-------------------
INSTITUTIONAL CLASS
-------------------
BALANCED INCOME FUND
SEMI-ANNUAL REPORT
APRIL 30, 1998
TO GET THERE, START HERE.(SM)
FIRSTAR
FUNDS
(logo)
NOTICE TO INVESTORS
- - Shares of Firstar Funds:
- ARE NOT INSURED BY THE FDIC, the US Government or any other governmental
agency;
- are not bank deposits or obligations of or guaranteed by Firstar Bank,
its parent company or its affiliates;
- are subject to investment risks, including possible loss of principal; and
- are offered by B.C. Ziegler and Company, member NASD, SIPC, and an
independent third-party distributor.
- -Firstar Bank affiliates serve as investment adviser, custodian, transfer
agent, administrator, and accounting services agent and receive compensation
for such services as disclosed in the current prospectus.
TABLE OF CONTENTS
Page(s)
SHAREOWNER LETTER........................................................1-2
FIRSTAR BALANCED INCOME FUND.............................................3-4
STATEMENT OF ASSETS AND LIABILITIES.......................................5
STATEMENT OF OPERATIONS...................................................5
STATEMENT OF CHANGES IN NET ASSETS........................................6
FINANCIAL HIGHLIGHTS......................................................7
SCHEDULE OF INVESTMENTS..................................................8-10
NOTES TO THE FINANCIAL STATEMENTS.......................................11-12
FIRSTAR
FUNDS
(logo)
DEAR SHAREOWNER:
INVESTMENT REVIEW
During the first half of our fiscal year, financial markets were strong,
rewarding investors that stayed the course. Robust U.S. employment gains, rising
incomes and declining levels of inflation drove consumer confidence to record
highs. Gains in consumer spending (responsible for two-thirds of U.S. economic
activity) on everything from housing to apparel to financial services kept U.S.
economic growth at impressive levels.
Despite solid economic underpinnings, the Asian financial crisis and the fear
that inflation is "just around the corner" will sustain above-average volatility
in the financial markets. However, even with all the ups and downs, we continue
to believe the long-term return potential of stocks and high quality bonds calls
for a consistent approach to asset allocation. Remember, it's time, not timing,
and a disciplined approach to asset allocation that wins the investment
marathon.
The Taxpayer Relief Act of 1997 created additional opportunities for IRA
investors to more aggressively prepare for their retirement. Many of you may
have already taken advantage of the new tax legislation by starting a Roth IRA.
Now, more than ever, it's important to consult your tax adviser to understand
how you can best benefit from favorable new tax laws.
The renaming of our fund family - from Portico to Firstar Funds - on February 1,
1998 aligned us more closely with our parent company and eliminated any
confusion over the relationship between the two organizations. Many enhancements
have been made to Firstar Funds literature as well as to the Firstar Funds web
site at www.firstarfunds.com. Newly introduced, Firstar Funds Direct allows you
to access information regarding your account(s) on-line. Look for transactional
capabilities to become available on-line this summer. These are just a few of
the ways we are adding value to our servicing efforts. Our goal is to make it
easy and convenient for you to access your account(s) - 24 hours a day, seven
days a week.
MARKET OUTLOOK
Looking ahead, our market forecast is predicated on the following trends:
- -The Asian "flu" has devolved to "pneumonia."
- -The absence of a Japanese economic "tugboat" to pull the Pacific Rim out of
its decline (a la the U.S. in the 1995 Mexican crisis) will deepen and
lengthen the region's financial woes.
- -Reduced demand for U.S. exports due to the dollar's strength and a surge in
Asian imports will balloon the U.S. trade deficit to $200-$250 billion in
1998, creating a drag on the U.S. economy equivalent to 2%-3% of GDP.
- -Rising U.S. wages along with today's competitive, no-pricing-power environment
are squeezing corporate profits and increasing the "urge to merge" as
companies have no alternative but to acquire their competitors and then cut
costs to grow earnings.
- -Competition from imports and global overcapacity in manufacturing (e.g. autos)
and commodities (e.g. oil) will keep U.S. inflation subdued with the Consumer
Price Index (CPI) rising just 1%-1.5% in 1998.
- -Low unemployment and rising "real" (inflation-adjusted) wages in the U.S. are
fueling a boom in consumer spending, sustaining the current U.S. economic
expansion (now in its eighth year) despite the weakness in U.S. foreign trade
and the drag from a federal budget surplus.
- -After the first quarter's strong 4.8% advance in real GDP, U.S. economic
growth will slow to a 2%-3% rate, bringing the full-year 1998 gain in economic
output to approximately 3%.
- -Prospects for continued low levels of inflation and a slowdown in U.S.
economic growth make today's historically high inflation-adjusted bond yields
very attractive.
FIRSTAR
FUNDS
(logo)
June 1998
- -U.S. bond market supply/demand trends favor lower interest rates as a likely
$75 billion swing in the federal budget from deficit to surplus reduces supply
while a strong dollar attracts foreign capital and increases demand.
- -A profits squeeze for the big, multi-national U.S. companies due to rising
wages, Asia's woes and a strong dollar could signal a cyclical peak in the
relative outperformance of large company stocks as their earnings growth slows
and the price-to-earnings multiples awarded their stocks are compressed.
- -With stock performance driven by just two variables - earnings and the
multiple investors are willing to put on those earnings - prospects for small
and medium-sized company stocks are getting brighter given their underexposure
to Asia, improved relative earnings growth and attractive valuations (i.e.
price-to-earnings multiples).
- -During the next several months, we expect one, perhaps two, stock market
declines of 10%-15%. Yet despite the likelihood of increased market volatility
in the near-term, we are sticking with our beginning-of-the-year outlook for
above-average stock market returns in calendar 1998.
IN SUMMARY
Looking ahead, we see continued moderate economic growth and low levels of
inflation. Although market volatility may heighten anxiety levels, we believe
1998 will be another good year for investors. Finally, given the market's
tremendous gains over the past few years, it may be an opportune time to review
your portfolio. Uneven gains can sidetrack a well-planned investment strategy.
Make sure you are properly diversified.
We appreciate your confidence in Firstar Balanced Income Fund and encourage you
to read the portfolio review that follows.
(photo) (photo)
J. SCOTT HARKNESS, CFA MARY ELLEN STANEK, CFA
Chairman/Chief President
Investment Officer
Firstar Investment Research & Management Company, LLC (FIRMCO)
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
Balanced Income Fund is the newest addition to the Firstar Family of Funds. Like
Firstar Balanced Growth Fund, the Balanced Income Fund invests in both common
stocks and fixed-income securities; however, the Balanced Income Fund maintains
a lower risk profile through lower stock exposure, an emphasis on larger
company, dividend-paying stocks, and a more conservatively structured bond
portfolio.
The Balanced Income Fund was launched by converting Firstar's Balanced Common
Trust Fund to a mutual fund (common trust funds are only available to Firstar
trust customers). Firstar Balanced Common Trust Fund was started in 1989 and was
managed by the same people, using the same strategy as the new mutual fund. From
January 1, 1989 through November 30, 1997, Firstar Balanced Common Trust Fund
achieved a compounded annual return of 15.4%. By converting it into a mutual
fund, we are able to offer an investment strategy with a proven performance
record to a broader range of investors.<F1>
Companies whose stocks are selected for the Balanced Income Fund generally have
the following characteristics: 1) historical and prospective earnings growth
rate higher than the average company in the S&P 500; 2) strong cash flow and
balance sheet characteristics to provide sufficient financial flexibility to
grow the business internally as well as support the stock price in a difficult
market environment; 3) high return on equity; 4) operate in an expanding
industry with strong unit growth trends; and 5) management with clear incentives
to grow the business and whose interests are aligned with shareowners. The
average company in the portfolio has a market value of approximately $20
billion.
The fixed-income component of Firstar Balanced Income Fund is managed using an
"enhanced-index" or "structured" approach. The objective of the Fund's fixed-
income segment is to provide an annual rate of total return comparable to the
return of the Lehman Brothers Intermediate Government/Corporate Bond Index.
The Fund's bond holdings have an average maturity of 4.3 years and a duration of
3.3 years. (Duration measures the price sensitivity of the Fund's bond holdings
to changes in interest rates.) The Fund's holdings are investment quality, with
over 60% of the fixed-income segment invested in securities rated Aaa/AAA or
higher by Moody's or Standard & Poor's. In the non-government sector of the bond
market, we follow a research-intensive selection process focused exclusively on
investment grade issues (Firstar Balanced Income Fund does not invest in "high-
yield" or "junk" bonds). Sectors that we currently favor include finance,
banking and brokerage. The Fund's asset-backed holdings are all rated Aaa/AAA
and represent the highest credit quality investments available in the non-
government sector.
In the five months following conversion to a mutual fund, the Balanced Income
Fund has provided a +10.9% total return, reflecting a strong stock market (up
+17.1%, as measured by the S&P 500) combined with a stable bond market. As of
April 30, 1998, Firstar Balanced Income Fund's assets were allocated 46% stocks,
47% bonds, and 7% money market securities.
Firstar Balanced Income Fund is well-suited for investors seeking an investment
vehicle with a more conservative, yet flexible, approach to asset allocation - a
strategy that allows for participation in the growth potential of the stock
market but biased toward stability and preservation of capital.
We welcome our new shareowners to the Balanced Income Fund.
<F1> The common trust fund was not registered under the Investment Company Act
of 1940 (the "1940 Act"), and was not subject to certain restrictions that
are imposed by the 1940 Act and the Internal Revenue Code. If the common
trust fund had been registered under the 1940 Act, performance may have
been adversely affected. The performance of the common trust fund has been
restated to reflect Firstar Balanced Income Fund's expenses set forth in
the Statement of Operations.
