RANSON MANAGED PORTFOLIOS
485APOS, 1997-07-28
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<PAGE>

     As filed with the Securities and Exchange Commission on July 28, 1997
=============================================================================

                      Securities and Exchange Commission
                            Washington, D.C. 20549
                                   Form N-1A

            Registration Statement under the
              Securities Act of 1933                         [ ]
            Registration No. 33-36324
            Pre-Effective Amendment No. ____                 [ ]
            Post-Effective Amendment No. 31                  [X]
            Registration Statement under the
              Investment Company Act of 1940                 [ ]
            Registration No. 811-6153
            Amendment No. 33                                 [X]

                           Ranson Managed Portfolios
        (Exact Name of Registrant as Specified in Declaration of Trust)

   1 North Main, Minot, North Dakota                            58703
(Address of Principal Executive Offices)                      (Zip Code)

      Registrant's Telephone Number, Including Area Code:  (701) 852-5292

                                                             Copies to:
       Robert E. Walstad - President                    Mark J. Kneedy, Esq.
               1 North Main                              Chapman and Cutler
         Minot, North Dakota 58703                     111 West Monroe Street
                                                      Chicago, Illinois 60603
  (Name and Address of Agent for Service)

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

<TABLE>
<S>                                      <C>
[ ] immediately upon filing              [ ] on (date) pursuant to paragraph (a)(1)
    pursuant to paragraph (b)

[ ] on (date) pursuant to                [X] 75 days after filing pursuant
    paragraph (b)                            to paragraph (a)(2)

[ ] 60 days after filing pursuant to     [ ] on (date) pursuant to paragraph
    paragraph (a)(1)                         (a)(2) of Rule 485.

</TABLE>

If appropriate, check the following box:

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

Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, Registrant has elected to register an indefinite number of shares and will
file a Rule 24f-2 notice with the Commission within 180 days after July 31,
1998, the close of its current fiscal year.

================================================================================


<PAGE>
 
                                   Contents

                                      of

                            Registration Statement

The Registration Statement comprises the following papers and contents:

     The Facing Sheet

     Cross-Reference Sheet

     Part A - Prospectus

     Part B - The Statement of Additional Information

     Part C - Other Information

     Signatures

     Index to Exhibits

     Exhibits
 
<PAGE>
 
                           RANSON MANAGED PORTFOLIOS

                             Cross Reference Sheet

           Pursuant to Rule 495(a) under the Securities Act of 1933

<TABLE>
<CAPTION>

Form N-1A, Part A, Item Number               Heading in Prospectus
- ------------------------------               ---------------------
<C>  <S>                                     <C>
  1  Cover Page                              Cover

  2  Synopsis                                Highlights of the Fund and
                                             Prospectus Summary; Fee and Expense
                                             Table

  3  Condensed Financial Information         Calculation of Fund Performance Data

  4  General Description of                  The Fund; Investment Objective and
     Registrant                              Policies

  5  Management of the Fund                  The Fund; Dividends and Taxes; Fund
                                             Management

 5A  Management's Discussion of              Not Applicable
     Fund Performance

  6  Capital Stock and Other                 Description of Shares and Rights
     Securities

  7  Purchase of Securities Being            Special Programs; Purchase of Shares
     Offered

  8  Redemption or Repurchase                Redemption of Shares

  9  Pending Legal Proceedings               *
</TABLE>

<TABLE>
<CAPTION>
                                             Heading in Statement of Additional
Form N-1A, Part B, Item Number               Information
- ------------------------------               ----------------------------------
<C>  <S>                                     <C>
 10  Cover Page                              Cover

 11  Table of Contents                       Table of Contents

 12  General Information and                 The Fund and its Shares
     History

 13  Investment Objectives and               Investment Objective, Policies and
     Policies                                Restrictions

 14  Management of the Fund                  Officers and Trustees

 15  Control Persons and Principal           The Fund and its Shares
     Holders of Securities

 16  Investment Advisory and Other           Management and Investment Advisory
     Services                                Agreement
</TABLE> 
- ------------------------
*   Not applicable.
<PAGE>
 
 17  Brokerage Allocation and                Portfolio Transactions
     Other Practices

 18  Capital Stock and Other                 Additional Information Regarding
     Securities                              Shares and Rights

 19  Purchase, Redemption and                Net Asset Value, in Prospectus;
     Pricing of Shares Being                 Purchase of Shares, in Prospectus;
     Offered                                 Redemption of Shares, in Prospectus



                                             Heading in Statement of Additional 
                                             ----------------------------------
Form N-1A, Part B, Item Number               Information
- ------------------------------               -----------

 20  Tax Status                              Dividends and Taxes, in Prospectus

 21  Underwriters                            Purchase of Shares, in
                                             Prospectus; The Distributor, in
                                             Prospectus

 22  Calculations of Performance             Performance Data
     Data        

 23  Financial Statements                    Report of Independent Auditors;
                                             Statement of Assets and Liabilities

Form N-1A, Part C, Item Number               Heading in Other Information
- ------------------------------               ----------------------------

 24  Financial Statements and                Financial Statements and Exhibits
     Exhibits

 25  Persons Controlled by or                Persons Controlled by or Under
     Under Common Control with               Common Control with Registrant
     Registrant

 26  Number of Holders of                    Number of Holders of Securities
     Securities

 27  Indemnification                         Indemnification

 28  Business and Other                      Business and Other Connections of
     Connections of Investment               Investment Advisor
     Adviser

 29  Principal Underwriters                  Principal Underwriters

 30  Location of Accounts and                Location of Accounts and Records
     Records

 31  Management Services                     Management Services

 32  Undertakings                            Undertakings

                                      -2-
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration of qualification under the securities laws of any such State.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
 
                      Subject to Completion July 28, 1997
                                  Prospectus


  _____________, 1997

                           Ranson Managed Portfolios

                          The Illinois Municipal Fund

                                  1 North Main
                           Minot, North Dakota 58703
                                 (701) 852-5292
                                 (800) 601-5593

       The Illinois Municipal Fund is an investment portfolio of Ranson Managed
  Portfolios which is an unincorporated business trust organized under the laws
  of Massachusetts on August 10, 1990.  Ranson Managed Portfolios is an open-end
  series non-diversified management company, known as a mutual fund.  The term
  "the Fund" as used herein shall refer to either Ranson Managed Portfolios or
  The Illinois Municipal Fund series of Ranson Managed Portfolios as the context
  may require.  The investment objective of the Fund is to provide its
  shareholders with as high a level of current income exempt from federal income
  tax and, to the extent indicated, Illinois income tax, as is consistent with
  preservation of capital.  Up to 100% of the Fund's total assets may be
  invested in Illinois Municipal Securities (as defined herein) which are
  subject to Illinois state income taxes.  Under normal market conditions, the
  Fund's assets will be invested in a portfolio of Illinois Municipal Securities
  which, in the opinion of Ranson Capital Corporation, will produce a higher
  level of current income than would be produced by a portfolio of Illinois
  Municipal Securities rated in only the highest rating category, but contains
  Illinois Municipal Securities which do not present a significant risk of loss
  of principal due to credit characteristics.  In pursuit of this objective, the
  Fund invests primarily in debt obligations issued by or on behalf of the State
  of Illinois, its political subdivisions and their agencies and
  instrumentalities.  A substantial portion of the income produced by the Fund
  may be includable in the calculation of alternative minimum taxable income.
  Shares of the Fund therefore would not ordinarily be a suitable investment for
  investors who are subject to the alternative minimum tax.

       A maximum sales load of 4.25% will be imposed on purchases (4.44% of the
  net amount invested).  The minimum initial investment is $1,000.  See
  "Purchase of Shares."

       Ranson Capital Corporation (the "Manager") is the Fund's manager.  ND
  Resources, Inc. serves as the Fund's Transfer Agent and First Western Bank &
  Trust serves as the Fund's Custodian.

       THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
  AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
  SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
  UPON THE ACCURACY OR ADEQUACY 
<PAGE>
 
  of this Prospectus. Any representation to the contrary is a criminal offense.

       Shares of the Fund are not deposits or obligations of, or guaranteed or
  endorsed by, any bank and are not federally insured by the Federal Deposit
  Insurance Corporation, the Federal Reserve Board, or any other agency.

       Read and retain this Prospectus for future reference.  The Prospectus
  concisely sets forth information investors should know before investing in the
  Fund.

       A Statement of Additional Information, dated the date of this Prospectus,
  regarding the Fund (which is incorporated herein by reference) has been filed
  with the Securities and Exchange Commission and is available upon request and
  without charge by writing the Fund at the above mailing address or by
  telephoning the Manager at either of the numbers set forth above.

                             Fee and Expense Table

       The following tables set forth (i) the non-recurring shareholder
  transaction expenses, (ii) the recurring annual Fund operating expenses and
  (iii) the estimated expenses paid directly and indirectly by a shareholder
  with a $1,000 investment that is subject to the maximum sales load over 1 and
  3 year periods.

       The following example should not be considered a representation of past
  or future expenses.  Actual expenses may be greater or lesser than those
  shown.

  Shareholder Transaction Expenses
  Maximum Sales Load imposed on Purchases (as a percentage of
  offering price)                                     4.25%
                                                      ====

       There is no sales charge on reinvested dividends, deferred sales charge,
  redemption fee or exchange fee. The Maximum Sales Load may be reduced or
  eliminated as described in "Purchase of Shares" and "Special Programs."

  Annual Fund Operating Expenses
  (as a percentage of average net           The Illinois Municipal Fund
  assets)                                   (Expense after Fee Waivers)

  Management Fees (Expense after Fee                   0.20%
   Waiver)
  Rule 12b-1 Fees                                      0.25%
  Other Expenses                                       0.40%
                                                       ----
   Total Fund Operating Expenses                      
    (Expense after Fee Waiver)                         0.85%
                                                       ====
 

                                      -2-
<PAGE>
 
EXAMPLE

                                           1 YEAR     3 YEARS

Shareholder would pay the following
 expenses after fee waiver on a $1,000
 investment, assuming a 5% annual return:

The Illinois Municipal Fund                  $51         $69
                                             ===         ===

     The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The calculation presumes expenses for the current year at the
projected rate of .85% for the Fund after a partial fee waiver by the Manager.
Other Expenses are estimated to be 0.40% while Management Fees, Rule 12b-1 Fees
and Total Fund Operating Expenses for the Fund are 0.50%, 0.25% and 1.15% before
fee waiver. These expenses assume a voluntary waiver by the Manager of a portion
of its fee not required by the Management and Investment Advisory Agreement.
These costs and expenses should not be considered a representation of past or
future expenses, and the actual expenses incurred by the Fund, and the degree of
expense reimbursement and fee waiver, if any, may be greater or less in the
future. See "Purchase of Shares" for information relating to sales load
discounts and "Fund Management" for the level of management fees and "The
Distributor" for information relating to the Fund's Shareholder Services Plan.
Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc.

                 Highlights of the Fund and Prospectus Summary

     The highlights and summary information below should be read in conjunction
with the detailed information appearing elsewhere in this Prospectus.

     The Investment Objective of the Fund is to provide its shareholders with as
high a level of current income that is exempt from federal income tax and, to
the extent indicated, Illinois income tax as is consistent with preservation of
capital. Under normal market conditions, the Fund's assets will be invested in a
portfolio of Illinois Municipal Securities which, in the opinion of Ranson
Capital Corporation, will produce a higher level of current income than would be
produced by a portfolio of Illinois Municipal Securities rated in only the
highest rating category, but contains Illinois Municipal Securities which do not
present a significant risk of loss of principal due to credit characteristics.
There is no assurance that the Fund's investment objective will be achieved. See
"Investment Objective and Policies--Investment Objective."

     The Investment Policy of the Fund is to invest in a portfolio of investment
grade municipal securities which generate interest income that is exempt from
federal income tax and, to the extent indicated, Illinois income tax. These
municipal securities (hereinafter referred to as "Illinois Municipal
Securities") generally include debt obligations of the State

                                      -3-
<PAGE>
 
of Illinois, its political subdivisions, municipalities, agencies and
authorities, and certain industrial development and other revenue bonds, short-
term municipal notes, participation interests in municipal leases and tax-exempt
commercial paper issued by such entities. Up to 100% of the Fund's total assets
may be invested in Illinois Municipal Securities which are subject to Illinois
state income taxes. See "Investment Objective and Policies -- Illinois Municipal
Securities" for a more complete description of Illinois Municipal Securities. In
certain circumstances the Fund may enter into when-issued or delayed delivery
transactions and purchase taxable securities. The Fund may, for hedging
purposes, enter into financial futures contracts, options on such futures,
municipal bond index futures contracts and options on securities. These
investments entail certain risks. See "Investment Objective and Policies --
Futures Contracts and Options." The interest on certain Illinois Municipal
Securities in the Fund's portfolio may constitute an item of preference for
determining the federal alternative minimum tax for individuals and
corporations. See "Dividends and Taxes."

     The Fund's Shares May Be Purchased through Ranson Capital Corporation and
selected dealers at the public offering price, which is equal to the net asset
value next determined, plus a sales charge of 4.25% of the public offering price
(4.44% of the net amount invested). See "Purchase of Shares."

     The Minimum Initial Investment is $1,000 and the minimum additional
investment is $50. See "Purchase of Shares." The initial and minimum investments
will be less under certain conditions described under "Purchase of Shares" and
"Special Programs."

     An Open Account Program will be established for each investor unless the
investor elects not to participate in such program as is provided under
"Purchase of Shares -- Open Account Program/Certificates."

     Special Programs of the Fund include: a group program; a systematic
withdrawal program; a preauthorized investment program; a rights of accumulation
program; and a reinstatement privilege. See "Special Programs."

     The Fund has a Shareholder Services Plan adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940, pursuant to which .25% per annum of
average daily net assets will be used to pay dealers and banks selling Fund
shares for administrative and shareholder services or to pay for certain
distribution expenses. See "The Distributor."

     Distributions for the Fund will be declared daily from net investment
income and will be paid monthly; net capital gains, if any, will be distributed
at least annually. See "Dividends and Taxes."

     Confirmation Statements will be sent to all investors who have had purchase
or redemption activity in their account.

     Redemptions can be made at net asset value, without charge. The Fund may
require redemption of shares if the value of an account is reduced to $1,000 or
less (for any reason

                                      -4-
<PAGE>
 
other than fluctuations in the market value of the Fund's portfolio securities
or, if as a result of the amount of an investor's initial purchase the value of
such an account is $1,000 or less). See "Redemption of Shares."

     The Fund's Manager and Investment Adviser is Ranson Capital Corporation
which receives a monthly management and investment advisory fee equivalent on an
annual basis to .50 of 1% of the Fund's average daily net assets. Under the
terms of the Management and Investment Advisory Agreement between the Fund and
the Manager, the Manager pays all expenses of the Fund, including the Fund's
management and investment advisory fee and the Fund's dividend disbursing,
administrative and accounting services fees (but excluding taxes and brokerage
fees and commissions, if any) that exceed 1.25% of the Fund's average daily net
assets on an annual basis up to the amount of the management and investment
advisory fee payable by the Fund to the Manager. The Manager may assume
additional Fund expenses or waive portions of its fees in its discretion. See
"Fund Management." Ranson Capital Corporation will act as the Fund's Evaluator.
The procedures of the Evaluator and its valuations are reviewed by the officers
of the Fund under the general supervision of the Board of Trustees. See "Net
Asset Value."

     Risk Factors: The Fund is subject to the risks of primarily concentrating
its investments in Illinois Municipal Securities and does not have the benefit
of geographical investment diversification (see "Investment Objective and
Policies"). Also, as a non-diversified investment company, the Fund has the
ability to invest a substantial portion of its assets in particular issuers
which may be advantageous when investing in Illinois Municipal Securities, but
which involves an increased risk of loss to the Fund should an issuer be unable
to make interest or principal payments or should the market value of such
securities decline. The Fund has the ability to purchase new issues of Illinois
Municipal Securities on a "when-issued" basis as well as outstanding issues on a
delayed delivery basis, both of which involve the potential risk of loss of
principal in the event either that the value of such securities to be purchased
declines prior to the settlement date or if such securities should ultimately
not be issued or delivered and the price of comparable securities has increased,
the cost of substitute securities having comparable par amounts, ratings and
yields will be greater than was originally contracted for. Twenty five percent
or more of the Illinois Municipal Securities in the Fund's portfolio may derive
their payment from mortgage loans and/or hospitals and other health care
facilities, respectively. In addition, a substantial portion of the Illinois
Municipal Securities in the Fund's portfolio may derive their payment from
utilities, turnpikes or educational facilities, all of which entail certain
risks (see "Investment Objective and Policies -- Illinois Municipal
Securities"). The Fund may from time to time invest in participations in
municipal leases. Municipal leases are less liquid than many other municipal
securities and therefore will be subject to the risks of illiquidity referred to
in the next paragraph. Also, municipal leases are subject to the risk of "non-
appropriation" which allows the municipal lessee to terminate the lease and
eliminate its obligation to continue to make lease payments (see "Investment
Objective and Policies -- Illinois Municipal Securities").

     The Fund will invest a substantial portion of its assets in investment
grade Illinois Municipal Securities. Lower quality securities involve a greater
risk of default, including

                                      -5-
<PAGE>
 
nonpayment of principal and interest, than investment grade securities; however,
the risk of default is present in investment grade securities. Illinois
Municipal Securities rated in the lowest category of investment grade debt have
speculative characteristics. The Fund will not invest in Illinois Municipal
Securities rated below investment grade (i.e. below BBB by Standard & Poor's
Corporation or Baa by Moody's Investors Service, Inc.); however, the subsequent
downgrading of an Illinois Municipal Security below investment grade will not in
itself cause such security to be sold from the Fund's portfolio. Investment in
medium-quality debt securities (rated BBB or A by Standard & Poor's Corporation
or Baa or A by Moody's Investors Service, Inc.) involves greater investment
risk, including the possibility of issuer default or bankruptcy, than investment
in higher-quality debt securities. An economic downturn could severely disrupt
this market and adversely affect the value of outstanding bonds and the ability
of the issuers to repay principal and interest. During a period of adverse
economic changes, including a period of rising interest rates, issuers of such
bonds are more likely to experience difficulty in servicing their principal and
interest payment obligations than is the case with higher grade bonds. In
addition, an investment in the Fund should be made with an understanding that
the value of the underlying portfolio may decline with increases in interest
rates. In recent years there have been wide fluctuations in interest rates and
thus in the value of fixed-rate, long-term debt obligations generally. The
Manager cannot predict whether these fluctuations will continue in the future.
The principal trading market for the Illinois Municipal Securities will
generally be in the over-the-counter market. As a result, the existence of a
liquid trading market for the Illinois Municipal Securities may depend on
whether dealers will make a market in such securities. There can be no assurance
that a market will be made for any of the Illinois Municipal Securities, that
any market for the Illinois Municipal Securities will be maintained or of the
liquidity of the Illinois Municipal Securities in any markets made. In addition,
certain of the Illinois Municipal Securities may be subject to extraordinary
optional and/or mandatory redemptions at par if certain events should occur. To
the extent securities were purchased at a price in excess of the par value
thereof and are subsequently redeemed at par as a result of an extraordinary
redemption, the Fund would suffer a loss of principal.

