portfolio
turnover. The Fund intends to invest to a very limited extent in warrants, which
are described in the Statement of Additional Information.

PORTFOLIO MANAGEMENT

The Emerging Markets Growth Fund is co-managed by W. George Greig and Jeffrey A.
Urbina.

22
<PAGE> 169
INVESTMENT RISKS
- --------------------------------------------------------------------------------

EQUITY FUNDS

Smaller Stocks. Stocks of smaller companies involve greater risk than those of
larger, more established companies. This is because smaller companies may be in
earlier stages of development, may be dependent on a small number of products or
services, may lack substantial capital reserves and/or do not have proven track
records. Smaller companies may be more adversely affected by poor economic or
market conditions, and may be traded in low volumes, which may increase
volatility and liquidity risks. From time to time, the Small Cap Growth Fund and
Emerging Markets Growth Fund may invest in the equity securities of very small
companies, often referred to as "micro-cap" companies. The considerations noted
above are generally intensified for these investments. Any convertible
debentures issued by small companies are likely to be lower-rated or non-rated
securities, which generally involve more credit risk than debentures in the
higher rating categories and generally include some speculative characteristics,
including uncertainties or exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet timely interest and
principal payments.

23
<PAGE> 170
In many foreign countries there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the U.S. There is an increased risk, therefore, of uninsured loss due to
lost, stolen, or counterfeit stock certificates. Prior governmental approval of
non-domestic investments may be required under certain circumstances in some
developing countries, and the extent of foreign investment in domestic companies
may be subject to limitation in other developing countries. Foreign ownership
limitations also may be imposed by the charters of individual companies in
developing countries to prevent, among other concerns, violation of foreign
investment limitations. Repatriation of investment income, capital and proceeds
of sales by foreign investors may require governmental registration and/or
approval in some developing countries. A Fund could be adversely affected by
delays in or a refusal to grant any required governmental registration or
approval for such repatriation.

The Emerging Markets Growth Fund may invest in Russian securities. Russian
securities involve additional significant risks, including political and social
uncertainty (for example, regional conflicts and risk of war), currency exchange
rate volatility, pervasiveness of corruption and crime in the Russian economic,
social and legal systems, delays in settling Fund transactions and risk of loss
arising out of Russia's system of share registration and custody, Russia's
system of share registration and custody creates certain risks of loss
(including the risk of total loss) that are not normally associated with
investments in other securities markets.

Temporary Defensive Position. Each Fund may significantly alter its make-up as a
temporary defensive strategy. A defensive strategy will be employed only if, in
the judgment of the Adviser, investments in a Fund's usual markets or types of
securities become decidedly unattractive because of current or anticipated
adverse economic, financial, political and social factors. Generally, the
Tax-Managed Growth Fund, Large Cap Growth Fund, Small Cap Growth Fund,
Disciplined Large Cap Fund and Emerging Markets Growth Fund will remain fully
invested, and the Adviser will not attempt to time the market. However, if a
significant adverse market action is anticipated, investment-grade debt
securities may be held without limit as a temporary defensive measure. Normally,
the Funds do not purchase any stocks with a view to quick turnover for capital
gains. At such time as the Adviser determines that the Fund's defensive strategy
is no longer warranted, the Fund will adjust its Fund back to its normal
complement securities as soon as practicable. When a Fund is invested
defensively, it may not meet its investment objective.

24
<PAGE> 171
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------

Each Fund pays the Adviser a monthly investment management fee based upon the
percentage of the Fund's average net assets as shown below:

<TABLE>
<CAPTION>
FEE AS A % OF
FUND AVERAGE NET ASSETS
- ---- ------------------
<S> <C>
Tax-Managed Growth Fund.................... .80%
Large Cap Growth Fund...................... .80%
Small Cap Growth Fund...................... 1.10%
Disciplined Large Cap Fund................. .80%
Emerging Markets Growth Fund............... 1.40%
</TABLE>

TRANSFER AGENT AND DIVIDEND PAYING AGENT. The Transfer Agent and Dividend Paying
Agent is State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110.

25
<PAGE> 172
objectives, policies, strategies and risks substantially similar to those of the
related Funds--the William Blair Tax-Managed Growth Fund and the William Blair
Large Cap Growth Fund. However, the Funds differ from the accounts in the
Composites in certain ways, none of which the Adviser believes would cause a
material change in investment results. In addition, the last table set forth
below relates to the William Blair Disciplined Large Cap Composite, which was
managed by Stan Kirtman, who was employed by Nikko Global Asset Management
(USA), Inc. for the period from March 1987 to June 1999. For the period from
December 31, 1992 to December 31, 1998, Mr. Kirtman has managed 5 accounts.

WILLIAM BLAIR TAX-MANAGED GROWTH COMPOSITE
AVERAGE TOTAL RETURNS: PERIODS ENDED 12/31/98

<TABLE>
<CAPTION>
S&P 500
COMPOSITE INDEX(1)
--------- --------
<S> <C> <C>
One Year ...........................................
From Inception 12/31/95.............................
</TABLE>

WILLIAM BLAIR LARGE CAP GROWTH COMPOSITE(2)
AVERAGE TOTAL RETURNS: PERIODS ENDED 12/31/98

<TABLE>
<CAPTION>
RUSSELL 1000
GROWTH
COMPOSITE INDEX(3)
--------- ------------
<S> <C> <C>
One Year ...........................................
Five Years..........................................
From Inception 7/1/93...............................
</TABLE>

WILLIAM BLAIR DISCIPLINED LARGE CAP COMPOSITE
AVERAGE TOTAL RETURNS: PERIODS ENDED 12/31/98

<TABLE>
<CAPTION>
S&P 500
COMPOSITE INDEX(1)
--------- --------
<S> <C> <C>
One Year............................................
Five Years..........................................
From Inception 12/31/92.............................
</TABLE>

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

(1) Total return data is presented for each period. The S&P 500 Index is an
unmanaged capitalization weighted measure of the performance of a
representative sample of leading U.S. companies in leading industries. The
S&P 500 Index is commonly used as a measure of U.S. stock market
performance. The S&P 500 Index returns assume dividends reinvested net of
withholding tax, and unlike Fund returns, do not reflect fees or expenses.
Returns reflect the investment of income dividends and capital gain
distributions, if any, but does not reflect fees, brokerage commissions or
other expenses of investing. Investment cannot be made directly into the
S&P 500 Index.

26
<PAGE> 173
(2) The William Blair Large Cap Growth Composite include the large cap
portion of the Growth Fund. The cash portion of the Growth Fund is
allocated on a pro-rata basis between the large cap portion and the
small cap portion of the Growth Fund each day, based on the percentage
of assets in each of the two portions of the Growth Fund. The portfolio
managers make discrete asset allocation shifts of cash from time to
time.

27
<PAGE> 174
CHOOSING A SHARE CLASS
- --------------------------------------------------------------------------------

CLASS A SHARES Offered at net asset value plus a maximum sales
charge of 5.75% (2.00% for the Income Fund) of the
offering price, subject to a 0.25% shareholder
services fee. Reduced sales charges apply to
purchases of $50,000 or more.

CLASS I SHARES Offered at net asset value without an initial sales
charge, Rule 12b-1 distribution fee or shareholder
services fee. Certain eligibility requirements
apply.

When placing purchase orders, investors must specify whether the order is for
Class A, Class B, Class C or Class I shares. Each class of shares represents
interest in the same portfolio of investments of a Fund. Each Fund offers Class
N shares through a separate prospectus. Class N shares, which are offered
without a sales charge, are offered only to investors who acquire the shares
directly through the Fund's distributor or through a select number of financial
intermediaries with whom the Distributor has entered into selling agreements
specifically authorizing them to sell Class N shares.

RULE 12b-1 PLAN

William Blair Funds has adopted plans under Rule 12b-1 of the Investment Company
Act of 1940 that provide for fees payable to compensate the Distributor for
distribution and other services provided to shareholders of Class B, Class C and
Class N shares. Because 12b-1 fees are paid out of Fund assets on an ongoing
basis, they will, over time, increase the cost of investment and may cost more
than other types of sales charges. Long-term shareholders of Class B and Class C
shares may pay more than the economic equivalent of the maximum initial sales
charges permitted by the National Association of Securities Dealers, although
the Distributor believes that it is unlikely, in the case of Class B Shares,
because of the automatic conversion feature of those shares.

28
<PAGE> 175
SHAREHOLDER SERVICES AGREEMENT

SPECIAL FEATURES

CLASS A SHARES

PUBLIC OFFERING PRICE: Net asset value per share plus the following sales
charge:

<TABLE>
<CAPTION>
EQUITY FUNDS DEALER
SALES CHARGE REALLOWANCE
--------------------------------- ------------------
AS A % OF AS A % OF NET AS A % OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED* OFFERING PRICE
- --------------------- -------------- ---------------- ------------------
<S> <C> <C> <C>
$0 - $49,999 5.75% 6.10% 5.00%
$50,000 - $99,999 4.50% 4.71% 3.75%
$100,000 - $249,999 3.50% 3.63% 2.75%
$250,000 - $499,999 2.50% 2.56% 2.00%
$500,000 - $999,999 2.00% 2.04% 1.75%
$1 million and over** 0.00% 0.00% 1.00%
</TABLE>

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

* Rounded to the nearest one hundredth percent.

** Redemption of shares may be subject to a contingent deferred sales
charge as discussed below.

29
<PAGE> 176
<TABLE>
<CAPTION>
INCOME FUND
SALES CHARGE DEALER REALLOWANCE
--------------------------------- ------------------
AS A % OF AS A % OF NET AS A % OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED* OFFERING PRICE
- --------------------- -------------- ---------------- ------------------
<S> <C> <C> <C>
$0 - $49,999 2.00% 2.04% 1.75%
$50,000 - $99,999 2.00% 2.04% 1.75%
$100,000 - $249,999 1.50% 1.52% 1.25%
$250,000 - $499,999 1.50% 1.52% 1.25%
$500,000 - $999,999 1.00% 1.01% 0.75%
$1 million and over** 0.00% 0.00% 0.50%
</TABLE>
- --------------

* Rounded to the nearest one hundredth percent.

** Redemption of shares may be subject to a contingent deferred sales
charge as discussed below.

NAV PURCHASES: Class A shares of a Fund may be purchased at net asset value by:

- - shareholders in connection with the investment or reinvestment of
income dividends and capital gain distributions;

- - any purchaser with investment totals in the Funds of at least
$1,000,000;

- - in connection with the acquisition of the assets of or merger or
consolidation with another investment company; and

- - redemptions under a Fund's Systematic Withdrawal Plan at the maximum of
10% per year of the net asset value of the account;

- - the redemption of shares of a shareholder (including a registered joint
owner) who has died;

30
<PAGE> 177
- - redemptions by a participant-directed qualified retirement plan or a
participant-directed non-qualified deferred compensation plan, provided
in each case that such plan has not less than 200 eligible employees;
and

- - the redemption of shares whose dealer of record at the time of the
investment notifies the Distributor that the dealer waives the
commission applicable to such Large Order NAV Purchase Privilege.

DISTRIBUTION (RULE 12b-1) FEE: None

SHAREHOLDER SERVICES FEE: 0.25%

EXCHANGE PRIVILEGE

Class A shares of a Fund may be exchanged for the Class A shares of another Fund
at their relative net asset values.

31
<PAGE> 178
CLASS B SHARES

PUBLIC OFFERING PRICE: Net asset value per share without any sales charge at the
time of purchase.

EQUITY FUNDS:

<TABLE>
<CAPTION>
YEAR OF REDEMPTION
AFTER PURCHASE: FIRST SECOND THIRD FOURTH FIFTH SIXTH SEVENTH
- --------------- ----- ------ ----- ------ ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Contingent Deferred Sales Charge: 5.00% 4.00% 3.00% 3.00% 2.00% 1.00% 0.00%
</TABLE>

INCOME FUND:

<TABLE>
<CAPTION>
YEAR OF REDEMPTION
AFTER PURCHASE: FIRST SECOND THIRD FOURTH FIFTH SIXTH SEVENTH
- -------------- ----- ------ ----- ------ ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Contingent Deferred Sales Charge: 2.00% 1.00% 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>

The contingent deferred sales charge will be waived in the event of:

- - redemptions made pursuant to a Fund's Systematic Withdrawal Plan for up
to 10% per year of the net asset value per year of the account;

- - the total disability (as evidenced by a determination by the federal
Social Security Administration) of the shareholder (including a
registered joint owner) occurring after the purchase of the shares
being redeemed; and

- - the redemption of shares of a shareholder (including a registered joint
owner) who has died.

DISTRIBUTION (RULE 12b-1) FEE: 0.75%

SHAREHOLDER SERVICES FEE: 0.25%

CONVERSION FEATURE: Class B shares of a Fund will automatically convert to Class
A shares of the same Fund at the end of the seventh year after purchase for
equity funds after issuance on the basis of the relative net asset value per
share. Shares purchased through the reinvestment of dividends and other
distributions paid with respect to Class B shares in a shareholder's account
will be converted to Class A shares on a pro rata basis.

EXCHANGE PRIVILEGE: Class B shares of a Fund may be exchanged for Class B Shares
of another Fund at their relative net asset values without a contingent deferred
sales charge.

32
<PAGE> 179
CLASS C SHARES

PUBLIC OFFERING PRICE: Net asset value per share without any sales charge at the
time of purchase.

- - redemptions by a participant-directed qualified retirement plan
described in Code Section 401(a) or a participant-directed
non-qualified deferred compensation plan described in Code Section 457;

- - the redemption of shares of a shareholder (including a registered joint
owner) who has died;

- - redemptions under a Fund's Systematic Withdrawal Plan at a maximum of
10% per year of the net asset value of the account;

- - the redemption of shares by an employer sponsored employee benefit plan
that offers funds in addition to William Blair Funds and whose dealer
of record has waived the advance of the first year administrative
service and distribution fees applicable to such shares and agrees to
receive such fees quarterly; and

- - the redemption of shares purchased through a dealer-sponsored asset
allocation program maintained on an omnibus record-keeping system
provided the dealer of record has waived the advance of the first year
administrative services and distribution fees applicable to such shares
and has agreed to receive such fees quarterly.

DISTRIBUTION (RULE 12b-1) FEE: 0.75%

SHAREHOLDER SERVICES FEE: 0.25%

CONVERSION FEATURE: None

EXCHANGE PRIVILEGE: Class C shares of a Fund may be exchanged for the Class C
shares of another Fund at their relative net sales values without a contingent
deferred sales charge.

33
<PAGE> 180
CLASS I SHARES

PUBLIC OFFERING PRICE: Net asset value per share without any sales change at the
time of purchase.

CONTINGENT DEFERRED SALES CHARGE: None

DISTRIBUTION (RULE 12b-1) FEE: None

SHAREHOLDER SERVICES FEE: None

EXCHANGE PRIVILEGE: Class I shares of a Fund may be exchanged for the Class I
share of another Fund at their relative net asset value.

ELIGIBILITY: Class I shares are available for purchase exclusively by the
following categories of institutional investors:

- - institutional investors (such as qualified retirement plans, wrap fee
plans and other programs charging asset-based fees) with $500,000 or
more invested in the William Blair Funds. Purchases may be aggregated
but must be in an omnibus account;

- - clients of William Blair & Company, L.L.C. with $2 million in aggregate
assets under management with William Blair & Company, L.L.C.; and

- - clients of William Blair & Company, L.L.C. who opened an equity or
income fund account prior to September 30, 1999.

34
<PAGE> 181
YOUR ACCOUNT
- --------------------------------------------------------------------------------

HOW TO BUY SHARES (By Mail, by Wire or by Telephone)

MINIMUM INVESTMENTS. To open an account, the minimum initial investment for
regular accounts is $5,000, and the minimum initial investment for Individual
Retirement Accounts ("IRAs") is $2,000. To add to an account, the minimum
subsequent investment is generally $1,000 for all Funds. The Funds may accept
smaller amounts under a group payroll deduction or similar plan. These minimum
amounts may be changed at any time and may be waived for trustees, principals,
officers or employees of the Trust or the Adviser.

PURCHASE PRICE. All Funds are sold at their public offering price, which is the
net asset value per share that is next computed after receipt of your order in
proper form by the Distributor, the Transfer Agent or a designated agent thereof
plus, with regard to the Class A shares of each Fund, an initial sales charge.
(For more information, see "Determination of Net Asset Value.") If you fail to
pay for your order, you will be liable for any loss to the Funds and, if you are
a current shareholder, the Funds may redeem some or all of your shares to cover
such loss.

CLASS A, B AND C SHARES. You may open a new account and purchase additional
shares by contacting the securities dealer or other financial services firm from
whom you received the prospectus.

BY MAIL

ADDING TO AN ACCOUNT. To purchase additional Class I shares, make out a check
for the amount of your investment, payable to "William Blair Funds." Mail the
check, together with a letter that specifies the portfolio name, the account
number and the name(s) in which the account is registered, to State Street Bank
and Trust Company, P.O. Box 8506, Boston, Massachusetts 02266-8506.

35
<PAGE> 182
BY WIRE

OPENING AN ACCOUNT. For Class I shares of the Funds, first, call State Street at
1-800-635-2886 (in Massachusetts, 1-800-635-2840) for an account number. Then
instruct your bank to wire federal funds to:

State Street Bank and Trust Co.
ABA # 011000028
DDA # 99029340
Attn: Custody & Shareholder Services
225 Franklin Street
Boston, Massachusetts 02110

ADDING TO AN ACCOUNT. To add to your Class I share account by wire, instruct
your bank to wire federal funds to:

State Street Bank and Trust Co.
ABA # 011000028
DDA # 99029340
Attn: Custody & Shareholder Services
225 Franklin Street
Boston, Massachusetts 02110

BY TELEPHONE

OPENING AN ACCOUNT. See "By Wire."

ADDING TO AN ACCOUNT. Call State Street at 1-800-635-2886 (in Massachusetts,
1-800-635-2840). Tell your account executive the Fund name, your account number
and the name(s) in which the account is registered. You may then pay for your
new shares by mail or by wire. To add to an existing account by telephone, you
must have selected this option on your account application.

HOW TO SELL SHARES (By Mail, by Wire or by Telephone)

CLASS A, B AND C SHARES. Contact your securities dealer or other financial
services firm to arrange for share redemption.

36
<PAGE> 183
BY MAIL

To redeem Class I shares by mail, send a written redemption request signed by
all account owners to State Street Bank and Trust Company, P.O. Box 8506,
Boston, Massachusetts 02266-8506.

FOR ALL FUNDS, WRITTEN REDEMPTION REQUESTS MUST INCLUDE:

-- a letter that contains your name, the Fund's name and the
dollar amount or number of shares to be redeemed; and

BY WIRE

To redeem some or all of your Class I shares in any Funds by wire, you may
contact the Transfer Agent; by mail or telephone, as explained herein. To redeem
by wire, you must have elected this option on your account application and
attached to the application a voided, unsigned check or deposit slip for your
bank account.

BY TELEPHONE

TO REDEEM SHARES BY TELEPHONE, YOU MUST HAVE ELECTED THIS OPTION ON YOUR ACCOUNT
APPLICATION. For Class I shares, contact the Transfer Agent at 1-800-635-2886
(in Massachusetts, 1-800-635-2840).

NOTE: Redemption requests should NOT be sent to the Trust or to the Distributor.

-- You wish to redeem shares having a value of $5,000 or more in
a single transaction;

-- Your account registration has changed; or

-- You want a check in the amount of your redemption to be mailed
to a different address than the one on your account
application (address of record).

SIGNATURE GUARANTEES, IF REQUIRED, MUST APPEAR ON THE WRITTEN REDEMPTION REQUEST
AND ON ANY ENDORSED STOCK CERTIFICATE OR STOCK POWER.

REDEMPTION PRICE. The redemption price that you receive for your shares may be
more or less than the amount that you originally paid for them, depending upon
their net asset value next calculated after receipt of your redemption request,
in proper order, by the Distributor, the Transfer Agent or a designated agent
thereof.

DELAYED PROCEEDS. The Trust reserves the right to delay delivery of your
redemption proceeds--up to seven days--or to honor certain redemptions with
securities, rather than cash, as described in the next section. In addition,
redemption of shares from a Fund within 180 days of purchase may be subject to a
1.00% redemption fee.

37
<PAGE> 184
the associated inconveniences. Notwithstanding the above, each of the Funds are
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1.00%
of the net asset value of such Fund during any 90-day period for any one
shareholder of record.

AUTOMATIC REDEMPTION OF SMALL ACCOUNTS. Because of the relatively high cost of
maintaining small accounts, the Trust reserves the right to redeem your shares
in any account that, following a redemption, is below a specified amount.
Currently, THE MINIMUM IS $5,000 PER ACCOUNT. Before the redemption is
processed, you will be notified that the value of your account has fallen below
the minimum and allowed to make an additional investment.

HOW TO EXCHANGE SHARES (By Mail or by Telephone)

Subject to the following limitations, you may exchange shares of all Class A, B,
C and I shares into either shares of each corresponding Class A, B, C and I
shares of another Fund at their relative net asset values so long as the shares
to be acquired are available for sale in your state of residence. Only four (4)
exchanges from a Fund are allowed within any 12-month period. Exchanges will be
effected by redeeming your shares and purchasing shares of the other Fund or
Funds requested. Shares of a William Blair Fund with a value in excess of
$1,000,000 acquired by exchange from another William Blair Fund may not be
exchanged thereafter until they have been owned for 15 days (the "15 Day Hold
Policy").

CLASS A, B AND C. Contact your securities dealer or other financial services
firm to arrange for share exchanges.

CLASS I. Contact your securities dealer or other financial services firm to
arrange for share exchange or contact the Company directly by mail or telephone
as described below.

BY MAIL

You may request an exchange of your shares by writing to William Blair Funds,
Attention: Exchange Department, P.O. Box 8506, Boston, Massachusetts 02266-8506.

BY TELEPHONE

You may also exchange your Class I shares of each Fund by telephone by
completing the appropriate section on your account application. Once your
telephone authorization is on file, State Street will honor your requests to
redeem shares by telephone at 1-800-635-2886 (in Massachusetts, 1-800-635-2840).

DIVIDENDS AND DISTRIBUTIONS

38
<PAGE> 185
capital gain distributions will be automatically reinvested in additional shares
at net asset value on the reinvestment date, unless you specifically request
otherwise (see "Shareholder Services and Account Policies -- Dividend Options").
Cash payments are made by the Dividend Paying Agent, State Street Bank and Trust
Company, shortly following the reinvestment date.

WHEN DIVIDENDS ARE PAID

TAXES

As with any investment, you should consider how your investment in a Fund will
be taxed. If your account is not a tax-deferred retirement account, you should
be aware of these tax implications.

Under the Federal tax laws, income dividends and short-term capital gains
distributions are taxed as ordinary income. Long-term capital gain distributions
are taxed as long-term capital gains. It is anticipated that a portion of the
ordinary income dividends for the Tax-Managed Growth Fund, Large Cap Growth
Fund, Small Cap Growth Fund and Disciplined Large Cap Fund will be eligible for
the dividends-received deduction available for corporate shareholders. The
ordinary income dividends of the Emerging Markets Growth Fund are not eligible
for the dividends-received deduction available to corporate shareholders.

TAXES ON TRANSACTIONS. Redemptions of Fund shares and exchanges for shares of
other Funds are treated as sales and are subject to capital gains taxation. A
capital gain or loss is the difference between the price that you paid for your
shares and the price that you receive when you sell (or exchange) them. Any loss
recognized on the redemption of shares held six months or less will be treated
as a long-term capital loss to the extent you have received any long-term
capital gain dividends on such shares. A shareholder who redeems shares normally
will recognize a capital gain or loss for Federal income tax purposes. If you
realize a loss on the redemption of Fund shares within 30 days before or after
an acquisition of shares of the same Fund, the two transactions may be subject
to the wash sale rules of the Internal Revenue Code, resulting in a postponement
of the recognition of such loss for Federal income tax purposes.

"BUYING A DIVIDEND." If you buy shares before a Fund deducts a distribution from
its net asset value, you will pay the full price for the shares and then receive
a portion of the price back in the form of a taxable distribution. See "Your
Account -- Dividends and Distributions" for payment schedules, and call the
Distributor if you have further questions.

39
<PAGE> 186

exemptions from tax. Accordingly, the Emerging Markets Growth Fund will operate
so as to qualify for such reduced tax rates or tax exemptions whenever
practicable.

For a more detailed discussion of taxes, see the Statement of Additional
Information.

40
<PAGE> 187
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------

WHEN AND HOW NET ASSET VALUE ("NAV") IS DETERMINED

A Fund's net asset value is the market value of its total assets, minus
liabilities, divided by the number of shares outstanding. The value of a single
share is called its share value or share price.

When net asset value is computed, quotations of foreign securities in foreign
currencies are converted into the United States dollar equivalents at the
prevailing market rates as computed by Investors Bank & Trust Company, the
custodian. Trading in securities on exchanges and over-the-counter markets in
Europe and the Far East is normally completed at various times prior to 3:00
p.m., Chicago time, the current closing time of the New York Stock Exchange.
Trading on foreign exchanges may not take place on every day that the New York
Stock Exchange is open. Conversely, trading in various foreign markets may take
place on days when the New York Stock Exchange is not open and on other days
when net asset value is not calculated. Consequently, calculation of the net
asset value for the Emerging Markets Growth Fund may not occur at the same time
as determination of the most current market prices of the securities included in
the calculation, and the value of the net assets held by the Emerging Markets
Growth Fund may be significantly affected on days when shares are not available
for purchase or redemption.

HOW THE MARKET VALUE OF FUND SECURITIES IS DETERMINED

41
<PAGE> 188
SHAREHOLDER SERVICES AND ACCOUNT POLICIES
- --------------------------------------------------------------------------------

The Funds provide a variety of services to help you manage your account.

1. AUTOMATIC DIVIDEND REINVESTMENT PLAN. The Funds automatically
reinvest all income dividends and capital gain distributions in additional
shares of stock at net asset value on the reinvestment date.
(For more information, see "Dividend and Distribution Policy.")

3. AUTOMATIC DEPOSIT OF DIVIDENDS. You may elect to have all income
dividends and capital gain distributions automatically deposited in a previously
established bank account.

With regard to retirement plans:

-- participation is voluntary;

-- you may terminate or change a plan at any time without penalty
or charge from the Funds;

-- the Funds will pay any additional expenses that they incur in
connection with such plans;

-- on your account application, you may select a plan or plans in
which to invest;

-- additional forms and further information may be obtained by
writing or calling the Funds;

42
<PAGE> 189
-- the Funds reserve the right to change the minimum amounts for
initial and subsequent investments or to terminate any of the
plans;

-- the Funds reserve the right to waive investment minimums at
the discretion of the Distributor; and

-- the Funds require a copy of the trust agreement when shares
are to be held in trust.

WRITTEN CONFIRMATIONS. Each purchase, exchange or redemption transaction is
confirmed in writing to the address of record by giving details of the purchase
or redemption.

43
<PAGE> 190

INVESTMENT GLOSSARY
- --------------------------------------------------------------------------------

44
<PAGE> 191
To the extent required to comply with the Investment Company Act of 1940 (the
"1940 Act") and the rules and interpretations thereunder, whenever the Fund
enters into a futures contract, the Fund will maintain a segregated account
consisting of either cash or liquid securities equal to the Fund's potential
obligation under such contracts. The segregation of assets places a practical
limit on the extent to which the Fund may engage in futures contracts.

45
<PAGE> 192

of the security during the Fund's holding period. The Funds currently intend to
enter into repurchase agreements only with member banks of the Federal Reserve
System or with primary dealers in U.S. Government securities. In all cases, the
Adviser, subject to the supervision of the Board of Trustees, must be satisfied
with the creditworthiness of the seller before entering into a repurchase
agreement. In the event of the bankruptcy or other default of the seller of a
repurchase agreement, the Fund could incur expenses and delays enforcing its
rights under the agreement, and experience a decline in the value of the
underlying securities and loss of income. The maturity of a security subject to
repurchase may exceed one year, and, for the Income Fund, the modified duration
of a security subject to repurchase may exceed eight years. Repurchase
agreements maturing in more than seven days, together with any securities that
are restricted as to disposition under the federal securities laws or are
otherwise considered to be illiquid, will not exceed 15% of the net assets of
the Tax-Managed Growth Fund, Large Cap Growth Fund, Small Cap Growth Fund,
Disciplined Large Cap Fund and Emerging Markets Growth Fund.

46
<PAGE> 193
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

TAX-MANAGED GROWTH FUND

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1999(a)
---------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............................. $10.000 $10.000 $10.000 $10.000
Income from investment operations:
Net investment income ......................................... 0.001 -- -- 0.001
Net realized and unrealized gain on investments ............... 0.180 0.180 0.180 0.180
------- ------- ------- -------
Total from investment operations ................................. 0.181 0.180 0.180 0.181
Less distributions from:
Net investment income ......................................... -- -- -- --
Net realized capital gains .................................... -- -- -- --
Total distributions .............................................. -- -- -- --
------- ------- ------- -------
Net asset value, end of period ................................... $10.181 $10.180 $10.180 $10.181
======= ======= ======= =======
Total return (%) (b) ............................................. 1.80 1.80 1.80 1.80
Ratios to average daily net assets (%):
Expenses ...................................................... 1.36 2.11 2.11 1.11
Net investment income (loss) .................................. 0.73 (0.01) (0.01) 0.99
</TABLE>

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1999(a)
--------------------------------
<S> <C>
Supplemental data for all classes:
Net assets at end of period (in thousands).................... $ 1,018
Portfolio turnover rate (%)................................... --
</TABLE>

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

(a) For the period December 27, 1999 (Commencement of Operations) to December
31, 1999.

(b) Total return is not annualized for periods that are less than a full year.

LARGE CAP GROWTH FUND

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1999(a)
--------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................... $ 10.000 $ 10.000 $ 10.000 $ 10.000
Income from investment operations:
Net investment loss ................................. -- (0.001) (0.001) --
Net realized and unrealized gain on investments ..... 0.143 0.141 0.141 0.141
---------- ---------- ---------- ----------
Total from investment operations ....................... 0.143 0.140 0.140 0.141
Less distributions from:
Net investment income ............................... -- -- -- --
Net realized capital gains .......................... -- -- -- --
Total distributions .................................... -- -- -- --
---------- ---------- ---------- ----------
Net asset value, end of period ......................... $ 10.143 $ 10.140 $ 10.140 $ 10.141
========== ========== ========== ==========
Total return (%) (b) ................................... 1.40 1.40 1.40 1.40
Ratios to average daily net assets (%):
Expenses ............................................ 1.36 2.11 2.11 1.11
Net investment loss ................................. (0.48) (1.41) (1.41) (0.40)
</TABLE>

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1999(a)
--------------------------------
<S> <C>
Supplemental data for all classes:
Net assets at end of period (in thousands) .......... $ 1,153
Portfolio turnover rate (%) ......................... --
</TABLE>

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

(a) For the period December 27, 1999 (Commencement of Operations) to December
31, 1999.

(b) Total return is not annualized for periods that are less than a full year.

47
<PAGE> 194
SMALL CAP GROWTH FUND

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1999(a)
--------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................... $ 10.000 $ 10.000 $ 10.000 $ 10.000
Income from investment operations:
Net investment loss ................................. -- (0.002) (0.002) (0.001)
Net realized and unrealized gain on investments ..... 0.192 0.192 0.192 0.192
---------- ---------- ---------- ----------
Total from investment operations ....................... 0.192 0.190 0.190 0.191
Less distributions from:
Net investment income ............................... -- -- -- --
Net realized capital gains .......................... -- -- -- --
Total distributions .................................... -- -- -- --
---------- ---------- ---------- ----------
Net asset value, end of period ......................... $ 10.192 $ 10.190 $ 10.190 $ 10.191
========== ========== ========== ==========
Total return (%) (b) ................................... 1.90 1.90 1.90 1.90
Ratios to average daily net assets (%):
Expenses ............................................ 1.60 2.35 2.35 1.35
Net investment loss ................................. (1.60) (2.35) (2.35) (1.35)
</TABLE>

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1999(a)
---------------------------------
<S> <C>
Supplemental data for all classes:
Net assets at end of period (in thousands) .......... $ 6,346
Portfolio turnover rate (%) ......................... --
</TABLE>

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

(a) For the period December 27, 1999 (Commencement of Operations) to December
31, 1999.

(b) Total return is not annualized for periods that are less than a full year.