(photo) (photo)
MARIAN E. ZENTMYER, WARREN D. PIERSON, CFA
CFA, CFP
PORTFOLIO MANAGER PROFILE
- --------------------------------------------------------------------------------
MARIAN E. ZENTMYER, CFA, CFP, Senior Vice President and Senior Portfolio Manager
of Firstar Investment Research & Management Company, LLC (FIRMCO) and WARREN D.
PIERSON, CFA, Vice President and Senior Portfolio Manager co-manage the Fund,
Marian since its inception on January 1, 1989 and Warren since July 1, 1995.
Marian has been with Firstar since 1982 and has 20 years of investment managment
experience. She received her BA from Stanford University in 1978. Warren has
been with Firstar since 1985 and has 13 years of investment management
experience. Warren received his BA from Lawrence University in 1984. Marian is a
Chartered Financial Analyst and a Certified Financial Planner. Warren is a
Chartered Financial Analyst.
FIRSTAR
FUNDS
(logo)
FIRSTAR BALANCED INCOME FUND
- ----------------------------
12/1/97 10,000
4/98 11,089
This chart assumes an initial investment of $10,000 made on 12/1/97 (inception).
Performance reflects fee waivers in effect. In the absence of fee waivers, total
return would be reduced. Returns shown include the reinvestment of all dividends
and other distributions. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
CUMULATIVE RATE OF RETURN (%)
FOR PERIOD ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
Since Inception
12/1/97
- --------------------------------------------------------------------------------
FIRSTAR BALANCED INCOME FUND 10.9
LIPPER BALANCED FUND INDEX<F1> 10.2
S&P 500 STOCK INDEX<F2> 17.1
- --------------------------------------------------------------------------------
<F1> The Lipper Balanced Fund Index is composed of the 30 largest mutual funds
whose primary objective is to conserve principal by maintaining a balanced
portfolio of stocks and bonds.
<F2> The S&P 500 Stock Index is an index of an unmanaged group of 500 selected
common stocks, most of which are listed on the New York Stock Exchange. The
Index is heavily weighted toward stocks with large market capitalizations
and represents approximately two-thirds of the total market value of all
domestic common stocks.
An investment cannot be made directly in an index.
Series A (Retail) shares, unlike the Series Institutional shares, have a 4%
maximum sales load and are subject to an annual 0.25% service organization fee.
Performance reflects fee waivers in effect. In the absence of fee waivers, total
return would be reduced.
TOP 5 EQUITYHOLDINGS
4/30/98
- ---------------------------------------------
TYCO INTERNATIONAL, LTD. 1.9%
- ---------------------------------------------
GAP, INC. 1.7%
- ---------------------------------------------
MCKESSON CORPORATION 1.6%
- ---------------------------------------------
XEROX CORPORATION 1.4%
- ---------------------------------------------
INTERPUBLIC GROUP OF COMPANIES, INC. 1.3%
- ---------------------------------------------
Portfolio holdings are subject to change and are not a representation of the
Fund's entire portfolio holdings.
TOTAL FUND NET ASSETS
4/30/98
- ---------------------------------------------
$34,471,814
- ---------------------------------------------
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
APRIL 30, 1998
(UNAUDITED)
ASSETS:
Investments, at value (Cost $31,925) $34,288
Income receivable 293
Capital shares sold 163
Receivable for securities sold 10
Other assets 66
--------
Total Assets 34,820
--------
LIABILITIES:
Payable for securities purchased 270
Capital shares redeemed 38
Payable to affiliates 22
Accrued expenses and other liabilities 18
--------
Total Liabilities 348
--------
NET ASSETS $34,472
========
NET ASSETS CONSIST OF:
Capital stock $31,904
Undistributed net investment income 102
Undistributed accumulated net realized gains 103
Unrealized net appreciation on investments 2,363
--------
Total Net Assets $34,472
========
SERIES A:
Net assets $ 3,519
Shares authorized ($.0001 par value) 500,000
Shares issued and outstanding 320
Net asset value and redemption price per share <F1> $10.99
========
Maximum offering price per share <F1> $11.45
========
SERIES INSTITUTIONAL:
Net assets $30,953
Shares authorized ($.0001 par value) 500,000
Shares issued and outstanding 2,814
Net asset value, redemption price
and offering price per share <F1> $11.00
========
<F1> Amounts may not recalculate due to rounding.
BALANCED INCOME FUND
STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS)
DECEMBER 1, 1997<F2> THROUGH APRIL 30, 1998
(UNAUDITED)
INVESTMENT INCOME:
Dividend income $ 98
Interest income 354
--------
452
--------
EXPENSES:
Investment advisory fees 92
Administration fees 14
Shareowner servicing and accounting costs 29
Service organization fees _ Series A 1
Custody fees 7
Federal and state registration fees 10
Professional fees 8
Reports to shareowners 10
Amortization of organization costs 4
Directors' fees and expenses 3
Other 1
--------
Total expenses before waiver 179
Less: Waiver of expenses (85)
--------
Net Expenses 94
--------
NET INVESTMENT INCOME 358
--------
REALIZED ANDUNREALIZEDGAIN:
Net realized gain on investments 103
Change in unrealized appreciation on investments 2,363
--------
Net gain on investments 2,466
--------
NETINCREASEINNET ASSETS
RESULTINGFROMOPERATIONS $2,824
========
<F2> Commencement of operations.
See notes to the financial statements.
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
(AMOUNTS IN THOUSANDS)
(UNAUDITED) December 1, 1997<F1>
through
April 30, 1998
--------------------
OPERATIONS:
Net investment income $ 358
Net realized gain on investments 103
Change in unrealized appreciation
on investments 2,363
--------
Net increase in net assets resulting
from operations 2,824
--------
CAPITAL SHARE TRANSACTIONS:
Shares sold 34,305
Shares issued to owners in
reinvestment of dividends 23
Shares redeemed (2,424)
--------
Net increase 31,904
--------
DISTRIBUTIONS TO
SERIES A SHAREOWNERS:
From net investment income (13)
From net realized gains -
--------
(13)
--------
DISTRIBUTIONS TO
SERIES INSTITUTIONAL SHAREOWNERS:
From net investment income (243)
From net realized gains -
--------
(243)
--------
TOTAL INCREASE IN NET ASSETS 34,472
NET ASSETS:
Beginning of period -
--------
End of period (including undistributed
net investment income of $102) $34,472
========
<F1> Commencement of operations.
See notes to the financial statements.
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
FINANCIAL HIGHLIGHTS
(UNAUDITED) December 1, 1997<F1>
through
April 30, 1998
-------------------------
Series Series
A Institutional
---------- -------------
Per Share Data:
Net asset value,
beginning of period $10.00 $10.00
Income from investment operations:
Net investment income 0.12<F6> 0.13<F6>
Net realized and unrealized
gains on securities 0.95 0.96
-------- --------
Total from investment operations 1.07 1.09
-------- --------
Less distributions:
Dividends from net investment income (0.08) (0.09)
Distributions from capital gains _ _
-------- --------
Total distributions (0.08) (0.09)
-------- --------
Net asset value, end of period $10.99 $11.00
======== ========
Total return <F2> <F3> 10.75% 10.89%
Supplemental data and ratios:
Net assets, in thousands, end of period $3,519 $30,953
Ratio of net expenses to average
net assets <F4> 1.00% 0.75%
Ratio of net investment income
to average net assets <F4> 2.66% 2.91%
Portfolio turnover rate <F2> <F5> 37.28% 37.28%
Average commission rate paid <F5> $0.0406 $0.0406
<F1> Commencement of operations.
<F2> Not annualized.
<F3> The total return calculation does not reflect the 4% front-end sales charge
for Series A.
<F4> Annualized.
<F5> Portfolio turnover and average commission rate paid are calculated on the
basis of the Fund as a whole without distinguishing between the classes of
shares issued.
<F6> Net investment income per share represents net investment income divided by
the average shares outstanding throughout the period.
See notes to the financial statements.
