FIRSTAR SELECT REIT-PLUS FUND
PROSPECTUS August 1, 1999
Firstar Select Funds
431 North Pennsylvania Street
Indianapolis, Indiana 46204
For Information, Client Services and Requests:
(800) 677-FUND
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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TABLE OF CONTENTS
REIT-Plus Fund...............................................................
Past Performance.............................................................
Fund Expenses................................................................
Management of the Fund.......................................................
Distribution of Shares.......................................................
Description of Classes.......................................................
The Price of Shares..........................................................
Purchasing Shares............................................................
Selling Shares...............................................................
Dividends, Capital Gain Distributions and Taxes..............................
Financial Highlights.........................................................
Additional Information ......................................................
Year 2000 Issue..............................................................
FOR MORE INFORMATION
See the last page for more information about the fund.
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REIT-PLUS FUND
Investment Goal
The REIT-Plus Fund's investment objective is to provide above average income and
long-term growth of capital.
Investment Policies and Portfolio Securities
The fund attempts to achieve its investment goals by investing primarily in real
estate investment trusts ("REITs") plus other real estate related equity
securities (including common stock, preferred stock and securities convertible
into common stock). Under normal circumstances, the fund will invest at least
65% of its total assets in REITs. The fund will invest primarily in equity REITs
that invest in office, residential, retail, industrial and specialty properties.
The fund may also invest in mortgage REITs that invest in real estate mortgages.
Real estate related equity securities also include those issued by real estate
developers, companies with substantial real estate holdings (for investment or
as part of their operations), as well as companies whose products and services
are directly related to the real estate industry, such as building supply
manufacturers, mortgage lenders or mortgage servicing companies.
The adviser selects securities and attempts to maintain an acceptable level of
risk and volatility largely through the use of quantitative and analytical
measurement techniques. The adviser considers the following factors when using
these research techniques:
the ratio of the company's income from operations compared to the price of
the security ("price to income ratio"),
historical and projected income growth rates,
management strategy,
real estate portfolio analysis,
market capitalization,
average daily trading volume and
the amount of the company's debt, and how that debt could affect the
company's ability to make additional investments.
The Fund primarily purchases REITs with above average income growth rates
(compared to other REITs) coupled with low price to income ratios. The Fund's
adviser believes that these companies, when managed successfully, will produce
above average income and will eventually become more widely recognized by
investors as valuable investment opportunities. These factors should result in
long-term growth of capital.
When selling securities, the adviser considers three factors: (1) Have the
objectives of the fund been met? (2) Has the attractiveness of the securities
deteriorated? (3) Has the adviser's outlook changed? If the adviser can answer
each question positively, then the adviser will sell the securities.
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TEMPORARY INVESTMENTS To respond to adverse market, economic, political or other
conditions, the fund may invest up to 100% of its assets in high quality U.S.
and foreign short-term money market instruments. The fund may invest up to 35%
of its assets in these securities to maintain liquidity. Some of the short-term
money market instruments include:
commercial paper
certificates of deposit, demand and time deposits and bankers'
acceptances
U.S. government securities
repurchase agreements collateralized by U.S. government securities
money market funds
To the extent the fund engages in this temporary, defensive strategy, the fund
may not achieve its investment objective. To the extent the Fund invests in
money market funds, shareholders will be subject to duplicative management fees.
Principal Investment Risks
The main risks of investing in the fund are:
STOCK MARKET RISK The fund is subject to stock market risks and significant
fluctuations in value. If the stock market declines in value, the fund is likely
to decline in value. Therefore, you may lose money if the value of the fund
declines.
STOCK SELECTION RISK The stocks selected by the investment adviser may decline
in value or not increase in value when the stock market in general is rising.
REAL ESTATE INDUSTRY RISKS The concentration of the fund's investments in the
real estate industry will subject the fund to risks in addition to those that
apply to the general equity markets. Economic, legislative or regulatory
developments may occur which significantly affect the entire real estate
industry and thus may subject the fund to greater market fluctuations than a
fund that does not concentrate in a particular industry. In addition, the fund
will generally be subject to risks associated with direct ownership of real
estate, such as decreases in real estate values or fluctuations in rental income
caused by a variety of factors, including increases in interest rates, increases
in property taxes and other operating costs, casualty or condemnation losses,
possible environmental liabilities and changes in supply and demand for
properties. Because of the fund's strategy to concentrate in the real estate
industry, it may not perform as well as other mutual funds that do not
concentrate in only one industry.
REAL ESTATE INVESTMENT TRUST RISKS Some of the risks of equity and mortgage
REITs are that they depend on management skills and are not diversified. As a
result, REITs are subject to the risk of financing either single projects or any
number of projects. REITs depend on heavy cash flow and may be subject to
defaults by borrowers and self-liquidation. The success of REITs can be
significantly affected by changing demographic patterns. Additionally, equity
REITs may be affected by any changes in the value of the underlying property
owned by the trusts. Mortgage REITs may be affected by the quality of any credit
extended. The adviser tries to minimize these risks by selecting REITs
diversified by sector (i.e. shopping malls, apartment building complexes, health
care facilities) and geographic location.
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SMALL AND MEDIUM SIZE COMPANIES RISK The fund may invest in the stocks of small
to medium size companies. Small and medium size companies often have narrower
markets and more limited managerial and financial resources than larger, more
established companies. As a result, their performance can be more volatile and
they face greater risk of business failure. The trading volume of small and
medium size companies is normally less than that of larger companies and,
therefore, may disproportionately affect their market price, tending to make
them fall more in response to selling pressure than is the case with larger
companies. These factors could negatively affect the price of the stock and
reduce the value of the Fund.
LIQUIDITY RISK Many REITs are smaller in size and therefore are subject to
liquidity risk. Liquidity risk is the risk that certain securities may be
difficult or impossible to sell at the time and price that the investment
adviser would like to sell. The adviser may have to lower the price, sell other
securities instead or forego an investment opportunity, any of which could have
a negative effect on fund management or performance.
The Statement of Additional Information contains additional information about
the fund and the types of securities in which it may invest.
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An investment in the fund is not a deposit of Firstar Bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Who May Want to Invest
The fund may be appropriate for people who:
wish to invest for the long term
want to diversify their portfolios
want to allocate some portion of their long-term investments to real
estate securities
are willing to accept a high degree of volatility and risk in exchange
for the opportunity to realize greater financial gains in the future
The fund may not be appropriate for people who:
are investing for short terms
are risk adverse
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PAST PERFORMANCE
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The bar chart and table below illustrate the variability of the fund's returns.
The bar chart indicates the risks of investing in the fund by showing the
changes in the fund's performance from year to year (on a calendar basis). The
table shows how the fund's average annual returns over time compare with broad
measures of market performance. The fund is the successor to the portfolio of a
common trust fund managed by the adviser for over ten years. At the fund's
commencement of operations on June 24, 1997, the assets from the common trust
fund were transferred to the fund in exchange for Class Y shares. The adviser
has represented that the fund's investment objective, policies and limitations
are in all material respects identical to those of the common trust fund.
The performance information of the Class Y shares includes the performance of
the common trust fund for periods before the fund's registration as a mutual
fund became effective. The common trust fund's performance was adjusted to
reflect expenses of 1.34% (the percentage of expenses estimated for the fund in
its original prospectus). The common trust fund was not registered as a mutual
fund and therefore was not subject to certain investment restrictions that are
imposed on the fund. If the common trust fund had been registered as a mutual
fund, the performance may have been adversely affected. THE FUND'S PAST
PERFORMANCE IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE
FUTURE.
REIT-Plus Fund - Y Shares*
Calendar Year Returns (12-31)
[Bar chart showing the fund's calendar year returns for each year from 1989 to
1998]
1989 8.65%
1990 -17.87%
1991 28.83%
1992 18.30%
1993 18.94%
1994 0.02%
1995 10.07%
1996 32.00%
1997 16.75%
1998 -15.96%
Best Quarter: Q1 1993 17.77%
Worst Quarter: Q3 1990 -12.22%
*Returns prior to June 24, 1997 are of the predecessor common trust
fund, not the fund.
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Average annual total return 1 Year Five Year 10 Year Since
Through 12/31/98 Inception
- ------------------------------ ---------- ------------- ----------- -----------
REIT-Plus Fund
B shares1 N/A N/A N/A -15.19%4
Y shares2 -15.96% 7.35% 7.89% 7.37%
Morgan Stanley -16.90% N/A N/A -5.15%5
REIT Index3
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1 B Shares commenced operations on April 1, 1998.
