Law Offices
DRINKER BIDDLE & REATH LLP
One Logan Square
18th and Cherry Street
Philadelphia, PA 19103
Telephone: (215) 988-2700
TELEX: 834684
FAX: (215) 988-2757
August 18, 1999
VIA EDGAR TRANSMISSION
- ----------------------
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: FIRSTAR FUNDS, INC.
(1933 ACT REGISTRATION NO. 33-18255)
(1940 ACT REGISTRATION NO. 811-5380)
------------------------------------
Ladies and Gentlemen:
On behalf of Firstar Funds, Inc. (the "Company"), I have transmitted
herewith for filing Post-Effective Amendment No. 37 to the Fund's Registration
Statement on Form N-1A under the Securities Act of 1933 and the Investment
Company Act of 1940.
Pursuant to Rule 485(a) under the Securities Act of 1933, it is
proposed that this Amendment become effective seventy-five days after filing.
The Amendment is being filed in order to register the shares of two proposed new
portfolios of Registrant, the Core International Equity Fund and the MidCap
Index Fund.
Securities and Exchange Commission
August 18, 1999
Page 2
As requested in the staff's generic comment letter dated February 25,
1994, we note for your information that shares of the Company are marketed in
part through banks.
Very truly yours,
/s/ Joan O. Swirsky
-------------------
Joan O. Swirsky
xxxxxxx
As filed with the Securities and Exchange Commission on August 18, 1999
1933 Act Registration No. 33-18255
1940 Act Registration No. 811-5380
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. X
-- ---
Post-Effective Amendment No. 37
---
and/or X
---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. 38 X
---
(Check appropriate box or boxes)
FIRSTAR FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
FIRSTAR Funds Center
615 East Michigan Street
Milwaukee, Wisconsin 53201-3011
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (414) 287-3909
W. Bruce McConnel, III, Esquire
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Street
Philadelphia, Pennsylvania 19103
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box).
immediately upon filing pursuant to paragraph (b)
---
on (date) pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
---
X 75 days after filing pursuant to paragraph (a)(2)
---
on pursuant to paragraph (a)(2) of Rule 485.
---
If appropriate, check the following box
--- this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
Title of securities being registered: Shares of common stock.
xxxxxxx
FIRSTAR CORE INTERNATIONAL EQUITY FUND
NOVEMBER 1, 1999
CONTENTS Page
THE FUND ----
The fund's objective and strategy, principal
risks and expenses.
ADDITIONAL FUND INFORMATION
Types of Investment Risk
INVESTING WITH FIRSTAR FUNDS
Share Classes Available
Sales Charges and Waivers
Purchasing Shares
Buying Shares
Redeeming Shares
Exchanging Shares
Additional Shareowner Services
ADDITIONAL INFORMATION
Dividends, Capital Gains Distributions and Taxes
Management of the Fund
Net Asset Value and Days of Operation
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy and accuracy of this Prospectus. Any
representation to the contrary is a criminal offense.
An investment in the Fund involves investment risks, including the risk that you
may lose money.
THE FUND
OBJECTIVE
The investment objective of the Core International Equity Fund is to
provide maximum, long-term total return consistent with reasonable risk to
principal. This investment objective may be changed by the Board of Directors
without approval of Shareowners, although no change is currently anticipated.
PRINCIPAL INVESTMENT STRATEGIES
The Glenmede Trust Company (the Sub-Adviser) attempts to achieve the Fund's
objective by investing primarily in common stocks and other equity securities of
companies located outside the United States. The Fund is expected to diversify
its investments across companies located in a number of foreign countries, which
may include, but are not limited to, Japan, the United Kingdom, Germany, France,
Switzerland, the Netherlands, Sweden, Australia, Hong Kong and Singapore. The
Fund will invest at least 65% of its total assets in the securities of companies
based in at least three different countries, other than the United States.
Factors considered by the Sub-Adviser in the selection of securities to buy
and sell for this Fund include both country selection and stock selection.
Countries are primarily selected by evaluating countries' valuations relative to
their historical valuations. Economic growth, government policies and other
factors are also considered. Securities are primarily selected by evaluating a
security's valuation relative to the valuations of other securities in the same
country. Growth in company earnings, industry fundamentals, and other factors
are also considered in determining which securities to buy and sell.
PRINCIPAL RISKS
The following principal investment risks are described in more detail under
the heading "Types of Investment Risk." Some additional risks which apply to the
Fund are also described under that heading.
The Fund may be suitable for you only if you are prepared to invest for the
long-term and are not seeking to speculate on short-term stock market movements.
The Fund's value is expected to be volatile as a result of its investment in
foreign securities.
The Fund is subject to market risk. Market risk is the risk that the
----------- -----------
value of the securities in which the Fund invests may go up or down in response
to the prospects of individual companies and/or general economic conditions.
The Fund's investments in foreign securities are subject to foreign risks.
--------------
Foreign stocks involve special risks not typically associated with
U.S. stocks. The stocks held by the Fund may underperform other types of
stocks, and they may not increase or may decline in value. Foreign investments
may be riskier than U.S. investments because of factors such as foreign
government restrictions, changes in currency exchange rates, incomplete
financial information about the issuers of securities, and political or economic
instability. Foreign stocks may be more volatile and less liquid than U.S.
stocks.
FEES AND EXPENSES OF THE FUND
- -----------------------------
This table describes the fees and expenses you may pay if you buy and hold
shares of the Fund.
INSTITUTIONAL RETAIL A RETAIL B
SHARES SHARES SHARES
-------------- --------- --------
SHAREOWNER FEES (fees paid
directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of offering
price) ...................... None 4.50% None
Maximum Deferred Sales Charge
(Load) (as a percentage of
offering price).............. None None 5.00%<F1>
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends.................. None None None
Redemption Fees.............. None<F2> None<F2> None<F2>
Exchange Fees................ None None None
- ------------------------------------------------------------------------------
Management Distribution Other Total Annual
Fees<F3> and Service Expenses Fund
(12b-1) <F5> Operating
Fees<F4> Expenses<F6>
ANNUAL FUND OPERATING
EXPENSES (expenses that
are deducted from Fund
assets)
Retail A 1.25% 0.00% 0.90% 2.15%
Retail B 1.25% 0.75% 0.90% 2.90%
Institutional 1.25% 0.00% 0.65% 1.90%
- --------------------------------------------------------------------------------
<F1> A contingent deferred sales charge is imposed on Retail B Shares redeemed
within six years of purchase at a rate of 5% in the first year, 4% in the second
year, 3% in the third and fourth years, 2% in the fifth year, declining to 1% in
the fifth year. Thereafter, the Retail B Shares convert to Retail A Shares,
which do not bear a contingent deferred sales charge.
<F2> A fee of $12.00 is charged for each wire redemption (Retail Shares) and
$15.00 for each non-systematic withdrawal from a Retirement Account for which
Firstar Bank, Milwaukee, N.A. is custodian.
<F3>The Adviser has voluntarily agreed that a portion of its management fee will
not be imposed on the Fund during the current fiscal year. As a result of the
fee waiver, current management fees for the Fund are 1.00% of the Fund's average
daily net assets. This waiver is expected to remain in effect for the current
fiscal year; however, it is voluntary and can be modified or terminated at any
time without the Fund's consent.
<F4> The total of all 12b-1 fees and shareowner servicing fees may not exceed,
in the aggregate, the annual rate of 0.25% of the Fund's average daily net
assets for the Retail A Shares. The Fund does not intend to pay 12b-1 fees with
respect to the Retail A Shares for the current fiscal year. The Fund does not
intend to pay more than 0.75% in 12b-1 fees with respect to the Retail B Shares
for the current fiscal year.
<F5> "Other Expenses" is based on estimated amounts for the current fiscal
year, and includes (1) estimated administration fees, transfer agency fees and
all other ordinary operating expenses of the Fund not listed above and (2) for
the Retail A and Retail B Shares, the payment of a Shareowner Servicing fee to
institutions under a Service Plan (described below under "Management of the
Funds - Shareowner Organizations") equal to 0.25% of the average daily net
assets of the Fund's Retail A Shares and Retail B Shares.
<F6> As a result of the fee waiver set forth in note 4, the Total Annual Fund
Operating Expenses of the Retail A, Retail B and Institutional Shares of the
Fund are estimated to be 1.70%, 2.45% and 1.45%, respectively, for the current
fiscal year. Although the fee waiver is expected to remain in effect for the
current fiscal year, this waiver is voluntary and may be terminated at any time
at the option of the Adviser.
EXAMPLE
The following example is intended to help you compare the cost of investing in
the Fund (without the fee waivers) with the cost of investing in other mutual
funds. The example assumes that 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. The example also assumes that your investment has a 5% return each
year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
1 Year 3 Years
------ -------
Retail A Shares. $658 $1,093
Retail B Shares
Assuming complete redemption
at end of period 793 1,198
Assuming no redemption....... 293 898
Institutional.................. 193 597
Retail B Shares convert to Retail A Shares six years after purchase; therefore
Retail A Shares expenses are used in the hypothetical example after year six.
In addition to the compensation itemized above, shareowner organizations may
charge fees for providing services in connection with their clients' investments
in a Fund's shares.
TYPES OF INVESTMENT RISK
The principal risks of investing in the Fund are described previously in
this Prospectus. The following list provides more detail about some of those
risks, along with information on additional types of risks which may apply to
the Fund. Risks associated with particular types of investments the Fund makes
are described in this section and in the Additional Statement referred to on the
back page.
GENERAL RISKS OF INVESTING IN THE FUND
Complete Investment Program
An investment in a single Fund, by itself, does not constitute a complete
investment plan.
Liquidity Risk
Certain securities may be difficult or impossible to sell at the time and price
that the Fund would like. The Fund 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. This risk applies, for
example, to: variable and floating rate demand notes, variable amount demand
securities and restricted securities which the Fund may purchase and the futures
contracts in which the Fund may engage. Illiquid securities also include
repurchase agreements and time deposits with notice/termination dates of greater
than seven days and certain unlisted over-the-counter options and other
securities traded in the U.S. but are subject to trading restrictions because
they are not registered under the Securities Act of 1933. There may be no
active secondary market for these securities. The Fund may invest up to 15% of
its net assets at the time of purchase in securities that are illiquid. A
domestically traded security which is not registered under the Securities Act of
1933 will not be considered illiquid if the Adviser determines an adequate
investment trading market exists for that security. Because illiquid and
restricted securities may be difficult to sell at an acceptable price, they may
be subject to greater volatility and may result in a loss to the Fund.
Loss of Money
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. An investment in the Fund involves risk, including the risk of losing
money.
Management Risk
A strategy which the Adviser or Sub-Adviser uses may fail to produce the
intended results. The particular securities and types of securities the Fund
holds may underperform other securities and types of securities. There can be
no assurance the Fund will achieve its investment objective. Certain policies of
the Fund, which may not be changed without a shareowner vote, are described in
the Additional Statement.
Other Types of Investments
This Prospectus describes the Fund's principal investment strategies, and the
types of securities in which the Fund principally invests. The Fund may, from
time to time, make other types of investments and pursue other investment
strategies in support of its overall investment goal. These supplemental
investment strategies - and the risk involved - are described in detail in the
Additional Statement, which is referred to on the back cover of this Prospectus.
Portfolio Turnover Risk
The Sub-Adviser will not consider the portfolio turnover rate a limiting factor
in making investment decisions for the Fund. A high rate of portfolio turnover
(100% or more) involves correspondingly greater expenses which must be borne by
the Fund and its shareowners. It may also result in higher short-term capital
gains taxable to shareowners.
Temporary Investment Risk
The Fund may, for temporary defensive purposes, invest a percentage of its total
assets, without limitation, in cash or various short-term instruments. This may
occur for example, when the Fund is attempting to respond to adverse market,
economic, political or other conditions. In particular, the Fund may invest in
money market securities denominated in U.S. or foreign currency. When the
Fund's assets are invested in these instruments, the Fund may not be achieving
its investment objective.
Valuation Risk
This is a risk that the Fund has valued certain securities at a higher or lower
price than the Fund can sell them.
Year 2000 Risk
Like other investment companies and financial service providers, the Fund could
be adversely affected if the computer systems used by its investment adviser
(and sub-adviser) and the Fund's other service providers do not properly process
and calculate date-related information and data beginning on January 1, 2000.
This possibility is commonly known as the "Year 2000 Problem." The Year 2000
Problem arises because most computer systems were designed only to recognize a
two-digit year, not a four-digit year. When the year 2000 begins, these
computers may interpret "00" as the year 1900 and either stop processing date-
related computations or process them incorrectly. These failures could have a
negative impact on the handling of securities trades, pricing and account
services. FIRMCO, the investment adviser to the Fund, The Glenmede Trust
Company, the investment sub-adviser to the Fund, and Firstar Corporation,
FIRMCO's parent company, are taking steps to address the Year 2000 Problem with
respect to the computer systems they use and are working with those entities
with which they have business relationships which may impact the services
provided to the Fund to determine the status of their Year 2000 initiatives. As
of the date of this Prospectus, it is not anticipated shareowners will
experience negative effects on their investment, or on the services provided in
connection therewith, as a result of the Year 2000 Problem relating to the
investment adviser or the Fund's other major service providers; however, there
can be no assurance that these steps taken by these service providers will be
successful, or that interaction with other non-complying computer systems will
not adversely impact the Fund. Also, companies in which the Fund invests could
be adversely affected by the Year 2000 Problem. Also, it is possible that the
normal operations of the Fund will, in any event, be disrupted significantly by
the failure of communications and public utility companies, governmental
entities, financial processors or others to perform their services as a result
of the Year 2000 Problem.
European Currency Unification
Many European countries have adopted a single European currency, the euro. On
January 1, 1999, the euro became legal tender for all countries participating in
the Economic and Monetary Union ("EMU"). A new European Central Bank has been
created to manage the monetary policy of the new unified region. On the same
date, the exchange rates were irrevocably fixed between the EMU member
countries. National currencies will continue to circulate until they are
replaced by euro coins and bank notes by the middle of 2002.
This change is likely to significantly impact the European capital markets in
which the Fund invests and may result in the Fund facing additional risks in
pursuing its investment objective. These risks, which include, but are not
limited to, uncertainty as to proper tax treatment of the currency conversion,
volatility of currency exchange rates as a result of the conversion, uncertainty
as to capital market reaction, conversion costs that may affect issuer
profitability and creditworthiness, and lack of participation by some European
countries, may increase the volatility of the Fund's net asset value per share.
Foreign Risks
When a Fund invests in foreign securities, it will be subject to special risks
not typically associated with domestic issuers resulting from less government
regulation, less public information and less economic, political and social
stability. Foreign securities and, in particular, foreign debt securities are
sensitive to changes in interest rates. In addition, investment in securities
of foreign governments involves the risk that foreign governments may default on
their obligations or may otherwise not respect the integrity of their debt. The
Fund will also be subject to the diplomatic risk that an adverse change in the
diplomatic relations between the U.S. and another country might reduce the value
or liquidity of investments. Future political and economic developments, the
possible imposition of withholding taxes on dividend income, the possible
seizure or nationalization of foreign holdings, the possible establishment of
exchange controls or freezes on the convertibility of currency, or the adoption
of other governmental restrictions might adversely affect an investment in
foreign securities. Additionally, foreign banks and foreign branches of domestic
banks may be subject to less stringent reserve requirements, and to different
accounting, auditing and recordkeeping requirements.
Foreign risks will normally be greatest when the Fund invests in issuers located
in emerging markets. Securities issued in emerging market countries, in
particular, may be more sensitive to certain economic changes and less liquid.
These countries are located in the Asia/Pacific region, Eastern Europe, Latin
and South America and Africa. In general, the securities markets of these
countries are less liquid, are subject to greater price volatility, have smaller
market capitalizations and have problems with securities registration and
custody. In addition, because the securities settlement procedures are less
developed in these countries, the Fund may be required to deliver securities
without receiving payment and also be unable to complete transactions during
market disruptions. As a result of these and other risks, investments in these
countries generally present a greater risk of loss to the Fund.
Investment in foreign securities also involves higher costs than investment in
U.S. securities, including higher transaction and custody costs as well as the
imposition of additional taxes by foreign governments.
The Fund may invest in foreign currency denominated securities. A Fund which
invests in foreign currency denominated securities will also be subject to the
risk of negative foreign currency rate fluctuations. A change in the exchange
rate between U.S. dollars and foreign currency may reduce the value of an
investment made in a security denominated in that foreign currency. The Fund
may hedge against foreign currency risk but is not required to do so.
ADDITIONAL RISKS WHICH APPLY TO PARTICULAR TYPES OF SECURITIES
Other Investment Companies
The Fund may invest its cash balances in other investment companies which invest
in high quality, short-term debt securities. A pro rata portion of the other
investment companies' expenses will be borne by the Fund's shareowners.
Borrowings, Reverse Repurchase Agreements
The Fund may borrow money to the extent allowed (as described in the Additional
Statement) to meet shareowner redemptions from banks or through reverse
repurchase agreements. These strategies involve leveraging. If the securities
held by the Fund decline in value while these transactions are outstanding, the
net asset value of the Fund's outstanding shares will decline in value by
proportionately more than the decline in value of the securities. In addition,
reverse repurchase agreements involve the risks that the interest income earned
by the Fund (from the investment of the proceeds) will be less than the interest
expense of the transaction, that the market value of the securities sold by the
Fund will decline below the price the Fund is obligated to pay to repurchase the
securities, and that the securities may not be returned to the Fund.
INVESTING WITH FIRSTAR FUNDS
This section describes for you the procedures for opening an account and how to
buy, sell or exchange Fund shares.
SHARE CLASSES AVAILABLE
The Fund offers three classes of shares; Retail A, Retail B and Institutional.
INSTITUTIONAL SHARES
- No sales charge
- Available for;
- trust, agency or custodial accounts opened through Firstar Bank,
Milwaukee, N.A.;
- employer-sponsored qualified retirement plans other than those
serviced by certain external organizations who have service
agreements with Firstar or its affiliates, and other than plans
administered by Firstar with assets less than $1 million at the
time Firstar begins plan administration (but including plans
administered by Firstar which owned institutional shares prior
to June 18, 1999). Plans administered by Firstar with assets
less than $1 million at the time Firstar begins plan
administration will become eligible for Institutional shares
when such plans grow to $1 million or greater as further described
in the Additional Statement;
- All clients of FIRMCO; and
- those purchasing through certain broker-dealers who have agreed to
provide certain services with respect to shares of the Funds,
including Waterhouse Securities, Inc. and Jack White, a division
of Waterhouse Securities, Inc. Check with your broker-dealer to see
if you qualify for institutional shares.
RETAIL A SHARES
- Initial sales charge of 4.50% or less
- No deferred sales charge
- Reduced sales charge for larger investments. See "Sales Charges and
Waivers" for more information
- Available to any investor who does not qualify to purchase Institutional
shares
RETAIL B SHARES
- No initial sales charge
- Deferred sales charge - Maximum of 5% for redemptions during the first
year, 4% in the second year, 3% in the third and fourth years, 2% in the
fifth year, 1% in the sixth year and 0% thereafter
- Converts to Retail A shares after six years
- Available to any investor who does not qualify to purchase Institutional
shares
A securities dealer, broker, financial institution or other industry
professional ("shareowner organization") may charge transaction or other fees
for providing administrative or other services in connection with investments in
Fund shares.
Sales Charges and Waivers
INITIAL SALES CHARGES - for Retail A Shares of the Fund:
The public offering price for Retail A Shares is the net asset value of the
Retail A Shares purchased plus any applicable front-end sales charge. A sales
charge will not be assessed on Retail A Shares purchased through reinvestment of
dividends or capital gains distributions. The sales charge is as follows:
<TABLE>
<CAPTION>
Amount of Transaction Sales Charge as a Sales Charge as Shareowner Organization
at Offering Price Percentage of Offering Percentage of Net Reallowances as a
Price Asset Value Percentage of Offering
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.00%
$100,000 to $249,999 3.75% 3.90% 3.25%
$250,000 to $499,999 2.50% 2.56% 2.00%
$500,000 to $749,999 2.00% 2.04% 1.50%
$750,000 to $999,999 1.00% 1.01% 0.50%
$1,000,000 and above 0.25% 0.25% 0.25%
</TABLE>
You only pay a sales charge when you buy shares. The Distributor may reallow the
entire sales charge to certain shareowner organizations and the amount reallowed
may change periodically. To the extent that 90% or more of the sales charge is
reallowed, shareowner organizations may be deemed to be underwriters under the
Act.
REDUCING YOUR SALES CHARGES AND WAIVERS - Retail A Shares
To qualify for a reduction of, or exception to the sales charge, you must notify
your shareowner organization or the Distributor at the time of purchase or
exchange. The reduction in sales charge is subject to confirmation of your
holdings through a check of records. The Company may modify or terminate
quantity discounts at any time.
WAIVERS - RETAIL A SHARES
You may purchase retail shares without a sales charge if:
(a) you are an employee, director, retiree or registered representative of
Firstar Corporation or its affiliates or of Firstar Funds, Inc.
(b) you are a spouse, parent, in-law, sibling or child of an individual who
falls within the preceding category (a) above
(c) you make any purchase for your medical savings account for which Firstar
Corporation or an affiliate serves in a custodial capacity
(d) you purchase through certain external organizations that have entered into
a service agreement with Firstar or its affiliates
(e) you are part of an employer-sponsored qualified retirement plan
administered by Firstar with assets less than $1 million at the time Firstar
begins plan administration which commenced administration by Firstar on or after
June 18, 1999
(f) you purchase through certain broker-dealers who have agreed to provide
certain services with respect to shares of the Funds, including Charles Schwab
Mutual Fund Marketplace/R. Check with your broker-dealer to see if you qualify
for this exemption.
REDUCING YOUR SALES CHARGES - RETAIL A SHARES
- - Right of Accumulation - Existing Equity, Balanced and Bond Fund shares can be
combined with new purchases for purposes of calculating reduced sales charges.
- - Letter of Intent - Fund shares purchased in a 13-month period qualify for the
same reduced sales charge as if all purchased at once. You may obtain a reduced
sales charge by means of a written Letter of Intent which expresses your non-
binding commitment to invest in the aggregate $100,000 or more in Retail A
Shares of an Equity, Balanced or Bond Fund within a period of 13 months. Any
investments you make during the period receive the discounted sales charge based
on the full amount of your investment commitment. The Additional Statement
includes details about the Letter of Intent.
For purposes of applying the Rights of Accumulation and Letter of Intent
privileges, the sales charge schedule applies to the combined purchases made by
any individual and/or spouse purchasing securities for his, her or their own
account, or the aggregate investments of a trustee or other fiduciary or IRA for
the benefit of the persons previously listed.
CONTINGENT DEFERRED SALES CHARGE - Retail B Shares
The public offering price for Retail B Shares is the net asset value of the
Retail B Shares purchased. Although investors pay no front-end sales charge on
purchases of Retail B Shares, such shares are subject to a contingent deferred
sales charge at the rates set forth below if they are redeemed within six years
of purchase.
The amount of any contingent deferred sales charge an investor must pay
depends on the number of years that elapse between the purchase date and the
date such Retail B Shares are redeemed. Solely for purposes of this
determination, all payments during a month will be aggregated and deemed to have
been made on the first day of the month.
Number of Years Contingent Deferred Sales Charge
Elapsed Since Purchase (as % of dollar amount subject to the charge)
- ----------------------- ---------------------------------------------
Less than one 5.00%
At least one but less than two 4.00%
At least two but less than three 3.00%
At least three but less than four 3.00%
At least four but less than five 2.00%
At least five but less than six 1.00%
At least six None
The contingent deferred sales charge on Retail B Shares is based on the lesser
of the net asset value of the shares on the redemption date or the original cost
of the shares being redeemed. As a result, no sales charge is imposed on any
increase in the net asset value of an investor's Retail B Shares. In addition,
a contingent deferred sales charge will not be assessed on Retail B Shares
purchased through reinvestment of dividends or capital gains distributions.
When a shareowner redeems his or her Retail B Shares, the redemption request is
processed to minimize the amount of the contingent deferred sales charge that
will be charged. Retail B Shares are redeemed first from those shares that are
not subject to a contingent deferred sales charge (that is, Retail B Shares that
were acquired through reinvestment of dividends or distributions or that qualify
for other deferred sales charge exemptions, if any) and after that from the
Retail B Shares that have been held the longest.
Shareowner organizations will recieve commissions in connection with sales
of Retail B Shares. A commission equal to 4% of the amount invested is paid to
authorized dealers.
The contingent deferred sales charge a shareowner may pay upon redemption
is remitted to the Distributor or other party, which may use such amounts to
defray the expenses associated with the distribution-related services involved
in selling Retail B Shares.
WAIVERS - RETAIL B SHARES
Certain types of redemptions may also qualify for an exemption from the
contingent deferred sales charge. If you think you may be eligible for a
contingent deferred sales charge waiver listed below, be sure to notify your
shareowner organization or the Distributor at the time Retail B Shares are
redeemed. The contingent deferred sales charge with respect to Retail B Shares
is not assessed on:
(i) exchanges described under "Exchange of Shares"
(ii) redemptions in connection with shares sold for certain retirement
distributions or because of disability or death.
(iii) redemptions effected pursuant to a Fund's right to liquidate a
shareowner's account if the aggregate net asset value of Retail B Shares held in
the account is less than the minimum account size set forth under "Redemption
of Shares - Other Transaction Information - Accounts Below the Minimum Balance";
(iv) redemptions in connection with the combination of a Fund with any other
investment company registered under the 1940 Act by merger, acquisition of
assets, or by any other transaction; or
(v) redemptions resulting from a certain tax-free return of an excess
contribution.
In addition to the foregoing exemptions, no contingent deferred sales charge
will be imposed on redemptions made pursuant to the Company's systematic
withdrawal plan. The Funds reserve the right to limit such redemptions without
a contingent deferred sales charge, on an annual basis, to 12% of the value of
your Retail B Shares on the redemption date. See the Additional Statement for
more information.
CONVERSION - RETAIL B SHARES
Retail B Shares will automatically convert into Retail A Shares of the same Fund
six years after the beginning of the calendar month in which the purchase date
occurred. If you acquire Retail B Shares of a Fund by exchange from Retail B
Shares of another Fund, your Retail B Shares will convert into Retail A Shares
of that Fund based on the date of the initial purchase.
If you acquire Retail B Shares through reinvestment of distributions, your
Retail B Shares will convert into Retail A Shares at the earlier of two dates -
either six years after the beginning of the calendar month in which the purchase
date occurred (based on the date of the initial purchase of the shares on which
the distribution was paid) or the date of conversion of the most recently
purchased Retail B Shares that were not acquired through reinvestment of
dividends or distributions. For example, if a shareowner makes a one-time
purchase of Retail B Shares of a Fund and subsequently acquires additional
Retail B Shares of that Fund only through reinvestment of dividends and/or
distributions, all of such shareowner's Retail B Shares of that Fund, including
those acquired through reinvestment, will convert to Retail A Shares of such
fund on the same date.
Upon conversion, the converted shares will be relieved of the distribution and
shareowner servicing fees borne by Retail B Shares, although they will be
subject to the shareowner servicing fees borne by Retail A Shares.
The conversion of Retail B Shares to Retail A Shares will not occur at any time
the Fund is advised that such conversions may constitute taxable events for
federal tax purposes, which the Fund believes is unlikely. If conversions do
not occur as a result of possible taxability, Retail B Shares would continue to
be subject to higher expenses than Retail A Shares for an indeterminate period.
REINSTATEMENT PRIVILEGE
If you sell shares of a Firstar Fund or Firstar Stellar Fund, you may reinvest
some or all of the proceeds in the Retail A Shares of any Firstar Fund within 60
days without a sales charge, as long as your investment professional is notified
before you reinvest. All accounts involved must have the same registration. You
may be subject to taxes as a result of a redemption. Consult your tax adviser
concerning the results of a redemption or reinvestment.
HOW TO DECIDE WHETHER TO BUY RETAIL A OR RETAIL B SHARES
The decision as to which type of Shares to purchase depends on the amount you
invest, the intended length of the investment and your personal situation.
Retail A Shares - If you are making an investment of an amount that qualifies
for a reduced sales charge, you may consider purchasing Retail A Shares.
Retail B Shares - If you plan to hold your investment for a significant period
of time and would prefer not to pay an initial sales charge, you might consider
purchasing Retail B Shares. By not paying a front-end sales charge, your entire
purchase in Retail B Shares is invested from the time you make your initial
investment; however, the distribution and service fee paid by Retail B Shares
will cause your Retail B Shares (until conversion to Retail A Shares) to have a
higher expense ratio and thus, lower performance and lower dividend payments (to
the extent dividends are paid) than Retail A Shares.
PURCHASING SHARES
Shares of the Fund are offered and sold on a continuous basis by the distributor
for the Fund, B.C. Ziegler and Company (the "Distributor"), which is independent
of the Adviser. The Distributor is a registered broker-dealer with offices at
215 North Main Street, West Bend, Wisconsin 53095.
MINIMUM INVESTMENTS
RETAIL SHARES
The minimum initial investment for Retail Shares in the Fund is $1,000. The
minimum subsequent investment is $50. The minimum initial investment will be
waived if you participate in the Periodic Investment Plan.
INSTITUTIONAL SHARES
There is no minimum initial or subsequent investment for Institutional Shares.
BUYING SHARES
Purchase requests accompanied by a check or wire payment received by the
transfer agent before 3:00 p.m. Central time on a business day for the Fund will
be executed the same day, at that day's closing price provided that payment is
received by the close of regular trading hours. Orders received after 3:00 p.m.
Central time and orders for which payment is not received by the close of
regular trading hours on the New York Stock Exchange will be executed on the
next business day after receipt of both order and payment in proper form.
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
Through a - Contact your Shareowner - Contact your Shareowner
Shareowner Organization. Organization.
Organization
- -------------------------------------------------------------------------------
By Mail - Complete an application and - Make your check payable to
mail it along with a check Firstar Funds. Please
payable to Firstar Funds, include your sixteen-digit
P.O. Box 3011, Milwaukee, WI account number on your
53201-3011: check and mail it to the
For overnight delivery mail address at the left.
to; 615 E. Michigan St.,
Milwaukee, WI 53202.
- -------------------------------------------------------------------------------
Automatically - Call 1-800-677-FUND to obtain - Complete a Periodic
(Retail A and a purchase application, which Investment Plan Application
B Shares) includes information for a to automatically purchase
Periodic Investment Plan or more shares.
ConvertiFund/R Account.
- Open a ConvertiFund/R
account to automatically
invest proceeds from one
account to another account
of the Firstar Family of
Funds.
- -------------------------------------------------------------------------------
By Wire - Call 1-800-677-FUND prior to - Call 1-800-677-FUND prior
sending the wire in order to to sending the wire in order
obtain a confirmation number to obtain a confirmation
and to ensure prompt and number and to ensure prompt
accurate handling of funds. and accurate handling of
Ask your bank to transmit funds. Ask your bank to
immediately available funds transmit immediately
by wire in the amount of your available funds by wire as
purchase to: described at the left.
Firstar Bank Milwaukee,N.A. Please include your
ABA # 0750-00022 sixteen-digit account
Firstar Trust Department number. The Fund and its
Account # 112-952-137 transfer agent are not
for further credit to [name responsible for the
of Fund] [name/title on the consequences of delays
account]. resulting from the banking
The Fund and its transfer or Federal Reserve Wire
agent are not responsible for system, or from incomplete
the consequences of delays wiring instructions
resulting from the banking or
Federal Reserve Wire system,
or from incomplete wiring
instructions.
- -------------------------------------------------------------------------------
Internet - Not Available. - Use Firstar Funds Direct to
www.firstar exchange from another
funds.com Firstar Fund account with
the same registration
including name, address
and taxpayer ID number.
- Purchase additional shares
using an electronic funds
transfer from your banking
institution for payment.
- Call 1-800-677-FUND to
authorize this service.
- -------------------------------------------------------------------------------
By Telephone - Call 1-800-677-FUND to - Call 1-800-677-FUND to
Exchange exchange from another Firstar exchange from another
Fund account with the same Firstar Fund account with
registration including name, the same registration
address and taxpayer ID including name, address
number. and taxpayer ID number.
- -------------------------------------------------------------------------------
Please Note: All checks must be drawn on a bank located within the United States
and must be payable in U.S. dollars to Firstar Funds. A $25 fee will be imposed
by the Funds' transfer agent if any check used for investment in an account does
not clear, and the investor involved will be responsible for any loss incurred
by the Fund. Prior to the transfer agent receiving a completed application,
investors may make an initial investment; however, redemptions will not be paid
until the transfer agent has received the completed application.
Additional Information on Buying Shares
The Fund will not accept payment in cash or third party checks for the purchase
of shares.
Federal regulations require that each investor provide a Social Security number
or other certified taxpayer identification number upon opening or reopening an
account. The Funds reserve the right to reject applications without such a
number or an indication that a number has been applied for. If a number has
been applied for, the number must be provided and certified within sixty days of
the date of the application. Any accounts opened without a proper number will
be subject to backup withholding at a rate of 31% on all liquidations and
dividend and capital gain distributions.
Payment for shares of the Fund in the amount of $1,000,000 or more may, at the
discretion of the Adviser, be made in the form of securities that are
permissible investments for the Fund.
The Fund may authorize one or more brokers and other shareowner organizations to
accept on their behalf purchase, redemption and exchange orders, and may
authorize such shareowner organizations to designate other intermediaries to
accept purchase, redemption and exchange orders on the Funds' behalf. In these
cases, a Fund will be deemed to have received an order when an authorized
shareowner organization or intermediary accepts the order, and customer orders
will be priced at the Fund's net asset value next computed after they are
accepted by a shareowner organization or intermediary. Shareowner organizations
and intermediaries will be responsible for transmitting accepted orders to the
Fund within the period agreed upon by them. Shareowners should contact their
shareowner organization or intermediaries to learn whether they are authorized
to accept orders for Funds.
It is the responsibility of shareowner organizations to transmit orders and
payment for the purchase of shares by their customers to the transfer agent on a
timely basis and to provide account statements in accordance with the procedures
previously stated.
For Owners of Institutional Shares:
All share purchases are effected pursuant to a customer's account at Firstar
Bank Milwaukee, N.A. Trust Department ("Firstar Trust") or at another chosen
institution or broker-dealer pursuant to procedures established in connection
with the requirements of the account. Confirmations of share purchases and
redemptions will be sent to Firstar Trust or the other shareowner organizations
involved. Firstar Trust and the other shareowner organizations or their
nominees will normally be the holders of record of Fund shares, and will reflect
their customers' beneficial ownership of shares in the account statements
provided by them to their customers. The exercise of voting rights and the
delivery to customers of shareowner communications from the Fund will be
governed by the customers' account agreements with Firstar Trust and the other
shareowner organizations. Investors wishing to purchase shares of the Funds
should contact their account representatives.
In the case of participants in certain employee benefit plans investing in
certain Funds, purchase and redemption orders will be processed on a particular
day based on whether a service organization acting on their behalf received the
order by the close of regular trading on that day.
REDEEMING SHARES
SELLING SHARES
Redemption requests received by the transfer agent before 3:00 p.m. Central time
on a business day for the Fund will be executed the same day, at that day's
closing price. Orders received after 3:00 p.m. Central time will be executed on
the next business day.
- -------------------------------------------------------------------------------
Through a - Contact your Shareowner Organization
Shareowner
Organization
- -------------------------------------------------------------------------------
By Phone - Call 1-800-677-FUND with your account name, sixteen digit
account number and amount of redemption (minimum $500).
Redemption proceeds will only be sent to a shareowner's
address or bank account of a commercial bank located
within the United States as shown on the transfer agent's
records. (Available only if telephone redemptions have
been authorized on the account application and if there
has been no change of address by telephone within the
preceding 15 days).
- -------------------------------------------------------------------------------
By Mail - Mail your instructions to the Firstar Funds, P.O. Box
3011, Milwaukee, WI 53201-3011 (via overnight delivery to
615 E. Michigan Street, Milwaukee, WI 53202). Include the
number of shares or the amount to be redeemed, your
sixteen-digit account number and Social Security number or
other taxpayer identification number. Your instructions
must be signed by all persons required to sign for
transactions exactly as their names appear on the account.
If the redemption amount exceeds $50,000, or if the
proceeds are to be sent elsewhere than the address of
record, or the address of record has been changed by
telephone within the preceding 15 days, each signature
must be guaranteed in writing by either a commercial bank
that is a member of the FDIC, a trust company, a credit
union, a savings association, a member firm of a national
securities exchange or other eligible guarantor
institution.
- -------------------------------------------------------------------------------
Internet - Use Firstar Funds Direct to redeem up to $25,000. Call
www.firstar 1-800-677-FUND to authorize this service.
funds.com
- -------------------------------------------------------------------------------
Automatically - Call 1-800-677-FUND for a Systematic Withdrawal Plan
application ($5,000 account minimum and $50 minimum per
transaction).
- -------------------------------------------------------------------------------
Guarantees must be signed by an eligible guarantor institution and "Signature
Guaranteed" must appear with the signature.
The Fund may require additional supporting documents for redemptions made by
corporations, executors, administrators, trustees and guardians. A redemption
request will not be deemed to be properly received until the transfer agent
receives all required documents in proper form. Purchases of additional shares
concurrently with withdrawals could be disadvantageous because of the sales
charge involved in the additional purchases.
ADDITIONAL TRANSACTION INFORMATION
Telephone Requests
In order to arrange for telephone redemptions after you have opened your account
or to change the bank or account designated to receive redemption proceeds, send
a written request to the Firstar Mutual Fund Services, LLC or contact your
registered representative. Each shareowner of the account must sign the
request. The Funds may request further documentation from corporations,
executors, administrators, trustees and guardians.
The Funds reserve the right to refuse a telephone redemption if they believe it
is advisable to do so. Procedures for redeeming shares by telephone may be
modified or terminated by the Funds at any time upon notice to shareowners.
During periods of substantial economic or market change, telephone redemptions
may be difficult to implement. If a shareowner is unable to contact the
transfer agent by telephone, shares may also be redeemed by delivering the
redemption request to the transfer agent.
In an effort to prevent unauthorized or fraudulent purchase and redemption
requests by telephone, Firstar employs reasonable procedures to confirm that
such instructions are genuine. Among the procedures used to determine
authenticity, investors electing to transact by telephone will be required to
provide their account number (unless opening a new account). All telephone
transactions will be recorded and confirmed in writing. Statements of accounts
shall be conclusive if not objected to in writing within 10 days after
transmitted by mail. Firstar may implement other procedures from time to time.
If reasonable procedures are not implemented, Firstar may be liable for any loss
due to unauthorized or fraudulent transactions. In all other cases, the
shareowner is liable for any loss for unauthorized transactions.
Certificates
Certificates are only issued upon shareowner request. If certificates have been
issued, the transfer agent must receive the certificates, properly endorsed or
accompanied by a properly executed stock power and accompanied by signature
guarantees, prior to a redemption request.
Additional Redemption Information
The Fund will make payment for redeemed shares typically within one or two
business days, but no later than the seventh day after receipt by the transfer
agent of a request in proper form, except as provided by SEC rules. HOWEVER, IF
ANY PORTION OF THE SHARES TO BE REDEEMED REPRESENTS AN INVESTMENT MADE BY CHECK,
THE FUND WILL DELAY THE PAYMENT OF THE REDEMPTION PROCEEDS UNTIL THE TRANSFER
AGENT IS REASONABLY SATISFIED THAT THE CHECK HAS BEEN COLLECTED, WHICH MAY TAKE
TWELVE DAYS FROM THE PURCHASE DATE. An investor must have filed a purchase
application before any redemption requests can be paid.
Accounts Below the Minimum Balance
If your account falls below $1,000, the Fund may redeem your account. The Funds
will impose no charge and will give you sixty days written notice prior to any
redemption. The Funds may also redeem shares involuntarily if it is appropriate
to do so to carry out the Funds' responsibilities under the 1940 Act and, in
certain cases, may make payment for redemption in securities. Investors would
bear any brokerage or other transaction costs incurred in converting the
securities so received to cash. See the Additional Statement referred to on the
last page for examples of when such redemptions might be appropriate.
EXCHANGING OF SHARES
You may exchange your shares for Money Market Fund shares (except that Retail B
shares are not exchangeable for Institutional Money Market Fund shares) or for
shares of other Firstar Funds within the same share class if you are eligible to
purchase the class at the time of the exchange. Unless you qualify for a sales
charge exemption, an initial sales charge will be imposed on the exchange if the
shares of the Fund being acquired have an initial sales charge and the shares
being redeemed were purchased without a sales charge. Retail B shares acquired
in an exchange will be subject to a contingent deferred sales charge upon
redemption in accordance with this prospectus. For purposes of computing the
contingent deferred sales charge, the length of time of ownership will be
measured from the date of the original purchase of Retail B shares.
Telephone exchange privileges automatically apply to each shareowner of record
unless the transfer agent receives written instructions canceling the privilege.
Firstar reserves the right to terminate the exchange privilege of any party who
requests more than four exchanges within a calendar year. Firstar may do so
with prior notice based on a consideration of both the number of exchanges and
the time period over which those exchange requests have been made, together with
the level of expense to the Funds or other adverse effects which may result from
the additional exchange requests.
For federal income tax purposes, an exchange of shares is a taxable event and,
accordingly, an investor may realize a capital gain or loss. Before making an
exchange request, an investor should consult a tax or other financial adviser to
determine the tax consequences of a particular exchange. No exchange fee is
currently imposed by Firstar on exchanges; however, Firstar reserves the right
to impose a charge in the future. In addition, shareowner organizations may
charge a fee for providing administrative or other services in connection with
exchanges. The Fund reserves the right to reject any exchange request with
prior notice to a shareowner and the exchange privilege may be modified or
terminated at any time. At least sixty days' notice will be given to
shareowners of any material modification or termination except where notice is
not required under SEC regulations. Also keep in mind:
- -- Exchanges are available only in states where exchanges may be legally made.
- -- The minimum amount which may be exchanged is $1,000.
- -- If any portion of the shares to be exchanged represents an investment made by
check, the Fund will delay the acquisition of new shares in an exchange until
the transfer agent is reasonably satisfied that the check has been collected,
which may take up to twelve days from the purchase date.
- -- It may be difficult to make telephone exchanges in times of drastic economic
or market changes.
Additional Shareowner Services
Shareowner Reports
Shareowners will be provided with a report showing portfolio investments and
other information at least semiannually; and after the close of the Fund's
fiscal year with an annual report containing audited financial statements. To
eliminate unnecessary duplication, only one copy of shareowner reports will be
sent to shareowners with the same mailing address. Shareowners may request
duplicate copies free of charge.
Account statements will be mailed after each purchase, reinvestment of dividends
and redemption. Statements of accounts shall be conclusive if not objected to in
writing within 10 Days after transmitted by mail. Generally, the Fund does not
send statements for funds held in brokerage, retirement or other similar
accounts.
Firstar Funds Website (www.firstarfunds.com)
The site offers educational information and interactive financial planning tools
as well as product-specific information.
Generally, Shareowners can request purchases, exchanges and redemptions of Fund
shares online via the Internet after an account is opened. Redemption requests
of up to $25,000 will be accepted through the Internet. Payment for shares
purchased online must be made by electronic funds transfer from your banking
institution. To authorize this service, call Firstar Mutual Fund Services, LLC
at 1-800-677-FUND.
Firstar Funds and their agents will not be responsible for any losses resulting
from unauthorized online transactions when procedures are followed which are
designed to confirm that the online transaction request is genuine. Statements
of accounts shall be conclusive if not objected to in writing within 10 days
after transmitted by mail. During periods of significant economic or market
change, it may be difficult to reach the Funds online. If this happens, you may
initiate transactions in your share accounts by mail or as otherwise described
in the prospectus.
Automated Teleresponse Service
Shareowners using a touch-tone/R telephone can access information on the Fund 24
hours a day, seven days a week. When calling Firstar Mutual Fund Services, LLC
at 1-800-677-FUND, shareowners may choose to use the automated information
feature or, during regular business hours (8:00 a.m. to 7:00 p.m. Central time,
Monday through Friday), speak with a Firstar representative.
Retirement Plans
The Fund offers individual retirement accounts including SIMPLE and SEP IRAs.
For details concerning Retirement Accounts (including service fees), please call
Firstar Funds Center at 1-800-677-FUND.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
Dividends and Capital Gains Distributions
- -----------------
Reinvested
dividends and
distributions
receive the
same tax
treatment as
those paid in
cash.
- -----------------
Dividends from net investment income of the Fund are declared and paid annually.
Any capital gains are distributed annually. A shareowner's dividends and capital
gains distributions will be reinvested automatically in additional shares unless
the Fund is notified that the shareowner elects to receive distributions in
cash.
If a shareowner has elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service is unable to
deliver checks to shareowner's address of record, such shareowner's distribution
option will automatically be converted to having all dividend and other
distributions reinvested in additional shares. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
Federal Taxes
The Fund contemplates declaring as dividends each year all, or substantially
all, of its taxable income, including its net capital gain (the excess of long
term capital gain over short-term capital loss). You will be subject to income
tax on these distributions regardless of whether they are paid in cash or
reinvested in additional shares. Distributions attributable to the net capital
gain of the Fund will be taxable to you as long-term capital gain, regardless of
how long you have held your shares. Other Fund distributions will generally be
taxable as ordinary income. You will be notified annually of the tax status of
distributions to you.
You should note that if you purchase shares just prior to a capital gain
distribution, the purchase price will reflect the amount of the upcoming
distribution, but you will be taxable on the entire amount of the distribution
received, even though, as an economic matter, the distribution simply
constitutes a return of capital. This is known as "buying into a dividend."
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund, based on the
difference between your tax basis in the shares and the amount you receive for
them. (To aid in computing your tax basis, you generally should retain your
account statements for the periods during which you held shares.) Any loss
realized on shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gain dividends that were received on
the shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other tax-
qualified plan) will not be currently taxable.
It is expected that the Fund will be subject to foreign withholding taxes with
respect to dividends or interest received from sources in foreign countries.
The Fund may make an election to treat a proportionate amount of such taxes as
constituting a distribution to each Shareowner, which would allow each
Shareowner either (1) to credit such proportionate amount of taxes against U.S.
federal income tax liability or (2) to take such amount as an itemized
deduction.
The foregoing is only a summary of certain tax considerations under current law,
which may be subject to change in the future. You should consult your tax
adviser for further information regarding federal, state, local and/or foreign
tax consequences relevant to your specific situation.
State and Local Taxes
Shareowners may also be subject to state and local taxes on distributions and
redemptions. State income taxes may not apply, however, to the portions of the
Fund's distributions, if any, that are attributable to interest on Federal
securities or interest on securities of the particular state. Shareowners
should consult their tax advisers regarding the tax status of distributions in
their state and locality.
MANAGEMENT OF THE FUNDS
Advisory Services
FIRMCO, a Wisconsin Limited Liability Company and subsidiary of Firstar
Corporation, a bank holding company, serves as investment adviser to the Fund.
FIRMCO, with principal offices at Firstar Center, 777 East Wisconsin Avenue, 8th
Floor, Milwaukee, Wisconsin 53202, has provided investment advisory services
since 1986. FIRMCO currently has $25.1 billion in assets under management.
Firstar Corporation has agreed to permit the Company to use the name "Firstar
Funds" and expansions thereof on a non-exclusive and royalty-free basis in
connection with mutual fund management and distribution services within the
United States, its territories and possessions. This agreement may be terminated
by Firstar Corporation under specified circumstances, including if no affiliate
of Firstar Corporation is serving as investment adviser for any portfolio
offered by the Company.
Subject to the general supervision of the Board of Directors and in accordance
with the investment objective and policies of the Fund, the Adviser is
responsible for the Fund's investment program, general investment criteria, and
policies.
The Adviser has retained The Glenmede Trust Company ("Glenmede") as Sub-Adviser
for the Core International Equity Fund. Glenmede is a limited purpose trust
company chartered in 1956, with principal offices at One Liberty Place, 1650
Market Street, Suite 1200, Philadelphia, Pennsylvania 19103. Glenmede currently
has over $14.4 billion in assets in the accounts for which it serves in various
capacities including as executor, trustee or investment advisor. Subject to the
oversight and supervision of the Fund's Board of Directors and Adviser, the Sub-
Adviser formulates and implements a continuous investment program for the Fund.
The Sub-Adviser is authorized to allocate purchase and sale orders for portfolio
securities to shareowner organizations, including, in the case of agency
transactions, shareowner organizations which are affiliated with the Adviser (or
Sub-Adviser), to take into account the sale of Fund shares if the Sub-Adviser
believes that the quality of the transaction and the amount of the commission
are comparable to what they would be with other qualified brokerage firms.