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1998
(UNAUDITED)
Number Market
of Value
Shares (in thousands)
--------- --------------
COMMON STOCKS 44.0%
APPLIANCES 0.4%
3,500 Snap-On Tools, Inc. $ 148
--------
BANKING 3.3%
5,500 Bank of New York Company, Inc. 325
2,800 Mellon Bank Corporation 202
3,800 Northern Trust Corporation 277
8,200 Norwest Corporation 325
--------
1,129
--------
BUILDING MATERIALS 0.5%
3,400 Martin Marietta Materials, Inc. 160
--------
BUSINESS MACHINES & SOFTWARE 2.1%
5,825 Diebold, Inc. 239
4,270 Xerox Corporation 485
--------
724
--------
BUSINESS SERVICES 2.2%
2,300 Automatic Data Processing, Inc. 154
3,500 H & R Block, Inc. 157
6,700 Equifax Inc. 259
5,000 Service Corporation International 206
--------
776
--------
CHEMICALS 2.8%
3,200 BetzDearborn, Inc. 166
1,900 Dupont (E.I.) De Nemours & Company 138
5,400 Ecolab, Inc. 171
1,700 Monsanto Company 90
2,600 Praxair, Inc. 131
2,400 Valspar Corporation 96
5,000 The Williams Companies, Inc. 158
--------
950
--------
COMMUNICATIONS & MEDIA 2.1%
6,900 Interpublic Group of Companies, Inc. 441
3,800 New York Times Company - Class A 270
--------
711
--------
CONSUMER PRODUCTS 1.5%
5,000 Avery Dennison Corporation 262
5,200 Newell Company 251
--------
513
--------
CONTAINERS 0.4%
3,400 Bemis Company, Inc. 151
--------
COSMETICS & SOAP 2.2%
2,500 Avon Products, Inc. 205
3,000 Estee Lauder Companies - Class A 199
700 Gillette Company 81
3,500 Procter & Gamble Company 288
--------
773
--------
Number Market
of Value
Shares (in thousands)
--------- --------------
DRUGS/MEDICAL SUPPLIES 5.5%
1,800 American Home Products Corporation $ 168
2,700 Baxter International, Inc. 150
3,000 Becton, Dickinson & Company 209
2,600 Johnson & Johnson 185
7,600 McKesson Corporation 537
1,800 Medtronic, Inc. 95
3,400 Pfizer, Inc. 387
2,700 SmithKline Beecham - PLC ADR 161
--------
1,892
--------
ELECTRIC UTILITIES 0.6%
7,600 NIPSO Industries, Inc. 204
--------
ELECTRICAL EQUIPMENT 0.6%
2,000 Grainger (W.W.), Inc. 218
--------
ELECTRONICS 0.3%
1,400 Hewlett-Packard Company 105
--------
ENTERTAINMENT & LEISURE 0.7%
6,700 Hasbro, Inc. 247
--------
FINANCE 1.1%
1,800 Household International, Inc. 237
2,500 The Travelers Group, Inc. 153
--------
390
--------
FINANCIAL SERVICES 1.3%
5,200 Alliance Capital Management L.P. 138
2,900 Federal National Mortgage Association 174
1,800 MBIA, Inc. 134
--------
446
--------
HEALTH CARE SERVICES & SUPPLIES 1.2%
2,300 Warner-Lambert Company 435
--------
INSURANCE 1.2%
9,100 ReliaStar Financial Corporation 411
--------
MULTI-INDUSTRY 2.2%
1,900 Harsco Corporation 87
11,900 Tyco International, Ltd. 648
--------
735
--------
NATURAL GAS 0.6%
3,900 Enron Corporation 192
--------
OIL - DOMESTIC 0.5%
3,300 Phillips Petroleum Company 164
--------
OIL - INTERNATIONAL 0.8%
3,300 Mobil Corporation 261
--------
See notes to the financial statements.
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1998
(UNAUDITED)
Number Market
of Value
Shares (in thousands)
--------- --------------
OIL & GAS SERVICES 0.6%
2,600 Schlumberger, Ltd. $ 215
--------
PAPER & FOREST PRODUCTS 0.3%
2,100 Kimberly-Clark Corporation 106
--------
PRINTING & PUBLISHING 0.8%
1,100 Houghton Mifflin Company 36
3,100 McGraw-Hill, Inc. 240
--------
276
--------
PRODUCTION 0.8%
6,800 Dover Corporation 269
--------
REAL ESTATE INVESTMENT TRUSTS (REIT'S) 1.8%
170 Bay Apartment Communities, Inc. 6
2,900 Boston Properties, Inc. 96
6,200 CCA Prison Realty Trust 220
4,000 Post Properties, Inc. 163
5,183 Security Capital Industrial 127
--------
612
--------
RETAIL 1.9%
11,205 Gap, Inc. 576
1,900 Hannaford Brothers Company 84
--------
660
--------
TELECOMMUNICATIONS 1.4%
2,700 GTE Corporation 158
4,350 Lucent Technologies, Inc. 331
--------
489
--------
TEXTILES & APPAREL 1.9%
3,800 CVS Corporation 280
2,600 Liz Claiborne, Inc. 128
5,700 Warnaco Group - Class A 241
--------
649
--------
TRANSPORTATION 0.4%
9,900 Laidlaw, Inc. - Class B 138
--------
Total Common Stock (Cost $13,124) 15,149
--------
PREFERRED STOCK 1.5%
COMPUTERS 0.4%
1,400 MicroSoft Corporation
(convertible to MicroSoft Corp. common stock) 130
--------
FINANCIAL SERVICES 1.1%
1,600 PLC Capital Trust II
(convertible to Protective Life Corporation
common stock) 100
4,100 Salomon, Inc.
(convertible to Cincinnati Bell, Inc.
common stock) 282
--------
382
--------
Total Preferred Stock (Cost $438) 512
--------
Number Market
of Shares Value
(in thousands) (in thousands)
- -------------- -------------
LONG-TERM INVESTMENTS 47.7%
CORPORATE CONVERTIBLE BONDS 2.1%
5 DECS Trust II,
6.875%, 11/15/00 (convertible to Royal
Group Technologies common stock) $ 146
2 Merrill Lynch Strypes,
6.50%, 8/15/98 (convertible to MGIC
Investment Corporation common stock) 263
Principal
Amount
(in thousands)
-------------
$200 Federated Department Stores,
5.00%, 10/01/03 (convertible to Federated
Department Stores, Inc. common stock) 299
--------
708
--------
ASSET-BACKED SECURITIES 5.8%
AUTO LOAN RECEIVABLES 1.5%
Banc One Auto Grantor Trust,
212 Series 1997-A, Class A, 6.27%, 11/20/03 213
Chase Manhattan Auto Owner Trust,
300 Series 1997-B, Class A5, 6.60%, 3/15/02 305
--------
518
--------
CREDIT CARD RECEIVABLES 3.4%
Chemical Master Credit Card Trust I,
250 Series 1995-2, Class A, 6.23%, 6/15/03 252
Citibank Credit Card Master Trust I, Principal Only,
300 Series 1996-1, Class A, 0.00%, 2/07/03 255
First Chicago Master Trust II,
250 Series 1994-L, Class A, 7.15%, 2/15/00 253
Sears Credit Account Master Trust,
400 Series 1995-2, Class A, 8.10%, 6/15/04 413
--------
1,173
--------
HOME EQUITY LOAN RECEIVABLES 0.9%
Green Tree Financial Corporation,
200 Series 1996-9, Class A3, 6.41%, 1/15/28 201
Security Pacific Home Equity Loan
Subordinated Notes,
105 9.75%, 5/15/99 109
--------
310
--------
CORPORATE BONDS 12.3%
Associates Corporation of North America
Senior Notes,
150 7.50%, 4/15/02 157
Bank of New York Subordinated Notes,
150 7.875%, 11/15/02 160
BankAmerica Corporation Subordinated Notes,
185 9.20%, 5/15/03 208
Bankers Trust - NY, Debentures,
200 9.50%, 6/14/00 213
Barclays American Corp. Debentures,
300 9.75%, 5/15/21 340
See notes to the financial statements.
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1998
(UNAUDITED)
Principal Market
Amount Value
(in thousands) (in thousands)
------------- -------------
CORPORATE BONDS 12.3% (CONT.)
Bear Stearns Company Notes,
$100 6.50%, 6/15/00 $ 101
Chase Manhattan Corporation Subordinated Notes,
200 9.75%, 11/01/01 222
Chrysler Financial Corporation Debentures,
100 12.75%, 11/01/99 109
Citicorp Subordinated Notes,
100 9.50%, 2/01/02 111
Continental Cablevision, Inc. Debentures,
100 9.50%, 8/01/13 117
Jack Eckerd Corporation Senior Subordinated Notes,
151 9.25%, 2/15/04 161
Federal Express Corporation Notes,
180 9.65%, 6/15/12 232
Ford Motor Credit Co. Debentures,
50 9.50%, 9/15/11 63
General Motors Corp. Debentures,
170 9.125%, 7/15/01 185
Household Finance Corp. Debentures,
250 9.55%, 4/01/00 265
Lehman Brothers, Inc. Senior Subordinated Notes,
300 9.875%, 10/15/00 324
Midlantic Corporation Subordinated Notes,
180 9.20%, 8/01/01 195
Morgan Stanley Group Debentures,
300 8.875%, 10/15/01 324
National Westminster Bank PLC Debentures,
300 9.375%, 11/15/03 343
Paine Webber Group, Inc. Subordinated Notes,
200 7.75%, 9/01/02 210
Salomon, Inc. Notes,
200 7.00%, 6/15/03 205
--------
4,245
--------
INTERNATIONAL/YANKEE (U.S. $ DENOMINATED) 1.9%
Ford Capital BV Debentures,
150 9.50%, 6/01/10 185
Korea Development Bank Bonds,
65 7.125%, 9/17/01 61
Norsk Hydro A/S Debentures,
50 9.00%, 4/15/12 60
Quebec (Province of) Local Government Guarantee,
50 11.00%, 6/15/15 56
Sweden (Kingdom of) Debentures,
180 12.00%, 2/01/10 262
Wharf Capital International Ltd.