DISCIPLINED LARGE CAP FUND

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1999(a)
--------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .................... $ 10.000 $ 10.000 $ 10.000 $ 10.000
Income from investment operations:
Net investment loss .................................. -- (0.001) (0.001) --
Net realized and unrealized gain on investments ...... 0.119 0.123 0.123 0.123
---------- ---------- ---------- ----------
Total from investment operations ........................ 0.119 0.122 0.122 0.123
Less distributions from:
Net investment income ................................ -- -- -- --
Net realized capital gains ........................... -- -- -- --
Total distributions ..................................... -- -- -- --
---------- ---------- ---------- ----------
Net asset value, end of period .......................... $ 10.119 $ 10.122 $ 10.122 $ 10.123
========== ========== ========== ==========
Total return (%) (b) .................................... 1.20 1.20 1.20 1.20
Ratios to average daily net assets (%):
Expenses ............................................. 1.25 2.00 2.00 1.00
Net investment loss .................................. (0.27) (0.96) (0.96) 0.04
</TABLE>

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1999(a)
---------------------------------
<S> <C>
Supplemental data for all classes:
Net assets at end of period (in thousands) ........... $ 1,518
Portfolio turnover rate (%) .......................... 0.5
</TABLE>
- --------------

(a) For the period December 27, 1999 (Commencement of Operations) to December
31, 1999.

(b) Total return is not annualized for periods that are less than a full year.

48
<PAGE> 195
WILLIAM BLAIR EMERGING MARKETS GROWTH FUND

<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1999
----------------------------------------------------------------------
CLASS A(b) CLASS B(b) CLASS C(b) CLASS I(c)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................ $ 10.850 $ 10.850 $ 10.850 $ 10.300
Income from investment operations:
Net investment income (loss) ..................... 0.031 0.019 (0.011) (0.067)
Net realized and unrealized gain on investments .. 2.782 2.784 2.817 3.438
----------- ----------- ----------- -----------
Total from investment operations .................... 2.813 2.803 2.806 3.371
Less distributions from:
Net investment income ............................ -- -- -- --
Net realized gain ................................ 0.039 0.039 0.039 0.039
----------- ----------- ----------- -----------
Total distributions .............................. 0.039 0.039 0.039 0.039
----------- ----------- ----------- -----------
Net asset value, end of period ...................... $ 13,624 $ 13,614 $ 13,617 $ 13,632
=========== =========== =========== ===========

Total return (%)(d) ................................. 25.91 25.82 25.91 32.73
Ratios to average daily net assets (%):
Expenses(a) ...................................... 2.00 2.75 2.75 2.06
Net investment income (loss)(a) .................. .52 (.21) (1.53) (0.63)
</TABLE>

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31
1999 1998(a)
--------- ---------
<S> <C> <C>
Supplemental data for all classes:
Net assets at end of period (in thousands)....... $6,028 $3,754
Portfolio turnover rate (%)...................... 201 226
</TABLE>

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

(a) Without the waiver of expenses in 1999, the expense ratio would have
been 4.46%, 5.21%, 5.21% and 4.53% for Class A, B, C and I,
respectively. The net investment loss ratio would have been (3.03)%,
(3.78)%, (3.78)%, (1.83)% for Classes A, B, C and I, respectively.
Without the waiver of expenses in 1998, the expense ratio would have
been 6.35% and the net investment loss ratio would have been 4.06%.

(b) For the period November 2, 1999 (Commencement of the Class) to December
31, 1999.

(d) Total return is not annualized for periods that are less than a full
year.

49
<PAGE> 196
FOR MORE INFORMATION

More information about the Funds is available without charge, upon request,
including the following:

SEMI-ANNUAL/ANNUAL REPORTS

STATEMENT OF ADDITIONAL INFORMATION (SAI)

TO OBTAIN INFORMATION:

BY TELEPHONE
Call: 1-800-635-2886
(In Massachusetts 1-800-635-2840)

BY MAIL
Write to:
WILLIAM BLAIR FUNDS
222 West Adams Street
Chicago, Illinois 60606

STATE STREET BANK AND TRUST COMPANY
(the Fund's Transfer Agent)
P.O. Box 8506
Boston, MA 02266-8506

ON THE INTERNET

Text-only versions of fund documents can be viewed online or downloaded from the
SEC at http://www.sec.gov

WILLIAM BLAIR FUNDS May 1, 2000
Investment Company Act File No.: 811-5344

<PAGE> 197

May 1, 2000

WILLIAM BLAIR FUNDS

CLASS I SHARES PROSPECTUS

READY RESERVES FUND

This prospectus contains important information about Class I shares of the Ready
Reserves Fund, including its investment objectives. For your benefit and
protection, please read it before you invest and keep it for future reference.

TABLE OF CONTENTS

<TABLE>
<S> <C>
Summary.................................................................. 1
Financial Highlights..................................................... 3
Investment Objectives, Principal Investment Strategies and Risks......... 4
Management of the Funds.................................................. 6
Your Account............................................................. 7
How to Buy Shares........................................................ 7
How to Sell Shares....................................................... 8
How to Exchange Shares................................................... 9
Dividends and Distributions.............................................. 10
Taxes ................................................................ 10
Determination of Net Asset Value......................................... 11
Shareholder Services and Account Policies................................ 11
Investment Glossary...................................................... 12
For More Information..................................................... Back Cover
</TABLE>

WILLIAM BLAIR FUNDS
222 West Adams Street
Chicago, Illinois 60606

<PAGE> 198

- --------------------------------------------------------------------------------
WILLIAM BLAIR READY RESERVES FUND SUMMARY
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The William Blair Ready Reserves Fund seeks current
income, a stable share price and daily liquidity.

MAIN INVESTMENT STRATEGIES: The Fund invests primarily in short-term U.S.
dollar-denominated domestic money market instruments, which include securities
issued by domestic corporations; the U.S. Government, its agencies and
instrumentalities; and U.S. banks. The Fund invests exclusively in securities
that are high-quality, which means that they are rated in the top 2 investment
categories. These instruments are considered to be among the safest investments
available because of their short maturities, liquidity and high-quality ratings.
The Fund is designed to be highly liquid and seeks to maintain a net asset value
of $1.00 per share. The Fund is designed for investors who seek to obtain the
maximum current income consistent with the preservation of capital.

MAIN RISKS OF INVESTING: Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Fund. As with any money market fund, there is a low risk that the issuers or
guarantors of securities will default on the payment of principal or interest or
the obligation to repurchase securities from the Fund. An investment in the Fund
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Of course, the skill of the Adviser will play a
significant role in the Fund's ability to achieve its investment objective.

FUND PERFORMANCE HISTORY

ANNUAL TOTAL RETURNS (CLASS N SHARES)(1)

<TABLE>
<CAPTION>
HIGHEST QUARTERLY LOWEST QUARTERLY
RETURN RETURN
------ ------
<S> <C>
1.25% 4Q89 0.64% (2Q93)
</TABLE>

(1) The Class I shares do not have a full calendar year of performance. The
Class N shares of the Fund are offered in a separate prospectus. The
returns for the Class I shares will be substantially similar to those
of the Class N shares shown in the chart because all shares of the Fund
are invested in the same portfolio of securities. The annual returns of
the different Classes of shares will differ only to the extent that the
expenses of the Classes differ.

<PAGE> 199

AVERAGE ANNUAL TOTAL RETURNS. The following table compares the Fund's average
annual total returns for the periods ended December 31, 1999, to a broad-based
securities market index.

<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
<S> <C> <C> <C>
Ready Reserves Fund 4.63% 4.99% 4.78%
S&P-rated AAA* 4.62% 4.98% 4.76%
</TABLE>

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

* The Standard and Poor's-rated AAA Money Market Funds Index is an
unmanaged index that includes money market mutual funds rated AAA by
Standard and Poor's. Expenses are not included.

YIELD: You may obtain the most current yield information for the Fund by calling
1-800-742-7272.

2
<PAGE> 200

FEES AND EXPENSES: This section describes the fees and expenses that you may pay
if you buy and hold Class I shares of the Fund.

SHAREHOLDER FEES. Class I shares are no-load investments, so you will not pay
any shareholder fees to buy shares, reinvest dividends in additional shares or
exchange into the Class I shares of another Fund.

ANNUAL FUND OPERATING EXPENSES are deducted from the Fund's assets.

<TABLE>
<S> <C>
Management Fee................................................................... .24%
Distribution (Rule 12b-1) Fee.................................................... None
Other Expenses................................................................... .10%
Total Annual Fund Operating Expenses............................................ .34%
</TABLE>

EXAMPLE: This example is intended to help you compare the cost of investing in
Class I shares of the Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund, redeem all of your shares
at the end of the periods shown, earn a 5% return each year and incur the same
operating expenses as shown above.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$35 $109 $191 $431
</TABLE>

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

<TABLE>
<CAPTION>
WILLIAM BLAIR READY RESERVES FUND CLASS N YEARS ENDED DECEMBER 31
-------------------------------
1999 1998 1997 1996 1995
---------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income .................... .05 .05 .05 .05 .05
Net realized and unrealized gain (loss) on
investments ........................... -- -- -- -- --
---------- ---------- -------- -------- --------
Total from investment operations .......... .05 .05 .05 .05 .05
Less distributions from:
Net investment income .................... .05 .05 .05 .05 .05
---------- ---------- -------- -------- --------
Total distributions ...................... .05 .05 .05 .05 .05
---------- ---------- -------- -------- --------
Capital contribution
Net asset value, end of year .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ======== ======== ========
Total return (%) .......................... 4.63 4.98 5.04 4.81 5.45
Ratios to average net assets (%):
Expenses ................................. .72 .69 .70 .71 .72
Net investment income .................... 4.52 4.87 4.92 4.78 5.30
Supplemental data:
Net assets at end of year (000s) ......... $1,052,803 $1,189,051 $904,569 $760,808 $703,993
</TABLE>

3
<PAGE> 201

- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RISKS
- --------------------------------------------------------------------------------

The Ready Reserves Fund is a series of William Blair Funds, an open-end
management investment company. William Blair & Company, L.L.C. (the "Adviser")
provides management and investment advisory services to the Fund.

The following section takes a closer look at the investment objectives of the
Fund, its principal investment strategies and certain related investment risks.
In addition, the Statement of Additional Information contains more detailed
information about certain of these practices, the potential risks and/or the
limitations adopted by the Fund to help manage such risks. All investments,
including those in mutual funds, have risks. No investment is suitable for all
investors. Of course, there can be no assurance that the Fund will achieve its
objective.

GOAL AND PRINCIPAL STRATEGIES

The Ready Reserves Fund seeks current income, a stable share price and daily
liquidity. The Fund invests exclusively in high-quality money market
instruments. These instruments are considered to be among the safest investments
available because of their short maturities, liquidity and high-quality ratings.
The Fund seeks to maintain a net asset value of $1.00 per share. Nevertheless,
there is no guarantee that the objective of the Fund will be achieved or that
the net asset value of $1.00 per share of the Fund will be maintained.

ADDITIONAL STRATEGIES AND RISKS

The Fund will invest exclusively in U.S. dollar-denominated money market
instruments, including, but not limited to, those issued by:

4
<PAGE> 202

of, but not limited to, less publicly available information, more volatile
markets, less securities regulation, less favorable tax provisions, war and
expropriation.

PORTFOLIO MANAGEMENT

The Ready Reserves Fund is co-managed by Jim Kaplan and Bentley Myer.

5
<PAGE> 203

- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------

TRUSTEES, OFFICERS AND ADVISER. The Board of Trustees of William Blair Funds
(the "Trust") has overall management responsibility. The duties of the trustees
and officers of the Trust include supervising the business affairs of the Trust,
monitoring investment activities and practices and considering and acting upon
future plans for the Trust. The Statement of Additional Information has the
names of and additional information about the trustees and officers of the
Trust. The Adviser, William Blair & Company, L.L.C., 222 West Adams Street,
Chicago, Illinois 60606, is responsible for providing investment advisory and
management services to the Trust, subject to the direction of the Board of
Trustees. The Adviser is also the principal underwriter and distributor of the
Trust and acts as agent of the Trust in the sale of its shares (the
"Distributor"). William Blair & Company, L.L.C. was founded over 60 years ago by
William McCormick Blair. Today, the firm has 150 principals and 750 employees.
The main office in Chicago houses all research and investment management
services.

For the most recently completed fiscal year, the Ready Reserves Fund paid the
Adviser a monthly investment management fee of 0.24% of the Fund's average net
assets.

TRANSFER AGENT AND DIVIDEND PAYING AGENT. The Transfer Agent and Dividend Paying
Agent is State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110.

6
<PAGE> 204

- --------------------------------------------------------------------------------
YOUR ACCOUNT
- --------------------------------------------------------------------------------

HOW TO BUY SHARES (By Mail, by Wire or by Telephone)

ELIGIBILITY AND MINIMUM INVESTMENT. The Fund is designed primarily for
institutional investors. Fund shares may not be purchased directly by
individuals, although institutions may purchase shares for accounts maintained
by individuals. Generally, each investor is required to open a single account
with the Fund for all purposes. In certain cases, the Trust may request
investors to maintain separate omnibus accounts for shares held by the investor
for its own account, for the account of other institutions and for accounts for
which the institution acts as a fiduciary.

The minimum initial investment is $10,000,000 or any lesser amount if, in the
Trust's opinion, the investor has adequate intent and availability of funds to
reach a future level of investment of $10,000,000. There is no minimum for
subsequent purchases. The initial investment must be accompanied by the Account
Application and corporate resolutions, if applicable. The Trust reserves the
right to offer Fund shares without regard to the minimum purchase requirements
to qualified or non-qualified employee benefit plans. The Trust does not impose
any sales charges in connection with purchases of Fund shares, although Service
Agents and other institutions may charge their clients fees in connection with
purchases for the accounts of their clients. Service Agents may receive
different levels of compensation for selling different classes of shares. The
Fund does not issue share certificates. To add to an account, the minimum
subsequent investment is $1.00. These minimum amounts may be changed at any
time.

PURCHASE PRICE. The Fund is sold at its public offering price, which is the net
asset value per share that is next computed after receipt of your order in
proper form by the Distributor, the Transfer Agent or a designated agent
thereof. (For more information, see "Determination of Net Asset Value.") If you
fail to pay for your order, you will be liable for any loss to the Fund and, if
you are a current shareholder, the Fund may redeem some or all of your shares to
cover such loss.

NOTE: All purchases made by check should be in U.S. dollars and made payable to
William Blair Funds. Third party checks will not be accepted. When purchases are
made by check or periodic account investment, the Fund may delay sending
redemption proceeds until it determines that collected funds have been received
for the purchase of such shares, which may be up to 15 calendar days.

RIGHT TO REJECT YOUR PURCHASE ORDER. The Trust reserves the right to decline
your purchase order (including exchanges) upon receipt for any reason, including
excessive, short-term or other abusive trading practices which may disrupt
portfolio management strategies and harm Fund performance. The Trust also
reserves the right to delay delivery of redemption proceeds -- up to seven days
- -- or to honor certain redemptions with securities, rather than cash.

BY MAIL

OPENING AN ACCOUNT. Send your check and completed application to the
Distributor, William Blair Funds, 222 West Adams Street, Chicago, Illinois
60606.

ADDING TO AN ACCOUNT. To purchase additional shares, make out a check for the
amount of your investment, payable to "William Blair Funds." Send your check and
letter to the Distributor, William Blair Funds, 222 West Adams Street, Chicago,
Illinois 60606.

7
<PAGE> 205

BY WIRE

OPENING AN ACCOUNT. First, call State Street at 1-800-635-2886 (in
Massachusetts, 1-800-635-2840) for an account number. Then instruct your bank to
wire federal funds to:

State Street Bank and Trust Co.
ABA # 011000028
DDA # 99029340
Attn: Custody & Shareholder Services
225 Franklin Street
Boston, Massachusetts 02110

Include the name of the Portfolio and the share class in which you are
investing, your assigned account number and the name(s) in which the account is
registered. Finally, complete the account application, indicate the account
number assigned to you by State Street and mail it to William Blair Funds, 222
West Adams Street, Chicago, Illinois 60606.

ADDING TO AN ACCOUNT. To add to your account by wire, instruct your bank to wire
federal funds to:

State Street Bank and Trust Co.
ABA # 011000028
DDA # 99029340
Attn: Custody & Shareholder Services
225 Franklin Street
Boston, Massachusetts 02110

In your request, specify the Portfolio name and the share class in which you are
investing, your account number, and the name(s) in which the account is
registered. To add to an existing account by wire transfer of funds, you must
have selected this option on your account application.

BY TELEPHONE

OPENING AN ACCOUNT. See "By Wire."

HOW TO SELL SHARES (By Mail, by Wire or by Telephone)

You can arrange to take money out of your account by selling ("redeeming") some
or all of your shares. You may give instructions to redeem your shares by mail,
by wire or by telephone, as described below. Redemption requests will be
processed after the next daily dividend declaration at the net asset value next
determined upon receipt by the Distributor of a proper redemption request. In
this way, you will receive the net asset value of your shares and all declared
but unpaid dividends on your shares through the date of redemption.

BY MAIL

Send your redemption request signed by all account owners to the Transfer Agent
or to the Distributor, William Blair & Company, L.L.C., 222 West Adams Street,
Chicago, Illinois 60606.

WRITTEN REDEMPTION REQUESTS MUST INCLUDE:

-- a letter that contains your name, the Fund's name and the
dollar amount or number of shares to be redeemed; and
-- any other necessary documents, such as corporate resolutions,
an inheritance tax consent or evidence of authority (for
example, letters testamentary), dated not more than 60 days
prior to receipt thereof by State Street or the Distributor.

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BY WIRE

To redeem some or all of your shares in any Funds by wire, you must have elected
this option on your account application and attached to the application a
voided, unsigned check or deposit slip for your bank account.

BY TELEPHONE

TO REDEEM SHARES BY TELEPHONE, YOU MUST HAVE ELECTED THIS OPTION ON YOUR ACCOUNT
APPLICATION. You may redeem some or all of your shares by telephone by calling
the Transfer Agent.

REDEMPTION PRICE. The Fund's net asset value normally will be $1.00. However,
the redemption price that you receive for your shares may be more or less than
the amount that you originally paid for them, depending upon their net asset
value next calculated after receipt of your redemption request, in proper order.

PAYMENT FOR REDEEMED SHARES. Payment normally will be mailed to you at the
address of record for your account by the third business day after receipt by
the Distributor of a redemption request and any other required documentation and
after any checks in payment for your shares have cleared.

REDEMPTIONS IN KIND. If the Adviser determines that existing conditions make
cash payments undesirable, redemption payments may be made in whole or in part
in securities or other financial assets, valued for this purpose as they are
valued in computing the NAV for each of the Fund's shares. Shareholders
receiving securities or other financial assets on redemption may realize a gain
or loss for tax purposes, and will incur any costs of sale, as well as the
associated inconveniences. Notwithstanding the above, the Fund is obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1.00% of the Fund's
net asset value during any 90-day period for any one shareholder of record.

REDEMPTION BY CHECK. To redeem shares by check, you must fill out the
appropriate section of your account application. If your application for the
check-writing privilege is approved, you will be provided with checks that may
be made payable to any person IN AN AMOUNT NOT LESS THAN $500 NOR MORE THAN $9
MILLION. There currently is no charge for this service and no limit on the
number of checks that you may write; however, these provisions are subject to
change.

The payee of the check may cash or deposit it like any other check drawn on a
bank. When the check is presented for payment, a sufficient number of full and
fractional shares from your account will be redeemed at their next-determined
net asset value per share, usually $1.00, to cover the amount of the check. This
enables you to continue earning daily dividends until the check clears. Canceled
checks will be returned to you by State Street. For joint accounts, unless a
single signer has been authorized on your account application, checks must be
signed by all joint account owners.

The Trust may refuse to honor checks whenever the right of redemption has been
suspended or postponed or whenever your account is otherwise impaired. For
instance, your account would be considered to be impaired when (1) there are
insufficient assets to cover the check, (2) a "stop order" has been placed on
the check, and (3) in other situations, such as where there is a dispute over
ownership of the your account. A $25 SERVICE FEE may be charged when a check is
presented to redeem shares in excess of the value of your account or for an
amount less than $500.

HOW TO EXCHANGE SHARES (By Mail or by Telephone)

Subject to the following limitations, you may exchange shares of Class I shares
into either shares of Class I shares of another Fund at their relative net asset
values so long as the shares to be acquired are available for sale in your state
of residence. Only four (4) exchanges from a Fund are allowed within any
12-month period. Exchanges will be effected by redeeming your shares and
purchasing shares of the other Fund or Funds requested. Shares of a

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William Blair Fund with a value in excess of $1,000,000 acquired by exchange
from another William Blair Fund may not be exchanged thereafter until they have
been owned for 15 days (the "15 Day Hold Policy").

BY MAIL

You may request an exchange of your shares by writing to William Blair Funds,
Attention: Exchange Department, P.O. Box 8506, Boston, Massachusetts 02266-8506.

BY TELEPHONE

DIVIDENDS AND DISTRIBUTIONS

INCOME DIVIDENDS. The Fund earns interest from short-term U.S. dollar
denominated domestic money market instruments, which are passed along to
shareholders as income dividends as long as expenses do not exceed income.

As a shareholder, you are entitled to your portion of the Fund's net income. The
Fund passes its earnings along to you as distributions. The Funds' policy is to
distribute substantially all net investment income. All distributions have the
effect of immediately thereafter decreasing net asset value per share. Income
dividends will be automatically reinvested in additional shares at net asset
value on the reinvestment date, unless you specifically request otherwise (see
"Shareholder Services and Account Policies -- Dividend Options"). Cash payments
are made by the Dividend Paying Agent, State Street Bank and Trust Company,
shortly following the reinvestment date.

WHEN DIVIDENDS ARE PAID

The Ready Reserves Fund's net investment income will be declared at the close of
the New York Stock Exchange on each day that the Fund is open for business,
which is generally 3:00 p.m., Chicago time, as a dividend to shareholders who
were of record prior to the declaration.

The Fund may vary its dividend practices at any time. Income dividends from the
Fund will vary from year to year. Dividends may be subject to withholding, as
required by the Internal Revenue Service (see "Your Account --Taxes").

TAXES

As with any investment, you should consider how your investment in the Fund will
be taxed. If your account is not a tax-deferred retirement account, you should
be aware of these tax implications.

TAXES ON DISTRIBUTIONS. The Fund's distributions are subject to Federal income
tax and may also be subject to state or local taxes. Distributions may be
taxable at different rates depending upon the length of time the Fund holds the
security. Your distributions are taxable when they are paid, whether you take
them in cash or reinvest them in additional shares. The Fund will inform you of
the amount and nature of distributions paid.

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<PAGE> 208

Under the Federal tax laws, income dividends and short-term capital gains
distributions are taxed as ordinary income.

TAXES ON TRANSACTIONS. For the Ready Reserves Fund, so long as a net asset value
of $1.00 is maintained, the sale or redemption of your shares will not result in
a capital gain or loss.

For a more detailed discussion of taxes, see the Statement of Additional
Information.

- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------

WHEN AND HOW NET ASSET VALUE IS DETERMINED

The Fund's net asset value is the market value of its total assets, minus
liabilities, divided by the number of shares outstanding. The value of a single
share is called its share value or share price.

For the purposes of calculating the net asset value of the Ready Reserves Fund,
portfolio securities are valued at their amortized cost, which means their
acquisition cost adjusted for the amortization of a premium or discount.
Securities for which a market price is not available, are valued at a fair value
as determined in good faith by, or under the direction of, the Board of Trustees
and in accordance with the Trust's pricing procedures.

- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES AND ACCOUNT POLICIES
- --------------------------------------------------------------------------------

The Fund provides a variety of services to help you manage your account.

1. AUTOMATIC DIVIDEND REINVESTMENT PLAN. The Fund automatically
reinvests all income dividends and capital gain distributions in additional
shares of stock at net asset value on the reinvestment date. (For more
information, see "Dividend and Distribution Policy.")

2. CASH-DIVIDEND PLAN. You may choose to have all of your income
dividends paid in cash. Any distributions you do not elect to have paid in cash
will be reinvested automatically in additional shares at net asset value.

3. AUTOMATIC DEPOSIT OF DIVIDENDS. You may elect to have all income
dividends automatically deposited in a previously established bank account.

WRITTEN CONFIRMATIONS. Each purchase, exchange or redemption transaction is
confirmed in writing to the address of record by giving details of the purchase
or redemption.

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<PAGE> 209

SUSPENSION OF OFFERING. The Trust reserves the right to withdraw all or any part
of the offering made by this Prospectus, and the Trust or the Distributor may
reject purchase orders. From time to time, the Trust may temporarily suspend the
offering of shares to new investors. During the period of such suspension,
persons who are already shareholders of the Fund may be permitted to continue to
purchase additional shares of the Fund, to have dividends reinvested and to make
redemptions.

SHAREHOLDER RIGHTS. All shares have equal rights with respect to dividends,
assets and liquidation of the Fund and equal, noncumulative voting rights.
Noncumulative voting rights allow the holder or holders of a majority of shares,
voting together for the election of trustees, to elect all the trustees. All
shares will be voted in the aggregate, except when a separate vote by Fund is
required under the Investment Company Act of 1940 (the "1940 Act"). Shares are
fully paid and nonassessable when issued, are transferable without restriction,
and have no preemptive or conversion rights. Under Delaware law, the Trust is
not required to hold shareholder meetings on an annual basis. As required by
law, the Fund will, however, hold shareholder meetings when a sufficient number
of shareholders request a meeting, or as deemed desirable by the Board of
Trustees, for such purposes as electing or removing trustees, changing
fundamental policies or approving an investment management agreement. (For
additional information about shareholder voting rights, see the Statement of
Additional Information.)

- --------------------------------------------------------------------------------
INVESTMENT GLOSSARY
- --------------------------------------------------------------------------------

BORROWING. The Ready Reserves Fund may borrow up to 5% of its total assets. Most
borrowing is intended only as a temporary measure for extraordinary or emergency
purposes, such as to help meet redemption requests, and not for leverage
purposes.

CONCENTRATION. The Ready Reserves Fund may invest more than 25% of its total
assets in the domestic banking industry.

DIVERSIFICATION. As a matter of fundamental policy, the Fund will not purchase
the securities of any issuer if, as a result, more than 5% of its total assets
would be invested in such issuer. In addition, the Fund will not purchase more
than 10% of the outstanding voting securities of any issuer. These limitations
do not apply to U.S. Government securities or to government agency or
instrumentality securities.

ILLIQUID SECURITIES. The Ready Reserves Fund may invest up to 10% of its net
assets in illiquid securities. Illiquid securities are those securities that are
not readily marketable, including restricted securities and repurchase
obligations maturing in more than seven days.

REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. Repurchase
agreements are instruments under which the Fund acquires ownership of a
security, and the seller, a broker-dealer or a bank agrees to repurchase the
security at a mutually agreed upon time and price. The repurchase agreement
serves to fix the yield of the security during the Fund's holding period. The
Fund currently intends to enter into repurchase agreements only with member
banks of the Federal Reserve System or with primary dealers in U.S. Government
securities. In all cases, the Adviser, subject to the supervision of the Board
of Trustees, must be satisfied with the creditworthiness of the seller before
entering into a repurchase agreement. In the event of the bankruptcy or other
default of the seller of a repurchase agreement, the Fund could incur expenses
and delays enforcing its rights under the agreement, and experience a decline in
the value of the underlying securities and loss of income. Repurchase

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<PAGE> 210

agreements maturing in more than seven days, together with any securities that
are restricted as to disposition under the federal securities laws or are
otherwise considered to be illiquid, will not exceed 10% of the Fund's net
assets.

SECTION 4(2) PAPER. The Fund may invest in commercial paper issued in reliance
upon the so-called "private placement" exemption from registration afforded by
Section 4(2) of the Securities Exchange Act of 1933 ("Section 4(2) paper").
Section 4(2) paper is restricted as to disposition under the Federal securities
laws, and generally is sold to institutional investors such as the Fund. Any
resale by the purchaser must be in an exempt transaction. Section 4(2) paper
normally is resold to other institutional investors through or with the
assistance of the issuer or investment dealers who make a market in the Section
4(2) paper, thus providing liquidity. The Adviser considers the legally
restricted but readily saleable Section 4(2) paper to be liquid; however,
pursuant to the procedures approved by the Fund's Board of Trustees, if a
particular investment in Section 4(2) paper is not determined to be liquid, that
investment will be included within the limitation on illiquid securities. The
Adviser monitors the liquidity of each investment in Section 4(2) paper on a
continuing basis.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. From time to time, in the ordinary
course of business, the Fund may purchase newly issued securities appropriate
for the Fund on a "when-issued" basis, and may purchase or sell securities
appropriate for the Fund on a "delayed delivery" basis. When-issued or delayed
delivery transactions involve a commitment by the Fund to purchase or sell
particular securities, with payment and delivery to take place at a future date.
These transactions allow the Fund to lock in an attractive purchase price or
yield on a security the Fund intends to purchase. Normally, settlement occurs
within one month of the purchase or sale. During the period between purchase and
settlement, no payment is made or received by the Fund and, for delayed delivery
purchases, no interest accrues to the Fund. Because the Fund is required to set
aside cash or liquid securities at least equal in value to its commitments to
purchase when-issued or delayed delivery securities, the Adviser's ability to
manage the Fund's assets may be affected by such commitments. The Fund will only
make commitments to purchase securities on a when-issued or delayed delivery
basis with the intention of actually acquiring the securities, but it reserves
the right to sell them before the settlement date if it is deemed advisable.

VARIABLE RATE SECURITIES. The Fund may invest in instruments having rates of
interest that are adjusted periodically or that "float" continuously or
periodically according to formulae intended to minimize fluctuation in values of
the instruments ("Variable Rate Securities"). The interest rate on a Variable
Rate Security is ordinarily determined by reference to, or is a percentage of,
an objective standard such as a bank's prime rate, the 90-day U.S. Treasury Bill
rate or the rate of return on commercial paper or bank certificates of deposit.
Generally, the changes in the interest rates on Variable Rate Securities reduce
the fluctuation in the market value of such securities. Accordingly, as interest
rates decrease or increase, the potential for capital appreciation or
depreciation is less than for fixed-rate obligations. Further, the Fund may
invest in Variable Rate Securities that have a demand feature entitling the Fund
to resell the securities to the issuer or a third party at an amount
approximately equal to the principal amount thereof plus accrued interest
("Variable Rate Demand Securities"). As is the case for other Variable Rate
Securities, the interest rate on Variable Rate Demand Securities varies
according to some objective standard intended to minimize fluctuation in the
values of the instruments. Many of these Variable Rate Demand Securities are
unrated, their transfer is restricted by the issuer, and there is little if any
secondary market for the securities. Thus, any inability of the issuers of such
securities to pay on demand could adversely affect the liquidity of these
securities. The Fund determines the maturity of Variable Rate Securities in
accordance with Securities and Exchange Commission rules, which allow the Fund
to consider certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument if they are guaranteed by the U.S.
Government or its agencies, if they have a stated maturity date of one year or
less, or if they have demand features prior to maturity.

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<PAGE> 211

FOR MORE INFORMATION

More information about the Fund is available without charge, upon request,
including the following:

SEMI-ANNUAL/ANNUAL REPORTS

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI contains more detailed information about the Fund. The current SAI has
been filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus, which means that it is part of this Prospectus
for legal purposes.

TO OBTAIN INFORMATION:

BY TELEPHONE
Call: 1-800-635-2886
(In Massachusetts 1-800-635-2840)

BY MAIL
Write to:
WILLIAM BLAIR FUNDS
222 West Adams Street
Chicago, Illinois 60606

STATE STREET BANK AND TRUST COMPANY
(the Fund's Transfer Agent)
P.O. Box 8506
Boston, MA 02266-8506

ON THE INTERNET

Text-only versions of fund documents can be viewed online or downloaded from the
SEC at http://www.sec.gov

William Blair Funds May 1, 2000
Investment Company Act File No.: 811-5344

<PAGE> 212
WILLIAM BLAIR FUNDS
222 WEST ADAMS STREET
CHICAGO, ILLINOIS 60606
(312) 364-8000

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 2000

This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus of William Blair Funds (the "Trust") dated
May 1, 2000. The financial statements for the William Blair Funds for the year
ended December 31, 1998, and the Report of Independent Auditors thereon are
incorporated by reference from the Annual Report to Shareholders dated December
31, 1999. The Prospectus and Annual Report to Shareholders may be obtained
without charge by writing or calling the Trust.