     The Fund may invest in financial futures contracts and related options
thereon for hedging purposes. A risk in employing futures contracts to protect
against the price volatility of portfolio securities is that the prices of
securities subject to futures contracts may not correlate perfectly with the
behavior of the cash prices of the Fund's portfolio securities. The risk of
imperfect correlation may be increased by the fact that the Fund may trade in
futures contracts on taxable securities and there is no guarantee that the
prices of taxable securities will move in a manner similar to the prices of tax-
exempt securities. Another risk is that the Manager could be incorrect in its
expectations as to the direction or extent of various interest rate movements or
the time span within which the movements take place. For example, if the Fund
sold futures contracts in anticipation of an increase in interest rates, and
then interest rates went down, causing bond prices to rise, the Fund would lose
money and incur transaction costs on the sale.

     Investors May Call (800) 601-5593 for daily yield and daily net asset value
quotations and for information on account balances.

                                      -6-
<PAGE>
 
                                   The Fund

     Ranson Managed Portfolios is an unincorporated business trust organized
under the laws of Massachusetts on August 10, 1990. It is an open-end non-
diversified series management investment company or "mutual fund." The Illinois
Municipal Fund is one of five portfolios or "series" offered at this time. Like
other mutual funds, the Fund sells its shares to investors and uses the proceeds
to invest in various securities as described in this Prospectus. The Fund is
subject to the overall direction and monitoring function of the Board of
Trustees (the "Trustees").

     Information regarding the Fund is available by telephoning or writing the
Fund at the phone number or address shown on the front cover of this Prospectus.


                       Investment Objective and Policies

Investment Objective

     The investment objective of the Fund is to provide its shareholders with
as high a level of current income exempt from federal income tax and, to the
extent indicated, Illinois income tax as is consistent with preservation of
capital. Under normal market conditions, the Fund's assets will be invested in a
portfolio of Illinois Municipal Securities which, in the opinion of Ranson
Capital Corporation, will produce a higher level of current income than would be
produced by a portfolio of Illinois Municipal Securities rated in only the
highest rating category, but contains Illinois Municipal Securities which do not
present a significant risk of loss of principal due to credit characteristics.
The Fund seeks to achieve its investment objective by investing primarily in
Illinois Municipal Securities (as further described below). At the respective
times of issuance of the Illinois Municipal Securities, certain of the issues of
the Illinois Municipal Securities may have been accompanied by an opinion of
bond counsel to the respective issuing authorities that interest on such
Illinois Municipal Securities are exempt from Illinois income tax. The Fund may
invest up to 100% of its total assets in Illinois Municipal Securities, the
interest on which is subject to Illinois income tax.

     A shareholder will receive taxable income in the event of capital gains
distributions by the Fund. In addition, the Fund has not established any limit
on the percentage of its portfolio that may be invested in Illinois Municipal
Securities subject to the alternative minimum tax provisions of federal tax law,
and a substantial portion of the income produced by the Fund may be includable
in the calculation of alternative minimum taxable income. Shares of the Fund
therefore would not ordinarily be a suitable investment for investors who are
subject to the alternative minimum tax. The suitability of shares of the Fund
for these investors will depend upon a comparison of the yield likely to be
provided from the Fund with the yield from comparable tax-exempt investments not
subject to the alternative minimum tax, and with the yield from comparable fully
taxable investments, in light of each such investor's tax position.

                                      -7-
<PAGE>
 
Illinois Municipal Securities

     As used in this Prospectus, the term "Illinois Municipal Securities" refers
to debt obligations of Illinois, its political subdivisions, municipalities,
agencies and authorities the interest payable on which is, in the opinion of
bond counsel to the issuer, exempt from federal income taxation. The term
"Illinois Municipal Securities" also includes obligations of the Commonwealth of
Puerto Rico, the Virgin Islands and Guam, the interest payable on which is, in
the opinion of bond counsel to the issuer, exempt from federal income taxation.
The Fund will not invest more than 30% of its total assets in Illinois Municipal
Securities which are obligations of the Commonwealth of Puerto Rico, the Virgin
Islands or Guam. Illinois law provides that to the extent dividends paid by the
Fund are derived from obligations of the Commonwealth of Puerto Rico, the United
States Virgin Islands or Guam, they shall be exempt from Illinois income tax.
Illinois Municipal Securities include debt obligations of Illinois, its
political subdivisions, municipalities, agencies and authorities issued to
obtain funds for various public purposes, including the construction or
improvement of a wide range of public facilities such as airports, bridges,
highways, hospitals, housing, jails, mass transportation, nursing homes, parks,
public buildings, recreational facilities, school facilities, streets and water
and sewer works. Other public purposes for which Illinois Municipal Securities
may be issued include the refunding of outstanding obligations, the anticipation
of taxes or state aids, the payment of judgments, the funding of student loans,
community redevelopment, the purchase of street maintenance and firefighting
equipment, or any authorized corporate purpose of the issuer except for the
payment of current expenses. In addition, certain types of industrial
development and other revenue bonds may be issued by or on behalf of public
corporations to finance privately operated housing facilities, air or water
pollution control facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal. Other types of industrial
development bonds, the proceeds of which are used for the construction,
equipping, repair or improvement of privately operated industrial, commercial or
office facilities, constitute Illinois Municipal Securities, although current
federal income tax laws place substantial limitations on the size of such
issues.

     Since the Fund will invest substantially all of its assets in Illinois
Municipal Securities, the Fund is susceptible to political and economic factors
affecting the issuers of Illinois Municipal Securities. In fiscal year 1995,
Illinois experienced its strongest economic growth in seven years. Illinois
payroll jobs increased 2.3% and the state achieved its lowest level of
unemployment in 21 years. During fiscal years 1995 and 1996, the state's cash
balance will have increased $300 million and unpaid Medicaid bills will be
reduced by more than $900 million. Outstanding Medicaid bills are being paid
faster than in nine of the ten previous fiscal years.

     The Illinois economy continued to grow in Fiscal Year 1996 and Fiscal Year
1997, although at a slower pace. As a result, there were continued constraints
on spending growth and new programs were necessary to ensure the state's
financial situation. The Fiscal Year 1997 budget increased education funding by
$332 million, the largest increase ever without a general tax increase. However,
the Fiscal Year 1997 budget contained no other major program expansions or
reductions. The state's cash balance was about $805 million as of

                                      -8-
<PAGE>
 
June 30, 1997. This amount included additional revenues of $85 million that were
due to unusually strong late-year growth in income tax revenue. In addition to
the $85 million in revenue growth, the June 30, 1997 balance reflects more than
$120 million in funds appropriated for specific purposes during Fiscal Year 1997
but not yet spent.

     Fiscal Year 1997 was the second year under a new state law that required
Illinois to fund its employee pension system obligations on an actuarially sound
basis. The state's pension contribution increased $109 million in Fiscal Year
1997, representing an 18% increase over Fiscal Year 1996 and raising the annual
funding for the five state systems to $723 million.

     Illinois' upward economy produced a total number employed of 5,849,448 as
of May 1997. For eight consecutive months, a new employment record has been
established. This has resulted in a sharp drop in the unemployment rate to 4.4%
as of May 1997. Employment in manufacturing has rebounded steadily over the past
five years from the low point it reached during the 1991 economic downturn.
Annual growth has averaged about 10,000 new jobs the last few years.

     Total personal income in the state rose 5.6% in 1996 compared to the U.S.
growth rate of 5.4%. The U.S. Department of Commerce noted that a good corn crop
helped boost personal income in corn producing states.

     Illinois ranked fifth in 1995 and 1996 in international shipments with
$34.7 billion in exports. An increase of over $2 billion helped boost sales 6.3%
in 1996. While Illinois ranked third in agricultural products, manufactured
products accounted for 89% of the state's direct sales last year. Any policies
or legislation affecting the export industry may have an adverse effect on the
revenue produced by export products in Illinois.

     The foregoing information constitutes only a brief summary of some of the
financial difficulties which may impact certain issuers of Illinois Municipal
Securities and does not purport to be a complete or exhaustive description of
all adverse conditions to which the issuers in the Fund are subject.
Additionally, many factors including national economic, social and environmental
policies and conditions, which are not within the control of the issuers of
Illinois Municipal Securities, could affect or could have an adverse impact on
the financial condition of the State and its various agencies and political
subdivisions. The Manager is unable to predict whether or to what extent such
factors or other factors may affect the issuers of Illinois Municipal
Securities, the market value or marketability of the Illinois Municipal
Securities or the ability of the respective issuers of the Illinois Municipal
Securities acquired by the Fund to pay interest on or principal of the Illinois
Municipal Securities.

     The Fund has a fundamental investment restriction which prohibits it from
investing 25% or more of its total assets in securities of issuers in any single
industry. This restriction does not, however, place any such limitation on the
purchase of securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities or by Illinois, its political subdivisions, municipalities,
agencies and authorities.

                                      -9-
<PAGE>
 
     Over 25% of the Illinois Municipal Securities in the Fund's portfolio may
derive their payment from mortgage loans. Such Illinois Municipal Securities are
single family mortgage revenue bonds issued for the purpose of acquiring from
originating financial institutions notes secured by mortgages on residences
located within the issuer's boundaries and owned by persons of low or moderate
income. Mortgage loans are generally partially or completely prepaid prior to
their final maturities, as a result of events such as the sale of the mortgaged
premises, default condemnation or casualty loss. Because these bonds are subject
to extraordinary mandatory redemption, in whole or in part, from such
prepayments on mortgage loans, a substantial portion of such bonds will probably
be redeemed prior to their scheduled maturities or even prior to their ordinary
call dates. Extraordinary mandatory redemption without premium could also result
from the failure of the originating financial institutions to make mortgage
loans in sufficient amounts within a specified time period or, in some cases,
from the sale by the Bond issuer of the mortgage loans. These bonds were issued
under Section 103A of the Internal Revenue Code, which Section contains certain
ongoing requirements relating to the use of the proceeds of such bonds in order
for the interest on such bonds to retain its tax-exempt status. In each case the
issuer of the bonds has covenanted to comply with applicable requirements and
bond counsel to such issuer has issued an opinion that the interest on the bonds
is exempt from federal income tax under existing laws and regulations. There can
be no assurance that such ongoing requirements will be met.

     Over 25% of the Illinois Municipal Securities in the Fund's portfolio may
be health care revenue bonds. Ratings of bonds issued for health care facilities
are often based on feasibility studies that contain projections of occupancy
levels, revenues and expenses. A facility's gross receipts and net income
available for debt service may be affected by future events and conditions
including, among other things, demand for services, the ability of the facility
to provide the services required, physicians' confidence in the facility,
management capabilities, competition with other hospitals, efforts by insurers
and governmental agencies to limit rates, legislation establishing state rate-
setting agencies, expenses, government regulation, the cost and possible
unavailability of malpractice insurance and the termination or restriction of
governmental financial assistance, including that associated with Medicare,
Medicaid and other similar third party payor programs. Medicare reimbursements
are currently calculated on a prospective basis utilizing a single nationwide
schedule of rates. Prior to this nationwide approach, Medicare reimbursements
were based on the actual costs incurred by the health facility. The current
legislation may adversely affect reimbursements to hospitals and other
facilities for services provided under the Medicare program.

     The Illinois Municipal Securities in which the Fund invests consist of
Illinois bonds, notes, commercial paper and participation interests in municipal
leases. Illinois tax-exempt notes and commercial paper are generally used to
provide for short-term capital needs and ordinarily have a maturity of up to one
year. These include notes issued in anticipation of tax revenue, revenue from
other government sources or revenue from bond offerings and short-term,
unsecured commercial paper, which is often used to finance seasonal working
capital needs or to provide interim construction financing. Illinois tax-exempt
leases are obligations of state and local government units incurred to lease or
purchase equipment or other property utilized by such governments. The Fund will
not originate leases as a lessor,

                                     -10-
<PAGE>
 
but will instead purchase a participation interest in the regular payment stream
of the underlying lease from a bank, equipment lessor or other third party.
General obligation bonds are secured by the issuer's pledge of its faith, credit
and taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Tax-exempt
industrial development bonds are in most cases revenue bonds and generally do
not carry the pledge of the credit of the issuing municipality. The revenues
from which such bonds are paid generally constitute an obligation of the
corporate entity on whose behalf the bonds are issued.

     Although the participations in municipal leases which the Fund may purchase
(hereinafter called "lease obligations") do not constitute general obligations
of the municipality for which the municipality's taxing power is pledged, a
lease obligation is ordinarily backed by the municipality's covenant to budget
for, appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide that
the municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. In addition to the
"nonappropriation" risk, these securities represent a relatively new type of
financing that has not yet developed the depth of marketability associated with
more conventional bonds. Although "non-appropriation" lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. The Fund will only purchase lease obligations
which are rated in the top category by either Standard & Poor's Corporation or
Moody's Investor Service, Inc. The Fund will not invest more than 10% of its net
investment assets in lease obligations (including, but not limited to those
lease obligations which contain "non-appropriation clauses"), or any other
illiquid securities.

     The Fund will only purchase lease obligations which are covered by an
existing opinion of legal counsel experienced in municipal lease transactions
that, as of the date of issue or purchase of each participation interest in a
municipal lease, the interest payable on such obligation is exempt from federal
income tax and, to the extent indicated, Illinois income tax and that the
underlying lease was the valid and binding obligation of the governmental
issuer.

Investment Policies

     It is a fundamental policy of the Fund, which may not be changed without
the approval of the majority of the Fund's shares, that under normal
circumstances at least 80% of the Fund's assets will be invested in Illinois
Municipal Securities which generate income that is exempt, in the opinion of
bond counsel, from federal income tax. While the Fund attempts, under normal
market conditions, to invest all of its assets in Illinois Municipal Securities,
and, under normal market conditions, must invest at least 65% of the value of
all of its assets in Illinois Municipal Securities, the Fund may temporarily
invest up to 100% of its assets in taxable fixed-income securities or hold up to
100% of its assets in cash during periods of abnormal market conditions that
dictate taking a defensive posture by investing in

                                     -11-
<PAGE>
 
such taxable obligations or cash. In addition, pending the investment or
reinvestment in Illinois Municipal Securities of proceeds of sales of shares or
sales of portfolio securities or in order to avoid the necessity of liquidating
portfolio investments to meet shareholders' redemption requests, the Fund may
invest up to 20% of its assets in taxable fixed income securities or cash.

     The Illinois Municipal Securities in which the Fund invests consist of
securities rated within the following grades assigned by Moody's Investors
Service, Inc. ("Moody's"): Aaa, Aa, A and Baa for bonds; MIG-1 and MIG-2 for
notes; Prime-1 and Prime-2 for commercial paper; or Standard & Poor's
Corporation ("S&P"): AAA, AA, A and BBB for bonds; SP-1 and SP-2 for notes; A-1
or A-2 for commercial paper. The risk of default, including nonpayment of
principal and interest, on securities rated below the three highest grades is
somewhat higher than the risk of default on securities rated within the three
highest grades. The Fund may also invest in Illinois tax-exempt industrial
development bonds, if the securities, at the time of purchase, are rated
investment grade quality by either Moody's or S&P. The Fund will not invest in
Illinois Municipal Securities rated below investment grade by either S&P or
Moody's. While ratings at the time of purchase will determine which Illinois
Municipal Securities may be acquired by the Fund, a subsequent reduction in
rating will not require the Fund to dispose of the securities. The Fund will
purchase unrated Illinois Municipal Securities which have been determined to be
of investment grade quality at the time of purchase by the Fund's Manager
pursuant to guidelines established and maintained in good faith by the Board of
Trustees of the Fund. Many issuers of tax-exempt securities which have
characteristics of rated securities choose not to have their obligations rated.
Although securities which are not rated are not necessarily of lower quality,
the market for them may not be as broad as for rated securities, since many
investors rely on rating agencies for credit appraisal. As a fundamental policy,
the Fund may not invest more than 30% of its assets in unrated Illinois
Municipal Securities. Also, the Fund will not invest more than 15% of the Fund's
net assets in lease obligations, or in any other illiquid securities.

     Taxable obligations which the Fund may purchase for temporary liquidity
purposes, or for temporary defensive purposes, may include: obligations of the
U.S. Government, its agencies or instrumentalities; other debt securities of
issuers having, at the time of purchase, a rating within the four highest grades
of Moody's or S & P; commercial paper rated Prime- 1 or better by Moody's or A-1
or better by S & P; certificates of deposit of domestic banks, including foreign
branches of domestic banks, which have capital, surplus and undivided profits of
over $100 million; time deposits; bankers' acceptances, repurchase agreements
and obligations of Illinois with respect to any of the foregoing investments.
Interest earned from taxable obligations will be taxable to investors.

     The Fund also may purchase floating and variable rate demand notes from
municipal and nongovernmental issuers. These notes normally have a stated
maturity in excess of one year, but permit the holder to demand payment of
principal plus accrued interest upon a specified number of days notice.
Frequently, such obligations are secured by letters of credit or other credit
support arrangements provided by banks. Use of letters of credit or other credit
support arrangements will generally not adversely affect the tax-exempt status

                                     -12-
<PAGE>
 
of these obligations. The Manager will rely upon the opinion of the issuer's
bond counsel to determine whether such notes are exempt from federal and
Illinois income taxation. The issuer of floating and variable rate demand notes
nominally has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the note plus accrued interest
upon a specified number of days notice to the noteholders. The interest rate on
a floating rate demand note is based on a known lending rate, such as a bank's
prime rate, and is adjusted automatically each time such rate is adjusted. The
interest rate on a variable rate demand note is adjusted at specified intervals,
based upon a known lending rate. The Manager will monitor the creditworthiness
of the issuers of floating and variable rate demand notes. The Fund will not
invest in derivative financial instruments other than in connection with its
hedging activities.

     The yields on Illinois Municipal Securities are dependent on a variety of
factors, including general money market conditions, the financial condition of
the issuer, general conditions of the Illinois municipal obligations market, the
size of a particular offering, the maturity of the obligation and the rating of
the issue or issuer. The ratings of Moody's and S&P represent their opinions as
to the quality of the Illinois Municipal Securities which they undertake to
rate. It should be emphasized, however, that ratings are general, and not
absolute, standards of quality. Consequently, Illinois Municipal Securities of
the same maturity, interest rate and rating may have different yields, while
Illinois Municipal Securities of the same maturity and interest rate with
different ratings may have the same yield. Subsequent to their purchase by the
Fund, particular Illinois Municipal Securities or other investments may cease to
be rated or their ratings may be reduced below the minimum rating required for
purchase by the Fund.