Company Guarantee,
50 7.625%, 3/13/07 43
--------
667
--------
Principal Market
Amount Value
(in thousands) (in thousands)
------------- -------------
U.S. GOVERNMENT AGENCY-BACKED MORTGAGE ISSUES 2.8%
Federal Home Loan Mortgage Corporation (FHLMC)
Real Estate Mortgage Investment Conduit (REMIC),
$ 142 Series 1201, Class E, 7.40%, 12/15/21 $ 145
Federal National Mortgage Association (FNMA)
Real Estate Mortgage Investment Conduit (REMIC):
200 Series 1993-37, Class B, 7.00%, 7/25/02 203
87 Series 1989-2, Class D, 8.80%, 1/25/19 91
128 Series 1990-89, Class K, 6.50%, 7/25/20 128
246 Series 1991-147, Class K, 7.00%, 1/25/21 248
Government National Mortgage Association (GNMA)
Real Estate Mortgage Investment Conduit (REMIC),
142 Series 3, Class F, 6.50%, 6/17/20 143
--------
958
--------
U.S. TREASURY OBLIGATIONS 22.8%
U.S. Treasury Bonds,
3,150 10.75%, 8/15/05 4,071
U.S. Treasury Notes,
3,700 6.625%, 7/31/01 3,805
--------
7,876
--------
Total Long-Term Investments (Cost $16,191) 16,455
--------
Number
of Shares
(in thousands)
--------------
SHORT-TERM INVESTMENTS 6.3%
INVESTMENT COMPANIES 6.3%
527 Financial Square Prime Obligation Fund 527
1,645 Short-Term Investments Co. Liquid
Assets Portfolio 1,645
--------
Total Short-Term Investments (Cost $2,172) 2,172
--------
Total Investments (Cost $31,925) 99.5% 34,288
--------
Other Assets, less Liabilities 0.5% 184
--------
TOTAL NET ASSETS 100.0% $34,472
========
See notes to the financial statements.
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION
Firstar Funds, Inc. (the "Company") was incorporated on February
15, 1988, as a Wisconsin Corporation and is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended. The
Balanced Income Fund (the "Fund") is a separate, diversified investment
portfolio of the Company. The Fund commenced operations on December 1, 1997. The
objective of the Balanced Income Fund is to seek current income and the
preservation of capital through investment in a balanced portfolio of dividend
paying equity and fixed income securities.
The costs, in thousands, incurred in connection with the organization,
initial registration and public offering of shares, aggregating $47, have been
paid by the Fund. These costs are being amortized over the period of benefit,
but not to exceed sixty months from the Fund's commencement of operations.
The Company has issued two classes of Fund shares:Series A and Series
Institutional. The Series A shares are subject to a 0.25% service organization
fee and an initial sales charge imposed at the time of purchase, in accordance
with the Fund's prospectus. The maximum sales charge is 4% of the offering price
or 4.16% of the net asset value. Each class of shares has identical rights and
privileges except with respect to service organization fees paid by Series A
shares, voting rights on matters affecting a single class of shares and the
exchange privileges of each class of shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
a) Investment Valuation - Securities which are traded on a recognized stock
exchange are valued at the last sale price on the securities exchange on which
such securities are primarily traded or at the last sale price on a national
securities exchange. Exchange-traded securities for which there were no
transactions are valued at the current bid prices. Securities traded only on
over-the-counter markets are valued on the basis of closing over-the-counter bid
prices. Instruments with a remaining maturity of 60 days or less are valued on
an amortized cost basis. Securities for which market quotations are not readily
available, and other assets are valued at fair value as determined by the
investment adviser under the supervision of the Board of Directors.
b) Federal Income Taxes - No provision for federal income taxes has been made
since the Fund has complied to date with the provisions of the Internal Revenue
Code available to regulated investment companies and intends to distribute
substantially all of its taxable income to shareowners. The Fund intends to
continue to so comply in future years.
c) Income and Expenses - The Fund is charged for those expenses that are
directly attributable to it, such as advisory, administration and certain
shareowner service fees. Expenses that are not directly attributable to a
portfolio are typically allocated among the Company's portfolios in proportion
to their respective net assets, number of shareowner accounts or net sales,
where applicable. Net investment income other than class specific expenses, and
realized and unrealized gains and losses are allocated daily to each class of
shares based upon the relative net asset value of outstanding shares of each
class of shares at the beginning of the day (after adjusting for the current
day's capital share activity of the respective class).
d) Distributions to Shareowners - Dividends from net investment income are
declared and paid quarterly. Distributions of net realized capital gains, if
any, will be declared at least annually.
e) When-Issued Securities - The Fund may purchase securities on a when-issued or
delayed delivery basis. Although the payment and interest terms of these
securities are established at the time the purchaser enters into the agreement,
these securities may be delivered and paid for at a future date, generally
within 45 days. The Fund records purchases of when-issued securities and
reflects the values of such securities in determining net asset value in the
same manner as other portfolio securities. The Fund segregates and maintains at
all times cash, cash equivalents, or other high-quality liquid securities in an
amount at least equal to the amount of outstanding commitments for when-issued
securities.
f) Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
g) Other - Investment and shareowner transactions are recorded on the trade
date. The Fund determines the gain or loss realized from investment transactions
by comparing the original cost of the security lot sold with the net sale
proceeds. Dividend income is recognized on the ex-dividend date or as soon as
information is available to the Fund and interest income is recognized on an
accrual basis. Generally accepted accounting principles require that permanent
reporting and tax differences be reclassified.
FIRSTAR
FUNDS
(logo)
3. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the Fund, in thousands, were as follows:
December 1, 1997 through April 30, 1998:
Series A Series Institutional
---------------------- ----------------------
Amount Shares Amount Shares
------ ------ ------ ------
Shares sold $3,688 344 $30,617 3,015
Shares issued to
owners in
reinvestment
of dividends 13 1 10 1
Shares redeemed (272) (25) (2,152) (202)
------- ------- ------- -------
Net increase $3,429 320 $28,475 2,814
======= ======= ======= =======
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities for the period December 1, 1997 through
April 30, 1998 (excluding short-term investments), in thousands, were as
follows:
Purchases:
U.S. Government $ 13,676
Other 17,682
Sales:
U.S. Government 5,795
Other 4,668
At April 30, 1998, gross unrealized appreciation and depreciation of
investments for federal tax purposes, in thousands, were as follows:
Appreciation $6,904
(Depreciation) (62)
------
Net unrealized appreciation
on investments $6,842
======
At April 30, 1998, the cost of investments, in thousands, for federal income tax
purposes was $27,446.
5. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Fund has entered into an Investment Advisory Agreement with Firstar
Investment Research & Management Company, LLC ("FIRMCO"). FIRMCO is a subsidiary
of Firstar Corporation, a publicly held bank holding company. Pursuant to its
Advisory Agreement with the Fund, the Adviser is entitled to receive a fee,
calculated daily and payable monthly, at the annual rate of 0.75% as applied to
the Fund's daily net assets. For the period ended April 30, 1998, $76 in
advisory fees, in thousands, were voluntarily waived for the Fund.
Firstar Trust Company, an affiliate of FIRMCO, serves as custodian, transfer
agent and accounting services agent for the Funds.
The Company has entered into a Co-Administration Agreement
with B.C. Ziegler and Company and Firstar Trust Company (the "Co-
Administrators") for certain administrative services. Pursuant to the Co-
Administration Agreement with the Company, the Co-Administrators are entitled to
receive a fee, computed daily and payable monthly, at the annual rate of 0.125%
of the Company's first $2 billion of average aggregate daily net assets, plus
0.10% of the Company's average aggregate daily net assets in excess of $2
billion. For the period ended April 30, 1998, $9 of administration fees, in
thousands, were voluntarily waived for the Fund.
The Company has entered into Servicing Agreements with certain Service
Organizations, including FIRMCO affiliates, for the Series A class of shares.
The Service Organizations are entitled to receive fees from the Fund up to an
annual rate of 0.25% of the average daily net asset value of the Series A Shares
for certain support and/or distribution services to customers of the Service
Organizations who are beneficial owners of Fund Series A Shares. These services
may include assisting customers in processing purchase, exchange and redemption
requests; processing dividend and distribution payments from the Fund; and
providing information periodically to customers showing their positions in Fund
Series A shares. Service Organization fees, in thousands, incurred by the Fund
aggregated $1 for the period ended April 30, 1998.
Each director of the Company who is not affiliated with FIRMCO receives a
fee from the Company for service as a Director and is eligible to participate in
a deferred compensation plan with respect to these fees. Participants in the
plan may designate their deferred Director's fees as if invested in any one of
the Firstar Funds (with the exception of the MicroCap Fund) or in 90-day U.S.
Treasury bills. The value of each Director's deferred compensation account will
increase or decrease as if it were invested in shares of the selected Firstar
Funds or 90-day U.S. Treasury bills. The Fund maintains its proportionate share
of the Company's liability for deferred fees.
FIRSTAR FUNDS ARE AVAILABLE THROUGH:
- - THE FIRSTAR FUNDS CENTER,
- - INVESTMENT SPECIALISTS WHO ARE REGISTERED
REPRESENTATIVES OF FIRSTAR INVESTMENT SERVICES, INC.
A REGISTERED BROKER/DEALER, NASD AND SIPC MEMBER,
- - AND THROUGH SELECTED SHAREHOLDER ORGANIZATIONS.
This report is authorized for distribution only when preceded or
accompanied by a current prospectus.
TO OPEN AN ACCOUNT OR REQUEST INFORMATION
1-800-982-8909
1-414-287-3710
FOR ACCOUNT BALANCES AND INVESTOR SERVICES
1-800-228-1024
1-414-287-3808
FIRSTAR FUNDS CENTER
615 EAST MICHIGAN STREET
P.O. BOX 3011
MILWAUKEE, WI 53201-3011
WWW.FIRSTARFUNDS.COM
TO GET THERE, START HERE.(SM)
FIRSTAR
FUNDS
(logo)
FORM #40-0251 6/98
------------
RETAIL CLASS
------------
BALANCED INCOME FUND
SEMI-ANNUAL REPORT
APRIL 30, 1998
TO GET THERE, START HERE.(SM)
FIRSTAR
FUNDS
(logo)
NOTICE TO INVESTORS
- - Shares of Firstar Funds:
- ARE NOT INSURED BY THE FDIC, the US Government or any other governmental
agency;
- are not bank deposits or obligations of or guaranteed by Firstar Bank,
its parent company or its affiliates;
- are subject to investment risks, including possible loss of principal; and
- are offered by B.C. Ziegler and Company, member NASD, SIPC, and an
independent third-party distributor.