2 Y Shares commenced operations on June 24, 1997.
3 The Morgan Stanley REIT Index is an unmanaged index comprised of the
most actively traded REITs.
4 Not annualized.
5 Based on Y Shares inception date.
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FUND EXPENSES
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This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
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Shareholder Fees (fees paid Class B Class Y
directly from your investment)
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Maximum Sales Charge (Load) Imposed None None
on Purchases (as a percentage of
offering price)
Maximum Deferred Sales Charge 5.00% None
(Load)1 (as a percentage of
offering price)
Maximum Sales Charge (Load) Imposed None None
on Reinvested Dividends
Redemption Fee None None
Exchange Fee None None
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Annual Fund Operating Expenses Class B Class Y
(expenses deducted from fund assets)
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Management Fees 0.75% 0.75%
Distribution and Service (12b-1) None None
Fees2
Other Expenses3 12.63% 0.72%
Total Annual Fund Operating Expenses
13.38% 1.47%
Expense Reimbursement4 11.78% N/A
Net Fund Operating Expenses 1.60% 1.47%
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1The contingent deferred sales charge is 5.00% in the first year, declining to
1.00% in the fifth year and 0.00% thereafter. See "Price of Shares."
2The Trust has adopted a 12b-1 Plan which permits the Fund to pay up to 0.25% of
average net assets as a 12b-1 fee to the Fund's distributor. The fund's expenses
will not be affected by the 12b-1 Plan because the Adviser does not intend to
activate the Plan through July 31, 2000. 3"Other Expenses" includes (1)
administration fees, transfer agency fees and all other ordinary operating
expenses of the fund not listed above, plus (2) an annual shareholder servicing
fee of 0.25% of average daily net assets. For the foreseeable future, the fund
plans to limit the shareholder servicing fee to an annual rate of 0.10% of
average daily net assets. 4The adviser has agreed contractually to maintain the
fund's Class B expenses until July 30, 2000 at the lesser of: a) 1.60%, or b)
the ratio of operating expenses to average net assets for the fund's Class Y
shares, for the same period. There is no contractual agreement to reimburse
Class Y expenses.
EXAMPLE The example below is intended to help you compare the cost of investing
in the fund with the cost of investing in other mutual funds.
This example assumes that:
1. You invest $10,000 in the fund for the time periods indicated and then redeem
all of your shares at the end of those periods.
2. Your investment has a 5% return each year, and
3. The fund's operating expenses remain the same. 4. You reinvest your dividends
and distributions.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
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1 Year 3 Years 5 Years 10 Years
- ------------- --------- ----------- ---------- ------------
Class B $668 $847 $1089 $2426
Class Y $154 $503 $911 $2242
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If you did not redeem your shares, you would pay the following expenses:
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1 Year 3 Years 5 Years 10 Years
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Class B $168 $547 $989 $2426
Class Y $154 $503 $911 $2242
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Class descriptions are on page ___.
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MANAGEMENT OF THE FUND
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Investment Adviser
The investment adviser for the fund is Firstar Bank, N.A. The adviser is located
at 425 Walnut Street, Cincinnati, Ohio 45202. The adviser conducts investment
research and supervision for the fund and is responsible for the purchase and
sale of securities of the fund's portfolio. The adviser receives an annual fee
from the fund for its services of 0.75% of its average daily assets.
The adviser was solely owned by StarBanc Corporation until November 20, 1998
when StarBanc Corporation merged with Firstar Corporation. The new entity
retained the "Firstar" name and Firstar Corporation is now the parent company of
the adviser. Firstar Bank, N.A. was known as Star Bank, N.A. prior to the
merger.
The merger has produced no significant changes to the management of the adviser.
Together, the two banks have become the 21st largest bank in the United States
and have blended an expertise of trust administration and investments together
with extensive knowledge in the mutual fund industry.
Firstar Bank manages trust funds and collective investment funds having a market
value in excess of $12 billion. As part of its regular banking operations,
Firstar Bank may make loans to public companies. As a result, it may be possible
for the funds to hold or acquire securities of companies that are also lending
clients of Firstar Bank. The lending relationship will not be a factor in the
selection of securities.
Portfolio Manager
Karen Bowie has been responsible for the day-to-day management of the Fund's
portfolio since March 1, 1999. Ms. Bowie has been a Senior Portfolio Manager and
Vice President of Firstar Bank since January 1999. She is responsible for
financial services research and portfolio management. From 1993 until January
1999 she served as Senior Portfolio Manager and Vice President of Investment
Management of PNC Bank, managing fixed income and value-oriented equity
portfolios. Ms. Bowie earned a Doctor of Jurisprudence degree from the Salmon P.
Chase College of Law in 1995, a Master of Business Administration degree from
Xavier University in 1990, and a Bachelor of Business Administration degree from
Xavier University in 1983. She also earned the Chartered Financial Analyst
designation in 1987.
Fund Administration, Fund Accounting, Dividend Disbursement, and Custody
Services
Unified Fund Services, Inc. provides administrative, accounting and dividend
disbursement services to the Firstar Select Funds and is located in
Indianapolis, Indiana. Firstar Bank, N.A., the fund's investment adviser, also
serves as custodian for the fund.
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DISTRIBUTION OF SHARES
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Distributor
Unified Management Corporation is the distributor for shares of the fund.
Unified is based in Indianapolis, Indiana and is the distributor for a number of
investment companies around the country.
Rule 12b-1 Plan
The fund has adopted a Rule 12b-1 Plan under the Investment Company Act of 1940.
Under the Rule 12b-1 Plan, class B and Y shares may pay up to an annual rate of
0.25% of the average daily net asset value of shares to Unified. Unified can use
this fee to finance activities that promote the sale of the fund's shares. Such
activities include, but are not necessarily limited to, advertising, printing
and mailing prospectuses to persons other than current shareholders, printing
and mailing sales literature, and compensating underwriters, dealers, and sales
personnel.
Currently, the fund is not paying or accruing Rule 12b-1 fees. The fund's
adviser does not intend to activate the Rule 12b-1 Plan through July 31, 2000.
Rule 12b-1 fees are paid out of fund assets on an on-going basis. Over time,
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
Servicing
The adviser (not the fund) may pay certain financial institutions (which may
include banks, securities dealers and other industry professionals), a
"servicing fee" for performing certain administrative functions for fund
shareholders. The servicing fee may amount to 0.25% of the average daily net
assets serviced by the institution for each calendar quarter, although it is
anticipated that no fee will be paid with respect to assets invested for more
than one year.
DESCRIPTION OF CLASSES
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Class B
Class B shares are regular retail shares and may be purchased through
broker-dealers. With class B shares, a sales charge may be imposed if you redeem
your shares within a certain time period. If you redeem your class B shares
within five full years of the date you purchased, a contingent deferred sales
charge (CDSC) may be charged by the fund's distributor. For more information on
the CDSC, see "The Price of Shares."
Class Y
The Y class of shares is available only to Firstar Bank's trust or institutional
investors. With Class Y shares you do not pay any sales charges. The Class Y
shares do pay investment management fees and other fees.
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THE PRICE OF SHARES
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How NAV is Determined
The net asset value (NAV) is calculated by taking the value of the fund's
assets, including interest on dividends accrued, but not yet collected, less all
liabilities and dividing the result by the number of shares outstanding. The net
asset value for the fund is determined as of the close of trading (normally 4:00
p.m., Eastern Time) on the New York Stock Exchange, Monday through Friday,
except on days the New York Stock Exchange is not open.
- --------------------------------
NAV=
Assets - Liabilities
--------------------
#outstanding shares
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Determining Market Value of Securities
Market or fair values of the fund's portfolio securities are determined as
follows:
1. For equity securities: according to the last quoted sale price on a
national securities exchange or on the NASDAQ National Market System, if
applicable.
2. In the absence of recorded sales for listed equity securities: according to
the mean between the last closing bid and asked prices.
3. For unlisted equity securities: latest bid prices
4. For bonds and other fixed-income securities: as determined by an
independent pricing service.
5. For short-term obligations: according to the mean between bid and asked
prices as furnished by an independent pricing service.