     Medium-quality Illinois Municipal Securities (rated BBB or A by S&P or Baa
or A by Moody's) are obligations of issuers that are considered to possess
adequate, but not outstanding, capacities to service the obligations. Illinois
Municipal Securities rated in the lowest category of investment grade debt
(rated BBB by S&P or Baa by Moody's) may have speculative characteristics.
Because many issuers of medium-quality Municipal Securities choose not to have
their obligations rated by a rating agency, up to 30% of the Illinois Municipal
Securities in the Fund's portfolio may be unrated. Investment in medium-quality
debt securities involves greater investment risk, including the possibility of
issuer default or bankruptcy, than investment in higher-quality debt securities.
An economic downturn could severely disrupt this market and adversely affect the
value of outstanding bonds and the ability of the issuers to repay principal and
interest. During a period of adverse economic changes, including a period of
rising interest rates, issuers of such bonds are more likely to experience
difficulty in servicing their principal and interest payment obligations than is
the case with higher grade bonds. Medium quality debt securities tend to be less
marketable than higher-quality debt securities because the market for them is
less broad. The market for unrated debt securities is even narrower. During
periods of thin trading in these markets, the spread between bid and asked
prices is likely to increase significantly, and the Fund may have greater
difficulty selling the medium-quality debt securities in its portfolio.

     The Fund is a non-diversified investment company, but intends to comply
with Subchapter M of the Internal Revenue Code. Because of the relatively small
number of
                                     -13-
<PAGE>
 
issuers of investment grade Illinois Municipal Securities, the Fund will
probably use its ability as a non-diversified fund to invest a substantial
portion of its assets in the securities of certain issuers which the Fund's
Manager deems to be attractive investments, rather than invest in securities of
a large number of issuers merely to satisfy diversification requirements.
Although the Fund's Manager believes that the ability to invest a substantial
portion of the investments of the Fund in particular issuers is advantageous
when investing in Illinois Municipal Securities, such concentration involves an
increased risk of loss to the Fund should the issuer be unable to make interest
or principal payments or should the market value of such securities decline.
Investment in a non-diversified investment company such as the Fund may
therefore entail greater risks than investment in a "diversified" fund.

     The Fund may invest up to 10% of its total assets in the securities of
other investment companies. Any investment by the Fund in securities issued by
other investment companies will result in the duplication of certain fees and
expenses.

FUTURES CONTRACTS AND OPTIONS

     The Fund may invest in financial futures contracts ("futures contracts")
and related options thereon for hedging purposes. It is not the intent of the
Manager to speculate in futures contracts and related options as an aggressive
investment strategy, but rather as described below. The Fund may sell a futures
contract or a call option thereon or purchase a put option on such futures
contract if the Manager anticipates that interest rates will rise, as a hedge
against a decrease in the value of the Fund's portfolio securities. If the
Manager anticipates that interest rates will decline, the Fund may purchase a
futures contract or a call option thereon or sell a put option on such futures
contract to protect against an increase in the price of the securities the Fund
intends to purchase. These futures contracts and related options thereon will be
used only as a hedge against anticipated interest rate changes. A futures
contract sale creates an obligation by the Fund, as seller, to deliver the
specific type of instrument called for in the contract at a specified future
time for a specified price. Purchase of a futures contract creates an obligation
by the Fund, as purchaser, to take delivery of the specific type of financial
instrument at a specified future time at a specified price. A purchaser or
seller of a futures contract is required to make daily payments of cash to
reflect the change in the value of the underlying contract. The specific
securities delivered or taken, respectively, at settlement date would not be
determined until or near that date. The determination would be in accordance
with the rules of the exchange on which the futures contract sale or purchase
was effected.

     Although the terms of futures contracts specify actual delivery or receipt
of securities, in most instances the contracts are closed out before the
settlement date without the making or taking of delivery of the securities.
Closing out of a futures contract is effected by entering into an offsetting
purchase or sale transaction prior to the expiration of the contract.

     Unlike a futures contract, which requires the parties to buy and sell a
security on a set date unless offset, an option on a futures contract entitles
its purchaser to decide on or before a future date whether to enter into such a
contract (a long position in the case of a

                                      -14-
<PAGE>
 
call option and a short position in the case of a put option). If the purchaser
decides not to enter into the contract, the premium paid for the option on the
contract is lost if it expires. Since the cost of the option is fixed, there are
no daily payments of cash by the purchaser to reflect the change in the value of
the underlying contract as there are by a purchaser or seller of a futures
contract. The seller of the option, however, may be required to make daily
maintenance margin payments to reflect the change in value of the underlying
contract. The value of the option is reflected in the net asset value of the
Fund.

     A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject to
futures contracts may not correlate perfectly with the behavior of the cash
prices of the Fund's portfolio securities. The risk of imperfect correlation may
be increased by the fact that the Fund may trade in futures contracts on taxable
securities and there is no guarantee that the prices of taxable securities will
move in a manner similar to the prices of tax-exempt securities. The correlation
may be distorted in part by the fact that the futures market is influenced by
short-term traders seeking to profit from the difference between a contract or
security price objective and their cost of borrowed funds. Such distortions
generally are minor and should diminish as the contract approaches maturity.

     Another risk is that the Manager could be incorrect in its expectations as
to the direction or extent of various interest rate movements or the time span
within which the movements take place. For example, if the Fund sold futures
contracts in anticipation of an increase in interest rates, and then interest
rates went down, causing bond prices to rise, the Fund would lose money,
including transaction costs, on the sale.

     The Fund may not enter into futures contracts or purchase related options
thereon if immediately thereafter the amount committed to initial margin plus
the amount paid for premiums for unexpired options on futures contracts exceed
5% of the value of the Fund's total assets. Similarly, the Fund may not purchase
or sell futures contracts or related options thereon if, immediately thereafter,
more than one-third of its net assets would be hedged.

FORWARD COMMITMENTS

     The Fund may purchase new issues of Illinois Municipal Securities and other
securities on a "when-issued" or delayed delivery basis, with delivery and
payment for the securities normally taking place within 45 days after the date
of the commitment to purchase. The payment obligation and the interest rate that
will be received on such securities are fixed at the time the buyer enters into
the commitment. The Fund may enter into such "forward commitments" if it holds,
and maintains until the settlement date in a segregated account with its
custodian, cash or high-grade, short-term obligations in an amount sufficient to
meet the purchase price. There is no percentage limitation on the Fund's total
assets which may be invested in forward commitments. Forward commitments involve
a risk of loss if the value of the Illinois Municipal Security or other security
to be purchased declines prior to the settlement date, which risk is in addition
to the risk of decline in the value of the Fund's other assets. Although the
Fund will generally enter into forward commitments with the intention of
acquiring Illinois Municipal Securities or other securities for its portfolio,
the

                                      -15-
<PAGE>
 
Fund may dispose of a commitment prior to settlement if the Manager deems it
appropriate to do so. The Fund may realize short-term profits or losses upon the
sale of forward commitments, which profits or losses may constitute capital
gains or ordinary income depending upon a number of factors, including the
number of sales of such commitments.

PORTFOLIO TURNOVER

     Portfolio transactions will be undertaken principally to accomplish the
Fund's objective in relation to anticipated movements in the general level of
interest rates, but the Fund may also engage in short-term trading consistent
with its objective. Securities may be sold in anticipation of a market decline
(a rise in interest rates) or purchased in anticipation of a market rise (a
decline in interest rates) and later sold. In addition, a security may be sold
and another purchased at approximately the same time to take advantage of what
the Manager believes to be a temporary disparity in the normal yield
relationship between the two securities. Yield disparities may occur for reasons
not directly related to the investment quality of particular issues or the
general movement of interest rates, due to such factors as changes in the
overall demand for or supply of various types of Illinois Municipal Securities
or changes in the investment objectives of investors.

     The Fund's investment policies may lead to frequent changes in investments,
particularly in periods of rapidly fluctuating interest rates. A change in
securities held by the Fund is known as "portfolio turnover" and may involve the
payment by the Fund of dealer mark-ups or underwriting commissions, and other
transaction costs, on the sale of securities, including Illinois Municipal
Securities, as well as on the reinvestment of the proceeds in other securities.
The Fund anticipates that its annual portfolio turnover rate will not exceed
75%. Portfolio turnover rate for a fiscal year is the ratio of the lesser of the
dollar amount of the purchases or sales of portfolio securities to the monthly
average of the value of portfolio securities excluding securities whose
maturities at acquisition were one year or less. The Fund's portfolio turnover
rate will not be a limiting factor when the Fund deems it desirable to sell or
purchase securities. Frequent changes in the Fund's portfolio securities may
result in higher transaction costs for the Fund. In addition, in order to
qualify as a regulated investment company under the Internal Revenue Code, the
Fund must limit the portion of its gross income derived from the sale or other
disposition of stock or securities held for less than three months. If the Fund
were unable to satisfy this condition, among others, the Fund would be subject
to tax on its taxable income without deduction for distributions to
shareholders. See "Dividends and Taxes" in this Prospectus and "Portfolio
Transactions" in the Fund's Statement of Additional Information.

REPURCHASE AGREEMENTS

     The Fund may enter into repurchase agreements with respect to not more than
10% of its total assets (taken at current value), except when investing for
temporary defensive purposes during times of adverse market conditions. A
repurchase agreement is a contract under which the Fund would acquire a security
for a relatively short period and the seller would agree to repurchase such
security at the Fund's cost plus interest within a specified

                                      -16-
<PAGE>
 
time (generally one day). Under the Investment Company Act of 1940, repurchase
agreements are considered loans by the Fund. The Fund will not enter into any
repurchase agreement in an amount which would jeopardize the Fund's status as a
regulated investment company or its ability to distribute tax-exempt dividends.
Although the Fund may enter into repurchase agreements with respect to any
securities which it may acquire consistent with its investment policies and
restrictions, it is the Fund's present intention to enter into repurchase
agreements only with respect to obligations of the U.S. Government or its
agencies or instrumentalities and with respect to Illinois Municipal Securities.
The Fund's custodian will hold the securities underlying any repurchase
agreement in a segregated account. In investing in repurchase agreements, the
Fund's risk is limited to the ability of the seller to pay the agreed-upon price
at the maturity of the repurchase agreement. In the opinion of the Manager, the
risk is not material, since in the event of default, barring extraordinary
circumstances, the Fund would be entitled to sell the underlying securities or
otherwise receive adequate protection under federal bankruptcy laws for its
interest in such securities. To the extent that proceeds from any sale upon a
default are less than the repurchase price, however, the Fund could suffer a
loss. In addition, the Fund may incur certain delays in obtaining direct
ownership of the collateral.

     The Fund's Board of Trustees may change any of the foregoing policies that
are not fundamental without an affirmative vote of a "majority of the Fund's
outstanding voting shares," as defined in "Investment Objective, Policies and
Restrictions" in the Fund's Statement of Additional Information.

                                NET ASSET VALUE

     The net asset value per share of the Fund is determined by calculating the
total value of the Funds' assets, deducting total liabilities, and dividing the
result by the number of shares outstanding. Fixed income securities are valued
at the mean between the quoted bid and asked price. Securities for which
quotations are not readily available (which will constitute a majority of the
securities held by the Fund) are valued at fair value as determined by Ranson
Capital Corporation (the "Evaluator") pursuant to procedures adopted by the
Board of Trustees using methods which include consideration of the following:
yields or prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating, indications as to value from dealers and general
market conditions. The Evaluator may employ electronic data processing
techniques and/or a matrix system to determine valuations. The procedures
utilized by the Evaluator and its valuations are reviewed by the officers of the
Fund under the general supervision of the Board of Trustees and are periodically
reviewed by the Board of Trustees. Short-term securities with remaining
maturities of less than 60 days are valued at amortized cost. Other assets are
valued at fair value as determined in good faith by the Trustees of the Fund.
The net asset value of the Fund is computed once daily as of 3:15 p.m. Central
time on each day that the New York Stock Exchange is open for trading. The
public offering price based thereon becomes effective as of the time of such
computation. The New York Stock Exchange is closed on weekends and on the
following days: New Year's Day, Washington's Birthday, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The

                                      -17-
<PAGE>
 
Fund reserves the right to calculate the net asset value and to adjust the
public offering price based thereon more frequently than once each day if deemed
desirable.

                              PURCHASE OF SHARES

     Shares may be purchased at the public offering price through any securities
dealer having a sales agreement with Ranson Capital Corporation (the
"Distributor"). Shares may also be purchased through banks and certain other
financial institutions that have agency agreements with the Distributor. These
financial institutions will receive transaction fees that are the same as
commissions to dealers and may charge their customers service fees relating to
investments in the Fund. Purchase requests should be addressed to the dealer or
agent from which this Prospectus was received which has a sales agreement with
the Distributor. Such dealer or agent may place a telephone order with the
Transfer Agent for the purchase of Fund shares. It is a dealer's or broker's
responsibility to promptly forward payment and registration instructions (or
completed applications) to the Transfer Agent for shares being purchased.
Reference should be made to the wire order to ensure proper settlement of the
trade. Payment must be received within three business days of the order or the
trade may be cancelled and the dealer or broker placing the trade will be liable
for any losses. The public offering price is the net asset value per share next
determined plus a sales charge that will be a percentage of the public offering
price and will vary as shown below. Current sales charge rates are:

                                  SALES CHARGE
<TABLE>
<CAPTION>
                                                         AS A PERCENTAGE    DEALER ALLOWANCE
                                      AS A PERCENTAGE     OF NET ASSET      AS PERCENTAGE OF
                                     OF OFFERING PRICE   VALUE INVESTED      OFFERING PRICE
AMOUNT OF PURCHASE
<S>                                  <C>                 <C>                <C>
Less than $50,000                          4.25%             4.44%               3.60%
$50,000 but less than $100,000             3.75%             3.90%               3.15%
$100,000 but less than $250,000            3.25%             3.36%               2.75%
$250,000 but less than $500,000            2.50%             2.56%               2.00%
$500,000 but less than $1,000,000          1.50%             1.52%               1.40%
$1,000,000 or more                         0.75%             0.76%               0.70%
</TABLE>

     The minimum initial investment is $1,000 and there is a $50 minimum on all
additional investments (excluding reinvestment of dividends and capital gains).
The Fund reserves the right to redeem Fund accounts that are reduced to a value
of less than $1,000 (for any reason other than fluctuation in the market value
of the Fund's portfolio securities or if as a result of the amount of an
investor's initial purchase, the value of such an account is $1,000 or less).
Should the Fund elect to exercise this right, the investor will be notified in
writing before such redemption is processed that the value of the investor's
account is less than $1,000 and that the investor will have sixty days to
increase the account to at least the $1,000 minimum amount before the account is
redeemed.

     Shares of the Fund may be sold at net asset value to the officers and
Trustees of the Fund and to any employees of Ranson Capital Corporation or to
members of their

                                      -18-
<PAGE>
 
immediate families. Immediate family members shall include spouse, children,
father, mother, brothers or sisters. Shares of the Fund may also be sold at
their net asset value to broker-dealers having sales agreements with Ranson
Capital Corporation and registered representatives and other employees of such
broker-dealers, including their spouses and children; to financial institutions
having sales agreements with Ranson Capital Corporation and employees of such
financial institutions, including their spouses and children; and to any broker-
dealer, financial institution, or other qualified firm which receives no
commissions for selling shares to its clients.

     From time to time the Distributor may implement programs under which
dealers and their representatives may be eligible to participate in which such
firms may win nominal awards for certain sales efforts or under which the
Distributor will reallow additional concessions to any dealer that sponsors
sales contests or recognition programs conforming to criteria established by the
Distributor or participates in sales programs sponsored by the Distributor.
These programs will not change the price that an investor pays for shares or the
amount that the Fund will receive from such sale. In addition, the Fund and the
Distributor may pay firms that sell the Fund's shares an annual service fee for
administrative and shareholder services, as described under "The Distributor."

LETTERS OF INTENT

     An investor may qualify for a reduced sales charge immediately by stating
his or her intention to invest in one or more series of the Fund, during a 13-
month period, an amount that would qualify for a reduced sales charge and by
signing a nonbinding Letter of Intent which may be signed at any time within 90
days after the first investment to be included under the Letter of Intent. After
signing the Letter of Intent, each investment made by an investor will be
entitled to the sales charge applicable to the total investment indicated in the
Letter of Intent. If an investor does not complete the purchases under the
Letter of Intent within the 13-month period, the sales charge will be adjusted
upward, corresponding to the amount actually purchased. When an investor signs a
Letter of Intent, shares of a series of the Fund with a value of up to 5% of the
amount specified in the Letter of Intent will be restricted. If the total
purchases made by an investor under the Letter of Intent, less redemptions,
equals or exceeds the amount specified in the Letter of Intent, the restriction
on the shares will be removed. In addition, if the total purchases exceed the
amount specified and qualify for a further quantity discount, the Distributor
will make a retroactive price adjustment and will apply the adjustment to
purchase additional shares at the then current applicable offering price. If an
investor does not complete purchases under a Letter of Intent, the sales charge
is adjusted upward, and if after written notice to the investor, he or she does
not pay the increased sales charge, sufficient restricted shares will be
redeemed at the current net asset value to pay such charge. In connection with
the determination of sales charges applicable to the purchase of shares of the
Fund, the Letter of Intent program will take into account investments in shares
of any other mutual fund carrying a sales load of which Ranson Capital
Corporation is the Distributor.

                                      -19-
<PAGE>
 
CONCURRENT PURCHASES

     An investor or his or her dealer or agent must notify the Transfer Agent
whenever a quantity discount is applicable to purchases. Upon such notification,
an investor will receive the lowest applicable sales charge. Quantity discounts
may be modified or terminated by the Distributor at any time. For more
information about quantity discounts, contact the dealer or agent from which
this Prospectus was obtained or the Distributor.

OPEN ACCOUNT PROGRAM/CERTIFICATES

     All investors in the Fund will be enrolled in an Open Account Program when
they make their first investment in the Fund, unless they elect otherwise.
Investors may then make additional purchases whenever they wish, but they are
not obligated to make any additional investments. Whenever investors make an
investment in the Fund, full and fractional shares will be purchased for their
account at the next determined public offering price applicable to their
purchase after the Fund receives their order.

     If an investor elects not to be enrolled in the Open Account Program by
notifying the Transfer Agent in written form, he or she will be sent share
certificates representing the full shares of the Fund and will be required to
surrender the certificates to redeem such shares. Fund share certificates will
be mailed within 10 days of an investor's request. Certificates will not be sent
outside of the United States. Investors should promptly notify the Fund if
certificates are not received. The Fund will not file a mail loss claim later
than one year after the issuance of Fund share certificates. After one year,
investors requesting replacement certificates may be required to post an
insurance bond in the amount of 2% of the market value of the certificated
shares.

                               SPECIAL PROGRAMS

REDEMPTIONS FROM OTHER FUNDS

     Shares of the Fund may be purchased at net asset value where the amount
invested is documented to the Fund to be proceeds from the redemption of shares
of mutual funds which do not impose a contingent deferred sales charge or
redemption fee and where the investor paid an initial sales charge. Purchases
must be made within 60 days of redemption date. The Fund reserves the right to
modify or terminate this privilege at any time without notice.