- -Firstar Bank affiliates serve as investment adviser, custodian, transfer
agent, administrator, and accounting services agent and receive compensation
for such services as disclosed in the current prospectus.
TABLE OF CONTENTS
Page(s)
SHAREOWNER LETTER........................................................1-2
FIRSTAR BALANCED INCOME FUND.............................................3-4
STATEMENT OF ASSETS AND LIABILITIES.......................................5
STATEMENT OF OPERATIONS...................................................5
STATEMENT OF CHANGES IN NET ASSETS........................................6
FINANCIAL HIGHLIGHTS......................................................7
SCHEDULE OF INVESTMENTS..................................................8-10
NOTES TO THE FINANCIAL STATEMENTS.......................................11-12
FIRSTAR
FUNDS
(logo)
DEAR SHAREOWNER:
INVESTMENT REVIEW
During the first half of our fiscal year, financial markets were strong,
rewarding investors that stayed the course. Robust U.S. employment gains, rising
incomes and declining levels of inflation drove consumer confidence to record
highs. Gains in consumer spending (responsible for two-thirds of U.S. economic
activity) on everything from housing to apparel to financial services kept U.S.
economic growth at impressive levels.
Despite solid economic underpinnings, the Asian financial crisis and the fear
that inflation is "just around the corner" will sustain above-average volatility
in the financial markets. However, even with all the ups and downs, we continue
to believe the long-term return potential of stocks and high quality bonds calls
for a consistent approach to asset allocation. Remember, it's time, not timing,
and a disciplined approach to asset allocation that wins the investment
marathon.
The Taxpayer Relief Act of 1997 created additional opportunities for IRA
investors to more aggressively prepare for their retirement. Many of you may
have already taken advantage of the new tax legislation by starting a Roth IRA.
Now, more than ever, it's important to consult your tax adviser to understand
how you can best benefit from favorable new tax laws.
The renaming of our fund family - from Portico to Firstar Funds - on February 1,
1998 aligned us more closely with our parent company and eliminated any
confusion over the relationship between the two organizations. Many enhancements
have been made to Firstar Funds literature as well as to the Firstar Funds web
site at www.firstarfunds.com. Newly introduced, Firstar Funds Direct allows you
to access information regarding your account(s) on-line. Look for transactional
capabilities to become available on-line this summer. These are just a few of
the ways we are adding value to our servicing efforts. Our goal is to make it
easy and convenient for you to access your account(s) - 24 hours a day, seven
days a week.
MARKET OUTLOOK
Looking ahead, our market forecast is predicated on the following trends:
- -The Asian "flu" has devolved to "pneumonia."
- -The absence of a Japanese economic "tugboat" to pull the Pacific Rim out of
its decline (a la the U.S. in the 1995 Mexican crisis) will deepen and
lengthen the region's financial woes.
- -Reduced demand for U.S. exports due to the dollar's strength and a surge in
Asian imports will balloon the U.S. trade deficit to $200-$250 billion in
1998, creating a drag on the U.S. economy equivalent to 2%-3% of GDP.
- -Rising U.S. wages along with today's competitive, no-pricing-power environment
are squeezing corporate profits and increasing the "urge to merge" as
companies have no alternative but to acquire their competitors and then cut
costs to grow earnings.
- -Competition from imports and global overcapacity in manufacturing (e.g. autos)
and commodities (e.g. oil) will keep U.S. inflation subdued with the Consumer
Price Index (CPI) rising just 1%-1.5% in 1998.
- -Low unemployment and rising "real" (inflation-adjusted) wages in the U.S. are
fueling a boom in consumer spending, sustaining the current U.S. economic
expansion (now in its eighth year) despite the weakness in U.S. foreign trade
and the drag from a federal budget surplus.
- -After the first quarter's strong 4.8% advance in real GDP, U.S. economic
growth will slow to a 2%-3% rate, bringing the full-year 1998 gain in economic
output to approximately 3%.
- -Prospects for continued low levels of inflation and a slowdown in U.S.
economic growth make today's historically high inflation-adjusted bond yields
very attractive.
FIRSTAR
FUNDS
(logo)
June 1998
- -U.S. bond market supply/demand trends favor lower interest rates as a likely
$75 billion swing in the federal budget from deficit to surplus reduces supply
while a strong dollar attracts foreign capital and increases demand.
- -A profits squeeze for the big, multi-national U.S. companies due to rising
wages, Asia's woes and a strong dollar could signal a cyclical peak in the
relative outperformance of large company stocks as their earnings growth slows
and the price-to-earnings multiples awarded their stocks are compressed.
- -With stock performance driven by just two variables - earnings and the
multiple investors are willing to put on those earnings - prospects for small
and medium-sized company stocks are getting brighter given their underexposure
to Asia, improved relative earnings growth and attractive valuations (i.e.
price-to-earnings multiples).
- -During the next several months, we expect one, perhaps two, stock market
declines of 10%-15%. Yet despite the likelihood of increased market volatility
in the near-term, we are sticking with our beginning-of-the-year outlook for
above-average stock market returns in calendar 1998.
IN SUMMARY
Looking ahead, we see continued moderate economic growth and low levels of
inflation. Although market volatility may heighten anxiety levels, we believe
1998 will be another good year for investors. Finally, given the market's
tremendous gains over the past few years, it may be an opportune time to review
your portfolio. Uneven gains can sidetrack a well-planned investment strategy.
Make sure you are properly diversified.
We appreciate your confidence in Firstar Balanced Income Fund and encourage you
to read the portfolio review that follows.
(photo) (photo)
J. SCOTT HARKNESS, CFA MARY ELLEN STANEK, CFA
Chairman/Chief President
Investment Officer
Firstar Investment Research & Management Company, LLC (FIRMCO)
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
Balanced Income Fund is the newest addition to the Firstar Family of Funds. Like
Firstar Balanced Growth Fund, the Balanced Income Fund invests in both common
stocks and fixed-income securities; however, the Balanced Income Fund maintains
a lower risk profile through lower stock exposure, an emphasis on larger
company, dividend-paying stocks, and a more conservatively structured bond
portfolio.
The Balanced Income Fund was launched by converting Firstar's Balanced Common
Trust Fund to a mutual fund (common trust funds are only available to Firstar
trust customers). Firstar Balanced Common Trust Fund was started in 1989 and was
managed by the same people, using the same strategy as the new mutual fund. From
January 1, 1989 through November 30, 1997, Firstar Balanced Common Trust Fund
achieved a compounded annual return of 14.6%. By converting it into a mutual
fund, we are able to offer an investment strategy with a proven performance
record to a broader range of investors.<F1>
Companies whose stocks are selected for the Balanced Income Fund generally have
the following characteristics: 1) historical and prospective earnings growth
rate higher than the average company in the S&P 500; 2) strong cash flow and
balance sheet characteristics to provide sufficient financial flexibility to
grow the business internally as well as support the stock price in a difficult
market environment; 3) high return on equity; 4) operate in an expanding
industry with strong unit growth trends; and 5) management with clear incentives
to grow the business and whose interests are aligned with shareowners. The
average company in the portfolio has a market value of approximately $20
billion.
The fixed-income component of Firstar Balanced Income Fund is managed using an
"enhanced-index" or "structured" approach. The objective of the Fund's fixed-
income segment is to provide an annual rate of total return comparable to the
return of the Lehman Brothers Intermediate Government/Corporate Bond Index.
The Fund's bond holdings have an average maturity of 4.3 years and a duration of
3.3 years. (Duration measures the price sensitivity of the Fund's bond holdings
to changes in interest rates.) The Fund's holdings are investment quality, with
over 60% of the fixed-income segment invested in securities rated Aaa/AAA or
higher by Moody's or Standard & Poor's. In the non-government sector of the bond
market, we follow a research-intensive selection process focused exclusively on
investment grade issues (Firstar Balanced Income Fund does not invest in "high-
yield" or "junk" bonds). Sectors that we currently favor include finance,
banking and brokerage. The Fund's asset-backed holdings are all rated Aaa/AAA
and represent the highest credit quality investments available in the non-
government sector.
In the five months following conversion to a mutual fund, the Balanced Income
Fund has provided a +10.9% total return, reflecting a strong stock market (up
+17.1%, as measured by the S&P 500) combined with a stable bond market. As of
April 30, 1998, Firstar Balanced Income Fund's assets were allocated 46% stocks,
47% bonds, and 7% money market securities.
Firstar Balanced Income Fund is well-suited for investors seeking an investment
vehicle with a more conservative, yet flexible, approach to asset allocation - a
strategy that allows for participation in the growth potential of the stock
market but biased toward stability and preservation of capital.
We welcome our new shareowners to the Balanced Income Fund.
<F1> The common trust fund was not registered under the Investment Company Act
of 1940 (the "1940 Act"), and was not subject to certain restrictions that
are imposed by the 1940 Act and the Internal Revenue Code. If the common
trust fund had been registered under the 1940 Act, performance may have
been adversely affected. The performance of the common trust fund has been
restated to reflect Firstar Balanced Income Fund's expenses set forth in
the Statement of Operations. The performance of the common trust fund also
has been restated to reflect the Firstar Balanced Income Fund's maximum
4.00% sales charge on retail shares.
