HERCULES FUNDS INC, 497, 1995-12-20

HERCULES FUNDS INC
497, 1995-12-20

Previous: STRONG HIGH YIELD MUNICIPAL BOND FUND INC, 497, 1995-12-20

Next: ACM MANAGED DOLLAR INCOME FUND INC, DEF 14A, 1995-12-20

<PAGE>
HERCULES EUROPEAN VALUE FUND
A SERIES OF
HERCULES FUNDS INC.
SUPPLEMENT DATED DECEMBER 20, 1995
TO PROSPECTUS DATED AUGUST 29, 1995

Christian Simond is no longer responsible for the day-to-day management of
European Value Fund. Nils Francke, formerly Mr. Simond's assistant, has assumed
such responsibilities. Biographical information about Mr. Francke is included in
this Prospectus. John Gerth will assist Mr. Francke in the day-to-day management
of European Value Fund. Mr. Gerth joined Pictet in 1991. Prior to that time he
was a Vice President and Senior Securities Officer and Head of International
Equities for Citibank.
<PAGE>
PROSPECTUS DATED AUGUST 29, 1995

HERCULES FUNDS INC.
222 SOUTH NINTH STREET,
MINNEAPOLIS, MINNESOTA 55402-3804
(612) 342-1100 (LOCAL CALLS)
(800) 584-1317 (TOLL FREE)

Hercules Funds Inc. (the "Company") is comprised of eight funds (the
"Fund(s)"). A prominent international advisory organization has been retained on
behalf of each Fund to act as its sub-adviser (the "Sub-Adviser(s)"). This
prospectus relates to six of the Funds; the remaining two Funds are not being
offered for sale as of the date hereof. The six Funds, their investment
objectives and Sub-Advisers are as follows:

HERCULES NORTH AMERICAN GROWTH AND INCOME FUND ("North American Fund") has
investment objectives of both long-term capital appreciation and current income.
North American Fund seeks to achieve its objectives primarily through
investments in securities of issuers in Mexico, Canada and the U.S. ACCI
WORLDWIDE, S.A. DE C.V. ("Acci") and AGF INVESTMENT ADVISORS, INC. ("AGF") serve
as Sub-Advisers to North American Fund regarding investments in securities of
Mexican and Canadian issuers, respectively. PIPER CAPITAL MANAGEMENT
INCORPORATED, the Company's investment manager, also manages the U.S. portion of
North American Fund.

HERCULES EUROPEAN VALUE FUND ("European Value Fund") has investment
objectives of long-term capital appreciation and to a lesser extent, current
income. European Value Fund seeks to achieve its objectives primarily through
investments in securities of issuers located in Europe. PICTET INTERNATIONAL
MANAGEMENT LIMITED ("Pictet") serves as Sub-Adviser to European Value Fund.

HERCULES PACIFIC BASIN VALUE FUND ("Pacific Value Fund") has investment
objectives of long-term capital appreciation and to a lesser extent, current
income. Pacific Value Fund seeks to achieve its objectives primarily through
investments in securities of issuers located in the Pacific Basin, which is
defined as those countries bordering on the Pacific Ocean. EDINBURGH FUND
MANAGERS PLC ("EFM") serves as Sub-Adviser to Pacific Value Fund.

HERCULES LATIN AMERICAN VALUE FUND ("Latin American Value Fund") has
investment objectives of long-term capital appreciation and to a lesser extent,
current income. Latin American Value Fund seeks to achieve its objectives
primarily through investments in securities of issuers located in Latin America.
BANKERS TRUST COMPANY serves as Sub-Adviser to Latin American Value Fund.

HERCULES WORLD BOND FUND ("Bond Fund") has an investment objective of a high
level of total investment return. Bond Fund seeks to achieve its objective
through investments principally in debt securities of issuers located anywhere
in the world. SALOMON BROTHERS ASSET MANAGEMENT LIMITED serves as Sub-Adviser to
Bond Fund.

HERCULES MONEY MARKET FUND ("Money Market Fund") has an investment objective
of maximizing current income consistent with the preservation of capital and
maintenance of liquidity. Money Market Fund invests exclusively in a variety of
high quality money market instruments, such as high grade domestic commercial
paper, repurchase agreements, obligations of domestic banks (e.g., time
deposits, certificates of deposit and bankers' acceptances), U.S. Government
securities and short-term corporate obligations. Money Market Fund seeks to
maintain a stable net asset value of $1.00 per share. SALOMON BROTHERS ASSET
MANAGEMENT INC serves as Sub-Adviser to Money Market Fund.

INVESTMENT IN EACH OF THE FUNDS (OTHER THAN MONEY MARKET FUND) INVOLVES
CERTAIN RISKS NOT TYPICALLY ASSOCIATED WITH A FUND WHICH INVESTS PRIMARILY IN
SECURITIES OF U.S. ISSUERS. SEE "SPECIAL RISK CONSIDERATIONS."

This Prospectus describes concisely the information about the Funds that you
should know before investing. Please read the Prospectus carefully before
investing and retain it for future reference. A Statement of Additional
Information about the Company dated August 29, 1995 is available free of charge.
Write to the Company at 222 South Ninth Street, 20th Floor, Minneapolis,
Minnesota 55402-3804 or telephone (612) 342-1100 (local calls) or (800) 584-1317
(toll free). The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated in its entirety by
reference in this Prospectus.

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

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

The Company is an open-end management investment company, commonly called a
mutual fund. The Company, which was organized as a corporation under the laws of
the State of Minnesota in 1993, has one class of capital stock that is currently
issued in eight separate series. This Prospectus relates to shares of six of
those series: Hercules North American Growth and Income Fund ("North American
Fund") Hercules European Value Fund ("European Value Fund"), Hercules Pacific
Basin Value Fund ("Pacific Value Fund"), Hercules Latin American Value Fund
("Latin American Value Fund"), Hercules World Bond Fund ("Bond Fund") and
Hercules Money Market Fund ("Money Market Fund") (sometimes referred to herein
as a "Fund" or, collectively, as the "Funds"). Shares of the remaining two
series, Hercules Emerging Markets Debt Fund and Hercules Global Short-Term Fund,
are not being offered for sale as of the date hereof. This prospectus relates to
the continuous offering of shares by each of the six Funds set forth above.

MANAGEMENT

On July 18, 1995, shareholders of the Company approved an investment
advisory and management agreement between Piper Capital Management Incorporated
(the "Manager"), a corporation organized under the laws of the state of Delaware
and the Company. Each Fund pays the Manager a fee for managing its investment
portfolio. Management fees for each of the Funds, except for Money Market Fund,
are paid monthly at an annual rate of 1.0% of average daily net assets of the
applicable Fund. These fees are higher than fees paid by most other investment
companies. The management fees for Money Market Fund are paid monthly at an
annual rate of .50% of average daily net assets. See "Management--Investment
Manager."

As previously described, with respect to each Fund, the Manager has entered
into a sub-advisory agreement pursuant to which the Sub-Advisers, subject to the
supervision of the Manager, are responsible for certain investment functions
including researching and developing an overall investment plan and making and
implementing investment decisions regarding assets of the respective Fund. With
respect to North American Fund, the Manager has retained the responsibility to
manage the U.S. portion of the portfolio. For its services, each Sub-Adviser is
paid by the Manager a fee, payable over the same time periods and calculated in
the same manner as the management fee of the applicable Fund, of .50% of average
daily net assets of such Fund (in the case of North American Fund, each of the
two Sub-Advisers is paid .166 of 1%), except that with respect to Money Market
Fund, the Sub-Adviser is paid by the Manager a fee of .25% of average daily net
assets of the applicable Fund. See "Management--Sub-Advisers."

THE DISTRIBUTOR

Piper Jaffray Inc. ("Piper Jaffray" or the "Distributor"), a wholly owned
subsidiary of Piper Jaffray Companies Inc. and an affiliate of the Manager,
serves as Distributor of the Company's shares. For its services as Distributor,
which include distributing shares of the Funds and for sales-related expenses,
the Distributor is entitled to reimbursement from each Fund (other than Money
Market Fund) each month for its actual expenses incurred in the distribution and
promotion of each Fund's shares pursuant to a Rule 12b-1 Distribution Plan
adopted by each of the Funds. Reimbursement to the Distributor is computed
separately for each of the applicable Funds and may not exceed .70% per annum of
the average daily net assets with respect to North American Fund, European Value
Fund, Pacific Value Fund and Latin American Value Fund and .50% per annum with
respect to Bond Fund. The Rule 12b-1 fees may be limited voluntarily by the
Distributor. Currently, reimbursement to the Distributor is limited on a per
annum basis to .50% with respect to average daily net assets of North

2
<PAGE>
American Fund, European Value Fund, Pacific Value Fund and Latin American Value
Fund and .30% with respect to average daily net assets of Bond Fund. These
limitations may be revised or terminated at any time after the Company's current
fiscal year. See "Distribution of Fund Shares."

OFFERING PRICES

Shares of the Funds are offered to the public at the next determined net
asset value after receipt of an order by either the Distributor or the Funds'
transfer agent, Investors Fiduciary Trust Company ("IFTC"). Shares redeemed
within two years of purchase are subject to a contingent deferred sales charge
under most circumstances. See "Purchase of Shares--Public Offering Price" and
"Redemption of Shares--Contingent Deferred Sales Charge."

MINIMUM INITIAL AND SUBSEQUENT INVESTMENTS

The minimum initial investment for each Fund is $250. Subsequent investments
must be $100 or more. These minimums may be lowered by the Distributor in
certain instances. See "Purchase of Shares--Minimum Investments."

EXCHANGES

Shares of a Fund may be exchanged for shares of any other Fund offered in an
investor's state at net asset value. An investor may make twelve exchanges per
year without payment of a service charge. Thereafter, there is a $50 service
charge for each exchange. See "Purchase of Shares--Exchange Privilege."

REDEMPTIONS

Shares of any Fund may be redeemed at any time at their net asset value next
determined after receipt of a redemption request by the Distributor or by IFTC.
The Company reserves the right, upon 30 days' written notice, to redeem an
account in any Fund if the net asset value of the shares in that account falls
below $200 as the result of a redemption or transfer request. Although no
commission or sales load is imposed on the purchase of shares, a contingent
deferred sales charge of up to 2% of net asset value is imposed on redemptions
of shares of each Fund (other than Money Market Fund) within two years of
purchase (the "holding period"). However, there is no charge imposed on
redemption of shares purchased through reinvestment of dividends or
distributions. See "Redemption of Shares."

TAXES

Each of the Funds is treated as a separate corporation for federal tax
purposes and each of the Funds expects to qualify as a regulated investment
company during the current taxable year.

CERTAIN SPECIAL RISK CONSIDERATIONS

An investment in any of the Funds is subject to certain risks, as set forth
in detail under "Special Risk Considerations." As with other mutual funds, there
can be no assurance that any Fund will achieve its objective. Each Fund (other
than Money Market Fund) invests in foreign securities. Accordingly, an
investment in each Fund (other than Money Market Fund) requires consideration of
certain risk factors that are not typically associated with investing in
securities of U.S. companies. To the extent a Fund's investments are denominated
in currencies other than the U.S. dollar, such Fund is subject to a risk of a
decline in the value of such currency against the U.S. dollar. Additional risk
factors include potential political and economic instability of certain
countries, limited liquidity, volatile prices of certain securities of non-U.S.
companies and foreign taxation. See "Special Risk Considerations--Foreign
Securities."

3
<PAGE>
The value of debt securities in which each of the Funds may invest typically
varies inversely with changes in the level of interest rates. Each Fund may
borrow for investment purposes principally through the use of reverse repurchase
agreements and to a lesser extent through borrowing from banks. This speculative
technique is referred to as "leveraging." Leveraging generally exaggerates the
effect on net asset value of any increase or decrease in the market value of the
Funds' portfolio securities. Money borrowed for leveraging will be subject to
interest costs which may or may not be recovered by income from or appreciation
of the securities purchased.

Some or all of the Funds, to the extent set forth under "Investment
Objectives and Policies," "Special Investment Methods" and "Other Eligible
Investments" may engage in the following investment practices: forward foreign
currency exchange transactions and foreign currency futures and options, the use
of repurchase agreements, entering into options and futures transactions with
respect to financial instruments and stock and interest rate indexes, entering
into interest rate swaps, caps and floors, the purchase of securities on a
"when-issued" basis, the purchase or sale of securities on a "forward
commitment" basis, the purchase of zero coupon and payment in kind bonds, the
purchase of Brady Bonds, the use of short sales, the purchase of illiquid
securities, investments in foreign index linked instruments and the purchase of
mortgage-related securities. The use of certain of these financial techniques to
generate income is considered speculative and may involve the creation of
leverage. In addition, the use of certain of these practices may increase the
volatility of a Fund's net asset value. Certain of the investment techniques set
forth above are commonly referred to as "derivative instruments." The term
"derivatives" has been used to identify a variety of financial instruments;
there is no discrete class of instruments that is covered by the term. A
"derivative" is commonly defined as a financial instrument whose value is based
upon, or derived from, an underlying index, reference rate (e.g., interest rates
or currency exchange rates), security, commodity, or other asset. All of these
transactions involve certain special risks, as set forth under "Special Risk
Considerations" and "Other Eligible Investments--Brady Bonds."

The Company has registered as a "non-diversified" investment company so that
each Fund will be able to invest more than 5% of the value of its assets in the
obligations of a single issuer, subject to the diversification requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to the
Funds. To the extent the Funds invest a relatively high percentage of their
assets in obligations of a limited number of issuers, the Funds may be more
susceptible than diversified funds to any single economic, political or
regulatory occurrence or to changes in an issuer's financial condition or in the
market's assessment of issuers. See "Special Risk
Considerations--Non-Diversified Status."

Latin American Value Fund and Bond Fund may invest in lower-quality debt
securities rated below Baa3 by Moody's Investors Service, Inc. ("Moody's") or
BBB- by Standard & Poor's Ratings Group ("S&P") (commonly known as "high yield"
or "junk" bonds) or, if unrated, of comparable quality as determined by their
respective Sub-Advisers. Latin American Value Fund and Bond Fund will each
invest less than 35% of its net assets in such high yield securities. Investment
in high yield securities typically involves risks not associated with
higher-rated securities, including, among others, overall greater risk of not
receiving timely and ultimate payment of interest and principal, potentially
greater sensitivity to general economic conditions and changes in interest
rates, greater market price volatility and less liquid secondary market trading.
See "Special Risk Considerations--Risks of Lower-Rated Debt Securities."

Each of the Funds (other than Money Market Fund) may invest in loans,
assignments of loans and participations in loans. Such investments are subject
to special risks, including the lack of a liquid

4
<PAGE>
secondary market for such securities and, in the case of loan participations,
assumption of the credit risk of both the underlying borrower and the seller of
the participation. See "Other Eligible Investments--Loan Participations and
Assignments."

SHAREHOLDER INQUIRIES

Any questions or communications regarding a shareholder account should be
directed to your broker-dealer or to IFTC at (800) 245-7087. General inquiries
regarding the Funds should be directed to the Funds at the telephone number set
forth on the cover page of this Prospectus.

5
<PAGE>
FEES AND EXPENSES

<TABLE>
<CAPTION>
LATIN
NORTH EUROPEAN PACIFIC AMERICAN MONEY
AMERICAN VALUE VALUE VALUE BOND MARKET
FUND FUND FUND FUND FUND FUND
-------- -------- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price)............................................ 0% 0% 0% 0% 0% 0%
Maximum Contingent Deferred Sales Charge(1)................. 2.00% 2.00% 2.00% 2.00% 2.00% None
Exchange Fee(2)............................................. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
ANNUAL FUND OPERATING EXPENSES (after fee limitation and
reimbursement; as a percentage of average net assets)
Management Fees............................................. 1.00% 1.00% 1.00% 1.00% 1.00% .50%
12b-1 Fees (after fee limitation)(3),(4).................... .50% .50% .50% .50% .30% 0%(5)
Other Expenses (after expense reimbursement)(4).............
Administrative Services, Transfer Agency and Custodian.... .50% .50% .50% .50% .50% .50%
Total Fund Operating Expenses (after fee limitation and
reimbursement)(4).......................................... 2.00% 2.00% 2.00% 2.00% 1.80% 1.00%
EXAMPLE
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each time period(4)
1 year.................................................... $ 40 $ 40 $ 40 $ 40 $ 38 $ 10
3 years................................................... $ 63 $ 63 $ 63 $ 63 $ 57 $ 32
5 years................................................... 108 108 108 108 97 55
10 years.................................................. 233 233 233 233 212 122
-------- -------- ------- -------- ------ ------
-------- -------- ------- -------- ------ ------
You would pay the following expenses on the same investment,
assuming no redemption
1 year.................................................... $ 20 $ 20 $ 20 $ 20 $ 18 $ 10
3 years................................................... $ 63 $ 63 $ 63 $ 63 $ 57 $ 32
5 years................................................... 108 108 108 108 97 55
10 years.................................................. 233 233 233 233 212 122
</TABLE>

- ---------

(1)The maximum 2% contingent deferred sales charge on shares of each Fund
(other than Money Market Fund) applies to redemptions during the first 365
days after purchase; the charge declines to 1% during the next 365 days
after purchase, reaching zero thereafter.

(2)There is a $50 fee for each exchange in excess of 12 exchanges per year. See
"Purchase of Shares-- Exchange Privilege."

(3)A portion of the Rule 12b-1 fee equal to .25% of the average daily net
assets with respect to all of the Funds (other than Money Market Fund) is
characterized as a service fee within the meaning of the guidelines of the
National Association of Securities Dealers, Inc. ("NASD").

(4)12b-1 fees for each Fund (other than Money Market Fund) are currently
limited voluntarily by the Distributor. In addition, certain "Other
Expenses" are borne by the Manager. The amounts set forth in the Example may
increase if such fee limitations and expense reimbursement are removed. For
each Fund's current fiscal year the Manager has voluntarily limited total
expenses on a per annum basis to 2% with respect to average daily net assets
of North American Fund, European Value Fund, Pacific Value Fund and Latin
American Value Fund, 1.8% with respect to average daily net assets of Bond
Fund and 1.00% with respect to average daily net assets of Money Market
Fund. After each Fund's current fiscal year, these limitations may be
revised or terminated at any time.

(5)The Company's 12b-1 Distribution Plan authorizes payments by Money Market
Fund in an amount not to exceed .10% per annum of its daily net assets;
however, the Board of Directors of the Company determined to discontinue
such payments by the Fund effective as of June 19, 1995.

6
<PAGE>
The purpose of the above Fees and Expenses table is to assist the investor
in understanding the various costs and expenses that each Fund expects to incur
and that investors in the Funds should expect to bear directly or indirectly.
The percentages set forth for each Fund which are included within the category
"Other Expenses" are estimates. The Rule 12b-1 fees set forth in the table (for
each of the Funds other than Money Market Fund) are pursuant to voluntary fee
limitations by the Distributor which may be revised or terminated at any time
after the conclusion of each Fund's current fiscal year. Absent such fee
limitation, Rule 12b-1 fees may not exceed .70% per annum of the average daily
net assets with respect to North American Fund, Pacific Value Fund, European
Value Fund and Latin American Value Fund and .50% with respect to Bond Fund. In
addition to the Rule 12b-1 fee limitation, certain "Other Expenses" were
voluntarily waived or absorbed by the Manager. Absent such waivers and
reimbursements for the fiscal year ended June 30, 1995, "Other Expenses" would
have been 1.69% of average daily net assets for North American Fund, 1.51% of
average daily net assets for European Value Fund, .83% of average daily net
assets for Pacific Value Fund, 1.77% of average daily net assets for Latin
American Value Fund, 1.03% of average daily net assets for Bond Fund and 24.84%
of average daily net assets for Money Market Fund. Had the Funds paid all
expenses, Total Fund Operating Expenses for the fiscal year ended June 30, 1995
would have been 3.39% of average daily net assets for North American Fund, 3.21%
of average daily net assets for European Value Fund, 2.53% of average daily net
assets for Pacific Value Fund, 3.47% of average daily net assets for Latin
American Value Fund, 2.53% of average daily net assets for Bond Fund and 25.44%
of average daily net assets for Money Market Fund.