GROUP PROGRAM

     The Fund has a group investment and reinvestment program (the "Group
Program") which allows investors to purchase shares of a Series of the Fund with
a lower minimum initial investment and with a lower sales charge if the investor
and the Group Program of which he or she is a participant meet the cost saving
criteria set forth below.

                                      -20-
<PAGE>
 
     Description of Group Program.  If the investor's Group Program (such as an
employee investment program) meets the requirements described below, a series of
the Fund will modify the $1,000 initial investment requirement to such minimum
investment as may be determined by the Fund. The sales charge set forth under
"Purchase of Shares" for each purchase by a participant of a Group Program will
be based on (i) the combined current purchases of such group of shares together
with (ii) the combined net asset value of shares of such group at the time of
such investment. The dealer or agent, if any, through which the Group Program
was initiated will be entitled to a dealer concession or agency commission based
on the sales charges paid by participants of such Group Program.

     Criteria for the Group Program.  The cost savings criteria to the Fund that
must be met in order for a Group Program to qualify for the benefits set forth
above are:

          (a)  The administrator of an investor's investment program must have
     entered into an agreement with the Distributor.

          (b)  Such agreement must provide that the administrator must submit a
     single order and make payment with a single remittance for all investments
     during each investment period (e.g., each pay period or distribution
     period) by all investors who choose to invest through the Group Program.

          (c)  Such agreement must provide that the administrator will provide
     the Transfer Agent with appropriate backup data for each participating
     investor in a computerized format compatible with the Transfer Agent's
     processing system.

     Additional Criteria for the Group Program.  As further requirements for
obtaining these special benefits under the Group Program, the Fund requires that
investments be in the form of an Open Account (with no share certificates being
issued), that all dividends and other distributions be reinvested in additional
shares without any systematic withdrawal program described herein and that the
minimum new investment in shares of the Fund by each participant in an employee
investment program be at least $25 per month. The Fund reserves the right to
modify or terminate this program at any time without notice.

SYSTEMATIC WITHDRAWAL PROGRAM

     The owner of $5,000 or more of shares of the Fund (which may not be in
certificated form) may provide for the payment from his or her account of any
requested dollar amount to his or her designated payee monthly, quarterly or
annually. Sufficient shares will be redeemed from the investor's account for the
designated amount so that the payee will receive it approximately the first of
each month. Dividend distributions automatically will be reinvested under this
program. Depending upon the size of the payments requested, redemptions for the
purpose of making such payments may reduce or even exhaust the account. The
program may be terminated at any time by the investor. If an investor desires to
utilize this program, he or she may so indicate on the Account Application
included with this Prospectus.

                                      -21-
<PAGE>
 
     It ordinarily will be disadvantageous to an investor to purchase shares
(except through reinvestment of distributions) while participating in a
systematic withdrawal program because he or she will be paying a sales charge to
purchase shares at the same time that shares are being redeemed upon which such
investor may already have paid a sales charge. Therefore, the Fund will not
knowingly permit an investor to make additional investments of less than $5,000
if an investor is at the same time making systematic withdrawals at a rate
greater than the dividend distributions being paid on such investor's shares.
The Fund reserves the right to amend or terminate the systematic withdrawal
program on thirty days' notice, and investors may withdraw from the program at
any time. The Fund reserves the right to modify or terminate this program at any
time.

PREAUTHORIZED INVESTMENT PROGRAM

     An investor may establish an automatic investment program with his or her
Fund account. With the Preauthorized Investment Program, monthly investments
(minimum $50) are made automatically from an investor's account at a bank,
savings and loan or credit union into such investor's Fund account. By enrolling
in the Preauthorized Investment Program, the investor authorizes the Fund and
its agents to take money out of his or her predesignated bank, savings and loan
or credit union account and invest that money in his or her Fund account. If an
investor also has expedited wire transfer redemption privileges with his or her
Fund account, such investor must designate the same bank, savings and loan or
credit union account for both the Preauthorized Investment Program and wire
redemption programs. Any account owner may terminate this privilege simply by
sending written notice to the Transfer Agent. Termination will become effective
as soon as the Transfer Agent has had a reasonable time to act upon the request.
The Preauthorized Investment Program may not be used with passbook savings
accounts. The redemption proceeds of Fund shares purchased by the Preauthorized
Investment Program may be delayed up to 15 days after this purchase date. If an
investor desires to utilize this program, he or she may so indicate on the
Account Application included with this Prospectus. The Fund reserves the right
to modify or terminate this program at any time.

RIGHTS OF ACCUMULATION

     A purchase of shares may qualify for a cumulative quantity discount.  The
applicable sales charge will be based on the total of:

          (a)  the investor's current purchase; and

          (b)  the net asset value (at the close of business on the previous
     day) of the shares of the Fund held by an investor.

     For example, if an investor owned shares worth $40,000 at the current net
asset value and purchased an additional $10,000 of shares, the sales charge for
the $10,000 purchase would be at the rate applicable to a single $50,000
purchase.

                                      -22-
<PAGE>
 
     To qualify for the cumulative quantity discount on a purchase through a
broker-dealer, when each purchase is made, the investor or broker-dealer must
provide the Fund with sufficient information to verify that the purchase
qualifies for the discount.

REINSTATEMENT PRIVILEGE

     An investor who has redeemed shares of the Fund may reinvest up to the full
amount of such redemption at net asset value at the time of reinvestment. An
investor using this privilege a year or more after such investor redeemed shares
of the Fund must file a new account application and provide proof that such
investor was a shareholder of the Fund. See "Dividends and Taxes" regarding the
potential tax implications of exercising this privilege. The Fund reserves the
right to modify or terminate this privilege at any time without notice.

                             REDEMPTION OF SHARES

     Upon receipt of a redemption request in proper form addressed to the
Transfer Agent, shares of the Fund will be redeemed by the Fund. It is a
broker's or dealer's responsibility to promptly forward the redemption requests
to the Transfer Agent for shares being redeemed in order for shareholders to
receive the next determined net asset value. The redemption price for shares of
the Fund is based on the net asset value per share next determined after receipt
of the redemption request. Redemption requests must be in writing, accompanied
by any issued certificates (for investor protection, certificates should be sent
by registered mail). Redemption requests and any certificates or stock power
must be endorsed by all registered owners with signatures guaranteed by a member
firm of a national securities exchange or by a commercial bank, savings and loan
association or trust company. Further documentation may be requested from
corporations, executors, administrators, trustees or guardians.

     Alternatively, an investor may place an order to sell shares (whether in
certificate or book entry form) through his or her dealer or agent which has a
sales agreement with the Distributor and from which this Prospectus was
received, which dealer or agent will telephone such request to the Distributor.
The investor will receive the net asset value next determined after the
Distributor receives such sell order from the dealer or agent. The Fund does not
charge for this transaction.

     Whether shares are redeemed by the Fund or sold through an investor's
dealer or agent, a check for the proceeds ordinarily will be mailed to an
investor or his or her dealer or agent within three business days after a
redemption request or repurchase order and Share certificates (if any) are
received in proper form as set forth above.

     If a request to redeem shares is received shortly after the purchase of
such shares, the Fund will not mail the proceeds until checks received for the
purchase of shares have cleared, which may take up to 15 days from the purchase
date. The proceeds of a redemption may be more or less than the cost of the
shares.

                                      -23-
<PAGE>
 
     The right of redemption or resale of the Fund shares may be suspended or
the date of payment postponed during any period when the New York Stock Exchange
is closed.

                              DIVIDENDS AND TAXES

DIVIDENDS

     The Fund will declare distributions on a daily basis to shareholders of
record on the date of each declaration and will pay such distributions on a
monthly basis. The monthly distribution will be composed of the investment
income earned by the Fund less the expenses of the Fund plus all or a portion of
net short-term capital gains (such net short-term capital gains reduced by net
long-term capital losses, if any, and carryover capital losses from previous
years) realized by the Fund on transactions in securities. The Fund will also
declare and make distributions of net long-term capital gains, if any, at least
annually. Net long-term capital gain distributions consist of the realized long-
term capital gains on transactions in securities of the Fund, net of certain
realized capital losses and less certain carryover capital losses from previous
years.

     The Fund automatically will credit monthly distributions and any capital
gain distributions to an investor's account in additional shares of the Fund
valued at net asset value on the date such distributions are payable, without
sales charge, unless an investor elects to the Transfer Agent of the Fund to
have distributions received in cash. Distributions that are reinvested are
treated as cash distributions for income tax purposes. If an investor elects to
change the method of distribution, such change will be effective only with
regard to distributions for which the payment date is seven or more business
days after the Transfer Agent has received the written request.

     A check will be generated on the date on which distributions are payable
for dividends to be received in cash. An investor can expect to receive this
check within seven days. If the U. S. Postal Service cannot deliver the check,
or if the checks remain uncashed for six months, the dollar amount of such
distributions will be held in a non-interest bearing account for the benefit of
the investor and all future dividends found to be undeliverable or uncashed for
six months will be similarly held.

     Distribution checks may be sent to parties other than the investor. The
Transfer Agent of the Fund can provide investors with a "Dividend Order" form
for such purposes. After the Transfer Agent receives this completed form with a
signature guarantee, distribution checks will be sent to the bank or other
person designated as an investor.

TAXES

     The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code") and, if so
qualified, will generally not be liable for federal income taxes to the extent
it timely distributes its earnings. If in any year the Fund should fail to
qualify under Subchapter M for tax treatment as a regulated

                                      -24-
<PAGE>
 
investment company, the Fund would incur a regular corporate federal income tax
upon its taxable income for that year, and distributions to shareholders of the
Fund would be taxable to such shareholders as ordinary income to the extent of
the earnings and profits of the Fund, including distributions that would
otherwise qualify as exempt-interest dividends. For shareholders of the Fund
that are corporations, such distributions would be eligible for the dividends-
received deduction. In addition, the Fund intends to invest in sufficient
municipal securities so that it will qualify to pay "exempt-interest dividends"
(as defined in the Code) to shareholders; the Fund's dividends payable from net
tax-exempt interest earned from municipal securities will qualify as exempt-
interest dividends if, at the close of each quarter of the taxable year of the
Series, at least 50% of the value of the Fund's total assets consists of tax-
exempt municipal securities.

     Exempt-interest dividends distributed to shareholders generally are not
subject to federal income tax except to the extent such interest is subject to
the alternative minimum tax, as discussed hereinafter. The percentage of income
that is tax-exempt is applied uniformly to all distributions made during each
calendar year and thus is an annual average for the Fund rather than a day-by-
day determination for each shareholder whether received in shares or in cash.
The percentage of all distributions of earnings other than exempt-interest
dividends paid by the Fund, such as net investment income received from
investments in debt securities other than tax-exempt municipal securities, and
any net realized short-term capital gains (including certain amounts deemed
distributed) will generally be taxable to the shareholders as ordinary income.
Any distribution of net related long-term capital gains (including amounts
deemed distributed) will generally be subject to federal taxation as long-term
capital gains ("long-term capital gain distributions"), regardless of the length
of time the investor has held such shares.

     "The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects tax-
exempt municipal securities to the market discount rules of the Code effective
for municipal securities purchased after April 30, 1993. In general, market
discount is the amount (if any) by which the stated redemption price at maturity
exceeds an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued), subject to
a statutory de minimis rule. Market discount can arise based on the price the
Fund pays for municipal securities. Under the Tax Act, accretion of market
discount is taxable as ordinary income; under prior law the accretion had been
treated as capital gain. Market discount that accretes while the Fund holds a
municipal security would be recognized as ordinary income by the Fund when
principal payments are received on the municipal security, or upon sale or at
redemption (including early redemption), unless the Fund elects to include
market discount in taxable income as it accrues. Distributions to shareholders
of the Fund, to the extent of any market discount that is included in the Fund's
taxable income, would be taxable to shareholders as ordinary income.

     For both individuals and corporations, interest paid on certain "private
activity bonds" issued on or after August 8, 1986 shall be treated as an item of
tax preference and may, therefore, be subject to the alternative minimum tax. To
the extent provided by regulations to be issued by the Secretary of the
Treasury, exempt-interest dividends paid by the Fund will be treated as interest
on private activity bonds to the extent of the proportionate amount

                                      -25-
<PAGE>
 
of interest on such private activity bonds received by the Fund. Such exempt-
interest dividends constitute a tax preference item subject to both the
individual and corporate alternative minimum tax. The Fund will annually supply
shareholders with a report indicating the percentage of Fund income attributable
to bonds subject to the alternative minimum tax.

     Exempt-interest dividends received by a shareholder which are not with
respect to certain "private activity bonds" are not treated as a tax preference
item. However, for certain corporate shareholders such dividends will be
included in the computation of an adjustment item used in determining such
corporation's alternative minimum tax and environmental tax (the "Superfund
Tax"). The adjustment item is 75% of the excess of such corporate shareholder's
"adjusted current earnings" over its other alternative minimum taxable income
with certain adjustments. Although exempt-interest dividends received by a
shareholder will not be included in the gross income of corporations for federal
income tax purposes, "adjusted current earnings" include all tax-exempt
interest, including exempt-interest dividends received from the Fund. Corporate
shareholders are advised to consult their tax advisors with respect to the tax
consequences of the alternative minimum tax, the Superfund Tax and the branch
profits tax under Section 884 of the Code.

     For taxpayers other than corporations, net capital gains are presently
subject to a maximum stated marginal tax rate of 28%. All taxpayers are required
to disclose to the Internal Revenue Service on their tax returns the amount of
tax-exempt interest earned during the year including exempt-interest dividends
from the Fund.

     The hedging activities and transactions in options and futures contracts of
the Fund are subject to special tax provisions that may accelerate or defer
recognition of certain taxable gains or losses, or alter the holding periods of
certain of the Fund's securities, or convert capital gain into ordinary income
and convert short-term capital losses into long-term capital losses. These rules
could therefore affect the amount, timing and character of distributions to
shareholders. Recognition of unrealized taxable gains by the Fund under the
"mark to market" rules of the Code may increase the difficulty of compliance
with requirements which must be satisfied in order for the Fund to continue to
qualify as a regulated investment company, thus requiring the Fund to limit its
hedging activities. Such activities also may be limited by the requirement that
the Fund derive less than 30% of its annual gross income from the sale or other
disposition of securities held for less than three months in order to qualify as
a regulated investment company under the Code.

     Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during January of the
following year will be treated as having been distributed by the Fund (and
received by the shareholders) on December 31 of the year such dividends are
declared.

     Distributions from the Fund will not generally be eligible for the
dividends received deduction for corporations.

                                      -26-
<PAGE>
 
     The Fund is required by law to withhold a specified percentage of taxable
dividends and certain other payments, including redemption payments, paid to
non-corporate investors who do not certify to the Fund their correct taxpayer
identification number (in the case of individuals, their social security
number) and in certain other circumstances as may be required by the Code.

     Under Section 86 of the Code, up to 50% of a social security recipient's
benefits may be included in taxable income for a benefit recipient if the sum of
his adjusted gross income, income from tax-exempt sources such as tax-exempt
bonds and distributions made by the Fund plus 50% of his social security
benefits exceeds certain base amounts.  Income from the Fund is still tax-exempt
to the extent described above; it is only included in the calculation of whether
a recipient's income exceeds certain established amounts.

     Redemption of shares of the Fund will be a taxable transaction for federal
income tax purposes and such investors will generally recognize gain or loss in
an amount equal to the difference between the basis of the shares and the amount
received. Assuming that investors hold such shares as a capital asset, the gain
or loss will be a capital gain or loss and will generally be long-term if
investors have held such shares for a period of more than one year. In the case
of shareholders holding shares of the Fund for six months or less and
subsequently selling those shares at a loss after receiving an exempt-interest
dividend, the loss will be disallowed to the extent of the exempt-interest
dividends received. If such loss is not entirely disallowed, it will be treated
as a long-term capital loss to the extent any long-term capital gain
distribution is made with respect to such shares during the six-month period or
less that the investor owns the shares. If a loss is realized on the redemption
of Fund shares, the reinvestment in additional Fund shares or the acquisition of
a contract or option to acquire securities that are substantially identical to
Fund shares within 30 days before or after the redemption may be subject to the
"wash sale" rules of the Code, resulting in a postponement of the recognition of
such loss for federal income tax purposes. In addition, an investor cannot take
into account any sales or similar charge incurred in acquiring shares of the
Fund (a "load charge," such charge does not include amounts paid with respect to
the reinvestment of mutual fund share dividends) in computing gain or loss on
the sale of shares of the Fund if the investor sells such shares within 90 days
of the date the shares are acquired and the investor obtains and subsequently
exercises the right to reinvest in shares of any mutual fund without the payment
of a load charge or with the payment of a reduced charge (however, such charges
shall be treated as incurred in connection with the reinvestment in shares).

     The Tax Act raised tax rates on ordinary income while capital gains remain
subject to a 28 percent maximum stated rate. Because some or all capital gains
are taxed at a comparatively lower rate under the Tax Act, the Tax Act includes
a provision that recharacterizes capital gains as ordinary income in the case of
certain financial transactions that are "conversion transactions" effective for
transactions entered into after April 30, 1993. It is possible that this
provision could result in the recharacterization of amounts or distributions
otherwise characterized as capital gains by the Fund or a shareholder as
ordinary income. Shareholders of the Fund should consult with their tax advisors
regarding the potential effect of this provision on their investment in shares
of the Fund.

                                      -27-

<PAGE>
 
     Interest on indebtedness which is incurred to purchase or carry shares of a
mutual fund which distributes exempt-interest dividends during the year is not
deductible for federal income tax purposes.  Further, the Fund may not be an
appropriate investment for persons who are "substantial users" of facilities
financed by industrial development bonds held by the Fund or are "related
persons" to such users; such persons should consult their tax advisors before
investing in the Fund.

     State and Local Tax Aspects.  To the extent that exempt-interest dividends
are derived from interest on Illinois Municipal Securities that is exempt from
the Illinois income tax, such dividends will be taxable for Illinois income tax
purposes to shareholders of the Fund.  However, to the extent that
exempt-interest dividends are derived from interest on obligations of the
Commonwealth of Puerto Rico, the United States Virgin Islands or Guam that is
exempt from Illinois income tax, such dividends will also qualify as exempt from
the Illinois income tax.  As discussed earlier, the Fund may invest up to 100%
of its total assets in Illinois Municipal Securities which are subject to
Illinois state income taxes.  Any exempt-interest dividends and dividends
taxable for federal income tax purposes as ordinary income will be taxable for
Illinois income tax purposes to the shareholders of the Fund. Distributions
treated as long-term capital gains for federal income tax purposes will
generally receive the same characterization under Illinois law.

     As described above with respect to Illinois income taxation, the exemption
from federal income tax for exempt-interest dividends does not necessarily
result in exemption for such dividends under the income or other tax laws of any
state or local taxing authority.  Taxpayers should consult their own advisors
regarding the consequences under such taxes with respect to the purchase,
ownership, and disposition of shares of the Fund.