TABLE OF CONTENTS

PAGE

MANAGEMENT OF THE TRUST................................................ B-1
Investment Adviser............................................ B-1
Distributor................................................... B-2
Code of Ethics................................................ B-3
Trustees and Officers......................................... B-3
Brokerage and Fund Transactions............................... B-9

INVESTMENT POLICIES AND RESTRICTIONS................................... B-11

INVESTMENT PRACTICES................................................... B-13
Borrowings.................................................... B-13
Collateralized Obligations.................................... B-13
Derivative Instruments........................................ B-17
Foreign Securities............................................ B-24
Forward Foreign Currency Transactions......................... B-27
Foreign Currency Futures...................................... B-28
High-Yield/High-Risk Securities............................... B-28
Investment Companies.......................................... B-28
Illiquid Securities........................................... B-28
Lending ..................................................... B-29
Repurchase Agreements......................................... B-29
Restricted Securities......................................... B-29
Small Companies............................................... B-30
Warrants ..................................................... B-30
When-Issued or Delayed Delivery Transactions.................. B-30

ADDITIONAL INFORMATION ABOUT SHARE CLASSES............................. B-30
Purchase of Shares--Alternative Purchase Arrangements......... B-30
Distribution Fees............................................. B-32
Shareholder Service Fees...................................... B-32
Summary of Ongoing Fees for Class A Shares.................... B-32
Summary of Ongoing Fees for Class B Shares.................... B-32
Summary of Ongoing Fees for Class C Shares.................... B-32
Summary of Ongoing Fees for Class N Shares.................... B-32
Summary of Ongoing Fees for Class I Shares.................... B-33

<PAGE> 213

Initial Sales Charge Alternative--Class A Shares.............. B-33
Deferred Sales Charge Alternative--Class B Shares............. B-34
Purchase of Class C Shares.................................... B-34
Purchase of Class N and Class I Shares........................ B-35
Fees Paid by Distributor to Service Firms..................... B-35
Class A Shares................................................ B-35
Class B Shares................................................ B-35
Class C Shares................................................ B-36
Class N Shares................................................ B-36
General ..................................................... B-36
Redemptions................................................... B-37
Special Redemptions........................................... B-37
Contingent Deferred Sales Charge--Large Order
NAV Purchase Privilege..................................... B-38
Contingent Deferred Sales Charge--Class B Shares.............. B-38
Contingent Deferred Sales Charge--Class C Shares.............. B-38
Contingent Deferred Sales Charge--General..................... B-39
Class A Shares--Combined Purchases............................ B-39
Class A Shares--Letter of Intent.............................. B-39
Class A Shares--Cumulative Discount........................... B-40
Class A Shares--Availability of Quantity Discounts............ B-40
Exchange Privilege............................................ B-40

GENERAL TRUST INFORMATION.............................................. B-41
Determination of Net Asset Value.............................. B-41
Performance................................................... B-41
Historical Performance........................................ B-41
Tax Status.................................................... B-47
Retirement Plans.............................................. B-48
Independent Auditors.......................................... B-49
Legal Counsel................................................. B-49
Custodian..................................................... B-50
Transfer Agent Services....................................... B-50
Reports to Shareholders....................................... B-50

SHAREHOLDER RIGHTS..................................................... B-50

INVESTMENT CRITERIA.................................................... B-50

TRUST HISTORY.......................................................... B-52

FINANCIAL INFORMATION OF THE FUND...................................... B-52

APPENDIX A - DESCRIPTION OF MONEY MARKET INSTRUMENTS................... A-1

APPENDIX B - RATINGS OF DEBT OBLIGATIONS............................... B-1

<PAGE> 214
MANAGEMENT OF THE TRUST
- --------------------------------------------------------------------------------

INVESTMENT ADVISER. As stated in the Prospectus, William Blair & Company, L.L.C.
("Adviser") is the Trust's investment adviser and manager. Pursuant to an
investment advisory and management agreement, the Adviser acts as each Fund's
adviser, manages its investments, administers its business affairs, furnishes
office facilities and equipment, provides clerical, bookkeeping and
administrative services, provides shareholder and information services and
permits any of its principals or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions. In addition to
the management advisory fee, each portfolio pays the expenses of its operations,
including a portion of the Trust's general administrative expenses, allocated on
the basis of the Fund's net asset value. Expenses that will be borne directly by
the Funds include, but are not limited to, the following: the fees and expenses
of independent auditors, counsel, custodian and transfer agent, costs of reports
and notices to shareholders, stationery, printing, postage, costs of calculating
net asset value, brokerage commissions or transaction costs, taxes, registration
fees, the fees and expenses of qualifying each Fund and its shares for
distribution under Federal and state securities laws and membership dues in the
Investment Company Institute or any similar organization.

The advisory agreement for a Fund continues in effect from year to year for so
long as its continuation is approved at least annually (a) by a majority of the
trustees who are not parties to such agreement or interested persons of any such
party except in their capacity as trustees of the Trust and (b) by the
shareholders of the Fund or the Board of Trustees. The agreement may be
terminated at any time upon 60 days' notice by either party; the Fund may so
terminate the agreement either by vote of the Board of Trustees or by majority
vote of the outstanding shares of the affected portfolio. The agreement may also
be terminated at any time either by vote of the Board of Trustees or by majority
vote of the outstanding voting shares of the subject portfolio if the Adviser
were determined to have breached the agreement. The agreement will terminate
automatically upon assignment. The agreement provides that the Adviser shall not
be liable for any error of judgment or of law, or for any loss suffered by the
Fund in connection with the matters to which the agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its obligations and duties, or by
reason of its reckless disregard of its obligations and duties under the
agreement.

Upon termination of the agreement and when so requested by the Adviser, the
Trust will refrain from using the name "William Blair" in its name or in its
business in any form or combination.

For the services and facilities furnished to each portfolio, the Trust pays the
Adviser an advisory fee, which is accrued daily and paid monthly on the first
business day of the following month. The Growth Fund pays an advisory fee at a
rate of .75% of the portfolio's average daily net assets. For the fiscal years
ended December 31, 1999, 1998 and 1997, the Adviser received fees of $5,616,635,
$4,861,435 and $4,093,417, respectively.

The Tax-Managed Growth Fund pays an advisory fee at a rate of .80% of the
portfolio's average daily net assets. The Adviser has entered into an agreement
with the Trust to cap the Fund's Class I share expenses at 1.11% until at least
April 30, 2001; the Adviser may continue to waive fees voluntarily thereafter.
For the Fund's Class A, B and C shares, the expenses will be capped at 1.11%
plus any distribution and/or shareholder services fees.

The Large Cap Growth Fund pays an advisory fee at a rate of .80% of the
portfolio's average daily net assets. The Adviser has entered into an agreement
with the Trust to cap the Fund's Class I share expenses at 1.11% until at least
April 30, 2001; the Adviser may continue to waive fees voluntarily thereafter.
For the Fund's Class A, B and C shares, the expenses will be capped at 1.11%
plus any distribution and/or shareholder services fees.

The Small Cap Growth Fund pays an advisory fee at a rate of 1.10% of the
portfolio's average daily net assets. The Adviser has entered into an agreement
with the Trust to cap the Fund's Class I share expenses at 1.35% until at least
April 30, 2001; the Adviser may continue to waive fees voluntarily thereafter.
For the Fund's Class A, B and C shares, the expenses will be capped at 1.35%
plus any distribution and/or shareholder services fees.

The International Growth Fund pays an advisory fee at a rate of 1.10% of the
first $250 million of average daily net assets plus 1.00% of average daily net
assets over $250 million. For the services and facilities furnished during the

B-1
<PAGE> 215

fiscal years ended December 31, 1999, 1998 and 1997, the Adviser received fees
of $2,068,002, $1,557,766 and $1,351,263, respectively.

The Emerging Markets Growth Fund pays an advisory fee at a rate of 1.40% of the
portfolio's average daily net assets. The Adviser voluntarily has agreed to
reimburse the portfolio during its first year of operation should all operating
expenses, including the compensation of the Adviser but excluding taxes,
interest, extraordinary expenses and brokerage commissions or transaction costs,
exceed 2.25% of average daily net assets of the portfolio. For the services and
facilities furnished during the fiscal period from the portfolio's incorporation
on May 1, 1998 to December 31, 1998, the Adviser received fees of $34,835. The
Adviser voluntarily agreed to reimburse the portfolio during its first year of
operation should all operating expenses, including the compensation of the
Adviser but excluding taxes, interest, extraordinary expenses and brokerage
commissions or transaction costs, exceed 2.25% of average daily net assets of
the portfolio. The Adviser has entered into an agreement with the Fund to cap
the Fund's Class I shares expenses at 1.81% until at least April 30, 2001; the
Adviser may continue to waive fees voluntarily thereafter. For the Fund's Class
A, B and C shares, the expenses will be capped at 1.81% plus any distribution
and/or shareholder services fees.

The Disciplined Large Cap Fund pays an advisory fee at a rate of .80% of the
portfolio's average daily net assets. The Adviser has entered into an agreement
with the Trust to cap the Fund's Class B share's expenses at 1.00% until at
least April 30, 2001; the Adviser may continue to waive fees voluntarily
thereafter. For the Fund's Class A, B and C shares, the expenses will be capped
at 1.00% plus any distribution and/or shareholder services fees.

The Value Discovery Fund pays an advisory fee at a rate of 1.15% of the
portfolio's average daily net assets. For services and facilities furnished to
the portfolio pursuant to the advisory agreement during the fiscal years 1999,
1998 and 1997 the Trust paid $513,144 (after the waiver of $14,075), $442,942
and $241,689, respectively. The Adviser has entered into an agreement with the
Fund to cap the Fund's Class I share expenses at 1.39% until at least April 30,
2001; the Adviser may continue to waive fees voluntarily thereafter. For the
Fund's Class A, B and C shares, the expenses will be capped at 1.39% plus any
distribution and/or shareholder services fees.

The Income Fund pays an advisory fee at a rate of .25% of the first $250 million
of average daily net assets plus .20% of average daily net assets over $250
million plus 5% of the gross income earned by the portfolio. For the services
and facilities furnished to the portfolio pursuant to the advisory agreement
during the fiscal years ended December 31, 1999, 1998 and 1997, the Fund paid
$1,082,218, $1,046,049 and $918,833, respectively.

The Ready Reserves Fund pays an advisory fee at a rate of .28% of the first $250
million of average daily net assets, plus .25% of the next $250 million of
average daily net assets, plus .23% of the next $2 billion of average daily net
assets, plus .20% of the average daily net assets over $2.5 billion. Prior to
January 1, 2000, the Ready Reserves Fund paid an advisory fee at a rate of .625%
of the first $250 million of average daily net assets, plus .60% of the next
$250 million of average daily net assets, plus .575% of the next $2 billion of
average daily net assets, plus .55% of the average daily net assets over $2.5
billion. For the services and facilities furnished to the portfolio pursuant to
the advisory agreement during the fiscal years ended December 31, 1999, 1998 and
1997, the Adviser received fees of $6,564,500, $6,215,491 and $5,236,627,
respectively.

The Adviser has agreed to reimburse the Trust should all operating expenses of
the Growth Fund, Income Fund or Ready Reserves Fund, including the compensation
of the Adviser but excluding taxes, distribution and shareholder services fees,
interest, extraordinary expenses and brokerage commissions or transaction costs,
exceed 1.50% of the first $30 million of average net assets of the portfolio and
1.00% of average net assets over $30 million of the portfolio on an annual
basis.

DISTRIBUTOR. Pursuant to separate Underwriting and Distribution Agreements,
William Blair & Company, L.L.C. also is the principal underwriter and
distributor ("Distributor") for shares of the Trust and acts as agent of the
Trust in the sale of its shares.

The Distribution Agreement continues in effect from year to year so long as such
continuance is approved for each class at least annually by a vote of the Board
of Trustees of the Trust, including the Trustees who are not interested

B-2
<PAGE> 216
persons of the Trust and who have no direct or indirect financial interest in
the agreement. Each agreement automatically terminates in the event of its
assignment and may be terminated for a class at any time without penalty by a
Fund or by the Distributor upon 60 days' notice. Termination by the Trust with
respect to a class may be by vote of a majority of the Board of Trustees, or a
majority of the Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the agreement, or a "majority
of the outstanding voting securities" of the class of a Fund, as defined under
the 1940 Act. The agreement may not be amended for a class to increase the fee
to be paid by a Fund with respect to such class without approval by a majority
of the outstanding voting securities of such class of the Fund and all material
amendments must in any event be approved by the Board of Trustees in the manner
described above with respect to the continuation of the agreement.

Messrs. Balkin, Barber, Brewer, Fischer, Fuller, Greig, Hanig, Jancosek,
Jostrand, Kaplan, Kayser, Kirtman, Kleczka, Ms. Lash, Myer, Ms. Seitz, Sullivan
and Urbina, Ms. Garavalia and Ms. Gassmann, who are trustees or officers of the
Fund, are also principals or employees of the Adviser/Distributor as indicated
under "Trustees and Officers."

The Adviser/Distributor is a limited liability company, the affairs of which are
controlled by all its principals, none of whom owns more than 25% of the firm.
The Chief Executive Officer of the firm is E. David Coolidge, III and the
Executive Committee is comprised of Rocky Barber, E. David Coolidge, III,
Richard D. Gottfred, John P. Kayser, Richard P. Kiphart, Albert J. Lacher,
Joseph F. LaManna and James D. McKinney.

CODE OF ETHICS. The Trust and Adviser/Distributor have adopted a joint Code of
Ethics (the "Code") in accordance with Rule 17j-1 under the Investment Company
Act of 1940 (the "1940 Act"). The Code allows access persons to purchase and
sell securities for their own accounts, subject to industry standard reporting
requirements and trading restrictions. The Code requires that such persons,
among other things, pre-clear their securities transactions, with certain
limited exceptions. The Code also bans investment personnel from acquiring any
securities in an initial public offering. The Code prohibits all persons subject
to the Code from purchasing or selling any security if such person knows or
reasonably should know at the time of the transaction that the security was
being purchased or sold or was being considered for such purchase of sale by a
Fund. Finally, the Code provides for trading "black out" periods of seven
calendar days for portfolio managers who may not trade in securities which have
been purchased or sold by any mutual fund or other account managed by the
portfolio manager. The foregoing description is qualified in its entirety by the
Code, a copy of which has been filed with the Securities and Exchange
Commission.

TRUSTEES AND OFFICERS. The trustees and officers of the Trust, their birthdates,
their principal occupations during the last five years, their affiliations, if
any, with William Blair & Company, L.L.C. and other significant affiliations are
set forth below. Unless otherwise noted, the address of each officer and
trustee is 222 West Adams Street, Chicago, Illinois 60606.

CONRAD FISCHER (04/29/34),* Chairman of the Board and Trustee; Principal,
William Blair & Company, L.L.C.; Trustee Emeritus, Chicago Child Care Society, a
non-profit organization, and Investment Committee, Kalamazoo College.

J. GRANT BEADLE (12/16/32), (1)(2)(3) Trustee; Retired Chairman and Chief
Executive Officer, Union Special Corporation, industrial sewing machine
manufacturer; Retired Associate Director, Northwestern University Institute for
Learning Sciences; Oliver Products Company, Batts, Inc. and Woodward Governor
Company.

THEODORE A. BOSLER (12/02/34), (1)(2)(3) Trustee; Retired Principal and Vice
President, Lincoln Capital Management; Director, Thresholds, a psychiatric
recovery center, and Institute of Chartered Financial Analysts.

JOHN P. KAYSER (08/21/49),* Trustee; Vice President of the Trust; Principal,
William Blair & Company, L.L.C.; Director, DuPage Children's Museum.

ANN P. MCDERMOTT (10/24/39), (1)(2)(3) Trustee; Trustee, Rush Presbyterian St.
Luke's Medical Center; Women's Board, Rush Presbyterian St. Luke's Medical
Center; Honorary

B-3
<PAGE> 217
Director, Visiting Nurse Association; Director, Presbyterian Homes; Northwestern
University, Women's Board; University of Chicago, Women's Board; Director,
Washington State University Foundation.

JOHN B. SCHWEMM (05/18/34), (1)(2)(3) Trustee; Retired Chairman and Chief
Executive Officer, R.R. Donnelley & Sons Company; Director, USG Corp., and
Walgreen Co.

ROBERT E. WOOD II (05/07/38), (1)(2) Trustee; Retired Executive Vice President,
Morgan Stanley Dean Witter; Chairman, Add-Vision, Inc.; Chairman,
Micro-Combustion, LLC.

ROCKY BARBER (10/20/51), Chief Executive Officer; Principal, William Blair &
Company, L.L.C.; Vice President and Secretary, LaRabida Hospital Foundation;
Past President, Stanford Associates.

MARCO HANIG (01/10/58), President; Associate, William Blair & Company, L.L.C.;
former Senior Vice President, First Chicago NBD; Engagement Manager, Marakon
Associates.

MICHAEL P. BALKIN (03/28/59), Senior Vice President; Principal, William Blair &
Company, L.L.C.

MARK A. FULLER, III (03/11/57), Senior Vice President; Principal, William Blair
& Company, L.L.C.

W. GEORGE GREIG (10/02/52), Senior Vice President; Principal, William Blair &
Company, L.L.C.; former Portfolio Manager, Provident Capital Management;
Manager, Akamai, partnership affiliated with Framlington Investment Management
Limited; Partner, Pilgrim, Baxter & Greig.

JOHN JOSTRAND (03/29/54), Senior Vice President; Principal, William Blair &
Company, L.L.C.

STAN KIRTMAN (09/08/41), Senior Vice President; Portfolio Manager, William Blair
& Company, L.L.C.; former President and CIO, Nikko Global Asset Management.

GLEN KLECZKA (10/19/62), Senior Vice President; Portfolio Manager, William Blair
& Company, L.L.C.; former Partner, Brinson Partners; former Portfolio Manager,
CNA Financial Corp.

GRETCHEN LASH (10/20/53), Senior Vice President; Principal, William Blair &
Company, L.L.C.; former Partner, Lincoln Capital Asset Management.

BENTLEY M. MYER (09/14/46), Senior Vice President; Principal, William Blair &
Company, L.L.C.; Director, Delnor Community Hospital.

MICHELLE SEITZ (07/09/65), Senior Vice President; Principal, William Blair &
Company, L.L.C.

NORBERT TRUDERING (05/02/52), Senior Vice President; Principal, William Blair &
Company, L.L.C.

JAMES S. KAPLAN (10/18/60), Vice President; Associate, William Blair & Company,
L.L.C.; former Vice President, First Union Bank.

TERENCE M. SULLIVAN (01/22/44), Vice President and Treasurer; Associate, William
Blair & Company, L.L.C.

JEFFREY A. URBINA (03/11/55), Vice President; Associate, William Blair &
Company, L.L.C.; former Director of Emerging Market Research and Portfolio
Manager, Van Kampen American Capital.

COLETTE M. GARAVALIA (03/15/61), Secretary; Associate, William Blair & Company,
L.L.C.; former Assistant Vice President; Scudder Kemper Investments.

B-4
<PAGE> 218

JANET V. GASSMANN (01/20/67), Assistant Secretary; Administrative Assistant,
William Blair & Company, L.L.C.; former Administrative Assistant, Shearson
Lehman Brothers, Inc.

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

* Trustees who are interested persons as defined in the 1940 Act.

(1) Member of the Standing Audit Committee. Mr. Schwemm is Chairperson of the
Standing Audit Committee.

(2) Member of the Nominating Committee. J. Grant Beadle is the Chairperson of
the Nominating Committee.

(3) Mr. Beadle, Mr. Bosler, Ms. McDermott and Mr. Schwemm employ the Adviser
to manage assets that they control.

Effective February 1, 1998, trustees who are not affiliated with the Adviser
receive an annual fee of $8,000 plus $3,000 for each meeting attended in person
plus expenses, $1,500 for each meeting by telephone and $3,000 for each
committee meeting held on a different day from a board meeting. Prior to
February 1, 1998, the trustees and officers not affiliated with the Adviser
received an annual fee of $4,000 plus $2,000 for each meeting attended in person
plus expenses. The trustees and officers affiliated with the Adviser received no
compensation from the Trust.

The following table sets forth the compensation earned from the Trust for the
fiscal year ended December 31, 1999 by trustees who are not affiliated with the
Adviser:

<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
BENEFITS ESTIMATED
AGGREGATE ACCRUED ANNUAL
COMPENSATION AS PART OF BENEFITS UPON TOTAL
TRUSTEE FROM THE TRUST TRUST EXPENSES RETIREMENT COMPENSATION
- ------- -------------- -------------- ------------- ------------
<S> <C> <C> <C> <C>
J. Grant Beadle.......................... $24,500 0 0 $24,500
Theodore A. Bosler....................... $24,500 0 0 $24,500
Ann P. McDermott......................... $24,500 0 0 $24,500
John B. Schwemm.......................... $24,500 0 0 $24,500
Robert E. Wood II $ 1,500 $ 1,500
------- -------
$99,500 $99,500
======= =======
</TABLE>

In addition, Mr. Vernon Armour, who retired as a Trustee in October, 1999,
received $23,000 of total compensation for the fiscal year ended December 31,
1999.

The following table provides certain information at ________________, 2000 with
respect to persons known to the Trust to be record holders of 5% or more of the
shares of the following portfolios:

<TABLE>
<CAPTION>
PERCENT OF FUND'S
NAME AND ADDRESS OUTSTANDING
OF RECORD OWNER COMMON STOCK NUMBER OF SHARES
<S> <C> <C>

GROWTH FUND CLASS A

</TABLE>

B-5
<PAGE> 219

<TABLE>
<CAPTION>
PERCENT OF FUND'S
NAME AND ADDRESS OUTSTANDING
OF RECORD OWNER COMMON STOCK NUMBER OF SHARES
<S> <C> <C>

GROWTH FUND CLASS B

GROWTH FUND CLASS C

GROWTH FUND CLASS I

GROWTH FUND CLASS N

VALUE DISCOVERY FUND CLASS A

VALUE DISCOVERY FUND CLASS B

VALUE DISCOVERY FUND CLASS C

</TABLE>

B-6
<PAGE> 220

<TABLE>
<CAPTION>
PERCENT OF FUND'S
NAME AND ADDRESS OUTSTANDING
OF RECORD OWNER COMMON STOCK NUMBER OF SHARES
<S> <C> <C>

VALUE DISCOVERY FUND CLASS I

VALUE DISCOVERY FUND CLASS N

INTERNATIONAL GROWTH CLASS A

INTERNATIONAL GROWTH CLASS B

INTERNATIONAL GROWTH CLASS C

INTERNATIONAL GROWTH CLASS N

EMERGING MARKETS CLASS A

</TABLE>

B-7
<PAGE> 221

<TABLE>
<CAPTION>
PERCENT OF FUND'S
NAME AND ADDRESS OUTSTANDING
OF RECORD OWNER COMMON STOCK NUMBER OF SHARES
<S> <C> <C>

EMERGING MARKETS CLASS B

EMERGING MARKETS CLASS C

EMERGING MARKETS CLASS I

INCOME FUND CLASS A

INCOME FUND CLASS B

INCOME FUND CLASS C

INCOME FUND CLASS I

</TABLE>

B-8
<PAGE> 222
<TABLE>
<CAPTION>
PERCENT OF FUND'S
NAME AND ADDRESS OUTSTANDING
OF RECORD OWNER COMMON STOCK NUMBER OF SHARES
<S> <C> <C>

INCOME FUND CLASS N

</TABLE>

As of February 17, 2000, the Trust's officers and trustees as a group owned (or
held or shared investment or voting power with respect to) 130,779 shares or
1.19% of the International Growth Fund's Class I shares, 168,433 shares or 4.87%
of the Value Discovery Fund's Class I shares, 13,287 shares or 11.45% of the
Tax-Managed Growth Fund, 22,955 shares or 15.70% of the Large Cap Growth Fund,
115,225 shares or 9.12% of the Small Cap Growth Fund, and 9,982 shares or 6.19%
of the Disciplined Large Cap Fund, 103,360 shares or 22.02% of the Emerging
Markets Growth Fund's Class I shares. As of February 17, 2000, the Trust's
officers and directors as a group did not own more than 1% of the outstanding
shares of any class of shares of any Fund, except as noted above. These figures
do not include shares of the Funds that may be indirectly owned by certain
officers of the Trust as a result of their interest in the William Blair Profit
Sharing Plan.

BROKERAGE AND FUND TRANSACTIONS. Decisions on portfolio transactions (including
the decision to buy or sell, the appropriate price, allocation of brokerage, use
of a broker as agent or dealer as principal and negotiation of commissions)
normally are made by the Adviser. In purchasing and selling portfolio
securities, the Trust seeks to obtain the most favorable overall result, taking
into account the net price, the method of execution and research services
provided by the broker. Such research services include economic forecasts and
analytical, narrative and statistical reports on industries and companies for
consideration by the Trust and the Adviser's other clients.

Portfolio transactions may increase or decrease the return of a Fund depending
upon the Adviser's ability to correctly time and execute such transactions. A
portfolio turnover rate for any year is determined by dividing the lesser of
sales or purchases (excluding in either case cash equivalents, such as
short-term corporate notes) by the portfolio's monthly average net assets and
multiplying by 100 (with all securities with maturities and expirations of one
year or less excluded from the computation). The Fund's turnover rate will also
vary from year to year depending on market conditions. Since the Ready Reserves
Fund's assets are invested in securities with short (less than one year)
effective maturities, its portfolio will turn over many times a year. Such
securities, however, are excluded from the Securities and Exchange Commission's
required portfolio turnover rate calculations, resulting in no portfolio
turnover rate for reporting purposes.

Selection of a broker for a particular portfolio transaction depends on many
factors, some of which are subjective and which include the net price, the
confidentiality, reliability, integrity, the size and nature of the transaction
and the market in which it is to occur and any research or other services that
the broker has provided. The Adviser determines the overall reasonableness of
brokerage commissions and of premiums and discounts on principal transactions
(which do not involve commissions) by review of comparable trades for the
Adviser's other clients and in the market generally. If more than one broker is
believed to be equally qualified to effect a portfolio transaction, the Adviser
may assign the transaction to a broker that has furnished research services, but
the Adviser has no agreement, formula or policy as to allocation of brokerage.
The Adviser may place orders with a broker on the basis that the broker has or
has not sold shares of a Fund.

The Trust may pay to brokers that provide research services to the Adviser a
commission higher than another broker might have charged if it is determined
that the commission is reasonable in relation to the value of the brokerage and
research services that are provided, viewed in terms of either the particular
transaction or the Adviser's overall responsibility to its advisory accounts.
The extent to which such commissions exceed commissions solely for execution
cannot be determined, but such research services, which are involved in
portfolio transactions for the Trust and for the Adviser's other advisory
accounts, can be of benefit to both the Trust and such other accounts.

B-9
<PAGE> 223

The value of research services that are provided by brokers who handle portfolio
transactions for the Trust cannot be precisely determined and such services are
supplemental to the Adviser's own efforts, which are undiminished thereby. The
Adviser does not believe that its expenses are reduced by reason of such
services, which benefit the Trust and the Adviser's other clients. Transactions
in over-the-counter securities are generally executed as principal trades with
primary market makers, except where it is believed that a better combination of
price and execution could otherwise be obtained. The Adviser receives research
products and services from broker/dealers and third parties in the form of
written reports on individual companies and industries of particular interest to
the Adviser, general economic conditions, pertinent Federal and State
legislative developments and changes in accounting practices; direct access by
telephone or meetings with leading research analysts throughout the financial
community, corporate management personnel, and industry experts; comparative
performance and evaluation and technical measurement services for issuers,
industries and the market as a whole; access to and monitoring of equity
valuation models; and services from recognized experts on investment matters of
particular interest to the Adviser.

The Growth Fund paid total brokerage fees of $905,779, $515,832 and $422,714 in
1999, 1998 and 1997, respectively. None of these brokerage fees were paid to a
broker that was an affiliated person of the Trust or to a broker of which an
affiliated person was an affiliated person of the Trust or of the Adviser. The
increase in brokerage fees from year to year is in proportion to the change in
the Fund's asset size.

The International Growth Fund paid brokerage fees of $1,181,973, $889,064 and
$820,267 in 1999, 1998 and 1997, respectively. None of these brokerage fees were
paid to a broker that was an affiliated person of the Trust or to a broker of
which an affiliated person was an affiliated person of the Trust or of the
Adviser.

The Emerging Markets Growth Fund paid brokerage fees of $79,199 in 1999 and
$60,161 in 1998. None of these brokerage fees were paid to a broker that was an
affiliated person of the Trust or to a broker of which an affiliated person was
an affiliated person of the Trust or the Adviser.

The Value Discovery Fund paid total brokerage fees of $114,434 in 1999, $103,906
in 1998 and $35,216 in 1997. None of these brokerage fees were paid to a broker
that was an affiliated person of the Trust or to a broker of which an affiliated
person was an affiliated person of the Trust or of the Adviser.

The Tax-Managed Growth Fund, the Large Cap Growth Fund, the Small Cap Growth
Fund and the Disciplined Large Cap Fund paid brokerage fees of $600, $822,
$2,376 and $941 for the period from December [27], 1999 (Commencement of
Operations) to December 31, 1999, respectively.

No brokerage commissions were paid by the Tax-Managed Growth Fund, the Large Cap
Growth Fund, the Small Cap Growth Fund and the Disciplined Large Cap Fund during
the last fiscal year ended December 31, 1998 because the Funds did not commence
operations until December 27, 1999.

Purchases and sales of portfolio securities for the Income Fund and the Ready
Reserves Fund usually are principal transactions, either directly with the
issuer or with an underwriter or market maker, with no brokerage commissions
paid by the portfolio. No brokerage commissions were paid by the Income Fund or
the Ready Reserves Fund during the fiscal years ended December 31, 1999, 1998
and 1997. Purchases from underwriters will include a commission or concession
paid by the issuer to the underwriter and purchases from dealers serving as
market makers will include the spread between the bid and asked prices. The
primary consideration in the allocation of transactions is prompt execution of
orders in an effective manner at the most favorable price.

Generally, the investment decisions for the Funds are reached independently from
those for other accounts managed by the Adviser. However, some other accounts
may make investments in the same type of instruments or securities as the Funds
at the same time as the Funds. In those instances where the Funds and another
client of the Adviser trade in the same type of instrument at the same time, the
Adviser has established allocation procedures that ensure an equitable
allocation of such trades among its various clients and the Funds. In some cases
this procedure may affect the size or price of the position obtainable for the
Funds. However, it is the opinion of the Board of Trustees that the benefits
available because of the Adviser's organization outweigh any disadvantages that
may arise from exposure to simultaneous transactions.

B-10
<PAGE> 224
No portfolio transactions are executed for the Funds with or through the Adviser
or any affiliated broker-dealer of the Adviser. The Funds may purchase
securities from other members of an underwriting syndicate of which the Adviser
or an affiliated broker-dealer is a participant, but only under conditions set
forth in applicable rules of the Securities and Exchange Commission and in
accordance with procedures adopted and reviewed periodically by the Board of
Trustees.

INVESTMENT POLICIES AND RESTRICTIONS

The Trust has adopted certain fundamental investment restrictions for each
portfolio that, along with the Fund's investment objective, can not be changed
without approval by holders of a "majority of the outstanding voting securities"
of the Fund, which is defined in the 1940 Act to mean the lesser of (a) 67% of
the shares of the portfolio at a meeting where more than 50% of the outstanding
voting shares of the Fund are present in person or by proxy; or (b) more than
50% of the outstanding voting shares of the Fund. All percentage restrictions on
investments apply at the time the investment is made and shall not be considered
to violate the limitations unless, immediately after or as a result of the
investment, a violation of the restriction occurs. There can be no assurance
that a portfolio will meet its investment objective.

Except as otherwise noted, the following fundamental investment restrictions
apply to each Fund:

CONCENTRATION. Each Fund except the Ready Reserves Fund:

The Fund will not make investments that will result in the concentration (as
that term is defined in the 1940 Act, any rule or order thereunder, or SEC staff
interpretation thereof) of its investments in the securities of issuers
primarily engaged in the same industry, provided that this restriction does not
limit the Fund from investing in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or in tax exempt securities.

This restriction also does not limit the Fund from investing in instruments,
such as repurchase agreements, secured by obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities.

Ready Reserves Fund: The Fund will not make investments that will result in the
concentration (as that term is defined in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof) of its investments in the
securities of issuers primarily engaged in the same industry; provided, however,
that the Fund reserves the freedom of action to invest up to 100% of its total
assets in securities or instruments issued by domestic banks, which include
certificates of deposit, time deposits, bankers' acceptances and repurchase
agreements.

SENIOR SECURITIES AND BORROWING. The Fund may not borrow money or issue senior
securities, except as the 1940 Act, any rule or order thereunder, or SEC staff
interpretation thereof may permit.

UNDERWRITING. The Fund may not underwrite the securities of other issuers,
except that the Fund may engage in transactions involving the acquisition,
disposition, or resale of its portfolio securities under circumstances where it
may be considered to be an underwriter under the Securities Act of 1933.

REAL ESTATE. The Fund may not purchase or sell real estate unless the real
estate is acquired as a result of ownership of securities or other instrument;
and provided that this restriction does not prevent the Fund from investing in
issuers that invest, deal, or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real estate or
interest therein.

COMMODITIES. The Fund may not purchase or sell physical commodities unless
acquired as a result of ownership of securities or other instrument; however,
this restriction shall not prevent the Fund from engaging in transactions
involving futures contracts, options or other derivative instruments, or
investing in securities that are secured by physical commodities.