THE TABLE AND EXAMPLES SET FORTH ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OR PREDICTION OF FUTURE EXPENSES OR PERFORMANCE WHICH MAY BE MORE
OR LESS THAN THOSE SET FORTH. For additional information, including a more
complete explanation of management and Rule 12b-1 fees, see "Management--
Investment Manager," "Management--Expenses" and "Distribution of Fund Shares."

Long-term shareholders of the Funds (other than Money Market Fund) may pay
more in Rule 12b-1 distribution fees than the economic equivalent of the maximum
front-end sales charge permitted by the NASD.

7
<PAGE>
FINANCIAL HIGHLIGHTS

The following financial highlights show certain per share data and selected
information for a share of capital stock outstanding during the indicated
periods for the Funds. The information has been audited by KPMG Peat Marwick
LLP, independent auditors, whose report thereon appears in the Statement of
Additional Information. This information should be read in conjunction with the
financial statements and the related notes thereto appearing in the Statement of
Additional Information.

<TABLE>
<CAPTION>
NORTH AMERICAN FUND EUROPEAN VALUE FUND
------------------------- -------------------------
FISCAL YEAR PERIOD FROM FISCAL YEAR PERIOD FROM
ENDED 11/9/93* TO ENDED 11/9/93* TO
6/30/95 6/30/94 6/30/95 6/30/94
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period........................ $ 9.46 10.00 9.86 10.00
- -------------------------------------------------------------------------------------------------------------------
Operations:
Investment income--net**.................................. 0.17 0.04 0.12 0.02
Net realized and unrealized gains (losses)................ 0.33 (0.58) 1.21 (0.16)
- -------------------------------------------------------------------------------------------------------------------
Total from operations....................................... 0.50 (0.54) 1.33 (0.14)
- -------------------------------------------------------------------------------------------------------------------
Distributions from:
Investment income--net.................................... (0.04) -- (0.03) --
Net realized gains........................................ -- -- (0.06) --
- -------------------------------------------------------------------------------------------------------------------
Total distributions......................................... (0.04) -- (0.09) --
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period.............................. $ 9.92 9.46 11.10 9.86
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***............................................. 5.36% (5.40%) 13.52% (1.40%)
Net assets, end of period (000s omitted).................... $13,217 16,856 17,520 16,574
Ratio of expenses to average daily net assets++............. 2.00% 2.00%+ 2.00% 2.00%+
Ratio of net investment income to average daily
net assets++............................................... 1.84% 0.87%+ 1.10% 0.47%+
Portfolio turnover rate (excluding short-term securities)... 52% 23% 131% 60%
</TABLE>

- ------------
* Commencement of operations.

** Based on the weighted average number of shares outstanding during the
period.

***Total return is based on the change in net asset value during the period,
assumes reinvestment of all distributions and does not reflect the
contingent deferred sales charge applicable to shares purchased after
6/19/95.

+ Adjusted to an annual basis.

++ Various portfolio fees and expenses were voluntarily waived or absorbed by
the manager and Distributor. Had the funds paid all expenses, the annualized
ratios of expenses and net investment income to average daily net assets
would have been as follows:

8
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
PACIFIC VALUE FUND LATIN AMERICAN VALUE FUND
------------------------- -------------------------
FISCAL YEAR PERIOD FROM FISCAL YEAR PERIOD FROM
ENDED 11/9/93* TO ENDED 11/9/93* TO
6/30/95 6/30/94 6/30/95 6/30/94
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period........................ $ 10.68 10.00 9.14 10.00
- -------------------------------------------------------------------------------------------------------------------
Operations:
Investment income (loss)--net**........................... (0.10) (0.04) -- 0.01
Net realized and unrealized gains (losses)................ (1.45) 0.72 (1.94) (0.87)
- -------------------------------------------------------------------------------------------------------------------
Total from operations....................................... (1.55) 0.68 (1.94) (0.86)
- -------------------------------------------------------------------------------------------------------------------
Distributions from:
Net realized gains........................................ (0.11) -- -- --
- -------------------------------------------------------------------------------------------------------------------
Total distributions......................................... (0.11) -- -- --
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period.............................. $ 9.02 10.68 7.20 9.14
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***............................................. (14.63%) 6.80% (21.23%) (8.60%)
Net assets, end of period (000s omitted).................... $31,527 40,828 22,624 27,750
Ratio of expenses to average daily net assets++............. 2.00% 2.00%+ 2.00%+ 2.00%+
Ratio of net investment income (loss) to average daily
net assets++............................................... (1.06%) (0.96%)+ (0.03%)+ 0.14%+
Portfolio turnover rate (excluding short-term securities)... 68% 39% 161% 78%
</TABLE>

- ------------
* Commencement of operations.

** Based on the weighted average number of shares outstanding during the
period.

+ Adjusted to an annual basis.

9
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
MONEY MARKET
BOND FUND FUND
------------------------- ------------
FISCAL YEAR PERIOD FROM PERIOD FROM
ENDED 11/9/93* TO 12/13/94* TO
6/30/95 6/30/94 6/30/95
----------- ----------- ------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period........................ $ 9.35 10.00 1.00
- ------------------------------------------------------------------------------------------------------
Operations:
Investment income net**................................... 0.45 0.12 0.02
Net realized and unrealized gains (losses)................ 0.22 (0.71) --
- ------------------------------------------------------------------------------------------------------
Total from operations....................................... 0.67 (0.59) 0.02
- ------------------------------------------------------------------------------------------------------
Distributions:
From investment income--net............................... (0.09) (0.06) (0.02)
Tax return of capital..................................... (0.11) -- --
- ------------------------------------------------------------------------------------------------------
Total distributions......................................... (0.20) (0.06) (0.02)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period.............................. $ 9.82 9.35 1.00
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***............................................. 7.24% (5.96%) 2.62%
Net assets, end of period (000s omitted).................... $13,776 32,360 1,230
Ratio of expenses to average daily net assets++............. 1.80% 1.80%+ 1.00%+
Ratio of net investment income to average daily net
assets++................................................... 4.76% 2.63%+ 4.53%+
Portfolio turnover rate (excluding short-term securities)... 501% 291% N/A
</TABLE>

- ------------
*Commencement of operations.

**Based on the weighted average number of shares outstanding during the
period.

+ Adjusted to an annual basis.

10
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

The investment objectives listed below are fundamental and cannot be changed
without shareholder approval. In view of the risks inherent in all investments
in securities, there is no assurance that these objectives will be achieved. The
investment policies and techniques employed in pursuit of the Funds' objectives
may be changed without shareholder approval unless otherwise noted.

NORTH AMERICAN FUND

North American Fund's objectives are to achieve long-term capital
appreciation and current income. The Fund seeks to achieve its investment
objectives by investing under normal circumstances at least 65% of its total
assets in U.S., Canadian and Mexican securities (as described below).

North American Fund defines U.S., Canadian or Mexican securities as
securities issued by: (a) companies organized in the U.S., Canada or Mexico or
for which the principal trading market is located in such countries, (b)
companies that derive at least 50% of their gross revenues from either goods
produced, sales made, services performed or investments made in such countries,
(c) companies which have at least 50% of their total assets located in the U.S.,
Canada or Mexico or (d) or guaranteed by the governments of such countries or
their agencies, political subdivisions or instrumentalities or the central bank
of such country (sovereign debt). The Fund will not invest 25% or more of its
total assets in government obligations issued by Canada or Mexico. See "Special
Risk Considerations-- Foreign Securities--Risks of Sovereign Debt Obligations."

In selecting particular investments, each Sub-Adviser and the Manager seek
to identify companies believed by it to have long term prospects for growth of
earnings and dividends in relationship to the prevailing market price. Emphasis
is expected to be placed on investment in companies which the Sub-Advisers and
the Manager believe are well positioned to benefit from the cross border
commerce among the countries in North America which is currently taking place
and is expected to increase as a result of government initiatives to promote
free cross border trade. Assets will be allocated among the U.S., Canada and
Mexico in accordance with the Manager's view as to where the best opportunities
exist. The Manager may rely in whole or in part in making such allocations on
the results of a proprietary allocation model made available to the Fund without
separate charge by a financial institution to be selected by the Manager.

Although initially the Fund expects to invest virtually all of its assets in
North American issuers, the Fund is authorized to invest up to 35% of its total
assets in securities of issuers located outside of the U.S., Canada and Mexico.
In evaluating investments outside of North America, the Manager and Sub-Adviser
will seek investments in issuers which they believe are well positioned to
benefit from cross-border trade with the U.S., Canada and Mexico or from other
developments in North America.

Equity securities in which the Fund may invest include common stocks and
preferred stocks (either convertible or non-convertible), warrants and stock
rights. The Fund does not expect to invest more than 5% of its net assets in
warrants and stock rights. Also, North American Fund may invest to a limited
extent in investment companies or trusts which invest in securities of the U.S.,
Canada and Mexico. See "Other Eligible Investments--Investments in Other
Investment Companies."

Debt securities in which the Fund may invest include bonds, notes and
debentures of any maturity, mortgage-backed securities and asset-backed
securities. Such securities may be issued by governmental or private issuers.
Debt securities must be rated at least BBB by S&P or Baa by Moody's, or, if
unrated, of at least comparable quality as determined by the Sub-Advisers to the
North American Fund. The foregoing rating limitation applies at the time of
acquisition of a security. Any

11
<PAGE>
subsequent change in rating by a rating service will not require the Fund to
dispose of the security. However, if the subsequent change in a rating of any
security causes the Fund to have in the aggregate more than 5% of its net assets
invested in securities rated below investment grade, the Fund will sell, as soon
as it is practicable, sufficient securities to reduce the total to below 5%. See
"Other Eligible Investments--Mortgage-Backed Securities" and "--Asset-Backed
Securities."

Generally, the Fund expects to invest no more than 60% or less than 20% of
its total assets in any one of the U.S., Canada or Mexico.

For temporary defensive purposes, the Fund may invest all or a portion of
its assets in U.S. dollar-or foreign currency-denominated cash or domestic or
foreign high quality money market instruments including commercial paper,
certificates of deposit, bankers' acceptances and securities issued by the U.S.
or a foreign government, their agencies or instrumentalities.

EUROPEAN VALUE FUND

European Value Fund's investment objectives are long-term capital
appreciation and, to a lesser extent, current income. European Value Fund seeks
to achieve its investment objectives primarily through investments (under normal
circumstances, at least 65% of its total assets) in securities issued by issuers
in Europe. The Fund defines Europe as Austria, Belgium, Denmark, Germany,
Finland, France, Greece, the Republic of Ireland, Italy, Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey and the United
Kingdom. As the securities markets of additional continental European countries
develop, such countries may be considered part of the Fund's definition of
Europe and appropriate countries for investment by the Fund.

Emphasis is expected to be placed on investments in equity securities. The
Fund may, however, also seek capital appreciation through investment in debt
securities, such as may occur through favorable changes in relative foreign
exchange rates, in relative interest rate levels or in creditworthiness of
issuers.

Under normal market conditions, European Value Fund's investments will be
allocated among at least three different countries in Europe. European Value
Fund defines securities of European issuers as follows: (a) securities of
companies organized under the laws of a country within Europe (including the
United Kingdom) or for which the principal trading market is in Europe; (b)
securities of companies that derive at least 50% of their gross revenues from
goods produced, sales made, services performed or investments in companies in
Europe; (c) securities of companies which have at least 50% of their total
assets located in Europe; or (d) securities issued or guaranteed by the
government of a country in Europe, its agencies, political subdivisions or
instrumentalities or the central bank of such country (sovereign debt). The Fund
will not invest 25% or more of its total assets in obligations issued by the
government of any one European country. See "Special Risk
Considerations--Foreign Securities--Risks of Sovereign Debt Obligations."

The Fund is authorized to invest up to 10% of its net assets in securities
issued by issuers in Eastern Europe. In view of rapid political developments in
Eastern Europe, it is not possible to categorically state the issuing markets;
however, the Fund currently defines Eastern Europe as the Czech Republic,
Slovakia, Hungary, Poland, Lithuania, Latvia, Estonia, Russian Federation,
Romania and Slovenia. The Fund may in the future invest in other markets in
Eastern Europe as these markets develop.

12
<PAGE>
Assets will be allocated among countries and currencies in accordance with
the Sub-Adviser's proprietary asset allocation system. The system involves the
continuing analysis of a fixed set of statistical indicators which (i) describe
the progress of the credit cycle in each country, (ii) gauge the outlook for
bond prices within the context of the historical and current relationship
between money supply growth, inflation and real interest rates, and (iii)
measure the likely relative return of stocks versus bonds on the basis of the
current, implicit equity risk premium vis-a-vis historic norms.

In selecting particular investments, the Sub-Adviser seeks to identify
companies believed by it to be undervalued in the marketplace in relation to
various factors such as the company's assets, earnings, growth potential and
cash flows.

Equity securities in which European Value Fund may invest include common
stocks and preferred stocks (either convertible or non-convertible), warrants
and stock rights. The Fund does not expect to invest more than 5% of its net
assets in warrants and stock rights. European Value Fund also may purchase
shares of investment companies or trusts which invest principally in securities
in which the European Value Fund is authorized to invest. See "Other Eligible
Investments--Investments in Other Investment Companies."

Debt securities that European Value Fund may acquire include bonds, notes
and debentures of any maturity, mortgage-backed securities and asset-backed
securities. Such securities may be issued by governmental or private issuers.
Debt securities that European Value Fund may acquire must be rated at least BBB
by S&P or Baa by Moody's, or, if unrated, of comparable quality as determined by
the Sub-Adviser. The foregoing rating limitation applies at the time of
acquisition of a security. Any subsequent change in rating by a rating service
will not require the Fund to dispose of any security. However, if the subsequent
change in a rating of any security causes the Fund to have in the aggregate more
than 5% of its net assets invested in securities rated below investment grade,
the Fund will sell, as soon as it is practicable, sufficient securities to
reduce the total to below 5%. See "Other Eligible Investments--Mortgage-Backed
Securities" and "--Asset-Backed Securities."

For temporary defensive purposes, European Value Fund may invest all or a
portion of its assets in U.S. dollar- or foreign currency-denominated cash or
domestic or foreign high-quality money market instruments including commercial
paper, certificates of deposit, bankers' acceptances and securities issued by
the U.S. or a foreign government, their agencies or instrumentalities.

PACIFIC VALUE FUND

Pacific Value Fund's investment objectives are long-term capital
appreciation and, to a lesser extent, current income. Pacific Value Fund seeks
to achieve its investment objectives through investments primarily (under normal
circumstances, at least 65% of its total assets) in the securities of issuers
located in the Pacific Basin. The Pacific Basin is defined as those countries
bordering the Pacific Ocean. The Pacific Value Fund may invest in the following
countries within the region: Malaysia, Pakistan, Sri Lanka, the Philippines,
Singapore, South Korea, Thailand, India, Indonesia, Hong Kong, Japan, Taiwan,
Australia and New Zealand. In addition, to the extent that suitable investment
opportunities become available, Pacific Value Fund may invest in the following
other countries: China, Vietnam, Laos, Cambodia, Myanmar, Bangladesh and North
Korea.

Emphasis is expected to be placed on investment in equity securities. The
Fund may, however, also seek capital appreciation through investment in debt
securities, such as may occur through favorable changes in relative foreign
exchange rates, in relative interest rate levels or in creditworthiness of
issuers.

13
<PAGE>
Under normal market conditions, Pacific Value Fund's investments will be
allocated among at least three different countries in the Pacific Basin. Pacific
Value Fund defines securities of Pacific Basin issuers as follows: (a)
securities of companies organized under the laws of a country within the Pacific
Basin or for which the principal trading market for its securities is located in
a country in the Pacific Basin, (b) securities of companies which derive at
least 50% of their gross revenues from goods produced, sales made, services
performed or investments in companies in the Pacific Basin, (c) securities of
companies which have at least 50% of their total assets located in the Pacific
Basin, or (d) securities issued or guaranteed by the government of a country in
the Pacific Basin, its agencies, political subdivisions or instrumentalities, or
the central bank of such country (sovereign debt). The Fund will not invest 25%
or more of its total assets in obligations issued by the governments of any one
country in the Pacific Basin. See "Special Risk Considerations--Foreign
Securities--Risks of Sovereign Debt Obligations."

In selecting investments, the Sub-Adviser seeks to identify countries and
industries which, due to economic and political factors, have potential for
significant growth and to identify those companies within such countries and
industries which are best positioned to benefit therefrom.

The equity securities in which Pacific Value Fund may invest consist of
common stock, preferred stock (convertible and non-convertible), warrants and
stock rights. The Fund does not expect to invest more than 5% of its net assets
in warrants and stock rights. Pacific Value Fund may also to a limited extent
purchase shares of investment companies or trusts which invest principally in
securities in which Pacific Value Fund is authorized to invest. See "Other
Eligible Investments--Investments in Other Investment Companies."

Debt securities that Pacific Value Fund may acquire include bonds, notes and
debentures of any maturity, mortgage-backed securities and asset-backed
securities. Such securities may be issued by governmental or private issuers.
Debt securities that the Fund may acquire must be rated at least BBB by S&P or
Baa by Moody's, or, if unrated, of comparable quality as determined by the Sub-
Adviser.

For temporary defensive purposes, Pacific Value Fund may invest without
limitation in U.S. dollar- or foreign currency-denominated cash or domestic or
foreign high-quality money market instruments.

LATIN AMERICAN VALUE FUND

The investment objectives of Latin American Value Fund are long-term capital
appreciation and to a lesser extent, current income.

Latin American Value Fund seeks to achieve its objectives primarily by
investing under normal circumstances at least 65% of its total assets in
securities of Latin American issuers.

In pursuit of its investment objectives, the Fund may invest in both equity
and debt securities. Capital appreciation from debt securities may result from
favorable changes in relative foreign exchange rates, in relative interest rate
levels or in creditworthiness of issuers. Under normal market conditions, Latin
American Value Fund's investments will be allocated among at least three
different countries in Latin America. The Fund defines Latin America as Mexico,
Central America and South America. Latin American Value Fund defines securities
of Latin American issuers as follows: (a) securities of companies organized in a
country in Latin America or for which the principal trading market is located in
Latin America, (b) securities of companies that derive at least 50% of their
gross revenues from either goods produced, sales made, services performed or
investments in companies in

14
<PAGE>
Latin America, (c) securities of companies which have at least 50% of their
total assets located in Latin America, or (d) securities issued or guaranteed by
the government of a country in Latin America, its agencies, political
subdivisions or instrumentalities, or the central bank of such country
(sovereign debt). The Fund will not invest 25% or more of its total assets in
obligations issued by the governments of any one country in Latin America. See
"Special Risk Considerations--Foreign Securities-- Risks of Sovereign Debt
Obligations."

Latin American Value Fund's assets will be allocated among the countries in
Latin America in accordance with the Manager's and Sub-Adviser's judgment as to
where the best investment opportunities exist. Criteria for determining the
appropriate distribution of investments among various countries and regions
include the prospects for relative growth among the countries, expected levels
of inflation, government policies influencing business conditions, the outlook
for currency relationships and the range of alternative opportunities available
to international investors. Criteria for selection of individual securities
include the issuer's competitive position, prospects for growth, managerial
strength, earnings quality, underlying asset value, relative market value and
overall marketability. The Fund may invest in securities of companies having
various levels of net worth, including smaller companies whose securities
generally are more volatile than securities offered by larger companies with
higher levels of net worth.

Latin American equity securities in which the Fund invests consist of common
stock and preferred stock (either convertible or non-convertible), warrants and
stock rights. The Fund does not expect to invest more than 5% of its net assets
in warrants and stock rights. Latin American Value Fund may invest to a limited
extent in investment companies or trusts which invest principally in securities
in which Latin American Value Fund invests. See, "Other Eligible
Investments--Investments in Other Investment Companies."