The Adviser will receive from the Fund a fee, calculated daily and payable
monthly, at the annual rates (as a percentage of the Fund's average daily net
assets) of 1.25% on the Fund's first $50 million and 1.05% of the Fund's average
daily net assets in excess of $50 million.
The Sub-Adviser is entitled to a fee, payable by the Adviser, for its services
and expenses incurred with respect to the Fund. The fee is computed daily and
paid monthly at the following annual rates (as a percentage of the Fund's
average daily net assets): 0.50% on the Fund's first $50 million and 0.30% of
the Fund's average daily net assets in excess of $50 million.
Fund Manager
Andrew B. Williams manages the Fund for the Sub-Adviser. Mr. Williams
joined the Sub-Adviser in 1985 and is a Senior Vice President of Glenmede.
Performance History
The Firstar Core International Equity Fund is managed by Andrew B.
Williams of The Glenmede Trust Company. Mr. Williams is primarily responsible
for the day-to-day management of the Fund and he uses substantially the same
investment objective policies, restrictions and strategies as the Glenmede
International Portfolio (the "Glenmede Fund"). The Glenmede Fund has been
managed by Mr. Williams since November 17, 1988.
Shares of the Glenmede Fund do not bear a sales load. Retail A Shares of
the Firstar Core International Equity Fund bear a maximum front-end sales load
of 4.50% and Retail B Shares of the Firstar Core International Equity Fund bear
a maximum contingent deferred sales load of 5.00%.
The following table sets forth the performance of the Glenmede Fund for
the periods represented, and also sets forth that performance adjusted to
reflect the maximum sales loads applicable to the Firstar Core International
Equity Fund.
GLENMEDE FUND PERFORMANCE
Average Annual Total Return
Five Ten
One Year Years Years
Ended Ended Ended
9/30/99 9/30/99 9/30/99
Glenmede Fund
Glenmede Fund
(w/Retail A Load)
Glenmede Fund
(w/ Retail B Load)
MSCI EAFE/R Index
The MSCI EAFE/R Index is an unmanaged capitalization weighted composite
portfolio consisting of equity total returns of companies in Australia, New
Zealand, Europe and the Far East. Investors cannot invest directly in the
index.
During the period October 1, 1989 through September 30, 1999, the
expense ratio of the Glenmede Fund ranged between 0.14% and 0.13% of the Fund's
average net assets, [and no fees were waived]. During the period October 1,
1989 through September 30, 1999, management fees for the Glenmede Fund ranged
between and of the Fund's average net assets, [and no fees were
--- ----
waived]. [In the absense of fee waivers, performance would be reduced.]
These fees were paid directly to The Glenmede Trust Company and are
not reflected in the Glenmede Fund's expense ratio or in the performance chart
above. The expense ratio of the Firstar Core International Equity Fund for the
current fiscal year is anticipated to be 1.70% of the Fund's average net assets
for Retail A Shares, 2.45% of average net assets for Retail B Shares, and
1.45% of average net assets for Institutional Shares (2.15%, 2.90%, and 1.90%,
respectively, without waivers).
Performance quotations of the Glenmede Fund represent past performance
of the Glenmede Fund, which is separate and distinct from the Firstar Core
International Equity Fund; do not represent past performance of the Core
International Equity Fund; and should not be considered as representative of
future results of the Core International Equity Fund.
Performance assumes the reinvestment of all net investment income and capital
gains and reflects fee waivers.
Administrative Services
Firstar Mutual Fund Services, LLC and B. C. Ziegler and Company
("Ziegler") serve as the Co-Administrators (the "Co-Administrators") and
receive fees for those services.
Shareowner Organizations - Retail A and B Shares
The Fund has adopted distribution and service plans for the Retail A and
Retail B shares. Under the distribution and service plans, the Fund may pay
distribution fees for the sale and distribution of its shares and service fees
for shareowner services. These fees are regulated by Rule 12b-1 under the
Investment Company Act of 1940 and are subject to the NASD Conduct Rules.
Because these fees are paid out of the Fund's assets on an ongoing basis, over
time, these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
The Fund also has adopted service plans for the Retail A and B shares,
under which the Fund may pay service fees for shareowner services to Retail A
and B shareowners.
For their services with respect to the Retail A shares, shareowner
organizations may be entitled to receive fees from the Fund at an annual rate
of up to 0.25% of the average daily net asset value of the shares covered by
their agreement for distribution and/or shareowner support services. Under
the distribution and service plan for the Retail B shares, the Distributor is
entitled to receive fees at an annual rate of up to 0.75% of the average daily
net asset value of the Retail B shares for distribution services with respect
to the Retail B shares. For their services with respect to the Retail B
shares, shareowner organizations may be entitled to receive fees from the Fund
at an annual rate of up to 0.25%, and 0.25% of the average daily net asset
value of the shares covered by their agreement, respectively, for shareowner
liaison under the distribution and service plan and for other support services
under the service plan (as described below).
Under these Plans, the Fund may enter into agreements with shareowner
organizations, including affiliates of the Adviser (such as FIS). The
shareowner organizations are required to provide a schedule of any fees that
they may charge to their customers relating to the investment of their assets in
shares covered by the agreements. Investors should read this Prospectus in
light of such fee schedules and under the terms of their shareowner
organization's agreement with Firstar. In addition, investors should contact
their shareowner organizations with respect to the availability of shareowner
services and the particular shareowner organization's procedures for purchasing
and redeeming shares. It is the responsibility of shareowner organizations to
transmit purchase and redemption orders and record those orders in customers'
accounts on a timely basis in accordance with their agreements with customers.
The Fund makes no payments to its Distributor under the Plans for the
Retail A shares or under the service plan for the Retail B shares. The Fund
makes payments to its Distributor under the distribution and service plan for
distribution services with respect to the Retail B shares. Payments to
shareowner organizations, including affiliates of the Adviser, under the plans,
and to the Distributor under the distribution and service plan for the Retail B
shares are not tied directly to their own out-of-pocket expenses and therefore
may be used as they elect (for example, to defray their overhead expenses), and
may exceed their direct and indirect costs.
Shareowner organizations will provide support and/or, in the case of the
distribution and service plan for the Retail A shares, distribution services to
their customers who are the shareowners of the Fund. Under the Service
Agreements, shareowner support services may include:
- - assisting investors in processing purchase, exchange and redemption requests
- - processing dividend and distribution payments from the Fund
- - providing information periodically to customers showing their positions in
Fund shares
- - providing sub-accounting
- - forwarding sales literature and advertising
Shareowner liaison services may include responding to customers' inquires
and providing information on their investments, and other personal and account
maintenance services within NASD Rules.
The Glass-Steagall Act and other applicable laws, among other things,
prohibit banks from engaging in the business of underwriting securities.
Accordingly, banks will be engaged under agreements with Firstar only to perform
the administrative and investor servicing functions described above, and will
represent to Firstar that in no event will the services provided by them under
the agreements be primarily intended to result in the sale of Fund shares.
Conflict-of-interest restrictions may apply to the receipt of compensation
paid by Firstar to a shareowner organization in connection with the investment
of fiduciary funds in Fund shares. Institutions, including banks regulated by
the Comptroller of the Currency and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor or state
securities commissions, are urged to consult legal counsel before entering into
agreements with Firstar.
Custodian, Transfer and Dividend Disbursing Agent, and Accounting Services Agent
Firstar Mutual Fund Services, LLC, an affiliate of the Adviser, provides
transfer agency, dividend disbursing agency and accounting services for the
Fund and receives fees for these services. Inquiries to the transfer agent may
be sent to: Firstar Mutual Fund Services, LLC, P.O. Box 3011, Milwaukee,
Wisconsin 53201-3011. Firstar Bank, Milwaukee, N.A., an affiliate of the
Adviser, provides custodial services for the Fund and receives fees for those
services.
NET ASSET VALUE AND DAYS OF OPERATION
The price of the Retail A, Retail B and Institutional shares (each, a
"class") is based on net asset value per share. This amount is calculated
separately for each class of shares by dividing the value of all securities and
other assets attributable to the class, less the liabilities attributable to
that class, by the number of outstanding shares of that class. The price at
which a purchase or redemption is effected is based on the next calculation of
net asset value after the order is accepted.
Net asset value for purposes of pricing purchase and redemption orders is
determined as of the close of regular trading hours on the Exchange, normally,
3:00 p.m. Central time, on each day the Exchange is open for trading.
The Fund's investments are valued based on market quotations, except that
restricted securities and securities for which market quotations are not readily
available and other assets are valued at fair value by the Adviser under the
supervision of the Board of Directors. Short-term investments having a maturity
of 60 days or less are valued at amortized cost, unless the amortized cost does
not approximate market value.
Portfolio securities which are primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on their respective exchanges, except when an occurrence subsequent
to the time a value was so established is likely to have changed such value. In
such an event, the fair value of those securities will be determined through the
consideration of other factors by or under the direction of the Board of
Directors. The Fund's foreign securities may trade on weekends or other days
when the Fund does not price its shares. Accordingly, the net asset value per
share of the Fund may change on days when shareowners will not be able to
purchase or redeem the Fund's shares.
The Fund's securities may be valued based on valuations provided by an
independent pricing service. The Adviser reviews these valuations. If the
Adviser believes that a valuation received from the service does not represent a
fair value, it values the security by a method that the Board of Directors
believes will determine a fair value. Any pricing service used may employ
electronic data processing techniques, including a "matrix" system, to determine
valuations.
Quotations of foreign securities in foreign currency are converted to U.S.
dollar equivalents using the foreign exchange quotation in effect at the time
net asset value is computed. Foreign securities held by the CORE International
Equity Fund may trade in their local markets on days the Fund is closed, and the
Fund's net asset value may, therefore, change on days when investors may not
purchase or redeem Fund shares.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S ADDITIONAL
STATEMENT INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR ITS
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY
ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE.
FOR MORE INFORMATION
STATEMENT OF ADDITIONAL INFORMATION
Additional information about the Funds and their policies is also available in
the Funds' Statement of Additional Information ("Additional Statement"). The
Additional Statement is incorporated by reference into this Prospectus (and is
legally considered part of this Prospectus).
The Funds' Additional Statement is available free upon request by calling
Firstar Funds at 1-800-677-FUND or 1-414-287-3808.
To obtain other information and for shareowner inquiries:
By telephone - call 1-800-677-FUND or 1-414-287-3808
By mail - Firstar Funds, Inc., 615 East Michigan Street
P.O. Box 3011
Milwaukee, Wisconsin 53201-3011
By e-mail - [email protected]
------------------------
On the Internet - Text only version of the Funds' documents are located online
and may be downloaded from: SEC - http://www.sec.gov
------------------
You may review and obtain copies of Fund documents by visiting the SEC's Public
Reference Room in Washington, D.C. You may also obtain copies of Fund documents
by sending your request and a duplicating fee to the SEC's Public Reference
Section, Washington, D.C. 20549-6009. Information on the operation of the
public reference room may be obtained by calling the SEC at 1-800-SEC-0330.
The Fund's Investment Company Act File Number is 811-5380
xxxxxxx
FIRSTAR MIDCAP INDEX FUND
NOVEMBER 1, 1999
CONTENTS
Page
----
THE FUND
The fund's objective and strategy, principal
risks and expenses.
ADDITIONAL FUND INFORMATION
Types of Investment Risk
INVESTING WITH FIRSTAR FUNDS
Share Classes Available
Sales Charges and Waivers
Purchasing Shares
Buying Shares
Redeeming Shares
Exchanging Shares
Additional Shareowner Services
ADDITIONAL INFORMATION
Dividends, Capital Gains Distributions and Taxes
Management of the Fund
Net Asset Value and Days of Operation
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy and accuracy of this Prospectus. Any
representation to the contrary is a criminal offense.
An investment in the Fund involves investment risks, including the risk that you
may lose money.
THE FUND
OBJECTIVE
The investment objective of the Fund is to seek returns, before Fund
expenses, comparable to the price and yield performance of publicly traded
common stocks in the aggregate, as represented by the S&P MidCap 400 Index. The
investment objective may be changed by the Board of Directors without approval
of Shareowners, although no change is currently anticipated.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund intends to invest substantially
all of its total assets in securities included in the S&P MidCap 400 Index, and
in any event the Fund will invest at least 80% of its net assets in securities
included in that index. The Fund uses the S&P MidCap 400 Index as the standard
performance comparison because it is composed of 400 selected common stocks of
medium-size domestic companies with market capitalizations between approximately
$148 million and $13 billion.
The S&P MidCap 400 Index is an unmanaged, capitalization-weighted index of
common stocks representing all major industries in the mid-range of the U.S.
stock market.
Rather than using traditional methods of investment management, index funds
such as the Firstar MidCap Index Fund are managed with the aid of a computer
program. The Adviser purchases and sells securities for the Fund in an attempt
to produce investment results that substantially duplicate the performance of
the common stocks of the issuers represented in the S&P MidCap 400 Index.
The Fund does not expect to hold all of the stocks included in the S&P
MidCap 400 Index at any particular time; however, the Adviser believes it will
be able to construct and maintain the Fund's investment portfolio so that it
reasonably tracks the performance of the S&P MidCap 400 Index by using a
capitalization weighting and sector balancing technique.
The Adviser believes the quarterly performance of the Fund and the S&P MidCap
400 Index will be within +/-0.3% under normal market conditions. The Adviser
believes that through the application of a capitalization weighting and sector
balancing technique it will be able to construct and maintain the Fund's
investment portfolio so it reasonably tracks the performance of the S&P MidCap
400 Index. In the event the performance of the Fund is not comparable to the
performance of the S&P MidCap 400 Index, the Board of Directors will examine the
reasons for the deviation and the availability of corrective measures. These
measures would include additional fee waivers by the Adviser and Co-
Administrators or adjustments to the Adviser's portfolio management practices.
If substantial deviation in the Fund's performance continued for extended
periods, it is expected the Board of Directors would consider possible changes
to the Fund's investment objective.
The Fund may invest in futures contracts.
PRINCIPAL RISKS
The following principal investment risks are described in more detail under
the heading "Types of Investment Risk." Some additional risks which apply to the
Fund are also described under that heading.
The Fund is subject to market risk. Market risk is the risk that the value
----------- -----------
of the securities in which the Fund invests may go up or down in response to the
prospects of individual companies and/or general economic conditions. Your
investment follows the mid-cap portion of the U.S. stock market, as measured by
the S&P MidCap 400 Index, during upturns as well as downturns. Because of its
indexing strategy, the Fund cannot take steps to reduce market volatility or to
lessen the effects of a declining market. Whenever mid-cap stocks perform less
than large- or small-cap stocks, the Fund may underperform funds that have
exposure to those segments. Further, the Fund will not necessarily dispose of a
security in response to adverse events affecting the issuer of a security (such
as adverse credit factors or failure to pay dividends).
If a large number of shareowners were to redeem shares, however, the
Adviser may be forced to reduce the number of issuers represented in the
portfolio. This could have an adverse effect on the accuracy with which the
Fund matches the performance of the S&P MidCap 400 Index.
The Adviser may be required to sell common stock if the issuer is
eliminated from the S&P MidCap 400 Index. Such sales may result in:
- lower prices, or
- losses that may not have been incurred if the Adviser did not have to
purchase or sell the securities.
The Fund's futures transactions involve derivatives risk. Derivatives risk
---------------- ----------------
is the risk of loss from transactions which may be more sensitive to or
otherwise not react in tandem with interest rate changes or market moves and may
be leveraged. Futures contracts could cause the Fund to track the Index less
closely if they don't perform as expected.
Standard & Poor's makes no representation or warranty regarding the
advisability of investing in index funds or the ability of the S&P MidCap 400
Index to track general stock market performance.
FEES AND EXPENSES OF THE FUND
- -----------------------------
This table describes the fees and expenses you may pay if you buy and hold
shares of the Fund.
INSTITUTIONAL RETAIL A RETAIL B
SHARES SHARES SHARES
------------- -------- --------
SHAREOWNER FEES (fees paid directly
from your investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price) .................. None 4.50% None
Maximum Deferred Sales Charge
(Load) (as a percentage of
offering price) ................... None None 5.00%<F1>
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends ........... None None None
Redemption Fees .................... None<F2> None<F2> None<F2>
Exchange Fees ...................... None None None
- ------------------------------------------------------------------------------
Management Distribution Other Total Annual
Fees and Service Expenses Fund
<F3> (12b-1) Fees <F5> Operating
<F4> Expenses<F6>
ANNUAL FUND OPERATING
EXPENSES (expenses that
are deducted from Fund
assets)
Retail A 0.25% 0.00% 0.70% 0.95%
Retail B 0.25% 0.75% 0.70% 1.70%
Institutional 0.25% 0.00% 0.45% 0.70%
- -------------------------------------------------------------------------------
<F1>A contingent deferred sales charge is imposed on Retail B Shares redeemed
within six years of purchase at a rate of 5% in the first year, 4% in the second
year, 3% in the third and fourth years, 2% in the fifth year, declining to 1% in
the sixth year. Thereafter, Retail B Shares convert to Retail A Shares, which
do not bear a contingent deferred sales charge.
<F2>A fee of $12.00 is charged for each wire redemption (Retail Shares) and
$15.00 for each non-systematic withdrawal from a Retirement Account for which
Firstar Bank, Milwaukee, N.A. is custodian.
<F3>The Adviser has voluntarily agreed that a portion of its management fee will
not be imposed on the Fund during the current fiscal year. As a result of the
fee waiver, current management fees for the Fund are 0.05% of the Fund's average
daily net assets. This waiver is expected to remain in effect for the current
fiscal year; however, it is voluntary and can be modified or terminated at any
time without the Fund's consent.
<F4>The total of all 12b-1 fees and shareowner servicing fees may not exceed, in
the aggregate, the annual rate of 0.25% of the Fund's average daily net assets
for the Retail A Shares. The Fund does not intend to pay 12b-1 fees with
respect to the Retail A Shares for the current fiscal year. The Fund does not
intend to pay more than 0.75% in 12b-1 fees with respect to the Retail B Shares
for the current fiscal year.
<F5>"Other Expenses" is based on estimated amounts for the current fiscal year
and includes (1) estimated administration fees, transfer agency fees and all
other ordinary operating expenses of the Fund not listed above and (2) for the
Retail A and Retail B Shares, the payment of a Shareowner Servicing fee to
institutions under a Service Plan (described below under "Management of the
Funds _ Shareowner Organizations") equal to 0.25% of the average daily net
assets of the Fund's Retail A Shares and Retail B Shares.
<F6>As a result of the fee waiver set forth in note 4, the Total Fund Operating
Expenses of the Retail A, Retail B and Institutional Shares of the Fund are
estimated to be 0.75%, 1.50% and 0.50%, respectively, for the current fiscal
year. Although the fee waiver is expected to remain in effect for the current
fiscal year, this waiver is voluntary and may be terminated at any time at the
option of the Adviser.
EXAMPLE
The following example is intended to help you compare the cost of investing in
the Fund (without the fee waivers) with the cost of investing in other mutual
funds. The example assumes that 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. The example also assumes your investment has a 5% return each year and
that the Fund's operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:
1 Year 3 Years
------ -------
Retail A Shares $543 $739
Retail B Shares
Assuming complete redemption at
end of period 673 836
Assuming no redemption 173 536
Institutional 72 224
Retail B Shares convert to Retail A Shares six years after purchase; therefore,
Retail A Shares expenses are used in the hypothetical example after year six.
In addition to the compensation itemized above, shareowner organizations may
charge fees for providing services in connection with their clients' investments
in the Fund's shares.
TYPES OF INVESTMENT RISK
The principal risks of investing in the Fund are described previously in
this Prospectus. The following list provides more detail about some of those
risks, along with information on additional types of risks which may apply to
the Fund. Risks associated with particular types of investments the Fund makes
are described in this section and in the Additional Statement referred to on the
back page.
GENERAL RISKS OF INVESTING IN THE FUND
Complete Investment Program
An investment in a single Fund, by itself, does not constitute a complete
investment plan.
Derivatives Risk
The term derivative covers a wide number of investments, but in general it
refers to any financial instrument whose value is derived, at least in part,
from the price of another security or a specified index, asset or rate. Some
derivatives may be more sensitive to or otherwise not react in tandem with
interest rate changes or market moves, and some may be susceptible to changes in
yields or values due to their structure or contract terms. Loss may result from
the Fund's investments in options, futures, swaps, structured securities and
other derivative instruments which may be leveraged. The Fund may use
derivatives to: increase yield; hedge against a decline in principal value;
invest with greater efficiency and lower cost than is possible through direct
investment; adjust the Fund's duration; or provide daily liquidity.
Hedging is the use of one investment to offset the effects of another
investment. To the extent that a derivative is used as a hedge against an
opposite position that the Fund also holds, a loss generated by the derivative
should be substantially offset by gains on the hedged investment, and vice
versa. While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedging also involves correlation risk - the risk that changes
in the value of a hedging instrument may not match those of the asset being
hedged.
To the extent that a derivative is not used as a hedge, the Fund is directly
exposed to the risks of that derivative. Gains or losses from speculative
positions in a derivative may be substantially greater than the derivative's
original cost.
Liquidity Risk
Certain securities may be difficult or impossible to sell at the time and price
that the Fund would like. The Fund 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. This risk applies, for
example, to: variable and floating rate demand notes, variable amount demand
securities and restricted securities which the Fund may purchase and the futures
contracts in which the Fund may engage. Illiquid securities also include
repurchase agreements and time deposits with notice/termination dates of greater
than seven days and certain unlisted over-the-counter options and other
securities traded in the U.S. but are subject to trading restrictions because
they are not registered under the Securities Act of 1933. There may be no
active secondary market for these securities. The Fund may invest up to 15% of
its net assets at the time of purchase in securities that are illiquid. A
domestically traded security which is not registered under the Securities Act of
1933 will not be considered illiquid if the Adviser determines an adequate
investment trading market exists for that security. Because illiquid and
restricted securities may be difficult to sell at an acceptable price, they may
be subject to greater volatility and may result in a loss to the Fund.
Loss of Money
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. An investment in the Fund involves risk, including the risk of losing
money.
Management Risk
A strategy which the Adviser uses may fail to produce the intended results. The
particular securities and types of securities the Fund holds may underperform
other securities and types of securities. There can be no assurance the Fund
will achieve its investment objective. Certain policies of the Fund, which may
not be changed without a shareowner vote, are described in the Additional
Statement.
Market Risk
The value of the securities in which the Fund invests may go up or down in
response to the prospects of individual companies and/or general economic
conditions. Price changes may be temporary or last for extended periods.
Other Types of Investments
This Prospectus describes the Fund's principal investment strategies, and the
types of securities in which the Fund principally invests. The Fund may, from
time to time, make other types of investments and pursue other investment
strategies in support of its overall investment goal. These supplemental
investment strategies - and the risk involved - are described in detail in the
Additional Statement, which is referred to on the back cover of this Prospectus.
Portfolio Turnover Risk
The Adviser will not consider the portfolio turnover rate a limiting factor in
making investment decisions for the Fund. A high rate of portfolio turnover
(100% or more) involves correspondingly greater expenses which must be borne by
the Fund and its shareowners. It may also result in higher short-term capital
gains taxable to shareowners.
Temporary Investment Risk
The Fund may, for temporary defensive purposes, invest a percentage of its total
assets, without limitation, in cash or various short-term instruments. This may
occur for example, when the Fund is attempting to respond to adverse market,
economic, political or other conditions. When the Fund's assets are invested in
these instruments, the Fund may not be achieving its investment objective.
Valuation Risk
This is a risk that the Fund has valued certain securities at a higher or lower
price than the Fund can sell them.
Year 2000 Risk
Like other investment companies and financial service providers, the Fund could
be adversely affected if the computer systems used by its investment adviser and
the Fund's other service providers do not properly process and calculate date-
related information and data beginning on January 1, 2000. This possibility is
commonly known as the "Year 2000 Problem." The Year 2000 Problem arises because
most computer systems were designed only to recognize a two-digit year, not a
four-digit year. When the year 2000 begins, these computers may interpret "00"
as the year 1900 and either stop processing date-related computations or process
them incorrectly. These failures could have a negative impact on the handling
of securities trades, pricing and account services. FIRMCO, the investment
adviser to the Fund, and Firstar Corporation, FIRMCO's parent company, are
taking steps to address the Year 2000 Problem with respect to the computer
systems they use and are working with those entities with which they have
business relationships which may impact the services provided to the Fund to
determine the status of their Year 2000 initiatives. As of the date of this
Prospectus, it is not anticipated shareowners will experience negative effects
on their investment, or on the services provided in connection therewith, as a
result of the Year 2000 Problem relating to the investment adviser or the Fund's
other major service providers; however, there can be no assurance that these
steps taken by these service providers will be successful, or that interaction
with other non-complying computer systems will not adversely impact the Fund.
Also, companies in which the Fund invests could be adversely affected by the
Year 2000 Problem. Also, it is possible that the normal operations of the Fund
will in any event, be disrupted significantly by the failure of communications
and public utility companies, governmental entities, financial processors or
others to perform their services as a result of the Year 2000 Problem.
Foreign Risks - to the extent the Fund invests in foreign securities
When the Fund invests in foreign securities, it will be subject to special risks
not typically associated with domestic issuers resulting from less government
regulation, less public information and less economic, political and social
stability. Foreign securities and, in particular, foreign debt securities are
sensitive to changes in interest rates. In addition, investment in securities
of foreign governments involves the risk that foreign governments may default on
their obligations or may otherwise not respect the integrity of their debt. The
Fund will also be subject to the diplomatic risk that an adverse change in the
diplomatic relations between the U.S. and another country might reduce the value
or liquidity of investments. Future political and economic developments, the
possible imposition of withholding taxes on dividend income, the possible
seizure or nationalization of foreign holdings, the possible establishment of
exchange controls or freezes on the convertibility of currency, or the adoption
of other governmental restrictions might adversely affect an investment in
foreign securities. Additionally, foreign banks and foreign branches of domestic
banks may be subject to less stringent reserve requirements, and to different
accounting, auditing and recordkeeping requirements.
Foreign risks will normally be greatest when the Fund invests in issuers located
in emerging markets. Securities issued in emerging market countries, in
particular, may be more sensitive to certain economic changes and less liquid.
These countries are located in the Asia/Pacific region, Eastern Europe, Latin
and South America and Africa. In general, the securities markets of these
countries are less liquid, are subject to greater price volatility, have smaller
market capitalizations and have problems with securities registration and
custody. In addition, because the securities settlement procedures are less
developed in these countries, the Fund may be required to deliver securities
without receiving payment and also be unable to complete transactions during
market disruptions. As a result of these and other risks, investments in these
countries generally present a greater risk of loss to the Fund.
Investment in foreign securities also involves higher costs than investment in
U.S. securities, including higher transaction and custody costs as well as the
imposition of additional taxes by foreign governments.
The Fund may invest in foreign currency denominated securities. A Fund which
invests in foreign currency denominated securities will also be subject to the
risk of negative foreign currency rate fluctuations. A change in the exchange
rate between U.S. dollars and foreign currency may reduce the value of an
investment made in a security denominated in that foreign currency.
Small Cap Stock Risk
Smaller capitalization stocks involve greater risks than those associated with
larger, more established companies. Small company stocks may be subject to more
abrupt or erratic price movements, for reasons including that the stocks are
traded in lower volume and that the issuers are more sensitive to changing
conditions and have less certain growth prospects. Also, there are fewer market
makers for these stocks and wider spreads between quoted bid and asked prices in
the over-the counter market for these stocks. Small cap stocks tend to be less
liquid, particularly during periods of market disruption. There normally is
less publicly available information concerning these securities. Small
companies in which the Fund may invest may have limited product lines, markets
or financial resources, or may be dependent on a small management group. In
particular, investments in unseasoned companies present risks considerably
greater than investments in more established companies.
ADDITIONAL RISKS WHICH APPLY TO PARTICULAR TYPES OF SECURITIES
Other Investment Companies
The Fund may invest its cash balances in other investment companies which invest
in high quality, short-term debt securities. A pro rata portion of the other
investment companies' expenses will be borne by the Fund's shareowners.
Borrowings, Reverse Repurchase Agreements
The Fund may borrow money to the extent allowed (as described in the Additional
Statement) to meet shareowner redemptions from banks or through reverse
repurchase agreements. These strategies involve leveraging. If the securities
held by the Fund decline in value while these transactions are outstanding, the
net asset value of the Fund's outstanding shares will decline in value by
proportionately more than the decline in value of the securities. In addition,
reverse repurchase agreements involve the risks that the interest income earned
by the Fund (from the investment of the proceeds) will be less than the interest
expense of the transaction, that the market value of the securities sold by the
Fund will decline below the price the Fund is obligated to pay to repurchase the
securities, and that the securities may not be returned to the Fund.
Options
An option is a type of derivative instrument that gives the holder the right
(but not the obligation) to buy (a "call") or sell (a "put") an asset in the
future at an agreed upon price prior to the expiration date of the option.
Options can be used to manage exposure to certain markets, enhance income or
hedge against a decline in value of portfolio securities. Options may relate to
particular securities or various stock or bond indices and may or may not be
listed on a national securities exchange and issued by the Options Clearing
Corporation. Purchasing options is a specialized investment technique which
entails a substantial risk of a complete loss of the amount paid as premiums to
the writer of the option.
The value of options can be highly volatile, and their use can result in loss if
the Adviser is incorrect in its expectation of price fluctuations. The
successful use of options for hedging purposes also depends in part on the
ability of the Adviser to manage future price fluctuations and the degree of
correlation between the options and securities markets.
The Fund may purchase put and call options in an amount not to exceed 5% of
their respective net assets.
In addition, the Fund may write call options on securities and on various stock
or bond indices. The Fund may write a call option only if the option is
covered. The Fund may cover a call option by owning the security underlying the
option or through other means which would allow for immediate satisfaction of
its obligation. Such options will be listed on a national securities exchange.
The aggregate value of the Fund's assets subject to options written by the Fund
will not exceed 5% of the value of its net assets during the current year. In
order to close out an option position, the Fund will be required to enter into a
"closing purchase transaction" (the purchase of a call option on a security or
an index with the same exercise price and expiration date as the call option
which it previously wrote on the same security or index).
Risks associated with the use of options on securities include (i) imperfect
correlation between the change in market value of the securities the Fund holds
and the prices of options relating to the securities purchased or sold by the
Fund; and (ii) the possible lack of a liquid secondary market for an option.
The Additional Statement includes additional information relating to option
trading practices and related risks.
Futures Contracts and Related Options
A futures contract is a type of derivative instrument that obligates the holder
to buy or sell an asset in the future at an agreed upon price. For example, a
futures contract may obligate the Fund, at maturity, to take or make delivery of
certain domestic or foreign securities, the cash value of a securities index or
a stated quantity of a foreign currency. When the Fund purchases an option on a
futures contract, it has the right to assume a position as a purchaser or seller
of a futures contract at a specified exercise price during the option period.
When the Fund sells an option on a futures contract it becomes obligated to
purchase or sell a futures contract if the option is exercised.
The Fund may invest in futures contracts and options on futures contracts for
hedging purposes, to have fuller exposure to price movements in a stock or bond
index, to increase total return or to maintain liquidity to meet potential
shareowner redemptions, invest cash balances or dividends or minimize trading
costs. In addition, the Fund may purchase and sell futures and related options
(based only on the S&P MidCap 400 Index) to maintain cash reserves while
simulating full investment in the stocks underlying the S&P MidCap 400 Index, to
keep substantially all of its assets exposed to the market (as represented by
the S&P MidCap 400 Index), and to reduce transaction costs.
Futures contracts and options present the following risks: imperfect correlation
between the change in market value of the Fund's securities and the price of
futures contracts and options; the possible inability to close a futures
contract when desired; losses due to unanticipated market movements which are
potentially unlimited; and the possible inability of the investment management
team to correctly predict the direction of securities prices, interest rates,
currency exchange rates and other economic factors. The Fund may buy and sell
futures contracts and related options on foreign exchanges or boards of trade
(which do not offer the same protections as U.S. exchanges).
The Fund's commodities transactions must constitute bona fide hedging or other
permissible transactions pursuant to regulations promulgated by the Commodities
and Futures Trading Commission ("CFTC"). In addition, the Fund may not engage
in such transactions if the sum of the amount of initial margin deposits and
premiums paid for unexpired commodity options, other than for bona fide hedging
transactions, would exceed 5% of the liquidation value of its assets, after
taking into account unrealized profits and unrealized losses on such contracts
it has entered into; provided, however, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
calculating the percentage limitation. Pursuant to SEC requirements, the Fund
may be required to segregate cash or high quality money market instruments in
connection with its commodities transactions in an amount generally equal to the
value of the underlying commodity. The Company intends to comply with the
regulations of the CFTC exempting the Fund from registration as a "commodity
pool operator."
The Fund intends to limit its transactions in futures contracts so that not more
than 10% of the Fund's net assets are at risk. For a more detailed description
of futures contracts and futures options, including a discussion of the
limitations imposed by federal tax law, see Appendix B to the Additional
Statement.
INVESTING WITH FIRSTAR FUNDS
This section describes for you the procedures for opening an account and how to
buy, sell or exchange Fund shares.
SHARE CLASSES AVAILABLE
The Fund offers three classes of shares; Retail A, Retail B and Institutional.
INSTITUTIONAL SHARES
- No sales charge
- Available for;
- trust, agency or custodial accounts opened through Firstar Bank,
Milwaukee, N.A.;
- employer-sponsored qualified retirement plans other than those serviced
by certain external organizations who have service agreements with Firstar
or its affiliates, and other than plans administered by Firstar with assets
less than $1 million at the time Firstar begins plan administration (but
including plans administered by Firstar which owned institutional shares
prior to June 18, 1999). Plans administered by Firstar with assets less
than $1 million at the time Firstar begins plan administration will become
eligible for Institutional shares when such plans grow to $1 million or
greater as further described in the Additional Statement;
- All clients of FIRMCO; and
- those purchasing through certain broker-dealers who have agreed to
provide certain services with respect to shares of the Funds, including
Waterhouse Securities, Inc. and Jack White, a division of Waterhouse
Securities, Inc. Check with your broker-dealer to see if you qualify for
institutional shares.
RETAIL A SHARES
- - Initial sales charge of 4.50% or less
- - No deferred sales charge
- - Reduced sales charge for larger investments. See "Sales Charges and Waivers"
for more information
- - Available to any investor who does not qualify to purchase Institutional
shares
RETAIL B SHARES
- - No initial sales charge
- - Deferred sales charge _ Maximum of 5% for redemptions during the first year,
4% in the second year, 3% in the third and fourth years, 2% in the fifth
year, 1% in the sixth year and 0% thereafter
- - Converts to Retail A shares after six years
- - Available to any investor who does not qualify to purchase Institutional
shares
A securities dealer, broker, financial institution or other industry
professional ("shareowner organization") may charge transaction or other fees
for providing administrative or other services in connection with investments in
Fund shares.
SALES CHARGES AND WAIVERS
INITIAL SALES CHARGES - for Retail A Shares of the Fund:
The public offering price for Retail A Shares is the net asset value of the
Retail A Shares purchased plus any applicable front-end sales charge. A sales
charge will not be assessed on Retail A Shares purchased through reinvestment of
dividends or capital gains distributions. The sales charge is as follows:
Shareowner
Organization
Sales Charge as a Sales Charge as Reallowance as a
Amount of Transaction Percentage of Percentage of Percentage of
at Offering Price Offering Price Net Asset Value Offering Price
Less than $100,000 4.50% 4.71% 4.00%
$100,000 to $249,999 3.75% 3.90% 3.25%
$250,000 to $499,999 2.50% 2.56% 2.00%
$500,000 to $749,999 2.00% 2.04% 1.50%
$750,000 to $999,999 1.00% 1.01% 0.50%
$1,000,000 and above 0.25% 0.25% 0.25%
You only pay a sales charge when you buy shares. The Distributor may reallow the
entire sales charge to certain shareowner organizations and the amount reallowed
may change periodically. To the extent that 90% or more of the sales charge is
reallowed, shareowner organizations may be deemed to be underwriters under the
Act.
REDUCING YOUR SALES CHARGES AND WAIVERS - Retail A Shares
To qualify for a reduction of, or exception to the sales charge, you must notify
your shareowner organization or the Distributor at the time of purchase or
exchange. The reduction in sales charge is subject to confirmation of your
holdings through a check of records. The Company may modify or terminate
quantity discounts at any time.
WAIVERS - RETAIL A SHARES
You may purchase retail shares without a sales charge if:
(a) you are an employee, director, retiree or registered representative of
Firstar Corporation or its affiliates or of Firstar Funds, Inc.
(b) you are a spouse, parent, in-law, sibling or child of an individual who
falls within the preceding category (a) above
(c) you make any purchase for your medical savings account for which Firstar
Corporation or an affiliate serves in a custodial capacity
(d) you purchase through certain external organizations that have entered into a
service agreement with Firstar or its affiliates
(e) you are part of an employer-sponsored qualified retirement plan
administered by Firstar with assets less than $1 million at the time Firstar
begins plan administration which commenced administration by Firstar on or after
June 18, 1999
(f) you purchase through certain broker-dealers who have agreed to provide
certain services with respect to shares of the Funds, including Charles Schwab
Mutual Fund Marketplace/R. Check with your broker-dealer to see if you qualify
for this exemption
REDUCING YOUR SALES CHARGES - RETAIL A SHARES
- - Right of Accumulation - Existing Equity, Balanced and Bond Fund shares can be
combined with new purchases for purposes of calculating reduced sales charges.
- - Letter of Intent - Fund shares purchased in a 13-month period qualify for the
same reduced sales charge as if all purchased at once. You may obtain a reduced
sales charge by means of a written Letter of Intent which expresses your non-
binding commitment to invest in the aggregate $100,000 or more in Retail A
Shares of an Equity, Balanced or Bond Fund within a period of 13 months. Any
investments you make during the period receive the discounted sales charge based
on the full amount of your investment commitment. The Additional Statement
includes details about the Letter of Intent.
For purposes of applying the Rights of Accumulation and Letter of Intent
privileges, the sales charge schedule applies to the combined purchases made by
any individual and/or spouse purchasing securities for his, her or their own
account, or the aggregate investments of a trustee or other fiduciary or IRA for
the benefit of the persons previously listed.
CONTINGENT DEFERRED SALES CHARGE - Retail B Shares
The public offering price for Retail B Shares is the net asset value of the
Retail B Shares purchased. Although investors pay no front-end sales charge on
purchases of Retail B Shares, such shares are subject to a contingent deferred
sales charge at the rates set forth below if they are redeemed within six years
of purchase.
The amount of any contingent deferred sales charge an investor must pay
depends on the number of years that elapse between the purchase date and the
date such Retail B Shares are redeemed. Solely for purposes of this
determination, all payments during a month will be aggregated and deemed to have
been made on the first day of the month.
Number of Years Contingent Deferred Sales Charge
Elapsed Since Purchase (as % of dollar amount subject to the charge)
- ---------------------- -------------------------------------------
Less than one 5.00%
At least one but less than two 4.00%
At least two but less than three 3.00%
At least three but less than four 3.00%
At least four but less than five 2.00%
At least five but less than six 1.00%
At least six None
The contingent deferred sales charge on Retail B Shares is based on the lesser
of the net asset value of the shares on the redemption date or the original cost
of the Shares being redeemed. As a result, no sales charge is imposed on any
increase in the net asset value of an investor's Retail B Shares. In addition,
a contingent deferred sales charge will not be assessed on Retail B Shares
purchased through reinvestment of dividends or capital gains distributions.
When a shareowner redeems his or her Retail B Shares, the redemption request is
processed to minimize the amount of the contingent deferred sales charge that
will be charged. Retail B Shares are redeemed first from those shares that are
not subject to a contingent deferred sales charge (that is, Retail B Shares that
were acquired through reinvestment of dividends or distributions or that qualify
for other deferred sales charge exemptions, if any) and after that from the
Retail B Shares that have been held the longest.
Shareowner organizations will receive commissions in connection with sales
of Retail B Shares. A commission equal to 4% of the amount invested is paid to
authorized dealers.
The contingent deferred sales charge a shareowner may pay upon redemption
is remitted to the Distributor or other party, which may use such amounts to
defray the expenses associated with the distribution-related services involved
in selling Retail B Shares.
WAIVERS - RETAIL B SHARES
Certain types of redemptions may also qualify for an exemption from the
contingent deferred sales charge. If you think you may be eligible for a
contingent deferred sales charge waiver listed below, be sure to notify your
shareowner organization or the Distributor at the time Retail B Shares are
redeemed. The contingent deferred sales charge with respect to Retail B Shares
is not assessed on:
(i) exchanges described under "Exchange of Shares"
(ii) redemptions in connection with shares sold for certain retirement
distributions or because of disability or death.
(iii) redemptions effected pursuant to a Fund's right to liquidate a
shareowner's account if the aggregate net asset value of Retail B Shares held in
the account is less than the minimum account size set forth under "Redemption
of Shares - Other Transaction Information - Accounts Below the Minimum Balance";
(iv) redemptions in connection with the combination of a Fund with any other
investment company registered under the 1940 Act by merger, acquisition of
assets, or by any other transaction; or
(v) redemptions resulting from a certain tax-free return of an excess
contribution.
In addition to the foregoing exemptions, no contingent deferred sales charge
will be imposed on redemptions made pursuant to the Company's systematic
withdrawal plan. The Funds reserve the right to limit such redemptions without
a contingent deferred sales charge, on an annual basis, to 12% of the value of
your Retail B Shares on the redemption date. See the Additional Statement for
more information.
CONVERSION - RETAIL B SHARES
Retail B Shares will automatically convert into Retail A Shares of the same Fund
six years after the beginning of the calendar month in which the purchase date
occurred. If you acquire Retail B Shares of a Fund by exchange from Retail B
Shares of another Fund, your Retail B Shares will convert into Retail A Shares
of that Fund based on the date of the initial purchase.
If you acquire Retail B Shares through reinvestment of distributions, your
Retail B Shares will convert into Retail A Shares at the earlier of two dates _
either six years after the beginning of the calendar month in which the purchase
date occurred (based on the date of the initial purchase of the shares on which
the distribution was paid) or the date of conversion of the most recently
purchased Retail B Shares that were not acquired through reinvestment of
dividends or distributions. For example, if a shareowner makes a one-time
purchase of Retail B Shares of a Fund and subsequently acquires additional
Retail B Shares of that Fund only through reinvestment of dividends and/or
distributions, all of such shareowner's Retail B Shares of that Fund, including
those acquired through reinvestment, will convert to Retail A Shares of such
fund on the same date.
Upon conversion, the converted shares will be relieved of the distribution and
shareowner servicing fees borne by Retail B Shares, although they will be
subject to the shareowner servicing fees borne by Retail A Shares.
The conversion of Retail B Shares to Retail A Shares will not occur at any time
the Fund is advised that such conversions may constitute taxable events for
federal tax purposes, which the Fund believes is unlikely. If conversions do
not occur as a result of possible taxability, Retail B Shares would continue to
be subject to higher expenses than Retail A Shares for an indeterminate period.
REINSTATEMENT PRIVILEGE
If you sell shares of a Firstar Fund or Firstar Stellar Fund, you may reinvest
some or all of the proceeds in the Retail A Shares of any Firstar Fund within 60
days without a sales charge, as long as your investment professional is notified
before you reinvest. All accounts involved must have the same registration. You
may be subject to taxes as a result of a redemption. Consult your tax adviser
concerning the results of a redemption or reinvestment.
HOW TO DECIDE WHETHER TO BUY RETAIL A OR RETAIL B SHARES
The decision as to which type of Shares to purchase depends on the amount you
invest, the intended length of the investment and your personal situation.
Retail A Shares - If you are making an investment of an amount that qualifies
for a reduced sales charge, you may consider purchasing Retail A Shares.
Retail B Shares - If you plan to hold your investment for a significant period
of time and would prefer not to pay an initial sales charge, you might consider
purchasing Retail B Shares. By not paying a front-end sales charge, your entire
purchase in Retail B Shares is invested from the time you make your initial
investment; however, the distribution and service fee paid by Retail B Shares
will cause your Retail B Shares (until conversion to Retail A Shares) to have a
higher expense ratio and thus, lower performance and lower dividend payments (to
the extent dividends are paid) than Retail A Shares.
PURCHASING SHARES
Shares of the Fund are offered and sold on a continuous basis by the distributor
for the Fund, B.C. Ziegler and Company (the "Distributor"), which is independent
of the Adviser. The Distributor is a registered broker-dealer with offices at
215 North Main Street, West Bend, Wisconsin 53095.
MINIMUM INVESTMENTS
RETAIL SHARES
The minimum initial investment for Retail Shares in the Fund is $1,000. The
minimum subsequent investment is $50. The minimum initial investment will be
waived if you participate in the Periodic Investment Plan.
INSTITUTIONAL SHARES
There is no minimum initial or subsequent investment for Institutional Shares.
BUYING SHARES
Purchase requests accompanied by a check or wire payment received by the
transfer agent before 3:00 p.m. Central time on a business day for the Fund will
be executed the same day, at that day's closing price provided that payment is
received by the close of regular trading hours. Orders received after 3:00 p.m.
Central time and orders for which payment is not received by the close of
regular trading hours on the New York Stock Exchange will be executed on the
next business day after receipt of both order and payment in proper form.
- -------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- -------------------------------------------------------------------------------
Through a Shareowner - Contact your Shareowner - Contact your Shareowner
Organization Organization. Organization.
- -------------------------------------------------------------------------------
By Mail - Complete an application and - Make your check
mail it along with a check payable to Firstar
payable to Firstar Funds, Funds. Please include
P.O. Box 3011, your sixteen-digit
Milwaukee, WI 53201-3011: account number on your
For overnight delivery mail check and mail it to
to; 615 E. Michigan St., the address at the
Milwaukee, WI 53202. left.
- -------------------------------------------------------------------------------
Automatically - Call 1-800-677-FUND to - Complete a Periodic
(Retail A and B obtain a purchase Investment Plan
Shares) application, which includes Application to
information for a Periodic automatically purchase
Investment Plan or more shares.
ConvertiFund/R Account.
- Open a ConvertiFund/R
account to
automatically invest
proceeds from one
account to another
account of the Firstar
Family of Funds.
- -------------------------------------------------------------------------------
By Wire - Call 1-800-677-FUND prior - Call 1-800-677-FUND
to sending the wire in prior to sending the
order to obtain a wire in order to
confirmation number and to obtain a confirmation
ensure prompt and accurate number and to ensure
handling of funds. Ask prompt and accurate
your bank to transmit handling of funds. Ask
immediately available funds your bank to transmit
by wire in the amount of immediately available
your purchase to: funds by wire as
Firstar Bank Milwaukee, described at the left.
N.A. ABA #0750-00022 Please include your
Firstar Trust Department sixteen-digit account
Account #112-952-137 number. The Fund and
for further credit to its transfer agent are
[name of Fund] not responsible for the
[name /title on the consequences of delays
account]. resulting from
The Fund and its transfer the banking or Federal
agent are not responsible Reserve Wire system,
for the consequences of or from incomplete
delays resulting from the wiring instructions.
banking or Federal Reserve
Wire system, or from
incomplete wiring
instructions.
- -------------------------------------------------------------------------------
Internet - Not Available - Use Firstar Funds
www.firstarfunds.com Direct to exchange
from another Firstar
Fund account with the
same registration
including name,
address and taxpayer
ID number.
- Purchase additional
shares using an
electronic funds
transfer from your
banking institution
for payment.
- Call 1-800-677-FUND to
authorize this service.
- -------------------------------------------------------------------------------
By Telephone - Call 1-800-677-FUND to - Call 1-800-677-FUND to
Exchange exchange from another exchange from another
Firstar Fund account with Firstar Fund account
the same registration with the same
including name, address and registration including
taxpayer ID number. name, address and
taxpayer ID number.
- -------------------------------------------------------------------------------
Please Note: All checks must be drawn on a bank located within the United States
and must be payable in U.S. dollars to Firstar Funds. A $25 fee will be imposed
by the Funds' transfer agent if any check used for investment in an account does
not clear, and the investor involved will be responsible for any loss incurred
by the Fund. Prior to the transfer agent receiving a completed application,
investors may make an initial investment; however, redemptions will not be paid
until the transfer agent has received the completed application.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Additional Information on Buying Shares
- -------------------------------------------------------------------------------
The Fund will not accept payment in cash or third party checks for the purchase
of shares.
Federal regulations require that each investor provide a Social Security number
or other certified taxpayer identification number upon opening or reopening an
account. The Funds reserve the right to reject applications without such a
number or an indication that a number has been applied for. If a number has
been applied for, the number must be provided and certified within sixty days of
the date of the application. Any accounts opened without a proper number will
be subject to backup withholding at a rate of 31% on all liquidations and
dividend and capital gain distributions.
Payment for shares of the Fund in the amount of $1,000,000 or more may, at the
discretion of the Adviser, be made in the form of securities that are
permissible investments for the Fund.