B-11
<PAGE> 225
LENDING. The Fund may not make loans, provided that this restriction does not
prevent the Fund from purchasing debt obligations, entering into repurchase
agreements, loaning its assets to broker/dealers or institutional investors, and
investing in loans, including assignments and participation interests.

DIVERSIFICATION.

Growth Fund, Tax-Managed Growth Fund, Large Cap Growth Fund, Small Cap Growth
Fund and Disciplined Large Cap Fund.

The Fund will operate as an open-end, diversified, management type
investment company, as defined in the 1940 Act. The Fund will not
purchase any security if doing so would cause more than 10% of the
voting securities of the issuer to be held by the Fund.

International Growth Fund:

The Fund may not invest more than 5% of the value of its total assets
in the securities of any one issuer or purchase more than 10% of the
outstanding voting securities, or any class of securities, of any one
issuer. For purposes of this restriction, all outstanding debt
securities of an issuer are considered as one class and all preferred
stock of an issuer is considered as one class. (This restriction does
not apply to obligations issued or guaranteed by the U.S. government,
or its agencies or instrumentalities.)

Emerging Markets Growth Fund and Value Discovery Fund:

The Fund may not with respect to 75% of its total assets, purchase the
securities of any issuer (except securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities) if, as a result,
(i) more than 5% of the portfolio's total assets would be invested in
the securities of that issuer or (ii) the portfolio would hold more
than 10% of the outstanding voting securities of that issuer.

Income Fund and Ready Reserves Fund:

The Fund may not purchase securities of any issuer (other than
obligations of, or guaranteed by, the United States Government, its
agencies or instrumentalities) if, as a result, more than 5% of the
value of its total assets would be invested in securities of that
issuer.

The Fund may not purchase more than 10% of any class of securities of
any issuer, except that such restriction shall not apply to securities
issued or guaranteed by the United States Government, its agencies or
instrumentalities. All debt securities and all preferred stocks are
each considered as one class.

The following are each Fund's non-fundamental operating policies, which may be
changed by the Trust's Board of Trustees without shareholder approval.

The Growth Fund, Tax-Managed Growth Fund, Large Cap Growth Fund, Small Cap
Growth Fund, International Growth Fund, Emerging Markets Growth Fund,
Disciplined Large Cap Fund and Value Discovery Fund may not:

(1) Invest in illiquid securities if, as a result of such investment, more
than 15% of its net assets would be invested in illiquid securities.

(2) Sell securities short, unless the portfolio owns or has the right to
obtain securities equivalent in kind and amount to the securities sold
short, or unless it covers such short sale as required by the current
rules and positions of the Securities and Exchange Commission or its
staff and provided that transactions in futures contracts or other
derivative instruments are not deemed to constitute selling securities
short.

B-12
<PAGE> 226
(3) Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions;
and provided that margin deposits in connection with futures contracts
or other derivative instruments shall not constitute purchasing
securities on margin.

The Income Fund may not:

(1) Make short sales of securities or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the
clearance of transactions.

(2) Purchase common stocks, preferred stocks, convertible preferred bonds,
warrants or other equity securities.

(3) Invest in illiquid securities if, as a result of such investment, more
than 15% of its net assets would be invested in illiquid securities.

The Ready Reserves Fund may not:

(1) Make short sales of securities or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the
clearance of transactions.

(2) Invest in illiquid securities if, as a result of such investment, more
than 10% of its net assets would be invested in illiquid securities.

INVESTMENT PRACTICES

The Prospectus describes each Fund's investment objective as well as certain
investment policies and investment techniques that the Fund may employ in
pursuing its investment objective. The following discussion supplements the
discussion contained in the Prospectus, including the Investment Glossary at the
end of the Prospectus. Not all of the Funds may invest in all of the types of
investments listed below.

BORROWINGS. Note: Presently, the Funds only intend to borrow from banks for
temporary or emergency purposes. However, each Fund may borrow money from banks
and make other investments or engage in other transactions permissible under the
1940 Act which may be considered a borrowing (such as mortgage dollar rolls and
reverse repurchase agreements).

COLLATERALIZED OBLIGATIONS. Mortgage-Backed Securities. Collateralized
obligations include mortgage-backed collateralized obligations ("mortgage-backed
securities"). Mortgage-backed securities are securities that directly or
indirectly represent a participation in, or are secured by and payable from,
mortgage loans secured by real property. There currently are three basic types
of mortgage-backed securities: (1) those issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities, such as GNMA (Government
National Mortgage Association), FNMA (Federal National Mortgage Association) and
FHLMC (Federal Home Loan Mortgage Corporation); (2) those issued by private
issuers that represent an interest in or are collateralized by mortgage-backed
securities issued or guaranteed by the U.S. Government or one of its agencies or
instrumentalities; and (3) those issued by private issuers that represent an
interest in or are collateralized by whole mortgage loans or mortgage-backed
securities without a government guarantee but that usually have some form of
private credit enhancement.

The yield characteristics of mortgage-backed securities differ from traditional
debt securities. Among the major differences are that interest and principal
payments are made more frequently, usually monthly, and that principal may be
prepaid at any time because the underlying mortgage loans generally may be
prepaid at any time. As a result, if a portfolio purchases such a security at a
premium, a prepayment rate that is faster than expected will reduce yield to
maturity, while a prepayment rate that is slower than expected will increase
yield to maturity. Conversely, if a portfolio purchases these securities at a
discount, faster than expected prepayments will increase yield to maturity,
while slower than expected prepayments will reduce it.

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Prepayments on a pool of mortgage loans are influenced by a variety of economic,
geographic, social and other factors, including changes in mortgagors' housing
needs, job transfers, unemployment, mortgagors' net equity in the mortgaged
properties and servicing decisions. Generally, however, prepayments on
fixed-rate mortgage loans will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Accordingly,
amounts available for reinvestment by the portfolio are likely to be greater
during a period of declining interest rates and, as a result, are likely to be
reinvested at lower interest rates than during a period of rising interest
rates. Mortgage-backed securities may decrease in value as a result of increases
in interest rates and may benefit less than other fixed income securities from
declining interest rates because of the risk of prepayment.

Guaranteed Mortgage Pass-Through Securities. Mortgage pass-through securities
represent participation interests in pools of residential mortgage loans
originated by United States Governmental or private lenders and guaranteed, to
the extent provided in such securities, by the United States Government or one
of its agencies or instrumentalities. Such securities, which are ownership
interests in the underlying mortgage loans, differ from conventional debt
securities, which provide for periodic payment of interest in fixed amounts
(usually semi-annually) and principal payments at maturity or on specified call
dates. Mortgage pass-through securities provide for monthly payments that are a
"pass-through" of the monthly interest and principal payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans, net
of any fees paid to the guarantor of such securities and the services of the
underlying mortgage loans. The guaranteed mortgage pass-through securities in
which the portfolio will invest will include those issued or guaranteed by GNMA,
FNMA and FHLMC.

GNMA is a wholly owned corporate instrumentality of the United States within the
Department of Housing and Urban Development. The National Housing Act of 1934,
as amended (the "Housing Act"), authorizes GNMA to guarantee the timely payment
of the principal of and interest on certificates ("Ginnie Mae Certificates")
that are based upon and backed by a pool of mortgage loans insured by the
Federal Housing Administration under the Housing Act or Title V of the Housing
Act of 1949 (FHA Loans), or guaranteed by the Veterans' Administration under the
Servicemen's Readjustment Act of 1944, as amended (VA Loans), or by pools of
other eligible mortgage loans. Ginnie Mae Certificates represent a pro rata
interest in one or more pools of eligible mortgage loans. The Housing Act
provides that the full faith and credit of the United States Government is
pledged to the payment of all amounts that may be required to be paid under any
guarantee. In order to meet its obligations under such guarantee, GNMA is
authorized to borrow from the United States Treasury with no limitations as to
amount.

FNMA is a federally chartered and privately owned corporation organized and
existing under the Federal National Mortgage Association Charter Act. FNMA was
originally established in 1938 as a United States Government agency to provide
supplemental liquidity to the mortgage market and was transformed into a
stockholder owned and privately managed corporation by legislation enacted in
1968. FNMA provides funds to the mortgage market primarily by purchasing home
mortgage loans from local lenders, thereby replenishing their funds for
additional lending. FNMA acquires funds to purchase home mortgage loans from
many capital market investors that may not ordinarily invest in mortgage loans
directly, thereby expanding the total amount of funds available for housing.

Each Fannie Mae Certificate will entitle the registered holder thereof to
receive amounts representing the holder's pro rata interest in scheduled
principal payments and interest payments (at such Fannie Mae Certificate's
pass-through rate, which is net of any servicing and guarantee fees on the
underlying mortgage loans) and any principal prepayments, on the mortgage loans
in the pool represented by such Fannie Mae Certificate and such holder's
proportionate interest in the full principal amount of any foreclosed or
otherwise finally liquidated mortgage loan. The full and timely payment of
principal of and interest on each Fannie Mae Certificate will be guaranteed by
FNMA, which guarantee is not backed by the full faith and credit of the United
States Government. FNMA has limited rights to borrow from the United States
Treasury.

FHLMC is a corporate instrumentality of the United States created pursuant to
the Emergency Home Finance Act of 1970, as amended. FHLMC was established
primarily for the purpose of increasing the availability of mortgage credit for
the financing of needed housing. The principal activity of FHLMC currently
consists of the purchase of first lien, conventional, residential mortgage loans
and participation interests in such mortgage loans and the resale of the
mortgage loans so purchased in the form of mortgage securities, primarily
Freddie Mac Certificates.

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FHLMC guarantees to each registered holder of a Freddie Mac Certificate the
timely payment of interest at the rate provided for by such Freddie Mac
Certificate, whether or not received. FHLMC also guarantees to each holder of a
Freddie Mac Certificate ultimate collection of all principal of the related
mortgage loans, without any offset or deduction, but does not always guarantee
the timely payment of scheduled principal. FHLMC may remit the amount due on
account of its guarantee of collection of principal at any time after default on
an underlying mortgage loan, but not later than 30 days following (i)
foreclosure sale, (ii) payment of a claim by any mortgage insurer or (iii) the
expiration of any right of redemption, whichever occurs last, but in any event
no later than one year after demand has been made upon the mortgagor for
accelerated payment of principal. The obligations of FHLMC under its guarantee
are obligations solely of FHLMC and are not backed by the full faith and credit
of the United States Government. FHLMC has limited rights to borrow from the
United States Treasury.

Private Mortgage Pass-Through Securities. Private mortgage pass-through
securities ("private pass-throughs") are structured similarly to the Ginnie Mae,
Fannie Mae and Freddie Mac mortgage pass-through securities described above and
are issued by originators of and investors in mortgage loans, including savings
and loan associations, mortgage banks, commercial banks, investment banks and
special purpose subsidiaries of the foregoing. Private pass-throughs are usually
backed by a pool of conventional fixed rate or adjustable rate mortgage loans.
Since private pass-throughs typically are not guaranteed by an entity having the
credit status of GNMA, FNMA or FHLMC, such securities generally are structured
with one or more types of credit enhancement. See "Types of Credit Support,"
below.

Collateralized Mortgage Obligations and Multiclass Pass-Through Securities.
Collateralized mortgage obligations, or "CMOs," are debt obligations
collateralized by mortgage loans or mortgage pass-through securities. Typically,
CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac Certificates,
but also may be collateralized by whole loans or private pass-throughs (such
collateral collectively hereinafter referred to as "Mortgage Assets").
Multiclass pass-through securities are equity interests in a trust composed of
Mortgage Assets. Payments of principal of and interest on the Mortgage Assets
and any reinvestment income thereon provide the funds to pay debt service on the
CMOs or make scheduled distributions on the multiclass pass-through securities.
CMOs may be issued by agencies or instrumentalities of the United States
Government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.

In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMOs, often referred to as a "tranche," is issued at a specific fixed
or floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semi-annual basis. The principal of and interest on the Mortgage Assets may
be allocated among the several classes of a series of a CMO in innumerable ways.
In a common structure, payments of principal, including any principal
prepayments, on the Mortgage Assets are applied to the classes of the series of
a CMO in the order of their respective stated maturities or final distribution
dates, so that no payment of principal will be made on any class of CMOs until
all other classes having an earlier stated maturity or final distribution date
have been paid in full.

Stripped Mortgage-Backed Securities. Stripped mortgage-backed securities
("SMBS") are derivative multiclass mortgage securities. SMBS may be issued by
agencies or instrumentalities of the United States Government, or by private
originators of, or investors in, mortgage loans, including savings and loan
associations, mortgage banks, commercial banks, investment banks and special
purpose subsidiaries of the foregoing.

SMBS are usually structured with two classes that receive different proportions
of the interest and principal distributions on a pool of Mortgage Assets. A
common type of SMBS will have one class receiving some of the interest and most
of the principal from the Mortgage Assets, while the other class will receive
most of the interest and the remainder of the principal. In the most extreme
case, one class will receive all the interest (the interest-only or "IO" class),
while the other class will receive all the principal (the principal-only or "PO"
class). The yield to maturity on an IO class is extremely sensitive to the rate
of principal payments (including prepayments) on the related underlying Mortgage
Assets and a rapid rate of principal payments may have a material adverse effect
on the

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portfolio's yield to maturity. If the underlying Mortgage Assets experience
greater than anticipated prepayments of principal, the portfolio may fail to
fully recoup its initial investment in these securities.

Although SMBS are purchased and sold by institutional investors through several
investment banking firms acting as brokers or dealers, these securities were
only recently developed and, accordingly, may have less liquidity than other
securities. The portfolio will invest only in IO and PO class mortgage
obligations collateralized by securities guaranteed by the United States
Government.

Types of Credit Support. Mortgage-backed and asset-backed securities are often
backed by a pool of assets representing the obligations of a number of different
parties. To lessen the effect of failures by obligors on underlying assets to
make payments, such securities may contain elements of credit support. Such
credit support falls into two categories: (i) liquidity protection and (ii)
protection against losses resulting from ultimate default by an obligor on the
underlying assets. Liquidity protection refers to the provision of advances,
generally by the entity administering the pool of assets, to ensure that the
receipt of payments on the underlying pool occurs in a timely fashion.
Protection against losses resulting from ultimate default ensures ultimate
payment of the obligations on at least a portion of the assets in the pool. Such
protection may be provided through guarantees, insurance policies or letters of
credit obtained by the issuer or sponsor from third parties, through various
means of structuring the transaction or through a combination of such
approaches.

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

Asset-Backed Securities. The securitization techniques used to develop
mortgage-backed securities are now being applied to a broad range of assets.
Through the use of trusts and special purpose corporations, various types of
assets, primarily automobile and credit card receivables, are being scrutinized
in pass-through structures similar to the mortgage pass-through structures
described above or in a pay-through structure similar to the CMO structure. The
Income Fund may invest in these and other types of asset-backed securities that
may be developed in the future.

As with mortgage-backed securities, the yield characteristics of asset-backed
securities differ from traditional debt securities. As with mortgage-backed
securities, asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties and use similar
credit enhancement techniques. See "Mortgage-Backed Securities," above. In
general, however, the collateral supporting asset-backed securities is of
shorter maturity than mortgage loans and is less likely to experience
substantial prepayments. Although certain of the factors that affect the rate of
prepayments on mortgage-backed securities also affect the rate of prepayments on
asset-backed securities, during any particular period, the predominant factors
affecting prepayment rates on mortgage-backed securities and asset-backed
securities may be different.

Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities do not have the benefit
of the same security interest in the related collateral. Credit card receivables
are generally unsecured and the debtors are entitled to the protection of a
number of state and federal consumer credit laws, many of which give such
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the balance due. Most issuers of automobile receivables permit the
services to retain possession of the underlying obligations. If the servicers
were to sell these obligations to another party, there is a risk that the
purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have a
proper security interest in all the obligations

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backing such receivables. Therefore, there is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support payments
on these securities.

Inverse Floaters. The Income Fund may invest in mortgage derivative products
like inverse floating rate debt instruments ("inverse floaters"). The interest
rate on an inverse floater resets in the opposite direction from the market rate
of interest to which the inverse floater is indexed. The income from an inverse
floater may be magnified to the extent that its rate varies by a magnitude that
exceeds the magnitude of the change in the index rate of interest. The higher
the degree of magnification in an inverse floater, the greater the volatility in
its market value. Accordingly, the duration of an inverse floater may exceed its
stated final maturity. The coupon of an inverse floating rate note moves
inversely to the movement of interest rates. In addition, mortgage-backed
inverse floaters will experience approximately the same changes in average lives
and durations that other comparable fixed-rate mortgage-backed bonds do when
prepayments rise and fall with declines and increases in interest rates. In a
rising interest rate environment, the declining coupon coupled with the increase
in the average life can magnify the price decline relative to a fixed-rate
obligation. Conversely, rate declines increase coupon income and gradually
shorten the average life, which tends to amplify the price increase. Inverse
floaters are typically priced based on a matrix.

DERIVATIVE INSTRUMENTS. In General. The Growth Fund, Tax-Managed Growth Fund,
Large Cap Growth Fund, Small Cap Growth Fund, International Growth Fund,
Emerging Markets Growth Fund, Disciplined Large Cap Fund and Value Discovery
Fund may use derivative instruments solely for the purpose of bona fide hedging
or risk management. Derivative instruments are commonly defined to include
securities or contracts whose values depend on (or "derive" from) the value of
one or more other assets, such as securities, currencies, or commodities. These
"other assets" are commonly referred to as "underlying assets."

A derivative instrument generally consists of, is based upon, or exhibits
characteristics similar to OPTIONS or FORWARD CONTRACTS. Options and forward
contracts are considered to be the basic "building blocks" of derivatives. For
example, forward-based derivatives include forward contracts, swap contracts, as
well as exchange-traded futures. Option-based derivatives include privately
negotiated, over-the-counter ("OTC") options (including caps, floors, collars,
and options on forward and swap contracts) and exchange-traded options on
futures. Diverse types of derivatives may be created by combining options or
forward contracts in different ways, and by applying these structures to a wide
range of underlying assets.

An option is a contract in which the "holder" (the buyer) pays a certain amount
("premium") to the "writer" (the seller) to obtain the right, but not the
obligation, to buy from the writer (in a "call") or sell to the writer (in a
"put") a specific asset at an agreed upon price at or before a certain time. The
holder pays the premium at inception and has no further financial obligation.
The holder of an option-based derivative generally will benefit from favorable
movements in the price of the underlying asset but is not exposed to
corresponding losses due to adverse movements in the value of the underlying
asset. The writer of an option-based derivative generally will receive fees or
premiums but generally is exposed to losses due to changes in the value of the
underlying asset.

A forward is a sales contract between a buyer (holding the "long" position) and
a seller (holding the "short" position) for an asset with delivery deferred
until a future date. The buyer agrees to pay a fixed price at the agreed future
date and the seller agrees to deliver the asset. The seller hopes that the
market price on the delivery date is less than the agreed upon price, while the
buyer hopes for the contrary. The change in value of a forward-based derivative
generally is roughly proportional to the change in value of the underlying
asset.

Hedging. The Funds may use derivative instruments to protect against possible
adverse changes in the market value of securities held in, or are anticipated to
be held in, its portfolio. Derivatives may also be used to "lock-in" realized
but unrecognized gains in the value of its portfolio securities. Hedging
strategies, if successful, can reduce the risk of loss by wholly or partially
offsetting the negative effect of unfavorable price movements in the investments
being hedged. However, hedging strategies can also reduce the opportunity for
gain by offsetting the positive effect of favorable price movements in the
hedged investments. To the extent that a hedge matures prior to or after the
disposition of the investment subject to the hedge, any gain or loss on the
hedge will be realized earlier or later than any offsetting gain or loss on the
hedged investment.

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Managing Risk. The Funds may also use derivative instruments to manage the risks
of its portfolio. Risk management strategies include, but are not limited to,
facilitating the sale of portfolio securities, managing the effective maturity
or duration of debt obligations in its portfolio, establishing a position in the
derivatives markets as a substitute for buying or selling certain securities, or
creating or altering exposure to certain asset classes, such as equity, debt, or
foreign securities. The use of derivative instruments may provide a less
expensive, more expedient or more specifically focused way to invest than
"traditional" securities (i.e., stocks or bonds) would.

Exchange and OTC Derivatives. Derivative instruments may be exchange-traded or
traded in OTC transactions between private parties. Exchange-traded derivatives
are standardized options and futures contracts traded in an auction on the floor
of a regulated exchange. Exchange contracts are generally very liquid. The
exchange clearinghouse is the counterparty of every contract. Thus, each holder
of an exchange contract bears the credit risk of the clearinghouse (and has the
benefit of its financial strength) rather than that of a particular
counterparty. OTC transactions are subject to additional risks, such as the
credit risk of the counterparty to the instrument, and are less liquid than
exchange-traded derivatives since they often can only be closed out with the
other party to the transaction.

Risks and Special Considerations. The use of derivative instruments involves
risks and special considerations as described below. Risks pertaining to
particular derivative instruments are described in the sections that follow.

(1) Market Risk. The primary risk of derivatives is the same as the risk of the
underlying assets, namely that the value of the underlying asset may go up or
down. Adverse movements in the value of an underlying asset can expose the Funds
to losses. Derivative instruments may include elements of leverage and,
accordingly, the fluctuation of the value of the derivative instrument in
relation to the underlying asset may be magnified. The successful use of
derivative instruments depends upon a variety of factors, particularly the
ability of the Adviser to predict movements of the securities, currencies, and
commodity markets, which requires different skills than predicting changes in
the prices of individual securities. There can be no assurance that any
particular strategy adopted will succeed. The Adviser's decision to engage in a
derivative transaction will reflect its judgment that the derivative transaction
will provide value to the Funds and their shareholders and is consistent with
the Funds' objectives, investment limitations, and operating policies. In making
such a judgment, the Adviser will analyze the benefits and risks of the
derivative transaction and weigh them in the context of the Funds' entire
portfolio and investment objective.

(2) Credit Risk. The Funds will be subject to the risk that a loss may be
sustained as a result of the failure of a counterparty to comply with the terms
of a derivative instrument. The counterparty risk for exchange-traded derivative
instruments is generally less than for privately negotiated or OTC derivative
instruments, since generally a clearing agency, which is the issuer or
counterparty to each exchange-traded instrument, provides a guarantee of
performance. For privately negotiated instruments, there is no similar clearing
agency guarantee. In all transactions, the Funds will bear the risk that the
counterparty will default, and this could result in a loss of the expected
benefit of the derivative transaction and possibly other losses. The Funds will
enter into transactions in derivative instruments only with counterparties that
the Adviser reasonably believes are capable of performing under the contract.

(3) Correlation Risk. When a derivative transaction is used to completely hedge
another position, changes in the market value of the combined position (the
derivative instrument plus the position being hedged) result from an imperfect
correlation between the price movements of the two instruments. With a perfect
hedge, the value of the combined position remains unchanged for any change in
the price of the underlying asset. With an imperfect hedge, the values of the
derivative instrument and the hedged position are not perfectly correlated.
Correlation risk is the risk that there might be imperfect correlation, or even
no correlation, between price movements of a derivative instrument and price
movements of investments being hedged. For example, if the value of a derivative
instrument used in a short hedge (such as writing a call option, buying a put
option, or selling a futures contract) increased by less than the decline in
value of the hedged investments, the hedge would not be perfectly correlated.
Such a lack of correlation might occur due to factors unrelated to the value of
the investments being hedged, such as speculative or other pressures on the
markets in which these instruments are traded. The effectiveness of hedges using
instruments

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on indices will depend, in part, on the degree of correlation between price
movements in the index and price movements in the investments being hedged.

(4) Liquidity Risk. Derivatives are also subject to liquidity risk. Liquidity
risk is the risk that a derivative instrument cannot be sold, closed out, or
replaced quickly at or very close to its fundamental value. Generally, exchange
contracts are very liquid because the exchange clearinghouse is the counterparty
of every contract. OTC transactions are less liquid than exchange-traded
derivatives since they often can be closed out only with the other party to the
transaction. The Funds might be required by applicable regulatory requirement to
maintain assets as "cover," maintain segregated accounts, and/or make margin
payments when they take positions in derivative instruments involving
obligations to third parties (i.e., instruments other than purchased options).
If the Funds were unable to close out their positions in such instruments, they
might be required to continue to maintain such assets or accounts or make such
payments until the position expired, matured, or was closed out. The
requirements might impair the Funds' ability to sell a portfolio security or
make an investment at a time when it would otherwise be favorable to do so, or
require that the Funds sell a portfolio security at a disadvantageous time. The
Funds' ability to sell or close out a position in an instrument prior to
expiration or maturity depends on the existence of a liquid secondary market or,
in the absence of such a market, the ability and willingness of the counterparty
to enter into a transaction closing out the position. Therefore, there is no
assurance that any derivatives position can be sold or closed out at a time and
price that is favorable to the Funds.

(5) Legal Risk. Legal risk is the risk of loss caused by the legal
unenforceability of a party's obligations under the derivative. While a party
seeking price certainty agrees to surrender the potential upside gain in
exchange for downside protection, the party taking the risk is looking for a
positive payoff. Despite this voluntary assumption of risk, a counterparty that
has lost money in a derivative transaction may try to avoid payment by
exploiting various legal uncertainties about certain derivative products.

(6) Systemic or "Interconnection" Risk. Interconnection risk is the risk that a
disruption in the financial markets will cause difficulties for all market
participants. In other words, a disruption in one market will spill over into
other markets, perhaps creating a chain reaction. Much of the OTC derivatives
market takes place among the OTC dealers themselves, thus creating a large
interconnected web of financial obligations. This interconnectedness raises the
possibility that a default by one large dealer could create losses at other
dealers and destabilize the entire market for OTC derivative instruments.

General Limitations. The use of derivative instruments is subject to applicable
regulations of the SEC, the several options and futures exchanges upon which
they may be traded, the Commodity Futures Trading Commission ("CFTC"), and
various state regulatory authorities. In addition, the Funds' ability to use
derivative instruments may be limited by certain tax considerations.

The Funds have filed a notice of eligibility for exclusion from the definition
of the term "commodity pool operator" with the CFTC and the National Futures
Association, which regulate trading in the futures markets. In accordance with
Rule 4.5 of the regulations under the Commodity Exchange Act ("CEA"), the notice
of eligibility for the Funds includes representations that the Funds will use
futures contracts and related options solely for bona fide hedging purposes
within the meaning of CFTC regulations, provided that the Funds may hold other
positions in futures contracts and related options that do not qualify as a bona
fide hedging position if the aggregate initial margin deposits and premiums
required to establish these positions, less the amount by which any such futures
contracts and related options positions are "in the money," do not exceed 5% of
a Fund's net assets. Adherence to these guidelines does not limit a Fund's risk
to 5% of the Fund's assets.

The SEC has identified certain trading practices involving derivative
instruments that involve the potential for leveraging the Funds' assets in a
manner that raises issues under the 1940 Act. In order to limit the potential
for the leveraging of the Funds' assets, as defined under the 1940 Act, the SEC
has stated that the Funds may use coverage or the segregation of the Funds'
assets. To the extent required by SEC guidelines, the Funds will not enter into
any such transactions unless it owns either: (1) an offsetting ("covered")
position in securities, options, futures, or derivative instruments; or (2) cash
or liquid securities positions with a value sufficient at all times to cover its
potential obligations to the extent that the position is not "covered". The
Funds will also set aside cash and/or

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appropriate liquid assets in a segregated custodial account if required to do so
by SEC and CFTC regulations. Assets used as cover or held in a segregated
account cannot be sold while the derivative position is open, unless they are
replaced with similar assets. As a result, the commitment of a large portion of
the Funds' assets to segregated accounts could impede portfolio management or
the Funds' ability to meet redemption requests or other current obligations.

In some cases, the Funds may be required to maintain or limit exposure to a
specified percentage of its assets to a particular asset class. In such cases,
when the Funds uses a derivative instrument to increase or decrease exposure to
an asset class and is required by applicable SEC guidelines to set aside liquid
assets in a segregated account to secure its obligations under the derivative
instruments, the Adviser may, where reasonable in light of the circumstances,
measure compliance with the applicable percentage by reference to the nature of
the economic exposure created through the use of the derivative instrument and
not by reference to the nature of the exposure arising from the liquid assets
set aside in the segregated account (unless another interpretation is specified
by applicable regulatory requirements).

Options. The Funds may use options for any bona fide hedging or risk management
purpose. An option is a contract in which the "holder" (the buyer) pays a
certain amount ("premium") to the "writer" (the seller) to obtain the right, but
not the obligation, to buy from the writer (in a "call") or sell to the writer
(in a "put") a specific asset at an agreed upon price ("strike price" or
"exercise price") at or before a certain time ("expiration date"). The holder
pays the premium at inception and has no further financial obligation. The
holder of an option will benefit from favorable movements in the price of the
underlying asset but is not exposed to corresponding losses due to adverse
movements in the value of the underlying asset. The writer of an option will
receive fees or premiums but is exposed to losses due to changes in the value of
the underlying asset. The Funds may buy or write (sell) put and call options on
assets, such as securities, currencies, futures, financial commodities, and
indices of debt and equity securities ("underlying assets") and enter into
closing transactions with respect to such options to terminate an existing
position. Options used by the Funds may include European, American, and Bermuda
style options. If an option is exercisable only at maturity, it is a "European"
option; if it is also exercisable prior to maturity, it is an "American" option.
If it is exercisable only at certain times, it is a "Bermuda" option.

The Funds may purchase (buy) and write (sell) put and call options on underlying
assets and enter into closing transactions with respect to such options to
terminate an existing position. The purchase of a call option serves as a long
hedge, and the purchase of a put option serves as a short hedge. Writing put or
call options can enable the Funds to enhance income by reason of the premiums
paid by the purchaser of such options. Writing call options serves as a limited
short hedge because declines in the value of the hedged investment would be
offset to the extent of the premium received for writing the option. However, if
the security appreciates to a price higher than the exercise price of the call
option, it can be expected that the option will be exercised and the Funds will
be obligated to sell the security at less than its market value or will be
obligated to purchase the security at a price greater than that at which the
security must be sold under the option. All or a portion of any assets used as
cover for OTC options written by the Funds would be considered illiquid. Writing
put options serves as a limited long hedge because decreases in the value of the
hedged investment would be offset to the extent of the premium received for
writing the option. However, if the security depreciates to a price lower than
the exercise price of the put option, it can be expected that the put option
will be exercised and the Funds will be obligated to purchase the security at
more than its market value.

The value of an option position will reflect, among other things, the historical
price volatility of the underlying investment, the current market value of the
underlying investment, the time remaining until expiration, the relationship of
the exercise price to the market price of the underlying investment, and general
market conditions.

The Funds may effectively terminate a right or obligation under an option by
entering into a closing transaction. For example, the Funds may terminate an
obligation under a call or put option that they had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, the Funds may terminate a position in a put or call option they had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. Closing transactions permit the Funds to realize the profit or
limit the loss on an option position prior to its exercise or expiration.

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The Funds may purchase or write both exchange-traded and OTC options.
Exchange-traded options are issued by a clearing organization affiliated with
the exchange on which the option is listed that, in effect, guarantees
completion of every exchange-traded option transaction. In contrast, OTC options
are contracts between the Funds and the other party to the transaction
("counterparty") (usually a securities dealer or a bank) with no clearing
organization guarantee. Thus, when the Funds purchase or write an OTC option,
they rely on the counterparty to make or take delivery of the underlying
investment upon exercise of the option. Failure by the counterparty to do so
would result in the loss of any premium paid by the Funds as well as the loss of
any expected benefit of the transaction.

The Funds' ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The Funds intend to
purchase or write only those exchange-traded options for which there appears to
be a liquid secondary market. However, there can be no assurance that such a
market will exist at any particular time. Closing transactions can be made for
OTC options only by negotiating directly with the counterparty, or by a
transaction in the secondary market if any such market exists. Although the
Funds will enter into OTC options only with counterparties that are expected to
be capable of entering into closing transactions with the Funds, there is no
assurance that the Funds will in fact be able to close out an OTC option at a
favorable price prior to expiration. In the event of insolvency of the
counterparty, the Funds might be unable to close out an OTC option position at
any time prior to its expiration. If the Funds were unable to effect a closing
transaction for an option it had purchased, it would have to exercise the option
to realize any profit.

The Funds also may engage in options transactions as described above on
securities indices and other financial indices and in so doing can achieve many
of the same objectives they would achieve through the sale or purchase of
options on individual securities or other instruments. Options on securities
indices and other financial indices are similar to options on a security or
other instrument except that, rather than settling by physical delivery of the
underlying instrument, they settle by cash settlement, i.e., an option on an
index gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the index upon which the option is based
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option (except if, in the case of an OTC option, physical
delivery is specified). This amount of cash is equal to the excess of the
closing price of the index over the exercise price of the option, which also may
be multiplied by a formula value. The seller of the option is obligated, in
return for the premium received, to make delivery of this amount. The gain or
loss on an option on an index depends on price movements in the instruments
making up the market, market segment, industry or other composite on which the
underlying index is based, rather than price movements in individual securities,
as is the case with respect to options on securities.