Debt securities that Latin American Value Fund may acquire include bonds,
notes and debentures of any maturity, mortgage-backed securities and
asset-backed securities. Such debt securities may be issued by governmental or
private issuers. The Fund may invest in any debt security regardless of rating
(including securities in default status), provided, however, that the Fund may
not invest more than 35% of its net assets in securities rated lower than
investment grade or, if unrated, of comparable quality as determined by the
Sub-Adviser. If a subsequent change in a rating of any security causes the Fund
to have more than 35% of its net assets in securities rated lower than
investment grade, the Fund will sell, as soon as it is practicable, sufficient
securities to reduce the total to 35% or below. See "Other Eligible
Investments--Mortgage-Backed Securities," "--Asset-Backed Securities," "Special
Risk Considerations--Risks of Lower-Rated Debt Securities" and "Appendix."

For temporary defensive purposes, the Fund may invest all or a portion of
its assets in U.S. dollar-or foreign currency-denominated cash or foreign or
domestic high-quality money market instruments including commercial paper,
certificates of deposit, bankers' acceptances and securities issued by the U.S.
or a foreign government, their agencies or instrumentalities.

BOND FUND

The investment objective of Bond Fund is to provide a high level of total
investment return. Bond Fund will attempt to achieve its investment objective by
investing principally in debt securities of issuers located anywhere in the
world. Total investment return is the combination of income and capital
appreciation. The Sub-Adviser emphasizes income in selecting securities for Bond
Fund, but also considers the potential for changes in value resulting from
changes in currency relationships, interest rates, individual issuers' credit
standings and other factors.

15
<PAGE>
Bond Fund will invest, under normal circumstances, at least 65% of its total
assets in debt securities (i.e., bonds and notes) with an initial maturity of
more than one year. Bond Fund will invest primarily in debt securities rated at
least Baa by Moody's or BBB by S&P or, if unrated, of comparable quality as
determined by the Sub-Adviser, but may invest in lower quality debt securities,
provided that such investments do not meet or exceed 35% of the Fund's net
assets. If a subsequent change in a rating of any security causes the Fund to
have more than 35% of its net assets in securities rated lower than investment
grade, the Fund will sell, as soon as it is practicable, sufficient securities
to reduce the total to 35% or below. See "Special Risk Considerations--Risks of
Lower-Rated Debt Securities" and "Appendix." Some of the debt securities
purchased by Bond Fund may be convertible into common stock or be traded
together with warrants for the purchase of common stock. Bond Fund can invest in
securities of any type of issuer including governmental, supranational and
private issuers. Up to 35% of the Fund's total assets may be invested in
mortgage-backed and asset-backed securities.

Bond Fund may invest in securities issued anywhere in the world, including
the U.S. Under normal market conditions, Bond Fund will be invested in at least
three different countries, one of which may be the U.S. Subject to the
requirement that Bond Fund may not invest 25% or more of its total assets in
obligations issued by the government of any one country, other than the U.S.,
there is no limit on the amount the Fund may invest in any one country, or in
securities denominated in the currency of any one country, to take advantage of
what the Sub-Adviser believes to be favorable yields, currency exchange
conditions or total investment return potential. The Sub-Adviser will actively
manage the allocation of Bond Fund's investments among countries, geographic
regions, currency denominations and issuers in an attempt to achieve a high
total investment return. In doing so, the Sub-Adviser will consider such factors
as the outlook for currency relationships, current and anticipated interest
rates, levels of inflation within various countries, prospects for relative
economic growth, government policies influencing currency exchange rates and
business conditions and the credit quality of individual issuers.

Although Bond Fund is not limited to any region, country or currency, the
Sub-Adviser currently expects to invest Bond Fund's assets primarily within
Australia, Canada, Europe, Eastern Europe, Japan, Latin America, New Zealand and
the United States, and in securities denominated in the currencies of these
countries or regions or denominated in multinational currency units such as the
European Currency Unit ("ECU"). Securities of issuers within a given country may
be denominated in the currency of another country. See "Special Risk
Considerations--Foreign Securities--Additional Risks Applicable to Investment in
Eastern Europe."

Under current market conditions, the Sub-Adviser expects that the
dollar-weighted average maturity of Bond Fund's investments will not exceed 15
years. Generally, Bond Fund's average maturity will be shorter when interest
rates worldwide or in a particular country are expected to rise, and longer when
interest rates are expected to fall. The Fund may use various techniques to
shorten or lengthen the dollar-weighted average maturity of its portfolio
including transactions in futures and options on futures, interest rate swaps
and short sales.

Bond Fund may purchase and sell forward foreign exchange contracts for
hedging purposes and for purposes of seeking to enhance portfolio returns and
managing portfolio risk more efficiently. See "Special Investment
Methods--Foreign Currency Transactions." The Sub-Adviser believes that active
currency management can enhance portfolio returns through opportunities arising
from interest rate differentials between currencies and/or changes in value
between currencies. Moreover, the Sub-Adviser believes active currency
management can be employed as an overall portfolio risk management tool. For
example, in its view, foreign currency management can provide overall portfolio
risk

16
<PAGE>
diversification when combined with a portfolio of foreign securities and the
market risks of investing in specific foreign markets can at times be reduced by
currency strategies which may not involve the currency in which the foreign
security is denominated. Use of foreign currency futures, options and forward
contracts will be subject to applicable limitations and requirements of the
Securities and Exchange Commission (the "SEC") and the Commodity Futures Trading
Commission (the "CFTC"). See "Special Risk Considerations--Risks of Transactions
in Futures Contracts and Options."

For temporary defensive purposes, the Fund may invest all or a portion of
its assets in U.S. dollar-or foreign currency-denominated cash or foreign or
domestic high-quality money market instruments.

MONEY MARKET FUND

Money Market Fund has an investment objective of maximizing current income
consistent with preservation of capital and maintenance of liquidity. Money
Market Fund will attempt to achieve its investment objective by investing in a
combination of money market securities described below and it may invest in
repurchase agreements and enter into reverse repurchase agreements (in an amount
not to exceed 5% of its total assets) with respect to such securities. See
"Special Investment Methods--Repurchase Agreements" and "--Reverse Repurchase
Agreements."

The Fund may invest in U.S. Government Securities. U.S. Government
Securities are obligations issued or guaranteed as to principal and interest by
the U.S. Government or one of its agencies or instrumentalities. These
securities include direct obligations of the U.S. Treasury, such as U.S.
Treasury bills, notes and bonds, and obligations of U.S. Government agencies or
instrumentalities, including, but not limited to, Federal Home Loan Banks, the
Farmers Home Administration, Federal Farm Credit Banks, the Federal National
Mortgage Association, the Government National Mortgage Association, the Federal
Home Loan Mortgage Corporation, the Financing Corporation and the Student Loan
Marketing Association. Certain U.S. Government Securities, such as Government
National Mortgage Association mortgage-backed securities, are backed by the full
faith and credit of the U.S. Treasury, while others, such as those of the
Federal Home Loan Banks, are backed by the right of the issuer to borrow from
the U.S. Treasury. In addition, other obligations, such as those issued by the
Federal National Mortgage Association, are backed by the discretionary authority
of the U.S. Government to purchase certain obligations of the agency or
instrumentality. Finally, obligations of other agencies or instrumentalities,
such as those of the Federal Home Loan Mortgage Corporation and the Student Loan
Marketing Association, are backed solely by the credit of the agency or
instrumentality issuing the obligations.

The Fund may also invest in other Eligible Securities. In addition to U.S.
Government Securities, Eligible Securities include securities rated in one of
the two highest short-term rating categories by at least two nationally
recognized statistical rating organizations ("NRSROs"). NRSROs currently include
Standard & Poor's Ratings Group, Moody's Investors Service, Inc., Duff and
Phelps, Inc., Fitch Investors Service, Inc., Thomson Bankwatch and, with respect
to debt issued by banks, bank holding companies, broker-dealers, broker-dealers'
parent companies, and bank-sponsored debt, IBCA Limited and its affiliate, IBCA,
Inc. See "Appendix" attached hereto for an explanation of the ratings issued by
these organizations. Eligible Securities also include (a) securities that at the
time of issuance were long-term securities but that have remaining maturities of
397 calendar days or less, provided the issuer has comparable outstanding
short-term debt rated in one of the two highest rating categories, and (b)
unrated securities of comparable quality, as determined by the Manager and the
Sub-Adviser pursuant to written guidelines and procedures adopted by the
Company's Board of Directors.

17
<PAGE>
The types of Eligible Securities in which the Fund may invest include bonds,
notes and commercial paper (including variable amount master demand notes) of
domestic issuers, certificates of deposits, bank notes, time deposits and
bankers' acceptances issued by domestic banks. Commercial paper is a short term
debt obligation of a domestic issuer. Variable amount master demand notes are
demand obligations that permit the investment of fluctuating amounts at varying
market rates of interest pursuant to arrangements between the issuer and a
commercial bank acting as agent for the payees of such notes, whereby both
parties have the right to vary the amount of the outstanding indebtedness on the
notes. Certificates of deposit are certificates evidencing the obligation of a
bank to repay funds deposited with it for a specified period of time. Time
deposits are non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Time deposits are not
transferable and are therefore illiquid prior to their maturity. The Fund will
not invest more than 10% of its net assets in time deposits of over 7 days and
other illiquid securities. See "Special Investment Methods--Illiquid
Securities." Bankers' acceptances are credit instruments evidencing the
obligation of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face amount
of the instrument upon maturity.

Money Market Fund may purchase from banks and securities dealers
participation interests in securities in which the Fund may invest. A
participation interest gives the Fund an undivided interest in the security in
the proportion that the Fund's participation interest bears to the total
principal amount of the security. These instruments may have fixed, floating or
variable rates of interest, with remaining maturities of one year or less. If
the participation interest is unrated, or has been given a rating below that
which is permissible for purchase by the Fund, the participation interest will
be backed by an irrevocable letter of credit or guarantee of a bank, or the
payment obligation otherwise will be collateralized by U.S. Government
Securities, or, in the case of unrated participation interests, the Sub-Adviser
must have determined that the instrument is of comparable quality to those
instruments in which the Fund may invest. For certain participation interests,
the Fund will have the right to demand payment, on not more than seven days'
notice, for all or any part of the Fund's participation interest in the
security, plus accrued interest. As to these instruments, the Fund intends to
exercise its right to demand payment only upon a default under the terms of the
security, as needed to provide liquidity to meet redemptions, or to maintain or
improve the quality of its investment portfolio. Participation interests that do
not have this demand feature are considered illiquid securities and subject to
the 10% limitation discussed below. See "Special Investment Methods--Illiquid
Securities."

RULE 2A-7. The Fund is subject to the investment restrictions of Rule 2a-7
under the Investment Company Act of 1940, as amended (the "1940 Act") in
addition to its other policies and restrictions discussed below. Rule 2a-7
requires that the Fund invests exclusively in securities that mature within 397
days and maintain an average weighted maturity of not more than 90 days. Rule
2a-7 also requires that all investments by the Fund be limited to U.S.
dollar-denominated investments that: (1) present "minimal credit risks," and (2)
are at the time of acquisition "Eligible Securities." It is the responsibility
of the Manager and the Sub-Adviser to determine that the Fund's investments
present only "minimal credit risks" and are Eligible Securities; such
determination will be made pursuant to written guidelines and procedures adopted
by the Company's Board of Directors.

Under Rule 2a-7, 95% of the assets of the Fund must be invested in Eligible
Securities that are deemed First Tier Securities, which include, among others,
securities rated by at least two NRSROs in the highest category for short-term
debt obligations. In addition, the Fund may not (1) invest (with

18
<PAGE>
certain limited exemptions) more than 5% of its total assets in securities of a
single issuer, other than U.S. Government Securities, (2) invest more than 5% of
its total assets in Second Tier Securities (I.E., Eligible Securities that are
not First Tier Securities) and (3) invest more than the greater of 1% of the
Fund's total assets or $1,000,000 in Second Tier Securities of a single issuer.

OTHER ELIGIBLE INVESTMENTS

DEPOSITORY RECEIPTS AND DEPOSITORY SHARES

Each Fund (other than Money Market Fund) may invest in American Depository
Receipts ("ADRs") or other similar securities, such as American Depository
Shares, convertible into securities of foreign issuers. These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs are receipts typically issued by a U.S. bank or
trust company evidencing ownership of the underlying securities. Generally,
ADRs, in registered form, are designed for use in U.S. securities markets. As a
result of the absence of established securities markets and publicly owned
corporations in certain foreign countries as well as restrictions on direct
investment by foreign entities, the Funds may be able to invest in such
countries solely or primarily through ADRs or similar securities and government
approved investment vehicles. No more than 5% of each Fund's assets (other than
Latin American Value Fund) will be invested in ADRs sponsored by persons other
than the underlying issuers. Latin American Value Fund may invest up to 20% of
its assets in these unsponsored ADRs. Issuers of the stock of such unsponsored
ADRs are not obligated to disclose material information in the United States
and, therefore, there may not be a correlation between such information and the
market value of such ADRs.

The Funds may also invest in European Depository Receipts ("EDRs") which are
typically issued in bearer form and are designed for use in the European
securities markets.

INVESTMENT IN OTHER INVESTMENT COMPANIES

Under the 1940 Act, each of the Funds generally may invest up to 10% of its
total assets in the aggregate in shares of other investment companies and up to
5% of its total assets in any one investment company, as long as that investment
does not represent more than 3% of the voting stock of the acquired investment
company at the time such shares are purchased. Investment in other investment
companies or investment vehicles may be the sole or most practical means by
which the Funds can invest in certain countries. Such investments may involve
the payment of substantial premiums above the value of such issuers' portfolio
securities, and are subject to limitations under the 1940 Act and market
availability. There can be no assurance that investment companies or other
investment vehicles for investing in certain countries will be available for
investment. In addition, special tax considerations may apply. The Funds do not
intend to invest in such investment companies or vehicles unless, in the
judgment of the Manager and Sub-Adviser, the potential benefits of such
investment justify the payment of any applicable premium or sales charge. As a
shareholder in an investment company, each of the Funds would bear its ratable
share of the applicable investment company's expenses, including its advisory
and administrative fees. At the same time, the Funds would continue to pay their
own management and advisory fees and other expenses. See "Special Risk
Considerations--Foreign Securities--Investment and Repatriation Restrictions."

SUPRANATIONAL ORGANIZATIONS

Each of the Funds (other than Money Market Fund) may invest in debt
securities issued or guaranteed by supranational organizations. Such
organizations are entities designated or supported by a government or government
entity to promote economic development and include, among others,

19
<PAGE>
the Asian Development Bank, the European Coal and Steel Community, the European
Economic Community and the World Bank. These organizations do not have taxing
authority and are dependent upon their members for payments of interest and
principal. Each supranational entity's lending activities are limited to a
percentage of its total capital (including "callable capital" contributed by
members at the entity's call), reserves and net income. Securities issued by
supranational organizations may be denominated in U.S. dollars or in foreign
currencies.

FOREIGN INDEX LINKED INSTRUMENTS

Each of the Funds (other than Money Market Fund) may, subject to compliance
with its respective quality limitations applicable to its investment in debt
securities, invest up to 10% of its total assets in instruments issued by the
U.S. or a foreign government or by private issuers that return principal and/or
pay interest to investors in amounts which derive a portion of their return
based on the level of a particular foreign index ("Foreign Index Linked
Instruments"). A foreign index may be based upon the exchange rate of a
particular currency or currencies or the differential between two currencies, or
the level of interest rates in a particular country or countries or the
differential in interest rates between particular countries. In the case of
Foreign Index Linked Instruments linking the principal amount to a foreign
index, the amount of principal payable by the issuer at maturity will increase
or decrease in response to changes in the level of the foreign index during the
term of the Foreign Index Linked Instruments. In the case of Foreign Index
Linked Instruments linking the interest component to a foreign index, the amount
of interest payable will adjust periodically in response to changes in the level
of the foreign index during the term of the Foreign Index Linked Instrument.
Foreign Index Linked Instruments may be issued by a U.S. or foreign governmental
agency or instrumentality or by a private issuer.

MORTGAGE-BACKED SECURITIES

Each of the Funds may invest in securities which represent interests in
pools of mortgages ("Mortgage-Backed Securities"). These securities provide
investors with payments consisting of both interest and principal as the
mortgages in the underlying mortgage pools are repaid. Such securities may be
issued or guaranteed by governmental issuers or by private issuers. Unscheduled
or early payments on the underlying mortgages may shorten these securities'
effective maturities and lower their total returns. Because prepayments of
principal generally occur when interest rates are declining, it is likely that a
Fund will have to reinvest the proceeds of prepayments at lower interest rates
than those at which the assets were previously invested. The value of
Mortgage-Backed Securities may change due to changes in the market's perception
of issuers. In addition, the mortgage securities market in general may be
adversely affected by regulatory or tax changes.

ADJUSTABLE RATE MORTGAGE SECURITIES. Each of the Funds may also invest in
adjustable rate mortgage securities ("ARMS") which are issued by agencies or
instrumentalities of the U.S. Government. ARMS are pass-through mortgage
securities collateralized by mortgages with interest rates that are adjusted
from time to time. The adjustments usually are determined in accordance with a
predetermined interest rate index and may be subject to certain limits. While
the values of ARMS, like other debt securities, generally vary inversely with
changes in market interest rates (increasing in value during periods of
declining interest rates and decreasing in value during periods of increasing
interest rates), the values of ARMS should generally be more resistant to price
swings than other debt securities because the interest rates of ARMS move with
market interest rates. The adjustable rate feature of ARMS will not, however,
eliminate fluctuations in the prices of ARMS, particularly during periods of
extreme fluctuations in interest rates. Also, since many adjustable rate
mortgages only

20
<PAGE>
reset on an annual basis, it can be expected that the prices of ARMS will
fluctuate to the extent that changes in prevailing interest rates are not
immediately reflected in the interest rates payable on the underlying adjustable
rate mortgages.

CMOS. Each of the Funds may invest in collateralized mortgage obligations
("CMOs"). CMOs are securities collateralized by mortgages or Mortgage-Backed
Securities. CMOs are issued in classes and series that have different maturities
and often are retired in sequence although certain classes of CMOs may have
priority over others with respect to the receipt of prepayments on the
mortgages. Therefore, depending on the type of CMOs in which a Fund invests, the
investment may be subject to a greater or lesser risk of prepayment than other
types of mortgage-related securities. CMOs are issued by government or
non-government entities such as banks, mortgage lenders, or other financial
institutions.

In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on collateral underlying a CMO may cause it to be retired
substantially earlier than the stated maturities or final distribution dates.
The principal and interest on the underlying mortgages may be allocated among
the several classes of a series of a CMO in many ways. One or more tranches of a
CMO may have coupon rates which reset periodically at a specified increment over
an index such as the London Interbank Offered Rate ("LIBOR"). These floating
rate CMOs are typically issued with lifetime caps on the coupon rate thereon.
Inverse or reverse floating CMOs ("inverse floaters") constitute a tranche of a
CMO with a coupon rate that moves in the reverse direction to an applicable
index such as LIBOR. Accordingly, the coupon rate thereon will increase as
interest rates decrease. Like most other fixed-income securities, the value of
inverse floaters will decrease as interest rates increase. Inverse floaters,
however, exhibit greater price volatility than the majority of Mortgage-Backed
Securities. Coupon rates on inverse floaters typically change at a multiple of
the changes in the relevant index rate. Thus, any rise in the index rate (as a
consequence of an increase in interest rates) causes a correspondingly greater
drop in the coupon rate of an inverse floater while any drop in the index rate
causes a correspondingly greater increase in the coupon of an inverse floater.
Some inverse floaters also exhibit extreme sensitivity to changes in
prepayments. As a result, the yield to maturity of an inverse floater is
sensitive not only to changes in interest rates but also to changes in
prepayment rates on the related underlying mortgage assets.