The Fund may authorize one or more brokers and other shareowner organizations to
accept on their behalf purchase, redemption and exchange orders, and may
authorize such shareowner organizations to designate other intermediaries to
accept purchase, redemption and exchange orders on the Funds' behalf. In these
cases, a Fund will be deemed to have received an order when an authorized
shareowner organization or intermediary accepts the order, and customer orders
will be priced at the Fund's net asset value next computed after they are
accepted by a shareowner organization or intermediary. Shareowner organizations
and intermediaries will be responsible for transmitting accepted orders to the
Fund within the period agreed upon by them. Shareowners should contact their
shareowner organization or intermediaries to learn whether they are authorized
to accept orders for Funds.
It is the responsibility of shareowner organizations to transmit orders and
payment for the purchase of shares by their customers to the transfer agent on a
timely basis and to provide account statements in accordance with the procedures
previously stated.
- -------------------------------------------------------------------------------
For Owners of Institutional Shares:
- -------------------------------------------------------------------------------
All share purchases are effected pursuant to a customer's account at Firstar
Bank Milwaukee, N.A. Trust Department ("Firstar Trust") or at another chosen
institution or broker-dealer pursuant to procedures established in connection
with the requirements of the account. Confirmations of share purchases and
redemptions will be sent to Firstar Trust or the other shareowner organizations
involved. Firstar Trust and the other shareowner organizations or their
nominees will normally be the holders of record of Fund shares, and will reflect
their customers' beneficial ownership of shares in the account statements
provided by them to their customers. The exercise of voting rights and the
delivery to customers of shareowner communications from the Fund will be
governed by the customers' account agreements with Firstar Trust and the other
shareowner organizations. Investors wishing to purchase shares of the Funds
should contact their account representatives.
In the case of participants in certain employee benefit plans investing in
certain Funds, purchase and redemption orders will be processed on a particular
day based on whether a service organization acting on their behalf received the
order by the close of regular trading on that day.
REDEEMING SHARES
SELLING SHARES
Redemption requests received by the transfer agent before 3:00 p.m. Central time
on a business day for the Fund will be executed the same day, at that day's
closing price. Orders received after 3:00 p.m. Central time will be executed on
the next business day.
- -------------------------------------------------------------------------------
Through a Shareowner - Contact your Shareowner Organization
Organization
- -------------------------------------------------------------------------------
By Phone - Call 1-800-677-FUND with your account name, sixteen
digit account number and amount of redemption
(minimum $500). Redemption proceeds will only be
sent to a shareowner's address or bank account of a
commercial bank located within the United States as
shown on the transfer agent's records. (Available
only if telephone redemptions have been authorized
on the account application and if there has been no
change of address by telephone within the preceding
15 days).
- -------------------------------------------------------------------------------
By Mail - Mail your instructions to the Firstar Funds, P.O.
Box 3011, Milwaukee, WI 53201-3011 (via overnight
delivery to 615 E. Michigan Street, Milwaukee, WI
53202). Include the number of shares or the amount
to be redeemed, your sixteen-digit account number
and Social Security number or other taxpayer
identification number. Your instructions must be
signed by all persons required to sign for
transactions exactly as their names appear on the
account. If the redemption amount exceeds $50,000,
or if the proceeds are to be sent elsewhere than the
address of record, or the address of record has been
changed by telephone within the preceding 15 days,
each signature must be guaranteed in writing by
either a commercial bank that is a member of the
FDIC, a trust company, a credit union, a savings
association, a member firm of a national securities
exchange or other eligible guarantor institution.
- -------------------------------------------------------------------------------
Internet - Use Firstar Funds Direct to redeem up to $25,000.
www.firstarfunds.com Call 1-800-677-FUND to authorize this service.
- -------------------------------------------------------------------------------
Automatically - Call 1-800-677-FUND for a Systematic Withdrawal Plan
application ($5,000 account minimum and $50 minimum
per transaction).
Guarantees must be signed by an eligible guarantor institution and "Signature
Guaranteed" must appear with the signature.
- -------------------------------------------------------------------------------
The Fund may require additional supporting documents for redemptions made by
corporations, executors, administrators, trustees and guardians. A redemption
request will not be deemed to be properly received until the transfer agent
receives all required documents in proper form. Purchases of additional shares
concurrently with withdrawals could be disadvantageous because of the sales
charge involved in the additional purchases.
- -------------------------------------------------------------------------------
ADDITIONAL TRANSACTION INFORMATION
- -------------------------------------------------------------------------------
Telephone Requests
- -------------------------------------------------------------------------------
In order to arrange for telephone redemptions after you have opened your account
or to change the bank or account designated to receive redemption proceeds, send
a written request to the Firstar Mutual Fund Services, LLC or contact your
registered representative. Each shareowner of the account must sign the
request. The Fund may request further documentation from corporations,
executors, administrators, trustees and guardians.
The Funds reserve the right to refuse a telephone redemption if they believe it
is advisable to do so. Procedures for redeeming shares by telephone may be
modified or terminated by the Funds at any time upon notice to shareowners.
During periods of substantial economic or market change, telephone redemptions
may be difficult to implement. If a shareowner is unable to contact the
transfer agent by telephone, shares may also be redeemed by delivering the
redemption request to the transfer agent.
In an effort to prevent unauthorized or fraudulent purchase and redemption
requests by telephone, Firstar employs reasonable procedures to confirm that
such instructions are genuine. Among the procedures used to determine
authenticity, investors electing to transact by telephone will be required to
provide their account number (unless opening a new account). All telephone
transactions will be recorded and confirmed in writing. Statements of accounts
shall be conclusive if not objected to in writing within 10 days after
transmitted by mail. Firstar may implement other procedures from time to time.
If reasonable procedures are not implemented, Firstar may be liable for any loss
due to unauthorized or fraudulent transactions. In all other cases, the
shareowner is liable for any loss for unauthorized transactions.
- -------------------------------------------------------------------------------
Certificates
- -------------------------------------------------------------------------------
Certificates are only issued upon shareowner request. If certificates have been
issued, the transfer agent must receive the certificates, properly endorsed or
accompanied by a properly executed stock power and accompanied by signature
guarantees, prior to a redemption request.
- -------------------------------------------------------------------------------
Additional Redemption Information
- -------------------------------------------------------------------------------
The Fund will make payment for redeemed shares typically within one or two
business days, but no later than the seventh day after receipt by the transfer
agent of a request in proper form, except as provided by SEC rules. HOWEVER, IF
ANY PORTION OF THE SHARES TO BE REDEEMED REPRESENTS AN INVESTMENT MADE BY CHECK,
THE FUND WILL DELAY THE PAYMENT OF THE REDEMPTION PROCEEDS UNTIL THE TRANSFER
AGENT IS REASONABLY SATISFIED THAT THE CHECK HAS BEEN COLLECTED, WHICH MAY TAKE
TWELVE DAYS FROM THE PURCHASE DATE. An investor must have filed a purchase
application before any redemption requests can be paid.
- -------------------------------------------------------------------------------
Accounts Below the Minimum Balance
- -------------------------------------------------------------------------------
If your account falls below $1,000, the Fund may redeem your account. The Fund
will impose no charge and will give you sixty days written notice prior to any
redemption. The Fund may also redeem shares involuntarily if it is appropriate
to do so to carry out the Fund's responsibilities under the 1940 Act and, in
certain cases, may make payment for redemption in securities. Investors would
bear any brokerage or other transaction costs incurred in converting the
securities so received to cash. See the Additional Statement referred to on the
last page for examples of when such redemptions might be appropriate.
- -------------------------------------------------------------------------------
EXCHANGING SHARES
- -------------------------------------------------------------------------------
You may exchange your shares for Money Market Fund shares (except that Retail B
shares are not exchangeable for Institutional Money Market Fund shares) or for
shares of other Firstar Funds within the same share class if you are eligible to
purchase the class at the time of the exchange. Unless you qualify for a sales
charge exemption, an initial sales charge will be imposed on the exchange if the
shares of the Fund being acquired have an initial sales charge and the shares
being redeemed were purchased without a sales charge. Retail B shares acquired
in an exchange will be subject to a contingent deferred sales charge upon
redemption in accordance with this prospectus. For purposes of computing the
contingent deferred sales charge, the length of time of ownership will be
measured from the date of the original purchase of Retail B shares.
Telephone exchange privileges automatically apply to each shareowner of record
unless the transfer agent receives written instructions canceling the privilege.
Firstar reserves the right to terminate the exchange privilege of any party who
requests more than four exchanges within a calendar year. Firstar may do so
with prior notice based on a consideration of both the number of exchanges and
the time period over which those exchange requests have been made, together with
the level of expense to the Funds or other adverse effects which may result from
the additional exchange requests.
For federal income tax purposes, an exchange of shares is a taxable event and,
accordingly, an investor may realize a capital gain or loss. Before making an
exchange request, an investor should consult a tax or other financial adviser to
determine the tax consequences of a particular exchange. No exchange fee is
currently imposed by Firstar on exchanges; however, Firstar reserves the right
to impose a charge in the future. In addition, shareowner organizations may
charge a fee for providing administrative or other services in connection with
exchanges. The Fund reserves the right to reject any exchange request with
prior notice to a shareowner and the exchange privilege may be modified or
terminated at any time. At least sixty days' notice will be given to
shareowners of any material modification or termination except where notice is
not required under SEC regulations. Also keep in mind:
- -- Exchanges are available only in states where exchanges may be legally made.
- -- The minimum amount which may be exchanged is $1,000.
- -- If any portion of the shares to be exchanged represents an investment made by
check, the Fund will delay the acquisition of new shares in an exchange until
the transfer agent is reasonably satisfied that the check has been collected,
which may take up to twelve days from the purchase date.
- -- It may be difficult to make telephone exchanges in times of drastic economic
or market changes.
Additional Shareowner Services
- -------------------------------------------------------------------------------
Shareowner Reports
- -------------------------------------------------------------------------------
Shareowners will be provided with a report showing portfolio investments and
other information at least semiannually; and after the close of the Fund's
fiscal year with an annual report containing audited financial statements. To
eliminate unnecessary duplication, only one copy of shareowner reports will be
sent to shareowners with the same mailing address. Shareowners may request
duplicate copies free of charge.
Account statements will be mailed after each purchase, reinvestment of dividends
and redemption. Statements of accounts shall be conclusive if not objected to in
writing within 10 Days after transmitted by mail. Generally, the Fund does not
send statements for funds held in brokerage, retirement or other similar
accounts.
- -------------------------------------------------------------------------------
Firstar Funds Website (www.firstarfunds.com)
- -------------------------------------------------------------------------------
The site offers educational information and interactive financial planning tools
as well as product-specific information.
Generally, Shareowners can request purchases, exchanges and redemptions of Fund
shares online via the Internet after an account is opened. Redemption requests
of up to $25,000 will be accepted through the Internet. Payment for shares
purchased online must be made by electronic funds transfer from your banking
institution. To authorize this service, call Firstar Mutual Fund Services, LLC
at 1-800-677-FUND.
Firstar Funds and their agents will not be responsible for any losses resulting
from unauthorized online transactions when procedures are followed which are
designed to confirm that the online transaction request is genuine. Statements
of accounts shall be conclusive if not objected to in writing within 10 days
after transmitted by mail. During periods of significant economic or market
change, it may be difficult to reach the Funds online. If this happens, you may
initiate transactions in your share accounts by mail or as otherwise described
in the prospectus.
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Automated Teleresponse Service
- -------------------------------------------------------------------------------
Shareowners using a touch-tone/R telephone can access information on the Fund 24
hours a day, seven days a week. When calling Firstar Mutual Fund Services, LLC
at 1-800-677-FUND, shareowners may choose to use the automated information
feature or, during regular business hours (8:00 a.m. to 7:00 p.m. Central time,
Monday through Friday), speak with a Firstar representative.
- -------------------------------------------------------------------------------
Retirement Plans
- -------------------------------------------------------------------------------
The Fund offers individual retirement accounts including SIMPLE and SEP IRAs.
For details concerning Retirement Accounts (including service fees), please call
Firstar Funds Center at 1-800-677-FUND.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
- -------------------------------------------------------------------------------
Dividends and Capital Gains Distributions
- -------------------------------------------------------------------------------
Dividends from net investment income of the Fund are declared and paid
quarterly.
- -------------------------------------------------------------------------------
Reinvested dividends and distributions receive the same tax treatment as those
paid in cash.
- -------------------------------------------------------------------------------
Any capital gains are distributed annually. A shareowner's dividends and capital
gains distributions will be reinvested automatically in additional shares unless
the Fund is notified that the shareowner elects to receive distributions in
cash.
If a shareowner has elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service is unable to
deliver checks to shareowner's address of record, such shareowner's distribution
option will automatically be converted to having all dividend and other
distributions reinvested in additional shares. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
- -------------------------------------------------------------------------------
Federal Taxes
- -------------------------------------------------------------------------------
The Fund contemplates declaring as dividends each year all, or substantially
all, of its taxable income, including its net capital gain (the excess of long-
term capital gain over short-term capital loss). You will be subject to income
tax on these distributions regardless of whether they are paid in cash or
reinvested in additional shares. Distributions attributable to the net capital
gain of the Fund will be taxable to you as long-term capital gain, regardless of
how long you have held your shares. Other Fund distributions will generally be
taxable as ordinary income. You will be notified annually of the tax status of
distributions to you.
You should note that if you purchase shares just prior to a capital gain
distribution, the purchase price will reflect the amount of the upcoming
distribution, but you will be taxable on the entire amount of the distribution
received, even though, as an economic matter, the distribution simply
constitutes a return of capital. This is known as "buying into a dividend."
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund, based on the
difference between your tax basis in the shares and the amount you receive for
them. (To aid in computing your tax basis, you generally should retain your
account statements for the periods during which you held shares.) Any loss
realized on shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gain dividends that were received on
the shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other tax-
qualified plan) will not be currently taxable.
The foregoing is only a summary of certain tax considerations under current law,
which may be subject to change in the future. You should consult your tax
adviser for further information regarding federal, state, local and/or foreign
tax consequences relevant to your specific situation.
- -------------------------------------------------------------------------------
State and Local Taxes
- -------------------------------------------------------------------------------
Shareowners may also be subject to state and local taxes on distributions and
redemptions. State income taxes may not apply, however, to the portions of the
Fund's distributions, if any, that are attributable to interest on Federal
securities or interest on securities of the particular state. Shareowners
should consult their tax advisers regarding the tax status of distributions in
their state and locality.
MANAGEMENT OF THE FUNDS
- -------------------------------------------------------------------------------
Advisory Services
- -------------------------------------------------------------------------------
FIRMCO, a Wisconsin Limited Liability Company and subsidiary of Firstar
Corporation, a bank holding company, serves as investment adviser to the Fund.
FIRMCO, with principal offices at Firstar Center, 777 East Wisconsin Avenue, 8th
Floor, Milwaukee, Wisconsin 53202, has provided investment advisory services
since 1986. FIRMCO currently has $25.1 billion in assets under management.
Firstar Corporation has agreed to permit the Company to use the name "Firstar
Funds" and expansions thereof on a non-exclusive and royalty-free basis in
connection with mutual fund management and distribution services within the
United States, its territories and possessions. This agreement may be terminated
by Firstar Corporation under specified circumstances, including if no affiliate
of Firstar Corporation is serving as investment adviser for any portfolio
offered by the Company.
Subject to the general supervision of the Board of Directors and in accordance
with the respective investment objective and policies of the Fund, the Adviser
manages the Fund's portfolio securities and maintains records relating to such
purchases and sales.
The Adviser is authorized to allocate purchase and sale orders for portfolio
securities to shareowner organizations, including, in the case of agency
transactions, shareowner organizations which are affiliated with the Adviser, to
take into account the sale of Fund shares if the Adviser believes that the
quality of the transaction and the amount of the commission are comparable to
what they would be with other qualified brokerage firms.
The Adviser will receive from the Fund a fee, calculated daily and payable
monthly, at the annual rate (as a percentage of the Fund's average daily net
assets) of 0.25%.
- -------------------------------------------------------------------------------
Administrative Services
- -------------------------------------------------------------------------------
Firstar Mutual Fund Services, LLC and B. C. Ziegler and Company
("Ziegler") serve as the Co-Administrators (the "Co-Administrators") and receive
fees for those services.
- -------------------------------------------------------------------------------
Shareowner Organizations - Retail A and B Shares
- -------------------------------------------------------------------------------
The Fund has adopted distribution and service plans for the Retail A and
Retail B shares. Under the distribution and service plans, the Fund may pay
distribution fees for the sale and distribution of its shares and service fees
for shareowner services. These fees are regulated by Rule 12b-1 under the
Investment Company Act of 1940 and are subject to the NASD Conduct Rules.
Because these fees are paid out of the Fund's assets on an ongoing basis, over
time, these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.
The Fund also has adopted service plans for the Retail A and B shares,
under which the Fund may pay service fees for shareowner services to Retail A
and B shareowners.
For their services with respect to the Retail A shares, shareowner
organizations may be entitled to receive fees from the Fund at an annual rate of
up to 0.25% of the average daily net asset value of the shares covered by their
agreement for distribution and/or shareowner support services. Under the
distribution and service plan for the Retail B shares, the Distributor is
entitled to receive fees at an annual rate of up to 0.75% of the average daily
net asset value of the Retail B shares for distribution services with respect to
the Retail B shares. For their services with respect to the Retail B shares,
shareowner organizations may be entitled to receive fees from the Fund at an
annual rate of up to 0.25%, and 0.25% of the average daily net asset value of
the shares covered by their agreement, respectively, for shareowner liaison
under the distribution and service plan and for other support services under the
service plan (as described below).
Under these Plans, the Fund may enter into agreements with shareowner
organizations, including affiliates of the Adviser (such as FIS). The
shareowner organizations are required to provide a schedule of any fees that
they may charge to their customers relating to the investment of their assets in
shares covered by the agreements. Investors should read this Prospectus in
light of such fee schedules and under the terms of their shareowner
organization's agreement with Firstar. In addition, investors should contact
their shareowner organizations with respect to the availability of shareowner
services and the particular shareowner organization's procedures for purchasing
and redeeming shares. It is the responsibility of shareowner organizations to
transmit purchase and redemption orders and record those orders in customers'
accounts on a timely basis in accordance with their agreements with customers.
The Fund makes no payments to its Distributor under the Plans for the
Retail A shares or under the service plan for the Retail B shares. The Fund
makes payments to its Distributor under the distribution and service plan for
distribution services with respect to the Retail B shares. Payments to
shareowner organizations, including affiliates of the Adviser, under the plans,
and to the Distributor under the distribution and service plan for the Retail B
shares are not tied directly to their own out-of-pocket expenses and therefore
may be used as they elect (for example, to defray their overhead expenses), and
may exceed their direct and indirect costs.
Shareowner organizations will provide support and/or, in the case of the
distribution and service plan for the Retail A shares, distribution services to
their customers who are the shareowners of the Fund. Under the Service
Agreements, shareowner support services may include:
- - assisting investors in processing purchase, exchange and redemption requests
- - processing dividend and distribution payments from the Fund
- - providing information periodically to customers showing their positions in
Fund shares
- - providing sub-accounting
- - forwarding sales literature and advertising
Shareowner liaison services may include responding to customers' inquires
and providing information on their investments, and other personal and account
maintenance services within NASD Rules.
The Glass-Steagall Act and other applicable laws, among other things,
prohibit banks from engaging in the business of underwriting securities.
Accordingly, banks will be engaged under agreements with Firstar only to perform
the administrative and investor servicing functions described above, and will
represent to Firstar that in no event will the services provided by them under
the agreements be primarily intended to result in the sale of Fund shares.
Conflict-of-interest restrictions may apply to the receipt of compensation
paid by Firstar to a shareowner organization in connection with the investment
of fiduciary funds in Fund shares. Institutions, including banks regulated by
the Comptroller of the Currency and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor or state
securities commissions, are urged to consult legal counsel before entering into
agreements with Firstar.
- -------------------------------------------------------------------------------
Custodian, Transfer and Dividend Disbursing Agent, and Accounting Services Agent
- -------------------------------------------------------------------------------
Firstar Mutual Fund Services, LLC, an affiliate of the Adviser, provides
transfer agency, dividend disbursing agency and accounting services for the
Fund and receives fees for these services. Inquiries to the transfer agent may
be sent to: Firstar Mutual Fund Services, LLC, P.O. Box 3011, Milwaukee,
Wisconsin 53201-3011. Firstar Bank, Milwaukee, N.A., an affiliate of the
Adviser, provides custodial services for the Fund and receives fees for those
services.
NET ASSET VALUE AND DAYS OF OPERATION
The price of the Retail A, Retail B and Institutional shares (each, a
"class") is based on net asset value per share. This amount is calculated
separately for each class of shares by dividing the value of all securities and
other assets attributable to the class, less the liabilities attributable to
that class, by the number of outstanding shares of that class. The price at
which a purchase or redemption is effected is based on the next calculation of
net asset value after the order is accepted.
Net asset value for purposes of pricing purchase and redemption orders is
determined as of the close of regular trading hours on the Exchange, normally,
3:00 p.m. Central time, on each day the Exchange is open for trading.
The Fund's investments are valued based on market quotations, except that
restricted securities and securities for which market quotations are not readily
available and other assets are valued at fair value by the Adviser under the
supervision of the Board of Directors. Short-term investments having a maturity
of 60 days or less are valued at amortized cost, unless the amortized cost does
not approximate market value.
Portfolio securities which are primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on their respective exchanges, except when an occurrence subsequent
to the time a value was so established is likely to have changed such value. In
such an event, the fair value of those securities will be determined through the
consideration of other factors by or under the direction of the Board of
Directors. The Fund's foreign securities may trade on weekends or other days
when the Fund does not price its shares. Accordingly, the net asset value per
share of the Fund may change on days when shareowners will not be able to
purchase or redeem the Fund's shares.
The Fund's securities may be valued based on valuations provided by an
independent pricing service. The Adviser reviews these valuations. If the
Adviser believes that a valuation received from the service does not represent a
fair value, it values the security by a method that the Board of Directors
believes will determine a fair value. Any pricing service used may employ
electronic data processing techniques, including a "matrix" system, to determine
valuations.
Quotations of foreign securities in foreign currency are converted to U.S.
dollar equivalents using the foreign exchange quotation in effect at the time
net asset value is computed.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S ADDITIONAL
STATEMENT INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR ITS
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY
ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE.
"STANDARD & POOR'S/R", S&P/R", "S&P MIDCAP400 INDEX" AND "STANDARD & POOR'S
MIDCAP 400 INDEX" ARE TRADEMARKS OF THE MCGRAW HILL COMPANIES, INC. AND HAVE
BEEN LICENSED FOR USE BY FIRSTAR FUNDS. THE FUND IS NOT SPONSORED, ENDORSED,
SOLD OR PROMOTED BY STANDARD & POOR'S AND STANDARD & POOR'S MAKES NO
REPRESENTATION REGARDING THE ADVISABILITY OF INVESTING IN THE FUND.
FOR MORE INFORMATION
STATEMENT OF ADDITIONAL INFORMATION
Additional information about the Fund and its policies is also available in the
Funds' Statement of Additional Information ("Additional Statement"). The
Additional Statement is incorporated by reference into this Prospectus (and is
legally considered part of this Prospectus).
The Funds' Additional Statement is available free upon request by calling
Firstar Funds at 1-800-677-FUND or 1-414-287-3808.
To obtain other information and for shareowner inquiries:
By telephone - call 1-800-677-FUND or 1-414-287-3808
By mail - Firstar Funds, Inc.
615 East Michigan Street
P.O. Box 3011
Milwaukee, Wisconsin 53201-3011
By e-mail - [email protected]
------------------------
On the Internet - Text only version of the Funds' documents are located online
and may be downloaded from: SEC - http://www.sec.gov
------------------------
You may review and obtain copies of Fund documents by visiting the SEC's Public
Reference Room in Washington, D.C. You may also obtain copies of Fund documents
by sending your request and a duplicating fee to the SEC's Public Reference
Section, Washington, D.C. 20549-6009. Information on the operation of the
public reference room may be obtained by calling the SEC at 1-800-SEC-0330.
The Fund's Investment Company Act File Number is 811-5380
xxxxxxx
FIRSTAR FUNDS, INC.
Statement of Additional Information
November 1, 1999
Firstar MidCap Index Fund Firstar Core International Equity Fund
TABLE OF CONTENTS
------------------
Page
----
Firstar Funds, Inc................................................
Description of the Funds and their Investments and Risks..........
Investment Strategies and Risks...................................
Net Asset Value...................................................
Additional Purchase and Redemption Information....................
Description of Shares.............................................
Additional Information Concerning Taxes...........................
Management of the Company.........................................
Custodian, Transfer Agent and Accounting Services Agent...........
Expenses..........................................................
Independent Accountants ..........................................
Counsel...........................................................
Performance Calculations..........................................
Miscellaneous.....................................................
Appendix A........................................................ A-1
Appendix B........................................................ B-1
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with Firstar Funds,
Inc.' s prospectuses ("Prospectuses") dated November 1, 1999, for
Institutional, Retail A and Retail B Shares of the MidCap Index Fund and Core
International Equity Fund (collectively referred to as the "Funds") and is
incorporated by reference in its entirety into the Prospectuses. Copies of the
Prospectuses for the Funds may be obtained by writing the Firstar Funds Center
at 615 East Michigan Street, P.O. Box 3011, Milwaukee, WI 53201-3011 or by
calling 1-800-677-FUND.
FIRSTAR FUNDS, INC.
Firstar Funds, Inc. (the "Company") is a Wisconsin corporation which was
incorporated on February 15, 1988 as a management investment company. The
Company, formerly known as Portico Funds, Inc., changed its name effective
February 1, 1998. The Company is authorized to issue separate classes of shares
of Common Stock representing interests in separate investment portfolios. Each
class of the Funds is currently divided into three series, a Retail A, Retail B
and Institutional series. This SAI pertains to Retail A Shares, Retail B Shares
and Institutional Shares of two diversified portfolios, the MidCap Index Fund
and Core International Equity Fund (collectively the "Funds"). The Funds
commenced operations on November 1, 1999. The Company also offers other
investment portfolios which are described in a separate statements of additional
information. For information concerning these other portfolios, contact the
Firstar Mutual Fund Services, LLC at 1-800-677-FUND or write to 615 East
Michigan Street, P.O. Box 3011, Milwaukee, Wisconsin 53201-3011.
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
The Company is a diversified, open-end management investment company. The
following policies supplement the Funds' respective investment objectives and
policies as set forth in the Prospectuses.
Portfolio Transactions
- ----------------------
Subject to the general supervision of the Board of Directors, the Adviser
is responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the MidCap Index Fund. Subject
to the general supervision of the Board of Directors, the Adviser is responsible
for the portfolio management of the Core International Equity Fund. Pursuant to
the terms of the Adviser's Advisory Agreement with the Fund, the Adviser has
employed The Glenmede Trust Company (the "Sub-Adviser" or "Glenmede"). Within
the framework of the investment objectives, policies and restrictions of the
Fund, and subject to the supervision of the Adviser, the Sub-Adviser is
responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the Core International Equity
Fund.
The portfolio turnover rate for each Fund is calculated by dividing the
lesser of purchases or sales of portfolio securities for the reporting period by
the monthly average value of the portfolio securities owned during the reporting
period. The calculation excludes all securities, including options, whose
maturities or expiration dates at the time of acquisition are one year or less.
Portfolio turnover may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements which enable the Funds to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making portfolio
decisions, and each Fund may engage in short-term trading to achieve its
investment objective.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Unlike transactions on
U.S. stock exchanges which involve the payment of negotiated brokerage
commissions, transactions in foreign securities generally involve the payment of
fixed brokerage commissions which are generally higher than those in the United
States.
Transactions in the over-the-counter market are generally principal
transactions with dealers and the costs of such transactions involve dealer
spreads rather than brokerage commissions. With respect to over-the-counter
transactions, the Adviser and Sub-Adviser will normally deal directly with
dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available elsewhere or as
described below.
The Funds may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
The Funds will engage in this practice, however, only when the Adviser or Sub-
Adviser, in its sole discretion, believes such practice to be in the Funds'
interests.
The Advisory Agreement between the Company and the Adviser and with respect
to the Core International Equity Fund and the Sub-Advisory Agreement among the
Company, the Adviser and Sub-Adviser, provide that, in executing portfolio
transactions and selecting brokers or dealers, the Adviser and Sub-Adviser will
seek to obtain the best overall terms available. In assessing the best overall
terms available for any transaction, the Adviser or Sub-Adviser shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commissions, if any, both
for the specific transaction and on a continuing basis. In addition, the
Agreements authorize the Adviser and Sub-Adviser to cause the Funds to pay a
broker-dealer which furnishes brokerage and research services at a higher
commission than that which might be charged by another broker-dealer for
effecting the same transaction, provided that the Adviser or Sub-Adviser
determines in good faith that such commission is reasonable in relation to the
value of the brokerage and research services provided by such broker-dealer,
viewed in terms of either the particular transaction or the overall
responsibilities of the Adviser and Sub-Adviser to the Funds. Such brokerage
and research services might consist of reports and statistics relating to
specific companies or industries, general summaries of groups of stocks or bonds
and their comparative earnings and yields, or broad overviews of the stock, bond
and government securities markets and the economy.
Supplementary research information so received is in addition to, and not
in lieu of, services required to be performed by the Adviser or Sub-Adviser and
does not reduce the advisory fees payable to it by the Funds. The Directors
will periodically review the commissions paid by the Funds to consider whether
the commissions paid over representative periods of time appear to be reasonable
in relation to the benefits inuring to the Funds. It is possible that certain
of the supplementary research or other services received will primarily benefit
one or more other investment companies or other accounts for which investment
discretion is exercised. Conversely, a Fund may be the primary beneficiary of
the research or services received as a result of portfolio transactions effected
for such other account or investment company.
Portfolio securities will not be purchased from or sold to (and savings
deposits will not be made in and repurchase and reverse repurchase agreements
will not be entered into with) the Adviser, the Sub-Adviser, and the Distributor
or an affiliated person of any of them (as such term is defined in the 1940 Act)
acting as principal. In addition, the Funds will not purchase securities during
the existence of any underwriting or selling group relating thereto of which the
Distributor or their Adviser or Sub-Adviser, or an affiliated person of any of
them, is a member, except to the extent permitted by the Securities and Exchange
Commission ("SEC").
Investment decisions for the Funds are made independently from those for
other investment companies and accounts advised or managed by their Adviser or
Sub-Adviser. Such other investment companies and accounts may also invest in
the same securities as the Funds. When a purchase or sale of the same security
is made at substantially the same time on behalf of a Fund and another
investment company or account, the transaction will be averaged as to price and
available investments allocated as to amount, in a manner which the Adviser or
Sub-Adviser believes to be equitable to the Fund and such other investment
company or account. In some instances, this investment procedure may adversely
affect the price paid or received by a Fund or the size of the position obtained
or sold by the Fund. To the extent permitted by law, the Adviser or Sub-Adviser
may aggregate the securities to be sold or purchased for a Fund with those to be
sold or purchased for other investment companies or accounts in executing
transactions.
INVESTMENT STRATEGIES AND RISKS
Ratings. The ratings of Standard & Poor's, Moody's and other nationally
-------
recognized rating agencies represent their opinions as to the quality of debt
securities. It should be emphasized, however, that ratings are general and are
not absolute standards of quality, and debt securities with the same maturity,
interest rate and rating may have different yields while debt securities of the
same maturity and interest rate with different ratings may have the same yield.
The payment of principal and interest on most debt securities purchased by
a Fund will depend upon the ability of the issuers to meet their obligations.
An issuer's obligations under its debt securities are subject to the provisions
of bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be
enacted by federal or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations. The power or ability of an issuer to meet its obligations
for the payment of interest on, and principal of, its debt securities may be
materially adversely affected by litigation or other conditions.
Subsequent to its purchase by a Fund, a rated security may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Adviser or Sub-Adviser will consider such an event in
determining whether the Fund involved should continue to hold the security. For
a more detailed description of ratings, see Appendix A.
Securities Lending. Each of the Funds may lend its portfolio securities to
------------------
unaffiliated domestic broker/dealers and other institutional investors pursuant
to agreements requiring that the loans be secured by collateral equal in value
to at least the market value of the securities loaned in order to increase
return on portfolio securities. Collateral for such loans may include cash,
securities of the U.S. government, its agencies or instrumentalities, or an
irrevocable letter of credit issued by a bank which meets the investment
standards stated below under "Money Market Instruments," or any combination
thereof. There may be risks of delay in receiving additional collateral or in
recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans will be
made only to borrowers deemed by the Adviser (and Sub-Adviser in the case of the
Core International Equity Fund) to be of good standing and when, in the
Adviser's (and Sub-Adviser's in the case of the Core International Equity Fund)
judgment, the income to be earned from the loan justifies the attendant risks.
When a Fund lends its securities, it continues to receive interest or dividends
on the securities loaned and may simultaneously earn interest on the investment
of the cash collateral which will be invested in readily marketable, high-
quality, short-term obligations. Although voting rights, or rights to consent,
attendant to securities on loan pass to the borrower, such loans may be called
at any time and will be called so that the securities may be voted by a Fund if
a material event affecting the investment is to occur.
Securities lending arrangements with broker/dealers require that the loans
be secured by collateral equal in value to at least the market value of the
securities loaned. During the term of such arrangements, a Fund will maintain
such value by the daily marking-to-market of the collateral.
Money Market Instruments. The Funds may invest from time to time in "money
------------------------
market instruments," a term that includes, among other things, U.S. government
obligations, repurchase agreements, cash, bank obligations, commercial paper,
variable amount master demand notes and corporate bonds with remaining
maturities of thirteen months or less. These investments are used to help meet
anticipated redemption requests or if other suitable securities are unavailable.
The Core International Equity Fund may reduce its holdings in equity and other
securities and may invest up to 100% of its assets in certain short-term (less
than twelve months to maturity) and medium-term (not greater than five years to
maturity) debt securities and in cash (U.S. dollars, foreign currencies, or
multicurrency units) for temporary defensive purposes, during periods in which
the Adviser (or the Sub-Adviser) believes changes in economic, financial or
political conditions make it advisable.
Bank obligations include bankers' acceptances, negotiable certificates of
deposit and non-negotiable time deposits, including U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks or
savings institutions. Although the Funds will invest in money market
obligations of foreign banks or foreign branches of U.S. banks only where the
Adviser (and Sub-Adviser in the case of the Core International Equity Fund)
determines the instrument to present minimal credit risks, such investments may
nevertheless entail risks that are different from those of investments in
domestic obligations of U.S. banks due to differences in political, regulatory
and economic systems and conditions. All investments in bank obligations are
limited to the obligations of financial institutions having more than $1 billion
in total assets at the time of purchase, and investments by each Fund in the
obligations of foreign banks and foreign branches of U.S. banks will not exceed
25% of such Fund's total assets at the time of purchase. The Funds may also
make interest-bearing savings deposits in commercial and savings banks in
amounts not in excess of 5% of its net assets.
Investments by a Fund in commercial paper will consist of issues rated at
the time A-1 and/or P-1 by Standard & Poor's, Moody's or similar rating by
another nationally recognized rating agency. In addition, the Funds may acquire
unrated commercial paper and corporate bonds that are determined by the Adviser
at the time of purchase to be of comparable quality to rated instruments that
may be acquired by such Fund as previously described.
The Funds may also purchase variable amount master demand notes which are
unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate. Although the notes are
not normally traded and there may be no secondary market in the notes, a Fund
may demand payment of the principal of the instrument at any time. The notes
are not typically rated by credit rating agencies, but issuers of variable
amount master demand notes must satisfy the same criteria as set forth above for
issuers of commercial paper. If an issuer of a variable amount master demand
note defaulted on its payment obligation, a Fund might be unable to dispose of
the note because of the absence of a secondary market and might, for this or
other reasons, suffer a loss to the extent of the default. The Funds invest in
variable amount master demand notes only when the Adviser (and Sub-Adviser in
the case of the Core International Equity Fund) deem the investment to involve
minimal credit risk.
Repurchase Agreements. Each Fund may agree to purchase securities from
---------------------
financial institutions subject to the seller's agreement to repurchase them at
an agreed upon time and price ("repurchase agreements"). During the term of the
agreement, the Adviser (and Sub-Adviser in the case of the Core International
Equity Fund) will continue to monitor the creditworthiness of the seller and
will require the seller to maintain the value of the securities subject to the
agreement at not less than 102% of the repurchase price. Default or bankruptcy
of the seller would, however, expose the Fund to possible loss because of
adverse market action or delay in connection with the disposition of the
underlying securities. The securities held subject to a repurchase agreement
may have stated maturities exceeding one year, provided the repurchase agreement
itself matures in less than one year.
The repurchase price under the repurchase agreements described in the
Prospectuses generally equals the price paid by a Fund plus interest negotiated
on the basis of current short-term rates (which may be more or less than the
rate on the securities underlying the repurchase agreement). Securities subject
to repurchase agreements will be held by the Funds' custodian (or sub-custodian)
or in the Federal Reserve/Treasury book-entry system or other authorized
securities depository. Repurchase agreements are considered to be loans under
the 1940 Act.
Investment Companies. Each Fund currently intends to limit its investments
--------------------
in securities issued by other investment companies so that, as determined
immediately after a purchase of such securities is made: (i) not more than 5%
of the value of the Fund's total assets will be invested in the securities of
any one investment company; (ii) not more than 10% of the value of its total
assets will be invested in the aggregate in securities of investment companies
as a group; and (iii) not more than 3% of the outstanding voting stock of any
one investment company will be owned by the Fund or by the Company as a whole.
The Funds may invest from time to time in securities issued by other
investment companies which invest in high-quality, short-term debt securities.
Securities of other investment companies will be acquired by the Funds within
the limits prescribed by the 1940 Act. As a shareowner of another investment
company, the Funds would bear, along with other shareowners, its pro rata
portion of the other investment company's expenses, including advisory fees, and
such fees and other expenses will be borne indirectly by the Fund's shareowners.
These expenses would be in addition to the advisory and other expenses that the
Funds bear directly in connection with their own operations.
U.S. Government Obligations. The Funds may invest in a variety of U.S.
---------------------------
Treasury obligations including bonds, notes and bills which mainly differ only
in their interest rates, maturities and time of issuance. The Funds may also
invest in other securities issued or guaranteed by the U.S. government, its
agencies and instrumentalities; such as obligations of Federal Home Loan Banks,
Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association,
Federal National Mortgage Association, General Services Administration, Central
Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks, Maritime Administration, and Resolution Trust Corp.
No assurance can be given that the U.S. government will provide financial
support to U.S. government-sponsored agencies or instrumentalities if it is not
obligated to do so by law.
Bank Obligations. For purposes of the Fund's investment policies with
----------------
respect to bank obligations, the assets of a bank or savings institution will be
deemed to include the assets of its domestic and foreign branches. A Fund's
investments in the obligations of foreign branches of U.S. banks and of foreign
banks may subject the Fund to investment risks (similar to those discussed below
under "Foreign Securities and American Depository Receipt") that are different
in some respects from those of investments in obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible imposition of withholding taxes on interest income, possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest of such obligations. In
addition, foreign branches of U.S. banks and foreign banks may be subject to
less stringent reserve requirements and to different accounting, auditing,
reporting and record keeping standards than those applicable to domestic
branches of U.S. banks.
Restricted Securities. The Funds may invest up to 15% of net assets in
---------------------
securities that are illiquid at the time of purchase. While these holdings may
offer more potential for growth, they may present a higher degree of business
and financial risk, which can result in substantial losses. The Funds may have
difficulty valuing these holdings and may be unable to sell these holdings at
the time or price desired. Restricted securities may include Rule 144
Securities. These securities are restricted securities that are eligible for
resale pursuant to Rule 144A under the Securities Act of 1933. A Fund may treat
a Rule 144A security as liquid if determined to be so under procedures adopted
by the Board.
Borrowings and Reverse Repurchase Agreements. Each Fund may borrow money
--------------------------------------------
to the extent allowed (as described under "Additional Investment Limitations"
below) to meet shareowner redemptions from banks or through reverse repurchase
agreements. If the securities held by a Fund should decline in value while
borrowings are outstanding, the net asset value of a Fund's outstanding shares
will decline in value by proportionately more than the decline in value suffered
by a Fund's securities. As a result, a Fund's share price may be subject to
greater fluctuation until the borrowing is paid off.
Reverse repurchase agreements are considered to be borrowings under the
1940 Act. At the time a Fund enters into a reverse repurchase agreement (an
agreement under which the Fund sells portfolio securities and agrees to
repurchase them at an agreed-upon date and price), it will place in a segregated
custodial account U.S. government securities or other liquid high-grade debt
securities having a value equal to or greater than the repurchase price
(including accrued interest), and will subsequently monitor the account to
insure that such value is maintained. Reverse repurchase agreements involve the
risk that the market value of the securities sold by the Fund may decline below
the price of the securities it is obligated to repurchase.
Preferred Stocks. The Core International Equity Fund may invest in
----------------
preferred stocks. Preferred stocks are securities that represent an ownership
interest providing the holder with claims on the issuer's earnings and assets
before common stock but after bond owners. Unlike debt securities, the
obligations of an issuer of preferred stock, including dividend and other
payment obligations, may not typically be accelerated by the holders of such
preferred stock on the occurrence of an event of default (such as a covenant
default or filing of a bankruptcy petition) or other non-compliance by the
issuer with the terms of the preferred stock. Often, however, on the occurrence
of any such event of default or non-compliance by the issuer, preferred
stockholders will be entitled to gain representation on the issuer's board of
directors or increase their existing board representation. In addition,
preferred stockholders may be granted voting rights with respect to certain
issues on the occurrence of any event of default.
Derivatives risk. The Core International Equity Fund may invest in
----------------
derivatives. The term derivative covers a wide number of investments, but in
general it refers to any financial instrument whose value is derived, at least
in part, from the price of another security or a specified index, asset or
rate. Some derivatives may be more sensitive to or otherwise not react in
tandem with interest rate changes or market moves, and some may be susceptible
to changes in yields or values due to their structure or contract terms. Loss
may result from the Fund's investments in options, futures, swaps, structured
securities and other derivative instruments which may be leveraged. The Fund
may use derivatives to: increase yield; hedge against a decline in principal
value; invest with greater efficiency and lower cost than is possible through
direct investment; adjust the Fund's duration; or provide daily liquidity.
Hedging is the use of one investment to offset the effects of another
investment. To the extent that a derivative is used as a hedge against an
opposite position that the Fund also holds, a loss generated by the derivative
should be substantially offset by gains on the hedged investment, and vice
versa. While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedging also involves correlation risk - the risk that changes
in the value of a hedging instrument may not match those of the asset being
hedged.
To the extent that a derivative is not used as a hedge, the Fund is directly
exposed to the risks of that derivative. Gains or losses from speculative
positions in a derivative may be substantially greater than the derivative's
original cost.
When-Issued Purchases, Delayed Delivery and Forward Commitments. These
---------------------------------------------------------------
Funds may purchase or sell particular securities with payment and delivery
taking place at a later date. The price or yield obtained in a transaction may
be less favorable than the price or yield available in the market when the
securities delivery takes place. Each Fund's forward commitments and when-issued
purchases are not expected to exceed 25% of the value of its total assets absent
unusual market conditions. When any Fund agrees to purchase securities on a
when-issued or delayed delivery basis or enter into a forward commitment to
purchase securities, its custodian will set aside cash or liquid high grade debt
securities equal to the amount of the commitment in a segregated account.
Normally, the custodian will set aside portfolio securities to satisfy a
purchase commitment, and in such a case the Fund may be required subsequently to
place additional assets in the segregated account in order to ensure that the
value of the account remains equal to the amount of the Fund's commitments. It
may be expected that the market value of a Fund's net assets will fluctuate to a
greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. Because a Fund will set aside cash or
liquid assets to satisfy its purchase commitments in the manner described, the
Fund's liquidity and ability to manage its portfolio might be affected in the
event its commitments ever exceeded 25% of the value of its assets. In the case
of a forward commitment to sell portfolio securities, the Fund's custodian will
hold the portfolio securities themselves in a segregated account while the
commitment is outstanding. When-issued and forward commitment transactions
involve the risk that the price or yield obtained in a transaction (and
therefore the value of a security) may be less favorable than the price or yield
(and therefore the value of a security) available in the market when the
securities delivery takes place.
The Funds will make commitments to purchase securities on a when-issued
basis or to purchase or sell securities on a forward commitment basis only with
the intention of completing the transaction and actually purchasing or selling
the securities. If deemed advisable as a matter of investment strategy, however,
a Fund may dispose of or renegotiate a commitment after it is entered into, and
may sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. In these cases the Fund may
realize a capital gain or loss.
When these Funds engage in when-issued, delayed delivery and forward
commitment transactions, they rely on the other party to consummate the trade.
Failure of such party to do so may result in a Fund incurring a loss or missing
an opportunity to obtain a price considered to be advantageous.
The market value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their market value, are taken into account when determining the net asset value
of a Fund starting on the day the Fund agrees to purchase the securities. The
Fund does not earn interest on the securities it has committed to purchase until
they are paid for and delivered on the settlement date. When a Fund makes a
forward commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Fund's assets. Fluctuations in the market value
of the underlying securities are not reflected in the Fund's net asset value as
long as the commitment remains in effect.
Other Investment Considerations - Core International Equity Fund
- ---------------------------------------------------------------
The Core International Equity Fund maintains a long-term investment
horizon with respect to investments in equity securities. However, when a
company's growth in earnings and valuation results in price appreciation that
reaches a level which meets the Fund's established return objective, the stock
is normally sold. Holdings are also sold if there has been significant
deterioration in the underlying fundamentals of the securities involved since
their acquisition. Sale proceeds are either re-invested in money market
instruments or in other securities which meet the Fund's investment criteria.
The Fund's investment in equity securities may include limited partnership
interests.
The increase or decrease of cash equivalents in the Fund is primarily the
residual effect of the research process. The portion of the Fund invested in
cash equivalents tends to rise when the pool of acceptable securities is limited
and tends to fall when the Fund's valuation screening process identifies a large
number of attractive securities. Short-term forecasts for the economy and
financial markets are not an important determinant of the level of cash
equivalents in a Fund. Under normal market conditions at least 65% of the value
of the Fund's total assets will be invested in equity securities. The Fund does
not attempt to "time" the securities market.
Foreign Equities. The Core International Equity Funds' investments in the
----------------
securities of foreign issuers may include both securities of foreign
corporations and banks, as well as securities of foreign governments and their
political subdivisions.
Investments in foreign securities, whether made directly or through ADRs ,
involve certain inherent risks and considerations not typically associated with
investing in U.S. companies, such as political or economic instability of the
issuer or the country of issue, the difficulty of predicting international trade
patterns, changes in exchange rates of foreign currencies and the possibility of
adverse changes in investment or exchange control regulations. There may be
less publicly available information about a foreign company than about a U.S.
company. Foreign companies are not subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
companies. In addition, foreign banks and foreign branches of U.S. banks are
subject to less stringent reserve requirements and to different accounting,
auditing, reporting and recordkeeping standards than those applicable to
domestic branches of U.S. banks. Further, foreign stock markets are generally
not as developed or efficient as those in the U.S., and in most foreign markets
volume and liquidity are less than in the U.S. Fixed commissions on foreign
stock exchanges are generally higher than the negotiated commissions on U.S.
exchanges, and there is generally less government supervision and regulation of
foreign stock exchanges, brokers and companies than in the U.S. With respect to
certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, limitations on the removal of assets or diplomatic
developments that could affect investment within those countries. Additionally,
foreign securities and dividends and interest payable on those securities may be
subject to foreign taxes, including foreign withholding taxes, and other foreign
taxes may apply with respect to securities transactions. See "Taxes."
Transactions in foreign securities may involve greater time from the trade date
until the settlement date than domestic securities transactions, and may involve
the risk of possible losses through the holding of securities in custodians and
securities depositories in foreign countries. Additional costs associated with
an investment in foreign securities may include higher transaction costs and the
cost of foreign currency conversions. Changes in foreign exchange rates will
also affect the value of securities denominated or quoted in currencies other
than the U.S. dollar. Changes in currency exchange rates will affect the value
of unhedged positions and will impact a Fund's net asset value (positively or
negatively) irrespective of the performance of the portfolio securities held by
the Fund. See the section entitled "Foreign Currency Transactions" below. The
Fund and its shareowners may encounter substantial difficulties in obtaining and
enforcing judgments against non-U.S. resident individuals and companies.
Because of these and other factors, securities of foreign companies acquired by
the Funds may be subject to greater fluctuation in price than securities of
domestic companies. Furthermore, because the Fund will invest substantially
all (and in any event, at least 65%) of the value of its total assets in foreign
securities, the net asset value of the Fund is expected to be volatile.