     The tax discussion set forth above is for general information only.
Annually, shareholders of the Fund receive information as to the tax status of
distributions made by the Fund in each calendar year.  The foregoing relates to
federal income taxation and to Illinois income taxation as in effect as of the
date of this Prospectus.  Investors should consult their own tax advisors
regarding the federal, state, local, foreign and other tax consequences of an
investment in the Fund, including the effects of any change, including any
proposed change, in the tax laws.

                       Description of Shares and Rights

     The Fund's Agreement and Declaration of Trust ("Trust Agreement") permits
its Trustees to issue an unlimited number of shares, without par value, from
each Series that is designated by the Board of Trustees.  Each share of a Series
represents an equal proportionate interest in the assets and liabilities
belonging to the Series with each other share of such Series and is entitled to
such dividends and distributions out of the income belonging to the Series as
are declared by the Trustees.  The shares do not have cumulative voting rights
nor any preemptive rights.  In case of a liquidation, subject to the rights of
creditors, the holders of the shares of the Series being liquidated will be
entitled to receive a distribution out of the net assets belonging to the Series
being liquidated.  Should additional 

                                      -28-
<PAGE>
 
Series be designated by the Board of Trustees, the net asset value of the shares
of each of such Series will be computed based only upon the net assets of each
such Series.

     Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust could be deemed to have the same type of personal
liability for the obligations of the Fund as does a partner of a partnership.
The Trust Agreement contains an express disclaimer of liability on the part of
Fund shareholders and provides that the Fund shall assume the defense on behalf
of its shareholders.  Thus, the risk of Fund shareholder liability is slight and
limited to a circumstance where a Series itself is unable to meet its
obligations.

     As a Massachusetts business trust, the Fund is not required to and does not
intend to hold annual shareholders' meetings.  However, the Trust Agreement
provides for Fund shareholder voting with respect to certain matters, including:
(a) the election or removal of Trustees if a meeting is called for that purpose;
(b) any contract as to which shareholder approval is required by the Investment
Company Act of 1940, as amended (the "1940 Act"); (c) any termination or
reorganization of the Fund or any Series of the Fund to the extent provided in
the Trust Agreement; and (d) any amendment of the Trust Agreement (other than
amendments designating new Series, changing the name of the Fund or any Series
of the Fund, supplying any omission, curing any ambiguity, or curing, correcting
or supplementing any provisions inconsistent with the 1940 Act or the Code). 
Meetings of shareholders may be called upon written application specifying the
purpose of the meeting by shareholders holding at least 25% (or 10% if the
purpose of the meeting is to determine if a Trustee is to be removed from
office) of the shares then outstanding.  In connection with the shareholders'
right to remove a Trustee, shareholders will be assisted with their
communications in such matter.

                                Fund Management

     The business and affairs of the Fund will be managed under the direction of
the Board of Trustees.  The Trustees are subject to the fiduciary
responsibilities imposed by the laws of the Commonwealth of Massachusetts.
Subject to the Trustees' authority, Ranson Capital Corporation, a Kansas
corporation, 1 North Main, Minot, North Dakota 58703, the Manager, will
supervise and implement the Fund's investment activities and will be responsible
for overall management of the Fund's business affairs.  Ranson Capital
Corporation is also the investment adviser of the Fund and will perform certain
evaluations of the securities held by the Fund.  The Fund will pay the Manager a
monthly management and investment advisory fee equivalent on an annual basis to
 .50 of 1% of its average daily net assets.

     Overall portfolio management strategy for the Fund is determined by the
Manager under the general supervision and direction of Robert E. Walstad, the
President of the Fund and the Manager since January 5, 1996.  Mr. Walstad is
also the President of five other open-end funds and of ND Money Management,
Inc., their investment adviser, and has supervised and directed the management
of their portfolios since they commenced operations.  Mr. Walstad started in the
securities business with Paine Webber in 1972 as a 

                                      -29-
<PAGE>
 
retail broker. He became branch manager with Dean Witter Reynolds in 1977 and
spent ten years in that capacity. In 1987, Mr. Walstad founded ND Holdings,
which is also sponsor of Integrity Mutual Funds. The day-to-day management of
the Fund, including credit analysis and the execution of portfolio transactions,
is the responsibility of a portfolio management team, consisting of Monte L.
Avery and W. Dan Korgel. Mr. Avery started in the securities business with Paine
Webber in 1981 as a retail broker transferring to Dean Witter in 1982. In 1988,
Mr. Avery joined First American Bank & Trust (Minot, ND) to help start their
Invest Center. He transferred back to Dean Witter in 1993 until joining ND
Holdings in 1995. Mr. Avery is responsible for the daily pricing of the
Integrity Mutual Funds as well as their portfolio trading. He is also portfolio
manager for the Integrity Fund of Funds. Mr. Korgel was employed in the trust
banking business for 12 years prior to joining ND Holdings. He was with the
trust department of First American Bank & Trust (Minot, ND) for two years as
head of investments and operations. He joined ND Holdings in May 1988, and is
the portfolio manager of four of the mutual funds which are sponsored by ND
Holdings. He is responsible for the daily portfolio management of those funds.
He is also Corporate treasurer for ND Holdings. All portfolio management
decisions are subject to weekly review by Mr. Walstad and to quarterly review by
the Fund's Board of Trustees.

     The Manager is a broker-dealer registered with the Securities and Exchange
Commission and a wholly-owned subsidiary of ND Holdings, Inc., a North Dakota
corporation.  The Manager was formed in 1990 and is also the investment adviser
for The Kansas Municipal Fund, The Kansas Insured Intermediate Fund, The
Nebraska Municipal Fund and The Oklahoma Municipal Fund, which had on June 30,
1997 current net asset values of approximately $127,000,000, $25,000,000,
$28,000,000 and $6,000,000, respectively.  The Manager has not retained the
right to withdraw from the Fund the use of the name "Ranson," but the Manager
may grant the use of the name "Ranson" to another investment company.

     Under the terms of the Management and Investment Advisory Agreement, the
Manager has agreed to pay all expenses of the Fund, including the Fund's
management and investment advisory fee and the Fund's administrative and
accounting services fees (but excluding taxes and brokerage fees and
commissions, if any) that exceed 1.25% of the Fund's average daily net assets on
an annual basis up to the amount of the investment advisory and management fee
payable by the Fund to the Manager.  Reimbursements by the Manager for such Fund
expenses will be paid monthly based on annualized year to date expenses.  All
other expenses shall be paid by the Fund.  From time to time and subject to
discontinuance at any time, the Manager may voluntarily assume certain expenses
of the Fund.  This will have the effect of lowering the overall expense ratio of
the Fund and of increasing yield to investors.  The Fund's expenses include,
among others, taxes, brokerage fees and commissions, if any, fees of
Disinterested Trustees, expenses of Trustees' and shareholders' meetings,
insurance premiums, expenses of redemption of shares, expenses of issue and sale
of shares (to the extent not borne by the Distributor), expenses of printing and
mailing certificates, association membership dues, charges of the Fund's
custodian, and bookkeeping, auditing and legal expenses, and the fees and
expenses of registering the Fund and its shares with the Securities and Exchange
Commission, registering or qualifying its 

                                      -30-
<PAGE>
 
shares under state securities laws and the expenses of preparing and mailing
prospectuses and reports to shareholders.

     ND Resources, Inc. ("Resources"), a wholly-owned subsidiary of ND Holdings,
Inc., a North Dakota corporation, acts as the Fund's administrative and
accounting services agent.  For these services, Resources receives an
administrative and accounting services fee payable monthly from the Fund equal
to the sum of (i) $2,000 per month and (ii) 0.05% of the Fund's average daily
net assets on an annual basis for the Fund's first $50 million of average daily
net assets, 0.04% of the Fund's average daily net assets on an annual basis for
the Fund's next $50 million of average daily net assets, 0.03% of the Fund's
average daily net assets on an annual basis for the Fund's next $100 million of
average daily net assets, 0.02% of the Fund's average daily net assets on an
annual basis for the Fund's next $300 million of average daily net assets, and
0.01% of the Fund's average daily net assets on an annual basis for the Fund's
average daily net assets in excess of $500 million, together with reimbursement
of Resources' out-of-pocket expenses. This fee and reimbursement are in addition
to the investment advisory and management fee received by the Manager, which is
also indirectly owned by ND Holdings, Inc., from the Fund.

     The Board of Trustees has the authority, without shareholder approval, to
determine who will perform the following services for the Fund: securities
evaluator; custodian of the Fund's securities and cash; and, dividend
disbursing, administrative and accounting services agent.

     In effecting purchases and sales of the Fund's portfolio securities, the
Manager and the Fund may place orders with and pay brokerage commissions to
brokers which are affiliated with the Fund, the Manager, the Distributor or
selected dealers participating in the offering of the Fund's shares.  In
addition, in selecting among firms to handle a particular transaction, the
Manager and the Fund may take into account whether the firm has sold or is
selling shares of the Fund.  Subject to rules adopted by the Securities and
Exchange Commission, the Fund may also purchase municipal securities from other
members of underwriting syndicates of which the Distributor or other affiliates
of the Fund are members.

                                The Distributor

     Shares of the Fund are offered on a continuous basis through Ranson Capital
Corporation, a Kansas Corporation, 1 North Main, Minot, North Dakota 58703. 
Pursuant to a Distribution and Services Agreement, the Distributor will purchase
shares of the Fund for resale to the public, either directly or through
securities dealers or agents, and is obligated to purchase only those shares for
which it has received purchase orders.  In addition to agreements with
securities dealers, the Distributor may enter into agreements with banks or bank
affiliates with respect to the sale of shares of the Fund.  Under the
Glass-Steagall Act, banks and bank affiliates are prohibited from underwriting
Fund shares; however, the Glass-Steagall Act does permit certain agency
transactions and the banking regulators have not indicated that these particular
agency transactions are not permitted under such Act.  In the event the
Glass-Steagall Act should prevent banks or bank affiliates from acting in any 

                                      -31-
<PAGE>

capacity or providing investor administrative and shareholder services, the
Fund's Trustees will consider what action, if any, is appropriate in order to
provide efficient services to the Fund. It is anticipated that a termination of
a relationship with a bank or bank affiliate would not result in a loss to
investors or a change in net asset value.

     Under the Distribution and Services Agreement between the Fund and the
Distributor, the Distributor pays the expenses of distribution of the Fund's
shares, including preparation and distribution of literature relating to the
Fund and its investment performance and advertising and public relations
material.  The Fund bears the expenses of registration of its shares with the
Securities and Exchange Commission and of sending prospectuses to existing
shareholders.  The Distributor will permit their officers and employees to serve
without compensation as Trustees and officers of the Fund if duly elected to
such positions.  The Fund will pay the cost of qualifying and maintaining
qualification of the shares for sale under the securities laws of the various
states if necessary.  In addition, under the plan adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940 and under which the Fund will pay some
costs of the distribution of its shares, the Fund will pay the Distributor .25 %
of the average daily net assets of the Fund and the Distributor may in turn pay
firms that sell the Fund's shares an annual service fee of up to .25% of average
daily net assets of customer accounts in existence for more than one year for
administrative and shareholder services or use some or all of such payment to
pay other distribution expenses which otherwise would be payable by the
Distributor.

     The Distribution and Services Agreement continues in effect from year to
year if specifically approved at least annually by the shareholders or Board of
Trustees of the Fund and by the Fund's disinterested Trustees in compliance with
the Investment Company Act of 1940.  The agreement may be terminated without
penalty upon sixty days' written notice by the Fund or ninety days' written
notice by the Distributor and will automatically terminate if it is assigned.

                       Shareholder Services and Reports

     First Western Bank & Trust serves as Custodian of the Fund and will have
custody of all securities and cash of the Fund and will attend to the collection
of principal and income and payment for and collection of proceeds of securities
bought and sold by the Fund.

     ND Resources, Inc. is the Transfer Agent for the Fund and will perform
bookkeeping, data processing and administrative services related to the
maintenance of shareholder accounts.  When an investor makes an initial
investment in the Fund, an account will be opened on the Fund's books and the
investor will receive a confirmation of the opening of the account.  An investor
will receive monthly statements giving details of all activity in his or her
account and will receive a statement whenever investments in or withdrawals from
such account are made.  The statement with tax information for the year will be
mailed to investors by January 31 and will also be filed with the Internal
Revenue Service.

     As a rule, the Fund will not issue share certificates.  However, upon
written request to the Transfer Agent, a share certificate will be issued for
any or all of the full shares credited 

                                      -32-
<PAGE>
 
to an investor's account. Share certificates which have been issued may be
returned at any time.

     Investors will receive annual financial statements, together with a report
of independent auditors, and semiannual unaudited financial statements.
Investors will also receive notices of shareholders' meetings.  Shareholder
inquiries regarding their account should be directed to the Transfer Agent.

                     Calculation of Fund Performance Data

     From time to time, the Fund may advertise several types of performance
information.  These are "current yield," "tax equivalent yield," "average annual
total return" and "total return." Each of these figures is based upon historical
results and is not necessarily representative of the future performance of the
Fund.

     Current yield is determined by annualizing net investment income earned per
share for a stated period (normally one month or thirty days) and dividing the
result by the maximum public offering price at the end of the evaluation period.

     Tax equivalent yield is determined by dividing that portion of current
yield which is tax-exempt by one minus a stated combined state and federal
income tax rate and adding that portion of the current yield, if any, that is
not tax-exempt.

     The Fund's distribution return is computed by dividing the income per share
by the number of days in the current month, and the quotient is multiplied by
365.  The result is divided by the average offering price per share on the last
day of the month.

     Average annual total return and total return figures measure both the net
investment income generated by the Fund and the effect of any realized or
unrealized appreciation or depreciation of the underlying investments in the
portfolio of the Fund for the period in question, assuming the reinvestment of
all dividends and capital gains distributions.  Thus, these figures reflect the
change in the value of an investment in the Fund during a specified period. 
Average annual total return will be quoted for at least the one, five and ten
year periods ending on a recent calendar quarter (or if such periods have not
yet elapsed, at the end of a shorter period corresponding to the life of the
Fund).  Average annual total return figures are annualized and, therefore,
represent the average annual percentage change over the period in question. 
Total return figures are not annualized and represent the aggregate percentage
or dollar value change over the period in question.

     From time to time, the Fund's performance may be compared to that of the
Consumer Price Index or various unmanaged bond indexes and may also be compared
to the performance of other fixed income or government bond mutual funds or
mutual fund indexes as reported by entities such as Lipper Analytical Services,
Inc. ("Lipper").  Lipper is a widely recognized independent mutual fund
reporting service.  Lipper performance calculations are based upon changes in
net asset value with all dividends reinvested and do not include the effect of
any sales charges.

                                      -33-
<PAGE>
 
     The Fund's shares are sold at net asset value plus a maximum sales charge
of 4.25% of the offering price.  While the maximum sales charge is normally
reflected in the Fund's performance figures, certain total return calculations
may not include such charge and those results would be reduced if it were
included.  The Fund's returns and net asset value will fluctuate.  Shares of the
Fund are redeemable by an investor at the then current net asset value, which
may be more or less than original cost.

                             Summary of Procedures

     The following summary is intended as a reference guide for investors.  It
is not intended to be comprehensive.  Investors should read the main body of the
Prospectus and consult with their dealer, agent or the Fund's customer service
representatives as necessary.

Purchases

     Initial investments of $1,000 or more and an account application
(indicating phone order information as applicable) should be mailed to the
dealer or agent from which this Prospectus was received which has a sales
agreement with the Distributor or directly mailed to the Transfer Agent.
Investors qualifying for reduced initial minimum investments or reduced sales
charges should indicate their qualification on the application.  Additional
investments should be sent to the same address.  Investors should include the
purchase form from the bottom of their monthly statement and should include
their account number on the check.

     Checks should be made payable to The Illinois Municipal Fund.

Redemptions

     Redemption Requests must be signed by all registered owners, accompanied by
signature guarantee(s).  Fund shares held in certificate form must be submitted
in proper form to effect redemption.  The Transfer Agent may request such other
documentation from corporations, executors, administrators, trustees or
guardians as is deemed necessary to determine the authority of the individual
making the request.

     Redemption Requests and Other Transfer Agent Inquiries should be sent to
the Fund, c/o the Transfer Agent.

Other

     Address Changes:  A new address should be indicated on the remittance
advice on the bottom of an investor's monthly statement (or on a copy of the
monthly statement) and mailed to the Transfer Agent at the above address.  All
other requests must be signature guaranteed.

                                      -34-
<PAGE>

     Registration Changes:  A new account is opened whenever there is a change
in registration.  Therefore, the procedures for redemption by mail should be
followed indicating the requested registration changes.  Shares will be
transferred to the new account at net asset value on the same date as the
closing of the old account.