STRIPPED MORTGAGE-BACKED SECURITIES. Each of the Funds (other than Money
Market Fund) may also invest in Stripped Mortgage-Backed Securities ("SMBS").
SMBS are derivative multi-class mortgage securities which may entitle the
holders thereof to receive distributions consisting solely or primarily of all
or a portion of the interest (the "IO class") or the principal (the "PO class")
on the underlying pool of mortgage loans or Mortgage-Backed Securities. The cash
flows and yields on IO and PO classes are extremely sensitive to the rate of
principal payments (including prepayments) on the related underlying pool of
mortgage loans or Mortgage-Backed Securities. For example, a rapid or slow rate
of principal payments may have a material adverse effect on the yield to
maturity of IOs or POs, respectively. If the underlying mortgage assets
experience greater than anticipated prepayments of principal, an investor in an
IO may incur substantial losses. Conversely, if the underlying mortgage assets
experience slower than anticipated prepayments of principal, the return on a PO
class will be adversely affected more severely than would be the case with a
traditional Mortgage-Backed Security. Under the Internal Revenue Code of 1986,
as amended, SMBS generate taxable income from the current accrual of original
issue discount, without a corresponding distribution of cash to the Funds. In
addition, the Staff of the Division of Investment Management of the SEC
considers privately issued SMBS to be illiquid securities.

21
<PAGE>
ASSET-BACKED SECURITIES

Each of the Funds may invest in asset-backed securities. Such securities
represent interests in pools of consumer loans (generally unrelated to mortgage
loans). Interest and principal payments ultimately depend on payment of the
underlying loans by individuals, although the securities may be supported by
letters of credit or other credit enhancements. The value of asset-backed
securities may also depend on the creditworthiness of the servicing agent for
the loan pool, the originator of the loans, or the financial institution
providing the credit enhancement.

BRADY BONDS

Each of the Funds (other than Money Market Fund) may invest in Brady Bonds
and other sovereign debt securities of countries that have restructured or are
in the process of restructuring sovereign debt pursuant to the Brady Plan. Brady
Bonds are debt securities issued under the framework of the Brady Plan, an
initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989
as a mechanism for debtor nations to restructure their outstanding external
indebtedness. The Brady Plan contemplates, among other things, the adoption by
debtor nations of certain economic reforms and the exchange of commercial bank
debt for newly issued bonds. In restructuring its external debt under the Brady
Plan framework, a debtor nation negotiates with its existing bank lenders as
well as the World Bank and/or the International Monetary Fund (the "IMF"). The
World Bank and/or the IMF support the restructuring by providing funds pursuant
to loan agreements or other arrangements which enable the debtor nation to
collateralize the new Brady Bonds or to replenish reserves used to reduce
outstanding bank debt. Under these loan agreements or other arrangements with
the World Bank or the IMF, debtor nations have been required to agree to the
implementation of certain domestic monetary and fiscal reforms. The Brady Plan
only sets forth general guiding principles for economic reform and debt
reduction, emphasizing that solutions must be negotiated on a case-by-case basis
between debtor nations and their creditors.

Brady Bonds have been issued only recently, and accordingly do not have a
long payment history. Agreements implemented under the Brady Plan to date are
designed to achieve debt and debt-service reduction through specific options
negotiated by a debtor nation with its creditors. As a result, the financial
packages offered by each country differ. The types of options have included the
exchange of outstanding commercial bank debt for bonds issued at 100% of face
value of such debt, bonds issued at a discount of face value of such debt, and
bonds bearing an interest rate which increases over time and the advancement of
the new money for bonds. The principal of certain Brady Bonds has been
collateralized by U.S. Treasury zero coupon bonds with a maturity equal to the
final maturity of such Brady Bonds. Collateral purchases are financed by the
IMF, the World Bank and the debtor nations' reserves. Interest payments may also
be collateralized in part in various ways.

FOREIGN LOAN PARTICIPATIONS AND ASSIGNMENTS

Each of the Funds (other than Money Market Fund) may invest in fixed and
floating rate loans ("Loans") arranged through private negotiations between a
foreign sovereign entity and one or more financial institutions ("Lenders"). The
Funds (other than Money Market Fund) may invest in such Loans in the form of
participations ("Participations") in Loans and assignments ("Assignments") of
all or a portion of Loans from third parties. Participations typically will
result in the Funds having a contractual relationship only with the Lender, not
with the borrower. The Funds will have the right to receive payments of
principal, interest and any fee to which they are entitled only from the Lender
selling the Participation and only upon receipt by the Lender of the payments
from the borrower. In

22
<PAGE>
connection with purchasing Participations, the Funds generally will have no
right to enforce compliance by the borrower with the terms of the loan agreement
relating to the Loan, nor any rights or set-off against the borrower, and the
Funds may not benefit directly from any collateral supporting the Loan in which
they have purchased the Participations. As a result, the Funds will assume the
credit risk of both the borrower and the Lender that is selling the
Participation. In the event of the insolvency of the Lender selling a
Participation, a Fund may be treated as a general creditor of the Lender and may
not benefit from any set-off between the Lender and the borrower. A Fund will
acquire a Participation only if the Lender interpositioned between the Fund and
the borrower is determined by the Sub-Adviser to be creditworthy. When the Funds
purchase Assignments from Lenders, the Funds will acquire direct rights against
the borrower on the Loan, except that under certain circumstances such rights
may be more limited than those held by the assigning Lender.

The Funds may have difficulty disposing of Assignments and Participations.
Because the market for such instruments is not highly liquid, the Funds
anticipate that such instruments could be sold only to a limited number of
institutional investors. The lack of a highly liquid secondary market will have
an adverse impact on the value of such instruments and on the Funds' ability to
dispose of particular Assignments or Participations in response to a specific
economic event, such as deterioration in the creditworthiness of the borrower.
Based upon the current position of the Staff of the SEC, the Funds will treat
investments in Assignments and Participations as illiquid for purposes of the
limitations on investments in illiquid securities. The Funds may revise this
policy based on any future change in the SEC's position. See "Special Investment
Methods--Illiquid Securities."

SPECIAL INVESTMENT METHODS

For risks associated with the following investment methods, see "Special
Risk Considerations."

FOREIGN CURRENCY TRANSACTIONS

Each of the Funds (other than Money Market Fund) may engage in currency
exchange transactions in connection with the purchase and sale of their
investments. Currency exchange transactions are necessary to enable the Funds to
purchase securities denominated in a foreign currency and to convert interest
and dividend payments or sales proceeds paid in a foreign currency into U.S.
dollars or into another currency.

The Funds may engage in "transaction hedging" to protect against a change in
foreign currency exchange rate between the date on which the Funds contract to
purchase or sell the security and the settlement date, or to "lock in" the U.S.
dollar equivalent (or other foreign currency equivalent to the extent needed for
purposes of purchasing securities) of a dividend or interest payment in a
foreign currency. For that purpose, the Funds may enter into forward foreign
currency exchange contracts ("Forward Contracts"). A Forward Contract is a
negotiated agreement to exchange currency at a future time at a rate or rates
that may be higher or lower than the spot rate.

For transaction hedging purposes, the Funds may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives the Funds the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives the Funds the
right to sell a currency at an exercise price until the expiration of the
option. A call option on a futures contract gives the Funds the right to assume
a long position in the futures contract until the expiration of the option. A
call option on currency gives the Funds the right to purchase a currency at the
exercise price until the expiration of the option.

23
<PAGE>
The Funds may enter into Forward Contracts or foreign currency options or
futures to protect against a decline in the value relative to the U.S. dollar of
the currencies in which their portfolio securities are denominated or quoted (or
an increase in the value of currency for securities which the Funds intend to
buy when they hold cash reserves and short-term investments) ("position
hedging"). For position hedging purposes, the Funds may enter into a forward
contract to sell, for a fixed amount of U.S. dollars or other currency, an
amount of foreign currency approximating the value of some or all of the
portfolio securities to be hedged. In some cases, the Funds may enter into a
forward contract to sell a currency other than the currency in which the
Securities to be hedged are denominated ("cross-hedging"). The Funds will use
cross-hedging, when it is determined that the foreign currency in which the
portfolio securities are denominated have insufficient liquidity or are trading
at a discount as compared with some other foreign currency with which it tends
to move in tandem.

Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Funds own or intend to purchase or
sell. They simply establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in the value of
such currency. In addition, currency transactions involve transaction costs. The
Funds may write covered call options on foreign currencies to offset some of the
costs of currency transactions. The Funds' ability to engage in currency and
related option transactions may be limited by tax considerations. See
"Taxation-- Consequences of Certain Investments" in the Statement of Additional
Information.

As noted above Bond Fund may enter into currency transactions other than
those described above with a view towards enhancing portfolio returns and
managing portfolio currency risk more efficiently. Such transactions may cause
the Fund to have a larger exposure to the movement of particular currencies than
would be the case if such techniques were not utilized. Therefore, if the
Sub-Adviser is incorrect in its assessment of currency rate movements, the Fund
may be adversely affected by such transactions. See "Special Risk
Considerations--Risks of Transactions in Futures Contracts and Options."

REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements with respect to debt
securities it holds. A repurchase agreement involves the purchase by a Fund of
securities with the condition that after a stated period of time the original
seller (a member bank of the Federal Reserve System or a recognized domestic
securities dealer) will buy back the same securities ("collateral") at a
predetermined price or yield. Repurchase agreements involve certain risks not
associated with direct investments in securities. In the event the original
seller defaults on its obligation to repurchase, as a result of its bankruptcy
or otherwise, the applicable Fund will seek to sell the collateral, which action
could involve costs or delays. In such case, the Fund's ability to dispose of
the collateral to recover such investment may be restricted or delayed. While
collateral will at all times be maintained in an amount equal to the repurchase
price under the agreement (including accrued interest due thereunder), to the
extent proceeds from the sale of collateral were less than the repurchase price,
the Fund would suffer a loss. The Company's Board of Directors has established
procedures, which are periodically reviewed by the Board, pursuant to which the
Manager and the Sub-Advisers will monitor the creditworthiness of the dealers
and banks with which the Funds enter into repurchase agreement transactions.

24
<PAGE>
REVERSE REPURCHASE AGREEMENTS

Each Fund may engage in "reverse repurchase agreements" with banks and
securities dealers. Reverse repurchase agreements are ordinary repurchase
agreements in which the Fund is the seller of, rather than the investor in,
securities and agrees to repurchase them at an agreed upon time and price. Use
of a reverse repurchase agreement may be preferable to a regular sale and later
repurchase of the securities because it avoids certain market risks and
transaction costs. Because certain of the incidents of ownership of the security
are retained by the Fund, reverse repurchase agreements are considered a form of
borrowing by the Fund from the buyer, collateralized by the security. At the
time the Fund enters into a reverse repurchase agreement, cash, U.S. Government
securities or other liquid high-grade debt obligations having a value sufficient
to make payments for the securities to be repurchased will be segregated, and
will be maintained throughout the period of the obligation. Reverse repurchase
agreements will be used as a means of borrowing for investment purposes. This
speculative technique is referred to as leveraging. Leveraging may exaggerate
the effect on net asset value of any increase or decrease in the market value of
the Fund's portfolio. Money borrowed for leveraging will be subject to interest
costs which may or may not be recovered by income from or appreciation of the
securities purchased. No more than 25% of the total assets of each of the Funds
(other than Money Market Fund) will be subject to reverse repurchase agreements;
no more than 5% of the total assets of Money Market Fund will be subject to
reverse repurchase agreements.

BORROWING

Each of the Funds may borrow money from banks for temporary or emergency
purposes in an amount up to 10% of the value of the Fund's total assets. With
respect to each Fund, reverse repurchase agreements are not included in this
limitation. See "Special Investment Methods-- Reverse Repurchase Agreements" in
the preceding paragraph. Interest paid by a Fund on borrowed funds would
decrease the net earnings of that Fund. None of the Funds will purchase
portfolio securities while outstanding borrowings (other than reverse repurchase
agreements) exceed 5% of the value of the Fund's total assets. Each of the Funds
may mortgage, pledge or hypothecate its assets in an amount not exceeding 10% of
the value of its total assets to secure temporary or emergency borrowing. The
policies set forth in this paragraph are fundamental and may not be changed with
respect to a Fund without the approval of a majority of that Fund's shares.

OPTIONS AND FUTURES TRANSACTIONS

Each Fund (other than Money Market Fund) may buy and sell put and call
options and futures contracts and options on futures contracts with respect to
financial instruments, stock and interest rate indexes and foreign currencies.
Any options sold (i.e., written) by a Fund must be "covered." Futures and
options will be used to facilitate allocation of a Fund's investment among asset
classes, for speculative purposes to generate income or to hedge against
declines in securities prices or increases in prices of securities proposed to
be purchased. Different uses of futures and options have different risk and
return characteristics. Generally, selling futures contracts, purchasing put
options and writing call options are strategies designed to protect against
falling securities prices and can limit potential gains if prices rise.
Purchasing futures contracts, purchasing call options and writing put options
are strategies whose returns tend to rise and fall together with securities
prices and can cause losses if prices fall. If securities prices remain
unchanged over time, option writing strategies tend to be profitable, while
option buying strategies tend to decline in value.

Options purchased and written by the Funds may be exchange traded or may be
options entered into by the Funds in negotiated transactions with investment
dealers and other financial institutions ("OTC Options") (such as commercial
banks or savings and loan associations) deemed creditworthy

25
<PAGE>
by the Manager. OTC Options are illiquid and it may not be possible for the
Funds to dispose of options they have purchased or terminate their obligations
under an option they have written at a time when the Manager and Sub-Adviser
believe it would be advantageous to do so.

Futures contracts and options on futures contracts will be entered into on
domestic and foreign exchanges and boards of trade, subject to applicable
regulations of the CFTC. These transactions may be entered into for bona fide
hedging and other permissible risk management purposes.

In connection with transactions in futures contracts and writing related
options, each Fund will be required to deposit as "initial margin" a specified
amount of cash or short-term U.S. Government securities. The initial margin
required for a futures contract is set by the exchange on which the contract is
traded. Thereafter, subsequent payments (referred to as "variation margin") are
made to and from the broker to reflect changes in the value of the futures
contract. No Fund will purchase or sell futures contracts or related options if,
as a result, the sum of the initial margin deposit on that Fund's existing
futures and related options positions and premiums paid for options on futures
contracts entered into for other than bona fide hedging purposes would exceed 5%
of the Fund's assets. With respect to futures and options on futures contracts,
segregated accounts will be maintained consisting of cash or high grade liquid
U.S. or foreign debt securities with a value (marked to market daily) equal to
the dollar amount of the Fund's purchase or sale obligation under such
contracts.

SWAP TRANSACTIONS

Each of the Funds (other than Money Market Fund) may enter into interest
rate swaps and purchase or sell interest rate caps and floors. Such transactions
will be entered into primarily to preserve a return or spread on a particular
investment or portion of its portfolio or as a duration management technique.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed-rate payments. The purchase of an interest rate cap
entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate cap, to receive payments of interest on a
contractually based principal amount from the party selling such interest rate
cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on a contractually based principal amount from the
party selling such interest rate floor.

A Fund will usually enter into interest rate swaps on a net basis, i.e., the
two payment streams are netted out, with the Fund receiving or paying, as the
case may be, only the net amount of the two payments. The net amount of the
excess, if any, of the Fund's obligations over its entitlements with respect to
each interest rate swap will be accrued on a daily basis and an amount of cash
or high-quality liquid debt securities having an aggregate net asset value at
least equal to the accrued excess will be maintained in a segregated account by
the Fund's custodian. If the Fund enters into an interest rate swap on other
than a net basis, the Fund will maintain a segregated account in the full
amount, accrued on a daily basis, of the Fund's obligations with respect to the
swap. To the extent the Fund sells (i.e., writes) caps and floors, that Fund's
sub-custodian will maintain in a segregated account cash or high-quality liquid
debt securities having an aggregate net asset value at least equal to the full
amount, accrued on a daily basis, of the Fund's obligations with respect to any
caps or floors.

The Funds will not enter into any interest rate swap, interest rate cap or
floor transaction unless the unsecured senior debt or the claims paying ability
of the other party thereto is rated at least A by S&P. The Manager and the
applicable Sub-Advisers will monitor the creditworthiness of contra-

26
<PAGE>
parties on an ongoing basis. If there is a default by the other party to such a
transaction, the applicable Fund will have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. The
Manager and Sub-Advisers have determined that, as a result, the swap market has
become relatively liquid. Caps and floors are more recent innovations for which
standardized documentation has not yet been developed and, accordingly, they are
less liquid than swaps.

There is no limit on the amount of interest rate swap transactions that may
be entered into by the Funds. Interest rate swap transactions do not involve the
delivery of securities or other underlying assets or principal. Accordingly, the
risk of loss with respect to interest rate swaps is limited to the net amount of
interest payments that the Fund is contractually obligated to make. If the other
party to an interest rate swap defaults, the Fund's risk of loss consists of the
net amount of interest payments that the Fund contractually is entitled to
receive. The aggregate purchase price of caps and floors held by a Fund may not
exceed 5% of the Fund's total assets. The Funds may sell (i.e., write) caps and
floors without limitation, subject to the segregated account requirement.

WHEN-ISSUED SECURITIES

Each of the Funds, may purchase securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. When such
transactions are negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. Normally, the settlement date occurs
within two months after the transaction, but delayed settlements beyond two
months may be negotiated. During the period between a commitment and settlement,
no payment is made for the securities purchased by the purchaser and, thus, no
interest accrues to the purchaser from the transaction. If a Fund chooses to
dispose of the right to acquire a when-issued security prior to its acquisition
or dispose of its right to deliver or receive against a forward commitment, it
can incur a gain or loss. The use of when-issued transactions and forward
commitments enables the Funds to hedge against anticipated changes in interest
rates and prices. The Funds may also enter into such transactions to generate
incremental income. In some instances, the third-party seller of when-issued or
forward commitment securities may determine prior to the settlement date that it
will be unable to meet its existing transaction commitments without borrowing
securities. If advantageous from a yield perspective, a Fund may, in that event,
agree to resell its purchase commitment to the third-party seller at the current
market price on the date of sale and concurrently enter into another purchase
commitment for such securities at a later date. As an inducement for a Fund to
"roll over" its purchase commitment, such Fund may receive a negotiated fee. The
purchase of securities on a when-issued or forward commitment basis exposes the
Funds to risk because the securities may decrease in value prior to their
delivery. Purchasing securities on a when-issued or forward commitment basis
involves the additional risk that the return available in the market when the
delivery takes place will be higher than that obtained in the transaction
itself. These risks could result in an increase in the volatility of a Fund's
net asset value. A segregated account consisting of cash or high-grade liquid
U.S. or foreign debt securities, equal to the value of the when-issued or
forward commitment securities will be established and maintained with the
custodian and will be marked to market daily. The purchase of securities with a
settlement date occurring on the Public Securities Association approved
settlement date is considered a normal delivery and not a "when-issued" or
"forward commitment" purchase.

27
<PAGE>
ZERO COUPON, DEFERRED INTEREST AND PAYMENT IN KIND BONDS

The Funds (other than Money Market Fund) may invest in zero coupon bonds,
deferred interest bonds and bonds on which the interest is payable in kind ("PIK
Bonds"). Zero coupon and deferred interest bonds are debt obligations which are
issued at a significant discount from face value. The discount approximates the
total amount of interest the bonds will accrue and compound over the period
until maturity or the first interest accrual date at a rate of interest
reflecting the market rate of the security at the time of issuance. While zero
coupon bonds do not require the periodic payment of interest, deferred interest
bonds provide for a period of delay before the regular payment of interest
begins. Although this period of delay is different for each deferred interest
bond, a typical period is approximately one-third of the bond's term to
maturity. PIK Bonds are debt obligations which provide that the issuer thereof
may, at its option, pay interest on such bonds in cash or in the form of
additional debt obligations. Such investments benefit the issuer by mitigating
its need for cash to meet debt service, but also require a higher rate of return
to attract investors who are willing to defer receipt of such cash. The Funds
will accrue income on such investments for tax and accounting purposes, in
accordance with applicable law, which income is distributable to shareholders.
Because no cash is received at the time such income is accrued, the Funds may be
required to liquidate portfolio securities to satisfy their distribution
obligations.