The writing and purchasing of options is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. Imperfect correlation between the
options and securities markets may detract from the effectiveness of the
attempted hedging.

Futures Contracts. The Funds may enter into contracts for the purchase or sale
for future delivery of fixed-income securities, foreign currencies or contracts
based on financial indices, including indices of U.S. government securities,
foreign government securities, equity or fixed-income securities. The Funds may
also purchase put and call options, and write covered put and call options, on
futures in which it is allowed to invest. The purchase of futures or call
options thereon can serve as a long hedge, and the sale of futures or the
purchase of put options thereon can serve as a short hedge. Writing covered call
options on futures contracts can serve as a limited short hedge, and writing
covered put options on futures contracts can serve as a limited long hedge,
using a strategy similar to that used for writing covered options in securities.
The Funds may also write put options on futures contracts while at the same time
purchasing call options on the same futures contracts in order to create
synthetically a long futures contract position. Such options would have the same
strike prices and expiration dates. The Funds will engage in this strategy only
when the Adviser believes it is more advantageous to the Funds than purchasing
the futures contract.

The Funds may use futures contracts solely for the purpose of bona fide hedging
or risk management. A Fund's primary purpose in entering into futures contracts
is to protect that Fund from fluctuations in the value of securities or interest
rates without actually buying or selling the underlying debt or equity security.
For example, if a Fund anticipates an increase in the price of stocks, and it
intends to purchase stocks at a later time, that Fund could enter

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into a futures contract to purchase a stock index as a temporary substitute for
stock purchases. If an increase in the market occurs that influences the stock
index, as anticipated, the value of the futures contracts will increase, thereby
serving as a hedge against that Fund not participating in a market advance.
Conversely, if a Fund holds stocks and seeks to protect itself from a decrease
in stock prices, the Fund might sell stock index futures contracts, thereby
hoping to offset the potential decline in the value of its portfolio securities
by a corresponding increase in the value of the futures contract position. A
Fund could protect against a decline in stock prices by selling portfolio
securities and investing in money market instruments, but the use of futures
contracts enables it to maintain a defensive position without having to sell
portfolio securities.

Although techniques other than sales and purchases of futures contracts could be
used to reduce the Funds' exposure to market or interest rate fluctuations, the
Funds may be able to hedge its exposure more effectively and perhaps at a lower
cost through the use of futures contracts.

A futures contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument for a
specified price at a designated date, time, and place. An index futures contract
is an agreement pursuant to which the parties agree to take or make delivery of
an amount of cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at which the index
futures contract was originally written. Transaction costs are incurred when a
futures contract is bought or sold and margin deposits must be maintained. A
futures contract may be satisfied by delivery or purchase, as the case may be,
of the instrument or by payment of the change in the cash value of the index.
More commonly, futures contracts are closed out prior to delivery by entering
into an offsetting transaction in a matching futures contract. Although the
value of an index might be a function of the value of certain specified
securities, no physical delivery of those securities is made. If the offsetting
purchase price is less than the original sale price, the Funds realize a gain;
if it is more, the Funds realize a loss. Conversely, if the offsetting sale
price is more than the original purchase price, the Funds realize a gain; if it
is less, the Funds realize a loss. The transaction costs must also be included
in these calculations. There can be no assurance, however, that the Funds will
be able to enter into an offsetting transaction with respect to a particular
futures contract at a particular time. If the Funds are not able to enter into
an offsetting transaction, the Funds will continue to be required to maintain
the margin deposits on the futures contract.

No price is paid by the Funds upon entering into a futures contract. Instead, at
the inception of a futures contract, the Funds are required to deposit in a
segregated account with its custodian, in the name of the futures broker through
whom the transaction was effected, "initial margin" consisting of cash and/or
other appropriate liquid assets in an amount generally equal to 10% or less of
the contract value. Margin must also be deposited when writing a call or put
option on a futures contract, in accordance with applicable exchange rules.
Unlike margin in securities transactions, initial margin on futures contracts
does not represent a borrowing, but rather is in the nature of a performance
bond or good-faith deposit that is returned to the Funds at the termination of
the transaction if all contractual obligations have been satisfied. Under
certain circumstances, such as periods of high volatility, the Funds may be
required by an exchange to increase the level of its initial margin payment, and
initial margin requirements might be increased generally in the future by
regulatory action.

Subsequent "variation margin" payments are made to and from the futures broker
daily as the value of the futures position varies, a process known as "marking
to market." Variation margin does not involve borrowing, but rather represents a
daily settlement of the Funds' obligations to or from a futures broker. When the
Funds purchases an option on a future, the premium paid plus transaction costs
is all that is at risk. In contrast, when the Funds purchase or sell a futures
contract or writes a call or put option thereon, it is subject to daily
variation margin calls that could be substantial in the event of adverse price
movements. If the Funds have insufficient cash to meet daily variation margin
requirements, it might need to sell securities at a time when such sales are
disadvantageous. Purchasers and sellers of futures positions and options on
futures can enter into offsetting closing transactions by selling or purchasing,
respectively, an instrument identical to the instrument held or written.
Positions in futures and options on futures may be closed only on an exchange or
board of trade that provides a secondary market. The Funds intends to enter into
futures transactions only on exchanges or boards of trade where there appears to
be a liquid secondary market. However, there can be no assurance that such a
market will exist for a particular contract at a particular time.

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Under certain circumstances, futures exchanges may establish daily limits on the
amount that the price of a future or option on a futures contract can vary from
the previous day's settlement price; once that limit is reached, no trades may
be made that day at a price beyond the limit. Daily price limits do not limit
potential losses because prices could move to the daily limit for several
consecutive days with little or no trading, thereby preventing liquidation of
unfavorable positions.

If the Funds were unable to liquidate a futures or option on a futures contract
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Funds would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Funds would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the future or option or to maintain cash or securities in a segregated
account.

Certain characteristics of the futures market might increase the risk that
movements in the prices of futures contracts or options on futures contracts
might not correlate perfectly with movements in the prices of the investments
being hedged. For example, all participants in the futures and options on
futures contracts markets are subject to daily variation margin calls and might
be compelled to liquidate futures or options on futures contracts positions
whose prices are moving unfavorably to avoid being subject to further calls.
These liquidations could increase price volatility of the instruments and
distort the normal price relationship between the futures or options and the
investments being hedged. Also, because initial margin deposit requirements in
the futures markets are less onerous than margin requirements in the securities
markets, there might be increased participation by speculators in the future
markets. This participation also might cause temporary price distortions. In
addition, activities of large traders in both the futures and securities markets
involving arbitrage, "program trading" and other investment strategies might
result in temporary price distortions.

Swap Agreements. The Funds may enter into interest rate, securities index,
commodity, or security and currency exchange rate swap agreements and related
caps, floors, and collars. The Funds will use such instruments solely for the
purpose of bona fide hedging or risk management, such as for the purpose of
attempting to obtain or preserve a particular desired return or spread at a
lower cost to the Funds than if the Funds had invested directly in an instrument
that yielded that desired return or spread. The Funds also may enter into swaps
in order to protect against an increase in the price of, or the currency
exchange rate applicable to, securities that the Funds anticipate purchasing at
a later date. Swap agreements are two-party contracts entered into primarily by
institutional investors for periods ranging from a few weeks to several years.
In a standard "swap" transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined
investments or instruments. The gross returns to be exchanged or "swapped"
between the parties are calculated with respect to a "notional amount" (i.e.,
the return on or increase in value of a particular dollar amount invested at a
particular interest rate) in a particular foreign currency, or in a "basket" of
securities representing a particular index. Swap agreements may include caps,
under which, in return for a premium, one party agrees to make payments to the
other to the extent that a specified index exceed a specified rate or amount, or
"cap;" floors, under which, in return for a premium, one party agrees to make
payments to the other to the extent that a specified index fall below a
specified level, or "floor;" and collars, under which a party sells a cap and
purchases a floor, or vice versa, in an attempt to protect itself against
movements interest or values exceeding given minimum or maximum levels.

The "notional amount" of the swap agreement is the agreed upon basis for
calculating the obligations that the parties to a swap agreement have agreed to
exchange. Under most swap agreements entered into by the Funds, the obligations
of the parties would be exchanged on a "net basis." Consequently, the Funds'
obligation (or rights) under a swap agreement will generally be equal only to
the net amount to be paid or received under the agreement based on the relative
values of the positions held by each party to the agreement. A Fund's obligation
under a swap agreement will be accrued daily (offset against amounts owed to the
Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be
covered by the maintenance of a segregated account consisting of cash and/or
other appropriate liquid assets.

Whether the Funds' use of swap agreements will be successful in furthering their
investment objectives will depend, in part, on the Adviser's ability to predict
correctly whether certain types of investments are likely to produce greater
returns than other investments. The swap market has grown substantially in
recent years with a large

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number of banking firms acting as both principals and agents using standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps, floors and collars are more recent innovations for which standardized
documentation has not been fully developed and, accordingly, they are less
liquid than swaps. Moreover, the Funds bear the risk of loss of the amount
expected to be received under a swap agreement in the event of the default or
bankruptcy of a swap agreement counterparty. Certain restrictions imposed on the
Funds by the Internal Revenue Code of 1986 ("IRC") may limit the Funds' ability
to use swap agreements. The swaps market is largely unregulated.

The Funds will enter swap agreements only with counterparties that the Adviser
reasonably believes are capable of performing under the swap agreements. If
there is a default by the other party to such a transaction, the Funds will have
to rely on its contractual remedies (which may be limited by bankruptcy,
insolvency or similar laws) pursuant to the agreements related to the
transaction.

Additional Derivative Instruments and Strategies. In addition to the derivative
instruments and strategies described above and in the Prospectus, the Adviser
expects additional derivative instruments and other hedging or risk management
techniques to develop from time to time. The Adviser may utilize these new
derivative instruments and techniques to the extent that they are consistent
with the Funds' investment objective and permitted by the Funds' investment
limitations, operating policies, and applicable regulatory authorities.

FOREIGN SECURITIES. Investing in foreign securities involves a series of risks
not present in investing in U.S. securities. Most of the foreign securities held
by the portfolios will not be registered with the Securities and Exchange
Commission (the "SEC"), nor will the foreign issuers be subject to SEC reporting
requirements. Accordingly, there may be less publicly available information
concerning foreign issuers of securities held by the portfolio than is available
concerning U.S. companies. Disclosure and regulatory standards in many respects
are less stringent in emerging market countries than in the U.S. and other major
markets. There also may be a lower level of monitoring and regulation of
emerging markets and the activities of investors in such markets and enforcement
of existing regulations may be extremely limited. Foreign companies and, in
particular, companies in smaller and emerging capital markets are not generally
subject to uniform accounting, auditing and financial reporting standards, or to
other regulatory requirements comparable to those applicable to U.S. companies.
The portfolio's net investment income and capital gains from its foreign
investment activities may be subject to non-U.S. withholding taxes.

The costs attributable to foreign investing that a Fund must bear frequently are
higher than those attributable to domestic investing; this is particularly true
with respect to emerging capital markets. For example, the costs of maintaining
custody of foreign securities exceeds custodian costs for domestic securities
and transaction and settlement costs of foreign investing also frequently are
higher than those attributable to domestic investing. Costs associated with the
exchange of currencies also make foreign investing more expensive than domestic
investing. Investment income on certain foreign securities in which the
portfolio may invest may be subject to foreign withholding or other government
taxes that could reduce the return of these securities. Tax treaties between the
United States and foreign countries, however, may reduce or eliminate the amount
of foreign tax to which the portfolio would be subject.

The economies of individual emerging market countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rate of inflation, currency depreciation, capital reinvestment,
resource self-sufficiency and balance of payments position. Further, the
economies of developing countries generally are heavily dependent upon
international trade and, accordingly, have been and may continue to be adversely
affected by trade barriers, exchange controls, managed adjustments in relative
currency values and other protectionist measures imposed or negotiated by the
countries with which they trade. These economies also have been and may continue
to be adversely affected by economic conditions in the countries with which they
trade.

Investments in companies domiciled in developing countries may be subject to
potentially higher risks than investments in developed countries. These risks
include (i) less social, political and economic stability; (ii) the small
current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict a

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portfolio's investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests; (iv) the absence
of developed legal structures governing private or foreign investment or
allowing for judicial redress for injury to private property; (v) the absence,
until recently in certain Eastern European countries, of a capital market
structure or market-oriented economy; and (vi) the possibility that recent
favorable economic developments in Eastern Europe may be slowed or reversed by
unanticipated political or social events in such countries.

In addition, many countries in which the Funds may invest have experienced
substantial, and in some periods extremely high, rates of inflation for many
years. Inflation and rapid fluctuations in inflation rates have had and may
continue to have negative effects on the economies and securities markets of
certain countries. Moreover, the economies of some developing countries may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross domestic product, rate of inflation, currency depreciation, capital
reinvestment, resources self-sufficiency and balance of payments position.

Investments in Eastern European countries may involve risks of nationalization,
expropriation and confiscatory taxation. The communist governments of a number
of Eastern European countries expropriated large amounts of private property in
the past, in many cases without adequate compensation, and there can be no
assurance that such expropriation will not occur in the future. In the event of
such expropriation, a portfolio could lose a substantial portion of any
investments it has made in the affected countries. Finally, even though certain
Eastern European currencies may be convertible into U.S. dollars, the conversion
rates may be artificial to the actual market values and may be adverse to
portfolio shareholders. Further, no accounting standards exist in Eastern
European countries.

Investing in Russian securities involves a high degree of risk and special
considerations not typically associated with investing in the U.S. securities
markets, and should be considered highly speculative. Such risks include: (1)
delays in settling portfolio transactions and risk of loss arising out of
Russia's system of share registration and custody; (2) the risk that it may be
impossible or more difficult than in other countries to obtain and/or enforce a
judgment; (3) pervasiveness of corruption and crime in the Russian economic
system; (4) currency exchange rate volatility and the lack of available currency
hedging instruments; (5) higher rates of inflation (including the risk of social
unrest associated with periods of hyper-inflation); (6) controls on foreign
investment and local practices disfavoring foreign investors and limitations on
repatriation of invested capital, profits and dividends, and on a portfolio's
ability to exchange local currencies for U.S. dollars; (7) the risk that the
government of Russia or other executive or legislative bodies may decide not to
continue to support the economic reform programs implemented since the
dissolution of the Soviet Union and could follow radically different political
and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed prior to the dissolution of the Soviet Union; (8) the
financial condition of Russian companies, including large amounts of
inter-company debt which may create a payments crisis on a national scale; (9)
dependency on exports and the corresponding importance of international trade;
(10) the risk that the Russian tax system will not be reformed to prevent
inconsistent, retroactive and/or exorbitant taxation; and (11) possible
difficulty in identifying a purchaser of securities held by a portfolio due to
the underdeveloped nature of the securities markets.

There is little historical data on Russian securities markets because they are
relatively new and a substantial proportion of securities transactions in Russia
are privately negotiated outside of stock exchanges. Because of the recent
formation of the securities markets as well as the underdeveloped state of the
banking and telecommunications systems, settlement, clearing and registration of
securities transactions are subject to significant risks. Ownership of shares
(except where shares are held through depositories that meet the requirements of
the 1940 Act) is defined according to entries in the company's share register
and normally evidenced by extracts from the register or by formal share
certificates. However, there is no central registration system for shareholders
and these services are carried out by the companies themselves or by registrars
located throughout Russia. These registrars are not necessarily subject to
effective state supervision and it is possible for a portfolio to lose its
registration through fraud, negligence or even mere oversight. While each
portfolio will endeavor to ensure that its interest continues to be
appropriately recorded either itself or through a custodian or other agent
inspecting the share register and by obtaining extracts of share registers
through regular confirmations, these extracts have no legal enforceability and
it is possible that subsequent illegal amendment or other fraudulent act may
deprive the portfolio

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of its ownership rights or improperly dilute its interests. In addition, while
applicable Russian regulations impose liability on registrars for losses
resulting from their errors, it may be difficult for a portfolio to enforce any
rights it may have against the registrar or issuer of the securities in the
event of loss of share registration. Furthermore, although a Russian public
enterprise with more than 1,000 shareholders is required by law to contract out
the maintenance of its shareholder register to an independent entity that meets
certain criteria, in practice this regulation has not always been strictly
enforced. Because of this lack of independence, management of a company may be
able to exert considerable influence over who can purchase and sell the
company's shares by illegally instructing the registrar to refuse to record
transactions in the share register. This practice may prevent a portfolio from
investing in the securities of certain Russian issuers deemed suitable by its
portfolio manager. Further, this also could cause a delay in the sale of Russian
securities by a portfolio if a potential purchaser is deemed unsuitable, which
may expose the portfolio to potential loss on the investment.

Each portfolio endeavors to buy and sell foreign currencies on as favorable a
basis as practicable. Some price spread in currency exchange (to cover service
charges) will be incurred, particularly when a portfolio changes investments
from one country to another or when proceeds of the sale of shares in U.S.
dollars are used for the purchase of securities in foreign countries. Also, some
countries may adopt policies which would prevent a portfolio from transferring
cash out of the country or withhold portions of interest and dividends at the
source. There is the possibility of cessation of trading on national exchanges,
expropriation, nationalization or confiscatory taxation, withholding and other
foreign taxes on income or other amounts, foreign exchange controls (which may
include suspension of the ability to transfer currency from a given country),
default in foreign government securities, political or social instability, or
diplomatic developments which could affect investments in securities of issuers
in foreign nations.

Foreign markets also have different clearance and settlement procedures and in
certain markets there have been times when settlements have failed 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 portfolio are uninvested and no return is earned thereon. The inability
of the portfolio to make intended security purchases due to settlement problems
could cause the portfolio to miss investment opportunities. Inability to dispose
of a portfolio security due to settlement problems either could result in losses
to the portfolio due to subsequent declines in the value of such portfolio
security or, if the portfolio has entered into a contract to sell the security,
could result in possible liability to the purchaser.

Foreign securities may be purchased through depository receipts, including
American Depository Receipts ("ADRs"), European Depository Receipts ("EDRs")
Global Depository Receivables ("GDRs"), or other securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. Generally, ADRs, in registered form, are denominated in U.S. dollars
and are designed for use in the U.S. securities markets, while EDRs and GDRs may
be denominated in other currencies and are designed for use in the European
securities markets. ADRs are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying securities. EDRs and GDRs are
European receipts evidencing a similar arrangement. For purposes of the
portfolio's investment policies, ADRs, EDRs and GDRs are deemed to have the same
classification as the underlying securities they represent, except that ADRs,
EDRs and GDRs shall be treated as indirect foreign investments. Thus, an ADR,
EDR or GDR representing ownership of common stock will be treated as common
stock. ADR, EDR and GDR depository receipts do not eliminate all of the risks
associated with directly investing in the securities of foreign issuers.

ADR facilities may be established as either "unsponsored" or "sponsored." While
ADRs issued under these two types of facilities are in some respects similar,
there are distinctions between them relating to the rights and obligations of
ADR holders and the practices of market participants.

A depository may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depository requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depository usually charges
fees upon the deposit and withdrawal of the deposited securities, the conversion
of dividends into U.S. dollars, the disposition of non-cash distributions and
the performance of other

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services. The depository of an unsponsored facility frequently is under no
obligation to pass through voting rights to ADR holders with respect to the
deposited securities. In addition, an unsponsored facility is generally not
obligated to distribute communications received from the issuer of the deposited
securities or to disclose material information about such issuer in the U.S. and
thus there may not be a correlation between such information and the market
value of the depository receipts.

Sponsored ADR facilities are created in generally the same manner as unsponsored
facilities, except that the issuer of the deposited securities enters into a
deposit agreement with the depository. The deposit agreement sets out the rights
and responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities.

FORWARD FOREIGN CURRENCY TRANSACTIONS. The foreign securities held by the Funds
will usually be denominated in foreign currencies and the Fund may temporarily
hold foreign currency in connection with such investments. As a result, the
value of the assets held by the Fund may be affected favorably or unfavorably by
changes in foreign currency exchange rates, by exchange control regulations and
by indigenous economic and political developments. Some countries in which the
Funds may invest may also have fixed or managed currencies that are not
free-floating against the U.S. dollar. Further, certain currencies may not be
internationally traded. Certain of these currencies have experienced a steady
devaluation relative to the U.S. dollar. Any devaluations in the currencies in
which a Fund's securities are denominated may have a detrimental impact on that
Fund.

A Fund may enter into forward foreign currency contracts ("forward currency
contracts") in an effort to control some of the uncertainties of foreign
currency rate fluctuations. A forward currency contract is an agreement to
purchase or sell a specific currency at a specified future date and price agreed
to by the parties at the time of entering into the contract. The Fund will not
engage in foreign currency contracts in which the specified future date is more
than one year from the time of entering into the contract. In addition, the Fund
will not engage in forward currency contracts for speculation, but only as an
attempt to hedge against changes in foreign currency exchange rates affecting
the values of securities which the Fund holds or intends to purchase. Thus, the
Fund will not enter into a forward currency contract if such contract would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the Fund securities or other assets denominated in that currency.

The Funds may use forward currency contracts to fix the value of certain
securities it has agreed to buy or sell. For example, when a Fund enters into a
contract to purchase or sell securities denominated in a particular foreign
currency, the Fund could effectively fix the maximum cost of those securities by
purchasing or selling a foreign currency contract, for a fixed value of another
currency, in the amount of foreign currency involved in the underlying
transaction. In this way, a Fund can protect the value of securities in the
underlying transaction from an adverse change in the exchange rate between the
currency of the underlying securities in the transaction and the currency
denominated in the foreign currency contract, during the period between the date
the security is purchased or sold and the date on which payment is made or
received.

The Funds may also use forward currency contracts to hedge the value, in U.S.
dollars, of securities it currently owns. For example, if the portfolio held
securities denominated in a foreign currency and anticipated a substantial
decline (or increase) in the value of that currency against the U.S. dollar, the
Fund may enter into a foreign currency contract to sell (or purchase), for a
fixed amount of U.S. dollars, the amount of foreign currency approximating the
value of all or a portion of the securities held which are denominated in such
foreign currency.

Upon the maturity of a forward currency transaction, the portfolio may either
accept or make delivery of the currency specified in the contract or, at any
time prior to maturity, enter into a closing transaction which involves the
purchase or sale of an offsetting contract. An offsetting contract terminates
the Fund's contractual obligation to deliver the foreign currency pursuant to
the terms of the forward currency contract by obligating the Fund to purchase
the same amount of the foreign currency, on the same maturity date and with the
same currency trader, as

B-27
<PAGE> 241
specified in the forward currency contract. The Fund realizes a gain or loss as
a result of entering into such an offsetting contract to the extent the exchange
rate between the currencies involved moved between the time of the execution of
the original forward currency contract and the offsetting contract.

The use of forward currency contracts to protect the value of securities against
the decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities the portfolio owns or intends to acquire,
but it does fix a future rate of exchange. Although such contracts minimize the
risk of loss resulting from a decline in the value of the hedged currency, they
also limit the potential for gain resulting from an increase in the value of the
hedged currency. The benefits of forward currency contracts to the portfolio
will depend on the ability of the portfolio's investment manager to accurately
predict future currency exchange rates.

FOREIGN CURRENCY FUTURES. Generally, foreign futures contracts will be executed
on a U.S. exchange. To the extent they are not, however, engaging in such
transactions will involve the execution and clearing of trades on or subject to
the rules of a foreign board of trade. Neither the National Futures Association
nor any domestic (U.S.) exchange regulates activities of any foreign boards of
trade, including the execution, delivery and clearing of transactions, or has
the power to compel enforcement of the rules of a foreign board of trade or any
applicable foreign law. This is true even if the exchange is formally linked to
a domestic market so that a position taken on the exchange may be liquidated by
a transaction on the appropriate domestic market. Moreover, applicable laws or
regulations will vary depending on the foreign country in which the foreign
futures transaction occurs. Therefore, entities (such as the portfolio) which
trade foreign futures contracts may not be afforded certain of the protective
measures provided by the Commodity Exchange Act, Commodity Futures Trading
Commission ("CFTC") regulations, the rules of the National Futures Association
or those of a domestic (U.S.) exchange. In particular, monies received from
customers for foreign futures transactions may not be provided the same
protections as monies received in connection with transactions on U.S. futures
exchanges. In addition, the price of any foreign futures and, therefore, the
potential profits and loss thereon, may be affected by any variance in the
foreign exchange rate between the time the order for the futures contract is
placed and the time it is liquidated, offset or exercised.

HIGH-YIELD/HIGH-RISK SECURITIES. High-yield/high-risk securities (or "junk"
bonds) are debt securities rated below investment grade by the primary rating
agencies (such as Standard & Poor's Ratings Services and Moody's Investors
Service, Inc.).

The value of lower quality securities generally is more dependent on the ability
of the issuer to meet interest and principal payments (i.e., credit risk) than
is the case for higher quality securities. Conversely, the value of higher
quality securities may be more sensitive to interest rate movements than lower
quality securities. Issuers of high-yield securities may not be as strong
financially as those issuing bonds with higher credit ratings. Investments in
such companies are considered to be more speculative than higher quality
investments.

Issuers of high-yield securities are more vulnerable to real or perceived
economic changes (for instance, an economic downturn or prolonged period of
rising interest rates), political changes or adverse developments specific to
the issuer. The market for lower quality securities is generally less liquid
than the market for higher quality securities. Adverse publicity and investor
perceptions as well as new or proposed laws may also have a greater negative
impact on the market for lower quality securities.

INVESTMENT COMPANIES. The Trust has applied for certain exemptive relief with
the SEC that, if granted, will allow the Funds to invest a portion of their
assets into shares of the Ready Reserves Fund based upon the terms and
conditions of such relief.

ILLIQUID SECURITIES. Illiquid securities are securities that are not readily
marketable. The Board of Trustees, or its delegate, has the ultimate authority
to determine, to the extent permissible under the federal securities laws, which
securities are illiquid for purposes of this limitation. Certain securities
exempt from registration or issued in transactions exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act"), such as
securities that may be resold to institutional investors under Rule 144A under
the Securities Act and Section 4(2) commercial paper may be considered liquid
under guidelines adopted by the Board of Trustees.

B-28
<PAGE> 242
The Board of Trustees has delegated to the Adviser the day-to-day determination
of the liquidity of a security, although it has retained oversight for such
determinations. The Board of Trustees has approved procedures that allow the
Adviser to deem Section 4(2) commercial paper liquid only if the Adviser
determines that there is no significant difference between Section 4(2)
commercial paper and traditional commercial paper based upon an evaluation of
the following characteristics: (i) market characteristic, such as the nature of
the security and the nature of marketplace trades; (ii) trading characteristics,
such as the frequency of trades and quotes for the security, the number of
dealers willing to purchase or sell the security and the number of other
potential purchasers; and (iii) the quality of the issue or issuer. With respect
to a portfolio's foreign holdings, a foreign security may be considered liquid
by the Adviser (despite its restricted nature under the Securities Act) if the
security can be freely traded in a foreign securities market and the facts and
circumstances support a finding of liquidity.

LENDING. The Income Fund may from time to time lend securities (but not in
excess of 75% of its assets) from its portfolio to brokers, dealers and
financial institutions, provided: (1) the loan is secured continuously by
collateral consisting of U.S. Government securities, government agency
securities, U.S. Government instrumentality securities, cash or cash equivalents
adjusted daily to have a market value at least equal to the current market value
of the securities loaned plus accrued interest; (2) the portfolio may at any
time call the loan and regain the securities loaned; and (3) the Adviser (under
the supervision of the Board of Trustees) has reviewed the creditworthiness of
the borrower and has found it satisfactory. The Funds will receive from the
borrower amounts equal to the interest paid on the securities loaned and will
also earn income for having made the loan. Any cash collateral will be invested
in short-term securities, the income from which will increase the return to the
portfolio. The risks associated with lending portfolio securities are similar to
those of entering into repurchase agreements. While the Value Discovery Fund ,
Tax-Managed Growth Fund, Large Cap Growth Fund, Small Cap Growth Fund and
Disciplined Large Cap Fund also have the authority to lend portfolio securities,
they have no current intention to do so.

REPURCHASE AGREEMENTS. In a repurchase agreement, a portfolio buys a security at
one price and at the time of sale, the seller agrees to repurchase the
obligation at a mutually agreed upon time and price (usually within seven days).
The repurchase agreement thereby determines the yield during the purchaser's
holding period, while the seller's obligation to repurchase is secured by the
value of the underlying security. The Adviser will monitor, on an ongoing basis,
the value of the underlying securities to ensure that the value always equals or
exceeds the repurchase price plus accrued interest. Repurchase agreements could
involve certain risks in the event of a default or insolvency of the other party
to the agreement, including possible delays or restrictions upon a portfolio's
ability to dispose of the underlying securities. The risk to a portfolio is
limited to the ability of the seller to pay the agreed upon sum on the delivery
date. In the event of default, a repurchase agreement provides that the
portfolio is entitled to sell the underlying collateral. The loss, if any, to
the portfolio will be the difference between the proceeds from the sale and the
repurchase price. However, if bankruptcy proceedings are commenced with respect
to the seller of the security, disposition of the collateral by the portfolio
may be delayed or limited. Although no definitive creditworthiness criteria are
used, the Adviser reviews the creditworthiness of the banks and non-bank dealers
with which the portfolio enters into repurchase agreements to evaluate those
risks. The Board of Trustees will review and monitor the creditworthiness of
broker-dealers and banks with which a portfolio enters into repurchase
agreements. A portfolio may, under certain circumstances, deem repurchase
agreements collateralized by U.S. government securities to be investments in
U.S. government securities.

RESTRICTED SECURITIES. Restricted securities may be sold only in privately
negotiated transactions or in a public offering with respect to which a
registration statement is in effect under the Securities Act. Where registration
is required, a portfolio may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the decision
to sell and the time the portfolio may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, the portfolio might obtain a less favorable price
than prevailed when it decided to sell. If through the appreciation of
restricted securities or the depreciation of unrestricted securities, a
portfolio would be in a position where more of its net assets are invested in
illiquid securities, including restricted securities that are not readily
marketable (except for 144A Securities and 4(2) commercial paper deemed to be
liquid by the Adviser), than is permitted by its investment restrictions, the
Fund will take such steps as it deems advisable, if any, to protect liquidity.

B-29
<PAGE> 243
SMALL COMPANIES. While smaller companies generally have the potential for rapid
growth, investments in smaller companies often involve greater risks than
investments in larger, more established companies because smaller companies may
lack the management experience, financial resources, product diversification and
competitive strengths of larger companies. In addition, in many instances the
securities of smaller companies are traded only over-the-counter or on a
regional securities exchange and the frequency and volume of their trading is
substantially less than is typical of larger companies. Therefore, the
securities of smaller companies may be subject to greater and more abrupt price
fluctuations. When making large sales, the portfolio may have to sell portfolio
holdings at discounts from quoted prices or may have to make a series of small
sales over an extended period of time due to the trading volume of smaller
company securities. Investors should be aware that, based on the foregoing
factors, an investment in the Value Discovery Fund and the Emerging Markets
Growth Fund, and to a lesser extent, the Growth Fund and the International
Growth Fund, may be subject to greater price fluctuations than an investment in
a fund that invests primarily in larger, more established companies. The
Adviser's research efforts may also play a greater role in selecting securities
for the portfolio than in a fund that invests in larger, more established
companies.

WHEN-ISSUED OR DELAYED DELIVERY TRANSACTIONS. Each Fund may purchase newly
issued securities on a when-issued basis and may purchase or sell portfolio
securities on a delayed delivery basis. When a Fund purchases securities on a
when-issued or a delayed delivery basis, it becomes obligated to purchase the
securities and it has all the rights and risks attendant to ownership of the
securities, although delivery and payment occur at a later date. A Fund will
record the transaction and reflect the liability for the purchase and the value
of the security in determining its net asset value. The value of fixed-income
securities to be delivered in the future will fluctuate as interest rates vary.
A Fund generally has the ability to close out a purchase obligation on or before
the settlement date, rather than take delivery of the security.

At the time a Fund makes the commitment to sell a security on a delayed delivery
basis, it will record the transaction and include the proceeds to be received in
determining its net asset value; accordingly, any fluctuations in the value of
the security sold pursuant to a delayed delivery commitment are ignored in
calculating net asset value so long as the commitment remains in effect.
Normally, settlement occurs within one month of the purchase or sale.

To the extent a Fund engages in when-issued or delayed delivery purchases, it
will do so for the purpose of acquiring securities consistent with the Fund's
investment objective and policies and not for the purpose of investment leverage
or to speculate on interest rate changes, but each Fund reserves the right to
sell these securities before the settlement date if deemed advisable. To the
extent required to comply with Securities and Exchange Commission Release No.
IC-10666, when purchasing securities on a when-issued or delayed delivery basis,
each Fund will maintain in a segregated account cash or liquid securities equal
to the value of such contracts.