The Core International Equity Fund may invest in emerging market
countries. Developing countries may impose restrictions on a Fund's ability to
repatriate investment income or capital. Even where there is no outright
restriction on repatriation of investment income or capital, the mechanics of
repatriation may affect certain aspects of the operations of the Fund. For
example, funds may be withdrawn from the People's Republic of China only in U.S.
or Hong Kong dollars and only at an exchange rate established by the government
once each week.
Some of the currencies in emerging markets have experienced devaluations
relative to the U.S. dollar, and major adjustments have been made periodically
in certain of such currencies. Certain developing countries face serious
exchange constraints.
Lastly, governments of some developing countries exercise substantial
influence over many aspects of the private sector. In some countries, the
government owns or controls many companies, including the largest in the
country. As such, government actions in the future could have a significant
effect on economic conditions in developing countries in these regions, which
could affect private sector companies, a Portfolio and the value of its
securities. Furthermore, certain developing countries are among the largest
debtors to commercial banks and foreign governments. Trading in debt obligations
issued or guaranteed by such governments or their agencies and instrumentalities
involves a high degree of risk.
Reverse Repurchase Agreements. The Core International Equity Fund may
-----------------------------
engage in reverse repurchase agreements to facilitate portfolio liquidity, a
practice common in the mutual fund industry, for temporary purposes only. In a
reverse repurchase agreement, the Fund would sell a security and enter into an
agreement to repurchase the security at a specified future date and price. The
Fund generally retains the right to interest and principal payments on the
security. Since the Fund receives cash upon entering into a reverse repurchase
agreement, it may be considered a borrowing. (See "Borrowing" above.) When
required by guidelines of the SEC, the Fund will set aside permissible liquid
assets in a segregated account to secure its obligations to repurchase the
security.
Forward Currency Contracts. The Core International Equity Fund may enter
--------------------------
into forward currency contracts; such transactions may serve as long hedges (for
example, if the Fund seeks to buy a security denominated in a foreign currency,
it may purchase a forward currency contract to lock in the $US price of the
security) or as short hedges (the Fund anticipates selling a security
denominated in a foreign currency may sell a forward currency contract to lock
in the $US equivalent of the anticipated sales proceeds).
The Core International Equity Fund may seek to hedge against changes in
the value of a particular currency by using forward contracts on another foreign
currency or a basket of currencies, the value of which the Adviser or Sub-
Adviser believes will have a positive correlation to the values of the currency
being hedged. In addition, the Fund may use forward currency contracts to shift
exposure to foreign currency fluctuations from one country to another. For
example, if the Fund owns securities denominated in a foreign currency and the
Adviser or Sub-Adviser believes that currency will decline relative to another
currency, it might enter into a forward contract to sell an appropriate amount
of the first foreign currency, with payment to be made in the second currency.
Transactions that use two foreign currencies are sometimes referred to as "cross
hedges." Use of different foreign currency magnifies the risk that movements in
the price of the instrument will not correlate or will correlate unfavorably
with the foreign currency being hedged.
The cost to the Core International Equity Fund of engaging in forward
currency contracts varies with factors such as the currency involved, the length
of the contract period and the market conditions then prevailing. Because
forward currency contracts are usually entered into on a principal basis, no
fees or commissions are involved. When the Fund enters into a forward currency
contract, it relies on the counterparty to make or take delivery of the
underlying currency at the maturity of the contract. Failure by the
counterparty to do so would result in the loss of any expected benefit of the
transaction.
As is the case with future contracts, holders and writers of forward
currency contracts can enter into offsetting closing transactions, similar to
closing transactions on futures, by selling or purchasing, respectively, an
instrument identical to the instrument held or written. Secondary markets
generally do not exist for forward currency contracts, with the result that
closing transactions generally can be made for forward currency contacts only by
negotiating directly with the counterparty. Thus, there can be no assurance
that the Core International Equity Fund will in fact be able to close out a
forward currency contract at a favorable price prior to maturity. In addition,
in the event of insolvency of the counterparty, the Fund might be unable to
close out a forward currency contract at any time prior to maturity. In either
event, the Fund would continue to be subject to market risk with respect to the
position, and would continue to be required to maintain a position in securities
denominated in the foreign currency or to maintain cash or securities in a
segregated account.
The precise matching of forward currency contract amounts and the value of
the securities involved generally will not be possible because the value of such
securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, the Core International Equity
Fund might need to purchase or sell foreign currencies in the spot (cash) market
to the extent such foreign currency market movements is extremely difficult, and
the successful execution of a short-term hedging strategy is highly uncertain.
Foreign Currency Transactions. Although the Core International Equity Fund
-----------------------------
values its assets daily in U.S. dollars, the Fund is not required to convert its
holdings of foreign currencies to U.S. dollars on a daily basis. The Fund's
foreign currencies generally will be held as "foreign currency call accounts" at
foreign branches of foreign or domestic banks. These accounts bear interest at
negotiated rates and are payable upon relatively short demand periods. If a
bank became insolvent, the Fund could suffer a loss of some or all of the
amounts deposited. The Fund may convert foreign currency to U.S. dollars from
time to time. Although foreign exchange dealers generally do not charge a
stated commission or fee for conversion, the prices posted generally include a
"spread," which is the difference between the prices at which the dealers are
buying and selling foreign currencies.
Except where segregated accounts are not required under the 1940 Act, when
this Fund enters into a forward contract or currency futures, the Custodian will
place cash, U.S. government securities, or high-grade debt securities into a
segregated account of this Fund in an amount equal to the value of the Fund's
total assets committed to consummation of forward contracts and currency
futures. If the value of these segregated securities declines, additional cash
or securities will be placed in the account on a daily basis so that the account
value is at least equal to the Fund's commitments to such contracts.
Other Investment Considerations - MidCap Index Fund
- ----------------------------------------------------
MidCap Index Fund Management Techniques. When purchasing securities for
the MidCap Index Fund's portfolio, the Adviser will consider initially the
relative market capitalization weightings of the stocks included in the S&P
MidCap 400 Index. The weighted capitalization of an issuer is determined by
dividing the issuer's market capitalization by the total market capitalizations
of all issuers included in the S&P MidCap 400 Index.
The Adviser will then compare the industry sector diversification of the
stocks in the Fund, acquired solely on the basis of their weighted
capitalizations, with the industry sector diversification of all issuers
included in the S&P MidCap 400 Index. This comparison is made because the
Adviser believes, unless the Fund holds all stocks included in the S&P MidCap
400 Index which it currently does not, that the selection of stocks for purchase
by the Fund solely on the basis of their weighted market capitalizations would
tend to place heavier concentration (as compared to the S&P MidCap 400 Index) in
certain industry sectors that are dominated by the larger corporations, such as
communications, automobile, oil and energy. As a result, events
disproportionately affecting such industries could affect the performance of the
S&P MidCap 400 Index. Conversely, if smaller companies were not purchased by
the Fund, industries included in the S&P MidCap 400 Index that are dominated by
smaller market-capitalized companies would be underrepresented (as compared to
the S&P MidCap 400 Index).
If an issuer drops in ranking, or is eliminated entirely from the S&P
MidCap 400 Index, the Adviser may be required to sell some or all of the common
stock of such issuer then held by the Fund. Sales of portfolio securities may
be made at times when, if the Adviser were not required to effect purchases and
sales of portfolio securities in accordance with the S&P MidCap 400 Index, such
securities might not be sold. Such sales may result in lower prices for such
securities than may have been realized or in losses that may not have been
incurred if the Adviser were not required to effect the purchases and sales.
"Adverse events" will not necessarily be the basis for the disposition of
portfolio securities, unless an event causes the issuer to be eliminated
entirely from the S&P MidCap 400 Index. "Adverse events" include the failure of
an issuer to declare or pay dividends, the institution against an issuer of
materially adverse legal proceedings, the existence or threat of defaults
materially and adversely affecting an issuer's future declaration and payment of
dividends, or the existence of other materially adverse credit factors.
However, although the Adviser does not intend to screen securities for
investment by the Fund by traditional methods of financial and market analysis,
the Adviser will monitor the Fund's investment with a bias towards removing
stocks of companies which may impair for any reason the Fund's ability to
achieve its investment objective.
For these reasons, the Adviser will identify the sectors which are (or,
except for sector balancing, would be) most underrepresented in the Fund's
portfolio and will purchase balancing securities in these sectors until the
portfolio's sector weightings closely match that of the S&P MidCap 400 Index.
This process continues until the portfolio is fully invested (except for cash
holdings).
The Fund may occasionally receive securities that are outside of the S&P
MidCap 400 Index due to corporate reorganizations or spin-offs. The Fund will
dispose of those securities in due course consistent with the Fund's investment
objective.
Other Portfolio Information
- ---------------------------
Options Trading. As stated in the Prospectus, the MidCap Index Fund may
---------------
purchase put and call options. Option purchases will not exceed 5% of the MidCap
Index Fund's net assets. Such options will relate only to stock indices and may
or may not be listed on a national securities exchange and issued by the Options
Clearing Corporation. This is a highly specialized activity which entails
greater than ordinary investment risks, including the complete loss of the
amount paid as premiums to the writer of the option. Regardless of how much the
market price of the underlying security or index increases or decreases, the
option buyer's risk is limited to the amount of the original investment for the
purchase of the option. However, options may be more volatile than the
underlying securities or indices, and therefore, on a percentage basis, an
investment in options may be subject to greater fluctuation than an investment
in the underlying securities. In contrast to an option on a particular
security, an option on an index provides the holder with the right to make or
receive a cash settlement upon exercise of the option. The amount of this
settlement will be equal to the difference between the closing price of the
index at the time of exercise and the exercise price of the option expressed in
dollars, times a specified multiple.
Closing transactions in certain options are usually effected directly with
the same broker-dealer that effected the original option transaction. A Fund
bears the risk that the broker-dealer will fail to meet its obligations. There
is no assurance that a liquid secondary trading market exists for closing out an
unlisted option position. Furthermore, unlisted options are not subject to the
protections afforded purchasers of listed options by the Options Clearing
Corporation, which performs the obligations of its members who fail to perform
in connection with the purchase or sale of options.
A call option gives the purchaser of the option the right to buy, and a
writer the obligation to sell, the underlying security or index at the stated
exercise price at any time prior to the expiration of the option, regardless of
the market price of the security. The premium paid to the writer is in
consideration for undertaking the obligations under the option contract. A put
option gives the purchaser the right to sell the underlying security or index at
the stated exercise price at any time prior to the expiration date of the
option, regardless of the market price of the security or index. Put and call
options purchased by a Fund will be valued at the last sale price or, in the
absence of such a price, at the mean between bid and asked prices.
The MidCap Index Fund may purchase put options on portfolio securities at
or about the same time that it purchases the underlying security or at a later
time. By buying a put, a Fund limits its risk of loss from a decline in the
market value of the security until the put expires. Any appreciation in the
value of and yield otherwise available from the underlying security, however,
will be partially offset by the amount of the premium paid for the put option
and any related transaction costs. Call options may be purchased by a Fund in
order to acquire the underlying security at a later date at a price that avoids
any additional cost that would result from an increase in the market value of
the security. A call option may also be purchased to increase a Fund's return
to investors at a time when the call is expected to increase in value due to
anticipated appreciation of the underlying security. Prior to its expiration, a
purchased put or call option may be sold in a "closing sale transaction" (a sale
by a Fund, prior to the exercise of the option that it has purchased, of an
option of the same series), and profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the option
plus the related transaction costs. In addition, the MidCap Index Fund may sell
covered call options listed on a national securities exchange. Such options
will relate only to stock indices. A call option on a security is covered if a
Fund owns the security underlying the call or has an absolute and immediate
right to acquire that security without additional cash consideration (or, if
additional cash consideration is required, cash or cash equivalents in such
amount as required are held in a segregated account by its custodian) upon
conversion or exchange of other securities held by it. A call option on an
index is covered if a Fund maintains with its custodian cash or cash equivalents
equal to the contract value. A call option is also covered if a Fund holds a
call on the same security or index as the call written where the exercise price
of the call held is (i) equal to or less than the exercise price of the call
written, or (ii) greater than the exercise price of the call written provided
the difference is maintained by a Fund in cash or cash equivalents in a
segregated account with its custodian. The aggregate value of the Fund's assets
subject to covered options written by the MidCap Index Fund will not exceed 5%
of the value of its net assets during the current year.
A Fund's obligation under a covered call option written by it may be
terminated prior to the expiration date of the option by the Fund's executing a
closing purchase transaction, which is effected by purchasing on an exchange an
option of the same series (i.e., same underlying security or index, exercise
price and expiration date) as the option previously written. Such a purchase
does not result in the ownership of an option. A closing purchase transaction
will ordinarily be effected to realize a profit on an outstanding option, to
prevent an underlying security from being called, to permit the sale of the
underlying security or to permit the writing of a new option containing
different terms. The cost of such a liquidation purchase plus transactions
costs may be greater than the premium received upon the original option, in
which event a Fund will have incurred a loss in the transaction. An option
position may be closed out only on an exchange which provides a secondary market
for an option of the same series. There is no assurance that a liquid secondary
market on an exchange will exist for any particular option. A covered call
option writer, unable to effect a closing purchase transaction, will not be able
to sell an underlying security until the option expires or the underlying
security is delivered upon exercise with the result that the writer in such
circumstances will be subject to the risk of market decline during such period.
A Fund will write an option on a particular security only if the Adviser
believes that a liquid secondary market will exist on an exchange for options of
the same series which will permit the Fund to make a closing purchase
transaction in order to close out its position.
By writing a covered call option on a security, a Fund foregoes the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price except insofar as the premium represents such
a profit, and it is not able to sell the underlying security until the option
expires or is exercised or the Fund effects a closing purchase transaction by
purchasing an option of the same series. Except to the extent that a written
call option on an index is covered by an option on the same index purchased by
the Fund, movements in the index may result in a loss to the Fund; however, such
losses may be mitigated by changes in the value of securities held by the Fund
during the period the option was outstanding. The use of covered call options
will not be a primary investment technique of the Funds. When a Fund writes a
covered call option, an amount equal to the net premium (the premium less the
commission) received by the Fund is included in the liability section of the
Fund's statement of assets and liabilities. The amount of the liability will be
subsequently marked-to-market to reflect the current value of the option
written. The current value of the traded option is the last sale price or, in
the absence of a sale, the average of the closing bid and asked prices. If an
option expires on the stipulated expiration date or if the Fund enters into a
closing purchase transaction, it will realize a gain (or loss if the cost of a
closing purchase transaction exceeds the net premium received when the option is
sold) and the liability related to such option will be eliminated. Any gain on
a covered call option on a security may be offset by a decline in the market
price of the underlying security during the option period. If a covered call
option on a security is exercised, the Fund may deliver the underlying security
held by it or purchase the underlying security in the open market. In either
event, the proceeds of the sale will be increased by the net premium originally
received, and the Fund will realize a gain or loss. Premiums from expired
options written by a Fund and net gains from closing purchase transactions are
treated as short-term capital gains for federal income tax purposes, and losses
on closing purchase transactions are short-term capital losses.
As noted previously, there are several risks associated with transactions
in options on securities and indices. These risks include (i) an imperfect
correlation between the change in market value of the securities the Fund holds
and the prices of options relating to the securities purchased or sold by the
Fund; and (ii) the possible lack of a liquid secondary market for an option. A
decision as to whether, when and how to use options involves the exercise of
skill and judgment, and a transaction may be unsuccessful to some degree because
of market behavior or unexpected events.
Futures Contracts and Related Options. The Adviser may determine that it
would be in the best interest of the Fund to purchase or sell futures
contracts, or options thereon, as a hedge against changes resulting from market
conditions in the value of the securities held by a Fund, or of securities which
it intends to purchase to maintain liquidity, to have fuller exposure to price
movements in the respective stock or bond index or to reduce transaction costs.
MidCap Index Fund will purchase and sell futures and related options (based only
on the S&P MidCap 400 Index) to maintain cash reserves while simulating full
investment in the stocks underlying the S&P MidCap 400 Index to keep
substantially all of its assets exposed to the market (as represented by the S&P
MidCap 400 Index) and to reduce transaction costs. For example, a Fund may enter
into transactions involving a bond or stock index futures contract, which is a
bilateral agreement pursuant to which the parties agree to take or make delivery
of an amount of cash equal to a specified dollar amount times the difference
between the index value (which assigns relative values to the securities
included in the index) at the close of the last trading day of the contract and
the price at which the futures contract is originally struck. No physical
delivery of the underlying bonds or stocks in the index is made. The Adviser may
also determine that it would be in the interest of a Fund to purchase or sell
interest rate futures contracts, or options thereon, which provide for the
future delivery of specified fixed-income securities. In addition, the MidCap
Index Fund may purchase and sell futures and related options (based only on the
S&P MidCap 400 Index) to maintain cash reserves while simulating full investment
in the stocks underlying the S&P MidCap 400 Index, to keep substantially all of
its assets exposed to the market (as represented by the S&P MidCap 400 Index),
and to reduce transaction costs.
Risks associated with the use of futures contracts and options on futures
include (a) imperfect correlation between the change in market values of the
securities held by a Fund and the prices of related futures contracts and
options on futures purchased or sold by the Fund, and (b) the possible lack of a
liquid secondary market for futures contracts (or related options) and the
resulting inability of a Fund to close open futures positions, which could have
an adverse impact on the Fund's ability to hedge.
Positions in futures contracts may be closed out only on an exchange which
provides a secondary market for such futures. However, there can be no
assurance that a liquid secondary market will exist for any particular futures
contract at any specific time. Thus, it may not be possible to close a futures
position. In the event of adverse price movements, the Fund would continue to
be required to make daily cash payments to maintain its required margin. In
such situations, if the Fund has insufficient cash, it may have to sell
portfolio holdings to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, the Fund may be required to make
delivery of the instruments underlying futures contracts it holds. The
inability to close options and futures positions also could have an adverse
impact on the Fund's ability to effectively hedge.
Successful use of futures by the Fund is also subject to the Investment
Adviser's ability to correctly predict movements in the direction of the market.
For example, if a Fund has hedged against the possibility of a decline in the
market adversely affecting securities held by it and securities prices increase
instead, the Fund will lose part or all of the benefit to the increased value of
its securities which it has hedged because it will have approximately equal
offsetting losses in its futures positions. In addition, in some situations, if
the Fund has insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising market. The Fund
may have to sell securities at a time when it may be disadvantageous to do so.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and extremely high
degree of leverage involved in futures pricing. As a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss (as well as gain) to the investor. For example, if at the time of
purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit, before any deduction for the
transaction costs, if the contract were closed out. Thus, a purchase or sale
of a futures contract may result in losses in excess of the amount invested in
the contract.
Utilization of futures transactions by a Fund involves the risk of loss by
the Fund of margin deposits in the event of bankruptcy of a broker with whom the
Fund has an open position in a futures contract of related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades
may be made on that day at a price beyond that limit. The daily limit governs
only price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
The trading of futures contracts is also subject to the risk of trading
halts, suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal trading activity, which could at times make it difficult
or impossible to liquidate existing positions or to recover excess variation
margin payments.
A Fund's commodities transactions must constitute bona fide hedging or
other permissible transactions pursuant to regulations promulgated by the
Commodities and Futures Trading Commissions ("CFTC"). In addition, a Fund may
not engage in such transactions if the sum of the amount of initial margin
deposits and premiums paid for unexpired commodity options, other than for bona
fide hedging transactions, would exceed 5% of the liquidation value of its
assets, after taking into account unrealized profits and unrealized losses on
such contracts it has entered into; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount may
be excluded in calculating the percentage limitation. In connection with a
futures transaction, unless the transaction is covered in accordance with SEC
positions, the Fund will maintain a segregated account with its custodian or
sub-custodian consisting of cash or liquid high grade debt securities to the
entire amount at risk (less margin deposits) on a continuous basis. The Company
intends to comply with the regulations of the CFTC exempting the Fund from
registrations as a "commodity pool operator".
The MidCap Index Fund intends to limit its transactions in futures
contracts so that not more than 10% of the Fund's net assets are at risk. For a
more detailed description of futures contracts and futures options, including a
discussion of the limitations imposed by federal tax law, see Appendix B.
Foreign Securities and American Depository Receipts ("ADRs"). The Core
------------------------------------------------------------
International Equity Fund may invest in sponsored and unsponsored ADRs. ADRs are
receipts issued by an American bank or trust company evidencing ownership of
underlying securities issued by a foreign issuer. ADRs may be listed on a
national securities exchange or may trade in the over-the-counter market. ADR
prices are denominated in U.S. dollars; the underlying security may be
denominated in a foreign currency. The underlying security may be subject to
foreign government taxes which would reduce the yield on such securities.
Investments in foreign securities and ADRs also involve certain inherent risks,
such as political or economic instability of the country of issue, the
difficulty of predicting international trade patterns and the possibility of
imposition of exchange controls. Such securities may also be subject to greater
fluctuations in price than securities of domestic corporations. In addition,
there may be less publicly available information about a foreign company than
about a domestic company. Foreign companies generally are not subject to
uniform accounting, auditing and financial reporting standards comparable to
those applicable to domestic companies. With respect to certain foreign
countries, there is a possibility of expropriation or confiscatory taxation, or
diplomatic developments which could affect investment in those countries.
While "sponsored" and "unsponsored" ADR programs are similar, there are
differences regarding ADR holders' rights and obligations and the practices of
market participants. A depository may establish an unsponsored facility without
participation by (or acquiescence of) the underlying issuer; typically, however,
the depository requests a letter of non-objection from the underlying issuer
prior to establishing the facility. Holders of unsponsored ADRs generally bear
all the costs of the ADR facility. The depository usually charges fees upon the
deposit and withdrawal of the underlying securities, the conversion of dividends
into U.S. dollars, the disposition of non-cash distribution, and the performance
of other services. The depository of an unsponsored facility frequently is
under no obligation to distribute shareholder communications received from the
underlying issuer or to pass through voting rights to ADR holders in respect of
the underlying securities.
Sponsored ADR facilities are created in generally the same manner as
unsponsored facilities, except that sponsored ADRs are established jointly by a
depository and the underlying issuer through a deposit agreement. The deposit
agreement sets out the rights and responsibilities of the underlying issuer, the
depository and the ADR holders. With sponsored facilities, the underlying
issuer typically bears some of the costs of the ADR (such as dividend payment
fees of the depository), although ADR holders may bear costs such as deposit and
withdrawal fees. Depositories of most sponsored ADRs agree to distribute
notices of shareholder meetings, voting instructions, and other shareholder
communications and information to the ADR holders at the underlying issuer's
request.
The Core International Equity Fund may also invest in EDRs and GDRs. EDRs
are receipts issued by a European financial institution evidencing ownership of
underlying foreign securities. GDRs are receipts structured similarly to EDRs
and are issued and traded in several international financial markets. The
underlying security may be subject to foreign government taxes, which would
reduce the yield on such securities.
Zero Coupon Bonds. Zero coupon obligations have greater price volatility
-----------------
than coupon obligations and will not result in the payment of interest until
maturity, provided that a Fund will purchase such zero coupon obligations only
if the likely relative greater price volatility of such zero coupon obligations
is not inconsistent with the Fund's investment objective. Although zero coupon
securities pay no interest to holders prior to maturity, interest on these
securities is reported as income to a Fund and distributed to its shareowners.
These distributions must be made from a Fund's cash assets or, if necessary,
from the proceeds of sales of portfolio securities. Additional income producing
securities may not be able to be purchased with cash used to make such
distributions and its current income ultimately may be reduced as a result.
Small Companies and Unseasoned Issuers. Small companies in which the Funds
--------------------------------------
may invest may have limited product lines, markets, or financial resources, or
may be dependent upon a small management group, and their securities may be
subject to more abrupt or erratic market movements than larger, more established
companies, both because their securities are typically traded in lower volume
and because the issuers are typically subject to a greater degree of change in
their earnings and prospects.
Securities of unseasoned companies, that is, companies with less than three
years' of continuous operation, which present risks considerably greater than do
common stocks of more established companies, may be acquired from time to time
by the Core International Equity Fund when the Sub-Advisor believes such
investments offer possibilities of attractive capital appreciation.
Each Fund may sell a portfolio investment soon after its acquisition if the
Adviser believes that such a disposition is consistent with attaining the
investment objective of the Fund. Portfolio investments may be sold for a
variety of reasons, such as a more favorable investment opportunity or other
circumstances bearing on the desirability of continuing to hold such
investments. A high rate of portfolio turnover (over 100%) may involve
correspondingly greater brokerage commission expenses and other transaction
costs, which must be borne directly by the Fund and ultimately by its
shareowners. High portfolio turnover may result in the realization of
substantial net capital gains; to the extent short-term capital gains are
realized, distributions relating from such gains will be ordinary income for
federal income tax purposes.
Investment Limitations
- -----------------------
Each Fund is subject to the investment limitations enumerated in this
subsection which may be changed with respect to a particular Fund only by a vote
of the holders of a majority of such Fund's outstanding shares (as defined under
"Miscellaneous" below).
No Fund may:
1. Make loans, except that a Fund may purchase and hold debt instruments
and enter into repurchase agreements in accordance with its investment objective
and policies and may lend portfolio securities in an amount not exceeding 30% of
its total assets.
2. Purchase securities of companies for the purpose of exercising
control.
3. Purchase or sell real estate or with respect to the Core International
Equity Fund, real estate limited partnerships, except that each Fund may
purchase securities of issuers which deal in real estate and may purchase
securities which are secured by interests in real estate.
4. Acquire any other investment company or investment company security
except in connection with a merger, consolidation, reorganization or acquisition
of assets or where otherwise permitted by the 1940 Act.
5. Act as an underwriter of securities within the meaning of the
Securities Act of 1933 except insofar as a Fund might be deemed to be an
underwriter upon the disposition of portfolio securities acquired within the
limitation on purchases of restricted securities and except to the extent that
the purchase of securities directly from the issuer thereof in accordance with
the Fund's investment objective, policies and limitations may be deemed to be
underwriting.
6. Write or sell put options, call options, straddles, spreads, or any
combination thereof, except for transactions in options on securities, indices
of securities, futures contracts and options on futures contracts.
7. Purchase securities on margin, make short sales of securities or
maintain a short position except that (a) this investment limitation shall not
apply to a Fund's transactions in futures contracts and related options and (b)
a Fund may obtain short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities.
8. Purchase or sell commodity contracts, or invest in oil, gas or mineral
exploration or development programs, except that each Fund may, to the extent
appropriate to its investment objective, purchase publicly traded securities of
companies engaging in whole or in part in such activities and may enter into
futures contracts and related options.
9. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in the securities of such issuer, or more than 10% of
the issuer's outstanding voting securities would be owned by the Fund or the
Company, except that up to 25% of the value of the Fund's total assets may be
invested without regard to these limitations. For purposes of this limitation,
a security is considered to be issued by the entity (or entities) whose assets
and revenues back the security. A guarantee of a security shall not be deemed
to be a security issued by the guarantor when the value of all securities issued
and guaranteed by the guarantor, and owned by the Fund, does not exceed 10% of
the value of the Fund's total assets.
10. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry; provided that, (a) with regard to all Funds there is no
limitation with respect to instruments issued or guaranteed by the United
States, its agencies or instrumentalities and repurchase agreements secured by
such instruments; (b) wholly owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of the parents; and (c) utilities will be divided
according to their services, for example, gas, gas transmission, electric and
gas, electric and telephone will each be considered a separate industry.
11. Borrow money or issue senior securities, except that each Fund may
borrow from banks and enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of the total assets at the time of
such borrowing; or mortgage, pledge or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of the Fund's total assets at
the time of such borrowing. A Fund will not purchase securities while its
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding. Securities held in escrow or separate accounts in
connection with the Fund's investment practices described in this SAI or in the
Prospectuses are not deemed to be pledged for purposes of this limitation.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
the Fund's portfolio securities will not constitute a violation of such
limitation.
If due to market fluctuations or other reasons, the amount of borrowings
and reverse repurchase agreements exceed the limit stated above, the Funds will
promptly reduce such amount. Except as otherwise provided in Investment
Restriction No. 10 above, for the purpose of such restriction, in determining
industry classification with respect to the Core International Equity Fund, the
Company intends to use the Morgan Stanley Capital International classification
titles.
With respect to investment limitation No. 10 under "Additional Investment
Limitations," asset-backed securities will be divided according to the type of
assets underlying the security. For example, automobile loans, credit card
receivables and installment sales contracts will each be considered a separate
industry.
NET ASSET VALUE
The net asset value per share of each Fund is calculated separately for the
Institutional Shares, Retail A Shares and Retail B Shares by adding the value of
all portfolio securities and other assets belonging to the particular Fund that
are allocated to a particular series, subtracting the liabilities charged to
that series, and dividing the result by the number of outstanding shares of that
series. Assets belonging to a Fund consist of the consideration received upon
the issuance of shares of the particular Fund together with all net investment
income, realized gains/losses and proceeds derived from the investment thereof,
including any proceeds from the sale of such investments, any funds or payments
derived from any reinvestment of such proceeds, and a portion of any general
assets of the Company not belonging to a particular investment portfolio. The
liabilities that are charged to a Fund are borne by each share of the Fund,
except for certain payments under the Funds' Distribution and Service Plans and
Shareowner Servicing Plans applicable only to Retail A Shares and Retail B
Shares. Subject to the provisions of the Articles of Incorporation,
determinations by the Board of Directors as to the direct and allocable
liabilities, and the allocable portion of any general assets, with respect to a
particular Fund are conclusive.
Shares which are traded on a recognized domestic 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 the national securities market.
The value of a Fund's portfolio securities that are traded on stock exchanges
outside the United States are based upon the price on the exchange as of the
close of business of the exchange immediately preceding the time of valuation,
except when an occurrence subsequent to the time a value was so established is
likely to have changed such value. Exchange- traded securities for which there
were no transactions are valued on the average of the current bid and asked
prices for the Core International Equity Fund and at the current bid prices for
the other Funds. Securities traded on only over-the-counter markets are valued
on the basis of closing over-the-counter bid prices. Securities trading in over-
the-counter markets in European and Pacific Basin countries is normally
completed well before 3:00 P.M. Central time. In addition, European and Pacific
Basin securities trading may not take place on all business days. Furthermore,
trading takes place in Japanese markets on certain Saturdays and in various
foreign markets on days which are not business days in New York and on which the
net asset value of a Fund, including the Core International Equity Fund, is not
calculated. The calculation of the net asset value of a Fund, including the
Core International Equity Fund, may not take place contemporaneously with the
determination of the prices of portfolio securities used in such calculation.
Events affecting the values of portfolio securities that occur between the time
their prices are determined and 3:00 P.M. Central time, and at other times, may
not be reflected in the calculation of net asset value of a Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Computation of Offering Price of the Funds. An illustration of the computation
of the initial offering price per share of the Retail A Shares based on the
value of each such Fund's net assets and number of outstanding securities at
November 1, 1999, follows:
MidCap Core International
Index Equity
Fund Fund
Net Asset Value
Per Share $10.00 $10.00
------ -------
Sales Charge, 4.50%
of offering price
(4.71% of net asset
value per share) 0.47 0.47
------ -------
Public Offering Price $10.47 $10.47
------ -------
Shareowner organizations or Institutions may be paid by the Funds for
advertising, distribution or shareowner services. Depending on the terms of the
particular account, shareowner organizations or Institutions also may charge
their customers fees for automatic investment, redemption and other services
provided. Such fees may include, for example, account maintenance fees,
compensating balance requirements or fees based upon account transactions,
assets or income. Shareowner organizations or Institutions are responsible for
providing information concerning these services and any charges to any customer
who must authorize the purchase of Fund shares prior to such purchase.
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment for shares during any period when (a) trading on
the Exchange is restricted by applicable rules and regulations of the SEC; (b)
the Exchange is closed for other than customary weekend and holiday closings;
(c) the SEC has by order permitted such suspension; or (d) an emergency exists
as determined by the SEC. (The Funds may also suspend or postpone the recording
of the transfer of their shares upon the occurrence of any of the foregoing
conditions.)
The Company has filed an election pursuant to Rule 18f-1 under the 1940 Act
which provides that each portfolio of the Company is obligated to redeem shares
solely in cash up to $250,000 or 1% of such portfolio's net asset value,
whichever is less, for any one shareholder within a 90-day period. Any
redemption beyond this amount may be made in proceeds other than cash.
In addition to the situations described in the Funds' Prospectus under
"Redemption of Shares," the Funds may redeem shares involuntarily to reimburse
the Funds for any loss sustained by reason of the failure of a shareowner to
make full payment for shares purchased by the shareowner or to collect any
charge relating to a transaction effected for the benefit of a shareowner which
is applicable to Fund shares as provided in the Prospectus from time to time.
Reducing Your Sales Charge on Retail A Shares.
- ---------------------------------------------
A. Rights of Accumulation
As stated in the Prospectuses, a reduced sales charge applies to any
purchase of Retail A Shares of any Firstar Fund that is sold with a sales charge
(an "Eligible Fund") where an investor's then current aggregate investment is
$100,000 or more. "Aggregate investment" means the total of (a) the dollar
amount of the then current purchase of shares of an Eligible Fund, and (b) the
value (based on current net asset value) of previously purchased and
beneficially owned shares of any Eligible Fund on which a sales charge has been
paid. If, for example, an investor beneficially owns shares of one or more
Eligible Fund, with an aggregate current value of $99,000 on which a sales
charge has been paid and subsequently purchases shares of an Eligible Fund which
is an Equity Fund having a current value of $1000, the sales charge applicable
to the subsequent purchase would be reduced to 3.75% of the offering price.
Similarly, each subsequent investment in Eligible Fund shares may be added to an
investor's aggregate investment at the time of purchase to determine the
applicable sales charge.
B. Letter of Intent
As discussed in the Prospectuses, Retail A Shares of the Company purchased
over a 13-month period through a Letter of Intent qualify for the same reduced
sales charge as if all purchased at once. During the term of the Letter of
Intent, the transfer agent will hold in escrow shares equal to 5% of the amount
indicated in the Letter of Intent for payment of a higher sales charge if an
investor does not purchase the full amount indicated in the Letter of Intent.
The escrow will be released when an investor fulfills the terms of the Letter of
Intent by purchasing the specified amount. Any redemptions made during the 13-
month period will be subtracted from the amount of purchases in determining
whether the Letter of Intent has been completed. If total purchases qualify for
a further sales charge reduction, the sales charge will be adjusted to reflect
an investor's total purchases. If total purchases are less than the amount
specified in the Letter of Intent, an investor will be requested to remit an
amount equal to the difference between the sales charge actually paid and the
sales charge applicable to the total purchases. If such remittance is not
received within 20 days, the transfer agent, as attorney-in-fact pursuant to the
terms of the Letter of Intent and at the Distributor's direction, will redeem an
appropriate number of shares held in escrow to realize the difference. Signing
a Letter of Intent does not bind an investor to purchase the full amount
indicated as the sales charge in effect at the time of signing, but an investor
must complete the intended purchase in accordance with the terms of the Letter
of Intent to obtain the reduced sales charge. To apply, an investor must
indicate his or her intention to do so under a Letter of Intent at the time of
purchase of Shares.
Exchange Privilege. By use of the exchange privilege, shareowners authorize
------------------
the transfer agent to act on telephonic or written exchange instructions from
any person representing himself to be the shareowner or in some cases, the
shareowner's registered representative or account representative of record, and
believed by the transfer agent to be genuine. The transfer agent's records of
such instructions are binding. The exchange privilege may be modified or
terminated at any time upon notice to shareowners.
Exchange transactions described in paragraphs A, B, C, D, E and F below
will be made on the basis of the relative net asset values per share of the
Funds included in the transaction.
A. Retail A Shares of any Fund purchased with a sales charge, as well as
additional shares acquired through reinvestment of dividends or distributions on
such shares, may be exchanged without a sales charge for other Retail A Shares
of any other Fund offered by the Company.
B. Retail A Shares of any Fund offered by the Company or Money Market Fund
Shares ("MMF Shares") acquired by a previous exchange transaction involving
Retail A Shares on which a sales charge has directly or indirectly been paid
(e.g., shares purchased with a sales charge or issued in connection with an
exchange involving shares that had been purchased with a sales charge) as well
as additional Shares acquired through reinvestment of dividends or distributions
on such Shares, may be exchanged without a sales charge for Retail A Shares of
any other Fund offered by the Company with a sales charge. To accomplish an
exchange under the provisions of this paragraph, investors must notify the
transfer agent of their prior ownership of Retail A Shares and their account
number.
C. Retail B Shares acquired pursuant to an exchange transaction will
continue to be subject to a contingent deferred sales charge. However, Retail B
Shares that have been acquired through an exchange of Retail B Shares may be
exchanged for other Retail B Shares without the payment of a contingent deferred
sales charge at the time of exchange. In determining the holding period for
calculating the contingent deferred sales charge payable on redemption of Retail
B Shares, the holding period of the shares originally held will be added to the
holding period of the shares acquired through exchange.
D. Retail B Shares may be exchanged for MMF Shares (but not for
Institutional Money Market Fund Shares) without paying a contingent deferred
sales charge. In determining the holding period for calculating the contingent
deferred sales charge payable on redemption of Retail B Shares, the holding
period of the shares originally held will be added to the holding period of the
shares acquired through exchange. If the shareowner subsequently exchanges the
shares back into Retail B Shares of a Fund, the holding period accumulation on
the shares will continue to accumulate. In the event that a shareholder wishes
to redeem MMF Shares acquired by exchange for Retail B Shares of a Fund, the
contingent deferred sales charge applicable to the accumulated Retail B Shares
and Money Market Fund Shares will be charged.
E. Retail A Shares of any Fund may be exchanged without a sales load for
Retail A Shares in any other Fund for shares of any other Fund that are offered
without a sales load.
F. Institutional Shares of any Fund may be exchanged for Institutional
Shares of any other Fund.
Except as stated above, a sales load will be imposed when shares of any
Fund that were purchased or otherwise acquired without a sales load are
exchanged for Retail A Shares of another Fund which are sold with a sales load.
Retail A Shares of any Fund will be exchanged for Institutional Shares if
the shares are registered in the name of an employer-sponsored qualified
retirement plan administered by Firstar and assets equal or exceed $1 million at
the preceding month-end. The date of the exchange will be 15 business days
following the month-end in which the plan assets equal or exceed $1 million.
Shares in a Fund from which the shareowner is withdrawing an investment
will be redeemed at the net asset value per share next determined on the date of
receipt. Shares of the new Fund into which the shareowner is investing will be
purchased at the net asset value per share next determined (plus any applicable
sales charge) after acceptance of the request by the Company in accordance with
the policies for accepting investments. Exchanges of Shares will be available
only in states where they may legally be made.
Exemptions from CDSC. Certain types of redemptions may also qualify for an
--------------------
exemption from the contingent deferred sales charge. To receive exemptions (vi)
or (viii) below, a shareowner must explain the status of his or her redemption.
If you think you may be eligible for a contingent deferred sales charge waiver
listed below, be sure to notify your Shareowner Organization or the Distributor
at the time Retail B Shares are redeemed. The following is a more detailed
description of certain of the instances described in the Prospectus in which the
contingent deferred sales charge with respect to the B Shares is assessed:
(i) redemptions in connection with required (or, in some cases, discretionary)
distributions to participants or beneficiaries of an employee pension, profit
sharing or other trust or qualified retirement or Keogh plan, individual
retirement account or custodial account maintained pursuant to Section 403(b)(7)
of the Internal Revenue Code of 1986, as amended (the "Code");
(ii) redemptions in connection with required (or, in some cases, discretionary)
distributions to participants in qualified retirement or Keogh plans, individual
retirement accounts or custodial account maintained pursuant to Section
403(b)(7) of the Code due to death, disability or the attainment of a specified
age;
(iii) redemptions in connection with the death or disability of a shareowner; or
(iv) redemptions resulting from certain tax-free returns of excess contributions
pursuant to section 408(d)(4) or (5) of the Code.
Additional Information Regarding Shareowner Services for Retail Shares
----------------------------------------------------------------------
The Retail A and Retail B Shares of the Funds offer a Periodic Investment
Plan whereby a shareowner may automatically make purchases of shares of a Fund
on a regular, monthly basis ($50 minimum per transaction). Under the Periodic
Investment Plan, a shareowner's designated bank or other financial institution
debits a preauthorized amount on the shareowner's account each month and applies
the amount to the purchase of Retail A and Retail B Shares. The Periodic
Investment Plan must be implemented with a financial institution that is a
member of the Automated Clearing House. No service fee is currently charged by
a Fund for participation in the Periodic Investment Plan. A $20 fee will be
imposed by the transfer agent if sufficient funds are not available in the
shareowner's account or the shareowner's account has been closed at the time of
the automatic transaction.
The Periodic Investment Plan permits an investor to use "Dollar Cost
Averaging" in making investments. Instead of trying to time market performance,
a fixed dollar amount is invested in Retail A or Retail B Shares at
predetermined intervals. This may help investors to reduce their average cost
per share because the agreed upon fixed investment amount allows more Retail A
or Retail B Shares to be purchased during periods of lower Retail A or Retail B
Share prices and fewer Retail A or Retail B Shares to be purchased during
periods of higher Retail A or Retail B Share prices. In order to be effective,
Dollar Cost Averaging should usually be followed on a sustained, consistent
basis. Investors should be aware, however, that Retail A or Retail B Shares
bought using Dollar Cost Averaging are purchased without regard to their price
on the day of investment or to market trends. Dollar Cost Averaging does not
assure a profit and does not protect against losses in a declining market. In
addition, while investors may find Dollar Cost Averaging to be beneficial, it
will not prevent a loss if an investor ultimately redeems his Retail A or Retail
B Shares at a price which is lower than their purchase price. An investor may
want to consider his financial ability to continue purchases through periods of
low price levels.
The Retail A and Retail B Shares of the Funds permit shareowners to effect
ConvertiFund/R transactions, an automated method by which a Retail shareowner
may invest proceeds from one account to another account of the Retail A or
Retail B Shares of the Firstar family of funds, as the case may be. Such
proceeds include dividend distribution, capital gain distributions and
systematic withdrawals. ConvertiFund/R transactions may be used to invest funds
from a regular account to another regular account, from a qualified plan account
to another qualified plan account, or from a qualified plan account to a regular
account.
The Retail A and Retail B Shares of the Funds offer shareowners a
Systematic Withdrawal Plan, which allows a shareowner who owns shares of a Fund
worth at least $5,000 at current net asset value at the time the shareowner
initiates the Systematic Withdrawal Plan to designate that a fixed sum ($50
minimum per transaction) be distributed to the shareowner or as otherwise
directed at regular intervals.
Special Procedures for In-Kind Payments
- ---------------------------------------
Payment for shares of a Fund may, in the discretion of the Fund, be made in
the form of securities that are permissible investments for the Fund as
described in its Prospectus. For further information about this form of
payment, contact Investor Services at 800-677-FUND. In connection with an
in-kind securities payment, a Fund will require, among other things, that the
securities be valued on the day of purchase in accordance with the pricing
methods used by the Fund; that the Fund receive satisfactory assurances that it
will have good and marketable title to the securities received by it; that the
securities be in proper form for transfer to the Fund; that adequate information
be provided to the Fund concerning the basis and other tax matters relating to
the securities; and that the amount of the purchase be at least $1,000,000.
DESCRIPTION OF SHARES
The Company's Articles of Incorporation authorize the Board of Directors to
issue up to 150,000,000,000 full and fractional shares of common stock, $.0001
par value per share, which is divided into thirty classes (each, a "class" or
"fund"). Each class below is divided into three series designated as
Institutional Shares, Retail A Shares and Retail B Shares (each, a "Series") and
consists of the number of shares set forth next to its Fund name in the table
below:
Class-Series of Fund in which Stock Number of Authorized
Common Stock Represents Interest Shares in Each Series
- ----------------- -------------------- ---------------------
19-Institutional MidCap Index 100 Million
19-A 100 Million
19-B 100 Million
20-Institutional Core International 100 Million
20-A 100 Million
20-B 100 Million
- -------------
The Board of Directors has also authorized the issuance of classes 1
through 18 common stock representing interests in eighteen other separate
investment portfolios which are described in separate statements of additional
information. The remaining authorized shares are classified into ten additional
classes representing interests in other potential future investment portfolios
of the Company. The Directors may similarly classify or reclassify any
particular class of shares into one or more additional series.
In the event of a liquidation or dissolution of the Company or an
individual Fund, shareowners of a particular Fund would be entitled to receive
the assets available for distribution belonging to such Fund, and a
proportionate distribution, based upon the relative assets of the Company's
respective investment portfolios, of any general assets not belonging to any
particular portfolio which are available for distribution. Subject to the
allocation of certain costs, expenses, charges and reserves attributed to the
operation of a particular series as described in the Funds' Prospectuses,
shareowners of a Fund are entitled to participate equally in the net
distributable assets of the particular Fund involved on liquidation, based on
the number of shares of the Fund that are held by each shareowner.
Shareowners of each class of the Funds are entitled to one vote for each
full share held and proportionate fractional votes for fractional shares held.
Shareowners of the Funds, as well as those of any other investment portfolio
offered by the Company, will vote together in the aggregate and not separately
on a portfolio-by -portfolio basis, except as otherwise required by law or when
the Board of Directors determines that the matter to be voted upon affects only
the interests of the shareowners of a particular class or a particular series
within a class. Rule 18f-2 under the 1940 Act provides that any matter required
to be submitted to the holders of the outstanding voting securities of an
investment company such as the Company shall not be deemed to have been
effectively acted upon unless approved by the shareowners of each portfolio
affected by the matter. A portfolio is affected by a matter unless it is clear
that the interests of each portfolio in the matter are substantially identical
or that the matter does not affect any interest of the portfolio. Under the
Rule, the approval of an investment advisory agreement or any change in a
fundamental investment policy would be effectively acted upon with respect to a
portfolio only if approved by a majority of the outstanding shares of such
portfolio. However, the Rule also provides that the ratification of the
appointment of independent accountants, the approval of principal underwriting
contracts and the election of Directors may be effectively acted upon by
shareowners of the Company voting together in the aggregate without regard to
particular portfolios. Similarly, on any matter submitted to the vote of
shareowners which only pertains to agreements, liabilities or expenses
applicable to one series of a Fund (such as a Distribution and Service Plan
applicable to Retail A or B Shares) but not the other series of the same Fund,
only the affected series will be entitled to vote. Each Retail Share of a Fund
represents an equal proportionate interest with other Retail Shares in that
Fund. Shares are entitled to such dividends and distributions earned on its
assets as are declared at the discretion of the Board of Directors. Shares of
the Funds do not have preemptive rights.
When issued for payment as described in the Funds' Prospectuses and this
SAI, shares of the Funds will be fully paid and non-assessable by the Company,
except as provided in Section 180.0622(2)(b) of the Wisconsin Business
Corporation Law, as amended, which in general provides for personal liability on
the part of a corporation's shareowners for unpaid wages of employees. The
Company does not intend to have any employees and, to that extent, the foregoing
statute will be inapplicable to holders of Fund shares and will not have a
material effect on the Company.
The Articles of Incorporation authorize the Board of Directors, without
shareowner approval (unless otherwise required by applicable law), to: (a) sell
and convey the assets belonging to a series of shares to another management
investment company for consideration which may include securities issued by the
purchaser and, in connection therewith, to cause all outstanding shares of such
series to be redeemed at a price which is equal to their net asset value and
which may be paid in cash or by distribution of the securities or other
consideration received from the sale and conveyance; (b) sell and convert the
assets belonging to a series of shares into money and, in connection therewith,
to cause all outstanding shares of such series to be redeemed at their net asset
value; or (c) combine the assets belonging to a series of shares with the assets
belonging to one or more other series of shares if the Board of Directors
reasonably determines that such combination will not have a material adverse
effect on the shareowners of any series participating in such combination and,
in connection therewith, to cause all outstanding shares of any such series to
be redeemed or converted into shares of another series of shares at their net
asset value.
ADDITIONAL INFORMATION CONCERNING TAXES
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and to distribute out its income to
shareholders each year, so that the Fund itself generally will be relieved of
federal income and excise taxes. If a Fund were to fail to so qualify: (1) the
Fund would be taxed at regular corporate rates without any deduction for
distributions to shareholders; and (2) shareholders would be taxed as if they
received ordinary dividends, although corporate shareholders could be eligible
for the dividends received deduction.
MANAGEMENT OF THE COMPANY
The business and affairs of the Funds are managed under the direction of
the Board of Directors of the Company. The Board is responsible for acting on
behalf of the shareowners.
The Board does not normally hold shareholder meetings except when required
by the 1940 Act or other applicable law. The Board will call a shareholders'
meeting for the purpose of voting on the question of removal of a Director when
requested to do so in writing by the record holders of not less than 10% of the
outstanding shares of the Company that are entitled to vote.