6. For short-term obligations with remaining maturity of 60 days or less at
the time of purchase: at amortized cost.
7. For all other securities: at fair value as determined in good faith by the
Trustees.
What Shares Cost- Class B Shares
If you purchase class B shares, you will pay the net asset value next determined
after your order is received. There is no sales charge on this class at the time
you purchase your shares. However, there is a contingent deferred sales charge
on Class B shares at the time you redeem. Any applicable CDSC will be imposed on
the lesser of the net asset value of the redeemed shares at the time of purchase
or the net asset value of the redeemed shares at the time of redemption in the
amount indicated by the table below:
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YEAR OF REDEMPTION AFTER PURCHASE CONTINGENT DEFERRED SALES CHARGE
- ------------------------------------- ---------------------------------------
Year 1 5.00%
Year 2 4.00%
Year 3 3.00%
Year 4 2.00%
Year 5 1.00%
Year 6 0.00%
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In computing the amount of CDSC you could be charged, redemptions are deemed to
have occurred in the following order:
1. shares of the fund you purchased by reinvesting your dividends and long-term
capital gains
2. shares of the fund you held for more than five full years from the date of
purchase
3. shares of the fund you held for fewer than five full years on a first-in,
first-out basis
A redemption made under the Automatic Withdrawal Plan (see "Selling Shares")
will not be assessed CDSC as long as annual redemptions do not amount to more
than 10% of your initial balance. CDSC is also not charged on:
shares purchased by reinvesting your dividends or distributions of short or
long-term capital gains
shares held for more than five full years after purchase
redemptions made following death or disability (as defined by the IRS)
redemptions made as minimum required distributions under an IRA or other
retirement plan to a shareholder who is 70 1/2 years old or older.
redemptions made in shareholder accounts that do not have the required
minimum balance
What Shares Cost-Class Y Shares
If you purchase Class Y shares you will pay their NAV next determined after your
order is received. There is no sales charge on this class at any time.
PURCHASING SHARES
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Opening an Account
To open an account, first determine if you are buying class B or Y shares (see
page ___ for class descriptions.) The minimum initial investment amounts for the
fund are as follows:
$1,000 for individuals
$500 for Education IRA customers
$25 for Firstar Bank Connections Group Banking customers and Firstar Bank
Employees and members of their immediate family, participants in the
Firstar Bank Student Finance 101 Program who establish a systematic
investment program and persons contributing to SIMPLE IRAs
$1,000 for trust or institutional customers of Firstar Bank ($1,000 may be
determined by combining the amount in all mutual fund accounts you maintain
with Firstar Bank)
Additional investments may be made in any amount.
<PAGE>
Waivers-Class B Shares
The following persons will not have to pay a sales charge on class B shares:
employees and retired employees of Firstar Bank (or Star Bank), Unified
Management Corporation, or their affiliates, or of any bank or investment
dealer who has a sales agreement with Unified Management Corporation with
regard to the Fund, and members of their families (including parents,
grandparents, siblings, spouses, children, and in-laws) of such employees
or retired employees;
Firstar Trust customers of Firstar Corporation and its subsidiaries; and
non-trust customers of financial advisers
<PAGE>
Receipt of Orders
Shares may only be purchased on days the New York Stock Exchange is open for
business. Your order will be considered received after your check is converted
into federal funds and received by Firstar Bank (usually the next business day).
If you are paying with federal funds (wire), your order will be considered
received when Firstar Bank receives the federal funds.
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When making a purchase request, make sure your
request is in good order. "Good order" means your
letter of instruction includes:
the name of the fund
the dollar amount of share to be purchased
purchase application or investment stub
check payable to Firstar Select Funds
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Timing of Requests
The price per share will be the net asset value next computed after the time
your request is received in good order and accepted by the fund or the fund's
authorized agent. All requests received in good order by the fund before 4:00
p.m. (Eastern time) will be executed on that same day. Requests received after
4:00 p.m. will be processed on the next business day.
|X|
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Methods of Buying
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To Open an Account To Add to an Account
- ------------------------------------------- ----------------------------------------- -----------------------------------------
By telephone Call Firstar Select Funds at 1-800- Call Firstar Select Funds at 1-800-677-
677-FUND to place the order. (Note: for FUND to place the order. (Note: for
(Firstar Bank customers only) security reasons, requests by telephone security reasons, requests by telephone
may be recorded.) may be recorded.)
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By Mail Make your check payable to "Firstar Fill out the investment stub from an
Select Funds." Forward the check and account statement, or indicate the fund
your application to the address below. name and account number on your check.
Make your check payable to "Firstar Select
Funds." Forward the check and stub to
the address below.
- ------------------------------------------- ----------------------------------------- -----------------------------------------
By Federal Funds Wire Forward your application to Firstar Call Firstar Select Funds at
Select Funds at the address below. 1-800-677-FUND to notify of incoming
Call 1-800-677- FUND to obtain an wire. Use the following instructions:
account number. Wire funds using the Firstar Bank, N.A.
instructions to the right. ABA# 042000013
Credit: Unified Management Corporation
Account # 486464944
Further Credit:
Firstar Select REIT-Plus Fund
(designate Class B or Y)
(your account #)
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Automatic Investment Plan Open a fund account with one of the If you didn't set up an automatic
other methods. If by mail, be sure to investment plan with your original
include your checking account number on application, call Firstar at
the appropriate section of your 1-800-677-FUND. Additional investments
application. (minimum of $25 per period) will be
taken automatically monthly or
quarterly from your checking account.
- ------------------------------------------- ----------------------------------------- -----------------------------------------
Through Shareholder Service To purchase shares for another To purchase shares for another
Organizations investor, call Firstar Select Funds at investor, call Firstar Select Funds at
1-800-677-FUND. 1-800-677-FUND.
- ------------------------------------------- ----------------------------------------- -----------------------------------------
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Address for Firstar Select Funds
You should use the following address when sending documents by mail or by
overnight delivery:
By Mail By Overnight Delivery:
Firstar Select Funds Firstar Select Funds
Client Services Client Services
c/o Firstar Bank, N.A. c/o Firstar Bank, N.A.
425 Walnut Street, ML 7135 425 Walnut Street, ML 7135
Cincinnati, Ohio 45202 Cincinnati, Ohio 45202
NOTE: The fund does not consider the U.S. Postal Service or other independent
delivery services to be its agents. Therefore, deposits in the mail or with such
services, or receipt at Firstar Bank's post office box of purchase applications
or redemption requests do not constitute receipt by the funds.
<PAGE>
SELLING SHARES
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Methods of Selling
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To Sell Some or All of Your Shares
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By telephone Call Firstar Select Funds at 1-800-677-FUND to sell any
amount of shares. (NOTE: For security reasons, requests by
telephone may be recorded.)
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By Mail Send a letter instructing the Firstar Select Funds to redeem
the dollar amount of shares you wish. The letter should
contain the fund's name, the account number and the number
of shares or the dollar amount of shares to be redeemed. Be
sure to have all shareholders sign the letter. If your
account is an IRA, signatures must be guaranteed.
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Redemption In-Kind Call Firstar Select Funds at 1-800-677-FUND to request the
amount of money you want. If the amount is over $250,000 or
1% of the class's net asset value, the fund has the right to
redeem your shares by giving you readily marketable
securities instead of cash.
- ---------------------------------------------------------------- --------------------------------------------------------------
By Federal Funds Wire
Call Firstar Select Funds at 1-800-677-FUND to request the
amount of money you want. Be sure to have all necessary
information from your bank. Your bank may charge a fee to
receive wired funds.
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Automatic Withdrawal Plan Call Firstar Select Funds at 1-800-677-FUND to arrange for
regular monthly or quarterly fixed withdrawal payments. The
minimum payment you may receive is $25 per period. Note
that this plan may deplete your investment and affect your
income or yield. Also, it isn't wise to make purchases of
class B shares while participating in this plan because of the
sales charges.
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Shareholder Service Organization Consult your account agreement for information on redeeming
shares.
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<PAGE>
When Redemption Proceeds Are Sent to You
Your shares may only be redeemed on days on which the fund computes its net
asset value. Your redemption requests cannot be processed on days the New York
Stock Exchange is closed or on federal holidays which restrict wire transfers.