(photo) (photo)
MARIAN E. ZENTMYER, WARREN D. PIERSON, CFA
CFA, CFP
PORTFOLIO MANAGER PROFILE
- --------------------------------------------------------------------------------
MARIAN E. ZENTMYER, CFA, CFP, Senior Vice President and Senior Portfolio Manager
of Firstar Investment Research & Management Company, LLC (FIRMCO) and WARREN D.
PIERSON, CFA, Vice President and Senior Portfolio Manager co-manage the Fund,
Marian since its inception on January 1, 1989 and Warren since July 1, 1995.
Marian has been with Firstar since 1982 and has 20 years of investment managment
experience. She received her BA from Stanford University in 1978. Warren has
been with Firstar since 1985 and has 13 years of investment management
experience. Warren received his BA from Lawrence University in 1984. Marian is a
Chartered Financial Analyst and a Certified Financial Planner. Warren is a
Chartered Financial Analyst.
FIRSTAR
FUNDS
(logo)
FIRSTAR BALANCED FIRSTAR BALANCED
INCOME FUND - INCOME FUND -
A - NO LOAD A - LOAD <F1>
------------------ ------------------
12/1/97 10,000 9,800
4/98 11,075 10,632
This chart assumes an initial investment of $10,000 made on 12/1/97 (inception).
Performance reflects fee waivers in effect. In the absence of fee waivers, total
return would be reduced. Returns shown include the reinvestment of all dividends
and other distributions. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
CUMULATIVE RATE OF RETURN (%)
FOR PERIOD ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
Since Inception
12/1/97
- --------------------------------------------------------------------------------
FIRSTAR BALANCED INCOME FUND - A - NO LOAD 10.8
FIRSTAR BALANCED INCOME FUND - A - LOAD<F1> 6.3
LIPPER BALANCED FUND INDEX<F2> 10.1
S&P 500 STOCK INDEX<F3> 17.1
- --------------------------------------------------------------------------------
<F1> Reflects maximum sales charge of 4.00%
<F2> The Lipper Balanced Fund Index is composed of the 30 largest mutual funds
whose primary objective is to conserve principal by maintaining a balanced
portfolio of stocks and bonds.
<F3> The S&P 500 Stock Index is an index of an unmanaged group of 500 selected
common stocks, most of which are listed on the New York Stock Exchange. The
Index is heavily weighted toward stocks with large market capitalizations
and represents approximately two-thirds of the total market value of all
domestic common stocks.
An investment cannot be made directly in an index.
Series A (Retail) shares, unlike the Series Institutional shares, have a 4%
maximum sales load and are subject to an annual 0.25% service organization fee.
Performance reflects fee waivers in effect. In the absence of fee waivers, total
return would be reduced.
A = Series A (retail shares)
TOP 5 EQUITYHOLDINGS
4/30/98
- ---------------------------------------------
TYCO INTERNATIONAL, LTD. 1.9%
- ---------------------------------------------
GAP, INC. 1.7%
- ---------------------------------------------
MCKESSON CORPORATION 1.6%
- ---------------------------------------------
XEROX CORPORATION 1.4%
- ---------------------------------------------
INTERPUBLIC GROUP OF COMPANIES, INC. 1.3%
- ---------------------------------------------
Portfolio holdings are subject to change and are not a representation of the
Fund's entire portfolio holdings.
TOTAL FUND NET ASSETS
4/30/98
- ---------------------------------------------
$34,471,814
- ---------------------------------------------
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
APRIL 30, 1998
(UNAUDITED)
ASSETS:
Investments, at value (Cost $31,925) $34,288
Income receivable 293
Capital shares sold 163
Receivable for securities sold 10
Other assets 66
--------
Total Assets 34,820
--------
LIABILITIES:
Payable for securities purchased 270
Capital shares redeemed 38
Payable to affiliates 22
Accrued expenses and other liabilities 18
--------
Total Liabilities 348
--------
NET ASSETS $34,472
========
NET ASSETS CONSIST OF:
Capital stock $31,904
Undistributed net investment income 102
Undistributed accumulated net realized gains 103
Unrealized net appreciation on investments 2,363
--------
Total Net Assets $34,472
========
SERIES A:
Net assets $ 3,519
Shares authorized ($.0001 par value) 500,000
Shares issued and outstanding 320
Net asset value and redemption price per share <F1> $10.99
========
Maximum offering price per share <F1> $11.45
========
SERIES INSTITUTIONAL:
Net assets $30,953
Shares authorized ($.0001 par value) 500,000
Shares issued and outstanding 2,814
Net asset value, redemption price
and offering price per share <F1> $11.00
========
<F1> Amounts may not recalculate due to rounding.
BALANCED INCOME FUND
STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS)
DECEMBER 1, 1997<F2> THROUGH APRIL 30, 1998
(UNAUDITED)
INVESTMENT INCOME:
Dividend income $ 98
Interest income 354
--------
452
--------
EXPENSES:
Investment advisory fees 92
Administration fees 14
Shareowner servicing and accounting costs 29
Service organization fees _ Series A 1
Custody fees 7
Federal and state registration fees 10
Professional fees 8
Reports to shareowners 10
Amortization of organization costs 4
Directors' fees and expenses 3
Other 1
--------
Total expenses before waiver 179
Less: Waiver of expenses (85)
--------
Net Expenses 94
--------
NET INVESTMENT INCOME 358
--------
REALIZED ANDUNREALIZEDGAIN:
Net realized gain on investments 103
Change in unrealized appreciation on investments 2,363
--------
Net gain on investments 2,466
--------
NETINCREASEINNET ASSETS
RESULTINGFROMOPERATIONS $2,824
========
<F2> Commencement of operations.
See notes to the financial statements.
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
(AMOUNTS IN THOUSANDS)
(UNAUDITED) December 1, 1997<F1>
through
April 30, 1998
--------------------
OPERATIONS:
Net investment income $ 358
Net realized gain on investments 103
Change in unrealized appreciation
on investments 2,363
--------
Net increase in net assets resulting
from operations 2,824
--------
CAPITAL SHARE TRANSACTIONS:
Shares sold 34,305
Shares issued to owners in
reinvestment of dividends 23
Shares redeemed (2,424)
--------
Net increase 31,904
--------
DISTRIBUTIONS TO
SERIES A SHAREOWNERS:
From net investment income (13)
From net realized gains -
--------
(13)
--------
DISTRIBUTIONS TO
SERIES INSTITUTIONAL SHAREOWNERS:
From net investment income (243)
From net realized gains -
--------
(243)
--------
TOTAL INCREASE IN NET ASSETS 34,472
NET ASSETS:
Beginning of period -
--------
End of period (including undistributed
net investment income of $102) $34,472
========
<F1> Commencement of operations.
See notes to the financial statements.
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
FINANCIAL HIGHLIGHTS
(UNAUDITED) December 1, 1997<F1>
through
April 30, 1998
-------------------------
Series Series
A Institutional
---------- -------------
Per Share Data:
Net asset value,
beginning of period $10.00 $10.00
Income from investment operations:
Net investment income 0.12<F6> 0.13<F6>
Net realized and unrealized
gains on securities 0.95 0.96
-------- --------
Total from investment operations 1.07 1.09
-------- --------
Less distributions:
Dividends from net investment income (0.08) (0.09)
Distributions from capital gains _ _
-------- --------
Total distributions (0.08) (0.09)
-------- --------
Net asset value, end of period $10.99 $11.00
======== ========
Total return <F2> <F3> 10.75% 10.89%
Supplemental data and ratios:
Net assets, in thousands, end of period $3,519 $30,953
Ratio of net expenses to average
net assets <F4> 1.00% 0.75%
Ratio of net investment income
to average net assets <F4> 2.66% 2.91%
Portfolio turnover rate <F2> <F5> 37.28% 37.28%
Average commission rate paid <F5> $0.0406 $0.0406
<F1> Commencement of operations.
<F2> Not annualized.
<F3> The total return calculation does not reflect the 4% front-end sales charge
for Series A.
<F4> Annualized.
<F5> Portfolio turnover and average commission rate paid are calculated on the
basis of the Fund as a whole without distinguishing between the classes of
shares issued.
<F6> Net investment income per share represents net investment income divided by
the average shares outstanding throughout the period.
See notes to the financial statements.