ADDITIONAL INFORMATION ABOUT SHARE CLASSES

PURCHASE OF SHARES--ALTERNATIVE PURCHASE ARRANGEMENTS. Class A shares of each
Fund are sold to investors subject to an initial sales charge. Class B shares
are sold without an initial sales charge but are subject to higher ongoing
expenses than Class A shares and a contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically convert to Class A shares at
the end of the seventh year after issuance (at the end of the third year after
issuance for Income Fund). Class C shares are sold without an initial sales
charge but are subject to higher ongoing expenses than Class A shares, are
subject to a contingent deferred sales charge payable upon certain redemptions
within the first year following purchase, and do not convert into another class.
Class N shares are sold to investors without an initial sales charge or a
contingent deferred sales charge but have higher ongoing expenses

B-30
<PAGE> 244
than Class I shares. Class I shares are sold to investors without an initial
sales charge or a contingent deferred sales charge, and have lower ongoing
expenses than Class N shares. When placing purchase orders, investors must
specify whether the order is for Class A, Class B, Class C shares, Class N
shares or Class I shares.

The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge structure and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees and shareholder services fees. These differences are
summarized in the table below. Each class has distinct advantages and
disadvantages for different investors, and investors may choose the class that
best suits their circumstances and objectives.

<TABLE>
<CAPTION>
ANNUAL ANNUAL
12B-1 FEES SHAREHOLDER
(AS A % OF SERVICES FEES
AVERAGE DAILY (AS A % OF AVERAGE OTHER
SALES CHARGE NET ASSETS) DAILY NET ASSETS) INFORMATION
------------------------------------ ------------- ------------------- ---------------------

<S> <C> <C> <C> <C>
Class A Maximum initial sales charge of None 0.25% Initial sales charge
5.75% (2.00% for the Income waived or reduced
Fund) of the public offering price for certain
purchases

Class B Maximum contingent deferred 0.75% 0.25% Shares convert to
sales charge of 5.00% (2.00% for Class A shares
the Income Fund) of redemption seven years after
proceeds; declines to zero after issuance (three for
six years (two years for the the Income Fund)
Income Fund)

Class C Contingent deferred sales charge 0.75% 0.25% No conversion
of 1% of redemption proceeds for feature
redemptions made during first
year after purchase

Class N None 0.25%(1) None

Class I None None None
</TABLE>

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

(1) For all Funds except the Income Fund (0.15%) and the Ready Reserves
Fund (0.35%).

ELIGIBILITY. In addition to the eligibility requirements set forth in the
prospectus, the following types of investors may invest in the following classes
of shares:

Class A:

(1) through certain investment advisers registered under the Investment
Advisers Act of 1940 and other financial services firms, acting solely
as agent for their clients, that adhere to certain standards
established by the Distributor, including a requirement that such
shares be purchased for the benefit of their clients participating in
an investment advisory program or agency commission program under which
such clients pay a fee to the investment advisor or the other firm for
portfolio management or agency brokerage services.

B-31
<PAGE> 245
Class I:

(1) tax-exempt retirement plans (Profit Sharing, 401(k), Money Purchase
Pension and Defined Benefit Plans) of William Blair and it affiliates
and rollover accounts from those plans; and

(2) investment companies managed by William Blair that invest primarily in
other investment companies.

Share certificates will not be issued.

DISTRIBUTION FEES. Each Fund has adopted plans under Rule 12b-1 ("Distribution
Plans") that provide for fees to compensate the Distributor for distribution and
services for Class B, Class C and Class N shares. Because Rule 12b-1 fees are
paid out of Fund assets on an ongoing basis, they will, over time, increase the
cost of an investment and cost more than other types of sales charges.

For its services under the Distribution Plan, the Distributor reserves a
distribution fee from each Fund, payable monthly, at the annual rate of 0.75%,
0.75% and 0.25%, of average daily net assets attributable to Class B, Class C
and Class N shares, respectively, of each Fund except for Class N shares of the
Income Fund and the Ready Reserves Fund. For the Class N shares of the Income
Fund and Ready Reserves Fund, the Distributor receives a fee under the
Distribution Plan, payable monthly, at the annual rate of 0.15% and 0.35%,
respectively.

If a Distribution Plan is terminated in accordance with its terms, the
obligation of a Fund to make payments to the Distributor pursuant to the
Distribution Plan will cease and the Fund will not be required to make any
payments past the termination date. Thus, there is no legal obligation for the
Fund to pay any expenses incurred by the Distributor in excess of its fees under
a Distribution Plan, if for any reason the Plan is terminated in accordance with
its terms. Future fees under a Distribution Plan may or may not be sufficient to
reimburse the Distributor for its expenses incurred.

SHAREHOLDER SERVICE FEES. Shareholder services are provided to each Fund's Class
A, Class B and Class C shares under a Shareholder Services Agreement with the
Distributor. The Distributor bears all its expenses of providing services
pursuant to the Shareholder Services Agreement, including the payment of
shareholder service fees. The Fund pays the Distributor a shareholder services
fee, payable monthly, at an annual rate of 0.25% of average daily net assets of
Class A, Class B and Class C shares of the Fund.

SUMMARY OF ONGOING FEES FOR CLASS A SHARES. Under a Shareholder Service
Agreement, the Funds pay a shareholder services fee to the Distributor, payable
monthly, at an annual rate of 0.25% of average daily net assets of each Fund
attributable to Class A shares. The fee is accrued daily as an expense of Class
A shares.

SUMMARY OF ONGOING FEES FOR CLASS B SHARES. Under a Distribution Plan, the Funds
pay a distribution fee to the Distributor, payable monthly, at the annual rate
of 0.75% of average daily net assets of each Fund attributable to Class B
shares. Under a Shareholder Service Agreement, the Funds also pay to the
Distributor a shareholder services fee, payable monthly, at an annual rate of
0.25% of average daily net assets of each Fund attributable to Class B shares.
Both fees are accrued daily as an expense of Class B shares.

SUMMARY OF ONGOING FEES FOR CLASS C SHARES. Under a Distribution Plan, the Funds
pay a distribution fee to the Distributor, payable monthly, at an annual rate of
0.75% of average daily net assets of each Fund attributable to Class C shares.
Under a separate Shareholder Services Agreement, the Funds also pay to the
Distributor a shareholder services fee, payable monthly, at an annual rate of
0.25% of average daily net assets of each Fund attributable to Class C shares.
Both fees are accrued daily as an expense of Class C shares.

SUMMARY OF ONGOING FEES FOR CLASS N SHARES. Under a Distribution Plan, the Funds
pay a distribution fee to the Distributor, payable monthly, at the annual rate
of 0.25% of average daily net assets of each Fund (0.15% for the Income Fund and
0.35% for the Ready Reserves Fund) attributable to Class N shares. The fee is
accrued daily as an expense of Class N shares.

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<PAGE> 246
SUMMARY OF ONGOING FEES FOR CLASS I SHARES. The Funds do not pay a distribution
or shareholder services fee for Class I shares.

INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES. The public offering price of
Class A shares for purchasers choosing the initial sales charge alternative is
the net asset value plus a sales charge, as set forth below:

<TABLE>
<CAPTION>
EQUITY FUNDS SALES CHARGE
---------------------------------------------------------
ALLOWED TO DEALERS
AS A PERCENTAGE AS A PERCENTAGE OF AS A PERCENTAGE OF
AMOUNT OF PURCHASE OF OFFERING PRICE NET ASSET VALUE* OFFERING PRICE***
------------------ ----------------- ------------------ ------------------
<S> <C> <C> <C>
$0 - $49,999 5.75% 6.10% 5.00%
$50,000 - $99,999 4.50% 4.71% 3.75%
$100,000 - $249,999 3.50% 3.63% 2.75%
$250,000 - $499,999 2.50% 2.56% 2.00%
$500,000 - $999,999 2.00% 2.04% 1.75%
$1 million and over** 0.00% 0.00% 1.00%
</TABLE>

- --------------
* Rounded to the nearest one-hundredth percent.

** Redemption of shares may be subject to a contingent deferred sales
charge as discussed below.

*** Commission is payable by the Distributor as discussed below.

<TABLE>
<CAPTION>
INCOME FUND SALES CHARGE
---------------------------------------------------------
ALLOWED TO DEALERS
AS A PERCENTAGE AS A PERCENTAGE OF AS A PERCENTAGE OF
AMOUNT OF PURCHASE OF OFFERING PRICE NET ASSET VALUE* OFFERING PRICE***
------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C>
$0 - $49,999 2.00% 2.04% 1.75%
$50,000 - $99,999 2.00% 2.04% 1.75%
$100,000 - $249,999 1.50% 1.52% 1.25%
$250,000 - $499,999 1.50% 1.52% 1.25%
$500,000 - $999,999 1.00% 1.01% 0.75%
$1 million and over** 0.0% 0.0% 0.50%
</TABLE>

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

* Rounded to the nearest one-hundredth percent.

** Redemption of shares may be subject to a contingent deferred sales
charge as discussed below.

*** Commission is payable by the Distributor as discussed below.

Class A shares of a Fund may be purchased at net asset value to the extent that
the amount invested represents the net proceeds from a redemption of shares of a
mutual fund for which William Blair or an affiliate does not serve as investment
manager ("non-William Blair Fund") provided that: (a) the investor has
previously paid either an initial sales charge in connection with the purchase
of the non-William Blair Fund shares, and (b) the purchase of Fund shares is
made within 90 days after the date of such redemption. To make such a purchase
at net asset value, the investor or the investor's dealer must, at the time of
purchase, submit a request that the purchase be processed at net asset value
pursuant to this privilege. The Distributor may in its discretion compensate
firms for sales of Class A shares under this privilege at a commission rate of
0.50% of the amount of Class A shares purchased. The redemption of the shares of
the non-William Blair Fund is, for Federal income tax purposes, a sale upon
which a gain or loss may be realized.

Class A shares of a Fund may be purchased at net asset value by: (a) any
purchaser provided that the amount invested in such Fund or other William Blair
Funds listed under " Special Features -- Class A Shares-- Combined Purchases"
totals at least $1,000,000 including purchases of Class A shares pursuant to the
"Combined Purchases,"

B-33
<PAGE> 247
"Letter of Intent" and "Cumulative Discount" features described under "Special
Features"; or (b) a participant-directed qualified retirement plan described in
Code Section 401(a) or a participant-directed non-qualified deferred
compensation plan described in Code Section 457, provided in each case that such
plan has not less than 200 eligible employees (the "Large Order NAV Purchase
Privilege"). Redemption within two years of shares purchased under the Large
Order NAV Purchase Privilege may be subject to a contingent deferred sales
charge. See "Contingent Deferred Sales Charge-Large Order NAV Purchase
Privilege" below.

Class A shares may be sold at a net asset value in any amount to: (a) officers,
trustees, directors, employees (including retirees) and sales representatives of
a Fund, its investment manager, it principal underwriter or certain affiliate
companies, for themselves or members of their families; (b) registered
representatives and employees of broker-dealers having selling group agreements
with the Distributor and officers, directors and employees of service agents of
the Funds, for themselves or their spouses or dependent children; and (c) any
trust, pension, profit-sharing or other benefit plan for only such persons.
Class A shares may be sold at net asset value in any amount to selected
employees (including their spouses and dependent children) of banks and other
financial services firms that provide services related to order placement and
payment to facilitate transactions in shares of the Funds on their clients
pursuant to an agreement with the Distributor or one of its affiliates. Only
those employees of such banks and other firms who as part of their usual duties
provide services related to transactions in Fund shares may purchase Fund Class
A shares at net asset value hereunder. Class A shares of a Fund may be sold at
net asset value through certain investment advisers registered under the
Investment Advisors Act of 1940 and other financial services firms that adhere
to certain standards established by the Distributor, including a requirement
that such shares be sold for the benefit of their clients participating in an
investment advisory program under which such clients pay a fee to the Adviser or
other firm for portfolio management and other services. Such shares are sold for
investment purposes and on the condition that they will not be resold except
through redemption or repurchase by the Funds. The Funds may also issue Class A
shares at net asset value in connection with the acquisition of the assets of or
merger or consolidation with another investment company, or to shareholders in
connection with the investment or reinvestment of income and capital gain
dividends.

The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes: an individual; or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.

DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES. Investors choosing the
deferred sales charge alternative may purchase Class B shares at net asset value
per share without any sales charge at the time of purchase. Since Class B shares
are being sold without an initial sales charge, the full amount of the
investor's purchase payment will be invested in Class B shares for his or her
account. A contingent deferred sales charge may be imposed upon redemption of
Class B shares. See "Redemption or Repurchase of Shares--Contingent Deferred
Sales Charge--Class B Shares."

Class B shares of a Fund will automatically convert to Class A shares of the
same fund eight years (three years for the Income Fund) after issuance on the
basis of the relative net asset value per share. The purpose of the conversion
feature is to relieve holders of Class B shares from the distribution services
fee when they have been outstanding long enough for the Distributor to have been
compensated for distribution related expenses. For purposes of conversion to
Class A shares, shares purchased through the reinvestment of dividends and other
distributions paid with respect to Class B shares in a shareholder's Fund
account will be converted to Class a shares on a pro rata basis.

PURCHASE OF CLASS C SHARES. The public offering price of the Class C shares of a
Fund is the next determined net asset value. No initial sales charge is imposed.
Since Class C shares are sold without an initial sales charge, the full

B-34
<PAGE> 248
amount of the investor's purchase payment will be invested in Class C shares for
his or her account. A contingent deferred sales charge may be imposed upon the
redemption of Class C shares if they are redeemed within one year of purchase.
See "Contingent Deferred Sales Charge--Class C Shares" below.

PURCHASE OF CLASS N AND CLASS I SHARES. The public offering price of the Class N
and Class I shares of a Fund (except Ready Reserves) is the next determined net
asset value. No initial sales charge or contingent deferred charge is imposed.
Since Class N and Class I shares are sold without an initial sales charge, the
full amount of the investor's purchase payment will be invested in Class N and
Class I shares for the investor's account.

FEES PAID BY DISTRIBUTOR TO SERVICE FIRMS. The Distributor may enter into
related arrangements with various broker-dealer firms and other service firms
("firms"), that provide services and facilities for their customers or clients
who are shareholders of a Fund. The firms provide such office space and
equipment, telephone facilities and personnel as is necessary or beneficial for
providing information and services to their clients. Such services and
assistance may include, but are not limited to, establishing and maintaining
accounts and records, processing purchase and redemption transactions, answering
routine inquiries regarding the Fund, assistance to clients in changing dividend
and investment options, account designations and addresses and such other
services as may be agreed upon from time to time and permitted by applicable
statute, rule or regulation. The Distributor also may provide some of the above
services and retains any portion of the fee under the Shareholder Services
Agreement not paid to firms. Currently, the shareholder services fee payable to
the Distributor is based upon all Fund assets.

CLASS A SHARES. Each Fund receives the entire net asset value of all its Class A
shares sold. The Distributor retains the sales charge on sales of Class A shares
from which it allows discounts from the applicable public offering price to
investment dealers, which discounts are uniform for all dealers in the United
States and its territories. The normal discount allowed to dealers (up to 5.00%
for equity funds and up to 1.75% for the Income Fund) is set forth in the table
in "Initial Sales Change Alternative--Class A shares" above. Upon notice to all
dealers with whom it has sales agreements, the Distributor may allow up to the
full applicable sales charge, as shown in the above table, during periods and
for transactions specified in such notice and such reallowances may be based
upon attainment of minimum sales levels. During periods when 90% or more of the
sales charge is reallowed, such dealers may be deemed to be underwriters as that
term is defined in the Securities Act of 1933.

The Distributor may in its discretion compensate investment dealers or other
financial services firms in connection with the sale of Class A shares of a Fund
at net asset value in accordance with the Large Order NAV Purchase Privilege up
to the following amounts: 1.00% of the net asset value of shares of all Funds
(except the Income Fund) and sold 0.50% on the net asset value of shares of the
Income Fund sold. The commission schedule will be reset on a calendar year basis
for sales of shares pursuant to the Large Order NAV Purchase Privilege to
employer sponsored employee benefit plans using the subaccount recordkeeping
system available through William Blair. For purposes of determining the
appropriate commission percentage to be applied to a particular sale, the
Distributor will consider the cumulative amount invested by the purchaser in a
Fund and other Funds listed under "Special Features--Class A Shares--Combined
Purchases," including purchases pursuant to the "Combined Purchases," "Letter of
Intent" and "Cumulative Discount" features referred to above. The privilege of
purchasing Class A shares of a Fund at net asset value under the Large Order NAV
Purchase Privilege is not available if another asset value purchase privilege
also applies.

For periods after the first year, the Distributor intends to pay firms for sales
of Class A shares a shareholder services fee, payable quarterly, at an annual
rate of 0.25% of net assets attributable to Class A shares. The fee will
continue until terminated by the Distributor or the Fund.

CLASS B SHARES. For Class B shares, the Distributor receives any contingent
deferred sales charges but may compensate firms for sales of Class B shares at
the time of sale at a commission rate of up to 4.00% for equity funds (1.50% for
the Income Fund). For periods after the first year, the Distributor intends to
pay firms for sales of Class B shares a shareholder services fee, payable
quarterly, at an annual rate of 0.25% of net assets attributable to Class B
shares. The fee will continue until terminated by the Distributor or the Fund.

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<PAGE> 249
CLASS C SHARES. The Distributor currently intends to pay firms for sales of
Class C shares a distribution and shareholder services fee, payable quarterly,
at an annual rate of 1.00% of net assets attributable to Class C shares.
The Distributor retains any contingent deferred sales charge on Class C shares.

CLASS N SHARES. The Distributor, in its discretion, may compensate firms,
payable quarterly, at an annual rate up to 0.25% (0.15% for the Income Fund and
0.35% for the Ready Reserves Fund) of the net assets attributable to Class N
shares.

GENERAL. Banks and other financial services firms may provide services related
to order placement and payment to facilitate transactions in shares of a Fund
for their clients, and the Distributor may pay them a transaction fee up to the
level of the discount or commission allowable or payable to dealers, as
described above. Banks are currently prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what action,
if any, would be appropriate. The Distributor does not believe that termination
of a relationship with a bank would result in any material adverse consequences
to a Fund.

The Distributor may, from time to time, pay or allow to firms a 1% commission on
the amount of shares of the Fund sold under the following conditions: (i) the
purchase shares are held in a William Blair IRA account, (ii) the shares are
purchased as a direct "roll over" of a distribution from a qualified retirement
plan account maintained on a participant subaccount record keeping system
provided by William Blair, and (iii) the purchase is not otherwise subject to a
commission.

In addition to the discounts or commissions described above, the Distributor
will, from time to time, pay or allow additional discounts, commissions or
promotional incentives, in the form of cash or other compensation, to firms that
sell shares of the Funds. Noncash compensation includes luxury merchandise and
trips to luxury resorts. In some instances, such discounts, commissions or other
incentives will be offered only to certain firms that sell or are expected to
sell during specified time periods certain minimum amounts of shares of the
Funds, or other funds underwritten by the Distributor.

Orders for the purchase of shares of a Fund will be confirmed at a price based
on the net asset value of that Fund next determined after receipt by the
Distributor of the order accompanied by payment. However, orders received by
dealers or other financial services firms prior to the determination of net
asset value (see "Net Asset Value") and received by the Distributor prior to the
close of its business day will be confirmed at a price based on the net asset
value effective on that day ("trade date"). The Funds reserve the right to
determine the net asset value more frequently than once a day if deemed
desirable. Dealers and other financial services firms are obligated to transmit
orders promptly. Collection may take significantly longer for a check drawn on a
foreign bank than for a check drawn on a domestic bank. Therefore, if an order
is accompanied by a check drawn on a foreign bank, funds must normally be
collected before shares will be purchased.

Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem the Funds' shares. Some may establish higher
minimum investment requirement than set forth above. Firms may arrange with
their clients for other investments or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
the Funds' shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Funds' transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from the Funds through the Distributor for recordkeeping and other expenses
relating to these nominee accounts. In addition, certain privileges with respect
to the purchase and redemption of shares or the reinvestment of dividends may
not be available through such firms. Some firms may participate in a program
allowing them access to their client's accounts for servicing including, without
limitation, transfers of registration and dividend payee changes; and may
perform functions such as generation of confirmation statements and
reimbursement of cash dividends. Such firms may receive compensation

B-36
<PAGE> 250
from the Funds through the Distributor Service Agent for these services. This
statement of additional information should be read in connection with such
firms' material regarding their fees and services.

The Funds reserve the right to withdraw all or any part of the offering made by
this statement of additional information and reject purchase orders. Also, from
time to time, each Fund may temporarily suspend the offering of any class of its
shares to new investors. During the period of such suspension, persons who are
already shareholders of such class of such Fund normally are permitted to
continue to purchase additional shares of such class and to have dividends
reinvested.

The conversion of Class B shares to Class A shares may be subject to the
continuing availability of an opinion of counsel, ruling by the Internal Revenue
Service or other assurance acceptable to each Fund to the effect that (a) the
assessment of the distribution services fee with respect to Class B shares and
not Class A shares does not result in the Fund's dividends constituting
"preferential dividends" under the Internal Revenue Code, and (b) that the
conversion of Class B shares to Class A shares does not constitute a taxable
event under the Internal Revenue Code. The conversion of Class B shares to Class
A shares may be suspended if such assurance is not available. In that event, no
further conversion of Class B shares would occur, and shares might continue to
be subject to the distribution services fee for an indefinite period that may
extend beyond the proposed conversion date as described herein.

The Trust has authorized certain members of the National Association of
Securities Dealers, Inc. ("NASD"), other than the Distributor to accept purchase
and redemption orders for the Funds' shares. Those brokers may also designate
other parties to accept purchase and redemption orders on the Funds' behalf.
Orders for purchase or redemption will be deemed to have been received by the
Trust when such brokers or their authorized designees accept the orders. Subject
to the terms of the contract between the Trust and the broker, ordinarily orders
will be priced at the Fund's net asset value next computed after acceptance by
such brokers or their authorized designees. Further, if purchases or redemptions
of a Fund's shares are arranged and settlement is made at an investor's election
through any other authorized NASD member, that member may, at its discretion,
charge a fee for that service. The Board of Trustees and the Distributor each
has the right to limit the amount of purchases by, and to refuse to sell to, any
person. The Board of Trustees and the Distributor may suspend or terminate the
offering of shares of a Fund at any time for any reason.

REDEMPTIONS.

SUSPENSION OF REDEMPTION OR DELAY IN PAYMENT. The Trust may not suspend the
right of redemption or delay payment on its shares for more than seven days
except (a) during any period when the New York Stock Exchange is closed (other
than on weekends and customary holidays); (b) when trading in the markets that
the portfolio normally utilizes is restricted or any emergency exists as
determined by the Securities and Exchange Commission, so that disposal of a
Fund's investments or determination of its net asset value is not reasonably
practicable; or (c) for such other periods as the Securities and Exchange
Commission may permit by order for protection of the Trust's shareholders.

SPECIAL REDEMPTIONS. Although it is the present policy of all of the Fund's to
redeem shares in cash, if the Board of Trustees determines that a material
adverse effect would be experienced by the remaining shareholders if payment of
large redemptions were made wholly in cash, the Funds will pay the redemption
price in whole or in part by a distribution of portfolio instruments in lieu of
cash, in conformity with the applicable rules of the Securities and Exchange
Commission, taking such instruments at the same value used to determine net
asset value and selecting the instruments in such manner as the Board of
Trustees may deem fair and equitable. If such a distribution occurs,
shareholders receiving instruments and selling them before their maturity could
receive less than the redemption value of such instruments and could also incur
transaction costs. The Funds have elected to be governed by Rule 18f-1 under the
1940 Act, pursuant to which the Funds are obligated to redeem portfolio shares
solely in cash up to the lesser of $250,000 or 1% of the net asset value of the
portfolio during any 90-day period for any one shareholder of record.

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<PAGE> 251
CONTINGENT DEFERRED SALES CHARGE--LARGE ORDER NAV PURCHASE PRIVILEGE. A
contingent deferred sales charge may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege as
follows: for all Funds (except the Income Fund), 1% if they are redeemed within
one year of purchase and 0.50% if they are redeemed during the second year after
purchase and for the Income Fund, 0.50% if they are redeemed within one year of
purchase. The charge will not be imposed upon redemption of reinvested dividends
or share appreciation. The charge is applied to the value of the shares
redeemed, excluding amounts not subject to the charge. The contingent deferred
sales charge will be waived in the event of: (a) redemptions by a
participant-directed qualified retirement plan described in Code Section 401(a)
or a participant-directed non-qualified deferred compensation plan described in
Code Section 457, provided in each case that such plan has not less than 200
eligible employees; (b) redemption of shares of a shareholder (including a
registered joint owner) who has died; (c) redemption of shares of a shareholder
(including a registered joint owner) who after purchase of the shares being
redeemed becomes totally disabled (as evidenced by a determination by the
federal Social Security Administration); (d) redemptions under a Fund's
Systematic Withdrawal Plan at a maximum of 10% per year of the net asset value
of the account; and (e) redemptions of shares whose dealer of record at the time
of the investment notifies the Distributor that the dealer waives the
discretionary commission applicable to such Large Order NAV Purchase.

CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. A contingent deferred sales
charge may be imposed upon redemption of Class B shares. There is no such charge
upon redemption of any share appreciation or reinvested dividends on Class B
shares. The charge is applied to the value of the shares redeemed, excluding
amounts not subject to the charge. The charge is computed at the following rates
applied to the value of the shares redeemed excluding amounts not subject to the
charge.

<TABLE>
<CAPTION>
EQUITY FUNDS INCOME FUND
CONTINGENT DEFERRED CONTINGENT DEFERRED
YEAR OF REDEMPTION AFTER PURCHASE SALES CHARGE SALES CHARGE
- --------------------------------- ------------------- -------------------
<S> <C> <C>
First............................ 5.00% 2.00%
Second........................... 4.00% 1.00%
Third............................ 3.00% 0.00%
Fourth........................... 3.00% 0.00%
Fifth............................ 2.00% 0.00%
Sixth............................ 1.00% 0.00%
Seventh.......................... 0.00% 0.00%
</TABLE>

The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan for up to 10% of net
assets annually (see "Special Features--Systematic Withdrawal Plan" below), (d)
for redemptions made pursuant to any IRA systematic withdrawal based on the
shareholder's life expectancy including, but not limited to, substantially equal
periodic payments described in Internal Revenue Code Section 72(t)(2)(A)(iv)
prior to age 59 1/2 and (e) for redemptions to satisfy required minimum
distributions after age 70 1/2 from an IRA account (with the maximum amount
subject to this waiver being based only upon the shareholder's William Blair IRA
accounts). The contingent deferred sales charge will also be waived in
connection with the following redemptions of shares held by employer sponsored
employee benefit plans maintained on the subaccount record keeping system made
available by the Distributor: (a) redemptions to satisfy participant loan
advances (note that loan repayments constitute new purchases for purposes of the
contingent deferred sales charge and the conversion privilege), (b) redemptions
in connection with retirement distributions (limited at any one time to 10% of
the total value of plan assets invested in a Fund), (c) redemptions in
connection with distributions qualifying under the hardship provisions of the
Internal Revenue Code and (d) redemptions representing returns of excess
contributions to such plans.

CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES. A contingent deferred sales
charge of 1% may be imposed upon redemption of Class C shares if they are
redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the

B-38
<PAGE> 252
shares redeemed excluding amounts not subject to the charge. The contingent
deferred sales charge will be waived: (a) in the event of the total disability
(as evidenced by a determination by the federal Social Security Administration)
of the shareholder (including a registered joint owner) occurring after the
purchase of the shares being redeemed, (b) in the event of the death of the
shareholder (including a registered joint owner), (c) for redemptions made
pursuant to a systematic withdrawal plan (limited to 10% of the net asset value
of the account, see "Special Features--Systematic Withdrawal Plan"), (d) for
redemptions made pursuant to any IRA systematic withdrawal based on the
shareholder's life expectancy including, but not limited to, substantially equal
periodic payments described in Internal Revenue Code Section 72(t)(2)(A)(iv)
prior to age 59 1/2, (e) for redemptions to satisfy required minimum
distributions after age 70 1/2 from an IRA account (with the maximum amount
subject to this waiver being based only upon the shareholder's William Blair IRA
accounts), (f) for any participant-directed redemptions of shares held by
employer sponsored employee benefit plans maintained on the subaccount record
keeping system made available by the Distributor and (g) redemption of shares by
an employer sponsored employee benefit plan that offers funds in addition to
William Blair Funds and whose dealer of record has waived the advance of the
first year administrative service and distribution fees applicable to such
shares and agrees to receive such fees quarterly.

CONTINGENT DEFERRED SALES CHARGE--GENERAL. The following example will illustrate
the operation of the contingent deferred sales charge. Assume that an investor
makes a single purchase of $10,000 of a Fund's Class B shares and that 16 months
later the value of the shares has grown by $1,000 through reinvested dividends
and by an additional $1,000 of share appreciation to a total of $12,000. If the
investor were then to redeem the entire $12,000 in share value, the contingent
deferred sales charge would be payable only with respect to $10,000 because
neither the $1,000 of reinvested dividends nor the $1,000 of share appreciation
is subject to the charge. The charge would be at the rate of 4.00% (1.00% for
the Income Fund) ($40 ($10 for the Income Fund)) because it was in the second
year after the purchase was made.

The rate of the contingent deferred sales charge is determined by the length of
the period of ownership. Investments are tracked on a monthly basis. The period
of ownership for this purpose begins the first day of the month in which the
order for the investment is received. For example, an investment made in
December, 1999 will be eligible for the second year's charge if redeemed on or
after December 1, 2000. In the event no specific order is requested when
redeeming shares subject to a contingent deferred sales charge, the redemption
will be made first from shares representing reinvested dividends and then from
the earliest purchase of shares. The Distributor receives any contingent
deferred sales charge directly.

SPECIAL FEATURES.

CLASS A SHARES--COMBINED PURCHASES. Each Fund's Class A shares (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of any William
Blair Fund.

CLASS A SHARES--LETTER OF INTENT. The same reduced sales charges for Class A
shares, as shown in the applicable prospectus or statement of additional
information, also apply to the aggregate amount of purchase of such Fund made by
any purchaser within a 12-month period under a written Letter of Intent
("Letter") provided by the Distributor. The Letter, which imposes no obligation
to purchase or sell additional Class A shares, provides for a price adjustment
depending upon the actual amount purchased within such period. The Letter
provides that the first purchase following execution of the Letter must be at
least 5% of the amount of the intended purchase, and that 5% of the amount of
the intended purchase normally will be held in escrow in the form of shares
pending completion of the intended purchase. If the total investments under the
Letter are less than the intended amount and thereby qualify only for a higher
sales charge than actually paid, the appropriate number of escrowed shares are
redeemed and the proceeds used toward satisfaction of the obligation to pay the
increased sales charge. The Letter for an employer sponsored employee benefit
plan maintained on the subaccount record keeping system available through the
Distributor may have special provisions regarding payment of any increased sales
charge resulting from a failure to complete the intended purchase under the
Letter. A shareholder may include the value (at the maximum offering price) of
all shares of such William Blair Funds held of record as of the initial purchase
date under the Letter as an

B-39
<PAGE> 253
"accumulation credit" toward the completion of the Letter, but no price
adjustment will be made on such shares. Only investments in Class A shares are
included in this privilege.

CLASS A SHARES--CUMULATIVE DISCOUNT. Class A shares of a Fund may also be
purchased at the rate applicable to the discount bracket attained by adding to
the cost of shares of a Fund being purchased, the value of all Class A shares of
the William Blair Funds (computer at the maximum offering price at the time of
purchase for which the discount is applicable) already owned by the investor.

CLASS A SHARES--AVAILABILITY OF QUANTITY DISCOUNTS. An investor or the
investor's dealer or other financial services firm must notify the Distributor
whenever a quantity discount or reduced sales charge is applicable to a
purchase. Upon such notification, the investor will receive the lowest
applicable sales charge. Quantity discounts described above may be modified or
terminated at any time.

EXCHANGE PRIVILEGE. Shareholders of Class A, Class B, Class C, Class N and Class
I shares may exchange their shares for shares of the corresponding class of
other William Blair Funds in accordance with the provisions below.

Class A Shares. Class A shares of the William Blair Funds may be exchanged for
each other at their relative net asset values.

Class A shares of a Fund purchased under the Large Order NAV Purchase Privilege
may be exchanged for Class A shares of another William Blair Fund under the
exchange privilege described above without paying any contingent deferred sales
charge at the time of exchange. If the Class A shares received on exchange are
redeemed thereafter, a contingent deferred sales charge may be imposed in
accordance with the foregoing requirements provided that the shares redeemed
will retain their original cost and purchase date for purposes of the contingent
deferred sales charge.