Directors and Officers
- ----------------------
The Directors and Officers of the Company, their addresses,
principal occupations during the past five years and other affiliations are as
follows:
POSITION(S) HELD PRINCIPAL OCCUPATIONS DURING PAST
NAME, ADDRESS & AGE WITH THE COMPANY 5 YEARS AND OTHER AFFILIATIONS
James M. Wade Chairman of the Vice President and Chief Financial
2802 Wind Bluff Board Officer, Johnson Controls, Inc.
Circle (a controls manufacturing company)
Wilmington, NC 28409 January 1987-May 1991.
Age: 55
Glen R. Bomberger Director Executive Vice President, Chief
One Park Plaza Financial Officer and Director, A.O.
11270 West Park Place Smith Corporation (a diversified
Milwaukee, WI manufacturing company) since January
53224-3690 1987; Director of companies
Age: 61 affiliated with A.O. Smith
Corporation; Chief Financial
Officer, Director and Vice
President, Smith Investment Company;
Officer and Director of companies
affiliated with Smith Investment
Company.
Jerry G. Remmel Director Vice President, Treasurer and Chief
16650A Lake Circle Financial Officer of Wisconsin
Brookfield, WI 53005 Energy Corporation 1994-1996;
Age: 67 Treasurer of Wisconsin Electric
Power Company 1973-1996; Director of
Wisconsin Electric Power Company
1989-1996; Senior Vice President,
Wisconsin Electric Power Company
1988 - 1994; Chief Financial
Officer, Wisconsin Electric Power
Company 1983-1996; Vice President
and Treasurer, Wisconsin Electric
Power Company, 1983 - 1989.
Richard K. Riederer Director President and Chief Executive
400 Three Springs Drive Officer of Weirton Steel since 1995;
Weirton, WV 26062-4989 Director of Weirton Steel since
Age: 54 1993; Executive Vice President and
Chief Financial Officer, Weirton
Steel January 1994 - 1995; Vice
President of Finance and Chief
Financial Officer, Weirton Steel
January 1989-1994; Member, Board of
Directors of American Iron and Steel
Institute since 1995; Member, Board
of Directors, National Association
of Manufacturers since 1995; Member,
Board of Directors, WESBANCO since
September 1997.
Charles R. Roy Director Vice President - Finance, Chief
14245 Heatherwood Court Financial Officer and Secretary,
Elm Grove, WI 53122 Rexnord Corporation (an equipment
Age: 68 manufacturing company), 1988 - 1992;
Vice President - Finance and
Administration, Rexnord Inc., 1982 -
1988; Officer and Director of
several Rexnord subsidiaries until
1992.
Mary Ellen Stanek<F1> Director, President of FIRMCO since 1994 and
777 E. Wisconsin Avenue, President Chief Executive Officer, FIRMCO
Suite 800 and since 1998; Director of FIRMCO since
Milwaukee, WI 53202 Treasurer 1992 and Director Fixed Income
Age: 42 Securities of FIRMCO since 1990.
W. Bruce McConnell, III Secretary Partner of the law firm of Drinker
One Logan Square Biddle & Reath LLP.
18th & Cherry Streets
Philadelphia, PA 19103
Age: 55
Laura J. Rauman Vice Vice President of Operations, FIRMCO
777 E. Wisconsin Avenue, President since 1995; Senior Auditor, Price
Suite 800 Waterhouse, LLP, prior thereto.
Milwaukee, WI 53202
Age: 30
POSITION(S) HELD PRINCIPAL OCCUPATIONS DURING PAST
NAME, ADDRESS & AGE WITH THE COMPANY 5 YEARS AND OTHER AFFILIATIONS
Joseph C. Neuberger Assistant Vice President, Firstar Mutual Fund
615 E. Michigan Street Treasurer Services, LLC since 1994; Manager,
Milwaukee, WI 53202 Arthur Andersen LLP, prior thereto.
Age: 37
Bronson J. Haase<F1> Director President and CEO of Wisconsin Gas
626 E. Wisconsin Avenue Company, WICOR Energy, FieldTech and
Milwaukee, WI 53202 Vice President of WICOR, Inc. since
Age: 54 1998; President and CEO of
Ameritech - Wisconsin (formerly
Wisconsin Bell Communications) 1993-
1997; Trustee of Roundy Foods.
<F1> Mr. Haase and Ms. Stanek are considered by the Company to be "interested
persons" of the Company as defined in the 1940 Act.
The following chart provides certain information about the Director fees
for the year ended October 31, 1998 of the Company's Directors.
TOTAL
COMPENSATION
PENSION OR ESTIMATED FROM
AGGREGATE RETIREMENT ANNUAL COMPANY
COMPENSATION ACCRUED AS BENEFITS AND FUND
NAME OF FROM THE PART OF FUND UPON COMPLEX<F1> PAID
PERSON/POSITION COMPANY EXPENSES RETIREMENT TO DIRECTORS
- --------------- ------------ ------------ ---------- ----------------
James M. Wade $18,500 $0 $0 $18,500
Chairman of the
Board
Glen R. $15,000<F2> $0 $0 $15,000
Bomberger
Director
Jerry G. Remmel $15,000 $0 $0 $15,000
Director
Richard K. $15,000 $0 $0 $15,000
Riederer
Director
Charles R. Roy $15,000 $0 $0 $15,000
Director
Bronson J. $3,500 $0 $0 $3,500
Haase
Director
<F1>The "Fund Complex" includes only the Company. The Company is comprised
of 20 separate portfolios.
<F2>Includes $15,000 which Mr. Bomberger elected to defer under the
Company's deferred compensation plan.
Each Director receives an annual fee of $10,000, a $1,000 per meeting
attendance fee and reimbursement of expenses incurred as a Director. The
Chairman of the Board is entitled to receive an additional $3,500 per annum for
services in such capacity. For the fiscal year ended October 31, 1998, the
Directors and Officers received aggregate fees and reimbursed expenses of
$82,754. Ms. Stanek, Ms. Rauman and Mr. Neuberger receive no fees from the
Company for their services as President and Treasurer, Vice President and
Assistant Treasurer respectively, although FIRMCO, of which Ms. Stanek and Ms.
Rauman are President and Vice President of Operations, respectively, receives
fees from the Company for advisory services and Firstar Mutual Fund Services,
LLC of which Mr. Neuberger is Vice President, receives fees from the Company for
administration, transfer agency and accounting services. FIRMCO is a wholly
owned subsidiary of Firstar Corporation. Drinker Biddle & Reath LLP, of which
Mr. McConnel is a partner, receives legal fees as counsel to the Company. As of
the date of this SAI, the Directors and Officers of the Company, as a group,
owned less than 1% of the outstanding shares of each Fund.
Directors, employees, retirees and their families of Firstar Corporation
or its affiliates are exempt and do not have to pay front-end sales charges
(provided the status of the investment is explained at the time of investment)
on purchases of Retail A Shares. These exemptions to the imposition of a front-
end sales charge are due to the nature of the investors and/or the reduced sales
efforts that will be needed in obtaining such investments.
Advisory Services
- -----------------
FIRMCO is the investment adviser to the Funds. In its Investment Advisory
Agreement, the Adviser has agreed to pay all expenses incurred by it in
connection with its advisory activities, other than the cost of securities and
other investments, including brokerage commissions and other transaction
charges, if any, purchased or sold for the Funds.
In addition to the compensation stated in the Prospectuses, the Adviser is
entitled to 4/10ths of the gross income earned by each Fund on each loan of its
securities, excluding capital gains or losses, if any. Pursuant to current
policy of the SEC, the Adviser does not intend to receive compensation for such
securities lending activity. The Adviser may voluntarily waive advisory fees
otherwise payable by the Funds.
Under its Investment Advisory Agreement, the Adviser is not liable
for any error of judgment or mistake of law or for any loss suffered by the
Funds in connection with the performance of such Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of com-
pensation for services or a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Adviser in the performance of its duties
or from its reckless disregard of its duties and obligations under the
Agreement.
With regard to the Core International Equity Fund, under the Investment
Advisory Agreement, the Adviser is authorized to employ or associate itself with
a subadviser. The Adviser has employed The Glenmede Trust Company ("Glenmede")
as Sub-Adviser to the Core International Equity Fund. The Sub-Adviser
determines the securities to be purchased, retained or sold by the Fund. See
"Sub-Adviser" below.
Sub-Adviser. The Core International Equity Fund receives sub-advisory
-----------
services from Glenmede (the "Sub-Adviser"). Under the terms of the Sub-Advisory
Agreement between the Adviser and Sub-Adviser, the Sub-Adviser furnishes
investment advisory and portfolio management services to the Core International
Equity Fund with respect to its investments. The Sub-Adviser is responsible for
decisions to buy and sell the Core International Equity Fund's investments and
all other transactions related to investment therein. The Sub-Adviser
negotiates brokerage commissions and places orders of purchases and sales of the
Core International Equity Fund's portfolio securities. During the term of the
Sub-Advisory Agreement, the Sub-Adviser will bear all expenses incurred by it in
connection with its services under such agreement.
Pursuant to the Sub-Advisory Agreement, in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Sub-Adviser or
reckless disregard of its obligations and duties thereunder, or loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation for
services, the Sub-Adviser will not be subject to any liability to the Adviser,
the Core International Equity Fund or the Company, or to any shareowner of the
Core International Equity Fund or the Company, for any act or omission in the
course of, or connected with, rendering services under the Sub-Advisory
Agreement. See "Banking Laws and Regulations" below for information regarding
certain banking laws and regulations and their applicability to the Sub-Adviser
and its services under the Sub-Adviser agreement.
Banking Laws and Regulations. Banking laws and regulations, including the
----------------------------
Glass-Steagall Act as presently interpreted by the Board of Governors of the
Federal Reserve System, presently (a) prohibit a bank holding company registered
under the Federal Bank Holding Company Act of 1956 or any bank or non-bank
affiliate thereof from sponsoring, organizing, controlling or distributing the
shares of a registered, open-end investment company continuously engaged in the
issuance of its shares, and prohibit banks generally from underwriting
securities, but (b) do not prohibit such a bank holding company or affiliate or
banks generally from acting as investment adviser, transfer agent or custodian
to such an investment company or from purchasing shares of such a company as
agent and upon order of a customer. In 1971, the United States Supreme Court
held in Investment Company Institute vs. Camp that the Glass-Steagall Act
-------------------------------------
prohibits a national bank from operating a fund for the collective investment of
managing agency accounts. Subsequently, the Board of Governors of the Federal
Reserve System (the "Board") issued a regulation and interpretation to the
effect that the Glass-Steagall Act and such decision forbid a bank holding
company registered under the Federal Bank Holding Company Act of 1956 (the
"Holding Company Act"), or any non-bank affiliate thereof from sponsoring,
organizing or controlling a registered, open-end investment company continuously
engaged in the issuance of its shares, but did not prohibit such a holding
company or affiliate from acting as investment adviser, transfer agent and
custodian to such an investment company. In 1981, the United States Supreme
Court held in Board of Governors of the Federal Reserve System v. Investment
--------------------------------------------------------------
Company Institute that the Board did not exceed its authority under the Holding
- -----------------
Company Act when it adopted its regulation and interpretation authorizing bank
holding companies and their non-bank affiliates to act as investment advisers to
registered closed-end investment companies. FIRMCO and Firstar Trust Services
("Firstar Trust") are subject to such banking laws and regulations.
FIRMCO and Firstar Trust believe that they may perform the services for
the Funds contemplated by their respective agreements with the Company without
violation of the Glass-Steagall Act or other applicable banking laws or
regulations. These companies further believe that, if the question were
properly presented, a court should hold that these companies may each perform
such activities without violation of the Glass-Steagall Act or other applicable
banking laws and or regulations. It should be noted, however, there have been
no cases deciding whether banks and their affiliates may perform services
comparable to those performed by these companies, and future changes in either
federal or state statutes and regulations relating to permissible activities of
banks or trust companies and their subsidiaries or affiliates, as well as
further judicial or administrative decisions or interpretations of present and
future statutes and regulations, could prevent such companies from continuing to
perform such services for the Funds. If the companies were prohibited from
continuing to perform advisory, accounting, shareowner servicing and custody
services for the Funds, it is expected that the Board of Directors would
recommend that the Funds enter into new agreements or would consider the
possible termination of the Funds. Any new advisory or sub-advisory agreement
would be subject to shareowner approval.
Shares of the Funds are not bank deposits, are neither endorsed by,
insured by, or guaranteed by, obligations of, nor otherwise supported by the
FDIC, the Federal Reserve Board, Firstar Bank, N.A. or FIRMCO, their affiliates
or any other bank, or any other governmental agency. An investment in the Funds
involves risks including possible loss of principal.
Administration and Distribution Services
- ----------------------------------------
Firstar Mutual Fund Services, LLC and B. C. Ziegler and Company ("Ziegler")
are Co-Administrator to the Funds. Under the Co-Administration Agreement, the
following administrative services are provided jointly by the Co-Administrators:
assist in maintaining office facilities, furnish clerical services, stationery
and office supplies; monitor the company's arrangements with respect to services
provided by Shareowner Organizations and Institutions; and generally assist in
the Funds' operations. The following administrative services are provided by
Ziegler: review and comment upon the registration statement and amendments
thereto prepared by Firstar Mutual Fund Services, LLC or counsel to the Company,
as requested by Firstar Mutual Fund Services, LLC; review and comment upon sales
literature and advertising relating to the Company, as requested by Firstar
Mutual Fund Services, LLC; assist in the administration of the marketing budget;
periodically review Blue Sky registration and sales reports for the Funds;
attend meetings of the Board of Directors, as requested by the Board of
Directors of the Company; and such other services as may be requested in writing
and expressly agreed to by Ziegler. The following administrative services are
provided by Firstar Mutual Fund Services, LLC: compile data for and prepare,
with respect to the Funds, timely Notices to the SEC required pursuant to Rule
24f-2 under the 1940 Act and Semi-Annual Reports to the SEC and current
Shareowners; coordinate execution and filing by the Company of all federal and
state tax returns and required tax filings other than those required to be made
by the Company's custodian and transfer agent; prepare compliance filings and
Blue Sky registrations pursuant to state securities laws with the advice of the
Company's counsel; assist to the extent requested by the Company with the
Company's preparation of Annual and Semi-Annual reports to Fund shareowners and
Registration Statements for the Funds; monitor each Fund's expense accruals and
cause all appropriate expenses to be paid on proper authorization from each
Fund; monitor each Fund's status as a regulated investment company under
Subchapter M of the Code; maintain each Fund's fidelity bond as required by the
1940 Act; and monitor compliance with the policies and limitations of each Fund
as set forth in the Prospectuses, SAI, By-laws and Articles of Incorporation.
The Co-Administrators are entitled to receive a fee for their
administrative services, 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. The Co-Administrators may voluntarily waive all or a portion of
their administrative fee from time to time. These waivers may be terminated at
any time at the Co-Administrators' discretion.
Each of the Co-Administrators has agreed to pay all expenses incurred by it
in connection with its administrative activities. Under the Co-Administration
Agreement, the Co-Administrators are not liable for any error of judgment or
mistake of law or for any loss suffered by the Funds in connection with the
performance of the Co-Administration Agreement, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Co-
Administrators in the performance of their respective duties or from their
reckless disregard of their duties and obligations under the Agreement.
Shareowner Organizations
- ------------------------
Retail A Shares
As stated in the Funds' Prospectuses the Funds intend to enter into
agreements from time to time with Shareowner Organizations providing for support
and/or distribution services to customers of the Shareowner Organizations who
are the beneficial owners of Retail A Shares of the Fund. Under the agreements,
the Funds may pay Shareowner Organizations up to 0.25% (on an annualized basis)
of the average daily net asset value of Retail A Shares beneficially owned by
their customers. Support services provided by Shareowner Organizations under
their Service Agreements or Distribution and Service Agreements may include:
(i) processing dividend and distribution payments from a Fund; (ii) providing
information periodically to customers showing their share positions; (iii)
arranging for bank wires; (iv) responding to customer inquiries; (v) providing
sub-accounting with respect to shares beneficially owned by customers or the
information necessary for sub-accounting; (vi) forwarding shareowner
communications; (vii) assisting in processing share purchase, exchange and
redemption requests from customers; (viii) assisting customers in changing
dividend options, account designations and addresses; and (ix) other similar
services requested by the Funds. In addition, Shareowner Organizations, under
the Distribution and Service Plan applicable to Retail A Shares, may provide
assistance (such as the forwarding of sales literature and advertising to their
customers) in connection with the distribution of Retail A Shares. All fees
paid under these agreements are borne exclusively by the Funds' Retail A Shares.
The Funds' arrangements with Shareowner Organizations under the agreements
are governed by two Plans (a Service Plan and a Distribution and Service Plan)
for the Retail A Shares, which have been adopted by the Board of Directors.
Retail B Shares
The Company has also adopted a Distribution and Service Plan pursuant to
Rule 12b-1 and a Service Plan with respect to the Retail B Shares of the Funds.
Under the Distribution and Service Plan, payments by the Company (i) for
distribution expenses may not exceed 0.75% (annualized) of the average daily
net assets attributable to a Fund's outstanding Retail B Shares; and (ii) for
shareholder liaison services may not exceed 0.25% (annualized), respectively, of
the average daily net assets attributable to each Fund's outstanding Retail B
Shares. Under the separate Service Plan for the Retail B Shares, payments by
the Company for shareholder administrative support services may not exceed 0.25%
(annualized) of the average daily net assets attributable to each Fund's
outstanding Retail B Shares.
Because the Distribution and Service Plans contemplate the provision of
services related to the distribution of Retail A and Retail B Shares (in
addition to support services), those Plans have been adopted in accordance with
Rule 12b-1 under the 1940 Act. In accordance with the Plans, the Board of
Directors reviews, at least quarterly, a written report of the amounts expended
in connection with the Funds' arrangements under the Plans and the purposes for
which the expenditures were made. In addition, the arrangements must be
approved annually by a majority of the Directors, including a majority of the
Directors who are not "interested persons" of the Funds (as defined in the 1940
Act) and have no direct or indirect financial interest in such arrangements (the
"Disinterested Directors").
The Funds believe that there is a reasonable likelihood that their
arrangements with Shareowner Organizations will benefit each Fund and the
holders of Retail A or Retail B Shares as a way of allowing Shareowner
Organizations to participate with the Funds in the provision of support and
distribution services to customers of the Shareowner Organization who own Retail
A or Retail B Shares. Any material amendment to the arrangements with
Shareowner Organizations under other agreements must be approved by a majority
of the Board of Directors (including a majority of the Disinterested Directors),
and any amendment to increase materially the costs under the Distribution and
Service Plan with respect to a Fund must be approved by the holders of a
majority of the outstanding Retail A or Retail B Shares of the Fund involved.
So long as the Plans are in effect, the selection and nomination of the members
of the Board of Directors who are not "interested persons" (as defined in the
1940 Act) of the Funds will be committed to the discretion of such Disinterested
Directors.
Under the terms of their agreement with Firstar, Shareowner Organizations
are required to provide a schedule of any fees that they may charge to their
customers relating to the investment of their assets in shares covered by the
agreements. In addition, investors should contact their Shareowner
Organizations with respect to the availability of shareowner services and the
particular Shareowner Organization's procedures for purchasing and redeeming
shares. It is the responsibility of Shareowner Organizations to transmit
purchase and redemption orders and record those orders in customers' accounts on
a timely basis in accordance with their agreements with customers. At the
request of a Shareowner Organization, the transfer agent's charge of $12.00 for
each payment made by wire of redemption proceeds may be billed directly to the
Shareowner Organization.
CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES AGENT
Firstar Bank Milwaukee, N.A. serves as custodian of all the Funds' assets.
Under the Custody Agreement, Firstar Bank Milwaukee, N.A. has agreed to (i)
maintain a separate account in the name of each Fund, (ii) make receipts and
disbursements of money on behalf of each Fund, (iii) collect and receive all
income and other payments and distributions on account of each Fund's portfolio
investments, (iv) respond to correspondence from shareowners, security brokers
and others relating to its duties and (v) make periodic reports to the Company
concerning each Fund's operations. Firstar Bank Milwaukee, N.A. may, at its own
expense, open and maintain a custody account or accounts on behalf of each Fund
with other banks or trust companies, provided that Firstar Bank Milwaukee, N.A.
shall remain liable for the performance of all of its duties under the Custody
Agreement notwithstanding any delegation. For its services as custodian,
Firstar Bank Milwaukee, N.A. is entitled to receive a fee, payable monthly,
based on the annual rate of 0.02% of the Company's first $2 billion of total
assets, plus 0.015% of the Company's next $2 billion of total assets, and 0.01%
of the Company's next $1 billion and 0.005% on the balance. In addition,
Firstar Bank Milwaukee, N.A., as custodian, is entitled to certain charges for
securities transactions and reimbursement for expenses. The Chase Manhattan Bank
performs certain foreign custodial services related to the Core International
Equity Fund.
Firstar Mutual Fund Services, LLC, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, serves as transfer agent and dividend disbursing agent for each
Fund under a Shareowner Servicing Agent Agreement. As transfer and dividend
disbursing agent, Firstar Mutual Fund Services, LLC has agreed to (i) issue and
redeem shares of the Funds, (ii) make dividend and other distributions to
shareowners of the Funds, (iii) respond to correspondence by Fund shareowners
and others relating to its duties, (iv) maintain shareowner accounts, and (v)
make periodic reports to the Funds. For its transfer agency and dividend
disbursing services, Firstar Mutual Fund Services, LLC is entitled to receive a
fee at the rate of $15.00 per shareowner account with an annual minimum of
$24,000 per Fund, plus certain other transaction charges and reimbursement for
expenses.
In addition, all of the Funds have entered into a Fund Accounting Servicing
Agreement with Firstar Mutual Fund Services, LLC pursuant to which Firstar
Mutual Fund Services, LLC has agreed to maintain the financial accounts and
records of the Funds in compliance with the 1940 Act and to provide other
accounting services to the Funds. For its accounting services, Firstar Mutual
Fund Services, LLC is entitled to receive fees, payable monthly, at the
following annual rates of the market value of each Fund's assets; MidCap Index
Fund -- $27,500 on the first $40 million, 0.0125% on the next $200 million, and
0.00625% on the balance, plus out-of-pocket expenses, including pricing
expenses; and Core International Equity Fund -- $31,250 on the first $40
million, 0.025% on the next $200 million, 0.0125% on the next $200 million,
0.00625% on the balance, plus out-of-pocket expenses, including pricing
expenses.
EXPENSES
Operating expenses of the Funds include taxes, interest, fees and expenses
of Directors and officers, SEC fees, state securities and qualification fees,
advisory fees, administrative fees, Shareowner Organization fees (Retail A and
Retail B Shares only), charges of the custodian and transfer agent, dividend
disbursing agent and accounting services agent, certain insurance premiums,
auditing and legal expenses, costs of preparing and printing prospectuses for
regulatory purposes and for distribution to shareowners, costs of shareowner
reports and meetings, membership fees in the Investment Company Institute, and
any extraordinary expenses. The Funds also pay any brokerage fees, commissions
and other transactions charges (if any) incurred in connection with the purchase
or sale of portfolio securities.
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
PricewaterhouseCoopers LLP, independent accountants, 100 East Wisconsin
Avenue, Suite 1500, Milwaukee, Wisconsin, 53202, serve as auditors for the
Company.
COUNSEL
Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary of the
Company, is a partner), One Logan Square, 18th and Cherry Streets, Philadelphia,
Pennsylvania 19103, serves as counsel to the Company and will pass upon the
legality of the shares offered by the Funds' Prospectuses.
PERFORMANCE CALCULATIONS
From time to time, the total return of the Retail A Shares, Retail B Shares
and Institutional Shares of each Fund may be quoted in advertisements,
shareowner reports or other communications to shareowners. Performance
information is generally available by calling the Firstar Funds Center at 1-800-
677-FUND.
Total Return Calculations.
- -------------------------
Each Fund computes "average annual total return" separately for its Retail
A, Retail B and Institutional Shares. Average annual total return reflects the
average annual percentage change in value of an investment in shares of a series
over the measuring period. This is computed by determining the average annual
compounded rates of return during specified periods that equate the initial
amount invested in a particular series to the ending redeemable value of such
investment in the series. This is done by dividing the ending redeemable value
of a hypothetical $1,000 initial payment by $1,000 and raising the quotient to a
power equal to one divided by the number of years (or fractional portion
thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:
n
P(1 + T) = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical
$1,000 payment made at the beginning of the
period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in
terms of years.
The Funds may compute aggregate total return, which reflects the total
percentage change in value over the measuring period. The Funds compute their
aggregate total returns separately for the Retail A, Retail B and Institutional
Series, by determining the aggregate rates of return during specified periods
that likewise equate the initial amount invested in a particular series to the
ending redeemable value of such investment in the series. The formula for
calculating aggregate total return is as follows:
ERV
T = [(-----) - 1]
P
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. In addition, the Funds' average
annual total return and aggregate total return reflect the deduction of the
4.50% maximum front-end sales charge in connection with the purchase of Retail A
Shares and the maximum sales load charged in connection with redemptions of
Retail B Shares (5.00%). The Funds may also advertise total return data without
reflecting sales charges in accordance with the rules of the Securities and
Exchange Commission. Quotations that do not reflect the sales charge will, of
course, be higher than quotations that do reflect the sales charge.
The total return and yield of a Fund's Shares may be compared in
publications to those of other mutual funds with similar investment objectives
and to stock and other relevant indices, to rankings, or other information
prepared by independent services or other financial or industry publications
that monitor the performance of mutual funds or to investments for which
reliable performance data is available. For example, the total return and
yield, as appropriate, of a Fund's shares may be compared to data prepared by
Lipper Analytical Services, Inc. In addition, the total return of an equity
Fund's shares may be compared to the S&P 500 Index; the S&P MidCap 400 Index,
the Dow Jones Industrial Average, a recognized unmanaged index of common stocks
of 30 industrial companies listed on the New York Stock Exchange, the NASDAQ
Composite Index, an index of unmanaged groups of common stocks of domestic
companies that are quoted on the National Association of Securities Quotation
System; the Wilshire Top 750 Index, an index of all domestic equity issues
which are traded over the national exchanges; the Russell MidCap; the Wilshire
Next 1750 Index; the Wilshire MidCap 750 Index; and the Consumer Price Index
and the Consumer Price Index. In addition, the total return of a series of
shares of the Core International Equity Fund will be compared to the MSCI EAFE/R
Index and may be compared to the Salomon-Russell Indices, Russell Universe
Indices, Lipper International Indices, and the domestic indices listed above.
Total return as reported in national financial publications, such as Money
Magazine, Forbes, Barron's, Morningstar Mutual Funds, Mutual Funds Magazine,
Kiplinger's Personal Finance Magazine, The Wall Street Journal and The New York
Times, or in publications of a local or regional nature, may also be used in
comparing the performance of the Funds.
Performance quotations represent past performance, and should not be
considered as representative of future results. The investment return and
principal value of an investment in a Fund's series of shares will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Since performance will fluctuate, performance data for a Fund
cannot necessarily be used to compare an investment in a Fund's series of shares
with bank deposits, savings accounts and similar investment alternatives which
often provide an agreed or guaranteed fixed yield for a stated period of time.
Investors should remember that performance is generally a function of the kind
and quality of the investments held in a portfolio, portfolio maturity,
operating expenses and market conditions. Any fees charged by Institutions
directly to their customer accounts in connection with investments in a Fund
will not be included in the Fund's calculations of total return
and will reduce total return received by the accounts.
The Funds may also from time to time include discussions or illustrations
of the effects of compounding in advertisements. "Compounding" refers to the
fact that, if dividends or other distributions on a Fund investment are
reinvested by being paid in additional Fund shares, any future income or capital
appreciation of a Fund would increase the value, not only of the original Fund
investment, but also of the additional Fund shares received through
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distribution had been paid in cash. The
Funds may also include discussions or illustrations of the potential investment
goals of a prospective investor, investment management techniques, policies or
investment suitability of a Fund, economic conditions, the effects of inflation
and historical performance of various asset classes, including but not limited
to, stocks, bonds and Treasury bills. From time to time advertisements or
communications to shareowners may summarize the substance of information
contained in shareowner reports (including the investment composition of a
Fund), as well as the views of the Adviser or Sub-Adviser as to market,
economic, trade and interest trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to a Fund. The Funds may also include in advertisements, charts,
graphs or drawings which illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to stocks,
bonds, treasury bills and shares of a Fund. In addition, advertisement or
shareowner communications may include a discussion of certain attributes or
benefits to be derived by an investment in a Fund. Such advertisements or
communications may include symbols, headlines or other materials which highlight
or summarize the information discussed in more detail therein.
MISCELLANEOUS
As used in this SAI and in the Funds' Prospectuses, a majority of the
outstanding shares of a Fund or portfolio means, with respect to the approval of
an investment advisory agreement or a charge in a fundamental investment policy,
the lesser of (1) 67% of the shares of the particular Fund or portfolio
represented at a meeting at which the holders of more than 50% of the
outstanding shares of such Fund or portfolio are present in person or by proxy,
or (2) more than 50% of the outstanding shares of such Fund or portfolio.
As of July 31, 1999, the Adviser and its affiliates held of record
substantially all of the outstanding shares of each of the Company's investment
portfolios as agent, custodian, trustee or investment adviser on behalf of their
customers. At such date, Firstar Trust Services, P.O. Box 2054, Milwaukee,
Wisconsin 53201, and its affiliated banks held as beneficial owner five percent
or more of the outstanding shares of the following investment portfolios of the
Company because they possessed sole voting or investment power with respect to
such shares: Money Market Fund: 1.0%; Institutional Money Market Fund: 76%; Tax-
Exempt Money Market Fund: 66%; U.S. Treasury Money Market Fund: 46%; U.S.
Government Money Market Fund: 77%; Growth and Income Fund: 68%; Short-Term Bond
Market Fund: 61%; Special Growth Fund: 75%; Bond IMMDEX/TM Fund: 68%; Equity
Index Fund: 75%; Balanced Income Fund: 73%; Balanced Growth Fund: 74%;
Intermediate Bond Market Fund: 81%; Growth Fund: 81%; Tax-Exempt Intermediate
Bond Fund: 66%; International Equity Fund: 86%; MicroCap Fund: 82%, and Emerging
Growth Fund: 89%. At such date, no other person was known by the Company to
hold of record or beneficially 5% or more of the outstanding shares of any
investment portfolio of the Company.
The MidCap Index Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P
makes no representation or warranty, express or implied, to the shareholders of
the MidCap Index Fund or any member of the public regarding the advisability of
investing in securities generally or in the MidCap Index Fund particularly or
the ability of the S&P MidCap 400 Index to track general stock market
performance. S&P's only relationship to the Company is the licensing of certain
trademarks and trade names of S&P and of the S&P MidCap 400 Index which is
determined, composed and calculated by S&P without regard to the Company or the
MidCap Index Fund. S&P has no obligation to take the needs of the Company or
shareholders of the MidCap Index Fund into consideration in determining,
composing or calculating the S&P MidCap 400 Index. S&P is not responsible for
and has not participated in the determination of the prices and amount of the
MidCap Index Fund or the timing of the issuance or sale of the MidCap Index Fund
or in the determination or calculation of the equation by which the MidCap Index
Fund is to be converted into cash. S&P has no obligation or liability in
connection with the administration, marketing or trading of the MidCap Index
Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
MidCap 400 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY
FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE
PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P MidCap 400 INDEX
OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P MidCap 400 INDEX OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P
HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
APPENDIX A
-----------
COMMERCIAL PAPER RATINGS
- ------------------------
A Standard & Poor's commercial paper rating is a current opinion of
the creditworthiness of an obligor with respect to financial obligations having
an original maturity of no more than 365 days. The following summarizes the
rating categories used by Standard and Poor's for commercial paper:
"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its financial
commitment on these obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
"C" - Obligations are currently vulnerable to nonpayment and are
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
"D" - Obligations are in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The "D" rating will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses the highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer failed to meet scheduled principal and/or interest
payments.
Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:
"F1" - Securities possess the highest credit quality. This
designation indicates the best capacity for timely payment of financial
commitments and may have an added "+"to denote any exceptionally strong credit
feature.
"F2" - Securities possess good credit quality. This designation
indicates a satisfactory capacity for timely payment of financial commitments,
but the margin of safety is not as great as in the case of the higher ratings.
"F3" - Securities possess fair credit quality. This designation
indicates that the capacity for timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to non-
investment grade.
"B" - Securities possess speculative credit quality. This designation
indicates minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.
"C" - Securities possess high default risk. This designation
indicates that default is a real possibility and that the capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
"D" - Securities are in actual or imminent payment default.
Thomson Financial BankWatch short-term ratings assess the likelihood
of an untimely payment of principal and interest of debt instruments with
original maturities of one year or less. The following summarizes the ratings
used by Thomson Financial BankWatch:
"TBW-1" - This designation represents Thomson Financial BankWatch's
highest category and indicates a very high likelihood that principal and
interest will be paid on a timely basis.
"TBW-2" - This designation represents Thomson Financial BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson Financial BankWatch's
lowest investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.
"TBW-4" - This designation represents Thomson Financial BankWatch's
lowest rating category and indicates that the obligation is regarded as non-
investment grade and therefore speculative.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
- ----------------------------------------------
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as
having significant speculative characteristics. "BB" indicates the least degree
of speculation and "C" the highest. While such obligations will likely have
some quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
"BB" - An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment on the
obligation.
"B" - An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
"CCC" - An obligation rated "CCC" is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the obligation.
In the event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation.
"CC" - An obligation rated "CC" is currently highly vulnerable to
nonpayment.
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action taken, but payments on this
obligation are being continued.
"D" - An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition or the taking
of a similar action if payments on an obligation are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples
include: obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk - such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds are considered as medium-grade obligations, (i.e., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" indicates poor standing; "Ca" represents
obligations which are speculative in a high degree; and "C" represents the
lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from "Aa" through "Caa." The modifier 1 indicates that
the obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking
in the lower end of its generic rating category.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable in periods of greater
economic stress.
"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt
rated "B" possesses the risk that obligations will not be met when due. Debt
rated "CCC" is well below investment grade and has considerable uncertainty as
to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the ratings used by Fitch IBCA for corporate
and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of credit risk and
are assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of credit risk and
indicate very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events.
"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of credit risk and indicate
strong capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.
"BBB" - Bonds considered to be investment grade and of good credit
quality. These ratings denote that there is currently a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this capacity.
"BB" - Bonds considered to be speculative. These ratings indicate
that there is a possibility of credit risk developing, particularly as the
result of adverse economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be met.
Securities rated in this category are not investment grade.
"B" - Bonds are considered highly speculative. These ratings indicate
that significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
"CCC," "CC," "C" - Bonds have high default risk. Default is a real
possibility, and capacity for meeting financial commitments is solely reliant
upon sustained, favorable business or economic developments. "CC" ratings
indicate that default of some kind appears probable, and "C" ratings signal
imminent default.
"DDD," "DD," and "D" - Bonds are in default. The ratings of
obligations in this category are based on their prospects for achieving partial
or full recovery in a reorganization or liquidation of the obligor. While
expected recovery values are highly speculative and cannot be estimated with any
precision, the following serve as general guidelines. "DDD" obligations have the
highest potential for recovery, around 90%-100% of outstanding amounts and
accrued interest. "DD" indicates potential recoveries in the range of 50%-90%,
and "D" the lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.
To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "CCC" may be modified by the addition of a
plus (+) or minus (-) sign to denote relative standing within these major rating
categories.
Thomson Financial BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:
"AAA" - This designation indicates that the ability to repay principal
and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis, with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents the lowest investment-grade
category and indicates an acceptable capacity to repay principal and interest.
Issues rated "BBB" are more vulnerable to adverse developments (both internal
and external) than obligations with higher ratings.
"BB," "B," "CCC," and "CC" - These designations are assigned by
Thomson Financial BankWatch to non-investment grade long-term debt. Such issues
are regarded as having speculative characteristics regarding the likelihood of
timely repayment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
MUNICIPAL NOTE RATINGS
- ----------------------
A Standard and Poor's note rating reflects the liquidity factors and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's for municipal notes:
"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess a
very strong capacity to pay debt service are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.
"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - This designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
"MIG-2"/"VMIG-2" - This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
"MIG-3"/"VMIG-3" - This designation denotes favorable quality, with
all security elements accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.
"SG" - This designation denotes speculative quality. Debt instruments
in this category lack margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
APPENDIX B
----------
ADDITIONAL INFORMATION CONCERNING FUTURES AND RELATED
OPTIONS
As stated in the Prospectuses, certain of the Funds may enter into futures
contracts and options for hedging or other purposes. Such transactions are
described in this Appendix.
I. Interest Rate Futures Contracts
-------------------------------
Use of Interest Rate Futures Contracts. Bond prices are established in
--------------------------------------
both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the
future for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, a Fund may use interest rate futures
as a defense, or hedge, against anticipated interest rate changes and not for
speculation. As described below, this would include the use of futures
contract sales to protect against expected increases in interest rates and
futures contract purchases to offset the impact of interest rate declines.
A Fund presently could accomplish a similar result to that which they hope
to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because
of the liquidity that is often available in the futures market the protection
is more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by a Fund, through using futures contracts.
Description of Interest Rate Futures Contracts. An interest rate futures
----------------------------------------------
contract sale would create an obligation by a Fund as seller, to deliver the
specific type of financial instrument called for in the contract at a specific
future time for a specified price. A futures contract purchase would create an
obligation by a Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until at or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery of
securities. Closing out a futures contract sale is effected by a Fund's
entering into a futures contract purchase for the same aggregate amount of the
specific type of financial instrument and the same delivery date. If the price
in the sale exceeds the price in the offsetting purchase, the Fund is paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, the Fund pays the difference and realizes a loss. Similarly,
the closing out of a futures contract purchase is effected by a Fund's entering
into a futures contract sale. If the offsetting sale price exceeds the
purchase price, the Fund realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction environment on
the floors of several exchanges - principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. The Funds would
deal only in standardized contracts on recognized exchanges. Each exchange
guarantees performance under contract provisions through a clearing
corporation, a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various financial
instruments including long-term U.S. Treasury Bonds and Notes; Government
National Mortgage Association (GNMA) modified pass-through mortgage-backed
securities; three-month U.S. Treasury Bills; and ninety-day commercial paper. A
Fund may trade in any futures contract for which there exists a public market,
including, without limitation, the foregoing instruments.
Examples of Futures Contract Sale. A Fund would engage in an interest rate
---------------------------------
futures contract sale to maintain the income advantage from continued holding
of a long-term bond while endeavoring to avoid part or all of the loss in
market value that would otherwise accompany a decline in long-term securities
prices. Assume that the market value of a certain security in a Fund's
portfolio tends to move in concert with the futures market prices of long-term
U.S. Treasury bonds ("Treasury bonds"). The Adviser wishes to fix the current
market value of this portfolio security until some point in the future. Assume
the portfolio security has a market value of 100, and the Adviser believes
that, because of an anticipated rise in interest rates, the value will decline
to 95. The Fund might enter into futures contract sales of Treasury bonds for
an equivalent of 98. If the market value of the portfolio security does indeed
decline from 100 to 95, the equivalent futures market price for the Treasury
bonds might also decline from 98 to 93.
In that case, the five-point loss in the market value of the portfolio
security would be offset by the five-point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.
The Adviser could be wrong in its forecast of interest rates and the
equivalent futures market price could rise above 98. In this case, the market
value of the portfolio securities, including the portfolio security being
protected, would increase. The benefit of this increase would be reduced by
the loss realized on closing out the futures contract sale.
If interest rate levels did not change, the Fund in the above example might
incur a loss of 2 points (which might be reduced by an offsetting transaction
prior to the settlement date). In each transaction, transaction expenses would
also be incurred.
Examples of Futures Contract Purchase. A Fund might engage in an interest
-------------------------------------
rate futures contract purchase when it is not fully invested in long-term bonds
but wishes to defer for a time the purchase of long-term bonds in light of the
availability of advantageous interim investments, e.g., shorter-term securities
whose yields are greater than those available on long-term bonds. A Fund's
basic motivation would be to maintain for a time the income advantage from
investment in the short-term securities; the Fund would be endeavoring at the
same time to eliminate the effect of all or part of an expected increase in
market price of the long-term bonds that the fund may purchase.
For example, assume that the market price of a long-term bond that the
Fund may purchase, currently yielding 10%, tends to move in concert with
futures market prices of Treasury bonds. The Adviser wishes to fix the current
market price (and thus 10% yield) of the long-term bond until the time (four
months away in this example) when it may purchase the bond. Assume the long-
term bond has a market price of 100, and the Adviser believes that, because of
an anticipated fall in interest rates, the price will have risen to 105 (and
the yield will have dropped to about 9 1/2%) in four months. The Fund might
enter into futures contracts purchases of Treasury bonds for an equivalent
price of 98. At the same time, the Fund could, for example, assign a pool of
investments in short-term securities that are either maturing in four months or
earmarked for sale in four months, for purchase of the long-term bond at an
assumed market price of 100. Assume these short-term securities are yielding
15%. If the market price of the long-term bond does indeed rise from 100 to
105, the equivalent futures market price for Treasury bonds might also rise
from 98 to 103. In that case, the 5-point increase in the price that the Fund
pays for the long-term bond would be offset by the 5-point gain realized by
closing out the futures contract purchase.
The Adviser could be wrong in its forecast of interest rates; long-term
interest rates might rise to above 10%; and the equivalent futures market price
could fall below 98. If short-term rates at the same time fall to 10% or
below, it is possible that the Fund would continue with its purchase program
for long-term bonds. The market price of available long-term bonds would have
decreased. The benefit of this price decrease, and thus yield increase, will
be reduced by the loss realized on closing out the futures contract purchase.
If, however, short-term rates remained above available long-term rates, it
is possible that the Fund would discontinue its purchase program for long-term
bonds. The yield on short-term securities in the portfolio, including those
originally in the pool assigned to the particular long-term bond, would remain
higher than yields on long-term bonds. The benefit of this continued
incremental income will be reduced by the loss realized on closing out the
futures contract purchase.
In each transaction, expenses would also be incurred.
II. Index Futures Contracts.
-----------------------
A stock or bond index assigns relative values to the stocks or bonds
included in the index and the index fluctuates with changes in the market
values of the stocks or bonds included. Some stock index futures contracts are
based on broad market indexes, such as the Standard & Poor's 500 or the New
York Stock Exchange Composite Index. In contrast, certain exchanges offer
futures contracts on narrower market indexes, such as the Standard & Poor's 100
or indexes based on an industry or market segment, such as oil and gas stocks.
Futures contracts are traded on organized exchanges regulated by the Commodity
Futures Trading Commission. Transactions on such exchanges are cleared through
a clearing corporation, which guarantees the performance of the parties to each
contract.
A Fund may sell index futures contracts as set forth in the Prospectuses.
A Fund may do so either to hedge the value of its portfolio as a whole, or to
protect against declines, occurring prior to sales of securities, in the value
of the securities to be sold. Conversely, a Fund may purchase index futures
contracts. In a substantial majority of these transactions, a Fund will
purchase such securities upon termination of the long futures position, but a
long futures position may be terminated without a corresponding purchase of
securities.
In addition, a Fund may utilize index futures contracts in anticipation of
changes in the composition of its portfolio holdings. For example, in the
event that a Fund expects to narrow the range of industry groups represented in
its holdings it may, prior to making purchases of the actual securities,
establish a long futures position based on a more restricted index, such as an
index comprised of securities of a particular industry group. A Fund may also
sell futures contracts in connection with this strategy, in order to protect
against the possibility that the value of the securities to be sold as part of
the restructuring of the portfolio will decline prior to the time of sale.
The following are examples of transactions in stock index futures (net of
commissions and premiums, if any).
ANTICIPATORY PURCHASE HEDGE: Buy the Future Hedge
Objective: Protect Against Increasing Price
Portfolio Futures
---------- --------
-Day Hedge is Placed-
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures=$62,500/Contract
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 130
Actual Cost = $65,000 Value of Futures = $65,000/Contract
Increase in Purchase Price = $2,500 Gain on Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors:
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index = 1.0
Portfolio Futures
--------- -------
-Day Hedge is Placed-
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio - Own Buy 16 Index Futures at 120
Stock with Value = $960,000 Value of Futures = $960,000
Loss in Portfolio Value = $40,000 Gain on Futures = $40,000
If, however, the market moved in the opposite direction, that is, market value
decreased and the Fund had entered into an anticipatory purchase hedge, or
market value increased and the Fund had hedged its stock portfolio, the results
of the Fund's transactions in stock index futures would be as set forth below.
Portfolio Futures
--------- --------
-Day Hedge is Placed-
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures=$62,500/Contract
Portfolio Futures
--------- --------
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 120
Actual Cost - $60,000 Value of Futures = $60,000/Contract
Decrease in Purchase Price = $2,500 Loss on Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors:
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index = 1.0
Portfolio Futures
--------- --------
-Day Hedge is Placed-
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio - Own Buy 16 Index Futures at 130
Stock with Value = $1,040,000 Value of Futures = $1,040,000
Gain in Portfolio Value = $40,000 Loss on Futures = $40,000
III. Futures Contracts on Foreign Currencies
---------------------------------------
A futures contract on foreign currency creates a binding obligation on
one party to deliver, and a corresponding obligation on another party to accept
delivery of, a stated quantity of foreign currency for an amount fixed in U.S.
dollars. Foreign currency futures may be used by the Core International Equity
Fund to hedge against exposure to fluctuations in exchange rates between the
U.S. dollar and other currencies arising from multinational transactions.
IV. Margin Payments.
---------------
Unlike when a Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract.
Initially, in accordance with the terms of the exchange on which such futures
contract is traded, the Fund may be required to deposit with the broker or in a
segregated account with the Fund's custodian an amount of cash or cash
equivalents, the value of which may vary but is generally equal to 10% or less
of the value of the contract. This amount is known as initial margin. The
nature of initial margin in futures transactions is different from that of
margin in security transactions in that futures contract margin does not
involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination of the
futures contract assuming all contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from the broker, will be
made on a daily basis as the price of the underlying security or index
fluctuates making the long and short positions in the futures contract more or
less valuable, a process known as marking to the market. For example, when a
Fund has purchased a futures contract and the price of the contract has risen
in response to a rise in the underlying instruments, that position will have
increased in value and the Fund will be entitled to receive from the broker a
variation margin payment equal to that increase in value. Conversely, where a
Fund has purchased a futures contract and the price of the future contract has
declined in response to a decrease in the underlying instruments, the position
would be less valuable and the Fund would be required to make a variation
margin payment to the broker. At any time prior to expiration of the futures
contract, the Adviser and, where applicable, the Sub-Adviser may elect to close
the position by taking an opposite position, subject to the availability of a
secondary market, which will operate to terminate the Fund's position in the
futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund, and the Fund
realizes a loss or gain.
V. Risks of Transactions in Futures Contracts.
------------------------------------------
There are several risks in connection with the use of futures by a Fund as
a hedging device. One risk arises because of the imperfect correlation between
movements in the price of the future and movements in the price of the
securities which are the subject of the hedge. The price of the future may
move more than or less than the price of the securities being hedged. If the
price of the future moves less than the price of the securities which are the
subject of the hedge, the hedge will not be fully effective but, if the price
of the securities being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the price
of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by the loss on the future. If the price of
the future moves more than the price of the hedged securities, the Fund
involved will experience either a loss or gain on the future which will not be
completely offset by movements in the price of the securities which are the
subject of the hedge. To compensate for the imperfect correlation of movements
in the price of securities being hedged and movements in the price of futures
contracts, a Fund may buy or sell futures contracts in a greater dollar amount
than the dollar amount of securities being hedged if the volatility over a
particular time period of the prices of such securities has been greater than
the volatility over such time period of the future, or if otherwise deemed to
be appropriate by the Adviser. Conversely, a Fund may buy or sell fewer
futures contracts if the volatility over a particular time period of the prices
of the securities being hedged is less than the volatility over such time
period of the futures contract being used, or if otherwise deemed to be
appropriate by the Adviser. It is also possible that, where a Fund has sold
futures to hedge its portfolio against a decline in the market, the market may
advance and the value of securities held by the Fund may decline. If this
occurred, the Fund would lose money on the future and also experience a decline
in value in its portfolio securities.
Where futures are purchased to hedge against a possible increase in the
price of securities before a Fund is able to invest its cash (or cash
equivalents) in securities (or options) in an orderly fashion, it is possible
that the market may decline instead; if the Fund then concludes not to invest
in securities or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.
In instances involving the purchase of futures contracts by a Fund, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the Fund's custodian
and/or in a margin account with a broker to collateralize the position and
thereby insure that the use of such futures is unleveraged.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the securities
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions which could distort the normal relationship
between the cash and futures markets. Second, with respect to financial
futures contracts, the liquidity of the futures market depends on participants
entering into off-setting transactions rather than making or taking delivery.