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All requests received in good order by Firstar Select Funds
before 3:30 p.m. (Eastern time),will normally be wired to the When making a redemption request, make sure your request is
bank you indicate or mailed on the following day to the in good order, "Good order" means your letter of
address of record. In no event will proceeds be wired or a instruction includes:
check mailed more than 7 calendar days after Firstar receives the name of the fund
a proper redemption request. If you purchase shares using a the number of shares or the dollar amount of shares
check and soon after request a redemption, Firstar Select to be redeemed
Funds will honor the redemption request, but will not mail the signatures of all registered shareholders exactly
proceeds until your purchase check has cleared (usually within as the shares are registered (guaranteed for IRAs)
12 business days). the account registration number
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Value of Shares Sold
Your shares will be redeemed at the net asset value next determined after
Firstar Select Funds receives you redemption request in good order. In the case
of class B shares, the applicable contingent deferred sales charge will be
subtracted from your redemption amount or your account balance, per your
instructions.
Accounts with Low Balances
Due to the high cost of maintaining accounts with low balances, Firstar Select
Funds may mail you a notice if your account falls below $1,000 requesting that
you bring the account back up to $1,000 or close it out. If you do not respond
to the request within 30 days , Firstar Select Funds may close the account on
your behalf and send you the proceeds. If you have an account through a
shareholder service organization, consult you account agreement for information
on accounts with low balances.
Signature Guarantees
You will need your signature guaranteed if:
you are redeeming shares from an IRA account
you request a redemption to be made payable to a person not on record with
the fund, or
you request that a redemption be mailed to an address other than that on
record with the fund.
You may obtain signature guarantees from most trust companies, commercial banks
or other eligible guarantor institutions.
<PAGE>
DIVIDENDS, CAPITAL GAIN
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Capital Gains
The fund declares and pays dividends on a quarterly basis. Unless you provide a
written request to receive payment in cash, your dividends will automatically be
reinvested in additional shares of the fund. Dividends paid in cash will be
mailed to you via the U.S. Postal Service. Keep in mind, undeliverable checks or
checks not deposited within six months will be reinvested in additional shares
of the fund at the then current net asset value. Dividends paid in cash or in
additional shares are treated the same for tax purposes.
If the fund realizes capital gains, they will be distributed once every 12
months.
Tax Information
The fund will pay no federal income tax because it expects to meet certain
Internal Revenue Code requirements. Depending on the purchase price and the sale
price, you may have a gain or a loss if you sell your shares of the fund. The
fund will provide you with detailed tax information for reporting purposes. You
should consult your own tax adviser regarding tax consequences under your state
and local laws.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional shares. All dividends paid by the funds and distributions of
net realized short-term capital gains are taxable as ordinary income.
Distributions paid by a fund from net realized long-term capital gains are
taxable as long-term capital gain. The capital gain holding period and the
applicable tax rate is determined by the length of time the fund has held the
security and not the length of time that you have held shares in the fund. The
fund expects that, because of its investment objective, distributions will
consist of income and long- and short-term capital gains. The fund will provide
you with detailed tax information for reporting purposes.
On the account application, you will be asked to certify that your social
security number or taxpayer identification number is correct and that you are
not subject to backup withholding for failing to report income to the IRS. If
you are subject to backup withholding or you did not certify your taxpayer
identification number, the IRS requires the fund to withhold 31% of any dividend
and redemption or exchange proceeds. The fund reserves the right to reject any
application that does not include a certified social security or taxpayer
identification number.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table set forth below is intended to help you
understand the fund's financial performance for the fund's period of operations.
Most of the information reflects financial results with respect to a single fund
share. The total returns in the table represent the rates that an investor would
have earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions). This information has been audited by McCurdy &
Associates CPA's., Inc., whose report, along with the fund's financial
statements, is included in the fund's annual report, which is available upon
request.
<TABLE>
<S> <C> <C> <C>
Class B Class Y
------- -------
Year Year Year
Ended Ended Ended
March 31, March 31, March 31,
1999 1999 1998(a)
---- ---- -------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning ................................... $ 10.59 $10.59 $10.00
Income from investment
Operations:
Net investment income ................................... 0.40 0.40 0.35
Net realized and unrealized
gain (loss) on investments............................... (2.54) (2.55) 0.86
-------- ------ -------
Total from investment income ................................. (2.14) (2.15) 1.21
Less distributions:
Dividends from net
investment income .................................. (0.38) (0.40) (0.35)
Distributions from net realized
Gains on investments................................ (0.08) (0.08) (0.27)
------ ------ ------
Total from distributions ..................................... (0.46) (0.48) (0.62)
------ ------ ------
Net asset value at end of period ............................. $ 7.99 $ 7.96 $ 10.59
===== ==== ======
TOTAL RETURN.................................................. (20.65%) (20.59%) 14.96%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands).................... 90,562 30,566 43,981
Ratio of total expenses to
average net assets ................................. 13.38% 1.47% 1.52%(b)
Ratio of total expenses to
average net assets (after reimbursement) ........... 1.45% ------ ------
Ratio of net investment
income to average net assets........................ (7.53%) 4.35% 4.29%(b)
Ratio of net investment
income to average net assets (after reimbursement) . 4.39% ------ ------
Portfolio turnover ...................................... 45.48% 45.48% 29.50%(b)
(a) For the period June 24, 1997 (commencement of operations) to March 31, 1998.
(b) Annualized.
</TABLE>
<PAGE>
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
The investment objective of the fund may be changed without shareholder
approval. You will be notified at least 30 days in advance of any change.
Each share of the fund is subject to redemption at any time if the Board of
Trustees determines in its sole discretion that failure to so redeem may have
materially adverse consequences to all or any of the shareholders of the fund.
YEAR 2000 ISSUE
- --------------------------------------------------------------------------------
Like all financial service providers, the fund's investment adviser, the
distributor and other third party service providers utilize systems that may be
affected by year 2000 transition issues and other date related issues. The
services provided to you and the fund by these service providers depend on the
smooth functioning of their computer systems and those of other parties they
deal with. Many computer software systems in use today cannot distinguish the
year 2000 from the year 1900 because of the way dates are encoded and
calculated. Such an event could have a negative impact on handling securities
trades, payments of interest and dividends, pricing and account services, as
well as worldwide markets and economies. Although there can be no assurance at
this time that there will be no adverse impact on the fund, the fund's service
providers have advised the fund that they have been actively working on
necessary changes to their computer systems to prepare for the year 2000. The
fund's service providers expect that their systems, and those of other parities
they deal with, will be adapted in time for that event. However, there can be no
assurance that the computer systems of the companies in which the fund invests
will be timely converted or that the value of such investments will not be
adversely affected by the year 2000 issue.
<PAGE>
Firstar Select Funds
FOR MORE INFORMATION
You may obtain the following and other information on the Firstar Select
REIT-Plus Fund free of charge:
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS
The annual and semi-annual reports provide the fund's most recent financial
reports and portfolio listings. The annual report contains a discussion of the
market conditions and investment strategies that affected the fund's performance
during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI) DATED AUGUST 1, 1999
The SAI is incorporated into this prospectus by reference (i.e. legally made a
part of this prospectus). The SAI provides more details about the fund's
policies and management.
To receive any of these documents or prospectuses on the Firstar Select
REIT-Plus Fund:
By telephone:
1-800-677-FUND
By mail:
Firstar Select Funds
Client Services
C/o Firstar Bank, N.A.
425 Walnut Street, ML 7135
Cincinnati, Ohio 45202
On the Internet:
Text only versions of fund documents can be viewed online or downloaded from:
http://www.sec.gov.
You may review and obtain copies of fund information (including the
SAI) at the SEC Public Reference Room in Washington, D.C. Please call
1-800-SEC-0330 for information relating to the operation of the Public Reference
Room. Copies of the information may be obtained for a fee by writing the Public
Reference Section, Securities and Exchange Commission, Washington, D.C.
20549-6009.
Investment Company Act File # 811-8155
<PAGE>
FIRSTAR SELECT REIT-PLUS FUND
A series of Firstar Select Funds
STATEMENT OF ADDITIONAL INFORMATION
August 1, 1999
This Statement of Additional Information ("SAI") is not a Prospectus.