Class B Shares. Class B shares of a Fund may be exchanged for each other at
their relative net asset values. Class B shares may be exchanged without a
contingent deferred sales charge being imposed at the time of exchange. For
purposes of the contingent deferred sales charge that may be imposed upon the
redemption of the Class B shares received on exchange, amounts exchanged retain
their original cost and purchase date.

Class C Shares. Class C shares of a Fund may be exchanged for each other at
their relative net asset values. Class C shares may be exchanged without a
contingent deferred sales charge being imposed at the time of exchange. For
determining whether there is a contingent deferred sales charge that may be
imposed upon the redemption of the Class C shares received, by exchange, they
retain the cost and purchase date of the shares that were originally purchased
and exchanged.

General. Shares of a William Blair Fund with a value in excess of $1,000,000
acquired by exchange from another William Blair Fund may not be exchanged
thereafter until they have been owned for 15 days (the "15-Day Hold Policy").
For purposes of determining whether the 15-Day Hold Policy applies to a
particular exchange, the value of the shares to be exchanged shall be computed
by aggregating the value of shares being exchanged for all accounts under common
control, discretion or advice, including without limitation accounts
administered by a financial services firm offering market timing, asset
allocation or similar services. The total value of shares being exchanged must
at least equal the minimum investment requirement of the Fund into which they
are being exchanged. Exchanges are made based on relative dollar values of the
shares involved in the exchange. There is no service fee for an exchange;
however, dealers or other firms may charge for their services in effecting
exchange transactions. Exchanges will be effected by redemption of shares of the
fund held and purchase of shares of the other Fund. For federal income tax
purposes, any such exchange constitutes a sale upon which a gain or loss may be
realized, depending upon whether the value of the shares being exchanged is more
or less than the shareholder's adjusted cost basis of such shares. Shareholders
interested in exercising the exchange privilege may obtain prospectuses of the
other funds from dealers, other firms or the Distributor. Exchanges may be
accomplished by a written request to William Blair, or by telephone if the
shareholder has given authorization. Once the authorization is on file, the
Distributor will honor requests by telephone subject to the limitations on
liability under "Purchase, Repurchase and Redemption of Shares--General." Any
share certificates must be deposited prior to any exchange

B-40
<PAGE> 254
of such shares. During periods when it is difficult to contact the Distributor
by telephone, it may be difficult to use the telephone exchange privilege. The
exchange privilege is not a right and may be suspended, terminated or modified
at any time. Exchanges may only be made for the funds that are available for
sale in the shareholder's state of residence.

GENERAL TRUST INFORMATION

DETERMINATION OF NET ASSET VALUE. For each Fund, net asset value is not
determined on the days that the New York Stock Exchange is closed, which
generally includes the observance of New Year's Day, Dr. Martin Luther King
Jr.'s Birthday, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. In addition, the net asset value
for the Ready Reserves Fund is not calculated on the observance of Columbus Day
and Veteran's Day. Net asset value is not required to be computed on a day when
no orders to purchase shares were received and no shares were tendered for
redemption.

As mentioned in the prospectus, the Ready Reserves Fund values its portfolio
instruments at amortized cost in accordance with Rule 2a-7 under the 1940 Act,
which means that they are valued at their acquisition cost (as adjusted for
amortization of premium or discount), rather than at current market value. This
involves initially valuing an instrument 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 instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price the portfolio would receive if it sold the instrument. Calculations are
made to compare the value of the portfolio's investments valued at amortized
cost with market values. Market valuations are obtained by using actual
quotations provided by market makers, estimates of market value or values
obtained from yield data relating to classes of money market instruments
published by reputable sources at the bid price for such securities.

If a deviation of one-half of one percent or more were to occur between the net
asset value per share calculated by reference to market values and the
portfolio's $1.00 per share net asset value, or if there were any other
deviation that the Board of Trustees determined would result in a material
dilution to shareholders or purchasers, the Board of Trustees would promptly
consider what action, if any, should be initiated. If the portfolio's net asset
value per share (computed using market values) declined, or was expected to
decline, below $1.00 (computed using amortized cost), the Board of Trustees
might temporarily reduce or suspend dividend payments in an effort to maintain
the net asset value at $1.00 per share. As a result of such reduction or
suspension of dividends or other action by the Board of Trustees, an investor
would receive less income during a given period than if such a reduction or
suspension had not taken place. Such action could result in investors receiving
no dividends for the period during which they held shares and receiving, upon
redemption, a price per share lower than that which they paid. On the other
hand, if the portfolio's net asset value per share (computed using market
values) were to increase, or were anticipated to increase, above $1.00 (computed
using amortized cost), the Board of Trustees might supplement dividends in an
effort to maintain the net asset value at $1.00 per share.

The Ready Reserves Fund has never had a deviation of one-half of one percent or
more between its net asset value per share calculated by reference to market
values and its $1.00 per share net asset value; therefore, no Board actions of
the type described above have been taken. To use the amortized cost method of
valuation, the portfolio is limited to investing in instruments that the Board
of Trustees has determined present minimal credit risks and that are within
certain rating categories of a nationally recognized statistical rating
organization.

PERFORMANCE

From time to time, the Trust may advertise its total return for prior period.
Any such advertisement would include at least average annual total return
quotations for one-year, five-year and ten-year (or since inception) periods.
Other total return quotations, aggregate or average, over other time periods may
also be included.

HISTORICAL PERFORMANCE

B-41
<PAGE> 255
In general. The historical performance or return of the Growth Fund, the
Tax-Managed Growth Fund, the Large Cap Growth Fund, the Small Cap Growth Fund,
the International Growth Fund, the Emerging Markets Growth Fund, the Disciplined
Large Cap Fund, the Value Discovery Fund and the Income Fund may be shown in the
form of "average annual total return" and "total return" figures. The
Tax-Managed Growth Fund may use annual average total return figures showing
after-tax returns, including comparisons to tax-deferred vehicles such as
Individual Retirement Accounts and variable annuities. The Income Fund's and
Ready Reserves Fund's historical performance or return may also be shown in the
form of "yield figures." These various measures of performance are described
below.

Average annual total return and total return measure both the net investment
income generated by and the effect of any realized and unrealized appreciation
or depreciation of, the underlying investments of the portfolio, assuming the
reinvestment of all dividends during the period. Average annual total return
figures represent the average annual percentage change over the period in
question. Total returns represent the aggregate percentage or dollar value
change over the period in question. Yield is a measure of the net investment
income per share earned over a specified period, expressed as a percentage of
the net asset value. Yield is an annualized figure, which means that it assumes
that a portfolio generates the same level of net investment income over a
one-year period.

The Trust may advertise cumulative (non-annualized) total return of each class
of shares of a Fund for various periods. Cumulative total return is calculated
by measuring the value of an initial investment in a given class of shares of a
Fund at a given time, deducting the value of all subsequent reinvested
distributions, and dividing the net change in the value of the investment as of
the end period by the amount of the initial investment and expressing the result
as a percentage. Cumulative total return will be calculated separately for each
class of shares. Cumulative total return calculations do not reflect the
imposition of a contingent deferred sales charge, and if any such contingent
deferred sales charge imposed at the time of redemption were reflected, it would
reduce the performance quoted.

The performance quotations for all of the Funds are based upon historical
results and are not necessarily representative of future performance. Returns
and net asset value will fluctuate. The Funds' performance depends upon general
market conditions, operating expenses and the performance of the investment
manager. Any additional fees charged by a dealer or other financial services
firm would reduce the returns described in this section.

In addition, from time to time the adviser has voluntarily absorbed certain
operating expenses of certain of the Funds. For the Income Fund, the Adviser
voluntarily waived certain advisory management fees for the fiscal years from
1990 to 1993 and to the extent described under "Management of the
Fund--Investment Adviser and Distributor." For the Value Discovery Fund, the
Adviser voluntarily waived certain advisory fees from December 23, 1996
(Commencement of Operations) to December 31, 1997 and $14,000 of management fees
in 1999 and to the extent described under "Management of the Fund -- Investment
Adviser and Distributor." For the Tax-Managed Growth Fund, the Large Cap Growth
Fund, the Small Cap Growth Fund, the Emerging Markets Growth Fund and the Value
Discovery Fund, the Adviser is currently voluntarily waiving certain advisory
fees. Without such waives, the performance results noted above for these Funds
would be lower.

Average annual total return. The Funds' average annual total return is computed
in accordance with a standardized method prescribed by rules of the Securities
and Exchange Commission. The average annual total return for a specific period
is found by first taking a hypothetical $1,000 investment ("initial investment")
in a portfolio's shares on the first day of the period and computing the
"redeemable value" of that investment at the end of the period. The redeemable
value is then divided by the initial investment and this quotient is taken to
the nth root (n representing the number of years in the period) and 1 is
subtracted from the result, which is then expressed as a percentage. This
calculation assumes that all income dividends and capital gains distributions by
a Fund have been reinvested at net asset value on the reinvestment dates during
the period.

The average annual total return for the Class N shares of the Funds for the
one-, five- and ten-year periods, or, if less, from commencement of operations
through December 31, 1999 are as follows:

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<PAGE> 256

<TABLE>
<CAPTION>
10-YEAR OR
1-YEAR 5-YEAR LIFE OF FUND
------ ------ ------------
<S> <C> <C> <C>
Growth Fund 19.98% 22.77% 17.97%
International Growth Fund (1) 96.25 22.88 0.17
Emerging Markets Growth Fund (2) 79.31 -- 20.69
Value Discovery Fund (3) 6.10 -- 12.54
Income Fund (4) 0.34 6.45 7.06
</TABLE>
- --------------

(1) Commenced operations on October 1, 1992.

(2) Commenced operations on May 1, 1998.

(3) Commenced operations on December 23, 1996.

(4) Commenced operations on September 25, 1990.

[Space for Adjusted Class Historical Returns]

Average annual after-tax total return. The Tax-Managed Growth Fund's average
annual after-tax total return is calculated by finding the average annual
compounded rates of return over the 1-, 5-, and 10- year periods (or for the
periods of the Fund's operations) that would equate the initial amount invested
to the after-tax value, according to the following formula:

After tax return (pre-liquidation):

P(1+T)(n) = ATV (pre)

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years

ATV(pre) = after-tax value of a hypothetical $1,000
payment made at the beginning of the 1-, 5-,
or 10-year periods at the end of the 1-, 5-,
10-year periods, assuming no liquidation of
the investment at the end of the measurement
periods.

In calculating after-tax returns, the Fund will, in general, will make certain
assumptions. First, the Fund will assume the maximum sales load (or other
charges deducted from payments) is deducted from the initial $1,000 payment.
Second, the Fund will assume all distributions by the Fund are reinvested--less
the taxes due on such dividends and distributions--at the price stated in the
prospectus (including any sales load imposed upon reinvestment of dividends) on
the reinvestment dates during the period. Third, the Fund will calculate the
taxes due on distributions by the Fund by applying the required federal marginal
tax rates to each component of the distributions on the reinvestment date (e.g.,
ordinary income, short-term capital gain, long-term capital gain, etc.). Note
that the required tax rates may vary over time. The Fund will assume no taxes
are due on the portions of any distributions classified as exempt interest or
non-taxable (i.e., return of capital). The Fund will not deduct any amounts for
state or local taxes. Fourth, if the Fund elects to pass through any foreign
taxes paid, the amount of the foreign taxes paid will be added to the ordinary
income distribution before applying the required marginal tax rate to that
portion of the distribution. Then, the taxes due on distributions will be
reduced by the amount of the assumed foreign tax credit resulting from such
distributions. If the calculated tax due is less than zero, the Fund will assume
that the tax due equals to zero. Fifth, the Fund will include all recurring fees
that are charged to all shareholder accounts. For any account fees that vary
with the size of the account, the Fund will assume an account size equal to the
Fund's mean (or median) account size. The Fund will assume that no additional
taxes or tax credits result from any redemption of shares required to pay such
fees. Finally, the Fund will state the total return to the nearest hundredth of
one percent.

Total return. Total return performance for a specific period is calculated by
first taking an investment (assumed below to be $10,000) ("initial investment")
in a Fund's shares on the first day of the period and computing the "ending
value" of that investment at the end of the period. The total return percentage
is then determined by subtracting the initial investment from the ending value,
dividing the remainder by the initial investment and

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expressing the result as a percentage. This calculation assumes that all income
and capital gains dividends by the Fund have been reinvested at net asset value
on the reinvestment dates during the period. Total return may also be shown as
the increased dollar value of the hypothetical investment over the period.

The total return for the Class N shares of the Funds for the one-, five- and
ten-year periods, or, if less, from commencement of operations through December
31, 1999 are as follows:

<TABLE>
<CAPTION>
10-YEAR OR
1-YEAR 5-YEAR LIFE OF FUND
------ ------ ------------
<S> <C> <C> <C>
Growth Fund
International Growth Fund (1)
Emerging Markets Growth Fund (2)
Value Discovery Fund (3)
Income Fund (4)
</TABLE>
- --------------

(1) Commenced operations on October 1, 1992.

(2) Commenced operations on May 1, 1998.

(3) Commenced operations on December 23, 1996.

(4) Commenced operations on September 25, 1990.

Yield. Like the portfolios' average annual total return, the yield for the
Income Fund is computed in accordance with a standardized method prescribed by
rules of the Securities and Exchange Commission. The yield is computed by
dividing the net investment income per share earned during a specific one-month
or 30-day period by the offering price per share on the last day of that period
according to the following formula:

YIELD = 2[(((a-b)/cd)+1)(6) - 1]

Where: a = dividends and interest earned during the period

b = expenses accrued for the period (net of reimbursements)

c = the average daily number of shares outstanding during
the period entitled to receive dividends

d = the offering price (net asset value) per share on the
last day of the period

The Income Fund's current yield for the 30-day period ended December 31, 1999
was 6.56%. Semiannual compounding is assumed.

In computing the foregoing yield, the portfolio follows certain standardized
accounting practices specified by Securities and Exchange Commission rules.
These practices are not necessarily consistent with those that the Fund uses to
prepare its annual and interim financial statements in accordance with generally
accepted accounting principles.

From time to time, the Trust may include in its sales literature and shareholder
reports a quotation of the current "distribution rate" for the Income Fund.
Distribution rate is simply a measure of the level of income and short-term
capital gain dividends distributed for a specified period. It differs from
yield, which is a measure of the income actually earned by the Income Fund's
investments and from total return, which is a measure of the income actually
earned by, plus the effect of any realized or unrealized appreciation or
depreciation of, such investments during the period. Distribution rate,
therefore, is not intended to be a complete measure of performance. Distribution
rate may sometimes be greater than yield since, for instance, it may include
short-term gains (which may be nonrecurring) and may not include the effect of
amortization of bond premiums.

The Ready Reserves Fund's yield quotations as they may appear in advertising and
sales materials also are calculated by a standard method prescribed by rules of
the Securities and Exchange Commission. Under that method, the current yield
quotation is annualized based on a seven-day period and computed as follows: the
portfolio's net investment income per share (accrued interest on portfolio
securities, plus or minus amortized

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purchase discount or premium, less accrued expenses) is divided by the price per
share (expected to remain constant at $1.00) during the period ("base period
return") and the result is divided by seven and multiplied by 365 and the
current yield figure is carried to the nearest one-hundredth of one percent.
Realized capital gains or losses and unrealized appreciation or depreciation of
investments are not included in the calculation. The effective yield is
determined by taking the base period return and calculating the effect of
assumed compounding according to the following formula:

YIELD = [(BASE PERIOD RETURN +1)(365/7)] - 1

The Ready Reserves Fund's effective yield is calculated similarly to its current
yield, except that the net investment income earned is assumed to be compounded
when annualized. The Ready Reserves Fund effective yield will be slightly higher
than its current yield due to compounding.

The Ready Reserves Fund's current yield for the seven-day period ended December
31, 1998 was 4.58%. The Ready Reserves Fund's effective yield for the same
period was 4.68%.

The Ready Reserves Fund's yield fluctuates and the publication of an annualized
yield quotation is not a representation as to what an investment in the Fund
will actually yield for any given future period. Actual yields will depend not
only on changes in interest rates on money market instruments during the period
the investment in the portfolio is held, but also on such matters as any
realized gains and losses and changes in Fund expenses.

COMPARISON OF FUND PERFORMANCE TO MARKET INDICES.

From time to time, in marketing and other Trust literature, each Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds with similar goals, as
tracked by independent organizations. Such market comparisons are set forth
briefly below.

From time to time, the Funds' performance may be compared to that of various
unmanaged stock indices such as the Standard & Poor's 500 Stock Index, NASDAQ,
Value Line and Russell 1000, 2000 and 3000. The Funds' performance may also be
compared to the performance of other growth mutual funds or mutual fund indices
as reported by Weisenberger/CDA Investment Technologies, Inc. ("CDA"), Lipper
Analytical Services, Inc. ("Lipper") or Morningstar, Inc. ("Morningstar").

- CDA: CDA is a widely recognized independent mutual fund reporting
service that is based upon changes in net asset value with all
dividends reinvested.

- LIPPER: Lipper is a widely used independent research firm that
ranks mutual funds' overall performance, investment objectives and
assets. Lipper performance figures are based on changes in net
asset value, with all income and capital gain dividends assumed to
be reinvested. Lipper's calculations do not include the effect of
any sales charges imposed by other funds. Lipper also issues a
monthly yield analysis for fixed- income funds.

- MORNINGSTAR: Morningstar rates funds on the basis of historical
risk and total return. Morningstar's ratings range from five stars
(highest) to one star (lowest) and represent Morningstar's
assessment of the historical risk level and total return of a fund
as a weighted average for three-, five-and ten-year periods.
Ratings are not absolute and do not represent future results.
Morningstar also publishes mutual fund rankings.

The portfolios may also compare their performance with that of indices, such as
the Consumer Price Index or the Lehman Intermediate Government/Corporate Bond
Index. The Lehman bond index is unmanaged and does not adjust for taxes payable
on interest or dividends. When assessing a portfolio's performance as compared
to that of any of these indices, it is important to note the differences and
similarities between the investments that the portfolio may purchase and the
investments measured by the applicable indices.

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- CONSUMER PRICE INDEX: The Consumer Price Index is generally
considered to be a measure of inflation.

- LEHMAN GOVERNMENT/CORPORATE INTERMEDIATE BOND INDEX: This index
generally represents the performance of intermediate government
and investment grade corporate debt securities under various
market conditions.

The Trust may also utilize performance information in hypothetical
illustrations. For example, a Fund may, from time to time: (1) illustrate the
benefits of tax-deferral by comparing taxable investments to investments made
through tax-deferred retirement plans; (2) illustrate in graph or chart form, or
otherwise, the benefits of dollar cost averaging by comparing investments made
pursuant to a systematic investment plan; (3) illustrate allocations among
different types of mutual funds or other investments for investors at different
stages of their lives; and (4) illustrate the benefits of compounding at various
assumed rates of return.

Bank product performance may be based upon, among other things, the Bank Rate
Monitor National Index or various certificates of deposit indices. Performance
of U.S. Treasury obligations may be based upon, among other things, various U.S.
treasury bill indices. Certain of these alternative investments may offer fixed
rates of return and guaranteed principal and may be insured. Money market fund
performance may be based upon, among other things, the IBC/Donoghue's Money Fund
Average (All Taxable). Investors may also want to compare the historical returns
of various investments, performance indexes of those investments or economic
indicators, including but not limited to stocks, bonds, certificates of deposit,
money market funds and U.S. Treasury obligations and the rate of inflation.

Comparative performance information other than that listed above may be used
from time to time in advertising the International Growth Fund and the Emerging
Markets Growth Fund, including data from Micropal Ltd., an independent fund
reporting service, and independent unmanaged indices. For the International
Growth Fund indices include the Morgan Stanley Capital International's Europe,
Australia and the Far East (EAFE) Index or Morgan Stanley Capital
International's All Country World (Free) Except United States (ACWFxUS) Index.
For the Emerging Markets Growth Fund such indices include the MSCI Emerging
Markets (free) Index.

From time to time marketing materials may show a Fund's asset class
diversification, top sectors, ten largest holdings and other Fund asset
structures. In addition, marketing materials may include various actual or
estimated portfolio characteristics, including but not limited to median market
capitalizations, earnings per share, alphas, betas, price/earnings ratios,
returns on equity, dividend yields, capitalization ranges, growth rates,
price/book ratios, and breakdowns by geographic regions or industries. Materials
may also mention how the Adviser believes a Fund compares relative to other
William Blair Funds.

The portfolios may quote information from industry or financial publications of
general U.S. or international interest, such as information from Morningstar,
the Wall Street Journal, Money Magazine, Forbes, Barron's, Fortune, the Chicago
Tribune, USA Today, Institutional Investor and Registered Representative. From
time to time, the Adviser or portfolio manager may provide views on the current
economy and portfolio strategy. In addition, portfolio holdings are available on
a delayed basis upon request.

Occasionally statistics may be used in marketing materials to specify a Fund's
volatility or risk. The general premise is that greater volatility connotes
greater risk undertaken in achieving performance. Measures of volatility or risk
are generally used to compare a Fund's net asset value or performance relative
to a market index. One measure of volatility is beta. Beta is the volatility of
a fund relative to the total market as represented by the Standard & Poor's 500
Stock Index. A beta of more than 1.00 indicates volatility greater than the
market, and a beta of less than 1.00 indicates volatility less than the market.
Another measure of volatility or risk is standard deviation. Standard deviation
is a statistical tool that measures the degree to which a fund's performance has
varied from its average performance during a particular time period.

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Standard deviation is calculated using the following formula:

Standard deviation = the square root of S(xi - xm)2

n-1

Where: S = "the sum of",
xi = each individual return during the time period,
xm = the average return over the time period, and
n = the number of individual returns during the time period.

Statistics may also be used to discuss a Fund's relative performance. One such
measure is alpha. Alpha measures the actual return of a fund compared to the
expected return of a fund given its risk (as measured by beta). The expected
return is based on how the market as a whole performed, and how the particular
fund has historically performed against the market. Specifically, alpha is the
actual return less the expected return. The expected return is computed by
multiplying the advance or decline in a market representation by the Fund's
beta. A positive alpha quantifies the value that the fund manager has added, and
a negative alpha quantifies the value that the fund manager has lost.

Other measures of volatility and relative performance may be used as
appropriate. However, all such measures will fluctuate and do not represent
future results.

TAX STATUS. Each series (Fund) of the Trust is treated as a separate entity for
accounting and tax purposes. The Trust has qualified and elected to be treated
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code (the "Code") and intends to continue to so qualify in the future. As such,
and by complying with the applicable provisions of the Code regarding the
sources of its income, the timing of its distributions and the diversification
of its assets, the Trust will not be subject to Federal income tax on its
taxable income (including net short-term and long-term capital gains) that is
distributed to shareholders in accordance with the timing requirements of the
Code.

Each Fund intends to declare and make distributions during the calendar year of
an amount sufficient to prevent imposition of a 4% nondeductible Federal excise
tax. The required distribution generally is the sum of 98% of a Fund's net
investment income for the calendar year plus 98% of its net capital gain income
for the one-year period ending October 31, plus the sum of any undistributed net
investment income and capital gain net income from the prior year, less any
over-distribution from the prior year.

The Trust is required to withhold Federal income tax at the rate of 31%
(commonly called "backup withholding") from taxable distributions to
shareholders that do not provide the Fund with a taxpayer identification (social
security) number or in other circumstances where shareholders have failed to
comply with Internal Revenue Service regulations.

Special tax provisions may accelerate or defer recognition of certain gains or
losses, change the character of certain gains or losses or alter the holding
periods of certain of a Fund's securities. Specifically, the mark-to-market
rules of the Code may require a Fund to recognize unrealized gains and losses on
certain forward contracts, futures and foreign currency futures held by a Fund
at the end of the Trust's fiscal year. Under these provisions, 60% of any
capital gain net income or loss recognized will generally be treated as
long-term and 40% as short-term. Although certain foreign currency forward
contracts and foreign currency futures contracts are marked-to-market, any gain
or loss related to foreign currency fluctuations is generally treated as
ordinary income under Section 988 of the Code (see below). In addition, the
straddle rules of the Code require deferral of certain losses realized on
positions of a straddle to the extent that the portfolio has unrealized gains in
offsetting positions at year end. The portfolios have elected to mark-to-market
their investments in passive foreign investment companies for Federal income tax
purposes.

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Foreign exchange gains and losses realized by the Trust in connection with
certain transactions that involve foreign currency-denominated debt securities,
certain foreign currency options, foreign currency forward contracts, foreign
currencies or payables or receivables denominated in a foreign currency are
subject to Section 988 of the Code, which generally causes such gains and losses
to be treated as ordinary income and losses and may affect the amount, timing
and character of distributions to shareholders. For example, if a Fund sold a
foreign stock or bond and part of the gain or loss on the sale was attributable
to an increase or decrease in the value of a foreign currency, then the currency
gain or loss may be treated as ordinary income or loss. If such transactions
result in higher net ordinary income, the dividends paid by the Fund will be
increased; if such transactions result in lower net ordinary income, a portion
of dividends paid could be classified as a return of capital.

The International Growth Fund and Emerging Markets Growth Fund may qualify for
and make an election permitted under the "pass through" provisions of Section
853 of the Code, which allows a regulated investment company to elect to have
its foreign tax credit taken by its shareholders instead of on its own tax
return. To be eligible for this credit, more than 50% of the value of the Fund's
total assets at the close of its taxable year must consist of stock or other
securities in foreign corporations, and the Fund must have distributed at least
90% of its taxable income.

If a Fund makes this election, it may not take any foreign tax credit and may
not take a deduction for foreign taxes paid. However, the Fund is allowed to
include the amount of foreign taxes paid in a taxable year in its dividends paid
deduction. Each shareholder would then include in his gross income, and treat as
paid by him, his proportionate share of the foreign taxes paid by the Fund.

If the U.S. government were to impose any restrictions, through taxation or
other means, on foreign investments by U.S. investors such as those to be made
through the Fund, the Board of Trustees will promptly review the Fund's policies
to determine whether significant changes in its investments are appropriate.

Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in a Fund is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above and in the
prospectus. Such investors may be subject to nonresident alien withholding tax
at the rate of 30% (or a lower rate under an applicable tax treaty) on amounts
treated as ordinary dividends from the Fund, unless an effective IRS Form W-8 or
authorized substitute for Form W-8 is on file, and to 31% backup withholding on
certain other payments from the Fund. Non-U.S. investors should consult their
tax advisers regarding such treatment and the application of foreign taxes to an
investment in a Fund.

RETIREMENT PLANS. The Trust offers a variety of retirement investment programs
whereby contributions are invested in shares of the Trust's Funds and any income
dividends or capital gain distributions are reinvested in additional full and
fractional shares of the Fund.

Individual Retirement Accounts. One of the tax-deferred retirement plan accounts
that may hold shares is an Individual Retirement Account ("IRA"). There are
three kinds of IRAs that an individual may establish: traditional IRAs, Roth
IRAs and education IRAs. With a traditional IRA, an individual may be able to
make a deductible contribution of up to $2,000 or, if less, the amount of the
individual's earned income for any taxable year prior to the year the individual
reaches age 70 1/2 if neither the individual nor his or her spouse is an active
participant in an employer's retirement plan. An individual who is (or who has a
spouse who is) an active participant in an employer retirement plan may be
eligible to make deductible IRA contributions; the amount, if any, of IRA
contributions that are deductible by such an individual is determined by the
individual's (and spouse's, if applicable) adjusted gross income for the year.
Even if an individual is not permitted to make a deductible contribution to an
IRA for a taxable year, however, the individual nonetheless may make
nondeductible contributions up to $2,000, or 100% of earned income if less, for
that year. A spouse also may contribute up to $2,000, as long as the spouses'
joint earned income is at least $4,000. There are special rules for determining
how withdrawals are to be taxed if an IRA contains both deductible and
nondeductible amounts. In general, a proportionate amount of each withdrawal
will be deemed to be made from nondeductible contributions; amounts treated as a
return of nondeductible contributions will not be taxable. Lump sum
distributions from another qualified retirement plan may be rolled over into a
traditional IRA also.

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With a Roth IRA, an individual may make only nondeductible contributions;
contributions can be made of up to $2,000 or, if less, the amount of the
individual's earned income for any taxable year, but only if the individual's
(and spouse's, if applicable) adjusted gross income for the year is less than
$95,000 for single individuals or $150,000 for married individuals. The maximum
contribution amount phases out and falls to zero between $95,000 and $110,000
for single persons and between $150,000 and $160,000 for married persons.
Contributions to a Roth IRA may be made even after the individual attains age 70
1/2. Distributions from a Roth IRA that satisfy certain requirements will not be
taxable when taken; other distributions of earnings will be taxable. An
individual with adjusted gross income of $100,000 or less generally may elect to
roll over amounts from a traditional IRA to a Roth IRA. The full taxable amount
held in the traditional IRA that is rolled over to a Roth IRA will be taxable in
the year of the rollover, except rollovers made in 1998, which may be included
in taxable income over a four-year period.

An education IRA provides a method for saving for the higher education expenses
of a child; it is not designed for retirement savings. Generally, amounts held
in an education IRA may be used to pay for qualified higher education expenses
at an eligible (post-secondary) educational institution. An individual may
contribute to an education IRA for the benefit of a child under 18 years old if
the individual's income does not exceed certain limits. The maximum contribution
for the benefit of any one child is $500 per year. Contributions are not
deductible, but earnings accumulate tax-free until withdrawal, and withdrawals
used to pay qualified higher education expenses of the beneficiary (or
transferred to an education IRA of a qualified family member) will not be
taxable. Other withdrawals will be subject to tax.

Please call the Trust to obtain information regarding the establishment of IRAs.
An IRA plan custodian may charge fees in connection with establishing and
maintaining the IRA. An investor should consult with a competent tax adviser for
specific advice concerning his or her tax status and the possible benefits of
establishing one or more IRAs. The description above is only very general; there
are numerous other rules applicable to these plans to be considered before
establishing one.

Shareholders should consult their tax advisers about the application of the
provisions of tax law in light of their particular tax situations.

Simplified Employee Pension Plans. An employer may establish a SEP plan under
which the employer makes contributions to all eligible employees' IRAs. Any
Fund's shares may be used for this purpose.

Qualified Retirement Plans. A corporation, partnership or sole proprietorship
may establish a qualified money purchase pension and profit sharing plan and
make contributions for each participant up to the lesser of 25% of each
participant's gross compensation or $30,000. Such contributions may be made by
the employer and, if certain conditions are met, participants may also make
nondeductible voluntary contributions.

Under the Code, an investor has at least seven days in which to revoke an IRA
after receiving certain explanatory information about the plan. Individuals who
have received distributions from certain qualified plans may roll over all or
part of such distributions into an IRA, which will defer taxes on the
distributions and shelter investment earnings. Trustees of qualified retirement
plans and 403(b)(7) accounts are required by law to withhold 20% of the taxable
portion of any distribution that is eligible to be "rolled over." The 20%
withholding requirement, however, does not apply to distributions from IRAs or
any part of a distribution that is transferred directly to another qualified
retirement plan, 403(b)(7) account or IRA. Shareholders are advised to consult
with a tax professional regarding this requirement.

INDEPENDENT AUDITORS. The Trust's independent auditors are Ernst & Young LLP,
Sears Tower, 233 South Wacker Drive, Chicago, Illinois 60606. Ernst & Young
audits and reports upon the Trust's annual financial statements, reviews certain
regulatory reports, prepares the Trust's Federal and state tax returns and
performs other professional accounting, auditing, tax and advisory services when
engaged to do so by the Trust.

LEGAL COUNSEL. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, is the Trust's Counsel.

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CUSTODIAN. The Trust's custodian, Investors Bank and Trust Company, 200
Clarendon Street, Boston, Massachusetts 02117, has custody of all securities and
cash of the Trust and attends to the collection of principal and income and
payment for and collection of proceeds of securities bought and sold by the
Trust. The custodian for IRAs may be State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110.

TRANSFER AGENT SERVICES. State Street Bank and Trust Company ("State Street"),
225 Franklin Street, Boston, Massachusetts 02110, is the Trust's transfer agent
and dividend-paying agent. State Street, as the shareholder service agent,
provides certain bookkeeping, data processing and administrative services
pertaining to the maintenance of shareholder accounts.

REPORTS TO SHAREHOLDERS. Shareholders will receive annual audited financial
statements and semi-annual unaudited financial statements.

SHAREHOLDER RIGHTS

All shares of each Fund have equal rights with respect to dividends, assets and
liquidation of a portfolio and equal, noncumulative voting rights. Noncumulative
voting rights allow the holder or holders of a majority of shares, voting
together for the election of directors, to elect all the directors. All shares
of each Fund will be voted in the aggregate, except when a separate vote by Fund
is required under the 1940 Act. Shares are fully paid and nonassessable when
issued, are transferable without restriction and have no preemptive or
conversion rights.