             Sales Information, Performance Data, Prior Days'
                      Offering Price and Net Asset Value
                     Call (701) 852-5292 Or (800) 601-5593

         For Information on Account Balances and all Other Inquiries
                              Call (800) 601-5593

                                      -35-
<PAGE>
 

Initial Application         Ranson Managed Portfolios--
                                            The Illinois Municipal Fund
 
Account Application
Mail To:  The Illinois Municipal Fund, P.O. Box 759, Minot, North Dakota 58702
================================================================================

1.  Account Registration (Please print)-Note: The name(s) and address shown
    below must read exactly in accordance with the registration of Shareholder
    Account (if any) currently on file.
    [_] Individual or joint* account

    ----------------------------------------    --------------------------------
    Name                                        Joint Owner's name
    *Joint tenants with rights of survivorship, unless you specify otherwise.
    [_]  Check here if purchaser is employee of Broker/Dealer.
    [_]  Gift or transfer to a minor (UGMA/UTMA)

<TABLE> 
<CAPTION> 
                          as custodian for                                                  under the
    ----------------------                -------------------------------------------------           ---------------  
<S>                                       <C>                                                         <C> 
    Custodian's name                                Minor's name                                        State
    Uniform Gifts/Transfers to Minors Act
    [_]  Trust
                                             as trustee(s) of 
    ----------------------------------------                  ------------------------
    Trustee's name(s)  Name of trust agreement                  Date of trust agreement
    Please include copy of first and last page of trust agreement.
    [_]  Corporation/other entity

    -----------------------------------  -------------------------------------------------------------------------------
    Name of corporation or other entity  Type of organization (i.e. corporation, non-profit, partnership)
    Please attach a certified copy of your corporate resolution showing the person(s) authorized to act on this account.
    Address:                                                           City, State, Zip:
            ----------------------------------------------------------                   -------------------------------
    Day telephone number:
                         --------------------------------------------------------- 

====================================================================================================================================

2.  Initial Investment
    _____ Check Enclosed for $__________ (Minimum Initial Investment is $1,000, thereafter $50.) Make  
    Check Payable to The Illinois Municipal Fund.
    _____ The Dealer Firm Named Below Ordered My Initial Purchase of _____ Shares by Wire on _______
                                                                                               Date
                       Reinvestment of [_] Principal and Interest [_] Principal Only                             
====================================================================================================================================
3.  Dividend and Distribution Options.  All dividends and capital gains reinvested unless indicated.
      Dividends                                  Capital Gains
          [_] Reinvest                                  [_] Reinvest
                [_] Cash                                      [_] Cash
  All cash distributions to shareowner of record unless indicated below
  Name
      -------------------------------------------------------------------------- 
  Address
         -----------------------------------------------------------------------
  City                                   State           Zip
       ----------------------------------     -----------   --------------------
  Account number (if applicable)                   Attach voided check if payable to your bank account.
                                 ------------------
====================================================================================================================================
4.  Letter of Intent
    I request establishment of a Letter of Intent to purchase shares of Ranson Managed Portfolios--The Illinois
    Municipal Fund as described in this Prospectus.  These shares will be purchased over a thirteen-month 
    period; the aggregate amount of these purchases will be at least equal to the amount indicated below:
    _____ $50,000  _____ $100,000  _____ $250,000  _____ $500,000  _____ $1,000,000
    _____ This is an amended Letter of Intent
====================================================================================================================================
</TABLE> 
                                     -36-
<PAGE>

================================================================================
5.  Rights of Accumulation

    If this account qualifies for a reduced sales charge under the Rights of
    Accumulation as described in this Prospectus, please give the following
    information:

     Account Number of Related Accounts           Relationship to Investor

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

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

================================================================================
6.  Systematic Withdrawal Plan

    _____ Systematic Withdrawal (Available only for accounts of $5,000 or more)
    --Redeem sufficient shares on or about the 24th of the month and send check
    to the owner listed above: _____ Monthly: _____ Quarterly (Jan., Apr., July
    & Oct.) for $________ (Minimum $50). The first redemption to take place on
    the 24th of (indicate month) __________ (Note: All distributions from the
    Fund must be reinvested) _____ Payment to a Different Payee or Account
    (Optional)--If systematic withdrawal checks are to be payable to person or
    address other than as registered above, make checks payable to:

    Name________________________________________________________________________
    Address_____________________________________________________________________
    City_________________________  State____________________  Zip_______________
    Account Number_______________  (if applicable)

================================================================================
7.  Preauthorized Investment Program

    I hereby authorize the Transfer Agent to draw from my account monthly
    beginning on the [_] 5th or [_] 20th of ______________

        Amount (minimum $50)         Name of Bank              ABA Number
       ______________________    _____________________    _____________________

                  Bank Address                         Bank Account No.
       ____________________________________     ________________________________

    Name shown on bank records
    ____________________________________________________________________________

    Attached is one of unsigned checks marked "Void" to ensure the correct
    encoding.
    _____________________________________      _________________________________
    Signature                        Date      Signature Co-depositor       Date
- --------------------------------------------------------------------------------

                                      -37-
<PAGE>

================================================================================
8.  Your Signature and Tax Certifications
    See enclosed substitute Instructions and Important Notice. The Fund reserves
    the right to refuse to open an account without either a certified taxpayer
    identification number ("TIN") or a certification of foreign status. Failure
    to provide the tax certifications in this section may result in backup
    withholding on payments relating to your account and/or in your inability to
    qualify for treaty withholding rates.
    _________________________________ OR _________________________________ 
         Social Security Number           Employer Identification Number
    I am a citizen of: [_] U.S. [_] _______ My Country of residence for tax
    purpose is: [_] U.S. [_] _______
    Check one of the following:
    [_] The number shown above is my correct TIN. I am not subject to backup
        withholding due to underreporting of interest or dividend income either
        because no notification has been received from the IRS or because the
        IRS has notified me that I am no longer subject to backup withholding.
        (If you are subject to backup withholding, please cross out the second
        sentence.)
    [_] Awaiting TIN. A TIN has not been issued to me, but I am in the process
        of applying for a TIN from either the appropriate Internal Revenue
        Service Center or Social Security Administration Office. I understand
        that if I do not provide a TIN to the Fund within 60 days, the Fund is
        required to commence backup withholding until I provide a certified TIN.
        I am not subject to backup withholding due to underreporting of interest
        or dividend income either because no notification has been received from
        the IRS or because the IRS has notified me that I am no longer subject
        to backup withholding. (If you are subject to backup withholding, please
        cross out the third sentence.)
    [_] Exempt Recipient. I am an Exempt Recipient. The instructions give a list
        of the most common Exempt Recipients. (You should still provide a TIN.)
    [_] Exempt Foreign Person.  I am an Exempt Person as explained in the
        instructions.
    Under the penalties of perjury, I certify that (1) the information provided
    on this application is true, correct and complete, (2) I have read the
    prospectus for the Fund in which I am investing and agree to the terms
    thereof, and (3) I am of legal age or an emancipated minor.
                                           Date:________________________________

    __________________________________     _____________________________________
               Signature                                  Signature
- --------------------------------------------------------------------------------
9.  Broker/Dealer Use Only:  (Please Print)        Ranson Dealer #
    We hereby submit this application for the purchase of shares of The Illinois
    Municipal Fund indicated in accordance with the terms of our selling
    agreement with Ranson Managed Portfolios and with the prospectus for The
    Illinois Municipal Fund. We agree to notify Distributor of any purchase made
    under a letter of intent or right of accumulation.

    Wire Order Only:  The attached check for $___________ should be applied
                      against wire order
                      Confirmation Number _____________ Dated __________ 
                      For _______ Shares

    Securities Dealer Name______________________________________________________
    Main Office Address_________________________________________________________
    Branch #____________________ Rep #_________________ Representative Name_____
    ____________________________
    Branch Address________________________________________ Telephone Number_____
    ____________________________
    Authorized Signature, Securities Dealer ____________________________________
    Title _______________
    [_] Check here if purchaser is employee of Broker/Dealer.
    ________________ Account No. ________________ Salesman's Last Name _________
    ________________ R.R. No.
    Accepted:  Ranson Managed Portfolios By _________________________ Date _____
- --------------------------------------------------------------------------------

                                      -38-
<PAGE>

================================================================================
10.  Additional Information
     Each time there is a transaction in a shareholder account, the shareholder
     will receive a confirmation statement showing the current transaction.
     Certificates can be issued for full shares only. These certificates will be
     sent to the shareholder only upon specific request.
     The method of delivery of share certificates is at the option and risk of
     the shareholder. If sent by mail, registered and insured mail is suggested.
     All correspondence regarding shareholder accounts should be addressed to
     the Fund, c/o ND Resources, Inc., P.O. Box 759, Minot, North Dakota  58702.
     This form is not authorized for distribution to prospective purchasers of
     shares of the portfolio in states where such shares are not qualified for
     sale.
- --------------------------------------------------------------------------------

                                      -39-
<PAGE>

================================================================================

                      Fund Manager and Investment Adviser
                           RANSON CAPITAL CORPORATION
                                 1 North Main 
                           Minot, North Dakota 58703

                                 Transfer Agent
                               ND RESOURCES, INC.
                                  1 North Main
                           Minot, North Dakota 58703

                                   Custodian
                           First Western Bank & Trust
                               900 South Broadway
                           Minot, North Dakota  58701

                              Independent Auditors
                        BRADY, MARTZ & ASSOCIATES, P.C.
                             24 West Central Avenue
                           Minot, North Dakota  58701

                                 Legal Counsel
                               CHAPMAN AND CUTLER
                             111 West Monroe Street
                            Chicago, Illinois  60603

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                            Page
<S>                                                                         <C>
Fee and Expense Table....................................................... 2
Highlights of the Fund and Prospectus Summary............................... 3
The Fund.................................................................... 7
Investment Objective and Policies........................................... 7
Net Asset Value.............................................................17
Purchase of Shares..........................................................18
Special Programs............................................................20
Redemption of Shares........................................................23
Dividends and Taxes.........................................................24
Description of Shares and Rights............................................28
Fund Management.............................................................29
The Distributor.............................................................31
Shareholder Services and Reports............................................32
Calculation of Fund Performance Data........................................33
Summary of Procedures.......................................................34
</TABLE>

================================================================================
                                RANSON MANAGED
                                  PORTFOLIOS


                                 THE ILLINOIS
                                MUNICIPAL FUND


                                ______________

                                  PROSPECTUS

                            Dated:  _________, 1997

                                ______________


                                  Distributor
                          RANSON CAPITAL CORPORATION
                                 1 North Main
                           Minot, North Dakota 58703

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

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Information contained herein is subject to completion or amendment. A 
registration statement relating to these securities has been filed with the 
Securities and Exchange Commission. These securities may not be sold nor may 
offers to buy be accepted prior to the time the registration statement becomes 
effective. This prospectus shall not constitute an offer to sell or the 
solicitation of an offer to buy nor shall there be any sale of these securities 
in any State in which such offer, solicitation or sale would be unlawful prior 
to registration of qualification under the securities laws of any such State.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

                     Subject to Completion, July 28, 1997

                      STATEMENT OF ADDITIONAL INFORMATION

                           RANSON MANAGED PORTFOLIOS

                          THE ILLINOIS MUNICIPAL FUND

     The Illinois Municipal Fund is an investment portfolio of Ranson Managed
Portfolios, a management investment company. The term "the Fund" as used herein
shall refer to either Ranson Managed Portfolios or The Illinois Municipal Fund
series of Ranson Managed Portfolios as the context may require. The investment
objective of The Illinois Municipal Fund is to provide its shareholders with as
high a level of current income exempt from federal income tax and Illinois
income tax, to the extent indicated, as is consistent with preservation of
capital. Certain Illinois Municipal Securities (as defined in the Prospectus)
will be subject to Illinois state income taxes. Under normal market conditions,
the Fund's assets will be invested in a portfolio of Illinois Municipal
Securities which, in the opinion of Ranson Capital Corporation, will produce a
higher level of current income than would be produced by a portfolio of Illinois
Municipal Securities rated in only the highest rating category, but contains
Illinois Municipal Securities which do not present a significant risk of loss of
principal due to credit characteristics. Up to 100% of the Fund's total assets
may be invested in Illinois Municipal Securities which are subject to Illinois
state income taxes. The Fund's manager is Ranson Capital Corporation.

     This Statement of Additional Information is not a prospectus but shall be
read in conjunction with the Prospectus for the Fund dated __________, 1997 (the
"Prospectus"). A copy of the Prospectus may be obtained without charge by
calling the Fund at 701/852-5292.

     The Prospectus and this Statement of Additional Information omit certain of
the information contained in the registration statement filed with the
Securities and Exchange Commission, Washington, D.C. These items may be obtained
from the Commission upon payment of the fee prescribed, or inspected at the
Commission's office at no charge.

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                            Page
<S>                                                                         <C>
The Fund and Its Shares....................................................... 2
Investment Objective, Policies and Restrictions............................... 2
Officers and Trustees......................................................... 7
Compensation Table............................................................ 9
Custodian..................................................................... 9
Independent Auditors..........................................................10
Management and Investment Advisory Agreement..................................10
Portfolio Transactions........................................................10
Additional Information Regarding Shares and Rights............................11
Expenses of the Fund..........................................................14
Performance Data..............................................................14
</TABLE>

      This Statement of Additional Information is dated ___________, 1997.
<PAGE>
 
                            THE FUND AND ITS SHARES

     The Illinois Municipal Fund is a newly-organized series of Ranson Managed
Portfolios, an open-end non-diversified management investment company organized
as an unincorporated business trust under the laws of Massachusetts on August
10, 1990.

     Prior to the sale of shares of the Fund to the public, all shares of the
fund were owned by Ranson Capital Corporation. Since the Fund is newly formed,
as of the date of this Statement of Additional Information, Ranson Capital
Corporation controls 100% of the shares of the Fund.

                INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

     The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Investment Objective and
Policies."

     The investment objective of the Fund is to provide its shareholders with as
high a level of current income that is exempt from federal income tax and
Illinois income tax, to the extent indicated, as is consistent with preservation
of capital. Under normal market conditions, the Fund's assets will be invested
in a portfolio of Illinois Municipal Securities which, in the opinion of Ranson
Capital Corporation, will produce a higher level of current income than would be
produced by a portfolio of Illinois Municipal Securities rated in only the
highest rating category, but contains Illinois Municipal Securities which do not
present a significant risk of loss of principal due to credit characteristics.
Up to 100% of the Fund's total assets may be invested in Illinois Municipal
Securities which are subject to Illinois state income taxes.

     The investment policy of the Fund is to invest at least 80% of its assets
in a portfolio of Illinois Municipal Securities which generate interest income
that is exempt from federal income tax and, to the extent indicated, Illinois
income tax. Illinois Municipal Securities generally include debt obligations of
the State of Illinois, its political subdivisions, municipalities, agencies and
authorities, and certain industrial development and other revenue bonds, short-
term municipal notes, municipal leases and commercial paper issued by such
entities and obligations of the Commonwealth of Puerto Rico, the United States
Virgin Islands and Guam.

     Futures Contracts, Options on Futures and Municipal Bond Index Futures.
The Fund may purchase or sell financial futures contracts ("futures contracts")
and related options thereon. These futures contracts and related options thereon
will be used only as a hedge against anticipated interest rate changes. In
general a futures contract sale creates an obligation by the Fund, as seller, to
deliver the specific type of instrument called for in the contract at a
specified future time for a specified price. A futures contract purchase would
generally create an obligation by the Fund, as purchaser, to take delivery of
the specific type of financial instrument at a specified future time at a
specified price. The specific securities delivered or taken, respectively, at
settlement date would not be determined until on or near

                                      -2-
<PAGE>
 
that date. The determination would be in accordance with the rules of the
exchange on which the futures contract sale or purchase was effected.

     Although the terms of futures contracts specify actual delivery or receipt
of securities, in most instances the contracts are closed out before the
settlement date without the making or taking of delivery of the securities.
Closing out a futures contract is usually effected by entering into an
offsetting transaction. An offsetting transaction for a futures contract sale is
effected by the Fund entering into a futures contract purchase for the same
aggregate amount of the specific type of financial instrument at the same
delivery date. If the price in the sale exceeds the price in the offsetting
purchase, the Fund immediately is paid the difference and thus realizes a gain.
If the offsetting purchase price exceeds the sale price, the Fund pays the
difference and realizes a loss. Similarly, the closing out of a futures contract
purchase is effected by the Fund entering into a futures contract sale. If the
offsetting sale price exceeds the purchase price, the Fund realizes a gain, and
if the offsetting sale price is less than the purchase price, the Fund realizes
a loss.

     Unlike a futures contract, which requires the parties to buy and sell an
instrument on a set date, an option on a futures contract entitles its holder to
decide on or before a future date whether to enter into such a contract (a long
position in the case of a call option and a short position in the case of a put
option). If the holder decides not to enter into the contract, the premium paid
for the contract is lost. Since the cost of the option is fixed, there are no
daily payments of cash by the purchaser to reflect the change in the value of
the underlying contract as discussed below for futures contracts. The seller of
the option, however, may be required to make daily maintenance margin payments
to reflect the change in the value of the underlying contract. The value of the
option is reflected in the net asset value of the Fund.

     The Fund is required to maintain margin deposits with brokerage firms
through which it effects futures contracts and options thereon. The initial
margin requirements vary according to the type of the underlying instrument. In
addition, due to current industry practice, daily variations in gains and losses
on open contracts are required to be reflected in cash in the form of variation
margin payments. The Fund may be required to make additional margin payments
during the term of the contract.

     Currently, futures contracts can be purchased on debt securities such as
U.S. Treasury Bills and Bonds, U.S. Treasury Notes with maturities between 6-1/2
and 10 years, Certificates of the Government National Mortgage Association, Bank
Certificates of Deposit and on a municipal bond index (see below). The Fund may
purchase or sell interest rate futures contracts covering these types of
financial instruments as well as new types of contracts that become available in
the future.

     Financial futures contracts and related options contracts are traded in an
auction environment on the floors of several futures Exchanges--principally, the
Chicago Board of Trade, the Chicago Mercantile Exchange and the New York Futures
Exchange.

                                      -3-
<PAGE>
 
     A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject to
futures contracts may not correlate perfectly with the behavior of the cash
prices of the Fund's portfolio securities. The correlation may be distorted in
part by the fact that the futures market is influenced by short-term traders
seeking to profit from the difference between a contract or security price
objective and their cost of borrowed funds. This would reduce the value of
futures contracts for hedging purposes over a short time period. The correlation
may be further distorted since the futures contracts that are being used to
hedge are not based on municipal obligations.

     Another risk is that the Manager could be incorrect in its expectations as
to the direction or extent of various interest rate movements or the time span
within which the movements take place. For example, if the Fund sold futures
contracts in anticipation of an increase in interest rates, and then interest
rates went down, causing bond prices to rise, the Fund would lose money,
including transaction costs, on the sale.

     In addition to the risks associated with investing in options on
securities, there are particular risks associated with trading in options on
futures. In particular, the ability to establish and close out positions on such
options will be subject to the development and maintenance of a liquid market in
such options. It is not certain that this market will develop.

     A substantial majority (i.e., approximately 75%) of all anticipatory hedge
transactions (transactions in which the Fund does not own, at the time of the
transaction, but expects to acquire the securities corresponding to the relevant
futures contract) involving the purchase of futures contracts, call options or
written put options thereon will be completed by the purchase of securities
which are the subject of the hedge.

     The Fund may not enter into futures contracts or related options thereon
if, immediately thereafter, the amount committed to initial margin plus the
amount paid for option premiums on open contracts exceeds 5% of the value of the
Fund's total assets. In instances involving the purchase of futures contracts by
the Fund, an amount equal to the gross market value of the futures contract will
be deposited in a segregated account of cash and cash equivalents and thereby
ensure that the use of such futures is unleveraged. The Fund may not purchase or
sell futures contracts or related positions if, immediately thereafter, more
than one-third of its net assets would be hedged.

     The Fund may utilize trading in municipal bond index futures contracts for
hedging purposes. The strategy in employing such contracts will be similar to
that discussed above with respect to financial futures and options thereon. A
municipal bond index is a method of reflecting in a single number the market
value (based on an average of quotations from certain dealers) of many different
municipal bonds. The index fluctuates in response to changes in the market
values of the bonds included within the index. Unlike futures contracts on
particular financial instruments, futures on a municipal bond index will be
settled in cash if held until the close of trading in the contract. However, as
in any other futures contract, a position in the contract may be closed out by
purchase or sale of an

                                      -4-
<PAGE>
 
offsetting contract for the same delivery month prior to expiration of the
contract. Because trading in municipal bond index futures contracts has been
taking place only for a short time, the Fund's ability to utilize such contracts
will be dependent upon the development and maintenance of a market in such
contract.

     The Securities and Exchange Commission generally requires that when
investment companies, such as the Fund, effect transactions of the foregoing
nature, such funds must either segregate cash or high quality, readily
marketable portfolio securities with its custodian in the amount of its
obligation under such transactions, or cover such obligations by maintaining
positions in portfolio securities, futures contracts or options that would serve
to satisfy or offset the risk of such obligations. When effecting transactions
of the foregoing nature, the Fund will comply with such segregation or cover
requirements.