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1998
(UNAUDITED)
Number Market
of Value
Shares (in thousands)
--------- --------------
COMMON STOCKS 44.0%
APPLIANCES 0.4%
3,500 Snap-On Tools, Inc. $ 148
--------
BANKING 3.3%
5,500 Bank of New York Company, Inc. 325
2,800 Mellon Bank Corporation 202
3,800 Northern Trust Corporation 277
8,200 Norwest Corporation 325
--------
1,129
--------
BUILDING MATERIALS 0.5%
3,400 Martin Marietta Materials, Inc. 160
--------
BUSINESS MACHINES & SOFTWARE 2.1%
5,825 Diebold, Inc. 239
4,270 Xerox Corporation 485
--------
724
--------
BUSINESS SERVICES 2.2%
2,300 Automatic Data Processing, Inc. 154
3,500 H & R Block, Inc. 157
6,700 Equifax Inc. 259
5,000 Service Corporation International 206
--------
776
--------
CHEMICALS 2.8%
3,200 BetzDearborn, Inc. 166
1,900 Dupont (E.I.) De Nemours & Company 138
5,400 Ecolab, Inc. 171
1,700 Monsanto Company 90
2,600 Praxair, Inc. 131
2,400 Valspar Corporation 96
5,000 The Williams Companies, Inc. 158
--------
950
--------
COMMUNICATIONS & MEDIA 2.1%
6,900 Interpublic Group of Companies, Inc. 441
3,800 New York Times Company - Class A 270
--------
711
--------
CONSUMER PRODUCTS 1.5%
5,000 Avery Dennison Corporation 262
5,200 Newell Company 251
--------
513
--------
CONTAINERS 0.4%
3,400 Bemis Company, Inc. 151
--------
COSMETICS & SOAP 2.2%
2,500 Avon Products, Inc. 205
3,000 Estee Lauder Companies - Class A 199
700 Gillette Company 81
3,500 Procter & Gamble Company 288
--------
773
--------
Number Market
of Value
Shares (in thousands)
--------- --------------
DRUGS/MEDICAL SUPPLIES 5.5%
1,800 American Home Products Corporation $ 168
2,700 Baxter International, Inc. 150
3,000 Becton, Dickinson & Company 209
2,600 Johnson & Johnson 185
7,600 McKesson Corporation 537
1,800 Medtronic, Inc. 95
3,400 Pfizer, Inc. 387
2,700 SmithKline Beecham - PLC ADR 161
--------
1,892
--------
ELECTRIC UTILITIES 0.6%
7,600 NIPSO Industries, Inc. 204
--------
ELECTRICAL EQUIPMENT 0.6%
2,000 Grainger (W.W.), Inc. 218
--------
ELECTRONICS 0.3%
1,400 Hewlett-Packard Company 105
--------
ENTERTAINMENT & LEISURE 0.7%
6,700 Hasbro, Inc. 247
--------
FINANCE 1.1%
1,800 Household International, Inc. 237
2,500 The Travelers Group, Inc. 153
--------
390
--------
FINANCIAL SERVICES 1.3%
5,200 Alliance Capital Management L.P. 138
2,900 Federal National Mortgage Association 174
1,800 MBIA, Inc. 134
--------
446
--------
HEALTH CARE SERVICES & SUPPLIES 1.2%
2,300 Warner-Lambert Company 435
--------
INSURANCE 1.2%
9,100 ReliaStar Financial Corporation 411
--------
MULTI-INDUSTRY 2.2%
1,900 Harsco Corporation 87
11,900 Tyco International, Ltd. 648
--------
735
--------
NATURAL GAS 0.6%
3,900 Enron Corporation 192
--------
OIL - DOMESTIC 0.5%
3,300 Phillips Petroleum Company 164
--------
OIL - INTERNATIONAL 0.8%
3,300 Mobil Corporation 261
--------
See notes to the financial statements.
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1998
(UNAUDITED)
Number Market
of Value
Shares (in thousands)
--------- --------------
OIL & GAS SERVICES 0.6%
2,600 Schlumberger, Ltd. $ 215
--------
PAPER & FOREST PRODUCTS 0.3%
2,100 Kimberly-Clark Corporation 106
--------
PRINTING & PUBLISHING 0.8%
1,100 Houghton Mifflin Company 36
3,100 McGraw-Hill, Inc. 240
--------
276
--------
PRODUCTION 0.8%
6,800 Dover Corporation 269
--------
REAL ESTATE INVESTMENT TRUSTS (REIT'S) 1.8%
170 Bay Apartment Communities, Inc. 6
2,900 Boston Properties, Inc. 96
6,200 CCA Prison Realty Trust 220
4,000 Post Properties, Inc. 163
5,183 Security Capital Industrial 127
--------
612
--------
RETAIL 1.9%
11,205 Gap, Inc. 576
1,900 Hannaford Brothers Company 84
--------
660
--------
TELECOMMUNICATIONS 1.4%
2,700 GTE Corporation 158
4,350 Lucent Technologies, Inc. 331
--------
489
--------
TEXTILES & APPAREL 1.9%
3,800 CVS Corporation 280
2,600 Liz Claiborne, Inc. 128
5,700 Warnaco Group - Class A 241
--------
649
--------
TRANSPORTATION 0.4%
9,900 Laidlaw, Inc. - Class B 138
--------
Total Common Stock (Cost $13,124) 15,149
--------
PREFERRED STOCK 1.5%
COMPUTERS 0.4%
1,400 MicroSoft Corporation
(convertible to MicroSoft Corp. common stock) 130
--------
FINANCIAL SERVICES 1.1%
1,600 PLC Capital Trust II
(convertible to Protective Life Corporation
common stock) 100
4,100 Salomon, Inc.
(convertible to Cincinnati Bell, Inc.
common stock) 282
--------
382
--------
Total Preferred Stock (Cost $438) 512
--------
Number Market
of Shares Value
(in thousands) (in thousands)
- -------------- -------------
LONG-TERM INVESTMENTS 47.7%
CORPORATE CONVERTIBLE BONDS 2.1%
5 DECS Trust II,
6.875%, 11/15/00 (convertible to Royal
Group Technologies common stock) $ 146
2 Merrill Lynch Strypes,
6.50%, 8/15/98 (convertible to MGIC
Investment Corporation common stock) 263
Principal
Amount
(in thousands)
-------------
$200 Federated Department Stores,
5.00%, 10/01/03 (convertible to Federated
Department Stores, Inc. common stock) 299
--------
708
--------
ASSET-BACKED SECURITIES 5.8%
AUTO LOAN RECEIVABLES 1.5%
Banc One Auto Grantor Trust,
212 Series 1997-A, Class A, 6.27%, 11/20/03 213
Chase Manhattan Auto Owner Trust,
300 Series 1997-B, Class A5, 6.60%, 3/15/02 305
--------
518
--------
CREDIT CARD RECEIVABLES 3.4%
Chemical Master Credit Card Trust I,
250 Series 1995-2, Class A, 6.23%, 6/15/03 252
Citibank Credit Card Master Trust I, Principal Only,
300 Series 1996-1, Class A, 0.00%, 2/07/03 255
First Chicago Master Trust II,
250 Series 1994-L, Class A, 7.15%, 2/15/00 253
Sears Credit Account Master Trust,
400 Series 1995-2, Class A, 8.10%, 6/15/04 413
--------
1,173
--------
HOME EQUITY LOAN RECEIVABLES 0.9%
Green Tree Financial Corporation,
200 Series 1996-9, Class A3, 6.41%, 1/15/28 201
Security Pacific Home Equity Loan
Subordinated Notes,
105 9.75%, 5/15/99 109
--------
310
--------
CORPORATE BONDS 12.3%
Associates Corporation of North America
Senior Notes,
150 7.50%, 4/15/02 157
Bank of New York Subordinated Notes,
150 7.875%, 11/15/02 160
BankAmerica Corporation Subordinated Notes,
185 9.20%, 5/15/03 208
Bankers Trust - NY, Debentures,
200 9.50%, 6/14/00 213
Barclays American Corp. Debentures,
300 9.75%, 5/15/21 340
See notes to the financial statements.
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1998
(UNAUDITED)
Principal Market
Amount Value
(in thousands) (in thousands)
------------- -------------
CORPORATE BONDS 12.3% (CONT.)
Bear Stearns Company Notes,
$100 6.50%, 6/15/00 $ 101
Chase Manhattan Corporation Subordinated Notes,
200 9.75%, 11/01/01 222
Chrysler Financial Corporation Debentures,
100 12.75%, 11/01/99 109
Citicorp Subordinated Notes,
100 9.50%, 2/01/02 111
Continental Cablevision, Inc. Debentures,
100 9.50%, 8/01/13 117
Jack Eckerd Corporation Senior Subordinated Notes,
151 9.25%, 2/15/04 161
Federal Express Corporation Notes,
180 9.65%, 6/15/12 232
Ford Motor Credit Co. Debentures,
50 9.50%, 9/15/11 63
General Motors Corp. Debentures,
170 9.125%, 7/15/01 185
Household Finance Corp. Debentures,
250 9.55%, 4/01/00 265
Lehman Brothers, Inc. Senior Subordinated Notes,
300 9.875%, 10/15/00 324
Midlantic Corporation Subordinated Notes,
180 9.20%, 8/01/01 195
Morgan Stanley Group Debentures,
300 8.875%, 10/15/01 324
National Westminster Bank PLC Debentures,
300 9.375%, 11/15/03 343
Paine Webber Group, Inc. Subordinated Notes,
200 7.75%, 9/01/02 210
Salomon, Inc. Notes,
200 7.00%, 6/15/03 205
--------
4,245
--------
INTERNATIONAL/YANKEE (U.S. $ DENOMINATED) 1.9%
Ford Capital BV Debentures,
150 9.50%, 6/01/10 185
Korea Development Bank Bonds,
65 7.125%, 9/17/01 61
Norsk Hydro A/S Debentures,
50 9.00%, 4/15/12 60
Quebec (Province of) Local Government Guarantee,
50 11.00%, 6/15/15 56
Sweden (Kingdom of) Debentures,
180 12.00%, 2/01/10 262
Wharf Capital International Ltd.