Under Delaware law, the Trust generally is not required to hold annual
shareholders' meetings. Upon the written request of ten or more shareholders
that have held Fund shares for at least six months in an amount equal to the
lesser of 1% of the outstanding shares or $25,000, the Fund will either
disseminate appropriate materials (at the expense of the requesting
shareholders) or provide such shareholders access to a list of names and
addresses of all shareholders of record. The written notice must state that the
shareholders making such request wish to communicate with the other shareholders
to obtain the signatures necessary to demand a meeting to consider removal of a
director. The Fund will hold shareholders' meetings when requested to do so in
writing by one or more shareholders collectively holding at least 10% of the
shares entitled to vote, such request specifying the purpose or purposes for
which each meeting is to be called, or when determined by a majority of the
Board of Trustees in their discretion. Shareholders' meetings also will be held
in connection with the following matters: (1) the election or removal of
directors, if a meeting is called for such purpose; (2) the adoption of any
contract for which shareholder approval is required by the Act; (3) any
termination of the Fund; (4) any amendment of the Declaration of Trust; (5) any
merger, consolidation or sale of assets; (6) incorporation of the Trust; and (7)
such additional matters as may be required by law, the Declaration of Trust, the
By-Laws of the Fund or any registration of the Fund with the Securities and
Exchange Commission or any state, or that the Trustees may consider necessary or
desirable, such as changes in fundamental investment objectives, policies or
restrictions.

The Trustees serve until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of
their successors or until a director sooner dies, resigns, retires, or is
removed by a majority vote of the shares entitled to vote or by a majority of
the trustees. In accordance with the Act, the Trust will hold a shareholder
meeting for the election of trustees at such time that (1) less than a majority
of the trustees has been elected by the shareholders and (2) if, as a result of
a vacancy in the Board of Trustees, less than two-thirds of the trustees have
been elected by the shareholders. A trustee may be removed from office by a vote
of the holders of a majority of the outstanding shares entitled to vote.

INVESTMENT CRITERIA

VALUE DISCOVERY FUND. The Value Discovery Fund's investment objective is to seek
long-term capital appreciation. The Fund pursues its objective by investing with
a value discipline primarily in the equity securities of small companies. The
Adviser's small cap value search begins with the total universe of companies
with market capitalizations of less than $1,500 million. This represents
approximately 90% of all companies trading in the U.S. They identify and
quantify potential price/value disparities, conduct fundamental due diligence
and formulate an opinion of the firm, estimate the value of the fund, calculate
the total expected return for all portfolio and database

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firms daily, build a portfolio of high-expected return, low valuation and high
qualify firms and adhere to a structured sell discipline. In selecting companies
for investment, the Adviser evaluates the extent to which a company meets the
investment criteria set forth below. The weight given to a particular investment
criterion will depend upon the circumstances, and some portfolio holdings may
not meet all of the following criteria:

Material Price/Value Disparity--whether the company's current market
value reflects a material discount from the Adviser's estimate of the
company's intrinsic value. In determining a company's intrinsic value,
the Adviser generally will assess whether a company's share price
appears to be inexpensive relative to any of the following: sales,
projected earnings, projected cash flow, discounted cash flow, asset
values and liquidation value. The discount of the market value from the
intrinsic value is considered material when it provides an adequate
return opportunity compared to alternative small company investments.
The Adviser believes that the short-term market assessment of a
company's value can differ materially from a long-term perspective.
Therefore, price/value disparities can result from particular
industries and companies currently being in disfavor in the market. As
the reasons for market disfavor dissipate, a market reassessment can
result in price appreciation. However, there is no guarantee that this
will result in market appreciation for a company.

Probable Expansion in Profitability--whether the company has a
reasonable expectation of improving its level of profitability over a
three-year investment horizon. The Adviser believes an expansion in
profit margins generally results in improved market valuation.
Therefore, the Adviser will look for companies that it believes have
the potential for normal, sustainable levels of profitability greater
than their current levels. Factors used to assess the normal level of
future profitability for a company include industry profit levels and
competitiveness and the company's competitive advantages and business
strategy.

Skilled and Committed Management--whether the company has a capable and
skilled management team and a clearly articulated and logical business
strategy with a reasonable probability of successful execution.
Generally, this determination will be made through due diligence with
management, which often includes on-site meetings. Factors used to
assess management's ability to execute its business strategy include
tangible evidence of prior business success and management's level of
financial commitment to the company through equity ownership.

Strong Capital Structure--whether the company has a relatively simple,
clean financial structure without excessive use of financial leverage.
In addition, the company should adhere to conservative and
straightforward accounting practices.

Positive Catalyst--the likelihood that the company will undergo a
positive corporate change within a three-year investment horizon.
Examples of positive corporate changes may include: successful
execution of its business plan, acquisitions, mergers, spin-offs,
divestitures, new products and management additions or changes. The
portfolio seeks to invest in companies before a positive catalyst
becomes apparent to the market.

INCOME FUND. The Adviser uses the following process to construct fixed income
portfolios:

- - A maturity range is selected that meets the fund's overall risk parameters.

- - Cash levels and maturity distributions are chosen to reflect current and
expected interest rates. The fund's need for liquidity is also factored.

- - When buying securities, careful attention is paid to factors such as
options, prepayments, etc., that may adversely affect prices in different
interest rate environments.

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- - Individual, non-government position sizes are limited to less than 10% of
the value of the Fund.

- - Bond types are varied to favor sectors expected to benefit from periodic
changes in yield spreads.

TRUST HISTORY

The Trust is a Delaware business trust organized under a Declaration of Trust
dated September 8, 1999. The Trust was formerly organized as a Maryland
corporation on September 22, 1987 under the name of William Blair Ready
Reserves, Inc. (the "Company"). On April 30, 1991, a reorganization of the
Company and Growth Industry Shares, Inc., a Maryland corporation, occurred such
that Growth Industry Shares, Inc. was reorganized into a separate portfolio of
the Company, now the Growth Fund, and the Fund changed its name to William Blair
Mutual Funds, Inc. On December 15, 1999, the Company was reorganized into the
Trust and changed its name to William Blair Funds. Presently, the Trust is
offering shares of the ten funds described in the prospectuses. The Board of
Trustees of the Trust may, however, establish additional portfolios with
different investment objectives, policies and restrictions in the future.

FINANCIAL INFORMATION OF THE FUND

The Trust's audited financial statements, including the notes thereto, contained
in the Trust's annual reports to shareholders for the period ended December 31,
1999, are incorporated herein by reference. Additional copies of the reports to
shareholders may be obtained without charge by writing or calling the Trust.

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APPENDIX A

DESCRIPTION OF MONEY MARKET INSTRUMENTS

The following information includes a description of certain money market
instruments in which the Ready Reserves Fund portfolio may invest to the extent
consistent with its investment objective.

UNITED STATES GOVERNMENT SECURITIES. These include marketable securities issued
by the United States Treasury, which consist of bills, notes and bonds. Such
securities are direct obligations of the United States government and are backed
by the full faith and credit of the United States. They differ mainly in the
length of their maturity. Treasury bills, the most frequently issued marketable
government security, have a maturity of up to one year and are issued on a
discount basis.

GOVERNMENT AGENCY SECURITIES. These include debt securities issued by
government-sponsored enterprises, federal agencies or instrumentalities and
international institutions. Such securities are not direct obligations of the
U.S. Treasury but involve some government sponsorship or guarantees. Different
instruments have different degrees of government backing. For example,
securities issued by the Federal National Mortgage Association are supported by
the agency's right to borrow money from the U.S. Treasury under certain
circumstances. Securities issued by the Student Loan Marketing Association are
supported only by the credit of the agency that issued them. Thus, the Fund may
not be able to assert a claim against the United States itself in the event the
agency or instrumentality does not meet its commitment.

SHORT-TERM CORPORATE DEBT INSTRUMENTS. These include commercial paper (including
variable amount master demand notes), which refers to short-term unsecured
promissory notes issued by corporations to finance short-term credit needs.
Commercial paper is usually sold on a discount basis and has a maturity at the
time of issuance not exceeding nine months. In addition, some short-term paper,
which can have a maturity exceeding nine months, is issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933 ("Section 4(2) paper"). The Ready Reserves
Fund portfolio may invest in Section 4(2) paper with maturities of twelve months
or less. Section 4(2) paper is restricted as to disposition under the Federal
securities laws and generally is sold to institutional investors such as the
Fund who agree that they are purchasing the paper for investment and not with a
view to public distribution. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payees of such notes, whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes.

Because variable amount master demand notes are direct lending arrangements
between the lender and the borrower, it is not generally contemplated that such
instruments will be traded and there is no secondary market for the notes.
Typically, agreements relating to such notes provide that the lender may not
sell or otherwise transfer the note without the borrower's consent. Such notes
provide that the interest rate on the amount outstanding is adjusted
periodically, typically on a daily basis in accordance with a stated short-term
interest rate benchmark. Since the interest rate of a variable amount master
demand note is adjusted no less often than every 60 days and since repayment of
the note may be demanded at any time, the Fund values such a note in accordance
with the amortized cost basis at the outstanding principal amount of the note.

Also included are nonconvertible corporate debt securities (e.g., bonds and
debentures) with no more than one year remaining to maturity at the date of
settlement. Corporate debt securities with a remaining maturity of less than one
year tend to become quite liquid, have considerably less market value
fluctuations than longer term issues and are traded as money market securities.

BANK MONEY INSTRUMENTS. These include instruments such as certificates of
deposit, time deposits and bankers' acceptances. Certificates of deposit are
generally short-term, interest-bearing negotiable certificates issued by
commercial banks or savings and loan associations against funds deposited in the
issuing institution. A time deposit is a non-negotiable deposit in a banking
institution earning a specified interest rate over a given period of time. A

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banker's acceptance is a time draft drawn on a commercial bank by a borrower
usually in connection with an international commercial transaction (to finance
the import, export, transfer or storage of goods). The borrower is liable for
payment as well as the bank, which unconditionally guarantees to pay the draft
at its face amount on the maturity date. Most acceptances have maturities of six
months or less and are traded in secondary markets prior to maturity.

REPURCHASE AGREEMENTS. A repurchase agreement is an instrument under which the
purchaser (e.g., a mutual fund) acquires ownership of an obligation (debt
security) and the seller agrees, at the time of the sale, to repurchase the
obligation at a mutually agreed upon time and price, thereby determining the
yield during the purchaser's holding period. This results in a fixed-rate of
return insulated from market fluctuations during such period. The underlying
securities will consist only of U.S. Government or government agency or
instrumentality securities.

Repurchase agreements usually are for short periods, typically less than one
week. Repurchase agreements are considered to be loans under the 1940 Act, with
the security subject to repurchase, in effect, serving as "collateral" for the
loan. The Fund will require the seller to provide additional collateral if the
market value of the securities falls below the repurchase price at any time
during the term of the repurchase agreement. In the event of a default by the
seller because of bankruptcy or otherwise, the Fund may suffer time delays and
incur costs or losses in connection with the disposition of the collateral.

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APPENDIX B - RATINGS OF DEBT OBLIGATIONS

COMMERCIAL PAPER RATINGS

A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The following summarizes the rating categories used by Standard and
Poor's for commercial paper:

"A-1" - Issue's degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety characteristics are denoted
"A-1+."

"A-2" - Issue's capacity for timely payment is satisfactory. However, the
relative degree of safety is not as high as for issues designated "A-1."

"A-3" - Issue has an adequate capacity for timely payment. It is, however,
somewhat more vulnerable to the adverse effects of changes and circumstances
than an obligation carrying a higher designation.

"B" - Issue has only a speculative capacity for timely payment.

"C" - Issue has a doubtful capacity for payment.

"D" - Issue is in payment default. The "D" category is used when interest
payments or principal payments are not made on the due date, even if the
applicable grace period has not expired when S & P believes such payments will
be made during such grace period.

Moody's commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
one year, unless explicitly noted. The following summarizes the rating
categories used by Moody's for commercial paper:

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

"Prime-2" - Issuer or related supporting institutions are considered to have a
strong capacity for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is maintained.

"Prime-3" - Issuer or related supporting institutions have an acceptable ability
for repayment of senior short-term debt obligations. The effects of industry
characteristics and market composition may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and the requirement for relatively high financial leverage.
Adequate alternate liquidity is maintained.

"Not Prime"- Issuer does not fall within any of the Prime rating categories.

The three rating categories of Duff & Phelps for investment grade commercial
paper and short-term debt are "Duff 1," "Duff 2" and "Duff 3." Duff & Phelps
employs three designations, "Duff 1+," "Duff 1" and "Duff 1-," within the
highest rating category. The following summarizes the rating categories used by
Duff & Phelps for commercial paper:

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<PAGE> 269
"Duff 1+" - Debt possesses highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.

"Duff 1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors. Risk
factors are minor.

"Duff 1-" - Debt possesses high certainty of timely payment. Liquidity factors
are strong and supported by good fundamental protection factors. Risk factors
are very small.

"Duff 2" - Debt possesses good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk factors
are small.

"Duff 3" - Debt possesses satisfactory liquidity, and other protection factors
qualify issue as investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.

"Duff 4" - Debt possesses speculative investment characteristics. Liquidity is
not sufficient to ensure against disruption in debt service. Operating factors
and market access may be subject to a high degree of variation.

"Duff 5" - Issuer has failed to meet scheduled principal and/or interest
payments.

Fitch short-term ratings apply generally to debt obligations that are payable on
demand or have original maturities of up to three years. The following
summarizes the rating categories used by Fitch for short-term obligations:

"F-1+" - Securities possess exceptionally strong credit quality. Issues assigned
this rating are regarded as having the strongest degree of assurance for timely
payment.

"F-1" - Securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree than
issues rated "F-1+."

"F-2" - Securities possess good credit quality. Issues carrying this rating have
a satisfactory degree of assurance for timely payment, but the margin of safety
is not as great as the "F-1+" and "F-1" categories.

"F-3" - Securities possess fair credit quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely payment is
adequate; however, near-term adverse changes could cause these securities to be
rated below investment grade.

"F-S" - Securities possess weak credit quality. Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for timely payment and
are vulnerable to near-term adverse changes in financial and economic
conditions.

"D" - Securities are in actual or imminent payment default.

CORPORATE LONG-TERM DEBT RATINGS

The following summarizes the ratings used by Standard & Poor's for corporate and
municipal debt:

"AAA" - This designation represents the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment is extremely
strong.

"AA" - An obligation rated "AA" differs from the highest rated obligations only
in small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.

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<PAGE> 270
"A" - An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

"BBB" - An obligation rated "BBB" exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.

"BB," "B," "CCC," "CC," and "C" - Debt is regarded as having significant
speculative characteristics. "BB" indicates the least degree of speculation and
"C" the highest. While such obligations will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.

"BB" - Debt is less vulnerable to non-payment than other speculative issues.
However, it faces major ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to obligor's inadequate
capacity to meet its financial commitment on the obligation.

"B" - Debt is more vulnerable to non-payment than obligations rated "BB," but
the obligor currently has the capacity to meet its financial commitment on the
obligation. Adverse business, financial or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial commitment on
the obligation.

"CCC" - Debt is currently vulnerable to non-payment, and is dependent upon
favorable business, financial and economic conditions for the obligor to meet
its financial commitment on the obligation. In the event of adverse business,
financial or economic conditions, the obligor is not likely to have the capacity
to meet its financial commitment on the obligation.

"CC" - An obligation rated "CC" is currently highly vulnerable to non-payment.

"C" - The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on this
obligation are being continued.

"D" - An obligation rated "D" is in payment default. This rating is used when
payments on an obligation are not made on the date due, even if the applicable
grace period has not expired, unless S & P believes that such payments will be
made during such grace period. "D" rating is also used upon the filing of a
bankruptcy petition or the taking of similar action if payments on an obligation
are jeopardized.

PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.

"r" - This rating is attached to highlight derivative, hybrid, and certain other
obligations that S & P believes may experience high volatility or high
variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an "r"
symbol should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.

The following summarizes the ratings used by Moody's for corporate and municipal
long-term debt:

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

"Aa" - Bonds are judged to be of high quality by all standards. Together with
the "Aaa" group they comprise what are generally known as high-grade bonds. They
are rated lower than the best bonds because margins of protection

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may not be as large as in "Aaa" securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in "Aaa" securities.

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

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

"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these ratings
provide questionable protection of interest and principal ("Ba" indicates some
speculative elements; "B" indicates a general lack of characteristics of
desirable investment; "Caa" represents a poor standing; "Ca" represents
obligations which are speculative in a high degree; and "C" represents the
lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in default.

Con. (--) - Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These are bonds
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operation experience, (c) rentals which begin when facilities are
completed, or (d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.

(P) - When applied to forward delivery bonds, indicates that the rating is
provisional pending delivery of the bonds. The rating may be revised prior to
delivery if changes occur in the legal documents or the underlying credit
quality of the bonds.

Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa1,
A1, Baa1, Ba1 and B1.

The following summarizes the ratings used by Duff & Phelps for corporate and
municipal long-term debt:

"AAA" - Debt is considered to be of the highest credit quality. The risk factors
are negligible, being only slightly more than for risk-free U.S. Treasury debt.

"AA" - Debt is considered of high credit quality. Protection factors are strong.
Risk is modest but may vary slightly from time to time because of economic
conditions.

"A" - Debt possesses protection factors which are average but adequate. However,
risk factors are more variable and greater in periods of economic stress.

"BBB" - Debt possesses below average protection factors but such protection
factors are still considered sufficient for prudent investment. Considerable
variability in risk is present during economic cycles.

"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these ratings is
considered to be below investment grade. Although below investment grade, debt
rated "BB" is deemed likely to meet obligations when due. Debt rated "B"
possesses the risk that obligations will not be met when due. Debt rated "CCC"
is well below investment grade and has considerable uncertainty as to timely
payment of principal, interest or preferred dividends. Debt rated "DD" is a
defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend averages.

To provide more detailed indications of credit quality, the "AA," "A," "BBB,"
"BB" and "B" ratings may be modified by the addition of a plus (+) or minus (-)
sign to show relative standing within these major categories.

The following summarizes the highest four ratings used by Fitch for corporate
and municipal bonds:

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

"AA" - Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA." Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+."

"A" - Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

"BBB" - Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have an adverse impact on these bonds and,
therefore, impair timely payment. The likelihood that the ratings of these bonds
will fall below investment grade is higher than for bonds with higher ratings.

"BB" - Bonds considered to be speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified, which could
assist the obligor in satisfying its debt service requirements.

"B" - Bonds are considered highly speculative. While securities in this class
are currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.

"CCC " - Bonds have certain identifiable characteristics that, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

"CC" - Bonds are minimally protected. Default in payments of interest and/or
principal seems probable over time.

"C" - Bonds are in imminent default in payment of interest or principal.

"DDD," "DD" and "D" - Bonds are in default on interest and/or principal
payments. Such securities are extremely speculative and should be valued on the
basis of their ultimate recovery value in liquidation or reorganization of the
obligor. "DDD" represents the highest potential for recovery on these
securities, and "D" represents the lowest potential for recovery.

To provide more detailed indications of credit quality, the Fitch ratings from
and including "AA" to "C" may be modified by the addition of a plus (+) or minus
(-) sign to show relative standing within these major rating categories.

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<PAGE> 273
WILLIAM BLAIR FUNDS
PART C

OTHER INFORMATION

<TABLE>
<CAPTION>
ITEM 23. EXHIBITS
<S> <C>
(a) Declaration of Trust dated September 3, 1999.(7)/

(b) By-laws.(7)/

(d) (i) Form of Management Agreement dated May 1, 1996, as amended.(3)/
(ii) Form of Management Agreement dated December 23, 1996.(2)/
(iii) Form of Management Agreement dated April 30, 1998.(4)/
(iv) Form of Management Agreement (Amended and Restated) dated December 15, 1999.(7)/

(e) (i) Underwriting Agreement.(1)/
(ii) Form of Distribution Agreement -- Class B and Class C.(5)/
(iii) Distribution Agreement -- Class N.(6)/

(f) None.

(g) (i) Custodian Agreement.(6)/
(ii) Delegation Agreement.(4)/

(h) (i) Shareholder Services Agreement -- Class A, Class B and Class C dated July 30, 1999.(7)/
(ii) Expense Limitation Agreement for the Value Discovery Fund dated September 30, 1999.(7)/
(iii) Expense Limitation Agreement for the Emerging Markets Growth Fund dated September 30, 1999.(7)/
(iv) Expense Limitation Agreement for the Tax Managed Growth Fund dated December 15, 1999.(7)/
(v) Expense Limitation Agreement for the Disciplined Large Cap Fund dated December 15, 1999.(7)/
(vi) Expense Limitation Agreement for the Small Cap Growth Fund dated December 15, 1999.(7)/
(vii) Expense Limitation Agreement for the Large Cap Growth Fund dated December 15, 1999.(7)/

(i) Opinion and Consent of Vedder, Price, Kaufman & Kammholz.*

(j) Consent of Ernst & Young LLP.*

(k) Not applicable.

(l) Subscription Agreement.(1)/

(m) (i) Form of Distribution Plan -- Class B and Class C.(5)/
(ii) Distribution Plan -- Class N.(6)/

(n) (i) Form of Multi-Class Plan.(5)/
</TABLE>

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<PAGE> 274

<TABLE>
<CAPTION>
<S> <C>
(ii) Amended Multi-Class Plan. (6)/

(o) (i) Powers of Attorney for each trustee except John P. Kayser and Robert E. Wood II.(6)/
(ii) Powers of Attorney for John P. Kayser and Robert E. Wood II.(7)/

(p) Code of Ethics.*

- ------------
(1)/ Incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement on
Form N-1A as filed on or about March 1, 1996.
(2)/ Incorporated herein by reference to Post-Effective Amendment No. 15 to Registrant's Registration Statement on
Form N-1A as filed on or about November 5, 1996.
(3)/ Incorporated herein by reference to Post-Effective Amendment No. 16 to Registrant's Registration Statement on
Form N-1A as filed on or about February 26, 1997.
(4)/ Incorporated herein by reference to Post-Effective Amendment No. 17 to Registrant's Registration Statement on
Form N-1A as filed on or about February 27, 1998.
(5)/ Incorporated herein by reference to Post-Effective Amendment No. 20 to Registrant's Registration Statement on
Form N-1A as filed on or about July 30, 1999.
(6)/ Incorporated herein by reference to Post-Effective Amendment No. 21 to Registrant's Registration Statement on
Form N-1A as filed on or about September 29, 1999.
(7)/ Incorporated herein by reference to Post-Effective Amendment No. 23 to Registrant's Registration Statement on
Form N-1A as filed on or about December 21, 1999.
* To be filed by amendment.

ITEM 24. Persons Controlled by or Under Common Control with Registrant

Not applicable.

ITEM 25. Indemnification

</TABLE>

Section 5.2 of Article V of the Registrant's Declaration of Trust provides
for indemnification of directors and officers under certain circumstances but
does not allow such indemnification in cases of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct
of his office.

The Investment Management Agreement between the Registrant and William
Blair & Company, L.L.C. (the "Adviser") provides that, in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties thereunder on the part of the Adviser, the Adviser shall
not be liable for any error of judgment or mistake of law, or for any loss
suffered by the Fund in connection with the matters to which such Agreement
relates.

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

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ITEM 26. Business and Other Connections of Investment Adviser

Registrant's investment manager is William Blair & Company, L.L.C., a
limited liability company. In addition to its services to Registrant as
investment manager as set forth in Parts A and B of this Registration Statement
on Form N-1A, William Blair & Company, L.L.C. is a registered broker-dealer and
investment adviser and engages in investment banking.

The principal occupations of the principals and primary officers of William
Blair & Company, L.L.C. are their services as principals and officers of that
Company. The address of William Blair & Company, L.L.C. and Registrant is 222
West Adams Street, Chicago, Illinois 60606.

Set forth below is information as to any other business, profession,
vocation or employment of a substantial nature in which each principal of
William Blair & Company, L.L.C. is, or at any time during the last two fiscal
years has been, engaged for his own account or in the capacity of director,
officer, employee, partner or trustee:

<TABLE>
<S> <C> <C>
Name and Position with Name of Company and/or
William Blair & Company, L.L.C. Principal Business Capacity
- ------------------------------- ---------------------- --------
Michael P. Balkin, The New Providence Fund General Partner
Principal William Blair Funds Sr. Vice President

Rocky Barber, LaRabida Hospital Foundation Vice President of the
Principal Board of Directors
Metropolitan Chicago YMCA Director
Metropolitan Club Board Member
Stanford Business School Member Advisory
Council
William Blair Funds Chief Executive Officer

Bowen Blair, The Art Institute of Chicago Trustee
Senior Principal Chicago Historical Society Trustee
Field Museum of Natural History Trustee

Edward McC. Blair, Sr., The Art Institute of Chicago Life Trustee
Senior Principal College of the Atlantic Board of Trustees
Pullman Educational Foundation Life Trustee
Rush Presbyterian-St. Luke's
Medical Center Life Trustee
University of Chicago Life Trustee

Edward McC. Blair, Jr., Chicago Zoological Society Deputy Chairman
Principal Interluken Genetics Director
Research Medical, Inc. Director
University of Chicago Hospital Trustee

Kurt Beuchel, Social Security Fund of the Member, Investment
Principal Principality of Liechtenstein Advisory Board

George Busse, Busse Venture Associates Partner
Principal George L. Busse & Co. Director
Mount Prospect National Bank Director

</TABLE>

C-3
<PAGE> 276

<TABLE>
<S> <C> <C>
Name and Position with Name of Company and/or
William Blair & Company, L.L.C. Principal Business Capacity
- ------------------------------- ---------------------- --------
Ellen Carnahan, William Blair Capital Partners VI, LLC Managing Member
Principal William Blair Venture Partners, L.P. General Partner

David G. Chandler, Cypress Medical Products Director
Principal DJ Pharma, Inc. Director
Electro Mechanical Solutions, Inc. Director
Encore Paper Company Director
Engineered Materials Corp. Director
Gibraltar Packaging Group Director
Harmonic Systems, Inc. Director
Morton Grove Pharmaceuticals, Inc. Director
PacWest Telecomm, Inc. Director
Pharma Research Corp. Director
Predelivery Service Corporation Director
Sweetwater Sound, Inc. Director

E. David Coolidge, III, Pittway Corporation Director
Chief Executive Officer

John Draper, Black Knight Productions, Inc. Director
Principal

Francis C. Farwell, Lake Forest Bank & Trust Director
Principal

Conrad Fischer, APM Limited Partnership General Partner
Principal Chicago Child Care Society Trustee, Emeritus
William Blair Funds Investment Committee
Chairman and Trustee

Thomas A. Fitzsimmons, Credit Acceptance Corporation Director
Principal

John Fordham, B.T. Alex Brown Managing Director
Principal (resigned 4/98)

Mark A. Fuller, III, Fuller Investment Company President
Principal Fulsen Howney Partners Partner
Three Rio Grande, LLC Principal
William Blair Funds Sr. Vice President

</TABLE>

C-4
<PAGE> 277

<TABLE>
<CAPTION>
Name and Position with Name of Company and/or
William Blair & Company, L.L.C. Principal Business Capacity
- ------------------------------- ---------------------- --------
<S> <C> <C>
John K. Greene, Chicago Horticultural Society Trustee
Principal Children's Home & Aid Society
of Illinois, Inc. Trustee
Garden Conservatory Trustee
Hazelden Chairman, Illinois
Board of Directors
Vulcan Materials Co. Director

W. George Greig, William Blair Funds Sr. Vice President
Principal

James P. Hickey, Eagle Point Software Director
Principal

Edgar D. Jannotta AAR Corporation Director
Senior Principal AON Corporation Director
Bandag, Incorporated Director
Molex, Incorporated Director
Oil-Dri Corporation of America Director
Sloan Valve Company Director
Unicom Corporation Director
William Blair Capital Partners VI, LLC Managing Member
William Blair Leveraged Capital Management, LP Partner
William Blair Capital Management, LP Partner

John F. Jostrand, William Blair Funds Sr. Vice President
Principal

John P. Kayser, Chicago Stock Exchange Board of Governors
Principal DuPage Children's Museum Director
King-Bruwaert House Director
William Blair Funds Trustee

Richard P. Kiphart, Concord EFS, Inc. Director
Principal Lyric Opera Director
McCormick Theological Seminary Board of Directors
Merit Music Program Director

Charles Kraft, Dalton, Greiner, Hartman, Maher, LP Limited Partner
Principal Spartan Holdings, LLC President

Robert Lanphier, IV, Ag. Med, Inc. Chairman
Principal

</TABLE>

C-5
<PAGE> 278

James McMullan, University of Mississippi Foundation Director
Principal

David W. Morrison, Bell Flavors & Fragrances, Inc. Director
Principal

Timothy M. Murray, Daisytek Int. Director
Principal PFS Web, Inc. Director
Portland Food Products, Incorporated Director
Towne Holdings, Inc. Director
William Blair Capital Partners, VI, LLC Managing Director
William Blair Leveraged Capital Management Partner

Bentley M. Myer, Delnor Community Hospital Director
Principal William Blair Funds Sr. Vice President

David G. O'Neill, Elder Care Information Network Director
Principal Resume Link, Inc. Director
Svoboda, Collins & Co. Investor/Advisor

Gregory J. Pusinelli, Steriltek, L.L.C. Director
Principal William Blair Funds Sr. Vice President

Philip W. Reitz, Fairway Drive Funding Corp. Director
Principal Worcester Co. Director (resigned 7/99)
XOLOX Corporation Advisory Board Member

Michelle R. Seitz, William Blair Funds Sr. Vice President
Principal

Neal L. Seltzer, Lake Shore Country Club Director
Principal New Providence Fund, L.P. General Partner
Scholarship and Guidance Foundation Director
Serendipity Fund II, L.P. General Partner

William Semmer, Chicago Home and Garden Magazine Director
Principal

Ronald B. Stansell, AFO Limited Partnership Limited Partner
Principal

Thomas H. Story, Security APL, Inc. Member, Advisory
Principal Council

Mark Timmerman, DIY Home Warehouse, Incorporated Director
Principal Prophet 21, Incorporated Director

</TABLE>

C-6
<PAGE> 279

<TABLE>
<CAPTION>
Name and Position with Name of Company and/or
William Blair & Company, L.L.C. Principal Business Capacity
- ------------------------------- ---------------------- --------
<S> <C> <C>
Kathleen A. Wieland, Blue Egg Enterprises President
Principal D/B/A Robin's Bookshop Co-Owner
</TABLE>

ITEM 27. Principal Underwriters

(a) Not applicable.

(b) The main business address of each principal and officer of
William Blair & Company, L.L.C., principal underwriter for
Registrant, is 222 West Adams Street, Chicago, Illinois 60606.
See Item 26 for information with respect to officers and
principals of William Blair & Company, L.L.C.

ITEM 28. Location of Accounts and Records

All such accounts, books and other documents are maintained by the
Registrant's officers at the offices of the Registrant and the offices of the
Investment Adviser, William Blair & Company, L.L.C., 222 West Adams Street,
Chicago, Illinois 60606. Shareholder account information and original
shareholder correspondence is also available at the offices of the Transfer
Agent and Dividend Paying Agent, State Street Bank and Trust Company, P.O. Box
8506, Boston, Massachusetts 02266-8506.

ITEM 29. Management Services

Not applicable.

ITEM 30. Undertakings

Not applicable.

C-7
<PAGE> 280
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant has duly caused this amended
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago, and State of Illinois, on the 1st day
of March, 2000.

WILLIAM BLAIR FUNDS

By: /s/ Marco Hanig
--------------------------------
Marco Hanig, President

Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to the registration statement has been signed below by
the following persons in the capacity indicated and on the 1st day of March,
2000.

SIGNATURE TITLE
- --------- -----

/s/ J. Grant Beadle* Trustee
- --------------------------------------
J. Grant Beadle

/s/ Theodore A. Bosler* Trustee
- --------------------------------------
Theodore A. Bosler

/s/ Conrad Fischer* Trustee (Chairman of the Board)
- --------------------------------------
Conrad Fischer

/s/ John P. Kayser* Trustee
- --------------------------------------
John P. Kayser

/s/ Ann P. McDermott* Trustee
- --------------------------------------
Ann P. McDermott

/s/ John B. Schwemm* Trustee
- --------------------------------------
John B. Schwemm

/s/ Robert E. Wood II* Trustee
- --------------------------------------
Robert E. Wood II

/s/ Marco Hanig President (Principal Executive
- -------------------------------------- Officer)
Marco Hanig

/s/ Terence M. Sullivan Treasurer (Principal Financial
- -------------------------------------- Officer, Principal Accounting
Terence M. Sullivan Officer)

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

* Marco Hanig signs this document pursuant to powers of attorney previously
filed.