Zero coupon securities, PIK Bonds and debt securities acquired at a discount
tend to be subject to greater price fluctuations in response to changes in
interest rates than are ordinary interest-paying debt securities with similar
maturities. The value of zero coupon securities and debt securities acquired at
a discount appreciates more during periods of declining interest rates and
depreciates more during periods of rising interest rates. Under current federal
income tax law, the Funds are required to accrue as income each year the value
of securities received in respect of pay-in-kind bonds and a portion of the
original issue discount with respect to zero coupon securities and other
securities issued at a discount to the stated redemption price. In addition, the
Funds will elect similar treatment for any market discount with respect to debt
securities acquired at a discount. Accordingly, the Funds may have to dispose of
portfolio securities under disadvantageous circumstances in order to generate
current cash to satisfy certain distribution requirements.

SHORT SALES

Bond Fund may make short sales, which are transactions in which the Fund
sells a security it does not own in anticipation of a decline in the market
value of that security. To complete such a transaction, the Fund must borrow the
security to make delivery to the buyer. The Fund then is obligated to replace
the security borrowed by purchasing it at the market price at the time of
replacement. The price at such time may be more or less than the price at which
the security was sold by the Fund. Until the security is replaced, the Fund is
required to pay to the lender any dividends or interest which accrue during the
period of the loan. To borrow the security, the Fund also may be required to pay
a premium, which would increase the cost of the securities sold. The proceeds of
the short sale will be retained by the broker, to the extent necessary to meet
margin requirements, until the short position is closed out.

The Fund will incur a loss as a result of the short sale if the price of the
security increases between the date of the short sale and the date on which the
Fund replaces the borrowed security. The Fund will realize a gain if the
security declines in price between those dates. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any premium,
dividends or interest the Fund may be required to pay in connection with the
short sale.

28
<PAGE>
No securities will be sold short if, after effect is given to any such short
sale, the total market value of all securities sold short would exceed 5% of the
value of the Fund's total assets. In addition, the value of the securities of
any one issuer in which the Fund is short will not exceed the lesser of 2% of
the value of the Fund's net assets or 2% of the securities of any class of any
issuer. During the period of time the short position is open, the Fund will
establish a segregated account maintained by the Fund's custodian in an amount
of cash, U.S. Government Securities or other high-grade liquid debt obligations
equal to the difference between the market value of the securities sold short at
the time they were sold short and any cash or U.S. Government Securities
required to be deposited as collateral with the broker in connection with the
short sale (not including the proceeds from the short sale), marked to market
daily.

In addition to the short sales discussed above, Bond Fund may also make
short sales "against the box" of securities they own or have the right to obtain
at no added cost which are identical to those sold short. Not more than 50% of
the Fund's total assets (determined at the time of the short sale) may be held
as collateral for such sales. Such sales will be made for the purpose of hedging
against an anticipated decline in the underlying securities.

ILLIQUID SECURITIES

Each of the Funds (other than Money Market Fund) may invest up to 15% of its
net assets in illiquid securities; Money Market Fund may invest up to 10% of its
net assets in illiquid securities. Each Fund will treat repurchase agreements
and time deposits with a term of more than seven days, securities that are
subject to repatriation restrictions for more than seven days, any securities
issued in connection with debt conversion programs that are restricted as to
remittance of invested capital or profits, purchased OTC Options, the cover for
any options a Fund has written and foreign index linked instruments, as illiquid
securities for purposes of this limitation.

The sale of illiquid securities often requires more time and results in
higher brokerage charges or dealer discounts and other selling expenses than
does the sale of securities eligible for trading on national securities
exchanges or in the over-the-counter markets. A Fund may be restricted in its
ability to sell such securities at a time when the Manager and Sub-Adviser deem
it advisable to do so. In addition, in order to meet redemption requests, a Fund
may have to sell other assets, rather than such illiquid or restricted
securities, at a time which is not advantageous.

"Restricted securities" are securities which were originally sold in private
placements and which have not been registered under the Securities Act of 1933,
as amended (the "1933 Act"). Such securities generally have been considered
illiquid because they may be resold only subject to statutory restrictions and
delays or if registered under the 1933 Act. In 1990, however, the Securities and
Exchange Commission adopted Rule 144A under the 1933 Act, which provides a safe
harbor exemption from the registration requirements of the 1933 Act for resales
of restricted securities to "qualified institutional buyers," as defined in the
rule. The result of this rule has been the development of a more liquid and
efficient institutional resale market for restricted securities. Thus,
restricted securities are no longer necessarily illiquid. The Funds are not
subject to any limitation on their ability to invest in securities simply
because such securities are restricted. The Funds may therefore invest in Rule
144A securities and treat them as liquid when they have been determined to be
liquid by the Board of Directors of the Company or by the Manager, subject to
the oversight of and pursuant to procedures adopted by the Board of Directors.
Under these procedures, factors taken into account in determining the liquidity
of a Rule 144A security include (a) the frequency of trades and quotes for the
security, (b) the number of dealers willing to purchase or sell the security and
the number of other potential

29
<PAGE>
purchasers, (c) dealer undertakings to make a market in the security, and (d)
the nature of the security and the nature of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). Investing in Rule 144A securities could have the effect
of increasing the level of Fund illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.

PORTFOLIO TURNOVER

Bond Fund may actively use trading to benefit from yield disparities among
different issues of securities or otherwise to achieve its investment objective
and policies and therefore Bond Fund is expected to have a high portfolio
turnover rate (generally defined as being 100% or more). To the extent that
active trading will increase a Fund's rate of turnover, certain transaction
expenses will increase and the incidence of short-term gain may be taxable as
ordinary income. For the fiscal year ended June 30, 1995, the portfolio turnover
rates for Bond Fund, European Value Fund and Latin American Value Fund were
501%, 131% and 161%, respectively. The calculation of portfolio turnover does
not include securities maturing in less than 12 months. Accordingly, the
portfolio turnover rate for Money Market Fund will generally be insignificant.

While it is not the policy of any of the other Funds to trade actively for
short-term profits, each Fund will dispose of securities without regard to the
time they have been held when such action appears advisable to the Manager and
Sub-Adviser. In the case of each Fund, frequent changes may result in higher
brokerage and other costs for the Fund. The method of calculating portfolio
turnover rate is set forth in the Statement of Additional Information under
"Investment Objectives, Policies and Restrictions--Portfolio Transactions and
Allocation of Brokerage."

INVESTMENT RESTRICTIONS

Each of the Funds has adopted certain investment restrictions, which are set
forth in detail in the Statement of Additional Information. The following
restriction is fundamental to each Fund and may not be changed without
shareholder approval: The Funds will not invest 25% or more of the value of its
total assets in the same industry or in the obligations of any one government
other than the U.S. All restrictions not defined as fundamental may be changed
without shareholder approval.

If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in percentage resulting from changes in values or
assets will not constitute a violation of such restriction. However, with
respect to the investment restriction on borrowing, each Fund is prohibited from
purchasing portfolio securities while outstanding borrowing exceeds 5% of the
value of that Fund's total assets.

SPECIAL RISK CONSIDERATIONS

FOREIGN SECURITIES

Investment in foreign securities involves risks not typically associated
with investment in securities of U.S. issuers. Those include the following:

CURRENCY FLUCTUATIONS. The value of a Fund's portfolio securities computed
in U.S. dollars will vary with increases and decreases in the exchange rate
between the currencies in which the Fund has invested and the U.S. dollar. A
decline in the value of any particular currency against the U.S. dollar

30
<PAGE>
will cause a decline in the U.S. dollar value of the Fund's holdings of
securities denominated in such currency and, therefore, will cause an overall
decline in the Fund's net asset value and net investment income and capital
gains, if any, to be distributed in U.S. dollars to shareholders by the Fund.

The rate of exchange between the U.S. dollar and other currencies is
determined by several factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the price of oil, the pace of activity in the industrial
countries, including the U.S., and other economic and financial conditions
affecting the world economy.

POLITICAL AND ECONOMIC RISKS. Nationalization, expropriation or
confiscatory taxation, currency blockage, political changes, government
regulation, social instability or diplomatic developments could affect adversely
the economy of a country or a Fund's investment in such country. A Fund may also
be adversely affected by exchange control regulations. The foregoing risks are
of particular concern in the case of issuers in emerging market countries
because such countries generally have less social, political and economic
stability than the U.S., Canada, Japan or Western Europe.

CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL REGULATION. Non-U.S.
companies are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory requirements comparable to
those applicable to U.S. companies and in certain countries no reporting
standards currently exist. Thus, there may be less information available
concerning non-U.S. issuers of securities held by a Fund than is available
concerning U.S. companies.

MARKET CHARACTERISTICS. Securities of many non-U.S. companies may be less
liquid and their prices more volatile than securities of comparable U.S.
companies. In addition, securities of companies traded in many countries outside
the U.S., particularly those of emerging market countries, may be subject to
further risks due to the inexperience of local brokers and financial
institutions in less developed markets, the possibility of permanent or
temporary termination of trading, and greater spreads between bid and asked
prices for securities. Non-U.S. stock exchanges and brokers are subject to less
governmental supervision and regulation than in the U.S., and non-U.S. stock
exchange transactions are usually subject to fixed commissions, which are
generally higher than negotiated commissions on U.S. transactions. In addition,
there may in certain instances be delays in the settlement of non-U.S. stock
exchange transactions.

The limited size of some non-U.S. securities markets and limited trading
volume in issuers compared to volume of trading in U.S. securities could cause
prices to be erratic for reasons apart from factors that affect the quality of
the securities. For example, limited market size may cause prices to be unduly
influenced by traders who control large positions. Adverse publicity and
investors' perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of portfolio securities, especially in these
markets.

INVESTMENT AND REPATRIATION RESTRICTIONS. Several countries restrict, to
varying degrees, foreign investments in their securities markets. Government and
private restrictions take a variety of forms, including (a) limitations on the
amount of funds that may be introduced into or repatriated from the country
(including limitations on repatriation of investment income and capital gains);
(b) prohibitions or substantial restrictions on foreign investment in certain
industries or market sectors, such as defense, energy and transportation; (c)
restrictions (whether contained in the charter of an individual company or
mandated by the government) on the percentage of securities of a single issuer
which may be owned by a foreign investor; (d) limitations on the types of
securities which a foreign investor may purchase; and (e) restrictions on a
foreign investor's right to invest in companies

31
<PAGE>
whose securities are not publicly traded. In some circumstances, these
restrictions may limit or preclude investment in certain countries or may
increase the cost of investing in securities of particular companies.

FOREIGN TAXES. The Funds' interest and dividend income from foreign issuers
may be subject to non-U.S. withholding taxes. The Funds also may be subject to
taxes on trading profits or on transfers of securities in some countries. The
imposition of these taxes will increase the cost to the Funds of investing in
any country imposing such taxes. For U.S. tax purposes, U.S. shareholders may be
entitled to a credit or deduction to the extent of any foreign income taxes paid
by the Funds. See "Dividends, Distributions and Tax Status--Taxes."

RISKS OF SOVEREIGN DEBT OBLIGATIONS. Each of the Funds (other than Money
Market Fund) may purchase sovereign debt instruments issued or guaranteed by
foreign governments or their agencies. Sovereign debt may be in the form of
conventional securities or other types of debt instruments such as loans or loan
participations. Sovereign debt of Latin American nations or other developing or
emerging market countries may involve a high degree of risk, and may be in
default or present the risk of default. The governmental entity that controls
the repayment of sovereign debt may not be able or willing to repay the
principal and/or interest when due in accordance with the terms of such debt. A
governmental entity's willingness or ability to repay principal and interest due
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the governmental entity's policy
towards the IMF, and the political constraints to which a governmental entity
may be subject. Holders of sovereign debt, including the Funds, may be requested
to participate in the rescheduling of such debt and to extend further loans to
governmental entities.

If a governmental entity defaults on its sovereign debt, the Funds may have
limited recourse against the issuer and/or guarantor. Remedies must, in some
cases, be pursued in the courts of the defaulting party itself, and the ability
of the holder of sovereign debt securities to obtain recourse may be subject to
the political climate in the relevant country.

ADDITIONAL RISKS APPLICABLE TO INVESTMENT IN EASTERN EUROPE. Investments in
companies domiciled in Eastern European countries may be subject to potentially
greater risks than those of other foreign issuers. These risks include: (a)
potentially less social, political and economic stability; (b) the small current
size of the markets for such securities and the low volume of trading, which
result in less liquidity and in greater price volatility; (c) certain national
policies which may restrict a Fund's investment opportunities, including
restrictions on investment in issuers or industries deemed sensitive to national
interests; (d) foreign taxation; (e) the absence of developed legal structures
governing private or foreign investment or allowing for judicial redress for
injury to private property; (f) the absence, until recently in certain Eastern
European countries, of a capital market structure or market-oriented economy;
and (g) the possibility that recent favorable economic developments in Eastern
Europe may be slowed or reversed by unanticipated political or social events in
such countries, or in the Commonwealth of Independent States (formerly the Union
of Soviet Socialist Republics).

The Communist governments of a number of Eastern European countries
expropriated large amounts of private property in the past, in many cases
without adequate compensation, and there may be no assurance that such
expropriation will not occur in the future. In the event of such expropriation,
a Fund could lose a substantial portion of any investments it has made in the
affected

32
<PAGE>
countries. Further, no accounting standards exist in Eastern European countries.
Finally, even though certain Eastern European currencies may be convertible into
U.S. dollars, the conversion rates may be artificial to the actual market values
and may be adverse to shareholders of the Fund.

ADDITIONAL RISKS APPLICABLE TO INVESTMENT IN LATIN AMERICAN COUNTRIES,
INCLUDING MEXICO. Many of the currencies of Latin American and certain other
emerging market countries have experienced steady devaluations relative to the
U.S. dollar, and major devaluations have historically occurred in certain
countries. Devaluations in the currencies in which the Funds' portfolio
securities are denominated may have a detrimental impact on the Funds.

Some Latin American countries also may have managed currencies which are not
free-floating against the U.S. dollar. In addition, there is a risk that certain
Latin American and other emerging market countries may restrict the free
conversion of their currencies into other currencies. Further, certain
currencies issued by Latin American countries may not be internationally traded.

Most Latin American countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain Latin American
countries.

Many Latin American governments have exercised and continue to exercise a
significant influence over many aspects of the private sector. Government
actions concerning the economy could have a significant effect on market
conditions and prices and/or yields of securities in which the Funds invest. For
more information on investment in Latin American and other emerging market
countries, see "Investment Objective and Policies--Special Risk
Considerations--Additional Risks Applicable to Investment in Countries in Latin
America" in the Statement of Additional Information.

RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND OPTIONS

Participation in the options or futures markets and in interest rate and
currency transactions involves investment risks and transaction costs to which
the Funds would not be subject absent the use of these strategies. If the
Manager's and Sub-Adviser's prediction of movements in the direction of the
securities, currency or interest rate markets are inaccurate, the adverse
consequences to a Fund (E.G., a reduction in a Fund's net asset value or a
reduction in the amount of income available for distribution) may leave that
Fund in a worse position than if such strategies were not used. Risks inherent
in the use of options, interest rate transactions, futures contracts and options
on futures contracts include (a) dependence on the Manager's and Sub-Advisers'
ability to predict correctly movements in the direction of interest rates and
security prices; (b) imperfect correlation between the price of options and
futures contracts and options thereon and movements in the prices of the
securities being hedged; (c) the fact that skills needed to use these strategies
are different from those needed to select portfolio securities; (d) the possible
absence of a liquid secondary market for any particular instrument at any time;
and (e) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences.

RISKS OF FIXED-INCOME SECURITIES

All fixed-income securities are subject to two types of risks: credit risk
and interest rate risk. Credit risk relates to the ability of the issuer to meet
interest or principal payments, or both, as they come due. Interest rate risk
refers to the fluctuations in the net asset value of any portfolio of fixed-
income securities resulting from the inverse relationship between price and
yield of fixed-income

33
<PAGE>
securities; that is, when the general level of interest rates rises, the prices
of outstanding fixed-income securities decline, and when interest rates fall,
prices rise. Fixed rate securities with longer term to maturity are generally
subject to greater volatility than shorter term instruments.

Each of the Funds may invest in bonds which are rated Baa by Moody's or BBB
by S&P. Such bonds are considered medium grade securities, and while normally
adequately secured, may be subject to adverse economic conditions which could
affect their ability to pay interest and repay principal and therefore have
speculative characteristics.

RISKS OF FOREIGN INDEX LINKED INSTRUMENTS

Foreign Index Linked Instruments may offer higher yields than comparable
securities linked to purely domestic indexes but also may be more volatile.
Foreign Index Linked Instruments are relatively recent innovations for which the
market has not yet been fully developed and, accordingly, they typically are
less liquid than comparable securities linked to purely domestic indexes. In
addition, the value of Foreign Index Linked Instruments will be affected by
fluctuations in foreign exchange rates or in foreign interest rates. If the
Manager and Sub-Adviser are incorrect in their prediction as to the movements in
the direction of particular foreign currencies or foreign interest rates, the
return realized by a Fund on Foreign Index Linked Instruments may be lower than
if the Fund had invested in a similarly rated domestic security. Foreign
currency gains and losses with respect to Foreign Index Linked Instruments may
affect the amount and timing of income recognized by the Funds.

RISKS OF LOWER-RATED DEBT SECURITIES

Latin American Value Fund and Bond Fund may invest in debt securities rated
below Baa3 by Moody's or BBB- by S&P (commonly known as "high yield" or "junk"
bonds). Such securities are subject to higher risks and greater market
fluctuations than are lower-yielding, higher-rated securities. Under rating
agency guidelines, medium- and lower-rated securities and comparable unrated
securities will likely have some quality and protective characteristics that are
outweighed by large uncertainties or major risk exposures to adverse conditions.
Certain of the debt securities in which the Fund may invest may have, or may be
considered comparable to securities having, the lowest ratings for
non-subordinated debt instruments assigned by Moody's or S&P. Under rating
agency guidelines, these securities are considered to have extremely poor
prospects of ever attaining any real investment standing, to have a current
identifiable vulnerability to default, to be unlikely to have the capacity to
pay interest and repay principal when due in the event of adverse business,
financial or economic conditions, and/or to be in default or not current in the
payment of interest or principal. Such securities are considered speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligations. Unrated securities deemed
comparable to these lower- and lowest-rated securities will have similar
characteristics. Accordingly, it is possible that these types of factors could,
in certain instances, reduce the value of securities held by the Fund with a
commensurate effect on the value of their respective shares.

The price of high yield securities has been found to be less sensitive to
changes in prevailing interest rates than higher-rated investments, but are
likely to be more sensitive to adverse economic changes or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers (which issuers of these securities
often are) may experience financial stress which would adversely affect their
ability to service their principal and interest payment obligations, to meet
their projected business goals or to obtain additional financing. If the issuers
of a fixed-income security owned by a Fund were to default, the Fund might incur
additional expenses to seek recovery. The risk of loss due to default by issuers
of high yield securities is

34
<PAGE>
significantly greater than that associated with higher-rated securities because
such securities generally are unsecured and frequently are subordinated to the
prior payment of senior indebtedness. In addition, periods of economic
uncertainty and change can be expected to result in an increased volatility of
market prices of high yield securities and a corresponding volatility in the net
asset value of a share of a Fund.