It should be read in conjunction with the Prospectus of Firstar Select REIT-Plus
Fund dated August 1, 1999. This SAI incorporates by reference the financial
statements and independent auditor's report from the Fund's Annual Report to
Shareholders for the fiscal year ended March 31, 1999. A free copy of the
Prospectus and Annual Report can be obtained by writing the Transfer Agent at
431 N. Pennsylvania Street, Indianapolis, Indiana 46204, or by calling
1-800-677-FUND.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
DESCRIPTION OF THE TRUST AND FUND............................................2
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS........3
INVESTMENT LIMITATIONS.......................................................4
THE INVESTMENT ADVISER.......................................................6
TRUSTEES AND OFFICERS........................................................7
PORTFOLIO TRANSACTIONS AND BROKERAGE.........................................8
DISTRIBUTION PLAN............................................................10
SHAREHOLDER SERVICES PLAN....................................................10
CONVERSION TO FEDERAL FUNDS..................................................10
DETERMINATION OF SHARE PRICE.................................................10
INVESTMENT PERFORMANCE.......................................................11
CUSTODIAN....................................................................12
TRANSFER AGENT AND ADMINISTRATOR.............................................12
ACCOUNTANTS..................................................................12
DISTRIBUTOR..................................................................12
FINANCIAL STATEMENTS.........................................................12
<PAGE>
DESCRIPTION OF THE TRUST AND FUND
Firstar Select REIT-Plus Fund (the "Fund") was organized as a
diversified series of Firstar Select Funds (the "Trust"). The Trust is an
open-end investment company established under the laws of Ohio by an Agreement
and Declaration of Trust dated February 28, 1997 (the "Trust Agreement"). The
Trust Agreement permits the Trustees to issue an unlimited number of shares of
beneficial interest of separate series without par value. The Fund (the only
series currently authorized by the Trustees) was organized on February 28, 1997,
and commenced operations on June 24, 1997.
The shares of the Fund are divided into two classes, designated Class B
and Class Y shares. The differing sales charges and other expenses applicable to
the different classes of the Fund's shares may affect the performance of those
classes. Broker/dealers and others entitled to receive compensation for selling
or servicing Fund shares may receive more with respect to one class than
another. The Board of Trustees of the Trust does not anticipate that there will
be any conflicts among the interests of the holders of the different classes of
Fund shares. On an ongoing basis, the Board will consider whether any such
conflict exists and, if so, take appropriate action. More information concerning
the classes of shares of the Fund may be obtained by calling Firstar Bank at
1-800-677-FUND.
The Fund does not issue share certificates. All shares are held in
non-certificate form registered on the books of the Fund and the Transfer Agent
for the account of the shareholder. Each share of a series represents an equal
proportionate interest in the assets and liabilities belonging to that series
with each other share of that series and is entitled to such dividends and
distributions out of income belonging to the series as are declared by the
Trustees. The shares do not have cumulative voting rights or any preemptive or
conversion rights, and the Trustees have the authority from time to time to
divide or combine the shares of any series into a greater or lesser number of
shares of that series so long as the proportionate beneficial interest in the
assets belonging to that series and the rights of shares of any other series are
in no way affected. In case of any liquidation of a series, the holders of
shares of the series being liquidated will be entitled to receive as a class a
distribution out of the assets, net of the liabilities, belonging to that
series. Expenses attributable to any series are borne by that series. Any
general expenses of the Trust not readily identifiable as belonging to a
particular series are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. No shareholder
is liable to further calls or to assessment by the Trust without his or her
express consent.
Any Trustee of the Trust may be removed by vote of the shareholders
holding not less than two-thirds of the outstanding shares of the Trust. The
Trust does not hold an annual meeting of shareholders. The Trust will, if
requested to do so by the holders of at least 10% of the Trust's outstanding
shares, call a meeting of shareholders for the purpose of voting upon the
question of removal of a trustee or trustees and will assist in communications
with other shareholders. When matters are submitted to shareholders for a vote,
each shareholder is entitled to one vote for each whole share he owns and
fractional votes for fractional shares he owns. All shares of the Fund have
equal voting rights and liquidation rights. A separate vote is taken by a class
of shares of the Fund if a matter affects just that class of shares. The
Declaration of Trust can be amended by the Trustees, except that any amendment
that adversely effects the rights of shareholders must be approved by the
shareholders affected.
<PAGE>
The Fund may determine to allocate certain of its expenses (in addition
to 12b-1 fees) to the specific class of the Fund's shares to which those
expenses are attributable. For example, a higher transfer agency fee per
shareholder account may be imposed on a class of shares subject to a contingent
deferred sales charge because, upon redemption, the duration of the
shareholder's investment must be determined.
The Fund has filed an election with the Securities and Exchange
Commission which permits the Fund to make redemption payments in whole or in
part in securities or other property if the Trustees determine that existing
conditions make cash payments undesirable. However, the Fund has committed to
pay in cash all redemptions for any shareholder, limited in amount with respect
to each shareholder during any ninety day period to the lesser of (a) $250,000
or (b) one percent of the net asset value of the Fund at the beginning of such
period.
As of May 21, 1999 the following persons may be deemed to beneficially
own five percent (5%) or more of the Class Y shares of the Fund: Firstar Bank,
N.A., trustee of the First Cinco omnibus accounts, PO Box 1118 ML 6120,
Cincinnati, Ohio 45201 - 99.37%.
As of May 21, 1999, the following persons may be deemed to beneficially
own five percent (5%) or more of the Class B shares of the Fund.
- ---------------------------------------- -------------------------- ------------
Name Address Percentage
- ---------------------------------------- -------------------------- ------------
- ---------------------------------------- -------- ----------------- ------------
Louis S. Ross, IRA 6221 N. Applecross Rd. 14.12 %
Highland Heights, OH 44143
- ---------------------------------------- -------------------------- ------------
- ---------------------------------------- -------------------------- ------------
John C. Loebs & Diann E. Loebs, JTWROS 14680 Winfield Park Dr. 8.77 %
Novelty, OH 44072
- ---------------------------------------- -------------------------- ------------
- ---------------------------------------- -------------------------- ------------
Kenneth A. Burke, IRA 611 Jefferson Drive 72.61 %
Cleveland, OH 44143
- ---------------------------------------- -------------------------- ------------
As of May 21, 1999, Firstar Bank, N.A. may be deemed to control the Fund as a
result of its beneficial ownership of the shares of the Fund.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS
This section contains a more detailed discussion of some of the
investments the Fund may make and some of the techniques it may use.
Equity Securities
The Fund may invest in common stock, preferred stock and common stock
equivalents (such as convertible preferred stock and convertible debentures) of
real estate related companies (including REITs) and other companies. Convertible
preferred stock is preferred stock that can be converted into common stock
pursuant to its terms. Convertible debentures are debt instruments that can be
converted into common stock pursuant to their terms. The Adviser intends to
invest only in convertible debentures rated A or higher by Standard & Poor's
Corporation ("S&P") or by Moody's Investors Services, Inc. ("Moody's") or, if
unrated, are deemed to be of comparable quality by the Adviser. The Fund may
hold warrants and rights issued in conjunction with common stock, but in general
will sell any such warrants or rights as soon as practicable after they are
received. Warrants are options to purchase equity securities at a specified
price valid for a specific time period. Rights are similar to warrants, but
normally have a short duration and are distributed by the issuer to its
shareholders.
Foreign Securities
The Fund may invest up to 10 % of its net assets at the time of
purchase in foreign equity securities including REITs. Purchases of foreign
securities are usually made in foreign currencies and, as a result, the Fund may
incur currency conversion costs and may be affected favorably or unfavorably by
changes in the value of foreign currencies against the U.S. dollar. In addition,
there may be less information publicly available about a foreign company than
about a U.S. company, and foreign companies are not generally subject to
accounting, auditing and financial reporting standards and practices comparable
to those in the U.S. Other risks associated with investments in foreign
securities include changes in restrictions on foreign currency transactions and
rates of exchanges, changes in the administrations or economic and monetary
policies of foreign governments, the imposition of exchange control regulations,
the possibility of expropriation decrees and other adverse foreign governmental
action, the imposition of foreign taxes, less liquid markets, less government
supervision of exchanges, brokers and issuers, difficulty in enforcing
contractual obligations, delays in settlement of securities transactions and
greater price volatility. In addition, investing in foreign securities will
generally result in higher commissions than investing in similar domestic
securities.