To the extent participants decide to make or take delivery, liquidity in the
futures market could be reduced thus producing distortions. Third, from the
point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the Adviser and, where
applicable, Sub-Adviser may still not result in a successful hedging
transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although a Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular contract or at any particular time. In such event, it may not be
possible to close a futures investment position, and in the event of adverse
price movements, a Fund would continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have
been used to hedge portfolio securities, such securities will not be sold until
the futures contract can be terminated. In such circumstances, an increase in
the price of the securities, if any, may partially or completely offset losses
on the futures contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation
margin payments.
Successful use of futures by a Fund is also subject to the Adviser's or,
where applicable, the Sub-Adviser's ability to predict correctly movements in
the direction of the market. For example, if a Fund has hedged against the
possibility of a decline in the market adversely affecting securities held in
its portfolio and securities prices increase instead, the Fund will lose part
or all of the benefit to the increased value of its securities which it has
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash, it may have to
sell securities to meet daily variation margin requirements. Such sales of
securities may be, but will not necessarily be, at increased prices which
reflect the rising market. A Fund may have to sell securities at a time when
it may be disadvantageous to do so.
VI. Options on Futures Contracts.
----------------------------
A Fund may purchase options on the futures contracts described above and,
if permitted by its investment objective and policies, may also write options
on futures contracts. A futures option gives the holder, in return for the
premium paid, the right to buy (call) from or sell (put) to the writer of the
option a futures contract at a specified price at any time during the period of
the option. Upon exercise, the writer of the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer,
of an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing, an option of the same
series, at which time the person entering into the closing transaction will
realize a gain or loss. A Fund will be required to deposit initial margin and
variation margin with respect to put and call options on futures contracts
written by it pursuant to brokers' requirements similar to those described
above. Net option premiums received will be included as initial margin
deposits. As an example, in anticipation of a decline in interest rates, a
Fund may purchase call options on futures contracts as a substitute for the
purchase of futures contracts to hedge against a possible increase in the price
of securities which the Fund intends to purchase. Similarly, if the value of
the securities held by a Fund is expected to decline as a result of an increase
in interest rates, the Fund might purchase put options or write call options on
futures contracts rather than sell futures contracts.
Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the
purchase or sale of an option also entails the risk that changes in the value
of the underlying futures contract will not be fully reflected in the value of
the option purchased. Depending on the pricing of the option compared to
either the futures contract upon which it is based, or upon the price of the
securities being hedged, an option may or may not be less risky than ownership
of the futures contract or such securities. In general, the market prices of
options can be expected to be more volatile than the market prices on the
underlying futures contract. Compared to the purchase or sale of futures
contracts, however, the purchase of call or put options on futures contracts
may frequently involve less potential risk to a Fund because the maximum amount
at risk is the premium paid for the options (plus transaction costs). Although
permitted by their fundamental investment policies, the Funds do not currently
intend to write futures options, and will not do so in the future absent any
necessary regulatory approvals.
VII. Accounting and Tax Treatment.
----------------------------
Accounting for futures contracts and options will be in accordance with
generally accepted accounting principles.
The tax principles applicable to futures contracts and options are complex
and, in some cases, uncertain. Such investments may cause a Fund to recognize
taxable income prior to the receipt of cash, thereby requiring the Fund to
liquidate other positions, or to borrow money, so as to make sufficient
distributions to shareholders to avoid corporate-level tax. Moreover, some or
all of the taxable income recognized may be ordinary income or short-term
capital gain, so that the distributions may be taxable to shareholders as
ordinary income.
xxxxxxx
PART C. OTHER INFORMATION
Item 23. Exhibits.
(a) (1) Articles of Incorporation filed February 19, 1988 is
incorporated by reference to Exhibit (1)(a) to Post-Effective
Amendment No. 28 to the Registration Statement, filed
February 15, 1996 ("Post-Effective Amendment No. 28").
(2) Amendment No. 1 to the Articles of Incorporation filed June
30, 1989 is incorporated by reference to Exhibit (1)(b) to
Post-Effective Amendment No. 28.
(3) Amendment No. 2 to the Articles of Incorporation filed June
30, 1989 is incorporated by reference to Exhibit (1)(c) to
Post-Effective Amendment No. 28.
(4) Amendment No. 3 to the Articles of Incorporation filed
November 12, 1991 is incorporated by reference to Exhibit
(1)(d) to Post-Effective Amendment No. 28.
(5) Amendment No. 4 to the Articles of Incorporation filed August
18, 1992 is incorporated by reference to Exhibit (1)(e) to
Post-Effective Amendment No. 28.
(6) Amendment No. 5 to the Articles of Incorporation filed
October 23, 1992 is incorporated by reference to Exhibit
(1)(f) to Post-Effective Amendment No. 28.
(7) Amendment No. 6 to the Articles of Incorporation filed
January 26, 1993 is incorporated by reference to Exhibit
(1)(g) to Post-Effective Amendment No. 28.
(8) Amendment No. 7 to the Articles of Incorporation filed
February 10, 1994 is incorporated by reference to Exhibit
(1)(h) to Post-Effective Amendment No. 28.
(9) Amendment No. 8 to the Articles of Incorporation filed
December 29, 1994 is incorporated by reference to Exhibit
(1)(i) to Post-Effective Amendment No. 28.
(10) Amendment No. 9 to the Articles of Incorporation filed July
20, 1995 is incorporated by reference to Exhibit (1)(j) to
Post-Effective Amendment No. 28.
(11) Amendment No. 10 to the Articles of Incorporation filed
November 10, 1995 is incorporated by reference to Exhibit
(1)(k) to Post-Effective Amendment No. 28.
(12) Amendment No. 11 to Articles of Incorporation filed July 21,
1997 with respect to the Emerging Growth Fund is incorporated
by reference to Exhibit (1)(l) to Post-Effective Amendment
No. 32.
(13) Amendment No. 12 to Articles of Incorporation filed January
12, 1998 with respect to change of name to Firstar Funds,
Inc. is incorporated by reference to Exhibit (1)(m) to Post-
Effective Amendment No. 34.
(14) Amendment No. 13 to Articles of Incorporation filed February
17, 1999 with respect to Retail B Shares is incorporated by
reference to Exhibit (a)(14) to Post-Effective Amendment No.
36.
(15) Form of Amendment No. 14 to Articles of Incorporation with
respect to Core International Equity Fund.
(16) Form of Amendment No. 15 to Articles of Incorporation with
respect to MidCap Index Fund.
(b) (1) Registrant's By-laws dated September 9, 1988 are incorporated
by reference to Exhibit (2)(a) to Post-Effective Amendment
No. 28.
(2) Amendment to By-Laws as approved by the Registrant's Board of
Directors on February 23, 1990 is incorporated by reference
to Exhibit (2)(b) to Post-Effective Amendment No. 28.
(3) Amendment to By-Laws as approved by the Registrant's Board of
Directors on February 15, 1991 is incorporated by reference
to Exhibit (2)(c) to Post-Effective Amendment No. 28.
(4) Amendment to By-Laws as approved by the Registrant's Board of
Directors on June 21, 1991 is incorporated by reference to
Exhibit (2)(d) to Post-Effective Amendment No. 28.
(c) (1) See Articles V and VII of the Articles of Incorporation which
are included as Exhibit (a)(14)and incorporated by reference
to Exhibits (1)(a) and (1)(i) to Post-Effective Amendment No.
28 and Article II, Sections 1, 9 and 10 of Article III,
Sections 1, 2 and 3 of Article V and Section II of Article
VII of the By-laws which are incorporated by reference to
Exhibits 2(a)-2(d) of Post-Effective Amendment No. 28.
(d) (1) Investment Advisory Agreement between Registrant and First
Wisconsin Trust Company dated August 29, 1991 with respect to
the Money Market Fund, U.S. Government Money Market Fund,
Tax-Exempt Money Market Fund, Income and Growth Fund, Short-
Intermediate Fixed Income Fund, Special Growth Fund, Bond
IMMDEX/TM Fund, Equity Index Fund, Institutional Money Market
Fund and U.S. Federal Money Market Fund is incorporated by
reference to Exhibit (5)(a) to Post-Effective Amendment No.
28.
(2) Assumption and Guarantee Agreement between First Wisconsin
Trust Company and First Wisconsin Asset Management dated
February 3, 1992 is incorporated by reference to Exhibit
(5)(b) to Post-Effective Amendment No. 28.
(3) Investment Advisory Agreement between Registrant and First
Wisconsin Asset Management dated March 27, 1992 with respect
to the Balanced Fund is incorporated by reference to Exhibit
(5)(c) to Post-Effective Amendment No. 28.
(4) Addendum No. 1 dated December 27, 1992 to Investment Advisory
Agreement between Registrant and Firstar Investment Research
and Management Company dated March 27, 1992 with respect to
the Growth Fund (formerly the MidCore Growth Fund) and
Intermediate Bond Market Fund is incorporated by reference to
Exhibit (5)(d) to Post-Effective Amendment No. 28.
(5) Addendum No. 2 dated February 5, 1993, to Investment Advisory
Agreement between the Registrant and Firstar Investment
Research and Management Company dated March 27, 1992 with
respect to the Tax-Exempt Intermediate Bond Fund is
incorporated by reference to Exhibit (5)(e) to Post-Effective
Amendment No. 28.
(6) Assumption and Guarantee Agreement between Firstar Trust
Company and Firstar Investment Research and Management
Company dated June 17, 1993 with respect to the Income and
Growth Fund is incorporated by reference to Exhibit (5)(f) to
Post-Effective Amendment No. 28.
(7) Addendum No. 3 dated September 2, 1997, to Investment
Advisory Agreement between the Registrant and Firstar
Investment Research and Management Company dated March 27,
1992 with respect to the International Equity Fund is
incorporated by reference to Exhibit (5)(g) to Post-Effective
Amendment No. 32.
(8) Amended and Restated Sub-Advisory Agreement among Firstar
Investment Research and Management Company, the Registrant
and Hansberger Global Investors, Inc. dated June 15, 1997
with respect to the International Equity Fund is incorporated
by reference to Exhibit (5)(h) to Post-Effective Amendment
No. 32.
(9) Addendum No. 4 to the Investment Advisory Agreement between
Registrant and Firstar Investment Research and Management
Company dated March 27, 1992 with respect to the MicroCap
Fund is incorporated by reference to Exhibit (5)(i) to Post-
Effective Amendment No. 28.
(10) Addendum No. 6 to the Investment Advisory Agreement between
Registrant and Firstar Investment Research & Management
Company dated December 1, 1997 with respect to the Balanced
Income Fund is incorporated by reference to Exhibit (5)(j) to
Post-Effective Amendment No. 34.
(11) Addendum No. 5 to the Investment Advisory Agreement between
Registrant and Firstar Investment Research & Management
Company dated as of August 15, 1997 with respect to the
Emerging Growth Fund is incorporated by reference to Exhibit
(5)(k) to Post-Effective Amendment No. 32.
(12) Form of Investment Sub-Advisory Agreement among the
Registrant, Firstar Investment Research & Management Company,
LLC and with respect to the Core International
-----------
Equity Fund.
(13) Form of Addendum No. 7 to the Investment Advisory Agreement
between Registrant and Firstar Investment Research and
Management Company, LLC.
(14) Form of Addendum No. 8 to the Investment Advisory Agreement
between Registrant and Firstar Investment Research &
Management Company LLC, with respect to the MidCap Index
Fund.
(e) (1) Distribution Agreement between Registrant and B.C. Ziegler &
Company dated as of January 1, 1995, with respect to Money
Market Fund, U.S. Government Money Market Fund, Tax-Exempt
Money Market Fund, Growth and Income Fund, Short-Term Bond
Market Fund, Special Growth Fund, Bond IMMDEX/TM Fund, Equity
Index Fund, Institutional Money Market Fund, U.S. Treasury
Money Market Fund, Balanced Fund, Intermediate Bond Market
Fund, Growth Fund (formerly the MidCore Growth Fund), Tax-
Exempt Intermediate Bond Fund and International Equity Fund
is incorporated by reference to Exhibit (6)(a) to Post-
Effective Amendment No. 28.
(2) Addendum No. 1 to the Distribution Agreement between
Registrant and B.C. Ziegler and Company dated as of January
1, 1995 with respect to the MicroCap Fund is incorporated by
reference to Exhibit (6)(b) to Post-Effective Amendment No.
28.
(3) Addendum No. 3 to the Distribution Agreement between
Registrant and B.C. Ziegler and Company dated as of December
1, 1997 with respect to the Balanced Income Fund is
incorporated by reference to Exhibit (6)(c) to Post-Effective
Amendment No. 34.
(4) Addendum No. 2 to the Distribution Agreement between
Registrant and B.C. Ziegler and Company dated as of August
15, 1997 with respect to the Emerging Growth Fund is incor-
porated by reference to Exhibit (6)(d) to Post-Effective
Amendment No. 32.
(5) Form of Addendum No. 4 to the Distribution Agreement dated
February 26, 1999 between Registrant and B.C. Ziegler &
Company with respect to the Series B Shares is incorporated
by reference to Exhibit (e) (5) to Post-Effective Amendment
No. 36.
(6) Form of Addendum No. 5 to the Distribution Agreement between
the Registrant and B. C. Ziegler and Company with respect to
the Core International Equity Fund.
(7) Form of Addendum No. 6 to the Distribution Agreement between
the Registrant and B.C. Ziegler and Company with respect to
the MidCap Index Fund.
(f) Deferred Compensation Plan dated September 16, 1994 and Deferred
Compensation Agreement between Registrant and its Directors is
incorporated by reference to Exhibit (7) to Post-Effective
Amendment No. 28.
(g) (1) Custodian Agreement between Registrant and First Wisconsin
Trust Company dated July 29, 1988 is incorporated by
reference to Exhibit (8)(a) to Post-Effective Amendment No.
28.
(2) Letter dated December 28, 1989 with respect to the Custodian
Agreement with respect to the Equity Index Fund is
incorporated by reference to Exhibit (8)(b) to Post-Effective
Amendment No. 28.
(3) Revised Mutual Fund Custodial Agent Service Annual Fee
Schedule dated March 1, 1997 to the Custodian Agreement with
respect to the Money Market Fund, U.S. Government Money
Market Fund, Intermediate Bond Market Fund, Bond IMMDEX/TM
Fund, Growth and Income Fund, MidCore Growth Fund, MicroCap
Fund, Tax-Exempt Money Market Fund, U.S. Treasury Money
Market Fund, Short-Term Bond Market Fund, Tax-Exempt
Intermediate Bond Fund, Balanced Fund, Equity Index Fund,
Special Growth Fund and International Equity Fund is
incorporated by reference to Exhibit (8)(c) to Post-Effective
Amendment No. 34.
(4) Amendment dated May 1, 1990 to the Custodian Agreement
between Registrant and First Wisconsin Trust Company is
incorporated by reference to Exhibit (8)(d) to Post-Effective
Amendment No. 28.
(5) Letter dated April 19, 1991 with respect to the Custodian
Agreement with respect to the Institutional Money Market Fund
and U.S. Federal Money Market Fund is incorporated by
reference to Exhibit (8)(e) to Post-Effective Amendment No.
28.
(6) Letter dated March 27, 1992 with respect to the Custodian
Agreement with respect to the Balanced Fund is incorporated
by reference to Exhibit (8)(f) to Post-Effective Amendment
No. 28.
(7) Letter dated December 27, 1992 with respect to the Custodian
Agreement with respect to the Intermediate Bond Market Fund
and Growth Fund (formerly the MidCore Growth Fund) is
incorporated by reference to Exhibit (8)(g) to Post-Effective
Amendment No. 28.
(8) Letter dated February 5, 1993 with respect to the Custodian
Agreement with respect to the Tax-Exempt Intermediate Bond
Fund is incorporated by reference to Exhibit (8)(h) to Post-
Effective Amendment No. 28.
(9) Letter Agreement with respect to the Custodian Agreement
dated as of September 2, 1997 with respect to the
International Equity Fund is incorporated by reference to
Exhibit No. (8)(i) to Post-Effective Amendment No. 32.
(10) Letter Agreement dated August 1, 1995 with respect to the
Custodian Agreement with respect to the MicroCap Fund is
incorporated by reference to Exhibit No. (8)(j) to Post-
Effective Amendment No. 28.
(11) Letter Agreement with respect to the Custodian Agreement with
respect to the Balanced Income Fund dated December 1, 1997 is
incorporated by reference to Exhibit (8)(k) to Post-Effective
Amendment No. 34.
(12) Letter Agreement with respect to the Custodian Agreement with
respect to the Emerging Growth Fund dated as of March 1, 1997
is incorporated by reference to Exhibit (8)(l) to Post-
Effective Amendment No. 34.
(13) Foreign Custodian Monitoring Agreement between Registrant and
Firstar Investment Research and Management Company dated June
13, 1997 with respect to the International Equity Fund is
incorporated by reference to Exhibit 8(m) to Post-Effective
Amendment No. 32.
(14) Assignment dated October 1, 1998 of Custodian Agreement
between Registrant and Firstar Trust Company, dated as of
July 29, 1988 to Firstar Bank Milwaukee, N.A. is incorporated
by reference to Exhibit (g)(14) to Post-Effective Amendment
No. 36.
(15) Form of Letter Agreement with respect to the Custodian
Agreement between the Registrant and Firstar Bank Milwaukee,
N. A. with respect to the Core International Equity Fund.
(16) Form of Letter Agreement with respect to the Custodian
Agreement between the Registrant and Firstar Bank Milwaukee,
N.A. with respect to the MidCap Index Fund.
(h) (1) Co-Administration Agreement Among the Registrant, B.C.
Ziegler & Company and Firstar Trust Company dated as of
January 1, 1995 is incorporated by reference to
Exhibit (9)(a) to Post-Effective Amendment No. 28.
(2) Addendum No. 1 to the Co-Administration Agreement among the
Registrant, B.C. Ziegler and Company and Firstar Trust
Company dated as of January 1, 1995 with respect to the
MicroCap Fund is incorporated by reference to Exhibit (9)(b)
to Post-Effective Amendment No. 28.
(3) Addendum No. 3 to the Co-Administration Agreement among the
Registrant, B.C. Ziegler and Company and Firstar Trust
Company dated as of January 1, 1995 with respect to the
Balanced Income Fund is incorporated by reference to Exhibit
(9)(c) to Post-Effective Amendment No. 34.
(4) Fund Accounting Servicing Agreement dated March 23, 1988
between Registrant and First Wisconsin Trust Company is
incorporated by reference to Exhibit (9)(d) to Post-Effective
Amendment No. 28.
(5) Letter dated July 29, 1988 with respect to the Fund
Accounting Servicing Agreement is incorporated by reference
to Exhibit (9)(e) to Post-Effective Amendment No. 28.
(6) Letter dated December 28, 1989 with respect to the Fund
Accounting Servicing Agreement with respect to the Equity
Index Fund is incorporated by reference to Exhibit (9)(f) to
Post-Effective Amendment No. 28.
(7) Letter dated April 19, 1991 with respect to the Fund
Accounting Servicing Agreement with respect to the
Institutional Money Market Fund and U.S. Federal Money Market
Fund is incorporated by reference to Exhibit (9)(g) to Post-
Effective Amendment No. 28.
(8) Letter dated March 27, 1992 with respect to the Fund
Accounting Servicing Agreement with respect to the Balanced
Fund is incorporated by reference to Exhibit (9)(h) to Post-
Effective Amendment No. 28.
(9) Letter dated December 27, 1992 with respect to the Fund
Accounting Servicing Agreement with respect to the
Intermediate Bond Market Fund and Growth Fund (formerly the
MidCore Growth Fund) is incorporated by reference to Exhibit
(9)(i) to Post-Effective Amendment No. 28.
(10) Letter dated February 5, 1993 with respect to the Fund
Accounting Servicing Agreement with respect to the Tax-Exempt
Intermediate Bond Fund is incorporated by reference to
Exhibit (9)(j) to Post-Effective Amendment No. 29.
(11) Revised Fund Valuation and Accounting Fee Schedule dated
March 1, 1997 to the Fund Accounting Servicing Agreement with
respect to the Money Market Fund, Tax-Exempt Money Market
Fund, U.S. Government Money Market Fund, U.S. Treasury Money
Market Fund, Institutional Money Market Fund, Short-Term Bond
Market Fund, Tax-Exempt Intermediate Bond Fund, Bond IMMDEX/TM
Fund, International Equity Fund, Balanced Fund, Growth and
Income Fund, Equity Index Fund, MidCore Growth Fund, Special
Growth Fund and MicroCap Fund is incorporated by reference to
Exhibit (9)(k) to Post-Effective Amendment No. 34.
(12) Intentionally left blank.
(13) Intentionally left blank.
(14) Letter Agreement dated August 1, 1995 with respect to the
Fund Accounting Servicing Agreement with respect to the
MicroCap Fund is incorporated by reference to Exhibit (9)(n)
to Post-Effective Amendment No. 28.
(15) Letter Agreement with respect to the Fund Accounting
Servicing Agreement with respect to the Balanced Income Fund
dated December 1, 1990 is incorporated by reference to
Exhibit (9)(o) to Post-Effective Amendment No. 34.
(16) Shareholder Servicing Agent Agreement dated March 23, 1988
between Registrant and First Wisconsin Trust Company is
incorporated by reference to Exhibit (9)(p) to Post-Effective
Amendment No. 28.
(17) Letter dated July 29, 1988 with respect to Shareholder
Servicing Agent Agreement is incorporated by reference to
Exhibit (9)(q) to Post-Effective Amendment No. 28
(18) Letter dated December 28, 1989 with respect to the
Shareholder Servicing Agent Agreement with respect to the
Equity Index Fund is incorporated by reference to Exhibit
(9)(r) to Post-Effective Amendment No. 28.
(19) Letter dated April 23, 1991 with respect to the Shareholder
Servicing Agent Agreement with respect to the Institutional
Money Market Fund and U.S. Federal Money Market Fund is
incorporated by reference to Exhibit (9)(s) to Post-Effective
Amendment No. 28.
(20) Letter dated March 27, 1992 with respect to the Shareholder
Servicing Agent Agreement with respect to the Balanced Fund
is incorporated by reference to Exhibit (9)(t) to Post-
Effective Amendment No. 28.
(21) Letter dated December 27, 1992 with respect to the
Shareholder Servicing Agent Agreement with respect to the
Intermediate Bond Market Fund and Growth Fund (formerly the
MidCore Growth Fund) is incorporated by reference to Exhibit
(9)(u) to Post-Effective Amendment No. 28.
(22) Letter dated February 5, 1993 with respect to the Shareholder
Servicing Agent Agreement with respect to the Tax-Exempt
Intermediate Bond Fund is incorporated by reference to
Exhibit (9)(v) to Post-Effective Amendment No. 29.
(23) Letter dated April 26, 1994 with respect to the Shareholder
Servicing Agent Agreement with respect to the International
Equity Fund is incorporated by reference to Exhibit (9)(w) to
Post-Effective Amendment No. 28.
(24) Amendment dated May 1, 1990 to the Shareholder Servicing
Agent Agreement between Registrant and First Wisconsin Trust
Company is incorporated by reference to Exhibit (9)(x) to
Post-Effective Amendment No. 28.
(25) Letter Agreement dated August 1, 1995 with respect to the
Shareholder Servicing Agent Agreement with respect to the
MicroCap Fund is incorporated by reference to Exhibit (9)(y)
to Post-Effective Amendment No. 28.
(26) Letter with respect to Shareholder Servicing Agent Agreement
with respect to the Balanced Income Fund dated December 1,
1997 is incorporated by reference to Exhibit (9)(z) to Post-
Effective Amendment No. 34.
(27) Plan of Reorganization is incorporated by reference to
Exhibit (9)(aa) to Post-Effective Amendment No. 28.
(28) Purchase and Assumption Agreement dated February 22, 1988 is
incorporated by reference to Exhibit (9)(ab) to Post-
Effective Amendment No. 28.
(29) Addendum No. 2 to the Co-Administration Agreement among the
Registrant, B.C. Ziegler and Company and Firstar Trust
Company with respect to the Emerging Growth Fund is
incorporated by reference to Exhibit (9)(ac) to Post-
Effective Amendment No. 32.
(30) Letter Agreement with respect to the Fund Accounting
Servicing Agreement with respect to the Emerging Growth Fund
is incorporated by reference to Exhibit (9)(ad) to Post-
Effective Amendment No. 32.
(31) Letter Agreement with respect to Shareholder Servicing Agent
Agreement with respect to the Emerging Growth Fund dated
August 15, 1997 is incorporated by reference to Exhibit
(9)(ae) to Post-Effective Amendment No. 34.
(32) Intentionally left blank.
(33) License Agreement between Registrant and Firstar Corporation
for use of Firstar name is incorporated by reference to
Exhibit (9)(ag) to Post-Effective Amendment No. 34.
(34) Revised Shareholder Servicing Agent Agreement Fee Schedule
dated March 1, 1997 with respect to the Money Market Fund,
Tax-Exempt Money Market Fund, U.S. Government Money Market
Fund, U.S. Treasury Money Market Fund, Institutional Money
Market Fund, Short-Term Bond Market Fund, Tax-Exempt
Intermediate Bond Fund, Balanced Fund, Equity Index Fund,
Special Growth Fund, International Equity Fund, Intermediate
Bond Market Fund, Bond IMMDEX/TM Fund, Growth and Income Fund,
MidCore Growth Fund and MicroCap Fund is incorporated by
reference to Exhibit (9)(ah) to Post-Effective Amendment No.
34.
(35) Internet Access Agreement with Firstar Trust Company, dated
April 1998 is incorporated by reference to Exhibit (h)(35) to
Post-Effective Amendment No. 35.
(36) Order Processing Agreement with M and I Trust Company, dated
April 1, 1998 is incorporated by reference to Exhibit (h)(36)
to Post-Effective Amendment No. 35.
(37) Service Agreement with Jack White and Company, dated May 12,
1998 is incorporated by reference to Exhibit (h)(37) to Post-
Effective Amendment No. 35.
(38) Service Agreement with National Investors Services
Corporation, dated June 1998 is incorporated by reference to
Exhibit (h)(38) to Post-Effective Amendment No. 35.
(39) Order Processing Agreement with Northern Trust Retirement
Consulting, L.L.C., dated February 1, 1998 is incorporated by
reference to Exhibit (h)(39) to Post-Effective Amendment No.
36.
(40) 403(b) Comprehensive Agreement with Universal Pensions, Inc.,
dated May 4, 1998 is incorporated by reference to Exhibit (h)
(40) to Post-Effective Amendment No. 36.
(41) Assignment dated October 1, 1998 of Fund Accounting Servicing
Agreement between Registrant and Firstar Trust Company, dated
March 23, 1988, to Firstar Mutual Fund Services, LLC. is
incorporated by reference to Exhibit (h)(41) to Post-
Effective Amendment No. 36.
(42) Assignment dated October 1, 1998 of Co-Administration
Agreement between Registrant, B.C. Ziegler and Company and
Firstar Trust Company, dated January 1, 1995, to Firstar
Mutual Fund Services, LLC. is incorporated by reference to
Exhibit (h) (42) to Post-Effective Amendment No. 36.
(43) Assignment dated October 1, 1998 of the Shareholder Servicing
Agent Agreement between Registrant and Firstar Trust Company,
dated March 23, 1988, to Firstar Mutual Fund Services, LLC.
is incorporated by reference to Exhibit (h)(43) to Post-
Effective Amendment No. 36.
(44) Confidentiality Agreement dated June 17, 1999 between Charles
Schwab & Co., Inc. and Firstar Investment Research and
Management Company, LLC.
(45) Operating Agreement dated June 17, 1999 among Registrant,
Charles Schwab & Co., Inc. and Firstar Investment Research
and Management Company LLC.
(46) Retirement Plan Order Processing Amendment to the Operating
Agreement dated June 17, 1999 among Registrant, Charles
Schwab & Co., Inc., the Charles Schwab Trust Company and
Firstar Investment Research and Management Company, LLC.
(47) Services Agreement dated June 17, 1999 among Registrant,
Charles Schwab & Co., Inc. and Firstar Investment Research
and Management Company, LLC.
(48) Form of Addendum No. 3 to the Co-Administration Agreement
among the Registrant, Firstar Investment Research and
Management Company, LLC and B. C. Ziegler and Company with
respect to the Core International Equity Fund.
(49) Form of Addendum No. 4 to the Co-Administration Agreement
among the Registrant, Firstar Investment Research and
Management Company, LLC, and B.C. Ziegler & Company with
respect to the MidCap Index Fund.
(50) Form of Letter regarding Fund Accounting Servicing Agreement
between Registrant and Firstar Mutual Fund Services, LLC,
with respect to the Core International Equity Fund.
(51) Form of Letter regarding Fund Accounting Servicing Agreement
between Registrant and Firstar Mutual Fund Services, LLC,
with respect to the MidCap Index Fund.
(52) Form of Letter Agreement to the Shareholder Servicing Agent
Agreement between the Registrant and Firstar Mutual Fund
Services, LLC, with respect to the Core International Equity
Fund.
(53) Form of Letter Agreement to the Shareholder Servicing Agent
Agreement between the Registrant and Firstar Mutual Fund
Services, LLC, with respect to the MidCap Index Fund.
(i) Opinion of Drinker Biddle & Reath LLP is incorporated by reference
to Exhibit i(1) to Post Effective Amendment No. 36.
(j) (1) Consent of Drinker Biddle & Reath LLP.
(2) Consent of PricewaterhouseCoopers LLP.
(k) None.
(l) (1) Purchase Agreement between Registrant and ALPS Securities,
Inc. is incorporated by reference to Exhibit (13)(a) to Post-
Effective Amendment No. 29.
(2) Purchase Agreement between ALPS Securities, Inc. and Sunstone
Financial Group, Inc. is incorporated by reference to Exhibit
(13)(b) to Post-Effective Amendment No. 29.
(3) Purchase Agreement between Firstar Trust (Wisconsin) and the
Registrant relating to startup of Balanced Income Fund is
incorporated by reference to Exhibit (13)(c) to Post-
Effective Amendment No. 34.
(4) Form of Purchase Agreement dated February 12, 1999 between
Registrant and B.C. Ziegler & Company with respect to the
Series B Shares is incorporated by reference to Exhibit
(1)(4) to Post-Effective Amendment No. 36.
(5) Form of Purchase Agreement between Registrant and B.C.
Ziegler & Company with respect to the International Fund.
(6) Form of Purchase Agreement between Registrant and B.C.
Ziegler & Company with respect to the MidCap Index Fund.
(m) (1) Amended and Restated Distribution and Service Plan and Form
of Distribution and Servicing Agreement is incorporated by
reference to Exhibit (14)(a) to Post-Effective Amendment No.
30.
(2) Distribution and Services Plan for the Retail B Shares is
incorporated by reference to Exhibit (m)(2) to Post-Effective
Amendment No. 36.
(3) Services Plan for the Retail B Shares is incorporated by
reference to Exhibit (m)(3) to Post-Effective Amendment No.
36.
(n) (1) Amended and Restated Plan Pursuant to Rule 18f-3 for Operation
of a Multi-Series System is incorporated by reference to
Exhibit (o)(2) to Post-Effective Amendment No. 36.
(2) Form of Amended and Restated Plan Pursuant to Rule 18f-3 for
Operation of a Multi-Series System.
Item 24. Persons Controlled By or Under Common Control with Registrant
-------------------------------------------------------------
Registrant is controlled by its Board of Directors.
Item 25. Indemnification
---------------
Article IX of Registrant's Articles of Incorporation, incorporated by
reference as Exhibit (1)(a) hereto, provides for the indemnification of
Registrant's directors and officers to the full extent permitted by the
Wisconsin Business Corporation Law and the Investment Company Act of 1940.
Article VII of the By-laws of the Registrant, incorporated by
reference as Exhibit (2)(a) hereto, provides that officers and directors of the
Registrant shall be indemnified by the Registrant against judgments, penalties,
fines, excise taxes, settlements and reasonable expenses (including attorney's
fees) incurred in connection with a legal action, suit or proceeding to the full
extent permissible under the Wisconsin Business Corporation Law, the Securities
Act of 1933 and the Investment Company Act of 1940.
In no event will Registrant indemnify any of its directors or officers
against any liability to which such person would otherwise be subject by reason
of his willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office. Registrant will comply
with Rule 484 under the Securities Act of 1933 and Release No. 11330 under the
Investment Company Act of 1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Indemnification of the Registrant, its affiliates, their respective
assigns and their respective officers, directors, employees, agents and servants
against certain losses is provided for in Section 7.2 of the Internet Access
Agreement with Firstar Trust Company incorporated herein by reference as Exhibit
(h)(35).
Indemnification of the Registrant, its transfer agent/co-
administrator, its administrators and their respective affiliates, directors,
trustees, officers, employees and agents, and each person who controls them
within the meaning of the Securities Act of 1933, against certain losses is
provided for in Section 12(a) of the Order Processing Agreement with Marshall &
Ilsley Trust Company incorporated herein by reference as Exhibit (h)(36) and
Section 9(a) of the Order Processing Agreement with Northern Trust Retirement
Consulting, L.L.C. incorporated herein by reference to Exhibit (h)(39).
Indemnification of the Registrant, its investment adviser and their
affiliates, directors, managers, employees and shareholders against certain
losses is provided for in Section 9 of the Service Agreement with Jack White &
Company incorporated herein by reference to Exhibit (h)(37).
Indemnification of the Registrant, its investment adviser and their
directors, managers, officers, employees and agents against certain losses is
provided for in Section 6(a) of the Service Agreement with National Investors
Services Corp. incorporated herein by reference as Exhibit (h)(38).
Indemnification of the Registrant and its directors, officers,
employees and agents against certain losses is provided for in Section 13 of the
Retirement Plan Order Processing Amendment to the Operating Agreement with
Charles Schwab & Co., Inc. and The Charles Schwab Trust Company incorporated
herein by reference to Exhibit (h)(46).
Indemnification of the Registrant, its investment adviser and their
directors, officers, employees and agents against certain losses is provided for
in Section 4(a) of the Services Agreement with Charles Schwab and Co., Inc.
incorporated herein by reference as Exhibit (h)(47).
Indemnification of Registrant's principal underwriter, custodians and
transfer agents against certain losses is provided for, respectively, in Section
1.9 of the Distribution Agreement, incorporated by reference as Exhibit (6)(a)
hereto, Section 11 of the Custodian Agreement, incorporated by reference as
Exhibit (8)(a) hereto, and Section 6(c) of the Shareholder Servicing Agent
Agreement incorporated by reference as Exhibit (9)(p) hereto. Registrant has
obtained from a major insurance carrier a directors' and officers' liability
policy covering certain types of errors and omissions.
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
Firstar Investment Research and Management Company, investment adviser
to the Money Market Fund, Institutional Money Market Fund, U.S. Treasury Money
Market Fund, U.S. Government Money Market Fund, Tax-Exempt Money Market Fund,
Short-Term Bond Market Fund, Growth and Income Fund, Special Growth Fund, Bond
IMMDEX/TM Fund, Equity Index Fund, Balanced Growth Fund (formerly the Balanced
Fund), Intermediate Bond Market Fund, Growth Fund (formerly the MidCore Growth
Fund), Tax-Exempt Intermediate Bond Fund, International Equity Fund, MicroCap
Fund and Balanced Income Fund, is a registered investment adviser under the
Investment Advisers Act of 1940.
To Registrant's knowledge, none of the directors or senior executive
officers of Firstar Investment Research and Management Company, except those set
forth below, is, or has been at any time during Registrant's past two fiscal
years, engaged in any other business, profession, vocation or employment of a
substantial nature, except that certain directors and officers of Firstar
Investment Research and Management Company also hold various positions with, and
engage in business for, their respective affiliates. Set forth below are the
names and principal businesses of the directors and certain of the senior
executive officers of Firstar Investment Research and Management Company who are
or have been engaged in any other business, profession, vocation or employment
of a substantial nature.
FIRSTAR INVESTMENT RESEARCH AND MANAGEMENT COMPANY
Position with
Firstar Investment
Research and Other Business Type of
Name Management Company Connections Business
- ---- ------------------ -------------- --------
Mary Ellen Stanek Director, Chief President and
Executive Officer, Treasurer, Investment
Chief Investment Firstar Funds, Inc. Company
Officer and Firstar Funds
President Center, 615 East
Michigan Street,
P.O. Box 3011,
Milwaukee, WI 53201-
3011
Robert L. Webster Director Executive Bank
Vice President,
Firstar Bank,
Milwaukee, N.A.
777 E. Wisconsin
Avenue, Milwaukee, WI
53202
Charles Groeschell Director
Todd Krieg Director
Marian Zentmyer Director,
Chief Equity
Investment Officer
Hansberger Global Investors, Inc. serves as sub-investment
adviser to the International Equity Fund.
To Registrant's knowledge, none of the directors or senior
executive officers of Hansberger Global Investors, Inc. except those set forth
below, is, or has been at any time during Registrant's past two fiscal years,
engaged in any other business, profession, vocation or employment of a
substantial nature, except that certain directors and officers of Hansberger
Global Investors, Inc. also hold various positions with, and engage in business
for, their respective affiliates. Set forth below are the names and principal
businesses of the directors and certain of the senior executive officers of
Hansberger Global Investors, Inc. who are or have been engaged in any other
business, profession, vocation or employment of a substantial nature.
<TABLE>
<CAPTION>
HANSBERGER GLOBAL INVESTORS, INC.
Position with Other Business
Name and Principal Hansberger Global Connections and
Business Address Investors, Inc. Address<F1> Type of Business
- ------------------ ----------------- --------------- ----------------
<C> <C> <C> <C>
Thomas L. Hansberger Chairman, CEO, Director, Mutual Fund
President, Director Schroder Korea Fund PLC
and Treasurer 33 Gutter Lane
London,
EC2B-A124 8AS
Director, Mutual Fund
The Bangkok Fund
Bangkok, Thailand
Advisory Board Member, Mutual Fund
The India Fund
India
Alberto Cribiore Director Director, Privately-owned
WESCO Distribution, Inc. distributor of
Pittsburgh, PA electrical products
Director, Privately-owned
Riverwood International supplier of
Corp. paperboard packaging
Atlanta, GA and producer of
coated unbleached
Kraft paperboard
Member & Chairman of the Distributor
Board, McCarthy, electronically of
Crizanti & Maffel, Inc. financial
One Chase Manhattan Way information
37th Floor
New York, NY 10005
Director, Publicly-owned
Tyco International Ltd. conglomerate
Exeter, NH
Member & Managing Private equity
Principal interest firm
Brera Capital
Partners, LLC
590 Madison Avenue
Suite 18C
New York, NY 10022
Max C. Chapman, Jr. Director Management Financial Financial services
Committee Member,
Tudor/Nomura Group
Trading Partnership
2 World Financial Center
Bldg. B
New York, NY 10281-1198
Director, Investment Advisor
McCarthy,
Maffel, Inc.
One Chase Manhattan
Plaza
New York, NY 10005
Director, Holding Company
MCM Group, Inc.
One Chase Manhattan
Plaza
New York, NY 10005
Chairman, Holding Company
Nomura Holding America,
Inc.
2 World Financial Center
Bldg. B
New York, NY 10281-1198
Director & Managing Financial Services
Director,
Nomura Securities Co.
LTD
Tokyo, Japan
Chairman & Director, Financial Services
Nomura Grand Caymen LTD
Caymen Islands
Chairman & CEO, Financial Services
Nomura American
Foundation
2 World Financial Center
Bldg. B
New York, NY 10281-1198
Director, Financial Services
Nomura International PLC
London, England
Chairman, Financial Services
Nomura Asset
Securitization Corp.
New York, NY
Chairman & Director Financial Services
Nomura Asset Capital
Corporation
New York, NY
Chairman, Director & Holding Company
CEO,
NCP Holding Company
Salah Al-Maousberji Director Director, Paper Manufacturer
Gulf Paper
Kuwait
President, Corporate Finance
Mashora Consulting
Services
Virgil Cumming Director Chief Investment Brokerage/Advisory
Officer, Smith Barney
Inc.
New York, NY
Kimberly Ann Scott Director,
Senior Vice
President and Chief
Compliance Officer
J. Christopher Jackson Director, None
Senior Vice
President and
General Counsel
James Everett Chaney Chief Investment None
Officer
Louretta Ann Reeves Director of None
Research
Francisco Jose Alzuru Managing Director None
Erik Erwin Bieck Managing Director None
Wesley Edmond Freeman Managing Director None
Mark Poon Managing Director None
Vladimir Tyurenkov Managing Director None
Ajit Dayal Managing Director None
Aureole Foong Managing Director None
<F1>Address of all individuals: 515 East Las Olas Blvd., Suite 1300, Fort Lauderdale,
FL 33301.
</TABLE>
The Glenmede Trust Company serves as sub-investment adviser to the Core
International Equity Fund.
Set forth below is a list of all of the directors, senior officers and
those officers primarily responsible for Registrant's affairs and, with respect
to each such person, the name and business address of the Company (if any) with
which such person has been connected at any time since July 31, 1996, as well
as the capacity in which such person was connected.
THE GLENMEDE TRUST COMPANY
NAME AND PRINCIPAL
NAME AND POSITION BUSINESS ADDRESS CONNECTION WITH
WITH INVESTMENT ADVISER OF OTHER COMPANY OTHER COMPANY
- ----------------------- ------------------ ----------------
Susan W. Catherwood Trustee Board of Chairman
the Medical Center
of the University
of Pennsylvania
PECO Energy Board Member
University of Vice Chairman,
Pennsylvania Board of Trustees
The World Affairs Board Member
Council
of Philadelphia
Monell Chemical Director
Senses Center
The Christopher Vice Chairman,
Ludwick Member,
Foundation Board of Managers
Executive Service Vice Chairman,
Corps Board of Directors
of the Delaware
Valley
Montessori Genesis II Advisory Board
Member
United Way of Director
Southeastern
Pennsylvania
Phoenixville Hospital Chairman,
Board of Trustees
Phoenixville Board Member
Healthcare Foundation
Richard F. Pew North Ridge Owner/Operator
Ranches, Montana
and Wyoming
Yellowstone Center Board Member
for Mountain
Environments
Mountain Research Director
Center, Montana State
University
Teton Science School; Director
Kelly Wyoming
Thomas W. Langfitt, M.D. Management Depart- Senior Fellow
ment, The Wharton
School of the
University of
Pennsylvania
New York Life Board Member
Insurance Company
Committee on Chairman
Automotive Safety,
General Motors
Corporation
University of Board Member
Pennsylvania Medical
Center Trustee
Board
Institute of Medicine Member
of the National
Academy
of Sciences
Sun Company Former Board
Member
SmithKline Beecham Former Board
Corporation Member
Princeton University Former Member,
Board of Trustees
Harvard Medical Former Member,
Board of Overseers
The American Member
Philosophical
Society
Greater Philadelphia Board Member
Urban Affairs
Coalition
The Philadelphia Board Member
Public
School/Business
Partnership
for Reform Governing
Board
Secretary's Advisory Board Member
Committee on Infant
Mortality, Department
of Health
and Human Services
Community College of Director
Philadelphia
National Museum of Trustee
American History -
Smithsonian Institute
Arthur E. Pew, III Burlington Northern Retired Director
Railroad of Administration,
Purchasing &
Material
Management Department
Minnesota Board Member
Transportation Museum
Museum of Chairman of the
Transportation Board
Development
Corporation,
St. Paul
Manitow Island Board Member
Association
(White Bear, Minnesota)
Osceola and St. Croix Board Member
Valley Railway
(Osceola, Wisconsin)
J. Howard Pew, II None None
J.N. Pew, III None None
J.N. Pew, IV, M.D. Private Practice None
of Internal Medicine
Flying Hills Self President
Storage, Inc.
American Red Cross, Director
Berks County
Alvernia College Trustee
French and Pickering Director
Creek Conservation
Trust, Inc.
R. Anderson Pew Radnor Corp.,a Sun Retired Chief
Company subsidiary Executive Officer
Bryn Mawr College Vice Chairman,
Board of Trustees
Children's Hospital Vice Chairman of
of Philadelphia the Board of Trustees
Massachusetts Member, Corporation
Institute of Visiting Committee
Technology for the Department of
Brain and Cognitive
Sciences
The Jackson Library Board Member/Trustee
Curtis Institute of Trustee
Music, Philadelphia
AOPA (a private Chairman of the
pilot's Board
association)
AOPA Air Safety Chairman of
Foundation the Board of Trustees
Academy of Music Board Member
Philadelphia Inc. ACM Committee
Ethel Benson Wister Academy of Music Committee Member
Philadelphia, Inc.
Peoples' Light and Honorary Board
Theater Company Member
Concerto Soloists Arts Award 1997 Recipient
Orchestra
Item 27. Principal Underwriter
---------------------
(a) B.C. Ziegler & Company ("B.C. Ziegler"), the Registrant's current
principal underwriter, serves as principal underwriter of the shares of the
Principal Preservation Funds, American Tax-Exempt Bond Trust, Series 1 (and
subsequent series); Ziegler U.S. Government Securities Trust, Series 1 (and
subsequent series); American Income Trust, Series 1 (and subsequent series);
Ziegler Money Market Trust; and The Insured American Tax-Exempt Bond Trust,
Series 1 (and subsequent series).
(b) To the best of Registrant's knowledge, the directors and
executive officers of B.C. Ziegler & Company are as follows:
Positions and
Name and Principal Position and Offices with Offices with
Business Address B. C. Ziegler Registrant
- ------------------ ------------------------- -------------
Peter D. Ziegler Chairman, President, None
Chief Executive Officer
and Director
S. Charles O'Meara Senior Vice President and None
General Counsel,
Corporate Secretary and
Director
Donald A. Carlson, Jr. Senior Vice President None
J.C. Wagner Senior Vice None
President -
Retail Sales and Director
Michael P. Doyle Senior Vice President - None
Retail Operations
Ronald N. Spears Senior Vice President None
Jeffrey C. Vredenbregt Vice President, None
Treasurer, Controller and
Director
Charles G. Stevens Vice President - None
Marketing Director
Jack H. Downer Vice President - None
MIS Director
Robert J. Tuszynski Senior Vice President None
Gerry Aman Vice President - None
Insurance
Sheila K. Hittman Vice President - None
Personnel
Robert J. Johnson Vice President - None
Compliance
James M. Bushman Vice President - None
Recruiting and Training
Coordinator
Lay C. Rosenheimer Vice President - Bond None
Sales Control
Darrell P. Frank Vice President - Director None
of Strategic Change
M.L. McBain Vice President - None
Equity Securities
James L. Brendemuehl Vice President - Managed None
Products
Ronald C. Strzok Senior Vice President - None
Administration
Roxanne Dalnodar Vice President - None
Operations
Kathleen A. Lochen Assistant Secretary None
The address of each of the foregoing is 215 North Main Street, West
Bend, Wisconsin 53095, (414) 334-5521.
(c) None.
Item 28. Location of Accounts and Records
--------------------------------
(1) Firstar Mutual Fund Services LLC, 615 E. Michigan Street, Milwaukee,
WI 53202 (records relating to its function as custodian, transfer
agent, fund accounting servicing agent, shareholder servicing agent
and co-administrator).
(2) Firstar Investment Research and Management Company, Firstar Center,
777 E. Wisconsin Avenue, Suite 800, Milwaukee, WI 53202 (records
relating to its function as investment adviser).
(3) Hansberger Global Investors, Inc., 515 East Las Olas Blvd., Suite
1300, Fort Lauderdale, FL 33301 (records relating to its function as
sub-investment adviser for the International Equity Fund).
(4) B.C. Ziegler & Company, 215 North Main Street, West Bend, Wisconsin
53095-3348 (records relating to its functions as distributor and co-
administrator).
(5) Drinker Biddle & Reath LLP, One Logan Square, 18th and Cherry Streets,
Philadelphia, Pennsylvania 19103 (Registrant's Articles of
Incorporation, By-laws and Minute Books).
(6) The Chase Manhattan Bank, 4 Chase Metro Tech Center, Brooklyn, NY
11245, ATTN: Global Investor Services, Investment Management Group
(records relating to its function as foreign subcustodian).
(7) The Glenmede Trust Company, One Liberty Place, 1650 Market Street,
Suite 1200, Philadelphia, PA 19103 (records relating to its function
as sub-investment adviser for the Core International Equity Fund).
Item 29. Management Services
-------------------
None.
Item 30 Undertakings
------------
None.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Post-
Effective Amendment No. 37 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Milwaukee,
and the State of Wisconsin, on the 18th day of August, 1999.
FIRSTAR FUNDS, INC.