The secondary market for high yield securities is less liquid than the
markets for higher quality securities and, as such, may have an adverse effect
on the market prices of certain securities. In addition, the trading volume for
high yield, high risk debt securities is generally lower than that for
higher-rated securities and the secondary markets could contract under adverse
market or economic conditions independent of any specific adverse changes in the
condition of a particular issuer. These factors may also adversely affect the
ability of the Company's Board of Directors to arrive at a fair value for
certain high yield securities at certain times and could make it difficult for a
Fund to sell certain securities. Furthermore, adverse publicity and investor
perceptions about lower-rated securities, whether or not based on fundamental
analysis, may tend to decrease the market value and liquidity of such
lower-rated securities. Less liquid secondary markets may also affect each
Fund's ability to sell securities at their fair value. In addition, each of the
Funds may invest up to 15% of its net assets, measured at the time of
investment, in illiquid securities, which may be more difficult to value and to
sell at fair value. If the secondary markets for high yield, high risk debt
securities contract due to adverse economic conditions or for other reasons,
certain previously liquid securities in a Fund's portfolio may become illiquid
and the proportion of the Fund's assets invested in illiquid securities may
increase.

Many fixed income securities, including certain U.S. corporate fixed income
securities in which a Fund may invest, contain call or buy-back features which
permit the issuer of the security to call or repurchase it. Such securities may
present risks based on payment expectations. If an issuer exercises such a "call
option" and redeems the security, a Fund may have to replace the called security
with a lower yielding security, resulting in a decreased rate of return for such
Fund.

DIVERSIFICATION STATUS

Each of the Funds (other than Money Market Fund) is "non-diversified" and,
accordingly, will be able to invest more than 5% of the value of its assets in
the obligations of a single issuer, subject to the diversification requirements
of subchapter M of the Internal Revenue Code of 1986, as amended, applicable to
the Funds. To the extent the Funds invest a relatively high percentage of their
assets in obligations of a limited number of issuers, the Funds may be more
susceptible than more widely diversified funds to any single economic, political
or regulatory occurrence or to changes in an issuer's financial condition or in
the market's assessment of the issuers. Pursuant to the requirements of Rule
2a-7 of the 1940 Act, Money Market Fund is "diversified" and, accordingly, may
not (except under certain circumstances) invest more than 5% of the value of its
assets in the obligations of a single issuer (other than U.S. Government
Securities).

MANAGEMENT

BOARD OF DIRECTORS

As in all corporations, the Company's Board of Directors has the primary
responsibility for overseeing the overall management of the Company and electing
its officers.

35
<PAGE>
INVESTMENT MANAGER

Piper Capital Management Incorporated (the "Manager") has been retained
under an Investment Advisory and Management Agreement (the "Advisory Agreement")
with the Company to act as investment adviser for each Fund subject to the
authority of the Board of Directors.

The Manager serves as investment adviser to a number of other open-end and
closed-end investment companies and to various other concerns, including pension
and profit sharing funds, corporate funds and individuals. As of June 30, 1995,
the Manager rendered investment advice regarding approximately $10 billion of
assets. The Manager is a wholly owned subsidiary of Piper Jaffray Companies
Inc., a publicly held corporation which is engaged through its subsidiaries in
various aspects of the financial services industry. The address of the Manager
is 222 South Ninth Street, 20th Floor, Minneapolis, Minnesota 55402-3804.

Under the Advisory Agreement, the Manager is to provide administrative
services, manage the business affairs and supervise the investment of the
Company's assets.

SUB-ADVISERS

Under Sub-Advisory Agreements between the Manager and the following
Sub-Advisers, each Sub-Adviser provides the respective Fund with investment
advice and portfolio management relating to the Fund's investment in securities
issued by issuers in the particular geographical region in which the applicable
Fund is authorized to invest, subject to the overall supervision of the Manager:

NORTH AMERICAN FUND--The Manager is responsible for investments in U.S.
securities. The individual who is primarily responsible for the day-to-day
management of the U.S. portion of North American Fund is Paul Dow. Mr. Dow has
been a Senior Vice President of the Manager since February 1989 and Chief
Investment Officer of the Manager since December 1989. Prior to joining the
Manager, Mr. Dow was a Vice President of Centerre Trust Company of St. Louis,
Missouri, serving as a senior equity and balanced portfolio manager since 1983.

In addition to Mr. Dow, John K. Schonberg is responsible for the day-to-day
management of the U.S. portion of North American Fund. Mr. Schonberg has been a
vice president, equity portfolio manager and quantitative analyst for the
Manager since 1989. He also manages several institutional separately managed
stock portfolio accounts.

Acci Worldwide, S.A. de C.V. ("Acci") (regarding investments in Mexican
securities), Paseo de la Reforma 398-4 Piso, 06600 Mexico, D.F. Acci, an
investment adviser registered under the Advisers Act, was organized in June 1990
as a controlled subsidiary of Acciones y Valores de Mexico, S.A. de C.V. ("AVM")
for the purpose of providing investment advice to non-Mexican investment funds
investing in Mexican securities. AVM, founded in 1971, has been involved in
equity underwriting and trading, portfolio investment and management of equity
mutual funds in Mexico and participates in the fixed-income markets. AVM is a
subsidiary of Grupo Financiero Banamex--Accival ("Banacci") which owns over 99%
of the voting stock of AVM and of Banamex, Mexico's largest bank. As of June 30,
1995, Banacci managed assets of approximately $964 million.

The individual at Acci who is responsible for the day-to-day management of
North American Fund is Maru Eugenia Pichardo. Ms. Pichardo has been associated
with AVM for fourteen years and is currently a managing director of AVM.

AGF Investment Advisors, Inc. ("AGF") (regarding investments in Canadian
securities), 31st Floor, Toronto-Dominion Bank Tower, Toronto, Ontario, Canada
M5K 1E9. AGF, an investment

36
<PAGE>
adviser registered under the Advisers Act, is a wholly owned subsidiary of AGF
Management Limited ("AGF Ltd."), an Ontario corporation incorporated in 1960,
located at Toronto-Dominion Bank Tower, Suite 3100, Toronto, Ontario, Canada M5K
1E9. As of June 30, 1995, AGF Ltd. and its subsidiaries had approximately $3.2
Billion under management.

The individual at AGF who is responsible for the day-to-day management of
North American Fund is Robert Farquharson. Mr. Farquharson has been associated
with AGF for over thirty years, and is currently a Vice Chairman of AGF Ltd. and
oversees strategy for the AGF equity funds.

EUROPEAN VALUE FUND--Pictet International Management Ltd. ("Pictet"),
Cutlers Garden, 5 Devonshire Square, London EC2M 4LD, England. Pictet, founded
in 1980 and based in London, is an investment adviser registered under the
Advisers Act and is regulated by the Investment Management Regulatory
Organisation Limited in the United Kingdom. Pictet is a wholly owned subsidiary
of Pictet (London) Limited ("Pictet London") which is a holding company wholly
owned by Pictet (Canada) and Company Ltd. ("Pictet Canada"). Pictet Canada is a
partnership, whose principal activities are investment accounting, custody and
securities brokerage. The Pictet group of companies provides a wide range of
services to individual and institutional clients including portfolio management,
administrative and custodian services, financial and economic research,
brokerage services and advice and counselling on legal, tax and accountancy
matters. As of June 30, 1995, the Pictet group managed assets in excess of $45
billion.

The individual at Pictet who is responsible for the day-to-day management of
European Value Fund is Christian Simond. Mr. Simond joined Pictet in 1986 and is
currently a Senior Investment Manager with Pictet (London) Limited. In addition,
Nils Francke assists Mr. Simond in the day-to-day management of European Value
Fund. Mr. Francke joined Pictet in 1994 as an Investment Manager with the Pictet
European equities team. Prior to 1994, Mr. Francke served for three years as an
Executive Officer with Schroder Munchmeyer Hengst in Germany, advising
institutions on European capital and equities markets.

PACIFIC VALUE FUND--Edinburgh Fund Managers plc ("EFM"), Donaldson House, 97
Haymarket Terrace, Edinburgh, EH12 5HD, Scotland. EFM is a public limited
company that was incorporated in 1969. EFM is a majority-owned subsidiary of The
British Investment Trust plc, a Scottish closed-end investment company founded
in 1889, for which EFM serves as investment manager. EFM, an investment adviser
registered under the Advisers Act, currently furnishes investment management
services, directly or through subsidiaries, to several closed-end and open-end
investment companies, pension plans, charitable organizations and other
individual/corporate clients. EFM is also a partner with U.S.-based Wilmington
Trust Company in a partnership known as Edinburgh-Wilmington International
Capital Management, which is a registered investment adviser providing
international equity management to U.S. investors. As of June 30, 1995, EFM
managed assets of approximately $5.7 billion.

The individual at EFM who is responsible for the day-to-day management of
Pacific Value Fund is Helen Fallow. Ms. Fallow joined EFM in 1990, and she
currently serves as Manager of its Pacific Rim Department. Prior to joining EFM,
Ms. Fallow was Vice President of Equity Sales with Crosby Securities Ltd.

In addition to Ms. Fallow, David Currie is responsible for the day-to-day
management of the Japanese portion of the Pacific Value Fund. Mr. Currie has
been a portfolio manager for EFM since 1988. Since 1991 he has been employed in
its Japanese Department; prior to that time he was employed in its United
Kingdom Department.

37
<PAGE>
LATIN AMERICAN VALUE FUND--Bankers Trust Company ("Bankers Trust"), a New
York banking corporation with executive offices at 130 Liberty Street, New York,
New York 10006, is a wholly owned subsidiary of Bankers Trust New York
Corporation. Bankers Trust conducts a variety of general banking and trust
activities and is a major wholesale supplier of financial services to the
international and domestic institutional market. As of December 31, 1994,
Bankers Trust New York Corporation was the seventh largest bank holding company
in the United States with total assets of approximately $72 billion. Bankers
Trust is a worldwide merchant bank dedicated to servicing the needs of
corporations, governments, financial institutions and private clients through a
global network of 83 offices in 36 countries. As of March 31, 1995, Bankers
Trust and its subsidiaries had assets under management of over $164.7 billion
worldwide and is one of the largest investment managers in the United States.
Bankers Trust's officers have had extensive experience in managing investment
portfolios having objectives similar to those of Latin American Value Fund.

The individual at Bankers Trust who is responsible for the day-to-day
management of the Fund is Maria-Elena Carrion. Since mid-1993, Ms. Carrion has
been a Vice President of Bankers Trust and is the head of its Latin American
Investment Team. Prior to joining Bankers Trust, Ms. Carrion was associated with
Latin American Securities, a London-based specialty fund management company.
From 1986 through July 1991 Ms. Carrion was a Vice President at U.S. Trust.

In addition to Ms. Carrion, Emily Alejos is responsible for the day-to-day
management of Latin American Value Fund. Ms. Alejos joined Bankers Trust in 1993
as a portfolio manager for the Latin American Investment Team. Prior to that
time she was an investment analyst for GT Capital Management where she
specialized in Latin American equitites.

BOND FUND--Salomon Brothers Asset Management Limited ("SBAM Limited"),
Victoria Plaza, 111 Buckingham Palace Road, London SW1W OSB England. SBAM
Limited is based in London and specializes in the management of global
multicurrency fixed income securities and currency transactions. SBAM Limited is
an indirect, wholly owned subsidiary of Salomon Inc, the parent of Salomon
Brothers Inc ("SBI"). SBI is one of the largest international investment houses
in the world, with offices and affiliates in 19 countries and assets at June 30,
1995 of approximately $164 billion. SBAM Limited is registered as an investment
adviser under the Advisers Act and is regulated by the Investment Management
Regulatory Organisation Limited in the United Kingdom. In connection with SBAM
Limited's service as Sub-Adviser to Bond Fund, SBAM Limited's affiliate, Salomon
Brothers Asset Management Inc ("SBAM Inc") will provide certain advisory
services to SBAM Limited for the benefit of Bond Fund. SBAM Inc will be
compensated by SBAM Limited at no additional expense to Bond Fund. Like SBAM
Limited, SBAM Inc is registered as an investment adviser under the Advisers Act
and is an indirect, wholly owned subsidiary of Salomon Inc. The business address
of SBAM Inc is Seven World Trade Center, New York, New York 10048. SBAM Limited
provides a broad range of fixed income investment advisory services for
institutional clients located around the world, and provides investment advisory
services for one U.S. registered investment company (including portfolios
thereof). As of June 30, 1995, SBAM Limited, SBAM Inc and their advisory
affiliates had in excess of $12 billion of assets under management of which
approximately $2.7 billion is in global fixed income portfolios.

David J. Griffiths and David Scott are responsible for the day-to-day
management of Bond Fund. David J. Griffiths assumed such responsibilities since
March 1995. Mr. Griffiths joined SBAM Limited in 1991 as a portfolio manager.
Prior to that time he was associated with Salomon's International

38
<PAGE>
Bond Market Research Group where he monitored European economic and interest
rate developments. Mr. Scott joined SBAM Limited in March 1994 as a portfolio
manager. Before joining SBAM Limited, he was a portfolio manager for J.P. Morgan
Investment Management in London. Prior to that, Mr. Scott was a portfolio
manager for Mercury Asset Management in London.

MONEY MARKET FUND. SBAM Inc, Seven World Trade Center, New York, New York
10048, has a professional staff with extensive experience in the securities and
investment industry in both portfolio and securities analysis. This staff has
been innovative in developing and managing funds for U.S. and non-U.S.
investors. SBAM Inc provides a broad range of fixed income and equity investment
advisory services for its individual and institutional clients located around
the world, and provides investment advisory services for 21 registered
investment companies (including portfolios thereof). SBAM Inc is an indirect
wholly owned subsidiary of Salomon Inc, the parent of SBI. SBI is one of the
largest international investment houses in the world with offices and affiliates
in 19 countries with assets at June 30, 1995 of approximately $164 billion.

Mary Beth Whyte will be responsible for the day-to-day management of Money
Market Fund's portfolio. Ms. Whyte, who joined SBAM Inc in 1994, is a Vice
President and Portfolio Manager responsible for directing SBAM Inc's investment
policy for all municipal portfolios and money market activities. Prior to
joining SBAM Inc, Ms. Whyte was a Senior Vice President and head of the
Municipal Bond Area at Fiduciary Trust Company International from 1987-1994.
Prior to that, she was associated with U.S. Trust Company from 1986-1987 and
Bernstein-Macaulay Inc. from 1985-1986.

RATE OF COMPENSATION. Under the Advisory Agreement, the Manager receives a
monthly fee computed separately for each Fund. Fees for North American Fund,
European Value Fund, Pacific Value Fund, Latin American Value Fund and Bond Fund
are paid monthly at an annual rate of 1.0% of average daily net assets of the
applicable Fund. These fees are higher than fees paid by most other investment
companies. The fees for Money Market Fund are paid monthly at an annual rate of
.50% of average daily net assets.

As compensation for their services provided pursuant to the respective
Sub-Advisory Agreements, the Manager pays each Sub-Adviser monthly compensation
payable over the same time periods and calculated in the same manner as the
investment advisory fee of the applicable Fund of .50% of net assets of such
Fund, except that with respect to Money Market Fund, the Sub-Adviser is paid by
the Manager a fee of .25% of daily net assets of the applicable Fund. In the
case of North American Fund, the fee is split equally among each of the
Sub-Advisers without regard to the amount of assets under their respective
management at any one time.

CUSTODIAN

Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street, 14th
Floor, Kansas City, Missouri 64105, (816) 474-8786, serves as custodian for each
Fund's portfolio securities and cash.

Rules adopted under the 1940 Act permit the Funds to maintain their
securities and cash in the custody of certain eligible banks and securities
depositories. IFTC has entered into a Sub-Custodian Agreement with Bankers Trust
Company with respect to the Company's foreign portfolio securities and related
cash. Rule 17f-5 adopted under the Act permits the Company to maintain such
securities and cash in the custody of certain eligible foreign banks and foreign
securities depositories. The

39
<PAGE>
Funds' foreign securities are held by such entities who are approved by the
Board of Directors in accordance with such rules. Determinations are made
pursuant to such rules following consideration of a number of factors including,
but not limited to, the reliability and financial stability of the institutions;
the ability of the institutions to perform custodial services for the Funds; the
reputation of the institutions in national markets; the countries in which the
institutions are located; and the risks of potential nationalization or
expropriation of assets of the Funds.

ACCOUNTING AGENT, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

IFTC has been retained to provide certain accounting and bookkeeping
services to the Funds. In addition, IFTC serves as Transfer Agent and Dividend
Disbursing Agent for the Company.

EXPENSES

The expenses of each Fund are deducted from their total income before
dividends are paid. These expenses include, but are not limited to,
organizational costs, fees paid to the Manager, distribution expenses pursuant
to a Rule 12b-1 plan, fees and expenses of officers and directors who are not
affiliated with the Manager, taxes, interest, legal fees, transfer agent,
dividend disbursing agent, accounting agent and custodian fees, auditing fees,
brokerage fees and commissions, fees and expenses of registering and qualifying
the Funds and their shares for distribution under federal and state securities
laws, expenses of preparing prospectuses and statements of additional
information and of printing and distributing prospectuses and statements of
additional information annually to existing shareholders, the expense of reports
to shareholders, shareholders' meetings and proxy solicitations, and other
expenses which are not expressly assumed by the Manager under the Investment
Advisory and Management Agreement. Any general expenses of the Company that are
not readily identifiable as belonging to a particular Fund will be allocated
among the Funds based upon the relative net assets of the Funds at the time such
expenses were accrued.

For each Fund's current fiscal year the Manager has voluntarily limited
total expenses (including the Manager's compensation and amounts paid pursuant
to the Rule 12b-1 plan discussed below but excluding interest, taxes, brokerage
fees and commissions and extraordinary expenses) on a per annum basis to 2% with
respect to average daily net assets of North American Fund, European Value Fund,
Pacific Value Fund and Latin American Value Fund, 1.8% with respect to average
daily net assets of Bond Fund and 1.00% with respect to average daily net assets
of Money Market Fund. After each Fund's current fiscal year, these limitations
may be revised or terminated at any time.

BROKERAGE COMMISSIONS

The Manager and Sub-Advisers may consider a number of factors in determining
which brokers or futures commission merchants to use for the respective Fund's
portfolio transactions (including transactions in futures contracts and options
on futures contracts). These factors, which are more fully discussed in the
Statement of Additional Information, include, but are not limited to, research
services, the reasonableness of commissions and quality of services and
execution. A broker's sales of a Fund's shares may also be considered a factor
if the Manager and/or Sub-Adviser is satisfied that such Fund would receive from
that broker the most favorable price and execution then available for a
transaction. Portfolio transactions for the Funds may be effected through the
Distributor or the Sub-Advisers (or the Manager with respect to the U.S. portion
of North American Fund) or their affiliates on a securities exchange if the
commissions, fees or other remuneration received by such persons are reasonable
and fair compared to the commissions, fees or other remuneration paid to other
brokers or other futures commission merchants in connection with comparable
transactions involving similar securities or similar futures contracts or
options on futures contracts being purchased or sold on an

40
<PAGE>
exchange during a comparable period of time. In effecting portfolio transactions
through the Distributor or the Sub-Advisers (or the Manager with respect to the
U.S. portion of North American Fund) or their affiliates, the Funds intend to
comply with Section 17(e) of the 1940 Act.

DISTRIBUTION OF FUND SHARES

Piper Jaffray Inc. ("Piper Jaffray" or the "Distributor") acts as the
principal distributor of the Funds' shares. From the date of this prospectus,
shares of each Fund are being offered to the public on a continuous basis. The
address of the Distributor is that of the Company.