Option Transactions
The Fund may engage in option transactions involving individual
securities and stock indexes. An option involves either (a) the right or the
obligation to buy or sell a specific instrument at a specific price until the
expiration date of the option, or (b) the right to receive payments or the
obligation to make payments representing the difference between the closing
price of a stock index and the exercise price of the option expressed in dollars
times a specified multiple until the expiration date of the option. Options are
sold (written) on securities and stock indexes. The purchaser of an option on a
security pays the seller (the writer) a premium for the right granted but is not
obligated to buy or sell the underlying security. The purchaser of an option on
a stock index pays the seller a premium for the right granted, and in return the
seller of such an option is obligated to make the payment. A writer of an option
may terminate the obligation prior to expiration of the option by making an
offsetting purchase of an identical option. Options are traded on organized
exchanges and in the over-the-counter market. To cover the potential obligations
involved in writing options, the Fund will either (a) own the underlying
security, or in the case of an option on a market index, will hold a portfolio
of stocks substantially replicating the movement of the index, or (b) the Fund
will segregate with the Custodian high grade liquid debt obligations sufficient
to purchase the underlying security or equal to the market value of the stock
index option, marked to market daily.
The purchase and writing of options requires additional skills and
techniques beyond normal portfolio management, and involves certain risks. The
purchase of options limits the Fund's potential loss to the amount of the
premium paid and can afford the Fund the opportunity to profit from favorable
movements in the price of an underlying security to a greater extent than if
transactions were effected in the security directly. However, the purchase of an
option could result in the Fund losing a greater percentage of its investment
than if the transaction were effected directly. When the Fund writes a call
option, it will receive a premium, but it will give up the opportunity to profit
from a price increase in the underlying security above the exercise price as
long as its obligation as a writer continues, and it will retain the risk of
loss should the price of the security decline. When the Fund writes a put
option, it will assume the risk that the price of the underlying security or
instrument will fall below the exercise price, in which case the Fund may be
required to purchase the security or instrument at a higher price than the
market price of the security or instrument. In addition, there can be no
assurance that the Fund can effect a closing transaction on a particular option
it has written. Further, the total premium paid for any option may be lost if
the Fund does not exercise the option or, in the case of over-the-counter
options, the writer does not perform its obligations.
Loans of Portfolio Securities
The Fund may make long- and short-term loans of its portfolio
securities. Under the lending policy authorized by the Board of Trustees and
implemented by the Adviser in response to requests of broker-dealers or
institutional investors which the Adviser deems qualified, the borrower must
agree to maintain collateral, in the form of cash or U.S. government
obligations, with the Fund on a daily mark-to-market basis in an amount at least
equal to 100% of the value of the loaned securities. The Fund will continue to
receive dividends or interest on the loaned securities and may terminate such
loans at any time or require such securities in time to vote on any matter which
the Adviser determines to be important. With respect to loans of securities,
there is the risk that the borrower may fail to return the loaned securities or
that the borrower may not be able to provide additional collateral.
Corporate Debt Securities
Corporate debt securities are bonds or notes issued by corporations and
other business organizations, including business trusts, in order to finance
their credit needs. Corporate debt securities include commercial paper which
consists of short term (usually from one to two hundred seventy days) unsecured
promissory notes issued by corporations in order to finance their current
operations. Corporate debt securities are subject to the risk that the company
may not be able to make interest and principal payments when due. In addition,
these debt securities may decrease in value when interest rates rise. This
interest rate risk increases with debt securities of longer maturities. Under
normal circumstances, the Fund may invest up to 5% of its net assets in
corporate bonds and notes. The Fund intends to invest only in fixed income
securities rated A or higher by Moody's Investors Services, Inc. or by Standard
and Poor's Corporation or, if unrated, are deemed to be of comparable quality by
the Adviser.
U.S. Government Obligations
U.S. government obligations may be backed by the credit of the
government as a whole or only by the issuing agency. U.S. Treasury bonds, notes,
and bills and some agency securities, such as those issued by the Federal
Housing Administration and the Government National Mortgage Association (GNMA),
are backed by the full faith and credit of the U.S. government as to payment of
principal and interest and are the highest quality government securities. Other
securities issued by U.S. government agencies or instrumentalities, such as
securities issued by the Federal Home Loan Banks and the Federal Home Loan
Mortgage Corporation, are supported only by the credit of the agency that issued
them, and not by the U.S. government. Securities issued by the Federal Farm
Credit System, the Federal Land Banks, and the Federal National Mortgage
Association (FNMA) are supported by the agency's right to borrow money from the
U.S. Treasury under certain circumstances, but are not backed by the full faith
and credit of the U.S. government. If a U.S. government agency or
instrumentality in which the Fund invests, defaults and the U.S. government does
not stand behind the obligation, the Fund's share price could fall. Under normal
circumstances, the Fund may invest up to 5% of its net assets in U.S. government
obligations.
Repurchase Agreements
The Fund may invest in repurchase agreements fully collateralized by
U.S. government obligations. A repurchase agreement is a short-term investment
in which the purchaser (i.e., the Fund) acquires ownership of a U.S. government
obligation (which may be of any maturity) and the seller agrees to repurchase
the obligation at a future time at a set price, thereby determining the yield
during the purchaser's holding period (usually not more than seven days from the
date of purchase). Any repurchase transaction in which the Fund engages will
require full collateralization of the seller's obligation during the entire term
of the repurchase agreement. In the event of a bankruptcy or other default of
the seller, the Fund could experience both delays in liquidating the underlying
security and losses in value. However, the Fund intends to enter into repurchase
agreements only with banks with assets of $1 billion or more and registered
securities dealers determined by the Adviser (subject to review by the Board of
Trustees) to be creditworthy. The Adviser monitors the creditworthiness of the
banks and securities dealers with which the Fund engages in repurchase
transactions.
INVESTMENT LIMITATIONS
FUNDAMENTAL. The investment limitations described below have been
adopted by the Trust with respect to the Fund and are fundamental
("Fundamental"), i.e., they may not be changed without the affirmative vote of a
majority of the outstanding shares of the Fund. As used in the Prospectus and
the Statement of Additional Information, the term "majority" of the outstanding
shares of the Fund means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting; or
(2) more than 50% of the outstanding shares of the Fund. Other investment
practices which may be changed by the Board of Trustees without the approval of
shareholders to the extent permitted by applicable law, regulation or regulatory
policy are considered non-fundamental ("Non-Fundamental").
1. Borrowing Money. The Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is an asset coverage
of 300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage of
300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
2. Senior Securities. The Fund will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is (a) consistent with or permitted by the
Investment Company Act of 1940, as amended, the rules and regulations
promulgated thereunder or interpretations of the Securities and Exchange
Commission or its staff and (b) as described in the Prospectus and the Statement
of Additional Information.
3. Underwriting. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. Real Estate. The Fund will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or that have a significant portion
of their assets in real estate (including real estate investment trusts).
5. Commodities. The Fund will not purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude the Fund from purchasing or selling options or
futures contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. Concentration. The Fund will not invest 25% or more of its total
assets in any particular industry other than the real estate industry. This
limitation is not applicable to investments in obligations issued or guaranteed
by the U.S. government, its agencies and instrumentalities or repurchase
agreements with respect thereto.
With respect to the percentages adopted by the Trust as maximum
limitations on its investment policies and limitations, an excess above the
fixed percentage will not be a violation of the policy or limitation unless the
excess results immediately and directly from the acquisition of any security or
the action taken. This paragraph does not apply to the borrowing policy set
forth in paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment
company, whether organized as a trust, association or corporation, or a personal
holding company, may be merged or consolidated with or acquired by the Trust,
provided that if such merger, consolidation or acquisition results in an
investment in the securities of any issuer prohibited by said paragraphs, the
Trust shall, within ninety days after the consummation of such merger,
consolidation or acquisition, dispose of all of the securities of such issuer so
acquired or such portion thereof as shall bring the total investment therein
within the limitations imposed by said paragraphs above as of the date of
consummation.
NON-FUNDAMENTAL. The following limitations have been adopted by the
Trust with respect to the Fund and are Non-Fundamental (see "Investment
Limitations" above).
1. Pledging. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
2. Borrowing. The Fund will not purchase any security while borrowings
(including reverse repurchase agreements) representing more than 5% of its total
assets are outstanding. The Fund will not engage in borrowing or enter into
reverse repurchase agreements.