     Investment Restrictions.  Fundamental investment restrictions limiting the
investments of the Fund provide that the Fund may not:

          1.  Borrow money, except from banks for temporary or emergency (not
     leveraging) purposes and then in an amount not exceeding 10% of the value
     of the Fund's total assets (including the amount borrowed). The Fund will
     not borrow for leveraging purposes, and securities will not be purchased
     while borrowings are outstanding. Interest paid on any money borrowed will
     reduce the Fund's net income.

          2.  Pledge, hypothecate, mortgage or otherwise encumber its assets, in
     excess of 10% of the value of its total assets (taken at the lower of cost
     or current value) and then only to secure borrowings for temporary or
     emergency purposes.

          3.  Purchase securities on margin, except such short-term credits as
     may be necessary for the clearance of purchases and sales of securities.
     The deposit of initial or maintenance margin by the Fund in connection with
     financial futures contracts and related options transactions, including
     municipal bond index futures contracts or related options transactions, is
     not considered the purchase of a security on margin.

          4.  Make short sales of securities or maintain a short position for
     the account of the Fund including any short sales "against the box."

          5.  Underwrite the securities of other issuers, except to the extent
     that, in connection with the disposition of its portfolio investments it
     may be deemed to be an underwriter under federal securities laws.

          6.  Purchase or sell real estate, but this shall not prevent the Fund
     from investing in securities which are secured by real estate or interests
     therein.

          7.  Purchase or sell commodities or commodity contracts except to the
     extent the options and futures contracts the Fund may trade in are
     considered to be commodities or commodities contracts.

                                      -5-
<PAGE>
 
          8.  Make loans to others except through the purchase of qualified debt
     obligations and the entry into repurchase agreements.

          9.  Invest 25% or more of its total assets in the securities of
     issuers in any single industry; provided that there shall be no such
     limitation on the purchase of securities issued or guaranteed by the U.S.
     Government, its agencies or instrumentalities or by Illinois, its political
     subdivisions, municipalities, agencies and authorities. (The Fund may, from
     time to time, invest 25% or more of its assets in a particular segment of
     the municipal bond market; however, the Fund will not invest 25% or more of
     its assets in industrial development bonds in a single industry.)

          10. Invest in securities of any issuer if, to the knowledge of the
     Fund, officers and Trustees of the Fund or officers and directors of the
     Manager who beneficially own more than 1/2 of 1% of the securities of that
     issuer together own more than 5%.

          11. Purchase securities restricted as to resale, if, as a result such
     investment would exceed 5% of the value of the Fund's net assets.

          12. Invest in (a) securities which at the time of such investment are
     not readily marketable, including participation interests in municipal
     leases, (b) securities the disposition of which is restricted under federal
     securities laws (as described in fundamental restriction (11) above) and
     (c) repurchase agreements maturing in more than seven days, if, as a
     result, more than 10% of such Fund's net assets (taken at current value)
     would be invested in securities described in (a), (b) and (c) above.

          13. Invest more than 5% of its total assets in securities of any one
     issuer, except that this limitation shall not apply to securities of the
     U.S. Government, its agencies and instrumentalities and except that with
     respect to 50% of the Fund's total assets the Fund may invest up to 25% of
     its total assets in securities of any one issuer.

     The Fund may not change any of these investment restrictions without the
approval of the lesser of (i) more than 50% of the Fund's outstanding shares or
(ii) 67% of the Fund's shares present or represented by proxy at a meeting at
which the holders of more than 50% of the outstanding shares are present or
represented by proxy. With the exception of the percentage restrictions set
forth in fundamental restrictions (1) and (12) above, which may not be exceeded
at any time, as long as the percentage restrictions described above are
satisfied at the time of the investment or borrowing, the Fund will be
considered to have abided by those restrictions even if, at a later time, a
change in values or net assets causes an increase or decrease in percentage
beyond that allowed.

     The following investment restrictions of the Fund may be changed by the
Board of Trustees of the Fund.

                                      -6-
<PAGE>
 
     The Fund will not:

          1.  Invest more than 5% of its total assets in the securities of any
     other single investment company, nor more than 10% of its total assets in
     the securities of two or more other investment companies, except as part of
     a merger, consolidation or acquisition of assets.

          2.  Buy or sell oil, gas or other mineral leases, rights or royalty
     contracts.

     An advisory fee will be charged for assets invested in securities of other
investment companies. However, the Fund will not invest more than 10% of its
total assets in such securities.

                             OFFICERS AND TRUSTEES

     The officers and Trustees of the Fund, their principal occupations for the
last five years and their affiliations, if any, with Ranson Capital Corporation
(the Manager and Distributor) are as follows:
<TABLE>
<CAPTION>

                               POSITION(S) HELD    PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE           WITH FUND/(1)/     DURING PAST 5 YEARS/(2)/
- --------------------------------------------------------------------------------
<S>                            <C>                 <C>
Lynn W. Aas                        Trustee         Retired; Attorney; Director, ND
904 NW 27th                                        Tax-Free Fund, Inc., ND Insured
Minot, North Dakota  58701                         Income Fund, Inc., Montana Tax-Free
76                                                 Fund, Inc., Integrity Fund of Funds,
                                                   Inc., and South Dakota Tax-Free
                                                   Fund, Inc.; Director, First Western
                                                   Bank & Trust
- --------------------------------------------------------------------------------
Orlin W. Backes                    Trustee         Attorney; Director, ND Tax-Free
15 2nd Ave. SW, Suite 305                          Fund, Inc., ND Insured Income Fund,
Minot, North Dakota  58701                         Inc., Montana Tax-Free Fund, Inc.,
62                                                 and South Dakota Tax-Free Fund, Inc.
                                                   and Integrity Fund of Funds, Inc.;
                                                   Director, First Western Bank & Trust
- --------------------------------------------------------------------------------
Arthur A. Link                     Trustee         Director, ND Tax-Free Fund, Inc., ND
2001 Grimsrud Drive                                Insured Income Fund, Inc., Montana
Bismarck, North Dakota  58501                      Tax-Free Fund, Inc., South Dakota
83                                                 Tax-Free Fund, Inc. and Integrity
                                                   Fund of Funds, Inc.; Director; Bank
                                                   Center First; Formerly Governor of
                                                   the State of North Dakota
- --------------------------------------------------------------------------------
Peter A. Quist*                 Vice President     Director and Vice President, ND
1 North Main                    and Secretary      Holdings, Inc.; Director, Vice
Minot, North Dakota  58703                         President and Secretary, ND Money
63                                                 Management, Inc., ND Capital, Inc.,
                                                   ND Resources, Inc., ND Tax-Free
                                                   Fund, Inc., ND Insured Income Fund,
                                                   Inc., Montana Tax-Free Fund, Inc.,
                                                   South Dakota Tax-Free Fund, Inc.,
                                                   Integrity Fund of Funds, Inc. and
                                                   Ranson Capital Corporation
- --------------------------------------------------------------------------------
</TABLE> 

                                      -7-
<PAGE>

<TABLE> 
 
- -------------------------------------------------------------------------------------------------------
<S>                             <C>                         <C> 
Robert E. Walstad*              Trustee, Chairman,          Director and President, ND Holdings, Inc.; 
1 North Main                        President               Director, President and Treasurer, ND Money 
Minot, North Dakota  58703        and Treasurer             Management, Inc., ND Capital, Inc., ND
52                                                          Resources, Inc., ND Tax-Free Fund,
                                                            Inc., ND Insured Income Fund, Inc.,
                                                            Montana Tax-Free Fund, Inc.,
                                                            Integrity Fund of Funds, Inc., and
                                                            South Dakota Tax-Free Fund, Inc.;
                                                            Director, President, CEO and
                                                            Treasurer, Ranson Capital Corporation
- ------------------------------------------------------------------------------------------------------
</TABLE>

                                      -8-
<PAGE>

____________________

  *   "Interested persons" of the Fund as that term is defined in the Investment
       Company Act of 1940.

/(1)/  The Trustees were elected at a joint special meeting of the shareholders
       of the Fund complex of Ranson Managed Portfolios held on December 11,
       1995, but did not assume office until the closing of the Stock Purchase
       Agreement between the shareholders of The Ranson Company, Inc., and ND
       Holdings, Inc., on January 5, 1996.  Prior to that time, the Board of
       Trustees consisted of J. Joseph Hannah, H. Dene Heskett, Harrison F.
       Johnson, Kevin F. Mitchelson, John A. Ranson and John S. Ranson.

/(2)/  Lynn W. Aas and Orlin W. Backes were elected to the boards of directors
       of the above-named funds (the "ND Fund")  in 1994 and 1995, respectively.
       Arthur A. Link has served on the boards of directors of the ND Funds
       since their inceptions.  Peter A. Quist has served as a director and as
       the Vice President and Secretary of the ND Funds since their inceptions,
       except that he was not elected to the board of directors of South Dakota
       Tax-Free Fund, Inc., until 1995.  Robert E. Walstad has served as a
       director and as the President and Treasurer of the ND Funds since their
       inceptions. Mssrs. Quist and Walstad were elected as directors and
       officers of Ranson Capital Corporation on January 5, 1996.

                              Compensation Table (2)
<TABLE>
<CAPTION>

                               Aggregate compensation      Total Compensation
Name of person                    from the Illinois       from registrant and
position (1)                          Municipal               fund complex
                                     Fund series
- -------------------------------------------------------------------------------
<S>                              <C>                        <C>
Lynn W. Aas                                    0                     0
- -------------------------------------------------------------------------------
Orlin W. Backes                                0                     0
- -------------------------------------------------------------------------------
Arthur A. Link                                 0                     0
- -------------------------------------------------------------------------------
*Robert E. Walstad                             0                     0
- -------------------------------------------------------------------------------
</TABLE>
___________________

*    "Interested persons" as defined in the Investment Company Act of 1940.

 (1)   Each of the named persons acted in the capacity of a Trustee.

 (2)   The compensation of any Trustee who is not an "interested person" as that
       term is defined in the Investment Company Act of 1940 is paid by the
       Manager. Until the closing of the Stock Purchase Agreement (see note (1)
       above), Trustees who were not interested persons of the Manager or the
       Distributor (the "Disinterested Trustees") were paid $500 plus expenses
       per meeting of the Board of Trustees and committees thereof attended by
       such Trustee. None of the Trustees who are interested persons received
       compensation for services as Trustees. Each of the Disinterested Trustees
       will be paid a fee of $10,000 for the calendar year ending December 31,
       1996, plus any expenses incurred in attending meetings. The $10,000 fee
       is apportioned among the nine funds comprised in the Integrity Mutual
       Funds group on the basis of gross assets.

       As of June 30, 1997, the officers and Trustees of the Fund owned, as a
       group, less than 1% of the shares of the Fund.

                                     Custodian

       First Western Bank & Trust, 900 South Broadway, Minot, North Dakota
  58701, is the Custodian of the Fund and has custody of all securities and cash
  of the Fund. The Custodian, among other things, attends to the collection of
  principal and income, and payment for and collection of proceeds of securities
  bought and sold by the Fund.

                                      -9-
<PAGE>
 
                             Independent Auditors

     Shareholders will receive annual financial statements, together with a
report of independent auditors, and semi-annual unaudited financial statements
of the Fund. The independent auditors for the Fund are Brady, Martz &
Associates, P.C., 24 West Central Avenue, Minot, North Dakota 58701. The
independent auditors will report on the Fund's annual financial statements,
review certain regulatory reports and the Fund's income tax returns, and perform
other professional accounting, auditing, tax and advisory services when engaged
to do so by the Fund.

                 Management and Investment Advisory Agreement

     The Management and Investment Advisory Agreement (the "Agreement") between
the Manager and the Fund provides that the Manager will supply investment
research and portfolio management, including the selection of securities for the
Fund to purchase, hold or sell, and the selection of brokers through whom the
Fund's portfolio transactions are executed. The Manager also administers the
business affairs of the Fund, furnished offices, necessary facilities and
equipment, provides administrative services, and permits its officers and
employees to serve without compensation as directors and officers of the Fund if
duly elected to such positions. Fees and expense limitations under the Agreement
are described in the Prospectus.

     The Agreement will continue in effect from year to year if specifically
approved by the Fund's Trustees or the Fund's shareholders and by the Fund's
Disinterested Trustees in compliance with the requirements of the Investment
Company Act of 1940 (the "1940 Act"). The Agreement may be terminated without
penalty upon 60 days' written notice by either party and will automatically
terminate in the event of assignment.

     Ranson Capital Corporation serves as the Manager and is a wholly-owned
subsidiary of ND Holdings, Inc., a North Dakota corporation.

                            Portfolio Transactions

     The Manager will place orders for portfolio transactions for the Fund with
broker-dealer firms giving consideration to the quality, quantity and nature of
each firm's professional services. These services include execution, clearance
procedures, wire service quotations and statistical and other research
information provided to the Fund and the Manager including quotations necessary
to determine the value of the Fund's net assets. Any research benefits derived
are available for all clients of the Manager. Since statistical and other
research information is only supplementary to the research efforts of the
Manager and still must be analyzed and reviewed by one of its staff, the receipt
of research information is not expected to materially reduce the Manager's
expenses. In selecting among the firms believed to meet the criteria for
handling a particular transaction, the Manager may take into consideration that
certain firms have sold or are selling shares of the Fund and that certain

                                     -10-
<PAGE>
 
firms provide market, statistical or other research information to the Fund and
the Manager, and may select firms that are affiliated with the Fund or the
Manager.

     If it is believed to be in the best interests of the Fund, the Manager may
place portfolio transactions with brokers who provide the types of service
described above, even if it means the Fund will have to pay a higher commission
(or, if the broker's profit is part of the cost of the security, will have to
pay a higher price for the security) than would be the case if no weight were
given to the broker's furnishing of these services. This will be done, however,
only if, in the opinion of the Manager, the amount of additional commission or
increased cost is reasonable in relation to the value of the services.

     If purchases or sales of securities of the Fund and of one or more other
portfolios of the Fund, investment companies or clients supervised by the
Manager are considered at or about the same time, transactions in such
securities will be allocated among the several portfolios of the Fund,
investment companies and clients in a manner deemed equitable to all by the
Manager, taking into account the respective sizes of the funds and the amount of
securities to be purchased or sold. Although it is possible that in some cases
this procedure could have a detrimental effect on the price or volume of the
security as far as the Fund is concerned, it is also possible that the ability
to participate in volume transactions and to negotiate lower brokerage
commissions will be beneficial to the Fund. The Fund expects that its portfolio
transactions in Illinois Municipal Securities will generally be effected on a
principal (as opposed to agency) basis and, accordingly, does not expect to
incur significant brokerage commissions.

     While the Manager will be primarily responsible for the placement of the
Fund's business, the policies and practices in this regard must be consistent
with the foregoing and will at all times be subject to review by the Trustees of
the Fund.

     The Board of Trustees has adopted certain policies incorporating the
standards of Rule 17e-1 issued by the Securities and Exchange Commission under
the 1940 Act which requires that the commissions paid to the Distributor and
other affiliates of the Fund must be reasonable and fair compared to the
commissions, fees or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time. The Rule and procedures also contain review
requirements and require the Manager to furnish reports to the Board of Trustees
and to maintain records in connection with such reviews. After consideration of
all factors deemed relevant, the Board of Trustees will consider from time to
time whether the advisory fee will be reduced by all or a portion of the
brokerage commission given to affiliated brokers.

              Additional Information Regarding Shares and Rights

     The Fund is a non-diversified, open-end investment company established
under Massachusetts law by an Agreement and Declaration of Trust ("Trust
Agreement") dated August 10, 1990, and is the type of organization commonly
known as a "Massachusetts business trust." It is a series company as
contemplated under Rule 18f-2 under the 1940 Act, having five series of shares
offered at this time which are known as "The Kansas Municipal

                                     -11-
<PAGE>
 
Fund," "The Kansas Insured Intermediate Fund," "The Nebraska Municipal Fund,"
"The Oklahoma Municipal Fund" and "The Illinois Municipal Fund." The Trust
Agreement provides that each shareholder, by virtue of becoming such, will be
held to have expressly assented and agreed to the terms of the Trust Agreement
and to have become a party thereto.

     The Trust Agreement permits the Trustees to issue an unlimited number of
full and fractional shares, without par value, from each portfolio. Each share
of a portfolio represents an equal proportionate interest in the assets and
liabilities belonging to such portfolio with each other share of such portfolio
and is entitled to such dividends and distributions out of the income belonging
to such portfolio as are declared by the Trustees. The shares do not have
cumulative voting rights nor any preemptive rights. In case of a liquidation,
subject to the rights of creditors, the holders of shares of each portfolio
being liquidated will be entitled to receive as a series a distribution out of
the net assets belonging only to that portfolio. Under the Trust Agreement,
expenses attributable to any specific portfolio (whether start-up for a new
portfolio or on-going operating expenses) will be borne by that portfolio. Any
general expenses of the Fund not readily identifiable as belonging to a
particular portfolio are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable, usually in
proportion to the portfolio's relative net assets. The net asset value of the
shares of any portfolio will be computed based only upon the net assets of such
portfolio.

     As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the Trust Agreement provides for Fund
shareholders voting only (a) for the election or removal of one or more Trustees
if a meeting is called for that purpose; (b) with respect to any contract as to
which shareholder approval is required by the 1940 Act (such as the Fund's
Management and Investment Advisory Agreement and the Distribution and Services
Agreement); (c) with respect to any termination or reorganization of the Fund or
any portfolio to the extent and as provided in the Trust Agreement; (d) with
respect to any amendment of the Trust Agreement (other than amendments
establishing and designating new portfolios, changing the name of the Fund or
the name of any portfolio, supplying any omission, curing any ambiguity, or
curing, correcting or supplementing any provision thereof which is internally
inconsistent with the 1940 Act or with the requirements of the Internal Revenue
Code and applicable regulations for the Fund to obtain the most favorable
treatment thereunder available to regulated investment companies), which
amendments require approval by more than 50% of the shares entitled to vote; (e)
to the same extent as the stockholders of a Massachusetts business corporation
as to whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Fund or
the shareholders, and (f) with respect to such additional matters relating to
the Fund as may be required by the 1940 Act (such as changes in the Fund's
investment policies and restrictions), the Trust Agreement, the by-laws of the
Fund, or any registration of the Fund with the Securities and Exchange
Commission or any state, or as the Trustees may consider necessary or desirable.

     Each Trustee serves until the next meeting of shareholders, if any, called
for the purpose of considering the election or reelection of such Trustee or of
a successor to such Trustee, and until the election and qualification of his
successor, if any, elected at such

                                     -12-
<PAGE>
 
meeting, or until such Trustee sooner dies, resigns, retires or is removed by
the shareholders or two-thirds of the Trustees.