The Company has adopted a Distribution Plan pursuant to Rule 12b-1 under the
1940 Act (the "Plan"), pursuant to which the Distributor is entitled to
reimbursement each month for its actual expenses incurred in connection with
servicing of the Funds' shareholder accounts and in connection with
distribution-related services provided with respect to each Fund in an amount
not to exceed .70% per annum of the average daily net assets with respect to
North American Fund, Pacific Value Fund, European Value Fund and Latin American
Value Fund, and .50% with respect to Bond Fund. The Plan also authorizes
payments by Money Market Fund in an amount not to exceed .10% per annum of its
average daily net assets. However, the Board of Directors of the Company has
determined to discontinue payments under the Plan with respect to Money Market
Fund effective as of June 19, 1995. For each of the applicable Funds payments
under the Plan are currently limited voluntarily by the Distributor to amounts
not in excess of an annual rate of .50% with respect to North American Fund,
Pacific Value Fund, European Value Fund and Latin American Value Fund and .30%
with respect to Bond Fund. These limitations may be revised or terminated at any
time after the conclusion of each Fund's current fiscal year.

The Distributor is reimbursed under the Plan for Distribution Expenses and
Shareholder Servicing Costs. Distribution Expenses include, but are not limited
to, initial and ongoing sales compensation (in addition to sales loads) paid to
investment executives of the Distributor and to other broker-dealers; expenses
incurred in the printing of prospectuses, statements of additional information
and reports used for sales purposes; expenses of preparation and distribution of
sales literature; expenses of advertising of any type; an allocation of the
Distributor's overhead; payments to and expenses of persons who provide support
services in connection with the distribution of Fund shares; and other
distribution-related expenses. Shareholder Servicing Costs include all expenses
of the Distributor incurred in connection with providing administrative or
accounting services including payments made to persons, including employees of
the Distributor, who respond to inquiries of shareholders of the Funds regarding
their ownership of shares or their accounts with the Funds or who provide other
administrative or accounting services not otherwise required to be provided by
the Funds' Adviser, Sub-Advisers or transfer agent. The Manager, the
Sub-Advisers and the Distributor may, out of their own assets, pay for certain
expenses incurred in connection with the distribution of shares of the Fund. In
particular, the Distributor may make payments out of its own assets to its
investment executives and other broker-dealers in connection with their sales of
shares of the Fund. See "Purchase of Shares--Public Offering Price."

The Distributor's Shareholder Servicing Costs include payments to its
investment executives and to other broker-dealers who have entered into sales
agreements with the Distributor as follows: If shares of a Fund (other than
Money Market Fund) are sold by a representative of a broker-dealer other than
the Distributor, that portion of .25% of the average daily net assets of the
Fund which is attributable to shares sold by such representative is paid to such
broker-dealer. If shares of a Fund

41
<PAGE>
(other than Money Market Fund) are sold by an investment executive of the
Distributor, compensation will be paid to the investment executive in the manner
set forth in a written agreement, in an amount not to exceed that portion of
.25% of the average daily net assets of the Fund which is attributable to shares
sold by such investment executive. In addition, the Distributor pays an amount
equal to .25% of the average daily net assets of North American Fund, European
Value Fund, Pacific Value Fund and Latin American Value Fund (.05% with respect
to Bond Fund) as ongoing sales compensation to investment executives of the
Distributor and to broker-dealers which have entered into sales agreements with
the Distributor. Such payments are considered Distribution Expenses of the
Distributor and are reimbursable under the Plan.

Further information regarding the Plan is contained in the Statement of
Additional Information.

PURCHASE OF SHARES

GENERAL

The Funds' shares may be purchased at the public offering price from the
Distributor and from certain other broker-dealers who have sales agreements with
the Distributor. The net asset value per share for the Money Market Fund is
normally expected to be $1.00. See "Valuation of Shares." The address of the
Distributor is that of the Funds. Shareholders will receive written confirmation
of their purchases. Stock certificates will not be issued in order to facilitate
redemptions and transfers between the Funds. The Distributor reserves the right
to reject any purchase order. Shareholders should be aware that, because the
Company does not issue stock certificates, Fund shares must be kept in an
account with the Distributor or with IFTC in the case of Fund shares purchased
through another broker-dealer that has a sales agreement with the Distributor.
Purchases of shares of Money Market Fund may be made by wire transfer for next
day settlement. A prospective shareholder must have an account with the Company
prior to wiring money for a purchase. For information concerning this method of
purchase contact your broker or call IFTC at (800) 245-7087.

PUBLIC OFFERING PRICE

Shares of the Funds are offered to the public at the net asset value per
share next determined after an order is received by either the Distributor or
IFTC. While no sales charge is imposed at the time shares are purchased, a
contingent deferred sales charge ("CDSC") may be imposed at the time of
redemption. See "Redemption of Shares--Contingent Deferred Sales Charge."

The Manager and the Sub-Adviser of the applicable Fund (other than Money
Market Fund) will advance to broker-dealers through which a sale of shares is
made, on each sale, a sales commission in the aggregate of 2% of the net asset
value of the shares purchased. The Distributor or the Manager, at its expense,
may also provide promotional incentives to investment executives of the
Distributor and to broker-dealers who have sales agreements with the Distributor
in connection with sales of shares of the Company and other investment companies
for which the Manager acts as investment adviser. In some instances, such
incentives may be made available only to certain investment executives or
broker-dealers who have sold or may sell significant amounts of such shares. The
incentives may include payment for travel expenses, including lodging, incurred
in connection with educational seminars.

MINIMUM INVESTMENTS

A minimum initial investment of $250 is required. The minimum subsequent
investment is $100. The Distributor may waive any such minimums in the case of
purchases by certain payroll deduction

42
<PAGE>
or other employee benefit plan investments. In addition, these minimums are not
applicable to purchases made under certain automatic investment programs offered
by the Distributor and other participating brokerage firms.

SPECIAL PURCHASE PLANS

For information on any of the following special purchase plans, contact your
broker-dealer.

TAX SHELTERED RETIREMENT PLANS. Contact your broker-dealer for prototype
plans for Individual Retirement Accounts ("IRAs"), Simplified Employee Pension
Accounts ("SEP IRAs") and Keogh, Pension and Profit Sharing Accounts and will
act as custodian for such Accounts.

AUTOMATIC MONTHLY INVESTMENT PROGRAM. Any shareholder may arrange to make
additional purchases of shares of the Company by having $100 or more per month
automatically transferred from his or her bank, savings and loan, or other
financial institution. Shareholders should contact their investment executive or
IFTC to obtain authorization forms or for additional information.

EXCHANGE PRIVILEGE

Shares of one Fund may be exchanged for shares of another Fund, provided
that the shares to be acquired in the exchange are eligible for sale in the
shareholder's state of residence. Exchanges are made on the basis of the net
asset values of the Funds involved. All exchanges are subject to the minimum
investment requirements and any other applicable terms set forth in the
prospectus relating to the Fund being acquired. An exchange will be treated for
federal income tax purposes as a redemption of shares (followed by a purchase of
new shares) on which the shareholder may realize a capital gain or loss (see
"Taxes", below). No CDSC is imposed at the time of any exchange, although any
applicable CDSC will be imposed upon ultimate redemption. During the period of
time the shareholder remains in Money Market Fund the holding period (for the
purpose of determining the rate of the CDSC) is frozen. If those shares are
subsequently reexchanged for shares of another Fund, the holding period
previously frozen when the first exchange was made resumes on the next day.
Thus, the CDSC is based upon the time (calculated as described above) the
shareholder was invested in any Fund other than Money Market Fund.

A shareholder may make an exchange by contacting his or her investment
executive. Other shareholders must contact IFTC. Shareholders who have
authorized telephone exchanges in their Account Application and Services Form
will be able to effect exchanges from a Fund into an identically registered
account in one of the other available Funds by calling IFTC at (800) 245-7087.
The Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. The procedures include requiring various
forms of personal identification such as name, mailing address, social security
or other tax identification number and account number. Telephone instructions
will also be recorded. If such procedures are not employed, the applicable Fund
may be liable for any losses due to unauthorized or fraudulent transactions.
Otherwise, exchanges must be made by mail by following the procedures applicable
to redemption of the Funds' shares (see "Redemption of Shares--Normal
Redemption," below) except that, with respect to an exchange transaction between
accounts registered in identical names, no signature guarantee is required
unless the amount being exchanged exceeds $25,000.

An investor may make twelve exchanges per year without payment of a service
charge. Thereafter, there is a $50 service charge for each exchange. The Company
reserves the right to change or discontinue the exchange privilege, or any
aspect of the privilege, upon 60 days' written notice.

43
<PAGE>
REDEMPTION OF SHARES

NORMAL REDEMPTION

Shares of each Fund, in any amount, may be redeemed at any time at their
current net asset value next determined after a request is received by the
Distributor or IFTC; however, such redemption proceeds may be reduced by the
amount of any applicable contingent deferred sales charge (see below). A written
redemption request (discussed below) will not be considered received unless it
is in proper form. To redeem shares of the Funds, an investor may make an oral
redemption request through his or her investment executive.

Shareholders may also redeem shares by written request to IFTC at the
address set forth above. See "Management--Custodian." To be considered in proper
form, written requests for redemption should indicate the dollar amount or
number of shares to be redeemed, should refer to the shareholder's Fund account
number, and should give either a social security or tax identification number
(as applicable). The request should be signed in exactly the same way the
account is registered. If there is more than one owner of the shares, all owners
must sign. If shares to be redeemed have a value of $25,000 or more or
redemption proceeds are to be paid to someone other than the shareholder at such
shareholder's address of record, the signature(s) must be guaranteed by an
"eligible guarantor institution," which includes a commercial bank that is a
member of the Federal Deposit Insurance Corporation, a trust company, a member
firm of a domestic stock exchange, a savings association or a credit union that
is authorized by its charter to provide a signature guarantee. IFTC may reject
redemption instructions if the guarantor is neither a member of nor a
participant in a signature guarantee program. Signature guarantees by notaries
public are not acceptable. The purpose of a signature guarantee is to protect
shareholders against the possibility of fraud. Further documentation will be
requested from corporations, administrators, executors, personal
representatives, trustees or custodians. Redemption requests given by facsimile
will not be accepted. Unless other instructions are given in proper form, a
check for the proceeds of the redemption will be sent to the shareholder's
address of record.

CONTINGENT DEFERRED SALES CHARGE

Shares that are held for more than two years after purchase will not be
subject to any charge upon redemption, except as described below. Shares of such
Funds redeemed sooner than two years after purchase may, however, be subject to
a charge upon redemption. This charge is called a contingent deferred sales
charge (or CDSC), which will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
percentage will depend upon how long the shares have been held, as set forth in
the table below:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF AMOUNT
NUMBER OF DAYS SINCE PURCHASE REDEEMED
- ----------------------------------------------------------------------- -----------------------
<S> <C>
first 365 days......................................................... 2.0%
next 365 days.......................................................... 1.0%
thereafter............................................................. None
</TABLE>

For purposes of calculating the time periods set forth in the preceding table,
any day in which shares of Money Market Fund are held is excluded. No CDSC will
be imposed on shares purchased prior to June 19, 1995.

44
<PAGE>
A CDSC will not be imposed when a Shareholder redeems: (a) shares
representing amounts attributable to increases in the value of an account above
the net cost of the investment due to increases in the net asset value per
share; (b) shares held for more than two years; (c) shares acquired through
reinvestment of income dividends or capital gain distributions; and (d) shares
acquired by exchange where the exchanged shares would not be assessed a CDSC
upon redemption. Moreover, in determining whether a CDSC is applicable, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that amounts described in (a), (b), (c) and (d) above are
redeemed in that order. In addition, as stated above, no CDSC will be assessed
on shares of Money Market Fund if they were not acquired in an exchange for
shares of another Fund.

The CDSC, if otherwise applicable, will be waived in the case of purchases
made by (a) employee benefit plans containing an actively maintained qualified
cash or deferred arrangement under Section 401(k) of the Internal Revenue Code
(the "Code"); (b) custodial accounts qualified under Section 403(b)(7) of the
Code; (c) trust companies and bank trust departments using funds over which they
exercise exclusive discretionary investment authority and which are held in a
fiduciary, agency, advisory, custodial or similar capacity; (d) the following
persons associated with the Manager and the Distributor: (i) officers, directors
and partners; (ii) employees and retirees; (iii) spouses, or children under the
age of 21, of any such persons; or (iv) any trust, pension, profit-sharing or
other benefit plan for any of the foregoing persons; and (e) sales
representatives of broker-dealers who have entered into sales agreements with
the Distributor, and spouses and children under the age of 21 of such sales
representatives. In addition, the CDSC will be waived in the event of (a) the
death or disability of the Shareholder; (b) a lump sum distribution from an
employee benefit plan qualified under Section 401(a) of the Code, an individual
retirement account under Section 408(a) of the Code, or a simplified employee
pension plan under Section 408(k) of the Code; (c) systematic withdrawals from
any plans set forth in (b), above, if the Shareholder is at least 59 1/2 years
old; (d) a tax-free return of the excess contribution to an individual
retirement account under Section 408(a) of the Code; or (e) involuntary
redemptions effected pursuant to the right of the Company to liquidate
Shareholder accounts having an aggregate net asset value of less than $200 or
such other amount as set forth in the then current prospectus.

In determining whether a Shareholder is "disabled" for purposes of waiving
the CDSC, the definition of the term contained in Section 72(m)(7) of the Code
will be utilized. The Company will apply the waiver for death or disability to
shares held at the time of death or the initial determination of disability of
either an individual Shareholder or one who owns the shares as a joint tenant
with the right of survivorship or as a tenant in common. All waivers will be
granted only following receipt by the Distributor of confirmation of the
Shareholder's entitlement.

REDEMPTIONS BY TELEPHONE

Redemption requests may be made by telephone by calling IFTC at (800)
245-7087. Telephone redemption requests over $25,000 are not allowed. Redemption
requests over this amount must be made in the Normal Redemption manner as
described above. Telephone redemptions will not be allowed if the shareholder
has changed his or her address of record in the preceding thirty days. Each Fund
will employ reasonable procedures to confirm that instructions received by
telephone are genuine. These procedures include requiring various forms of
personal identification such as name, mailing address, social security or other
tax identification number and shareholder account number. Telephone instructions
will also be recorded. If such procedures are not employed, each Fund may be
liable for any losses due to unauthorized or fraudulent transactions.

45
<PAGE>
EXPEDITED REDEMPTIONS

Expedited redemptions may be requested by telephone by contacting IFTC at
(800) 245-7087. The proceeds of the expedited redemption will be wired to a bank
account designated by the shareholder. The shareholder must make the election to
use expedited redemptions and provide the appropriate bank information to his or
her broker-dealer or directly to IFTC at the time the shareholder's Fund account
is opened. The minimum amount for expedited redemptions is $25,000. Expedited
redemptions will not be allowed if the shareholder has changed his or her bank
instructions within the preceding thirty days. Each Fund will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
These procedures are described in the Redemptions by Telephone section above.

SYSTEMATIC WITHDRAWAL PLAN

If your account has a value of $5,000, you may establish a Systematic
Withdrawal Plan for any of the Funds and receive regular periodic payments. A
request to establish a Systematic Withdrawal Plan must be submitted in writing
to an investor's broker-dealer. There are no service charges for maintenance;
the minimum amount that you may withdraw each period is $100. (This is merely
the minimum amount allowed and should not be interpreted as a recommended
amount.) The holder of a Systematic Withdrawal Plan will have any income
dividends and any capital gains distributions reinvested in full and fractional
shares at net asset value. To provide funds for payment, the appropriate Fund
will redeem as many full and fractional shares as is necessary at the redemption
price, which is net asset value. Redemption of shares may reduce or possibly
exhaust the shares in your account, particularly in the event of a market
decline. As with other redemptions, a redemption to make a withdrawal payment is
a sale for federal income tax purposes. Payments made pursuant to a Systematic
Withdrawal Plan cannot be considered as actual yield or income since part of
such payments may be a return of capital. Any applicable CDSC will be imposed on
shares redeemed under the Systematic Withdrawal Plan. Therefore, any shareholder
participating in the Systematic Withdrawal Plan will have sufficient shares
redeemed from his or her account so that the proceeds (net of any applicable
CDSC) to the shareholder will be the designated monthly or quarterly amount.

You will ordinarily not be allowed to make additional investments of less
than $5,000 or three times the annual withdrawals under the Systematic
Withdrawal Plan during the time you have the plan in effect. You will receive a
confirmation of each transaction showing the sources of the payment and the
share and cash balance remaining in your plan. The plan may be terminated on
written notice by the shareholder or the appropriate Fund, and it will terminate
automatically if all shares are liquidated or withdrawn from the account or upon
the death or incapacity of the shareholder. You may change the amount and
schedule of withdrawal payments or suspend such payments by giving written
notice to your broker-dealer at least ten business days prior to the end of the
month preceding a scheduled payment.

PAYMENT OF REDEMPTION PROCEEDS

Normally, the Funds will make payment for all shares redeemed within three
business days, but in no event will payment be made more than seven days after
receipt by the Distributor or IFTC of a redemption request in proper order.
However, payment may be postponed or the right of redemption (by each of the
methods described above) suspended for more than seven days under unusual
circumstances, such as when trading is not taking place on the New York Stock
Exchange (the "Exchange"). Payment of redemption proceeds may also be delayed if
the shares to be redeemed were purchased by a check drawn on a bank which is not
a member of the Federal Reserve System, until such checks have cleared the
banking system, which may be up to 15 days from the purchase date.

46
<PAGE>
INVOLUNTARY REDEMPTION

The Company reserves the right to redeem a shareholder's account at any time
the net asset value of the account falls below $200 as the result of a
redemption or transfer request. Shareholders will be notified in writing prior
to any such redemption and will be allowed 30 days to make additional
investments before the redemption is processed.

VALUATION OF SHARES

Each Fund determines its net asset value on each day the Exchange is open
for business, provided that the net asset value need not be determined for a
Fund on days on which changes in the value of the Fund's portfolio securities
will not materially affect the current net asset value of the Fund's shares and
days when no Fund shares are tendered for redemption and no order for Fund
shares is received. The calculation is made as of the primary closing time of
the Exchange (currently 4:00 p.m. New York time) after the Funds have declared
any applicable dividends.

The net asset value per share for each of the Funds is determined by
dividing the value of the securities owned by the Fund plus any cash and other
assets (including interest accrued and dividends declared but not collected)
less all liabilities by the number of Fund shares outstanding. For the purposes
of determining the aggregate net assets of the Funds, cash and receivables will
be valued at their face amounts. Interest will be recorded as accrued and
dividends will be recorded on the ex-dividend date. Securities traded on a
national securities exchange or on the NASDAQ National Market System are valued
at the last reported sale price that day. Securities traded on a national
securities exchange or on the NASDAQ National Market System for which there were
no sales on that day and securities traded on other over-the-counter markets for
which market quotations are readily available are valued at the mean between the
bid and asked prices as obtained from one or more dealers that make markets in
the securities. To the extent dealer quotes are used in pricing securities,
quotes are always sought from more than one dealer. However, from time to time,
it may not as a practical matter be possible to obtain bid and asked quotations
from more than one dealer. Under such circumstances, one dealer quote will be
used as a basis for valuing the security unless the Manager, subject to the
supervision of the Board of Directors, believes based on market prices of
comparable securities, developments in the marketplace or otherwise, that the
quote is not reflective of the market value of the security in which case such
security will be valued at fair value. If a Fund should have an open short
position as to a security, the valuation of the contract will be at the average
of the bid and asked prices. Portfolio securities underlying actively traded
options will be valued at their market price as determined above. The current
market value of any exchange-traded option held or written by a Fund is its last
sales price on the exchange prior to the time when assets are valued. Lacking
any sales that day, the options will be valued at the mean between the current
closing bid and asked prices. Financial futures are valued at the settlement
price established each day by the board of trade or exchange on which they are
traded.

The value of certain fixed-income securities will be provided by an
independent pricing service which determines these valuations at a time earlier
than the close of the Exchange. Pricing services consider such factors as
security prices, yields, maturities, call features, ratings and developments
relating to specific securities in arriving at securities valuations.
Occasionally events affecting the value of such securities may occur between the
time valuations are determined and the close of the Exchange. If events
materially affecting the value of such securities occur during such period, or
if the Company's management determines for any other reason that valuations
provided by the pricing service are inaccurate, such securities will be valued
at their fair value according to procedures

47
<PAGE>
decided upon in good faith by the Company's Board of Directors. In addition, any
securities or other assets of a Fund for which market prices are not readily
available will be valued at their fair value in accordance with such procedures.