3. Margin Purchases. The Fund will not purchase securities or evidences
of interest thereon on "margin." This limitation is not applicable to short term
credit obtained by the Fund for the clearance of purchases and sales or
redemption of securities, or to arrangements with respect to transactions
involving options, futures contracts, short sales and other permitted
investments and techniques.
4. Options. The Fund will not purchase or sell puts, calls, options or
straddles, except as described in the Prospectus and the Statement of Additional
Information.
5. Short Sales. The Fund will not effect short sales of securities.
6. Illiquid Securities. The Fund will not purchase securities that are
restricted as to resale or otherwise illiquid. For this purpose, illiquid
securities generally include securities which cannot be disposed of within seven
days in the ordinary course of business without taking a reduced price. Certain
Rule 144A securities may be considered liquid; however the Fund has no present
intention of investing in such securities.
7. Money Market Funds. The Fund will not purchase shares of any money
market fund if immediately after such purchase more than 3 percent of the total
outstanding shares of the money market fund would be owned by the Fund and its
affiliates.
THE INVESTMENT ADVISER
The Fund's investment adviser is Firstar Bank, N.A., 425 Walnut Street,
Cincinnati, Ohio 45201 ("Firstar Bank" or the "Adviser"). The Adviser is a
wholly owned subsidiary of Firstar Corporation, a bank holding company. Because
of internal controls maintained by the Adviser to restrict the flow of
non-public information, Fund investments are typically made without any
knowledge of Firstar Bank's or its affiliates' lending relationships with an
issuer.
Under the terms of the management agreement (the "Agreement"), the
Adviser manages the Fund's investments subject to approval of the Board of
Trustees. As compensation for its management services, the Fund is obligated to
pay the Adviser a fee computed and accrued daily and paid monthly at an annual
rate of 0.75% of the average daily net assets of the Fund. The Adviser may waive
all or part of its fee, at any time, and at its sole discretion, but such action
shall not obligate the Adviser to waive any fees in the future. For the fiscal
year ended March 31, 1999, and for the period from June 24, 1997 (commencement
of operations) through March 31, 1998, the Fund paid fees to the Adviser of
$281,358 and $214,090, respectively.
The Adviser retains the right to use the names "Star," "Star Select,"
and" "Star Select REIT-Plus" or any variation thereof in connection with another
investment company or business enterprise with which the Adviser is or may
become associated. The Trust's right to use such
<PAGE>
names automatically ceases ninety days after termination of the Agreement and
may be withdrawn by the Adviser on ninety days written notice.
The Adviser will, and other banks and financial institutions may,
provide shareholder services and administer shareholder accounts. The
Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of the Fund believes that
the Glass-Steagall Act should not preclude a bank from providing shareholder and
shareholder account services. However, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law. If a bank were prohibited from continuing to perform all or a part of such
services, management of the Fund believes that there would be no material impact
on the Fund or its shareholders. Banks may charge their customers fees for
offering these services to the extent permitted by applicable regulatory
authorities, and the overall return to those shareholders availing themselves of
the bank services will be lower than to those shareholders who do not. The Fund
may from time to time purchase securities issued by banks which provide such
services; however, in selecting investments for the Fund, no preference will be
shown for such securities. The Fund will not purchase securities issued by
FirstarBanc Corporation, the Adviser, or any of its affiliates.
TRUSTEES AND OFFICERS
The names of the Trustees and executive officers of the Trust are shown
below.
<TABLE>
<S> <C>
- ------------------------------------------------ ---------------------------------------------------------
Positions with the Trust & Principal Occupations
Name, Address and Age During the Page 5 Years
- ------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------ ---------------------------------------------------------
*Timothy L. Ashburn (48) Trustee (Chairman of the Board) and President of the
431 N. Pennsylvania St. Trust and The Unified Funds; Chairman of the Board and
Indianapolis, IN 46204 President, Unified Investment Advisers, Inc. (December
1994 to present); Chairman of the Board, Unified Financial
Services, Inc.(a financial services holding company),
Unified Management Corporation (a registered broker/dealer)
and Unified Fund Services, Inc. (a mutual fund service
provider)(December 1989 to present); Director, Health
Financial, Inc. (a registered investment adviser) (June 1997
to present).
- ------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------ ---------------------------------------------------------
Daniel J. Condon (48) Trustee of the Trust and The Unified Funds; Vice
101 Carley Court President International Crankshaft Inc. (an automotive
Georgetown, KY 40324 supplier)(1990 to present).
- ------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------ ---------------------------------------------------------
Philip L. Conover (53) Trustee of the Trust and The Unified Funds; Private
8218 Cypress Hollow investor and financial consultant (self-employed);
Sarasota, FL 34238 part-time Adjunct Professor of Finance, University of
South Florida (August 1994 topresent).
- ------------------------------------------------ ---------------------------------------------------------
<PAGE>
- ------------------------------------------------ ---------------------------------------------------------
David E. LaBelle (50) Trustee of the Trust and The Unified Funds; Practice
5005 LBJ Freeway Leader with oxy Services, Inc. (a service subsidiary of
Dallas, TX 76092 Occidental Petroleum Corp. (January 1999 to present);
Vice President of Compensation and Benefits, Occidental
Petroleum Corp. (an international oil and chemical
company)(May 1993 to December 1998).
- ------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------ ---------------------------------------------------------
*Jack R. Orben (61) Trustee of the Trust and The Unified Funds; Director,
36 W. 44th St. Unified Financial Services, Inc. (a financial services
New York, NY 10036 holding company); Chairman and CEO Associated Family
Services (a financial services holding company)(January
1980 to present); Chairman and CEO Starwood Corporation (a
registered investment adviser)(March 1984 to present);
Chairman Fiduciary Counsel, Inc. (a registered investment
adviser)(April 1979 to present); Chairman Estate Management
Company (a wealth management firm)(January 1978
to present).
- ------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------ ---------------------------------------------------------
Thomas G. Napurano (58) Treasurer of the Trust and The Unified Funds; February
431 N. Pennsylvania St. 1998 to present); Chief Financial Officer, Unified
Indianapolis, IN 46204 Investment Advisers, Inc. (January 1995 to present);
Executive Vice President and Chief Financial Officer of
Unified Financial Services, Inc. (a financial services
holding company), Unified Management Corporation (a
registered broker/dealer) and Unified Fund Services,
Inc. (a mutual fund service provider)(1990 to present).
- ------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------ ---------------------------------------------------------
Carol J. Highsmith (34) Secretary of the Trust and The Unified Funds;
Secretary, Unified Fund Services, Inc. (a mutual fund
service provider), Unified Management Corporation (a
registered broker/dealer); Secretary of Unified
Financial Services, Inc. (a financial services holding
company) and Unified Investment Advisers, Inc. (October
1996 to present); employed by Unified Fund Services,
Inc. (November 1994 to present).
- ------------------------------------------------ ---------------------------------------------------------
</TABLE>
* Unified Fund Services, Inc. is the Fund's transfer agent and administrator,
and Unified Management Corporation is the Fund's principal underwriter. Unified
Fund Services, Inc. and Unified Management Corporation are subsidiaries of
Unified Financial Services, Inc. Mr. Ashburn and Mr. Orben may each be deemed to
be an "interested person" of the Trust, as defined in the Investment Company Act
of 1940, because of their respective positions with Unified Financial Services,
Inc. and its subsidiaries.
Trustee fees are Trust expenses. The following table sets forth the
Trustees' compensation for the fiscal year ended March 31, 1999.
====================== ==================================================
Total Compensation from Trust
Name (the Trust is not in a Fund Complex)
====================== ==================================================
Timothy L. Ashburn $0
====================== ==================================================
Daniel J. Condon $4,000
====================== ==================================================
Philip L. Conover $4,000
====================== ==================================================
David E. LaBelle $4,000
====================== ==================================================
Jack R. Orben $0
=========================================================================
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust,
the Adviser is responsible for the Fund's portfolio decisions and the placing of
the Fund's portfolio transactions. In placing portfolio transactions, the
Adviser seeks the best qualitative execution for the Fund, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The Adviser generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received.
The Adviser is specifically authorized to select brokers or dealers who
also provide brokerage and research services to the Fund and/or the other
accounts over which the Adviser exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Adviser determines in good faith that the commission
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to the Trust and to other
accounts over which it exercises investment discretion. Consistent with the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.,
and subject to its obligation of seeking best qualitative execution, the Adviser
may give consideration to sales of shares of the Fund as a factor in the
selection of brokers and dealers to execute portfolio transactions.