Registrant
By /s/ Mary Ellen Stanek
-----------------------------------
Mary Ellen Stanek
Director, President & Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 37 to the Registration Statement of the Registrant has
been signed by the following persons in the capacities and on the dates
indicated:
Signature Title Date
--------- ----- ----
<F1>James M. Wade Chairman and August 18, 1999
- ------------------------
(James M. Wade) Director
Mary Ellen Stanek Director,
- ------------------------
(Mary Ellen Stanek) President, Treasurer August 18, 1999
<F1>Richard Riederer Director August 18, 1999
- ------------------------
(Richard Riederer)
<F1>Jerry Remmel Director August 18, 1999
- ------------------------
(Jerry Remmel)
<F1>Glen R. Bomberger Director August 18, 1999
- ------------------------
(Glen R. Bomberger)
<F1>Charles R. Roy Director August 18, 1999
- ------------------------
(Charles R. Roy)
<F1>Bronson J. Haase Director August 18, 1999
- ------------------------
(Bronson J. Haase)
<F1>By /s/ Mary Ellen Stanek August 18, 1999
----------------------
Mary Ellen Stanek
Attorney-in-fact
*******
POWER OF ATTORNEY
------------------
Glen R. Bomberger, whose signature appears below, does hereby
constitute and appoint James M. Wade, Mary Ellen Stanek and W. Bruce McConnel,
III, and each and any of them, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, or each and
any of them, may deem necessary or advisable or which may be required to enable
Firstar Funds, Inc. (the "Company") to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended (the "Acts"), and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof, in connection with the filing and effectiveness of the
Company's Registration Statement under the said Acts, and any and all amendments
(including post-effective amendments) thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Company said Registration Statement and any and all such amendments
thereto that are filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or each and any of them, shall do or cause to be done by virtue hereof.
Date: August 17, 1999 /s/ Glen R. Bomberger
---------------------
Glen R. Bomberger
POWER OF ATTORNEY
-----------------
James M. Wade, whose signature appears below, does hereby constitute
and appoint Mary Ellen Stanek and W. Bruce McConnel, III, and either of them,
his true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Firstar Funds, Inc.
(the "Company") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended (the "Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the Company's
Registration Statement under the said Acts, and any and all amendments
(including post-effective amendments) thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Company said Registration Statement and any and all such amendments
thereto that are filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Date: August 13, 1999 /s/ James M. Wade
------------------
James M. Wade
POWER OF ATTORNEY
------------------
Richard K. Riederer, whose signature appears below, does hereby
constitute and appoint James M. Wade, Mary Ellen Stanek and W. Bruce McConnel,
III, and each and any of them, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, or each and
any of them, may deem necessary or advisable or which may be required to enable
Firstar Funds, Inc. (the "Company") to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended (the "Acts"), and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof, in connection with the filing and effectiveness of the
Company's Registration Statement under the said Acts, and any and all amendments
(including post-effective amendments) thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Company said Registration Statement and any and all such amendments
thereto that are filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or each and any of them, shall do or cause to be done by virtue hereof.
Date: August 13, 1999 /s/ Richard K. Riederer
-----------------------
Richard K. Riederer
POWER OF ATTORNEY
-----------------
Jerry Remmel, whose signature appears below, does hereby constitute
and appoint James M. Wade, Mary Ellen Stanek and W. Bruce McConnel, III, and
each and any of them, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, or each and any of
them, may deem necessary or advisable or which may be required to enable Firstar
Funds, Inc. (the "Company") to comply with the Investment Company Act of 1940,
as amended, and the Securities Act of 1933, as amended (the "Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of the
Company's Registration Statement under the said Acts, and any and all amendments
(including post-effective amendments) thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Company said Registration Statement and any and all such amendments
thereto that are filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or each and any of them, shall do or cause to be done by virtue hereof.
Date: August 13, 1999 /s/ Jerry Remmel
-----------------
Jerry Remmel
POWER OF ATTORNEY
-----------------
Mary Ellen Stanek, whose signature appears below, does hereby
constitute and appoint James M. Wade and W. Bruce McConnel, III, and either of
them, her true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Firstar Funds, Inc.
(the "Company") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended (the "Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the Company's
Registration Statement under the said Acts, and any and all amendments
(including post-effective amendments) thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Company said Registration Statement and any and all such amendments
thereto that are filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Date: August 13, 1999 /s/ Mary Ellen Stanek
----------------------
Mary Ellen Stanek
POWER OF ATTORNEY
-------------------
Charles R. Roy, whose signature appears below, does hereby constitute
and appoint James M. Wade, Mary Ellen Stanek and W. Bruce McConnel, III, and
each and any of them, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, or each and any of
them, may deem necessary or advisable or which may be required to enable Firstar
Funds, Inc. (the "Company") to comply with the Investment Company Act of 1940,
as amended, and the Securities Act of 1933, as amended (the "Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of the
Company's Registration Statement under the said Acts, and any and all amendments
(including post-effective amendments) thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Company said Registration Statement and any and all such amendments
thereto that are filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or each and any of them, shall do or cause to be done by virtue hereof.
Date: August 13, 1999 /s/ Charles R. Roy
-------------------
Charles R. Roy
POWER OF ATTORNEY
------------------
Bronson J. Haase, whose signature appears below, does hereby
constitute and appoint James M. Wade, Mary Ellen Stanek and W. Bruce McConnel,
III, and each and any of them, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, or each and
any of them, may deem necessary or advisable or which may be required to enable
Firstar Funds, Inc. (the "Company") to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended (the "Acts"), and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof, in connection with the filing and effectiveness of the
Company's Registration Statement under the said Acts, and any and all amendments
(including post-effective amendments) thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Company said Registration Statement and any and all such amendments
thereto that are filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or each and any one of them, shall do or cause to be done by virtue hereof.
Date: August 13, 1999 /s/ Bronson J. Haase
---------------------
Bronson J. Haase
*******
FIRSTAR FUNDS, INC.
CERTIFICATE OF SECRETARY
The following resolution was duly adopted by the Board of Directors of
Firstar Funds, Inc. on August 13, 1999 and remains in effect on the date
hereof:
FURTHER RESOLVED, that the directors and officers of the Company who
may be required to execute any amendments to the Registration Statement of the
Company be, and each of them hereby is, authorized to execute a Power of
Attorney appointing James M. Wade, Mary Ellen Stanek and W. Bruce McConnel, III,
and each and any of them, their true and lawful attorney or attorneys, to
execute in their name, place and stead, in their capacity as director or
officer, or both, of the Company any and all amendments to said Registration
Statement, and all instruments necessary or incidental in connection therewith,
and to file the same with the Securities and Exchange Commission; and each and
any of said attorneys shall have the power to act thereunder with or without the
other said attorney and shall have full power of substitution and
resubstitution; and each and any of said attorneys shall have full power and
authority to do in the name and on behalf of said directors and officers, or any
or all of them, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and purposes
as each of said directors or officers, or any or all of them, might or could do
in person, said acts of said attorneys, or each and any of them, being hereby
ratified and approved.
FIRSTAR FUNDS, INC.
By: /s/ W. Bruce McConnel III
------------------------------
W. Bruce McConnel, III
Secretary
Dated: August 18, 1999
xxxxxxx
EXHIBIT INDEX
Exhibit No. Item
- ----------- ----
(a) (15) Amendment No. 14 to Articles of Incorporation dated
September __, 1999 for the International Fund.
(a) (16) Amendment No. 15 to Articles of Incorporation dated
September __, 1999 for the MidCap Index Fund.
(d) (12) Form of Investment Sub-Advisory Agreement between Firstar
Investment Research and Management Company, LLC and
The Glenmede Trust Company.
(d) (13) Form of Addendum No. 7 to the Investment Advisory Agreement
between Registrant and Firstar Investment Research and
Management Company, LLC dated September __, 1999 with
respect to the International Fund.
(d) (14) Form of Addendum No. 8 to the Investment Advisory Agreement
between Registrant and Firstar Investment Research and
Management Company, LLC dated September __, 1999 with
respect to the MidCap Index Fund.
(e) (6) Form of Addendum No. 5 to the Distribution Agreement dated
September __, 1999 between Registrant and B.C. Ziegler &
Company with respect to the International Fund.
(e) (7) Form of Addendum No. 6 to the Distribution Agreement
dated September __, 1999 between Registrant and B.C. Ziegler
& Company with respect to the MidCap Fund.
(g) (15) Form of Letter Agreement with respect to the Custodian
Agreement with respect to the International Fund.
(g) (16) Form of Letter Agreement with respect to the Custodian
Agreement with respect to the MidCap Index Fund.
(h) (44) Confidentiality Agreement between Firstar Investment
Research and Management Company, LLC and Charles Schwab &
Company, Inc. dated June 17, 1999.
(h) (45) Operating Agreement between Firstar Investment Research and
Management Company, LLC and Charles Schwab & Company, Inc.
dated June 17, 1999.
(h) (46) Retirement Plan Order Processing Amendment to the Operating
Agreement between Firstar Investment Research and Management
Company, LLC and Charles Schwab & Company, Inc. dated June
17, 1999.
(h) (47) Services Agreement between Firstar Investment Research and
Management Company, LLC and Charles Schwab & Company, Inc.
dated June 17, 1999.
(h) (48) Form of Addendum No. 4 to the Co-Administration Agreement
among the Registrant, B.C. Ziegler and Company and Firstar
Mutual Fund Services, LLC with respect to the International
Fund.
(h) (49) Form of Addendum No. 5 to the Co-Administration
Agreement among the Registrant, B.C. Ziegler and Company and
Firstar Mutual Fund Services, LLC with respect to the MidCap
Index Fund.
(h) (50) Form of Letter Agreement with respect to the Fund Accounting
and Servicing Agreement with respect to the International
Fund.
(h) (51) Form of Letter Agreement with respect to the Fund Accounting
and Servicing Agreement with respect to the MidCap Index
Fund.
(h) (52) Form of Letter Agreement to the Shareholder Servicing Agent
Agreement between Registrant and Firstar Mutual Fund
Services, LLC with respect to the International Fund.
(h) (53) Form of Letter Agreement to the Shareholder Servicing Agent
Agreement between Registrant and Firstar Mutual Fund
Services, LLC with respect to the MidCap Index Fund.
(j) (1) Consent of Drinker Biddle & Reath LLP.
(j) (2) Consent of PricewaterhouseCoopers LLP.
(l) (5) Form of Purchase Agreement between Registrant and B.C.
Ziegler & Company with respect to the International Fund.
(l) (6) Form of Purchase Agreement between Registrant and B.C.
Ziegler & Company with respect to the MidCap Index Fund.
(n) (2) Form of Amended and Restated Plan Pursuant to Rule 18f-3 for
Operation of a Multi-Series System.
EXHIBIT (a) (15)
ARTICLES OF AMENDMENT Stock(for profit)
- ---------------------------------------
Joan Ohlbaum Swirsky, Esquire - Please indicate where you would like
DRINKER BIDDLE & REATH LLP the acknowledgement copy of the filed
One Logan Square document sent. Please include complete
18th and Cherry Street name and mailing address.
Philadelphia, PA 19103
- ---------------------------------------
Your phone number during the day: (215) 988-2601
--- --------
INSTRUCTIONS (Ref. sec. 180.1006 Wis. Stats. for document content)
- ------------
Submit one original and one exact copy to Department of Financial
Institutions, Division of Corporate and Consumer Services, P.O. Box 7846,
Madison, Wisconsin, 53707-7846. (If sent by Express or Priority U.S. mail,
------- --------
address to 345 W. Washington Ave., Madison, WI 53703). The original must
include an original manual signature (sec. 180.0120(3)(c), Wis. Stats). If you
have any additional questions, please call the Corporations Division at
608-261-9555.
A. State the name of the corporation (before any changes effected by this
amendment) and the text of the amendment(s). The text should recite the
resolution adopted (e.g.) "RESOLVED, THAT, Article 1 of the Articles of
Incorporation is hereby amended to read as follows.... etc.").
If an amendment provides for an exchange, reclassification or cancellation
of issued shares, state the provisions for implementing the amendment if not
contained in the amendment itself.
B. Enter the date of adoption of the amendment(s). If there is more than one
amendment, identify the date of adoption of each. Mark one of the three choices
to indicate the method of adoption of the amendment(s).
By Board of Directors - Refer to sec. 180.1002 Wis. Stats. for specific
------------------
information on the character of amendments that may be adopted by the Board of
Directors without shareholder action.
By Board of Directors and Shareholders - Amendments proposed by the Board
-----------------------------------
of Directors and adopted by shareholder approval. Voting requirements differ
with circumstances and provisions in the articles of incorporation. See sec.
180.1003 Wis. Stats. for specific information.
By Incorporators or Board of Directors - Before issuance of shares -
------------- ------------------
See sec. 180.1005 Wis. Stats. for conditions attached to the adoption of an
amendment approved by a vote or consent of less than 2/3rds of the shares
subscribed for.
C. Enter the date of execution and the name and title of the person signing
the document. The document must be signed by one of the following: An officer
(or incorporator if directors have not been elected) of the corporation or the
fiduciary if the corporation is in the hands of a receiver, trustee, or other
-------- -------
court appointed fiduciary. At least one copy must bear an original manual
- ---------------
signature.
D. If the document is executed in Wisconsin, sec. 14.38(14) Wis. Stats.
provides that it shall not be filed unless the name of the drafter (either an
individual or a governmental agency) is printed in a legible manner. If
document is NOT drafted in Wisconsin, please so state.
---
FILING FEES
- -----------
Submit the document with a minimum filing fee of $40.00, payable to
SECRETARY OF STATE. If the amendment causes an increase in the number of
authorized shares, provide an additional fee of 1 cent for each new authorized
share. When the document has been filed, an acknowledgement copy stamped
"FILED" will be sent to the address indicated above.
ARTICLES OF AMENDMENT
STOCK (FOR PROFIT)
A. Name of Corporation: Firstar Funds, Inc.
------------------------------------------------
(prior to any change effected by this amendment)
--------
Text of Amendment (Refer to the existing articles of incorporation and
-----------------
instruction A. Determine those items to changed and set forth below the
number identifying the paragraph being changed and how the amended
paragraph is to read.)
RESOLVED, THAT, the articles of incorporation be amended as follows:
SEE ATTACHED
The effective date of these Articles of Amendment shall be September __,
1999.
B. Amendment(s) adopted on August 13, 1999 (Directors)
---------------------------------------
(date)
Indicate the method of adoption by checking the appropriate choice below:
( X ) In accordance with sec. 180.1002, Wis. Stats. (By the Board of
Directors)
OR
( ) In accordance with sec. 180.1003, Wis. Stats. (By the Board of
Directors and Shareholders)
OR
( ) In accordance with sec. 180.1005, Wis. Stats. (By Incorporators or
Board of Directors, before issuance of shares)
C. Executed on behalf of the
corporation on September , 1999
----------------------
(date)
----------------------
(signature)
Mary Ellen Stanek
----------------------
(printed name)
President
----------------------
(officer's title)
D. This document was drafted by Joan Ohlbaum Swirsky, Esquire
-----------------------------------
(name of individual required by law)
FILING FEE - $40.00 OR MORE
SEE REVERSE for Instructions, Suggestions, Filing Fees and Procedures
-----------
AMENDMENT TO ARTICLES OF INCORPORATION
ADOPTED BY BOARD OF DIRECTORS ON SEPTEMBER , 1999
---------------------------------------------------
(a) The name of the Company is Firstar Funds, Inc.
(b) and (c) The text of the Amendment which determines the terms of the
Company's Class 19-Institutional Series, Class 19-A Series, and
Class 19-B Series Common Stock and the number of shares thereof
is as follows:
RESOLVED, that pursuant to Article V of the Articles of
Incorporation of the Company, One Hundred Million authorized,
unissued and unclassified shares of Class 19 Common Stock of the
Company be, and hereby are, divided into and classified as Class
19 - Institutional Series, One Hundred Million authorized,
unissued and unclassified shares of Class 19 Common Stock of the
Company be, and hereby are divided into and classified as Class
19-A Series Common Stock and One Hundred Million authorized,
unissued and unclassified shares of Class 19 Common Stock of the
Company be, and hereby are divided into and classified as Class
19-B Series Common Stock, with all of the preferences,
limitations and relative rights set forth in Article V. B. of
said Articles of Incorporation.
(d) No shares of the Company's Class 19 - Institutional Series, Class
19-A Series and Class 19-B Series Common Stock have been issued.
(e) The Amendment was adopted on September __, 1999.
(f) The Amendment was unanimously adopted by the Board of Directors
and shareholder action was not required.
EXHIBIT (a) (16)
ARTICLES OF AMENDMENT Stock (for profit)
- ------------------------------------
Joan Ohlbaum Swirsky, Esquire - Please indicate where you would like
DRINKER BIDDLE & REATH LLP the acknowledgement copy of the filed
One Logan Square document sent. Please include complete
18th and Cherry Street name and mailing address.
Philadelphia, PA 19103
- ------------------------------------
Your phone number during the day: (215) 988-2601
--- --------
INSTRUCTIONS (Ref. sec. 180.1006 Wis. Stats. for document content)
- ------------
Submit one original and one exact copy to Department of Financial
Institutions, Division of Corporate and Consumer Services, P.O. Box 7846,
Madison, Wisconsin, 53707-7846. (If sent by Express or Priority U.S. mail,
------- --------
address to 345 W. Washington Ave., Madison, WI 53703). The original must
include an original manual signature (sec. 180.0120(3)(c), Wis. Stats). If you
have any additional questions, please call the Corporations Division at
608-261-9555.
A. State the name of the corporation (before any changes effected by this
amendment) and the text of the amendment(s). The text should recite the
resolution adopted (e.g.) "RESOLVED, THAT, Article 1 of the Articles of
Incorporation is hereby amended to read as follows.... etc.").
If an amendment provides for an exchange, reclassification or cancellation
of issued shares, state the provisions for implementing the amendment if not
contained in the amendment itself.
B. Enter the date of adoption of the amendment(s). If there is more than one
amendment, identify the date of adoption of each. Mark one of the three choices
to indicate the method of adoption of the amendment(s).
By Board of Directors - Refer to sec. 180.1002 Wis. Stats. for specific
------------------
information on the character of amendments that may be adopted by the Board of
Directors without shareholder action.
By Board of Directors and Shareholders - Amendments proposed by the Board
-----------------------------------
of Directors and adopted by shareholder approval. Voting requirements differ
with circumstances and provisions in the articles of incorporation. See sec.
180.1003 Wis. Stats. for specific information.
By Incorporators or Board of Directors - Before issuance of shares -
------------- ------------------
See sec. 180.1005 Wis. Stats. for conditions attached to the adoption of an
amendment approved by a vote or consent of less than 2/3rds of the shares
subscribed for.
C. Enter the date of execution and the name and title of the person signing
the document. The document must be signed by one of the following: An officer
(or incorporator if directors have not been elected) of the corporation or the
fiduciary if the corporation is in the hands of a receiver, trustee, or other
-------- -------
court appointed fiduciary. At least one copy must bear an original manual
- ---------------
signature.
D. If the document is executed in Wisconsin, sec. 14.38(14) Wis. Stats.
provides that it shall not be filed unless the name of the drafter (either an
individual or a governmental agency) is printed in a legible manner. If
document is NOT drafted in Wisconsin, please so state.
---
FILING FEES
- -----------
Submit the document with a minimum filing fee of $40.00, payable to
SECRETARY OF STATE. If the amendment causes an increase in the number of
authorized shares, provide an additional fee of 1 cent for each new authorized
share. When the document has been filed, an acknowledgement copy stamped
"FILED" will be sent to the address indicated above.
ARTICLES OF AMENDMENT
STOCK (FOR PROFIT)
A. Name of Corporation: Firstar Funds, Inc.
------------------------------------------------
(prior to any change effected by this amendment)
--------
Text of Amendment (Refer to the existing articles of incorporation and
-----------------
instruction A. Determine those items to changed and set forth below the
number identifying the paragraph being changed and how the amended
paragraph is to read.)
RESOLVED, THAT, the articles of incorporation be amended as follows:
SEE ATTACHED
The effective date of these Articles of Amendment shall be September __,
1999.
B. Amendment(s) adopted on August 13, 1999 (Directors)
---------------------------------------
(date)
Indicate the method of adoption by checking the appropriate choice below:
( X ) In accordance with sec. 180.1002, Wis. Stats. (By the Board of
Directors)
OR
( ) In accordance with sec. 180.1003, Wis. Stats. (By the Board of
Directors and Shareholders)
OR
( ) In accordance with sec. 180.1005, Wis. Stats. (By Incorporators or
Board of Directors, before issuance of shares)
C. Executed on behalf of the
corporation on September __, 1999
------------------------
(date)
------------------------
(signature)
Mary Ellen Stanek
------------------------
(printed name)
President
------------------------
(officer's title)
D. This document was drafted by Joan Ohlbaum Swirsky, Esquire
------------------------------------
(name of individual required by law)
FILING FEE - $40.00 OR MORE
SEE REVERSE for Instructions, Suggestions, Filing Fees and Procedures
-----------
AMENDMENT TO ARTICLES OF INCORPORATION
ADOPTED BY BOARD OF DIRECTORS ON SEPTEMBER , 1999
---------------------------------------------------
(a) The name of the Company is Firstar Funds, Inc.
(b) and (c) The text of the Amendment which determines the terms of the
Company's Class 20-Institutional Series, Class 20-A Series, and
Class 20-B Series Common Stock and the number of shares thereof
is as follows:
RESOLVED, that pursuant to Article V of the Articles of
Incorporation of the Company, One Hundred Million authorized,
unissued and unclassified shares of Class 20 Common Stock of the
Company be, and hereby are, divided into and classified as Class
20-Institutional Series, One Hundred Million authorized, unissued
and unclassified shares of Class 20 Common Stock of the Company
be, and hereby are divided into and classified as Class 20-A
Series Common Stock and One Hundred Million authorized, unissued
and unclassified shares of Class 20 Common Stock of the Company
be, and hereby are divided into and classified as Class 20-B
Series Common Stock, with all of the preferences, limitations and
relative rights set forth in Article V. B. of said Articles of
Incorporation.
(d) No shares of the Company's Class 20-Institutional Series, Class
20-A Series and Class 20-B Series Common Stock have been issued.
(e) The Amendment was adopted on September __, 1999.
(f) The Amendment was unanimously adopted by the Board of Directors
and shareholder action was not required.
EXHIBIT (d) (12)
FORM OF INVESTMENT SUB-ADVISORY AGREEMENT
THIS AGREEMENT, made this __th day of September, 1999, is by and among
Firstar Investment Research & Management Company, LLC, a Wisconsin corporation
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended (the "Advisers Act") (the "Adviser"), .,
-----------------------------
a registered as an investment adviser under the
--------------- ----------------
Advisers Act (the "Sub-Adviser"), and Firstar Funds, Inc. (the "Company"), an
open-end diversified management investment company of the series type,
registered under the Investment Company Act of 1940, as amended (the "1940
Act").
WHEREAS, the Adviser is the investment adviser to the Firstar International
Fund (the "Fund") of the Company, and the Adviser desires to retain the Sub-
Adviser to furnish it with portfolio selection and related research and
statistical services in connection with the Adviser's investment advisory
activities on behalf of the Fund, and the Sub-Adviser desires to furnish such
services to the Adviser;
NOW, THEREFORE, in consideration of the premises and the terms and
conditions hereinafter set forth, it is agreed as follows:
1. Appointment of Sub-Adviser
--------------------------
In accordance with and subject to the investment advisory agreement (the
"Investment Advisory Agreement") between the Company and the Adviser, the
Adviser hereby appoints the Sub-Adviser to perform portfolio selection and
related research and statistical services described herein for investment and
reinvestment of the Fund's investment assets, subject to the control and
direction of the Company's Board of Directors, for the period and on the terms
hereinafter set forth. The Sub-Adviser accepts such appointment and agrees to
furnish the services hereinafter set forth for the compensation herein provided.
The Sub-Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or authorized, have no
authority to act for or represent the Company or the Adviser in any way or
otherwise be deemed an agent of the Company or the Adviser.
2. Obligations of and Services to be Provided by the Sub-Adviser
-------------------------------------------------------------
(a) The Sub-Adviser shall provide the following services and assume the
following obligations with respect to the Fund:
(1) The investment of the assets of the Fund shall at all times be
subject to the applicable provisions of the articles of
incorporation, the by-laws, the registration statement, the
effective prospectus and the statement of additional information
of the Company relating to the Fund (the "Fund Documents") and
shall conform to the investment objectives, policies and
restrictions of the Fund as set forth in such documents and as
interpreted from time to time by the Board of Directors of the
Company and by the Adviser. Copies of the Fund Documents have
been or will be submitted to the Sub-Adviser. The Company agrees
to provide copies of all amendments to or restatements of the
Fund Documents to the Sub-Adviser on a timely and on-going basis
but in all events prior to such time as said amendments or
restatements become effective. The Sub-Adviser will be entitled
to rely on all such documents furnished to it by the Company, the
Fund, or the Adviser. Within the framework of the investment
objectives, policies and restrictions of the Fund, and subject to
the supervision of the Adviser, the Sub-Adviser shall have
responsibility for making and executing investment decisions for
the Fund.
(2) In carrying out its obligations to manage the investments and
reinvestments of the assets of the Fund, the Sub-Adviser shall:
(1) obtain and evaluate pertinent economic, statistical,
financial and other information affecting the economy generally
and individual companies or industries, the securities of which
are included in the Fund's investment portfolio or are under
consideration for inclusion therein; (2) under the supervision of
the Adviser, formulate and implement a continuous investment
program for the Fund consistent with the investment objective and
related investment policies for the Fund as set forth in the Fund
Documents, as amended; and (3) take such steps as are necessary
to implement the aforementioned investment program by purchase
and sale of securities including the placing, or directing the
placement through an affiliate of the Sub-Adviser in accordance
with applicable regulatory requirements, of orders for such
purchases and sales.
(3) In connection with the purchase and sale of securities of the
Fund, the Sub-Adviser shall arrange for the transmission to the
Adviser and the Custodian for the Fund and, as directed by the
Adviser, any other persons retained by the Fund on a daily basis
such confirmations, trade tickets and other documents as may be
necessary to enable them to perform their administrative
responsibilities with respect to the Fund's investment portfolio.
The Sub-Adviser shall render such reports to the Adviser and/or
to the Company's Board of Directors concerning the investment
activity and portfolio composition of the Fund in such form and
at such intervals as the Adviser or the Board may, from time to
time require.
(4) The Sub-Adviser shall, in the name of the Fund, place or direct
the placement of orders for the execution of portfolio
transactions in accordance with the policies of the Fund, as set
forth in the Fund Documents, as amended from time to time, and
under the Securities Act of 1933, as amended (the "1933 Act"),
and the 1940 Act. In connection with the placement of orders for
the execution of the Fund's portfolio transactions, the Sub-
Adviser shall create and maintain all necessary brokerage records
of the Fund in accordance with all applicable laws, rules and
regulations, including but not limited to, records required by
Section 31(a) of the 1940 Act. All records shall be the property
of the Company and shall be available for inspection and use by
the Securities and Exchange Commission ("SEC"), the Company, the
Adviser, or any other person retained by the Company. The Sub-
Adviser agrees to surrender promptly to the Company any of such
records upon the Company's request. Where applicable, such
records shall be maintained by the Sub-Adviser for the period and
in the place required by the 1940 Act. The Sub-Adviser shall, in
the name of the Fund, vote all proxies solicited by or with
respect to the issuers of securities in which the Fund may be
invested from time to time.
(5) In placing orders or directing the placement of orders for the
execution of portfolio transactions, the Sub-Adviser shall select
brokers and dealers for the execution of the Fund's transactions.
In selecting brokers or dealers to execute such orders, the Sub-
Adviser will use its best efforts to seek on behalf of the Fund
the best overall terms available. In assessing the best overall
terms available for any transaction, the Sub-Adviser shall
consider all factors that it deems relevant, including the
breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker
or dealer, and the reasonableness of the commission, if any, both
for the specific transaction and on a continuing basis. In
evaluating the best overall terms available, and in selecting the
broker-dealer to execute a particular transaction, the Sub-
Adviser is expressly authorized to consider the fact that a
broker or dealer has furnished statistical, research or other
information or services which enhance the Sub-Adviser's
investment research and portfolio management capability
generally. Subject to the initial approval of the Sub-Adviser's
soft dollar policy by the Company's Board of Directors and
further subject to the review of the Company's Board of Directors
from time to time with respect to the extent and continuation of
such policy, the Sub-Adviser may, in accordance with Section
28(e) of the Securities Exchange Act of 1934, as amended,
negotiate with and assign to a broker a commission which may
exceed the commission which another broker would have charged for
effecting the transaction if the Sub-Adviser determines in good
faith that the amount of commission charged was reasonable in
relation to the value of brokerage and/or research services (as
defined in Section 28(e)) provided by such broker viewed in terms
either of the Fund or the Sub-Adviser's overall responsibilities
to the Sub-Adviser's discretionary accounts. In addition, the
Sub-Adviser is authorized to take into account the sale of shares
of the Company in allocating purchase and sale orders for
portfolio securities to brokers or dealers (including brokers and
dealers that are affiliated with the Adviser, Sub-Adviser or the
Company's principal underwriter), provided that the Sub-Adviser
believes that the quality of the transaction and the commission
are comparable to what they would be with other qualified firms.
In no instance, however, will portfolio securities be purchased
from or sold to the Sub-Adviser, the Adviser, the Company's
principal underwriter, or any affiliated person of either the
Company, the Adviser, Sub-Adviser or the principal underwriter,
acting as principal in the transaction, except to the extent
permitted by the SEC through rules, regulations, decisions and
no-action letters.
(b) The Sub-Adviser shall use the same skill and care in providing
services to the Fund as it uses in providing services to fiduciary
accounts for which it has investment responsibility. The Sub-Adviser
will conform with all applicable federal and state laws, rules and
regulations.
3. Expenses
--------
The Sub-Adviser will bear all expenses in connection with the performance
of its services under this Agreement, which expenses shall not include brokerage
fees or commissions in connection with the effectuation of securities
transactions for the Fund. The Fund (or the Adviser) will bear certain other
expenses to be incurred in the Fund's operation, including but not limited to:
organizational expenses, taxes, interest, brokerage fees and commissions, if
any; SEC fees and state blue sky qualification fees; expenses of custodians,
transfer and dividend disbursing agents and the Fund's co-administrators;
insurance premiums; outside auditing and legal expenses; costs of maintenance of
the Fund's existence; costs attributable to investor services, including without
limitation, telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders; costs of shareholders' reports
and meetings of the shareholders of the Fund and of the officers or Board of
Directors of the Fund; and any extraordinary expenses.
4. Compensation
------------
In payment for the investment sub-advisory services to be rendered by the
Sub-Adviser in respect of the Fund hereunder, the Adviser shall pay to the Sub-
Adviser as full compensation for all services hereunder a fee computed at an
annual rate which shall be a percentage of the average net assets of the Fund.
The fee shall be accrued daily and shall be based on the net asset values of all
of the issued and outstanding shares of the Fund as determined as of the close
of each business day pursuant to the Fund Documents. The fee shall be payable
in arrears during the following calendar month.
The amount of such annual fee, as applied to the average daily value of the
net assets of the Fund shall be as described in the schedule below:
Assets Fee
------ ---
On the first $25 million in assets %
----
On the next $75 million in assets %
----
On the assets in excess of $100 million %
----
5. Effective Date, Renewal and Termination
----------------------------------------
This Agreement shall become effective as of the date first above written
and, unless otherwise terminated, shall continue until February 28, 2001
and from year to year thereafter so long as approved annually in accordance
with the 1940 Act and the rules thereunder. This Agreement may be terminated
without penalty on sixty (60) days' written notice to the Sub-Adviser (i) by the
Adviser, (ii) by vote of the Board of Directors of the Company, or (iii) by vote
of a majority of the outstanding voting securities of the Fund; or it may be
terminated without penalty on sixty (60) days' written notice to the Adviser by
the Sub-Adviser. This Agreement will terminate automatically in the event of
its assignment or upon any termination of the Investment Advisory Agreement.
The terms "assignment" and "vote of majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act.
6. Representations of the Company, Adviser and the Sub-Adviser
-----------------------------------------------------------
The Company and Fund represent that (i) a copy of the Company's Articles of
Incorporation, dated February 15, 1988, together with all amendments thereto, is
on file in the office of the Wisconsin Department of Financial Institutions,
(ii) the appointment of the Adviser has been duly authorized, (iii) the
appointment of the Sub-Adviser has been duly authorized, and (iv) they have
acted and will continue to act in conformity with the 1940 Act, and other
applicable laws.
The Adviser represents that (i) it is authorized to perform the services
herein, (ii) the appointment of the Sub-Adviser has been duly authorized, and
(iii) it will act in conformity with the 1940 Act, and other applicable laws.
The Sub-Adviser represents that it is authorized to perform the services
described herein.
7. Materials
---------
Neither the Adviser, the Company, or the Fund shall publish or distribute
any information including but not limited to, registration statements,
advertising or promotional material regarding the provision of investment
advisory services by the Sub-Adviser pursuant to this Agreement, without the
prior written consent of the Sub-Adviser, which consent shall not be
unreasonably withheld or delayed. If the Sub-Adviser has not notified the
Adviser of its disapproval of sample materials within five (5) days after its
receipt thereof, such materials shall be deemed approved. Materials
substantially similar to materials approved on an earlier occasion, with the
exception of any regulatory filings, shall also be deemed approved.
Notwithstanding the foregoing, the Adviser may distribute information regarding
the provision of investment advisory services by the Sub-Adviser to the
Company's Board of Directors ("Board Materials") without the prior written
consent of the Sub-Adviser. The Adviser shall provide copies of the Board
Materials to the Sub-Adviser within a reasonable time following distribution to
the Company's Board of Directors.
The Sub-Adviser shall not publish or distribute any information including
but not limited to, registration statements, advertising or promotional material
regarding the provision of investment advisory services by the Sub-Adviser
pursuant to this Agreement, without the prior written consent of the Adviser and
the Company, which consent shall not be unreasonably withheld or delayed. If
the Adviser or Company has not notified the Sub-Adviser of its disapproval of
sample materials within five (5) days after its receipt thereof, such materials
shall be deemed approved. Materials substantially similar to materials approved
on an earlier occasion, with the exception of any regulatory filings, shall also
be deemed approved.
8. General Provisions
------------------
(a) The Sub-Adviser may rely on information reasonably believed by it to
be accurate and reliable. Except as may otherwise be provided by the
1940 Act, neither the Sub-Adviser nor its officers, directors,
employees or agents shall be subject to any liability for any error of
judgment or mistake of law or for any loss arising out of any
investment or other act or omission in the performance by the Sub-
Adviser of its duties under this Agreement or for any loss or damage
resulting from the imposition by any government or exchange control
restrictions which might affect the liquidity of the Fund's assets, or
from acts or omissions of custodians or securities depositories or
from any war or political act of any foreign government to which such
assets might be exposed, provided that nothing herein shall be deemed
to protect or purport to protect, the Sub-Adviser against any
liability to the Adviser or the Company or to its shareholders to
which the Sub-Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its
duties hereunder, or by reason of the Sub-Adviser's reckless disregard
of its obligations and duties hereunder or a breach of its fiduciary
duty.
(b) The Adviser and the Fund understand that the Sub-Adviser now acts,
will continue to act, or may act in the future, as investment adviser
or investment sub-adviser to fiduciary and other managed accounts,
including other investment companies and the Adviser and the Fund have
no objection to the Sub-Adviser so acting, provided that the Sub-
Adviser duly performs all obligations under this Agreement. The
Adviser and the Fund also understand that the Sub-Adviser may give
advice and take action with respect to any of its other clients or for
its own account which may differ from the timing or nature of action
taken by the Sub-Adviser, with respect to the Fund. Nothing in this
Agreement shall impose upon the Sub-Adviser any obligation to purchase
or sell or to recommend for purchase or sale, with respect to the
Fund, any security which the Sub-Adviser or its shareholders,
directors, officers, employees or affiliates may purchase or sell for
its or their own account(s) or for the account of any other client.
(c) Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the right of the
Sub-Adviser, or the right of any of its officers, directors or
employees who may also be an officer, director or employee of the
Company, or person otherwise affiliated with the Company (within the
meaning of the 1940 Act) to engage in any other business or to devote
time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature or to render
services of any kind to any other trust corporation, firm, individual
or association.
(d) Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Florida. The captions in this
Agreement are included for convenience only and in no way define or
delimit any of the provisions hereof or otherwise affect their
construction or effect.
(e) Any notice under this Agreement shall be in writing, addressed and
delivered or mailed postage pre-paid to the appropriate party at the
following address: The Adviser, the Company and the Fund at 777 East
Wisconsin Avenue, Suite 800, Milwaukee, Wisconsin 53202, and the Sub-
Adviser at One Liberty Place, 1650 Market Street, Philadelphia,
PA 19103-7391, Attention: General Counsel.
(f) Sub-Adviser agrees to notify Adviser of any change in Sub-Adviser's
senior officers, portfolio managers, and directors within a reasonable
time after such change. Sub-Adviser further agrees to provide Adviser
with any amendments to Parts I and II of its ADV within a reasonable
time after such amendments and notify Adviser of any regulatory, civil
or criminal proceedings, actions or complaints involving the Sub-
Adviser or its affiliates within a reasonable time.
(g) This Agreement may be amended in accordance with the 1940 Act.
(h) This Agreement constitutes the entire agreement among the parties
hereto.
(i) This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
THE GLENMEDE TRUST COMPANY
One Liberty Place
1650 Market Street
Suite 1200
Philadelphia, PA 19103-7391
By:
------------------------------------
----------------------, ------------
FIRSTAR INVESTMENT RESEARCH &
MANAGEMENT COMPANY
By:
------------------------------------
Name:
Title:
FIRSTAR FUNDS, INC.
By:
------------------------------------
Name:
Title:
EXHIBIT (d)(13)
FORM OF
ADDENDUM NO. 7 TO INVESTMENT ADVISORY AGREEMENT
This Addendum, dated as of the day of September, 1999, is entered into
-----
between FIRSTAR FUNDS, INC. (the "Company"), a Wisconsin corporation, and
Firstar Investment Research and Management Company, LLC (the "Investment
Adviser").
WHEREAS, the Company and the Investment Adviser have entered into an
Investment Advisory Agreement dated as of March 27, 1992 (the "Advisory
Agreement"), pursuant to which the Company appointed the Investment Adviser to
act as investment adviser to the Company for its Balanced Fund;
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the event
the Company establishes one or more additional investment portfolios with
respect to which it desires to retain the Investment Adviser to act as the
investment adviser under the Advisory Agreement, the Company shall so notify the
Investment Adviser in writing and if the Investment Adviser is willing to render
such services it shall notify the Company in writing, and the compensation to be
paid to the Investment Adviser shall be that which is agreed to in writing by
the Company and the Investment Adviser; and
WHEREAS, pursuant to Section 1(b) of the Advisory Agreement, the Company
has notified the Investment Adviser that it has established the International
Fund and that it desires to retain the Investment Adviser to act as the
investment adviser therefor, and the Investment Adviser has notified the Company
that it is willing to serve as investment adviser for the International Fund
(the "Fund");
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT.
------------
The Company hereby appoints the Investment Adviser to
act as investment adviser to the Company for the International Fund for the
period and the terms set forth herein and in the Advisory Agreement. The
Investment Adviser hereby accepts such appointment and agrees to render the
services set forth herein and in the Advisory Agreement, for the compensation
herein provided.
2. SUBCONTRACTORS.
---------------
It is understood that the Investment Adviser may from
time to time employ or associate with itself such person or persons as the
Investment Adviser may believe to be particularly fitted to assist in the
performance of this Agreement; provided, however, that the compensation of such
person or person shall be paid by the Investment Adviser; and that any person
providing investment advisory services to the Fund shall be approved in
accordance with the provisions of the 1940 Act. Each such sub-adviser is
hereinafter referred to as a "Sub-Adviser".
Notwithstanding the approval of any such Sub-Adviser(s), however, in
carrying out its obligations hereunder the Investment Adviser shall in all
events:
a. assist and consult with any Sub-Adviser with respect to the Fund
in connection with the Fund's continuous investment program;
b. establish and monitor general investment criteria and policies for
the Fund;
c. review, monitor and analyze on a periodic basis the Fund's
portfolio holdings and transactions to determine that each Sub-Adviser
performs its sub-advisory services in accordance with the Fund's investment
objective, policies and restrictions as stated in its prospectus and
statement of additional information and to determine that such portfolio
holdings are appropriate in light of the Fund's shareholder base;
d. review, monitor and analyze on a periodic basis the policies
established by any Sub-Adviser for the Fund with respect to the placement
of orders for the purchase and sale of portfolio securities;
e. review, monitor, analyze and report to the Board of Directors on
the performance of the Sub-Adviser(s);
f. furnish to the Board of Directors or the Sub-Adviser(s), reports,
statistical and economic information as may be requested; and
g. recommend, either in its sole discretion or in conjunction with
the Sub-Adviser(s), potential changes in investment policy.
In the event that any Sub-Adviser appointed hereunder is terminated, the
Investment Adviser may provide all investment advisory services pursuant to this
Agreement without a Sub-adviser or further shareholder approval.
3. COMPENSATION.
-------------
For the services provided and the expenses assumed with
respect to the International Fund pursuant to the Advisory Agreement and this
Addendum, the Company will pay the Investment Adviser and the Investment Adviser
will accept as full compensation therefor (a) of the gross income earned
------
by the Fund on the loan of its securities (excluding capital gains and losses if
any), plus (b) a fee, computed daily and paid monthly, at the annual rate of
of the first of the Fund's average net assets, of the next
- ----- ------- ------
of the Fund's average net assets, and of the Fund's average net
- ------- ------
assets exceeding .
------
4. MISCELLANEOUS.
--------------
Except to the extent supplemented hereby, the
Advisory Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
FIRSTAR FUNDS, INC.
By:
---------------------
(Authorized Officer)
FIRSTAR INVESTMENT RESEARCH AND MANAGEMENT
COMPANY, LLC
By:
---------------------
(Authorized Officer)
EXHIBIT (d) (14)
FORM OF ADDENDUM NO. 8 TO THE INVESTMENT ADVISORY AGREEMENT
This Addendum, dated as of the __ day of September, 1999, is entered into
between FIRSTAR FUNDS, INC. (the "Company"), a Wisconsin corporation, and
Firstar Investment Research and Management Company, LLC (the "Investment
Adviser").
WHEREAS, the Company and the Investment Adviser have entered into an
Investment Advisory Agreement dated as of March 27, 1992 (the "Advisory
Agreement"), pursuant to which the Company appointed the Investment Adviser to
act as investment adviser to the Company for its Balanced Fund;
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the event
the Company establishes one or more additional investment portfolios with
respect to which it desires to retain the Investment Adviser to act as the
investment adviser under the Advisory Agreement, the Company shall so notify the
Investment Adviser in writing, and if the Investment Adviser is willing to
render such services it shall notify the Company in writing, and the
compensation to be paid to the Investment Adviser shall be that which is agreed
to in writing by the Company and the Investment Adviser; and
WHEREAS, pursuant to Section 1(b) of the Advisory Agreement, the Company
has notified the Investment Adviser that it has established the MidCap Index
Fund and that it desires to retain the Investment Adviser to act as the
investment adviser therefor, and the Investment Adviser has notified the Company
that it is willing to serve as investment adviser for the MidCap Index Fund (the
"Fund");
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Company hereby appoints the Investment Adviser to
-----------
act as investment adviser to the Company for the MidCap Index Fund for the
period and the terms set forth herein and in the Advisory Agreement. The
Investment Adviser hereby accepts such appointment and agrees to render the
services set forth herein and in the Advisory Agreement, for the compensation
herein provided.
2. COMPENSATION. For the services provided and the expenses assumed with
------------
respect to the MidCap Index Fund pursuant to the Advisory Agreement and this
Addendum, the Company will pay the Investment Adviser and the Investment Adviser
will accept as full compensation therefor ____________.
3. MISCELLANEOUS. Except to the extent supplemented hereby, the Advisory
-------------
Agreement shall remain unchanged and in full force and effect and is hereby
ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
FIRSTAR FUNDS, INC.
By:
-----------------------------
Title:
FIRSTAR INVESTMENT RESEARCH
AND MANAGEMENT COMPANY, LLC
By:
-----------------------------
Title:
EXHIBIT (e) (6)
FORM OF ADDENDUM NO.5 TO THE DISTRIBUTION AGREEMENT
This Addendum, dated as of the __ day of September, 1999, is entered into
between Firstar Funds, Inc. (the "Company"), a Wisconsin corporation, and B.C.
Ziegler and Company, a Wisconsin corporation ("BCZ").
WHEREAS, the Company and BCZ have entered into a Distribution Agreement
dated as of January 1, 1995 (the "Distribution Agreement"), pursuant to which
the Company appointed BCZ to provide distribution services to the Company for
its Money Market Fund, U.S. Treasury Money Market Fund, U.S. Government Money
Market Fund, Tax-Exempt Money Market Fund, Short-Term Bond Market Fund,
Intermediate Bond Market Fund, Tax-Exempt Intermediate Bond Fund, Bond IMMDEX/TM
Fund, Balanced Income Fund, Balanced Growth Fund, Growth and Income Fund, Equity
Index Fund, Growth Fund, Special Growth Fund, Emerging Growth Fund, MicroCap
Fund, International Equity Fund and any other Firstar Funds that may be
contemplated;
WHEREAS, the Company is establishing an additional investment portfolio to
be known as the International Fund and desires to retain BCZ to act as the
distributor under the Distribution Agreement; and
WHEREAS, BCZ is willing to serve as distributor for the International Fund
(the "Fund");
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Company hereby appoints BCZ to act as distributor to
-----------
the Company for the International Fund for the period and the terms set forth
herein and in the Distribution Agreement. BCZ hereby accepts such appointment
and agrees to render the services set forth herein and in the Distribution
Agreement.
2. MISCELLANEOUS. Except to the extent supplemented hereby, the
-------------
Distribution Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
Firstar FUNDS, INC.
By:
-------------------------------
Title:
B.C. ZIEGLER AND COMPANY
By:
------------------------------
Title:
EXHIBIT (e) (7)
FORM OF ADDENDUM NO.6 TO THE DISTRIBUTION AGREEMENT
This Addendum, dated as of the __ day of September, 1999, is entered into
between Firstar Funds, Inc. (the "Company"), a Wisconsin corporation, and B.C.
Ziegler and Company, a Wisconsin corporation ("BCZ").
WHEREAS, the Company and BCZ have entered into a Distribution Agreement
dated as of January 1, 1995 (the "Distribution Agreement"), pursuant to which
the Company appointed BCZ to provide distribution services to the Company for
its Money Market Fund, U.S. Treasury Money Market Fund, U.S. Government Money
Market Fund, Tax-Exempt Money Market Fund, Short-Term Bond Market Fund,
Intermediate Bond Market Fund, Tax-Exempt Intermediate Bond Fund, Bond IMMDEX/TM
Fund, Balanced Income Fund, Balanced Growth Fund, Growth and Income Fund, Equity
Index Fund, Growth Fund, Special Growth Fund, Emerging Growth Fund, MicroCap
Fund, International Equity Fund and any other Firstar Funds that may be
contemplated;
WHEREAS, the Company is establishing an additional investment portfolio to
be known as the MidCap Index Fund and desires to retain BCZ to act as the
distributor under the Distribution Agreement; and
WHEREAS, BCZ is willing to serve as distributor for the MidCap Index Fund
(the "Fund");
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Company hereby appoints BCZ to act as distributor to
-----------
the Company for the MidCap Index Fund for the period and the terms set forth
herein and in the Distribution Agreement. BCZ hereby accepts such appointment
and agrees to render the services set forth herein and in the Distribution
Agreement.
2. MISCELLANEOUS. Except to the extent supplemented hereby, the
-------------
Distribution Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
Firstar FUNDS, INC.
By:
-------------------------------
Title:
B.C. ZIEGLER AND COMPANY
By:
------------------------------
Title:
EXHIBIT (g) (15)
FORM OF CUSTODIAN AGREEMENT
(ADDITION OF THE INTERNATIONAL FUND)
Firstar Bank Milwaukee, N.A.
777 E. Wisconsin Ave.
Milwaukee, WI 53202
Gentlemen:
Pursuant to Paragraph 16 of the Custodian Agreement dated as of July
29, 1988 and amended as of May 1, 1990, between Firstar Funds, Inc. (formerly,
Portico Funds, Inc. and formerly Elan Funds, Inc.) (the "Company"), as assigned
to you by assignment dated October 1, 1998, the Company requests that you render
services as Custodian under the terms of said agreement with respect to the
International Fund, an additional portfolio which the Company is establishing.
Your compensation for the services provided under said agreement for said
additional portfolio shall be determined in accordance with the fee schedule
attached hereto.