Any assets or liabilities initially expressed in terms of foreign currencies
are translated into U.S. dollars by the pricing service retained by the Funds
or, to the extent that an exchange rate is not available through such pricing
service, at the mean of current bid and asked prices of such currencies against
the U.S. dollar last quoted by a major bank that is a regular participant in the
foreign exchange market. The Funds have been advised that the pricing service
translates foreign currencies into U.S. dollars on the basis of the official
exchange rate or by taking into account the quotes provided by a number of major
banks that are regular participants in the foreign exchange market. Trading in
securities on Latin American, European and Pacific Basin securities exchanges
and in over-the-counter markets is normally completed well before the close of
business on each business day of the Funds. In addition, securities trading in a
particular country in which a Fund invests may not take place on all business
days in New York. Furthermore, trading takes place in various foreign markets on
days which are not business days of the Funds and on which the Funds' net asset
value is not calculated. Therefore, the net asset value of a Fund might be
significantly affected on days when the investor has no access to the Fund. The
Funds calculate net asset value per share as of the close of the regular trading
session on the Exchange. Such calculation does not generally take place
contemporaneously with the determination of the prices of the majority of the
portfolio securities used in such calculation. If events materially affecting
the value of such securities occur between the time when their price is
determined and the time when the Funds' net asset value is calculated, such
securities will be valued at fair value as determined in good faith by or under
the direction of the Board of Directors.

The Board of Directors expects that the net asset value per share for Money
Market Fund will ordinarily be $1.00. Total assets for the Fund is determined by
valuing the portfolio securities at amortized cost in accordance with Rule 2a-7
under the 1940 Act. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost, is higher
or lower than the price the Fund would receive if the Fund sold its portfolio.
Under the direction of the Board of Directors, certain procedures have been
adopted to monitor and stabilize the price per share. Calculations are made to
compare the value of the Fund's portfolio valued at amortized cost with market
values. Market valuations are obtained from yield data relating to classes of
money market instruments published by reputable sources at the bid prices for
the instruments. In the event that a deviation of one-half of 1% or more exists
between the $1.00 per share net asset value for the Fund and the net asset value
calculated by reference to market quotations, or if there is any other deviation
which the Board of Directors believes would result in a material dilution to
shareholders or purchasers, the Board of Directors will promptly consider what
action, if any, should be initiated. See "Net Asset Value and Public Offering
Price" in the Statement of Additional Information.

DIVIDENDS, DISTRIBUTIONS AND TAX STATUS

DIVIDENDS AND DISTRIBUTIONS

Net investment income and net realized long-term and short-term capital
gains will be determined separately for each Fund. Bond Fund intends to declare
and pay dividends from investment income quarterly. Bond Fund may at times pay
out more or less than the entire amount of net investment income in any
particular period in order to permit such Fund to maintain a stable level of

48
<PAGE>
distributions. Any such amount retained by Bond Fund would be available to
stabilize future distributions. As a result, the distributions paid by Bond Fund
for any particular period may be more or less than the amount of net investment
income earned by such Fund during such period. Distributions may also include
amounts attributable to net short-term capital gains if necessary to maintain a
stable level of distributions. This may result in a portion of the distributions
constituting a return of capital to the extent Bond Fund subsequently realize
capital losses. Dividends from net investment income earned by the remaining
Funds (other than Money Market Fund) will be declared and paid annually.
Distributions of any net realized long-term and short-term gains (except as
noted above with respect to Bond Fund) earned by a Fund will be made annually.

Money Market Fund intends to declare dividends on a daily basis which will
be reinvested in additional Fund shares on a monthly basis. Each daily dividend
is payable to Fund shareholders of record at the time of its declaration.

On the record date for a distribution, a Fund's share price is reduced by
the amount of the distribution. If an investor buys shares just before the
record date ("buying a dividend"), the investor will pay the full price for the
shares and then receive a portion of the price back as a taxable distribution.

All net investment income dividends and net realized capital gains
distributions with respect to the shares of any Fund will be payable in
additional shares of such Fund at net asset value unless the shareholder
notifies his or her broker-dealer of an election to receive cash. Shareholders
may elect either to receive income dividends in cash and capital gains in
additional shares of the Fund at net asset value, or to receive both income
dividends and capital gains in cash. The taxable status of income dividends
and/or net capital gains distributions is not affected by whether they are
reinvested or paid in cash.

TAXES

Each of the Funds is treated as a separate corporation for federal tax
purposes. Therefore, each Fund is treated separately in determining whether it
qualifies as a regulated investment company and for purposes of determining the
net ordinary income (or loss), net realized capital gains (or losses) and
distributions necessary to relieve such Fund of any federal income tax
liability. Each of the Funds expects to qualify as a regulated investment
company during the current taxable year. If qualified as a regulated investment
company, a Fund will not be liable for federal income taxes to the extent it
distributes its taxable income to shareholders.

Distributions by a Fund are generally taxable to the shareholders, whether
received in cash or additional shares of the Funds. Distributions of net capital
gains (designated as "capital gain dividends") are taxable to shareholders as
long-term capital gains, regardless of the length of time the shareholder has
held the shares of the Fund. In general, individuals are taxed on long-term
capital gains at a maximum rate of 28% and on ordinary income at a maximum rate
of 39.6%. Corporations are taxed at a maximum rate of 35%.

A shareholder will recognize a capital gain or loss upon the sale or
exchange of shares in a Fund (including upon a sale or exchange of Fund shares
pursuant to the Exchange Privilege) if, as is normally the case, the shares are
capital assets in the shareholder's hands. This capital gain or loss will be
long-term if the shares have been held for more than one year.

A Fund may be subject to foreign income taxes including withholding taxes.
If a Fund has more than 50% of its assets invested in the stock or securities of
foreign corporations at the end of the

49
<PAGE>
Fund's taxable year, the Fund may make an election to allow shareholders either
to claim U.S. foreign tax credits with respect to foreign taxes paid by the Fund
or to deduct such amounts as an itemized deduction on their tax return. In the
event such an election is made, shareholders would have to increase their
taxable income by the amount of such taxes and the Fund would not be able to
deduct such taxes in computing its taxable income.

For federal income tax purposes, North American Fund, Pacific Basin Value
Fund, Latin American Value Fund and Bond Fund had capital loss carryovers at
June 30, 1995 of $838,953; $1,546,411; $10,643,620; and $338,380, respectively.
If these capital loss carryovers are not offset by subsequent capital gains,
they will expire in the years 2002 through 2004. It is unlikely the board of
directors of the Company will authorize a distribution of any net realized
capital gains until the available capital loss carryovers have been offset or
expire.

The foregoing relates to federal income taxation as in effect as of the date
of this Prospectus. For a more detailed discussion of the federal income tax
consequences of investing in shares of the Funds, see "Taxation" in the
Statement of Additional Information. Distributions may also be subject to state
and local taxes. Before investing in any of the Funds, you should check the
consequences of your local and state tax laws. The tax discussion set forth in
this Prospectus and in the Statement of Additional Information does not purport
to address all of the federal income tax consequences applicable to an
investment in the Funds, or to all categories of investors, some of which may be
subject to special rules. Investors should consult their tax advisors as to the
applicability of the foregoing to their situation.

PERFORMANCE COMPARISONS

Advertisements and other sales literature for a Fund may refer to a Fund's
"average annual total return" and "cumulative total return." In addition, North
American Fund, Bond Fund and Money Market Fund may provide yield calculations in
advertisements and other sales literature. All such yield and total return
quotations are not intended to predict or represent future performance. The
return on and principal value of an investment in any of the Funds will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.

Yield calculations other than for Money Market Fund will be based upon a
30-day period stated in the advertisement and will be calculated by dividing the
net investment income per share (as defined under Securities and Exchange
Commission rules and regulations) earned during the advertised period by the
offering price per share (including the maximum sales charge) on the last day of
the period. The result will then be "annualized" using a formula that provides
for semi-annual compounding of income.

The "yield" of Money Market Fund refers to the income generated by an
investment in the Fund over a seven-day period (which period will be stated in
the advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment.

Average annual total return is the average annual compounded rate of return
on a hypothetical $1,000 investment made at the beginning of the advertised
period. Cumulative total return is calculated by subtracting a hypothetical
$1,000 payment to a Fund from the redeemable value of such

50
<PAGE>
payment at the end of the advertised period, dividing such difference by $1,000
and multiplying the quotient by 100. In calculating average annual and
cumulative total return, the maximum sales charge is deducted from the
hypothetical investment and all dividends and distributions are assumed to be
reinvested.

In addition to advertising total return and yield, comparative performance
information may be used from time to time in advertising the Funds' shares,
including data from Lipper Analytical Services, Inc., the S&P 500, NASDAQ
Composite, Wilshire 5000, Russell 2000 and Value Line Composite indexes and
other industry publications. Performance of the Funds may also be compared to
the performance of comparable Funds, as reported by Lipper Analytical Services.

For additional information regarding the calculation of yield, average
annual total return and cumulative total return, see "Calculation of Performance
Data" in the Statement of Additional Information. The Company's annual report
will contain performance information that will be made available to shareholders
upon request and without charge.

LEGAL EXPERTS

The validity of the shares offered hereby will be passed upon for the
Company by Gordon Altman Butowsky Weitzen Shalov & Wein, New York, New York.
With regard to matters of Minnesota law, Gordon Altman Butowsky Weitzen Shalov &
Wein may rely upon the opinion of Dorsey & Whitney, Minneapolis, Minnesota.

PENDING LITIGATION

Complaints have been filed in U.S. District Court against the Manager and
the Distributor relating to other investment companies managed by the Manager.
These lawsuits do not involve the Company. The Manager and the Distributor have
entered into a settlement agreement which represents a consolidation of a number
of complaints. The settlement is subject to court approval. The Manager and
Distributor do not believe that the lawsuits will have a material adverse effect
upon their ability to perform under their agreements with the Manager or the
Company and they intend to defend the lawsuits vigorously. See "Pending Legal
Proceedings" in the Statement of Additional Information.

GENERAL INFORMATION

The Company is authorized to issue a total of 10 trillion shares of common
stock, with a par value of $.01 per share. 260 billion of these shares have been
authorized by the Board of Directors to be issued in 8 separate series: 10
billion shares designated as North American Fund shares, 10 billion shares as
European Value Fund shares, 10 billion shares as Pacific Value Fund shares, 10
billion shares as Latin American Value Fund shares, 10 billion shares as Bond
Fund shares, 100 billion shares as Money Market Fund shares and 110 billion
shares allocated among the other two series of the Company that are not
currently being offered for sale. The Board of Directors is empowered under the
Company's Articles of Incorporation to issue other series of the Company's
common stock without shareholder approval.

All shares, when issued, will be fully paid and nonassessable and will be
redeemable. All shares have equal voting rights. They can be issued as full or
fractional shares. A fractional share has pro rata the same kind of rights and
privileges as a full share. The shares possess no preemptive or conversion
rights.

51
<PAGE>
Each share of a series has one vote (with proportionate voting for
fractional shares) irrespective of the relative net asset value of the series'
shares. On some issues, such as the election of directors, all shares of the
Company vote together as one series. Cumulative voting is not authorized. This
means that the holders of more than 50% of the shares voting for the election of
directors can elect 100% of the directors if they choose to do so, and, in such
event, the holders of the remaining shares will be unable to elect any
directors.

On an issue affecting only a particular series, the shares of the affected
Fund vote as a separate series. An example of such an issue would be a
fundamental investment restriction pertaining to only one series. In voting on
the Investment Management and Advisory Agreement and the Sub-Advisory Agreement,
approval of the Agreements by the shareholders of a particular series would make
the Agreements effective as to that series whether or not it had been approved
by the shareholders of the other series.

The assets received by the Company for the issue or sale of shares of each
series, and all income, earnings, profits and proceeds thereof, subject only to
the rights of creditors, are allocated to such series, and constitute the
underlying assets of such series. The underlying assets of each series are
required to be segregated on the books of account, and are to be charged with
the expenses in respect to such series and with a share of the general expenses
of the Company. Any general expenses of the Company not readily identifiable as
belonging to a particular series shall be allocated among the series based upon
the relative net assets of the series at the time such expenses were accrued.

The Bylaws of the Company provide that shareholder meetings be held only
with such frequency as required under Minnesota law. Minnesota corporation law
requires only that the Board of Directors convene shareholder meetings when it
deems appropriate. In addition, Minnesota law provides that if a regular meeting
of shareholders has not been held during the immediately preceding 15 months, a
shareholder or shareholders holding 3% or more of the voting shares of the
Company may demand a regular meeting of shareholders by written notice given to
the chief executive officer or chief financial officer of the Company. Within 30
days after receipt of the demand, the Board of Directors shall cause a regular
meeting of shareholders to be called, which meeting shall be held no later than
90 days after receipt of the demand, all at the expense of the Company. In
addition, the 1940 Act requires a shareholder vote for various other matters
such as amendments to investment advisory contracts or to fundamental investment
policies and restrictions.

52
<PAGE>
APPENDIX

RATINGS OF INVESTMENTS

MOODY'S INVESTORS SERVICE INC. ("MOODY'S")

BOND RATINGS

<TABLE>
<S> <C>
Aaa....... Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa........ Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger
than in Aaa securities.
A......... Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa....... Bonds which are rated Baa are considered as medium grade obligations; i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba........ Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times in the future. Uncertainty
of position characterizes bonds in this class.
B......... Bonds which are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa....... Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca........ Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
</TABLE>

A-1
<PAGE>
<TABLE>
<S> <C>
C......... Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
</TABLE>

CONDITIONAL RATING: Municipal bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.

RATING REFINEMENTS: Moody's may apply numerical modifiers, 1, 2 and 3 in
each generic rating classification from Aa through B in its corporate and
municipal bond rating system. The modifier 1 indicates that the security ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and a modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.

COMMERCIAL PAPER RATINGS

Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
Prime-1, Prime-2, Prime-3.

Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.

STANDARD & POOR'S RATINGS GROUP ("STANDARD & POOR'S")

BOND RATINGS

A Standard & Poor's bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.

The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.

Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other reasons.

A-2
<PAGE>

<TABLE>
<S> <C>
AAA....... Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA........ Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A......... Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher-rated
categories.
BBB....... Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher-rated categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
BB........ Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.
B......... Debt rated B has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC....... Debt rated CCC has a current identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayments of principal. In the event
of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.
CC........ The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C......... The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC - debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
C1........ The rating C1 is reserved for income bonds on which no interest is being
paid.
D......... Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless Standard & Poor's
believes that such payment will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
NR........ Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not
rate a particular type of obligation as a matter of policy.
</TABLE>

A-3
<PAGE>
<TABLE>
<S> <C>
Bonds rated BB, B, CCC, CC and C are regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the
major ratings categories.
In the case of municipal bonds, the foregoing ratings are sometimes
followed by a "p" which indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the bonds being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the project, makes
no comment on the likelihood or risk of default upon failure of such
completion.
</TABLE>

COMMERCIAL PAPER RATINGS

Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into group
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Ratings are applicable to both taxable and tax-exempt commercial paper.
The categories are as follows:

Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
1, 2 and 3 to indicate the relative degree of safety.

<TABLE>
<S> <C>
A-1....... indicates that the degree of safety regarding timely payment is very
strong.
A-2....... indicates capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as
for issues designated "A-1."
A-3....... indicates a satisfactory capacity for timely payment. Obligations carrying
this designation are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
</TABLE>

A-4
<PAGE>
FITCH INVESTORS SERVICE, INC. ("FITCH")

BOND RATINGS

<TABLE>
<S> <C>
AAA....... Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA........ Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA.

Because bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated F-1+.
</TABLE>

COMMERCIAL PAPER RATINGS

The rating F-1+ is the highest commercial paper rating assigned by Fitch.
Paper rated F-1+ is regarded as having the strongest degree of assurance for
timely payment. The rating F-1 is the second highest commercial paper rating
assigned by Fitch which reflects an assurance of timely payment only slightly
less in degree than the strongest issues.

DUFF & PHELPS, INC. ("DUFF")

BOND RATINGS

<TABLE>
<S> <C>
AAA....... Bonds rated AAA are considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than U.S. Treasury
debt.
AA........ Bonds rated AA are considered by Duff to be of high credit quality with
strong protection factors. Risk is modest and may vary slightly from time
to time because of economic conditions.
</TABLE>

COMMERCIAL PAPER RATINGS

The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets, and sound liquidity factors
and company fundamentals. Risk factors are small.

IBCA LIMITED AND IBCA INC. ("IBCA")

BOND RATINGS

<TABLE>
<S> <C>
AAA....... Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
</TABLE>

A-5
<PAGE>
<TABLE>
<S> <C>
AA........ Obligations rated AA by IBCA have a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial condition
may increase investment risk, albeit not very significantly.
</TABLE>

IBCA also assigns a rating to certain international and U.S. banks. An IBCA
bank rating represents IBCA's current assessment of the strength of the bank and
whether such bank would receive support should it experience difficulties. In
its assessment of a bank, IBCA uses a dual rating system comprised of Legal
Ratings and Individual Ratings. In addition, IBCA assigns banks Long- and Short-
Term Ratings as used in the corporate ratings discussed above. Legal Ratings,
which range in gradation from 1 through 5, address the question of whether the
bank would receive support provided by central banks or shareholders if it
experienced difficulties, and such ratings are considered by IBCA to be a prime
factor in its assessment of credit risk. Individual Ratings, which range in
gradations from A through E, represent IBCA's assessment of a bank's economic
merits and address the question of how the bank would be viewed if it were
entirely independent and could not rely upon support from state authorities or
its owners.

COMMERCIAL PAPER RATINGS

The designation A1 by IBCA indicates that the obligation is supported by a
very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. Obligations rated A2 are
supported by a strong capacity for timely repayment, although such capacity may
be susceptible to adverse changes in business, economic or financial conditions.

THOMSON BANKWATCH, INC. ("BANKWATCH")

BOND RATINGS

BankWatch assigns a rating to each issuer it rates, in gradations of A
through E. BankWatch examines all segments of the organization, including, where
applicable, the holding company, member banks or associations, and other
subsidiaries. In those instances where financial disclosure is incomplete or
untimely, a qualified rating (QR) is assigned to the institution. BankWatch also
assigns, in the case of foreign banks, a country rating which represents an
assessment of the overall political and economic stability of the country in
which the bank is domiciled.

COMMERCIAL PAPER RATINGS

The rating TBW-1 is the highest short-term obligation rating assigned by
BankWatch. Obligations rated TBW-1 are regarded as having the strongest capacity
for timely repayment. Obligations rated TBW-2 are supported by a strong capacity
for timely repayment, although the degree of safety is not as high as for issues
rated TBW-1.

A-6
<PAGE>
No dealer, sales representative or other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus (and/or in the Statement of Additional Information referred to
on the cover page of this Prospectus), and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Funds or Piper Jaffray Inc. This Prospectus does not constitute an offer or
solicitation by anyone in any state in which such offer or solicitation is not
authorized, or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Introduction....................... 2
Fees and Expenses.................. 6
Financial Highlights............... 8
Investment Objectives and
Policies.......................... 11
Other Eligible Investments......... 19
Special Investment Methods......... 23
Investment Restrictions............ 31
Special Risk Considerations........ 30
Management......................... 35
Distribution of Fund Shares........ 41
Purchase of Shares................. 42
Redemption of Shares............... 44
Valuation of Shares................ 47
Dividends, Distributions and Tax
Status............................ 48
Performance Comparisons............ 50
Legal Experts...................... 51
Pending Litigation................. 51
General Information................ 51
Ratings of Investments................Appendix
</TABLE>

[LOGO]

HERCULES FUNDS INC.

August 29, 1995

HERC-05X