Research services include supplemental research, securities and
economic analyses, statistical services and information with respect to the
availability of securities or purchasers or sellers of securities and analyses
of reports concerning performance of accounts. The research services and other
information furnished by brokers through whom the Fund effects securities
transactions may also be used by the Adviser in servicing all of its accounts.
Similarly, research and information provided by brokers or dealers serving other
clients may be useful to the Adviser in connection with its services to the
Fund. Although research services and other information are useful to the Fund
and the Adviser, it is not possible to place a dollar value on the research and
other information received. It is the opinion of the Board of Trustees and the
Adviser that the review and study of the research and other information will not
reduce the overall cost to the Adviser of performing its duties to the Fund
under the Agreement.
Over-the-counter transactions will be placed either directly with
principal market makers or with broker-dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities are
normally purchased directly from the issuer, an underwriter or a market maker.
Purchases include a concession paid by the issuer to the underwriter and the
purchase price paid to a market maker may include the spread between the bid and
asked prices.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser, investments of the type the
Fund may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by the Adviser are prepared to invest in, or desire
to dispose of, the same security, available investments or opportunities for
sales will be allocated in a manner believed by the Adviser to be equitable to
each. In some cases, this procedure may adversely affect the price paid or
received by the Fund or the size of the position obtained or disposed of by the
Fund. In other cases, however, it is believed that coordination and the ability
to participate in volume transactions will be to the benefit of the Fund.
When the Fund and another of the Adviser's clients seek to purchase or
sell the same security at or about the same time, the Adviser may execute the
transaction on a combined ("blocked") basis. Blocked transactions can produce
better execution for the Fund because of the increased volume of the
transaction. If the entire blocked order is not filled, the Fund may not be able
to acquire as large a position in such security as it desires or it may have to
pay a higher price for the security. Similarly, the Fund may not be able to
obtain as large an execution of an order to sell or as high a price for any
particular portfolio security if the other client desires to sell the same
portfolio security at the same time. In the event that the entire blocked order
is not filled, the purchase or sale will normally be allocated on a pro rata
basis. Due to research services provided by brokers, the Fund directed to
brokers $257,931,527 of brokerage transactions (on which commissions were
$94,143.88) during the fiscal year ended March 31, 1999.
DISTRIBUTION PLAN
With respect to the Fund, the Trust has adopted a Plan pursuant to Rule
12b-1 which was promulgated by the Securities and Exchange Commission pursuant
to the Investment Company Act of 1940 (the "Plan"). The Plan provides for
payment of fees to Unified Management Corporation to finance any activity which
is principally intended to result in the sale of the Fund's shares subject to
the Plan. Such activities may include the advertising and marketing of shares of
the Fund; preparing, printing, and distributing prospectuses and sales
literature to prospective shareholders, brokers, or administrators; and
implementing and operating the Plan. Pursuant to the Plan, Unified Management,
Inc. may pay fees to brokers and others for such services. The Trustees expect
that the adoption of the Plan will result in the sale of a sufficient number of
shares so as to allow the Fund to achieve economic viability. It is also
anticipated that an increase in the size of the Fund will facilitate more
efficient portfolio management and assist the Fund in seeking to achieve its
investment objective.
SHAREHOLDER SERVICES PLAN
This arrangement permits the payment of fees to the Fund and,
indirectly, to financial institutions to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may include,
but are not limited to, providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic
<PAGE>
investments of client account cash balances; answering routine client inquiries;
and assisting clients in changing dividend options, account designations, and
addresses.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from shareholders must
be in federal funds or be converted into federal funds. Firstar Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
DETERMINATION OF SHARE PRICE
The price (net asset value) of the shares of the Fund is determined as
of 4:00 p.m., Eastern time on each day the Trust is open for business and on any
other day on which there is sufficient trading in the Fund's securities to
materially affect the net asset value. The Trust is open for business on every
day except Saturdays, Sundays and the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas. For a description of the methods
used to determine the net asset value (share price), see "The Price of Shares"
in the Prospectus.
INVESTMENT PERFORMANCE
The Fund may periodically advertise the average annual total return for
its shares. "Average annual total return," as defined by the Securities and
Exchange Commission, is computed by finding the average annual compounded rates
of return for the period indicated that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
P(1+T)n=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
applicable period of the hypothetical $1,000
investment made at the beginning of the
applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
The Fund may also periodically advertise the total return for its
shares over various periods in addition to the value of a $10,000 investment
(made on the date of the initial public offering of its shares) as of the end of
a specified period. The "total return" for its shares refers to the percentage
change in the value of an account between the beginning and end of the stated
period, assuming no activity in the account other than reinvestment of dividends
and capital gains distributions.
The Fund's investment performance will vary depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods and time periods
used in calculating non-standardized investment performance should be considered
when comparing the Fund's performance to those of other investment companies or
investment vehicles. The risks associated with the Fund's investment objective,
policies and techniques should also be considered. At any time in the future,
investment performance may be higher or lower than past performance, and there
can be no assurance that any performance will continue.
From time to time, in advertisements, sales literature and information
furnished to present or to prospective shareholders, the performance of the Fund
may be compared to indices of broad groups of unmanaged securities considered to
be representative of or similar to the portfolio holdings of the Fund or
considered to be representative of the stock market in general. The Fund may use
the NAREIT (National Association of Real Estate Investment Trusts) Index, the
Standard & Poor's 500 Stock Index or the Dow Jones Industrial Average.
In addition, the performance of the Fund may be compared to other
groups of mutual funds tracked by any widely used independent research firm
which ranks mutual funds by overall performance, investment objectives and
assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The
objectives, policies, limitations and expenses of other mutual funds in a group
may not be the same as those of the Fund. Performance rankings and ratings
reported periodically in national financial publications such as Barron's and
Fortune also may be used. The Fund's average annual total return of Class Y
shares of the Fund for the one, five and ten year periods ended March 31, 1999
was -20.59%, 39.78% and 23.94%, respectively.
CUSTODIAN
In addition to acting as the Fund's Adviser, Firstar Bank, is Custodian
of the Fund's investments. As Custodian, Firstar Bank acts as the Fund's
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Fund's request and
maintains records in connection with its duties. As Custodian, Firstar Bank
receives a monthly fee at the annual rate of 0.025% of the total assets of the
Fund on the last business day of each month.
TRANSFER AGENT AND ADMINISTRATOR
Unified Fund Services, Inc.("Unified"), 431 N. Pennsylvania,
Indianapolis, Indiana 46204, acts as the Fund's transfer agent and, in such
capacity, maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of the Fund's shares, acts as dividend and distribution disbursing
agent and performs other shareholder service functions. In addition, Unified
Fund Services, Inc., in its capacity as Fund administrator, provides the Fund
with certain monthly reports, record-keeping and other management-related
services. Unified also provides fund accounting services to the Fund including
maintaining the Fund's accounts, books and records and calculating the daily net
asset value. For these administrative and fund accounting services, it receives
a monthly fee from the Fund equal to an annual average rate of 0.18% of the
Fund's average daily net assets.. For the fiscal year ended March 31, 1999, and
for the period from June 24, 1997 (commencement of operations) through March 31,
1998, Unified received $75,658, and $29,253, respectively, for its services as
administrator and fund accountant.
<PAGE>
ACCOUNTANTS
The firm of McCurdy & Associates, CPA's, 27955 Clemens Road, Westlake,
Ohio 44145, has been selected as independent public accountants for the Trust
for the fiscal year ending March 31, 2000. McCurdy & Associates performs an
annual audit of the Fund's financial statements and provides financial, tax and
accounting consulting services as requested.
DISTRIBUTOR
Unified Management Corporation, 431 N. Pennsylvania, Indianapolis,
Indiana 46204, is the exclusive agent for distribution of shares of the Fund.
The Distributor is obligated to sell shares of the Fund on a best efforts basis
only against purchase orders for the shares. Shares of the Fund are offered to
the public on a continuous basis.
FINANCIAL STATEMENTS
The financial information required to be included in this Statement
of Additional Information is incorporated herein by reference to the Trust's
Annual Report to Shareholders dated March 31, 1999. The Fund will provide the
Annual Report without charge at written or telephone request.