     The Trust Agreement provides that on any matter submitted to a vote of the
shareholders, all Fund shares entitled to vote, irrespective of portfolio, shall
be voted in the aggregate and not by portfolio except that (a) as to any matter
with respect to which a separate vote of any portfolio is required by the 1940
Act, such requirements as to a separate vote by that portfolio shall apply in
lieu of the aggregate voting as described above, and (b) when the Trustees have
determined that the matter affects only the interests of one or more portfolios,
then only shareholders of the affected portfolios shall be entitled to vote
thereon.

     Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of the 1940 Act or applicable state law, or
otherwise, to the holders of the outstanding voting securities of an investment
company with separate portfolios like this Fund shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares (as defined below) of each portfolio "affected by" such
matter. Rule 18f-2 further provides that a portfolio shall be deemed to be
affected by a matter unless the interests of each portfolio in the matter are
substantially identical or the matter does not affect any interests of such
portfolio. The Rule specifically exempts the selection of independent auditors,
the approval of principal underwriting contracts and the election of trustees
from such separate voting requirements and specifically provides that any
required approval of the Fund's Management and Investment Advisory Agreement and
the Distribution and Services Agreement is subject to such separate voting
requirements. In addition, changes in the Fund's investment policies are also
subject to separate voting requirements.

     The Trust Agreement provides that the presence at a meeting of shareholders
in person or by proxy of shareholders entitled to vote at least thirty percent
(30%) of the votes entitled to be cast on a matter (or if voting is to be by
portfolio, shareholders of each portfolio entitled to vote at least thirty
percent (30%) of the votes entitled to be cast by each portfolio) shall
constitute a quorum. This permits a meeting of shareholders of the Fund to take
place even if less than a majority of the shareholders are present on its
scheduled date. Shareholders would in such a case be permitted to take action
which does not require a larger vote than a majority of a quorum (the election
of Trustees and the ratification of the selection of independent public
accountants are examples). Some matters requiring a larger vote under the Trust
Agreement, such as termination or reorganization of the Fund and certain
amendments of the Trust Agreement, would not be affected by this provision. This
is also true with respect to matters which under the 1940 Act require the vote
of a majority of the outstanding voting shares (as defined below) of the Fund or
a particular portfolio.

     As used in the Prospectus and this Statement of Additional Information, the
term "majority of the outstanding shares" of either the Fund or a particular
portfolio of the Fund means the vote of the lesser of (i) 67% or more of the
shares of the Fund or such portfolio present or represented by proxy at a
meeting, if the holders of more than 50% of the

                                     -13-
<PAGE>
 
outstanding shares of the Fund or of such portfolio are present or represented
by proxy, or (ii) more than 50% of the outstanding shares of the Fund or such
portfolio.

     Under the terms of the Trust Agreement, a Trustee is liable for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, and for nothing else, and shall
not be liable for errors of judgment or mistakes of fact or of law. The Trust
Agreement provides for indemnification by the Fund of the Trustees and the
officers of the Fund except with respect to any matter as to which such person
did not act in good faith in the reasonable belief that his action was in or not
opposed to the best interests of the Fund (or the predecessor corporation) but
such person may not be indemnified against any liability to the Fund or the Fund
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. The Trust Agreement also provides that
any agreement or undertaking by the Trustees on behalf of the Fun d is binding
upon the Fund only and not on the Trustees personally.

                             Expenses of the Fund

     The Fund's expenses include, among others, management and investment
advisory fees, 12b-1 fees, accounting and administrative fees, taxes, brokerage
fees and commissions, if any, fees of Disinterested Trustees, expenses of
Trustees' and shareholders' meetings, insurance premiums, expenses of redemption
of shares, expenses of issue and sale of shares (to the extent not borne by the
Distributors), expenses of printing and mailing certificates, association
membership dues, charges of the Fund's custodian, and bookkeeping, auditing and
legal expenses, and the fees and expenses of registering the Fund and its shares
with the Securities and Exchange Commission, registering or qualifying its
shares under state securities laws and the expenses of preparing and mailing
prospectuses and reports to shareholders.

                               Performance Data

     As described in the prospectus, the Fund's historical performance may be
shown in the form of "current yield," "tax equivalent yield," "average annual
total return" and "total return" figures. These various measures of performance
are described below.

     Current yield is determined in accordance with a standardized method
prescribed by rules of the Securities and Exchange Commission by annualizing net
investment income earned per share for a stated period (normally one month or
thirty days) and dividing the result by the maximum public offering price at the
end of the evaluation period. The Securities and Exchange Commission's rules for
calculating current yield require the use of certain standardized accounting
practices which are not necessarily consistent with those used by the Fund in
the preparation of its audited financial statements or federal tax return. The
Fund's current yield figure is based upon historical results and is not
necessarily representative of future performance.


                                      -14-
<PAGE>
 
     Tax equivalent yield is determined by dividing that portion of current
yield which is tax-exempt by one minus a stated income tax rate and adding that
portion of current yield, if any, that is not tax-exempt.

     The Fund's distribution return is computed by dividing the income per share
by the number of days in the current month, and the quotient is multiplied by
365. The result is divided by the average offering price per share on the last
day of the month.

      The Fund's average annual total return quotation is computed in accordance
with a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for the Fund for a specific period
is found by first taking a hypothetical $1,000 investment ("initial investment")
in the Fund's shares on the first day of the period reduced by the maximum sales
charge in effect on that date 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 the 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. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period.

     The Fund's total return quotation is computed by aggregating the percentage
or dollar value change over the period in question, exclusive of the initial
sales charge.

     The Fund's performance figures are based upon historical results and are
not necessarily representative of future performance. The Fund's shares are sold
at net asset value plus a maximum sales charge of 4.25% of the offering price.
Returns and net asset value will fluctuate. Factors affecting the Fund's
performance include general market conditions, operating expenses and investment
management. Any additional fees charged by a dealer or other financial services
firm would reduce the returns described in this section. Shares of the Fund are
redeemable at net asset value, which may be more or less than original cost.


                                     -15-
<PAGE>
 
Part C    Other Information

Item 24.  Financial Statements and Exhibits.

     (a)  Financial Statements:

          (i)  Financial Statements included in Part A of the Registration 
               Statement:

               None.

          (ii) Financial Statements included in Part B of the Registration 
               Statement:

               None

               Schedules 2, 3, 4, 5, 6 and 7 have been omitted as the required
               information is not present.

     (b)  Exhibits:

               1.   Agreement and Declaration of Trust dated August 10, 1990
                    (incorporated by reference to Form N-1A [File No. 33-36324]
                    filed on behalf of Ranson Managed Portfolios -- The Kansas
                    Municipal Fund).

               2.   By-Laws (incorporated by reference to Form N-1A [File No. 
                    33-36324] filed on behalf of Ranson Managed Portfolios --
                    The Kansas Municipal Fund).

               3.   Inapplicable.

               4.   Inapplicable.

               5.   Form of Management and Investment Advisory Agreement between
                    Registrant and Ranson Capital Corporation (incorporated by
                    reference to Post-effective Amendment No. 11 to the
                    Registration Statement).

               6.   (a)  Form of Distribution and Services Agreement between
                         Registrant and Ranson Capital Corporation (incorporated
                         by reference to Post-effective Amendment No. 11 to the
                         Registration Statement).

                    (b)  Dealer Agreement (incorporated by reference to Post-
                         effective Amendment No. 11 to the Registration
                         Statement).

               7.   Inapplicable.

               8.   Form of Custodian Agreement between Ranson Managed
                    Portfolios and First Western Bank & Trust (incorporated by
                    reference to Post-Effective Amendment No. 25 to the
                    Registration Statement).

                                      C-1
<PAGE>
 
               9.  Administrative and Accounting Services Agreement between
                   Registrant and ND Resources, Inc. (incorporated by reference
                   to Post-Effective Amendment No. 25 to the Registration
                   Statement).

              10.  Opinion of Chapman and Cutler.*

              11.  Inapplicable

              12.  Inapplicable.

              13.  Inapplicable.

              14.  Shareholder Services Plan (incorporated by reference to Post-
                   effective Amendment No. 11 to the Registration Statement).

              15.  Inapplicable

              16.  Inapplicable.

            * To be filed by amendment.

Item 25.  Persons Controlled by or under Common Control with Registrant.

     Since The Illinois Municipal Fund portfolio of Registrant is newly formed
and has not yet commenced its public offering of its shares, there are no
outstanding shares of The Illinois Municipal Fund portfolio of Registrant.  To
the best of Registrant's knowledge, as of June 30, 1997, no person is directly
or indirectly controlled by or under common control with The Illinois Municipal
Fund portfolio of Registrant.

Item 26.  Number of Holders of Securities.

     As of June 30, 1997, the number of record holders of Registrant was as
follows: 

          The Kansas Municipal Fund:  4,319 
          The Kansas Insured Intermediate Fund: 754 
          The Nebraska Municipal Fund:  1,237 
          The Oklahoma Municipal Fund:  122 
          The Illinois Municipal Fund:  __0__    

Item 27.  Indemnification.

     The following is a summary of the rights of indemnification set forth in
the Agreement and Declaration of Trust of Registrant (see Exhibit 1).  Article
VIII of the Agreement and Declaration of Trust of Registrant provides generally
that any person who is or has been a trustee or officer of Registrant (including
persons who serve at the request of Registrant as directors, trustees or
officers of another organization and including persons who served as officers
and directors of the Registrant) shall be indemnified by Registrant to the
fullest extent permitted by law against liabilities and expenses reasonably
incurred by such person in connection with any claim, suit or proceeding in
which such person becomes involved as a party or otherwise by virtue of being or
having been such a trustee, director or officer and against amounts incurred in
settlement thereof.  It is further provided in such Agreement and Declaration of
Trust that no indemnification shall be provided in the event 

                                      C-2
<PAGE>
 
that it is determined that such person was engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office or that such person did not act in good faith in the
reasonable belief that his action was in the best interests of Registrant. In
the event of a settlement or other disposition not involving a final
determination of the foregoing matters by a court or other body, no
indemnification shall be provided unless such determination is made by a vote of
a majority of the "disinterested" trustees acting on the matter or a written
opinion of independent legal counsel. The right to indemnification as so
provided may be insured against by policies maintained by the Registrant and
shall continue as to any person who has ceased to be a trustee or officer of
Registrant.

     Expenses of preparation and presentation of a defense by a person claiming
indemnification may be advanced by Registrant provided generally that such
person undertakes to repay any such advances if it is ultimately determined that
he is not entitled to indemnification and provided that either such undertaking
is secured by appropriate security or a majority of the "disinterested" trustees
acting on the matter or independent legal counsel in a written opinion
determines that there is reason to believe that such person ultimately will be
found entitled to indemnification.

     The Agreement and Declaration of Trust provides further that in the event
that any shareholder or former shareholder shall be found to be personally
liable solely by reason of his being a shareholder and not because of acts or
omissions of such person, such shareholder shall be entitled out of assets of
the Registrant to be indemnified against all loss and expense arising from such
liability (provided there is no liability to reimburse any shareholder for taxes
paid by reason of such shareholder's ownership of shares or for losses suffered
by reason of any changes in value of any of Registrant's assets).

     The Agreement and Declaration of Trust (Article IV, Section 2(o)) provides
specifically that the trustees have the power to purchase and pay for insurance
out of assets of Registrant as they deem necessary or appropriate for the
conduct of its business including policies insuring shareholders, trustees,
officers, employees, agents, investment managers, principal underwriters or
independent contracts or Registrant against claims or liabilities arising by
reason of such persons holding or having held any such office or position with
Registrant or by reason of any action alleged to have been taken or omitted by
such person in such office or position including any action taken or omitted
that may be determined to constitute negligence whether or not the Registrant
would have the power to indemnify such person against such liability.

     The provisions with respect to indemnification in the Agreement and
Declaration of Trust of Registrant do not affect any rights of indemnification
that persons other than those specifically covered may have whether under
contract or otherwise under law.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers, and controlling persons of the
Registrant pursuant to the provisions of Registrant's Agreement and Declaration
of Trust, or otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is,

                                      C-3
<PAGE>
 
therefore, unenforceable. In the event that a claim for indemnification against
such liability (other than the payment by the Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) as 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 of whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.

Item 28.  Business and Other Connections of Investment Advisor.

     The names of the directors and officers of the Manager and their
businesses, professions, vocations and employment during the past two fiscal
years, either for their own account or as directors, officers, employees,
partners or trustees, are as follows:
<TABLE>
<CAPTION>
       (1)                                 (2)                                    (3)
                                                                             Other Business
Name and Principal                   Affiliation with                    Profession Vocation or
Business Address*                   Investment Advisor                  Employment Connection**
- ------------------------------------------------------------------------------------------------
<S>                      <C>                                            <C>
Richard D. Olson         Assistant Vice President - Sales
1 North Main             
Minot, ND 58703

Peter A. Quist           Director, Vice President and Secretary            Director and Vice
1 North Main                                                               President, ND Holdings,
Minot, ND 58703                                                            Inc.; Director, Vice
                                                                           President and Secretary,
                                                                           ND Money Management,
                                                                           Inc., ND Capital, Inc.,
                                                                           ND Resources, Inc., ND
                                                                           Tax-Free Fund, Inc., ND
                                                                           Insured Income Fund,
                                                                           Inc., Montana Tax-Free
                                                                           Fund, Inc., South Dakota
                                                                           Tax-Free Fund, Inc.,
                                                                           Integrity Fund of Funds,
                                                                           Inc.; Vice President and
                                                                           Secretary, Ranson Managed
                                                                           Portfolios

Shannon D. Radke         Assistant Vice President - Finance
1 North Main
Minot, ND 58703
</TABLE> 
                                      C-4
<PAGE>

<TABLE> 
<S>                      <C>                                            <C>
Robert E. Walstad        Director, President, CEO                          Director and President,
1 North Main             and Treasurer                                     ND Holdings, Inc.;
Minot, ND                                                                  Director, President and
58703                                                                      Treasurer, ND Money
                                                                           Management, Inc., ND
                                                                           Capital, Inc., ND
                                                                           Resources, Inc., ND
                                                                           Tax-Free Fund, Inc., ND
                                                                           Insured Income Fund,
                                                                           Inc., Montana Tax-Free
                                                                           Fund, Inc., South Dakota
                                                                           Tax Free Fund, Inc. and
                                                                           Integrity Fund of Funds,
                                                                           Inc.; Trustee, Chairman,
                                                                           President and Treasurer,
                                                                           Ranson Managed Portfolios
</TABLE> 

Item 29.  Principal Underwriters.

     (a) Ranson Capital Corporation acts as investment advisor and manager of
The Kansas Municipal Fund, The Kansas Insured Intermediate Fund, The Nebraska
Municipal Fund and The Oklahoma Municipal Fund having net assets of
approximately $127,000,000, $25,000,000, $28,000,000 and $6,000,000,
respectively, as of June 30, 1997.

     (b) The information required by the following table is provided with
respect to each director, officer or partner of each principal underwriter named
in the answer to Item 21.

                           Ranson Capital Corporation
<TABLE>
<CAPTION>
       (1)                        (2)                                (3)

Name and Principal      Positions and Offices with           Positions and  Offices
 Business Address       Ranson Capital Corporation              with Registrant
- --------------------------------------------------------------------------------------
<S>                    <C>                                <C>

1 North Main
Minot, ND 58703

Richard D. Olson        Assistant Vice President -
                                  Sales

Peter A. Quist          Director, Vice President          Vice President and Secretary
                              and Secretary

Shannon D. Radke        Assistant Vice President -
                                 Finance

Robert E. Walstad       Director, President, CEO and        Trustee, Chairman,
                                  Treasurer               President and Treasurer
</TABLE>
Item 30.  Location of Accounts and Records.

     All accounts, books and documents of Registrant are maintained at the
offices of Ranson Managed Portfolios, 1 North Main, Minot, North Dakota 58703
and with the

                                      C-5
<PAGE>

Custodian at First Western Bank & Trust, 900 South Broadway, Minot, North Dakota
58701,

Item 31.  Management Services.

     Inapplicable.

Item 31.  Undertakings.

     (a)  Registrant hereby undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six months
from the effective date of Registrant's 1933 Act Registration Statement.

     (b)  Registrant hereby undertakes, if requested to do so by the holders of
at least 10% of Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of a trustee
or trustees and to assist in communications with other shareholders as required
by Section 16(c) of the 1940 Act.

                                      C-6
<PAGE>

                                   Signatures

     Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it has duly
caused this Post-Effective Amendment to be signed on its behalf by the
undersigned duly authorized in the City of Minot, and State of North Dakota on
the 28th day of July, 1997.

                                        Ranson Managed Portfolios

                                        By        Robert E. Walstad
                                           --------------------------------
                                                  Robert E. Walstad
                                                      President

     Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to Registration Statement No. 33-36324 has been signed
below on behalf of the following persons in the capacities indicated on the
28th day of July, 1997:


            Signatures              Title


Lynn W. Aas                         Trustee
- ----------------------------------
Lynn W. Aas


Orlin W. Backes                     Trustee
- ----------------------------------
Orlin W. Backes


Arthur A. Link                      Trustee
- ----------------------------------
Arthur A. Link


Robert E. Walstad                   Trustee, Chairman of the Board, President
- ----------------------------------  and Treasurer
Robert E. Walstad



                                      C-7
<PAGE>
 
                                 Exhibit Index

1.     Agreement and Declaration of Trust dated August 10, 1990 (incorporated by
       reference to Form N-lA [File No. 33-36324] filed on behalf of Ranson
       Managed Portfolios -- The Kansas Municipal Fund).

2.     By-Laws (incorporated by reference to Form N-1A [File No. 33-36324] filed
       on behalf of Ranson Managed Portfolios -- The Kansas Municipal Fund).

3.     Inapplicable.

4.     Inapplicable.

5.     Form of Management and Investment Advisory Agreement between Registrant
       and Ranson Capital Corporation (incorporated by reference to Post-
       effective Amendment No. 11 to the Registration Statement).

6.     (a) Form of Distribution and Services Agreement between Registrant
           and Ranson Capital Corporation (incorporated by reference to Post-
           effective Amendment No. 11 to the Registration Statement).

       (b) Dealer Agreement (incorporated by reference to Post-effective
           Amendment No. 11 to the Registration Statement).

7.     Inapplicable.

8.     Form of Custodian Agreement between Ranson Managed Portfolios and First
       Western Bank & Trust (incorporated by reference to Post-Effective
       Amendment No. 25 to the Registration Statement).

9.     Administrative and Accounting Services Agreement between Registrant and
       ND Resources, Inc. (incorporated by reference to Post-Effective Amendment
       No. 25 to the Registration Statement).

10.    Opinion of Chapman and Cutler.*

11.    Inapplicable.

12.    Inapplicable.

13.    Inapplicable.

14.    Shareholder Services Plan (incorporated by reference to Post-effective
       Amendment No. 11 to the Registration Statement).

15.    Inapplicable.

16.    Inapplicable.

* To be filed by amendment.


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