Company Guarantee,
50 7.625%, 3/13/07 43
--------
667
--------
Principal Market
Amount Value
(in thousands) (in thousands)
------------- -------------
U.S. GOVERNMENT AGENCY-BACKED MORTGAGE ISSUES 2.8%
Federal Home Loan Mortgage Corporation (FHLMC)
Real Estate Mortgage Investment Conduit (REMIC),
$ 142 Series 1201, Class E, 7.40%, 12/15/21 $ 145
Federal National Mortgage Association (FNMA)
Real Estate Mortgage Investment Conduit (REMIC):
200 Series 1993-37, Class B, 7.00%, 7/25/02 203
87 Series 1989-2, Class D, 8.80%, 1/25/19 91
128 Series 1990-89, Class K, 6.50%, 7/25/20 128
246 Series 1991-147, Class K, 7.00%, 1/25/21 248
Government National Mortgage Association (GNMA)
Real Estate Mortgage Investment Conduit (REMIC),
142 Series 3, Class F, 6.50%, 6/17/20 143
--------
958
--------
U.S. TREASURY OBLIGATIONS 22.8%
U.S. Treasury Bonds,
3,150 10.75%, 8/15/05 4,071
U.S. Treasury Notes,
3,700 6.625%, 7/31/01 3,805
--------
7,876
--------
Total Long-Term Investments (Cost $16,191) 16,455
--------
Number
of Shares
(in thousands)
--------------
SHORT-TERM INVESTMENTS 6.3%
INVESTMENT COMPANIES 6.3%
527 Financial Square Prime Obligation Fund 527
1,645 Short-Term Investments Co. Liquid
Assets Portfolio 1,645
--------
Total Short-Term Investments (Cost $2,172) 2,172
--------
Total Investments (Cost $31,925) 99.5% 34,288
--------
Other Assets, less Liabilities 0.5% 184
--------
TOTAL NET ASSETS 100.0% $34,472
========
See notes to the financial statements.
FIRSTAR
FUNDS
(logo)
BALANCED INCOME FUND
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION
Firstar Funds, Inc. (the "Company") was incorporated on February
15, 1988, as a Wisconsin Corporation and is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended. The
Balanced Income Fund (the "Fund") is a separate, diversified investment
portfolio of the Company. The Fund commenced operations on December 1, 1997. The
objective of the Balanced Income Fund is to seek current income and the
preservation of capital through investment in a balanced portfolio of dividend
paying equity and fixed income securities.
The costs, in thousands, incurred in connection with the organization,
initial registration and public offering of shares, aggregating $47, have been
paid by the Fund. These costs are being amortized over the period of benefit,
but not to exceed sixty months from the Fund's commencement of operations.
The Company has issued two classes of Fund shares:Series A and Series
Institutional. The Series A shares are subject to a 0.25% service organization
fee and an initial sales charge imposed at the time of purchase, in accordance
with the Fund's prospectus. The maximum sales charge is 4% of the offering price
or 4.16% of the net asset value. Each class of shares has identical rights and
privileges except with respect to service organization fees paid by Series A
shares, voting rights on matters affecting a single class of shares and the
exchange privileges of each class of shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
a) Investment Valuation - Securities which are traded on a recognized stock
exchange are valued at the last sale price on the securities exchange on which
such securities are primarily traded or at the last sale price on a national
securities exchange. Exchange-traded securities for which there were no
transactions are valued at the current bid prices. Securities traded only on
over-the-counter markets are valued on the basis of closing over-the-counter bid
prices. Instruments with a remaining maturity of 60 days or less are valued on
an amortized cost basis. Securities for which market quotations are not readily
available, and other assets are valued at fair value as determined by the
investment adviser under the supervision of the Board of Directors.
b) Federal Income Taxes - No provision for federal income taxes has been made
since the Fund has complied to date with the provisions of the Internal Revenue
Code available to regulated investment companies and intends to distribute
substantially all of its taxable income to shareowners. The Fund intends to
continue to so comply in future years.
c) Income and Expenses - The Fund is charged for those expenses that are
directly attributable to it, such as advisory, administration and certain
shareowner service fees. Expenses that are not directly attributable to a
portfolio are typically allocated among the Company's portfolios in proportion
to their respective net assets, number of shareowner accounts or net sales,
where applicable. Net investment income other than class specific expenses, and
realized and unrealized gains and losses are allocated daily to each class of
shares based upon the relative net asset value of outstanding shares of each
class of shares at the beginning of the day (after adjusting for the current
day's capital share activity of the respective class).
d) Distributions to Shareowners - Dividends from net investment income are
declared and paid quarterly. Distributions of net realized capital gains, if
any, will be declared at least annually.
e) When-Issued Securities - The Fund may purchase securities on a when-issued or
delayed delivery basis. Although the payment and interest terms of these
securities are established at the time the purchaser enters into the agreement,
these securities may be delivered and paid for at a future date, generally
within 45 days. The Fund records purchases of when-issued securities and
reflects the values of such securities in determining net asset value in the
same manner as other portfolio securities. The Fund segregates and maintains at
all times cash, cash equivalents, or other high-quality liquid securities in an
amount at least equal to the amount of outstanding commitments for when-issued
securities.
f) Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
g) Other - Investment and shareowner transactions are recorded on the trade
date. The Fund determines the gain or loss realized from investment transactions
by comparing the original cost of the security lot sold with the net sale
proceeds. Dividend income is recognized on the ex-dividend date or as soon as
information is available to the Fund and interest income is recognized on an
accrual basis. Generally accepted accounting principles require that permanent
reporting and tax differences be reclassified.
FIRSTAR
FUNDS
(logo)
3. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the Fund, in thousands, were as follows:
December 1, 1997 through April 30, 1998:
Series A Series Institutional
---------------------- ----------------------
Amount Shares Amount Shares
------ ------ ------ ------
Shares sold $3,688 344 $30,617 3,015
Shares issued to
owners in
reinvestment
of dividends 13 1 10 1
Shares redeemed (272) (25) (2,152) (202)
------- ------- ------- -------
Net increase $3,429 320 $28,475 2,814
======= ======= ======= =======
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities for the period December 1, 1997 through
April 30, 1998 (excluding short-term investments), in thousands, were as
follows:
Purchases:
U.S. Government $ 13,676
Other 17,682
Sales:
U.S. Government 5,795
Other 4,668
At April 30, 1998, gross unrealized appreciation and depreciation of
investments for federal tax purposes, in thousands, were as follows:
Appreciation $6,904
(Depreciation) (62)
------
Net unrealized appreciation
on investments $6,842
======
At April 30, 1998, the cost of investments, in thousands, for federal income tax
purposes was $27,446.
5. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Fund has entered into an Investment Advisory Agreement with Firstar
Investment Research & Management Company, LLC ("FIRMCO"). FIRMCO is a subsidiary
of Firstar Corporation, a publicly held bank holding company. Pursuant to its
Advisory Agreement with the Fund, the Adviser is entitled to receive a fee,
calculated daily and payable monthly, at the annual rate of 0.75% as applied to
the Fund's daily net assets. For the period ended April 30, 1998, $76 in
advisory fees, in thousands, were voluntarily waived for the Fund.
Firstar Trust Company, an affiliate of FIRMCO, serves as custodian, transfer
agent and accounting services agent for the Funds.
The Company has entered into a Co-Administration Agreement
with B.C. Ziegler and Company and Firstar Trust Company (the "Co-
Administrators") for certain administrative services. Pursuant to the Co-
Administration Agreement with the Company, the Co-Administrators are entitled to
receive a fee, computed daily and payable monthly, at the annual rate of 0.125%
of the Company's first $2 billion of average aggregate daily net assets, plus
0.10% of the Company's average aggregate daily net assets in excess of $2
billion. For the period ended April 30, 1998, $9 of administration fees, in
thousands, were voluntarily waived for the Fund.
The Company has entered into Servicing Agreements with certain Service
Organizations, including FIRMCO affiliates, for the Series A class of shares.
The Service Organizations are entitled to receive fees from the Fund up to an
annual rate of 0.25% of the average daily net asset value of the Series A Shares
for certain support and/or distribution services to customers of the Service
Organizations who are beneficial owners of Fund Series A Shares. These services
may include assisting customers in processing purchase, exchange and redemption
requests; processing dividend and distribution payments from the Fund; and
providing information periodically to customers showing their positions in Fund
Series A shares. Service Organization fees, in thousands, incurred by the Fund
aggregated $1 for the period ended April 30, 1998.
Each director of the Company who is not affiliated with FIRMCO receives a
fee from the Company for service as a Director and is eligible to participate in
a deferred compensation plan with respect to these fees. Participants in the
plan may designate their deferred Director's fees as if invested in any one of
the Firstar Funds (with the exception of the MicroCap Fund) or in 90-day U.S.
Treasury bills. The value of each Director's deferred compensation account will
increase or decrease as if it were invested in shares of the selected Firstar
Funds or 90-day U.S. Treasury bills. The Fund maintains its proportionate share
of the Company's liability for deferred fees.
FIRSTAR FUNDS ARE AVAILABLE THROUGH:
- - THE FIRSTAR FUNDS CENTER,
- - INVESTMENT SPECIALISTS WHO ARE REGISTERED
REPRESENTATIVES OF FIRSTAR INVESTMENT SERVICES, INC.
A REGISTERED BROKER/DEALER, NASD AND SIPC MEMBER,
- - AND THROUGH SELECTED SHAREHOLDER ORGANIZATIONS.
This report is authorized for distribution only when preceded or
accompanied by a current prospectus.
TO OPEN AN ACCOUNT OR REQUEST INFORMATION
1-800-982-8909
1-414-287-3710
FOR ACCOUNT BALANCES AND INVESTOR SERVICES
1-800-228-1024
1-414-287-3808
FIRSTAR FUNDS CENTER
615 EAST MICHIGAN STREET
P.O. BOX 3011
MILWAUKEE, WI 53201-3011
WWW.FIRSTARFUNDS.COM
TO GET THERE, START HERE.(SM)
FIRSTAR
FUNDS
(logo)
FORM #40-0250 6/98