Please sign two copies of this letter where indicated to signify your
agreement to serve as Custodian and to the compensation terms set forth on the
attached fee schedule.
Sincerely,
Dated: September __, 1999 FIRSTAR FUNDS, INC.
By:
-------------------------------
(Authorized Officer)
ACKNOWLEDGED AND AGREED:
FIRSTAR BANK MILWAUKEE, N.A.
By: Dated: September __, 1999
---------------------------
(Authorized Officer)
FIRSTAR BANK MILWAUKEE, N.A.
MUTUAL FUND CUSTODIAL AGENT SERVICE ANNUAL FEE SCHEDULE
FOR
International Fund
-------------------
Annual Fee based on total assets of the Firstar Fund:
- ----------
% on the first $2 billion
- -----
% on the next $2 billion
- -----
% on the balance in excess of $4 billion
- -----
Investment Transactions: Purchase, sale, exchange, tender, redemption
(maturity), receipt and delivery.
$ per Book Entry Securities (Depository or Federal
----- Reserve System).
$ per Definitive Security (Physical).
-----
$ per Euroclear.
-----
$ per Principal reduction on pass-through certificates.
-----
$ per Option/Futures Contract.
-----
$ per variation margin transaction.
-----
$ per Mutual Fund trade.
-----
$ per Fed Wire deposit or withdrawal.
-----
$ per Commercial Paper.
-----
$ per Repurchase Agreement.
-----
Extraordinary expenses based on time and complexity involved.
Out-of-Pocket Expenses: Charged on the account.
Fees are billed quarterly based on the value at the beginning of the quarter.
EXHIBIT (g) (16)
FORM OF CUSTODIAN AGREEMENT
(ADDITION OF THE MIDCAP INDEX FUND)
Firstar Bank Milwaukee, N.A.
777 E. Wisconsin Ave.
Milwaukee, WI 53202
Gentlemen:
Pursuant to Paragraph 16 of the Custodian Agreement dated as of July
29, 1988 and amended as of May 1, 1990, between Firstar Funds, Inc. (formerly,
Portico Funds, Inc. and formerly Elan Funds, Inc.) (the "Company") and Firstar
Trust Company, as assigned to you by assignment dated October 1, 1999, the
Company requests that you render services as Custodian under the terms of said
agreement with respect to the MidCap Index Fund, an additional portfolio which
the Company is establishing. Your compensation for the services provided under
said agreement for said additional portfolio shall be determined in accordance
with the fee schedule attached hereto.
Please sign two copies of this letter where indicated to signify your
agreement to serve as Custodian and to the compensation terms set forth on the
attached fee schedule.
Sincerely,
Dated: September __, 1999 FIRSTAR FUNDS, INC.
By:
--------------------------------
(Authorized Officer)
ACKNOWLEDGED AND AGREED:
FIRSTAR BANK MILWAUKEE, N.A.
By: Dated: September __, 1999
---------------------------
(Authorized Officer)
FIRSTAR BANK MILWAUKEE, N.A.
MUTUAL FUND CUSTODIAL AGENT SERVICE ANNUAL FEE SCHEDULE
FOR
MidCap Index Fund
-----------------
Annual Fee based on total assets of the Firstar Fund:
- ----------
% on the first $2 billion
- -----
% on the next $2 billion
- -----
% on the balance in excess of $4 billion
- -----
Investment Transactions: Purchase, sale, exchange, tender, redemption
(maturity), receipt and delivery.
$ per Book Entry Securities (Depository or Federal
----- Reserve System).
$ per Definitive Security (Physical).
-----
$ per Euroclear.
-----
$ per Principal reduction on pass-through certificates.
-----
$ per Option/Futures Contract.
-----
$ per variation margin transaction.
-----
$ per Mutual Fund trade.
-----
$ per Fed Wire deposit or withdrawal.
-----
$ per Commercial Paper.
-----
$ per Repurchase Agreement.
-----
Extraordinary expenses based on time and complexity involved.
Out-of-Pocket Expenses: Charged on the account.
Fees are billed quarterly based on the value at the beginning of the quarter.
EXHIBIT (h) (44)
CONFIDENTIALITY AGREEMENT
This Agreement is made as of June 17, 1999, between Charles Schwab & Co.,
Inc. ("Schwab"), a California corporation, and Firstar Investment Research and
Management Company, LLC ("Fund Affiliate"), an affiliate of Firstar Funds, Inc.
which entered into an Operating Agreement with Schwab, made as of June 17, 1999,
as amended thereafter ("Operating Agreement").
RECITALS
A. Fund Affiliate wishes Schwab to provide it with the names and
addresses of investment managers and retirement plan administrators, whose
clients hold positions in any of the Funds (as defined in the Operating
Agreement), for purposes of Fund Affiliate's direct marketing and communication
with these investment managers and retirement plan administrators and for
purposes of tracking the demographics of sale of the Fund shares. Fund
Affiliate mailings using this confidential, proprietary information may occur
through a mailing agent for the Fund Affiliate.
B. Subject to the terms and conditions herein or as may be mutually
agreed upon in writing from time to time, Schwab is willing to provide to Fund
Affiliate such confidential, proprietary information.
AGREEMENT
THEREFORE, in consideration of the foregoing and the mutual promises set
forth below, the parties agree as follows:
1. Definitions. As used in this Agreement, each of the following terms
-----------
will have the meaning ascribed thereto:
a. "Schwab Institutional Customer" means a Schwab customer who is an
investment manager or retirement plan administrator whose client(s) hold
position(s) in any of the Funds.
b. "Mailing Agent" means the person or entity with whom Fund
Affiliate contracts to act as its agent in performing mailings to Schwab
Institutional Customers and to whom Fund Affiliate provides names and addresses
of Schwab Institutional Customers received from Schwab under this Agreement;
c. "Objecting Customer" means any Schwab Institutional Customer who
has made objection to the release of his or her name or address.
d. "Proprietary Information" means the lists of names and addresses
of Schwab Institutional Customers, other than Objecting Customers, together with
the opening and closing position in the Fund(s) by each master account and any
activity which has occurred in the master account subsequent to any previous
reporting, which will be provided to Fund Affiliate under this Agreement.
2. Access to Proprietary Information.
---------------------------------
a. During the term of this Agreement, Schwab will provide to Fund
Affiliate on a monthly basis, the Proprietary Information for that month. The
Proprietary Information shall be provided together with the master accounts of
Objecting Customers which shall be identified only by coded account number.
b. Fund Affiliate will hold the Proprietary Information in strictest
confidence and will use the Proprietary Information solely for the business
purposes set forth in Recital A above. Fund Affiliate will have in effect, and
enforce, rules and policies designed to prevent unauthorized access to,
disclosure of, or use of the Proprietary Information by their employees or
Mailing Agent, including but not limited to communication to their employees and
Mailing Agent of the terms of this Confidentiality Agreement, to insure that
they protect the confidentiality of the Proprietary Information. Fund Affiliate
may disclose Proprietary Information to its responsible employees and Mailing
Agent only to the extent necessary to carry out the purpose for which
Proprietary Information is disclosed as set forth in Recital A. Fund Affiliate
shall instruct its employees not to disclose Proprietary Information to third
parties, except to Mailing Agent.
c. Fund Affiliate shall not be prevented from using or disclosing
any information or material, or any element thereof, whether or not such
information or material is Proprietary Information for the purposes of this
Agreement, to the extent any such information or material, or any element
thereof:
i. has been previously published or is published hereafter,
unless such publication is itself a breach of this Agreement or a similar
confidential disclosure agreement with Schwab;
ii. was already known to Fund Affiliate prior to being disclosed
by Schwab as evidenced by written records kept in the ordinary course of
business of Fund Affiliate or by proof of actual use by Fund Affiliate;
iii. has been or is hereafter rightfully received by Fund
Affiliate from a third person without restriction on disclosure and without
breach of this Agreement; or
iv. has been independently developed by Fund Affiliate.
It shall be presumed that any Proprietary Information in Fund Affiliate's
possession is not within exceptions (iii) or (iv) above, and the burden is on
Fund Affiliate to prove otherwise by records and documentation.
d. Fund Affiliate may release Proprietary Information if required by
law or by order or requirement of any court or governmental authority; provided
that prior to releasing Proprietary Information pursuant to any such requirement
or order, Fund Affiliate shall so notify Schwab. If feasible, such notice shall
be provided not less than five (5) business days prior to the required
disclosure. Fund Affiliate will use reasonable efforts not to release the
Proprietary Information pending the outcome of any measures taken by Schwab to
contest the requirement or order.
e. Fund Affiliate acknowledges and agrees that it or its agent's
breach of any part of this Agreement will result in irreparable harm to Schwab
for which an adequate remedy is not available at law. Accordingly, in such
event, Schwab shall be entitled, in addition to any other remedies available, to
equitable relief, including preliminary injunction and restraining order.
f. Fund Affiliate shall receive Proprietary Information back from
any Mailing Agent, and destroy all tangible and non-tangible representations of
Proprietary Information, within thirty (30) days of its receipt, upon receipt of
Proprietary Information for a more recent month, or at termination of this
Agreement, whichever is sooner. Fund Affiliate shall, if so requested by
Schwab, deliver a letter to Schwab confirming the return and the destruction of
the Proprietary Information.
g. Schwab reserves all rights in the Proprietary Information
pursuant to any patents and copyrights contained therein. Fund Affiliate
recognizes and agrees that nothing contained in this Agreement shall be
construed as granting any rights, license or otherwise, to any Proprietary
Information disclosed pursuant to this Agreement.
h. Fund Affiliate shall, at its own expense, take all reasonable
steps, including the initiation and prosecution of actions at law or in equity,
necessary to prevent disclosure of any Proprietary Information by any employee
of Fund Affiliate or Mailing Agent or any former employee of Fund Affiliate or
Mailing Agent, and to prevent the unauthorized use or disclosure of any
Proprietary Information by any other person who gained such Proprietary
Information from Fund Affiliate or Mailing Agent, or either's employees or
former employees, in violation of the terms of this Agreement.
3. Responsibility for Communications. Fund Affiliate acknowledges its
---------------------------------
sole responsibility for any communication made with or mailings sent to Schwab
Institutional Customers hereunder, and the compliance of such communications and
mailings with all applicable laws and regulations.
4. Indemnification. Fund Affiliate shall indemnify and hold harmless
---------------
Schwab and each director, officer, employee and agent of Schwab from and against
any and all claims, liabilities, losses, damages, and expenses of any nature,
including counsel fees ("Losses") arising out of (i) any use made by Fund
Affiliate or Mailing Agent of the Proprietary Information, (ii) any failure by
Fund Affiliate or Mailing Agent to comply with any applicable laws and
regulations in performing this Agreement, and (iii) any action taken or omitted
to be taken by Schwab in observance of the terms of this Agreement, unless such
Losses were the direct result of Schwab's malfeasance, bad faith, or negligence.
5. Liability. Fund Affiliate shall cause Mailing Agent to enter into a
---------
contract with Fund Affiliate requiring that the Proprietary Information be kept
confidential as provided in this Agreement and not used for any other purpose
than envisioned under this Agreement. Fund Affiliate understands and agrees
that it shall be liable for any failure of the Mailing Agent to keep the
Proprietary Information confidential to the extent provided in this Agreement.
6. Assignability. This Agreement shall be binding upon, and shall inure
-------------
to the benefit of, the parties and their respective successors and assigns. Any
assignment (within the meaning of Section 2(a)(4) of the Investment Company Act
of 1940, as amended) of this Agreement by Fund Affiliate is prohibited without
Schwab's prior written consent.
7. Termination. Schwab may terminate this Agreement by giving Fund
-----------
Affiliate ten (10) days prior written notice. The termination of the Agreement
shall not affect Fund Affiliate's obligations or rights with respect to
Proprietary Information disclosed prior to the effective date of termination,
including but not limited to indemnification.
8. Choice of Law. This Agreement shall be governed by and interpreted in
-------------
accordance with the laws of the State of California applicable to agreements
made and performed in California by California residents. If any provision of
this Agreement is determined to be illegal or unenforceable by competent
judicial authority, all other terms and provisions shall nevertheless remain
effective and shall be enforced to the fullest extent permitted by law.
9. Waiver. No delay or omission by a party in exercising any rights
------
under this Agreement will operate as a waiver of that or any other right. A
waiver or consent given by a party on one occasion is effective only in that
instance and will not be construed as bar to or waiver of any right on any other
occasion.
10. Entire Agreement. This Agreement contains the entire agreement
----------------
between the parties with respect to the subject matter hereof. Any modification
to this Agreement must be in writing and signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CHARLES SCHWAB & CO., INC. FIRSTAR INVESTMENT RESEARCH AND
MANAGEMENT COMPANY, LLC
By: /s/ Dennis P. Clark
-------------------------------
Dennis P. Clark By: /s/ Laura Rauman
Senior Vice President --------------------------------------
Mutual Funds Name: Laura Rauman
-------------------------------------
Date: June 30, 1999 Title: Vice President
------------------------------ ------------------------------------
Date: June 21, 1999
-------------------------------------
EXHIBIT (h) (45)
OPERATING AGREEMENT
This Agreement is made as of June 17, 1999, between Charles Schwab & Co.,
Inc. ("Schwab"), a California corporation, Firstar Investment Research and
Management Co., LLC ("Fund Affiliate"), and each registered investment company
executing this Agreement ("Fund Company"), on its own behalf and on behalf of
each of its series or classes of shares listed on Schedule I ("Fund(s)"), as
amended from time to time. In the event there are no series or classes of
shares listed on Schedule 1, then the term "Fund" shall mean "Fund Company."
WHEREAS, Fund Company and Fund Affiliate wish to have shares of the
Fund(s) available to investors for purchase and redemption through Schwab's
Mutual Fund Marketplace/R ("MFMP");
WHEREAS, certain policies, procedures and information are necessary to
enable the Fund(s) to participate in the MFMP; and
WHEREAS, Schwab is willing to permit the Fund(s) to participate in its
MFMP pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
set forth below, the parties agree as follows:
1. Operating Procedures
--------------------
Schwab will open an omnibus account (the "Account") with each Fund
through which it will purchase and redeem shares, settle transactions, reconcile
transactions, obtain pricing, reinvest distributions and maintain records in
accordance with the Operating Procedures set forth in Exhibit A hereto. In
addition, the parties agree to transfer accounts, communicate with Fund
shareholders and perform other obligations in accordance with the Operating
Procedures.
2. Qualification Requirements
--------------------------
a. Schwab will only place purchase orders for shares of a Fund on
behalf of an MFMP investor whose account address recorded on Schwab's books is
in a state or other jurisdiction in which Fund Company has advised Schwab that
such Fund has qualified its shares for sale under applicable law. Fund Company
shall advise Schwab immediately if any such qualification is terminated or if it
wishes Schwab not to place purchase orders for a Fund on behalf of MFMP
investors whose account addresses are in a particular state or other
jurisdiction.
b. Schwab will, upon request, (i) furnish Fund Company with
monthly written statements of the number of shares of each Fund purchased on
behalf of MFMP investors whose account addresses are in one or more states or
other jurisdictions indicated by Fund Company or (ii) on a daily basis, transmit
to an electronic database provider with whom Schwab has established effective
systems interfaces information regarding the number of shares of each Fund
purchased on behalf of MFMP investors whose account addresses are in each state
for retrieval by Fund Company. Fund Company or Fund Affiliate shall be
responsible for all reasonable fees and other reasonable charges of such
database provider in connection with Schwab's transmission of such information
to and Fund Company's retrieval of such information from such database provider.
3. Compliance Responsibilities
---------------------------
a. Fund Company is responsible for (i) the compliance of each
prospectus, registration statement, annual or other periodic report, proxy
statement and item of advertising or marketing material of or relating to each
Fund with all applicable laws, rules and regulations (except for advertising or
marketing material prepared by Schwab that was not published or provided to
Schwab by or on behalf of Fund Company or any Affiliate (defined below) or
accurately derived from information published or provided by or on behalf of
Fund Company or any Affiliate), (ii) the distribution and tabulation of proxies
in accordance with all applicable laws, rules and regulations (except for such
proxy related services provided by Schwab's mailing agent), (iii) the
registration or qualification of the shares of each Fund under all applicable
laws, rules and regulations, and (iv) the compliance by Fund Company and each
Affiliate of Fund Company, as that term is defined below, with all applicable
laws, rules and regulations (including the Investment Company Act of 1940, as
amended (the "1940 Act"), and the Investment Advisers Act of 1940, as amended),
and the rules and regulations of each self-regulatory organization with
jurisdiction over Fund Company or Affiliate, except to the extent that the
failure to so comply by Fund Company or any Affiliate is caused by Schwab's
breach of this Agreement. Fund Company's responsibilities under Sections
3(a)(i) to 3(a)(iv) include, but are not limited to, compliance of information
published, distributed, or made available, and activities conducted through, the
Internet and any other electronic medium. For purposes of this Agreement, an
"Affiliate" of a person means (i) any person directly or indirectly controlling,
controlled by, or under common control with, such person, (ii) any officer,
director, partner, corporation, or employee of such person, and (iii) if such
person is an investment company, any investment advisor thereof or any member of
the advisory board thereof.
b. In the event that the Account holds five percent (5 %) or more
of the outstanding Fund shares, Fund Company will be responsible for requesting
Schwab to confirm its status as shareholder of record and to confirm whether any
MFMP investor beneficially owns five percent (5%) or more of the outstanding
Fund shares through its Schwab brokerage account. For this purpose, Fund Company
shall indicate in its inquiry the number of Fund shares that equal five percent
(5 %) of outstanding Fund shares. Schwab shall promptly reply to any such
inquiries.
c. Schwab is responsible for Schwab's compliance with all
applicable laws, rules and regulations governing Schwab's performance under this
Agreement, except to the extent that Schwab's failure to comply with any law,
rule or regulation is caused by Fund Company's breach of this Agreement, or its
willful misconduct or negligence in the performance or failure to perform its
obligations under this Agreement.
d. Except as otherwise set forth in this Agreement, any
communication, instruction or notice made pursuant to this Agreement may be made
orally, provided that such oral communication is on a recorded telephone line or
is promptly confirmed in writing by facsimile transmission. Schwab is entitled
to rely on any communications, instructions or notices which it reasonably
believes were provided to it by Fund Company, any Affiliate or their agents
authorized to provide such communications, instructions or notices to Schwab.
Fund Company is entitled to rely on any communications, instructions or notices
it reasonably believes were provided to it by Schwab, or its agents authorized
to provide such communications, instructions or notices to Fund Company.
e. Except to the extent otherwise expressly provided in this
Agreement, neither party assumes any responsibility hereunder, or will be liable
to the other, for any damage, loss of data, delay or any other loss whatsoever
caused by events beyond its reasonable control.
f. Fund Company, as to each Fund severally and not jointly, shall
indemnify and hold harmless Schwab and each director, officer, employee and
agent of Schwab from and against any and all losses, claims, liabilities and
expenses (including reasonable attorney's fees) ("Losses") incurred by any of
them arising out of (i) any untrue statement of material fact or any omission of
a material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading in any prospectus,
registration statement, annual or other periodic report or proxy statement of
the Fund or in any advertising or promotional material published or provided to
Schwab by or on behalf of Fund Company or any Affiliate or accurately derived
from information published or provided by or on behalf of Fund Company or any
Affiliate, (ii) any violation of any law, rule or regulation relating to the
registration or qualification of shares of the Fund, (iii) any breach by Fund
Company of any representation, warranty or agreement contained in this
Agreement, or (iv) any willful misconduct or negligence by Fund Company or a
Fund in the performance of, or failure to perform, its obligations under this
Agreement, except to the extent such Losses are caused by Schwab's breach of
this Agreement or its willful misconduct or negligence in the performance, or
failure to perform, its obligations under this Agreement. This Section 3(f)
shall survive termination of this Agreement.
4. Account Establishment and Maintenance Fees
------------------------------------------
Fund Affiliate shall pay to Schwab such fees as are set forth on Schedule
II hereto to reimburse Schwab for its costs in establishing and maintaining
Account(s) for each Fund. The fee shall be paid at the time and in the manner
set forth in Schedule II.
5. Representations and Warranties
------------------------------
a. Fund Company represents and warrants that (i) each Fund is in
compliance with the conditions and qualifications set forth in Rule 2830 of the
Conduct Rules of the National Association of Securities Dealers Regulation, Inc.
("NASDR"), as amended from time to time ("Rule 2830"), which enable a member of
the National Association of Securities Dealers, Inc. ("NASD") to offer or sell
shares of the Fund; and (ii) each Fund marked with an asterisk on Schedule I is
a "no load" or "no sales charge" Fund as defined in Rule 2830. If a Fund, for
any reason, fails to satisfy the terms and conditions of Rule 2830, Fund Company
will notify Schwab immediately of such failure to satisfy the terms and
conditions and the reason therefor.
b. Schwab represents and warrants that it is a member of the NASD.
6. Use of Parties' Names
---------------------
a. Without Schwab's prior written consent, Fund Company will not
cause or permit the use, description, or reference to Schwab, or to the
relationship contemplated by this Agreement in any advertisement or promotional
materials or activities, including, without limitation, any advertisement or
promotional materials published, distributed, or made available, or any activity
conducted through, the Internet or any other electronic medium.
b. Fund Company authorizes Schwab to use the names or other
identifying marks of Fund Company and Fund in connection with the operation of
the MFMP.
c. Fund Company may withdraw this authorization as to any particular
use of any such name or identifying marks at any time (i) upon Fund Company's
reasonable determination that such use would have a material adverse effect on
the reputation or marketing efforts of Fund Company or such Fund, or (ii) if any
of the Funds cease to be available through the MFMP; provided, however, that
Schwab may, in its discretion, continue to use materials prepared or printed
prior to the withdrawal of such authorization or in the process of being
prepared or printed at the time of such withdrawal.
7. Proprietary Information
-----------------------
Each party hereto acknowledges that the identities of the other
party's customers, information maintained by such other party regarding those
customers, and all computer programs and procedures developed by such other
party or such other party's Affiliates or agents in connection with such other
party's performance of its duties hereunder constitute the valuable property of
such other party. Each party agrees that should it or its Affiliate or agent
come into possession of any list or compilation of the identities of or other
information about the other party's customers, or any other property of such
party, pursuant to this Agreement or any other agreement related to services
under this Agreement, the party who acquired such information or property, or
whose Affiliate or agent acquired such information or property, shall use its
best efforts to hold, or to cause its Affiliate or agent to hold, such
information or property in confidence and refrain from using, disclosing, or
distributing any of such information or other property, except (i) with the
other party's prior written consent, or (ii) as required by law or judicial
process. Each party acknowledges that any breach of the foregoing agreements as
to another party would result in immediate and irreparable harm to such other
party for which there would be no adequate remedy at law and agrees that in the
event of such a breach such other party will be entitled to equitable relief by
way of temporary and permanent injunctions, as well as such other relief as any
court of competent jurisdiction deems appropriate.
8. Assignability
-------------
This Agreement is not assignable by either party without the other
party's prior written consent, and any attempted assignment in contravention
hereof shall be null and void and not merely voidable; provided, however, that
Schwab may, without the consent of Fund Company, assign its rights and
obligations under this Agreement to any Affiliate.
9. Exhibits and Schedules; Entire Agreement
----------------------------------------
All Exhibits and Schedules to this Agreement, as they may be amended
from time to time, are by this reference incorporated into and made a part of
this Agreement. This Agreement (including the Exhibits and Schedule hereto)
constitutes the entire agreement between the parties as to the subject matter
hereof and supersedes any and all agreements, representations and warranties,
written or oral, regarding such subject matter made prior to the date on which
this Agreement has been executed and delivered by Schwab, Fund Affiliate and
Fund Company.
10. Amendment
---------
This Agreement may be amended only by a writing executed by each
party hereto that is to be bound by such amendment, except as provided in this
Section 10. Exhibit A and Schedule II may each be amended by Schwab on forty
(40) days' written notice to Fund Company or such earlier time as shall be
agreed to by the parties. Exhibits B and C shall be amended by Fund Company in
the event of any change to the information contained therein.
11. Governing Law
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This Agreement shall be governed by and interpreted under the laws
of the State of California, applicable to contracts between California residents
entered into and to be performed entirely within the state.
12. Arbitration.
-----------
In the event of a dispute between Fund Company, Fund Affiliate and
Schwab relating to or arising out of this Agreement or the relationship of the
parties hereto, the parties will submit the matter to arbitration in accordance
with paragraphs a, b, and c below.
a. Arbitration will be held in San Francisco, California, in
accordance with the rules and regulations of the NASD, except, (i) in the event
that the NASD is unwilling to accept jurisdiction of the matter, such
arbitration will be held in San Francisco, California in accordance with the
rules and regulations of the American Arbitration Association, and (ii) in the
event that a non-party to this Agreement brings an arbitration against Schwab or
Fund Company or Fund Affiliate relating to or arising out of this Agreement,
then the parties agree to arbitrate in whichever arbitration forum such
arbitration is brought.
b. If the arbitration is brought by one of the parties hereto, the
number of arbitrators will be three (3), and they will be selected in accordance
with the rules and regulations of the NASD or American Arbitration Association,
as appropriate. The arbitrators shall be attorneys specializing in securities
law. Any award of the arbitrators will be limited to compensatory damages and
will be conclusive and binding upon the parties. The arbitration shall be
governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16 to the exclusion
of state laws inconsistent therewith, and judgment upon the award may be entered
in any court having jurisdiction.
c. Each party will bear its own expenses, including legal and
accounting fees, if any, with respect to the arbitration. The arbitrator will
designate the party to bear the expenses of the arbitration or the respective
amounts of such expense to be borne by each party. Any costs, fees or taxes
involved in enforcing the award shall be fully assessed against and paid by the
party resisting enforcement of the award.
d. Nothing in this Section 12 will prevent either party from
resorting to judicial proceedings or otherwise for injunctive relief to prevent
serious irreparable harm or injury to a party or to others.
13. Effectiveness and Termination
-----------------------------
a. The effective date of this Agreement as to any Fund shall be the
later of the date on which this Agreement is made or the date set forth opposite
the name of the Fund on Schedule I.
b. This Agreement may be terminated as to any Fund by Schwab
immediately upon written notice to Fund Company. This Agreement may be
terminated as to any Fund by Fund Company upon thirty (30) days' written notice
to Schwab.
c. Upon the termination date for any Fund, Schwab will no longer
make the Fund shares available for purchase by investors through the MFMP.
Schwab reserves the right to transfer the Fund shares of MFMP investors out of
the Account. If Schwab continues to hold the Fund shares on behalf of MFMP
investors in the Account, the parties agree to be obligated under, and act in
accordance with, the terms and conditions of this Agreement with respect to such
shares.
IN WITNESS WHEREOF, this Agreement has been executed by a duly
authorized representative of the parties hereto.
CHARLES SCHWAB & CO., INC. FIRSTAR FUNDS, INC., on its own behalf
and on behalf of each Fund listed on
By: /s/ Fred Potts Schedule I hereto, as amended from
-------------------------------- time to time
Fred Potts
Vice President/Mutual Funds
Operations Administration By: /s/ Mary Ellen Stanek
------------------------------
Date: July 5, 1999 Name: Mary Ellen Stanek
------------------------------- ------------------------------
Title: President
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FIRSTAR INVESTMENT RESEARCH AND
MANAGEMENT CO., LLC Date: June 21, 1999
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By: /s/ Laura Rauman
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Name: Laura Rauman
-----------------------------
Title: Vice President
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Date: June 21, 1999
-----------------------------
SCHEDULE I
TO THE OPERATING AGREEMENT
Fund Company/Funds Effective Date
------------------ --------------
Firstar Funds, Inc.
Firstar Bond IMMDEX/TM Fund, Retail A Shares 6/17/99
Firstar Growth Fund, Retail A Shares 6/17/99
Firstar Growth & Income Fund, Retail A Shares 6/17/99
Firstar Intermediate Bond Market Fund, Retail A Shares 6/17/99
Firstar MicroCap Fund, Retail A Shares 6/17/99
* Indicates that Fund is a "no-load" or "no sales charge" Fund as defined in
Rule 2830 of the NASDR.
SI Indicates that Fund is available only to MFMP investors through Schwab
Institutional or another advice program offered or made available by
financial institutions clearing transactions through Schwab.
SCHEDULE II
TO THE OPERATING AGREEMENT
Fees to Establish and Maintain Account(s) for a Fund
ESTABLISHMENT FEE
The Establishment Fee for the Account(s) for the initial Fund established
on Schwab's system shall be $18,000 plus an additional amount determined as
follows for any negotiation of this Operating Agreement with Schwab's in house
or external legal counsel: $2,000 for each 10 hour period of such attorney time
or any incremental portion thereof. The Establishment Fee for the Account(s)
for each additional Fund, whether added at the same time or subsequent to the
initial Fund, shall be $6,000. The Establishment Fee for each Fund shall be
paid prior to establishment of the Account(s) for such Fund.
MAINTENANCE FEE
a. The Maintenance Fee as to the Account(s) for each Fund shall be
billed in arrears on February 28 (or February 29 in a leap year) and August 31
(each an "Assessment Date") on the first Assessment Date after the establishment
of the Account(s) for the Fund on the Schwab system. The Maintenance Fee as to
the Account(s) of a Fund shall continue to be paid as long as there are any
shares held in the Account(s). The Maintenance Fee shall be paid by wire
transfer within ten (10) days after Fund Company's receipt of the invoice. Such
wire transfers shall be separate from wire transfers of redemption proceeds or
distributions under this Agreement.
b The Maintenance Fee as to the Account(s) for a Fund is $1,000 per
full month of establishment on Schwab's system since the previous Assessment
Date unless the assets held in the Account(s) for the Fund are in excess of $5
million on the Assessment Date. If the assets held in the Account(s) for a Fund
are in excess of $5 million on the Assessment Date, then the Maintenance Fee as
to the Account(s) for the Fund for such period is $0.
c For purposes of this calculation, the value of the shares of each
Fund will be the net asset value reported by such Fund to the National
Association of Securities Dealers, Inc. Automated Quotation System. No
adjustments will be made to the net asset values to correct errors in the net
asset values so reported for any Assessment Date unless such error is corrected
and the corrected net asset value per share is reported to Schwab before 5
o'clock, p.m., San Francisco time, on the next business day after the Assessment
Date to which the error relates. For purposes of this Exhibit, a "Business Day"
is any day the New York Stock Exchange is open for trading.
EXHIBIT A
OPERATING PROCEDURES
1. The Account
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a. Schwab will open an Account with each Fund. The Account shall
be registered:
Charles Schwab & Co., Inc.
Special Custody Account for the Exclusive Benefit of Customers
Attention: Mutual Funds
101 Montgomery Street
San Francisco, California 94104
The Account will be set up for the reinvestment of capital gains and dividend
distributions.
b. The Fund shall designate the Account with account numbers.
Account numbers will be the means of identification when the parties are
transacting in the Account.
c. The Parties acknowledge that the Account is an omnibus account
in Schwab's name with shares held by any number of beneficial owners. Schwab
represents that the shares in the Account are customer securities and are
segregated from Schwab's own assets. Fund Company represents that the shares in
the Account are carried free of any charge, lien or payment of any kind in favor
of the Fund or any person claiming through the Fund.
d. The Account shall be kept open on the Fund's books regardless
of a lack of activity or small position size, except to the extent that Schwab
takes specific action to close the Account, or to the extent the Fund's
prospectus reserves the right to close accounts that are inactive. In the
latter case, Fund Company will give prior notice to Schwab before closing any
Account.
e. Schwab has the right to open additional accounts from time to
time to accommodate other investment options and features, and to consolidate
existing accounts if and when appropriate to meet the needs of the MFMP. In the
event that it is necessary for Schwab to open an account with a Fund for the
payment of distributions in cash, the term "Account" shall mean both the account
for the reinvestment of capital gains and dividend distributions and the account
for the payment of distributions in cash.
f. Schwab reserves the right to issue instructions to each Fund
to move shares between the Account and any other account Schwab may open.
2. Purchase and Redemption Orders
------------------------------
For each day on which any MFMP investor places with Schwab a
purchase or redemption order for shares of a Fund, Schwab shall aggregate all
such purchase orders and aggregate all such redemption orders and communicate to
the Fund an aggregate purchase order and an aggregate redemption order.
3. Authorization to Receive Orders on Fund's Behalf
------------------------------------------------
a. Fund Company hereby designates and authorizes Schwab to
receive purchase and redemption orders in proper form ("Orders") from MFMP
investors on the Fund's behalf for purposes of Rule 22c-1, so that any such MFMP
investor will receive the share price next computed by the Fund after the time
at which such MFMP investor places its Order with Schwab.
b. Fund Company further agrees that Schwab may designate and
authorize such intermediaries as it deems necessary, appropriate or desirable
("Sub-Designees"), to receive Orders from their customers on the Fund's behalf
for purposes of Rule 22c-1, so that any such customer will receive the share
price next computed by the Fund after the time at which such customer places its
Order with Sub-Designee. Schwab shall be liable to Fund Company and the Funds
for compliance with the terms of this Section 3b to the same extent as if Schwab
itself had acted or failed to act instead of the Sub-Designee.
c. Schwab agrees that, except as set forth in Section 4b below,
(a) Orders received by Schwab or a Sub-Designee prior to the close of the New
York Stock Exchange (generally, 4:00 p.m. Eastern Time) ("Market Close") on any
Business Day ("Day 1") (such Orders are referred to herein as "Day 1 Trades")
will be transmitted by Schwab to the Fund by 8:00 p.m. Eastern Time on the same
Business Day; and (b) Orders received by Schwab or Sub-Designees at or after
Market Close on any business day (such Orders are referred to herein as "Day 2
Trades") will be transmitted by Schwab to the Fund by 8:00 p.m. Eastern Time on
the next Business Day ("Day 2"). For purposes of this Exhibit, a "business day"
is any day the New York Stock Exchange is open for trading.
d. In connection with this Section 3 of Exhibit A, Fund Company
represents and warrants to Schwab that all necessary legal and other actions
have been taken to authorize Schwab to receive purchase and redemption Orders
from MFMP investors on behalf of the Funds for purposes of Rule 22c-1 under the
1940 Act by each Fund's board of directors or board of trustees, and that it
will cause each Funds' board of directors or board of trustees to take such
necessary legal and other actions regarding the annual review of such
authorization.
e. In connection with this Section 3 of Exhibit A, Schwab
represents and warrants that:
(i) Schwab's internal control structure over the processing
and transmission of Orders for Fund transactions is suitably designed to prevent
or detect on a timely basis Orders received after Market Close from being
aggregated with Orders received before Market Close, and to minimize errors that
could result in late transmission of Orders to the Funds;
(ii) it will cause an independent public accountant or other
qualified independent party annually to review Schwab's internal control
structure and prepare a written report to Schwab concerning the structure's
adequacy for the obligations undertaken by Schwab under this Agreement, and that
upon receipt of its internal control structure report, it will make such report
available to Fund Company or any Fund upon written request; and
(iii) it will also require each Sub-Designee to retain an
independent public accountant or other qualified independent party annually to
review Sub-Designee's internal control structure and prepare a written report to
Schwab and the Sub-Designee concerning the structure's adequacy for the
obligations undertaken by Sub-Designee as set forth in this Agreement, and that,
upon its receipt of any internal control structure report of any Sub-Designee,
it will make such report available to Fund Company or any Fund upon written
request.
4. Fund's Pricing of Orders
------------------------
a. Fund Company agrees that, except as set forth in Section 4b
below, Day 1 Trades will be effected at the net asset value of each Fund's
shares ("Net Asset Value") calculated as of Market Close on Day 1, provided such
trades are received by the Fund by 8:00 p.m. Eastern Time on Day 1; and Day 2
Trades will be effected at the Net Asset Value calculated as of Market Close on
Day 2, provided such trades are received by the Fund by 8:00 p.m. Eastern Time
on Day 2. Fund Company agrees that, consistent with the foregoing, Day 1 Trades
will have been received by the Fund prior to Market Close on Day 1, and Day 2
Trades will have been received by the Fund prior to Market Close on Day 2, for
all purposes, including, without limitation, effecting distributions (if
distributions are paid based on the date Trades are effected).
b. Notwithstanding Sections 3c and 4a above, Fund Company agrees
that, if Schwab is prevented from transmitting Day 1 Trades to the Fund by 8:00
p.m. Eastern Time on Day 1 due to unforeseen circumstances, such as computer
system failures, natural catastrophes, or other emergencies or human error, then
Schwab may transmit such Day 1 Trades by 9:30 a.m. Eastern Time on Day 2, and
such Day 1 Trades will be effected at the Net Asset Value calculated as of
Market Close on Day 1, provided that Schwab notifies the Fund of such
contingency prior to 8:00 p.m. Eastern Time on Day 1.
5. Settlement of Transactions
--------------------------
a. Schwab and Fund Company will settle Day 1 Trades on Day 2 and
will settle Day 2 Trades on Day 3 (each, respectively, a "Settlement Date").
b. Schwab will transmit the aggregate purchase price of all the
purchase Orders for a given trade date to the Fund by wire transfer on the
appropriate Settlement Date.
c. Fund Company will cause the Fund(s) to send to Schwab the
aggregate proceeds of all redemption Orders for the Fund(s) placed by Schwab on
a given trade date on the appropriate Settlement Date. Such redemption proceeds
will be sent by wire transfer on the Settlement Date for the redemption Orders;
provided that Fund Company may, in its discretion, send such proceeds by check
if the aggregate amount is less than $250. Wire transfers of redemption
proceeds shall be separate from wire transfers for other purposes.
d. Each wire transfer of redemption proceeds shall indicate, on
the Fed Funds wire system, the amount thereof attributable to each Fund;
provided, however, that if the number of entries would be too great to be
transmitted through the Fed Funds wire system, Fund Company shall, on the day
the wire is sent, notify Schwab of such entries. The cost of the wire transfer
is the responsibility of the party sending the wire. The interest cost
associated with any delayed wire is the responsibility of the party sending the
wire and will be charged at the Federal Funds rate for Schwab, and as set forth
in Section 5(f) below for Fund Company.
e. Should a Fund need to extend settlement on a trade, including
without limitation Orders under any amendment to this Operating Agreement to
implement retirement plan order processing, Fund Company must contact Schwab by
7:00 p.m. Eastern time on trade date to discuss the extension. For purposes of
determining the length of settlement, Fund Company agrees to treat shareholders
that hold Fund shares through the Account the same as it treats shareholders
that hold Fund shares directly with the Fund.
f. If Fund Company does not settle redemption orders on
Settlement Date and has not contacted Schwab by 7:00 p.m. Eastern Time on trade
date to discuss such extension of settlement (even if such extension is due to a
systems problem unknown on trade date), then Schwab may, at its option, take any
or all of the following actions:
(i) Charge Fund Affiliate interest on the amount of the
redemption proceeds due to it, as follows:
(A) For the first day, (a) Schwab may charge Fund
Affiliate interest at the Federal Funds "offered" rate for such day as published
in The Wall Street Journal if the amount does not exceed $1 million, or (b)
Schwab may charge Fund Affiliate interest at the Prime Rate for such day as
published in The Wall Street Journal if the amount exceeds $1 million; and
(B) For each day following, Schwab may charge Fund
Affiliate interest at the Prime Rate for each such day as published in The Wall
Street Journal, plus 2% per annum; and
(ii) Upon notice to Fund Company, on any subsequent
Settlement Date and for so long as such redemption proceeds are due to it:
(A) Schwab may settle purchase orders and redemption
orders net of each other for such Fund; and/or
(B) Schwab may net any redemption proceeds still due
to it against any net or gross purchase amount due from it to the Fund.
g. In the event that a Fund cannot verify redemption proceeds,
Fund Company will settle trades and forward redemption proceeds in accordance
with this Agreement based on the information provided by Schwab. Schwab will be
responsible for the accuracy of all trade information provided by it.
h. Fund Company represents that each Fund that has reserved the
right to redeem in kind has filed Form N-18F-1 with the Securities and Exchange
Commission. For purposes of complying with the Fund's election on Form N-18F-1,
Fund Company agrees that it will treat as a "shareholder" each shareholder that
holds Fund shares through the Account, provided that Schwab provides to Fund
Company, upon request, the name or account number, number of Fund shares and
other relevant information for each such shareholder. Fund Company acknowledges
that treatment of Schwab as the sole shareholder of Fund shares held in the
Account for purposes of applying the limits in Rule 18f-1 under the 1940 Act
would be inconsistent with the intent of Rule 18f-1 and the Fund's election on
Form N-18F-1 and could unfairly prejudice shareholders that hold Fund shares
through the Account.
6. Account Reconciliation Requirements
-----------------------------------
a. Schwab shall verify, on a next day basis, Orders placed for
the Account with each Fund. All activity in the Account must be reflected.
Therefore, any "as of" activity must be shown with its corresponding "as of"
dates.
b. Schwab must receive statements on or before the eighth
Business Day of each month, even if there has been no activity in the Account
during the period, unless Schwab can verify transactions by electronic
transmission.
c. The parties agree to notify each other and correct any error
in the Account with any Fund upon discovery. If an error is not corrected by
the day following discovery, each party agrees to make best efforts to avoid
this from hindering any routine daily operational activity.
7. Pricing Information
-------------------
For every Business Day on which there is a transaction in the
Account and for each month-end Business Day, Fund Company will provide to Schwab
prior to 7:00 p.m., Eastern Time, each Fund's closing Net Asset Value and public
offering price (if applicable) for that day and/or notification of no price for
that day. Fund Company shall provide such information on a best efforts basis
taking into consideration any extraordinary circumstances arising at the Fund
(e.g. natural disasters, etc.).
8. Distributions
-------------
a. Fund Company shall provide distribution information to Schwab
in a timely manner to enable Schwab to pay distributions to its MFMP investors
on or as close to payable date as practicable. As to each Fund, Fund Company or
such Fund shall provide Schwab with (i) the record date, ex-dividend date, and
payable date with respect to a Fund as soon as practicable after it is
announced, but no later than three (3) Business Days prior to record date, (ii)
the record date share balance in the Account and the distribution rate per share
on the first Business Day after record date, and (iii) the reinvest price per
share as soon as it is available. Other distribution information required by
Schwab from time to time for payment of distributions to its MFMP investors
shall be provided by Fund Company on such dates as are agreed upon between
Schwab and Fund Company, but no later than payable date.
b. For purposes of effecting cash distributions for MFMP
investors who have elected to receive their capital gains distributions and/or
dividends in cash, prior to 10:00 a.m., Eastern Time, on the next Business Day
following receipt of the reinvest price per share as provided in paragraph
8(a)(iii) above, Schwab shall notify Fund Company of the aggregate number of
Fund shares necessary to make an adjusting reconciling transaction to void the
purchase of such number of shares. Fund Company or such Fund shall wire the
proceeds from said adjusting reconciling transaction from the Fund to the
designated Schwab account on the same Business Day. Schwab shall use such
proceeds to pay the distribution in cash to MFMP investors who have elected to
receive such distributions in cash.
c. In the event that Schwab maintains an Account with a Fund for
the payment of distributions in cash, Fund Company shall wire, on payable date,
any cash distribution from the Fund to Schwab.
d. (i) With respect to a consolidated omnibus Account, and for
purposes of effecting cash distributions for investors who have elected to
receive their capital gains distributions and/or dividends in cash, if Fund
Company does not wire the cash proceeds to Schwab on the next Business Day after
the ex-dividend date for such distribution (a "Due Date"), then Schwab may, at
its option, charge Fund Affiliate interest on the amount of such cash proceeds
outstanding on or after the Due Date as set forth in Section 8 (d)(iii) below.
(ii) With respect to a cash distribution Account, if Fund
Company does not wire the cash distribution to Schwab on the payable date for
such distribution (also a "Due Date"), then Schwab may, at its option, charge
Fund Affiliate interest on the amount of such cash distribution outstanding on
or after the Due Date as set forth in Section 8 (d)(iii) below.
(iii) (A) For the Due Date, Schwab may charge Fund Affiliate
interest at the Federal Funds "offered" rate for such day as published in The
Wall Street Journal if the amount does not exceed $1 million, and Schwab may
charge Fund Affiliate interest at the Prime Rate for such day as published in
The Wall Street Journal if the amount exceeds $1 million.
(B) For each day following the Due Date, Schwab may
charge Fund Affiliate interest at the Prime Rate for each such day as published
in The Wall Street Journal, plus 2% per annum.
e. For each Fund that pays daily dividends, Fund Company shall
provide on a daily basis, the following record date information: daily rate,
account share balance, account accrual dividend amount (for that day), account
accrual dividend amount (for period to date), and account transfers and period-
to-date accrual amounts.
f. For each Fund that pays daily dividends, each Fund shall
accrue dividends, commencing on the settlement date for the purchase of Fund
shares and terminating on the trade date for the redemption of Fund shares.
g. For annual tax reporting purposes, Fund Company shall inform
Schwab by January 15 of the portion of each Fund's distributions for the
previous calendar year that include dividends, capital gains, and tax
reclassifications; and by February 15, the portion of each Fund's distributions
for the previous calendar year that include foreign source income, tax exempt
income by state of origin or return of capital, U.S. government obligation
interest, creditable and non-creditable foreign tax, dividends eligible for the
corporate dividends received deductions, and redemption and exchange proceeds
and throwback dividends.
h. In conformance with its status as a broker/dealer holding its
customers securities in street name, Schwab shall prepare and file with the
appropriate governmental agencies, such information, returns and reports as are
required to be so filed for reporting (i) dividends and other distributions
made, (ii) amounts withheld on dividends and other distributions and payments
under applicable federal and state laws, rules and regulations and (iii) gross
proceeds of sales transactions as required.
i. Upon notice from Fund Company, Schwab shall effect mergers,
splits and other reorganization activities of a Fund for its customers.
9. Price and Distribution Rate Errors
----------------------------------
a. In the event adjustments are required to correct any error in
the computation of the Net Asset Value or public offering price of a Fund's
shares or in the distribution rate for a Fund's shares, Fund Company shall
notify Schwab upon discovering the need for such adjustments. Notification may
be made orally, but must be confirmed in writing.
b. Schwab and Fund Company shall agree promptly and in good faith
to a resolution of the error, and no adjustment for the error shall be taken in
the Account until such agreement is reached. Following resolution, upon request
by Schwab, Fund Company shall provide Schwab with written notification of the
resolution. The letter shall be written on Fund Company letterhead and must
state for each day on which an error occurred the incorrect price or rate, the
correct price or rate, and the reason for the price or rate change. Fund
Company agrees that Schwab may send this writing, or derivation thereof, to
Schwab's MFMP investors whose accounts are affected by the price or rate change.
c. If an MFMP investor has received cash in excess of what he is
entitled, Schwab will, when requested by Fund Company, and to the extent
practicable and permitted by law, debit the customer's brokerage account in the
amount of such excess, but only to the extent of any cash in the account, and
repay it to the Fund. In no event, however, shall Schwab be liable to Fund
Company or the Fund for any such amounts. Upon the request of Fund Company,
Schwab shall provide Fund Company with the name of Schwab's customer and other
relevant information concerning the customer's brokerage account to assist Fund
Company in the collection from Schwab's customer of any such excess amount not
repaid to the Fund.
d. If adjustment is necessary to correct an error which has
caused Schwab's customers to receive dollars or shares less than that to which
they are entitled, the Fund shall, as appropriate and as mutually agreed by the
parties pursuant to 9(b) above, make all necessary adjustments to the number of
shares owned in the Account and/or distribute to Schwab any and all amounts of
the underpayment. Schwab will credit the appropriate amount of such shares or
payment to each MFMP investor.
e. For purposes of making adjustments, including the collection
of overpayments, Fund Company agrees to treat shareholders that hold Fund shares
through the Account the same as it treats shareholders that hold Fund shares
directly with the Fund. When making adjustments for an error, a Fund shall not
net transactions for that day in the Account.
10. Record Maintenance
------------------
a. Schwab maintains records for each of its customers who holds
Fund shares through the Account, which records include:
i. Number of shares;
ii. Date, price and amount of purchases and redemptions (including
dividend reinvestments) and date and amounts of dividends paid
for at least the current year to date;
iii. Name and address of each of its customers, including zip codes
and social security numbers or taxpayer identification
numbers;
iv. Records of distributions and dividend payments;
v. Any transfers of shares; and
vi. Overall control records.
b. Schwab posts transactions in Fund shares to its customers'
brokerage accounts.
11. Transfer of Accounts
--------------------
a. Fund Company agrees to transfer shares between direct accounts
for MFMP investors or other street name brokers held with a Fund and the Account
on the Fund's records. For the purpose of expediting direct transfers from
accounts for MFMP investors, Fund Company will accept by facsimile transmission
a summary sheet of information ("Summary Sheet") indicating the customers'
names, account numbers, the Fund affected and the number of shares to be re-
registered or liquidated. For record keeping purposes, actual copies of
transfer forms will be forwarded to a Fund upon its request for such forms.
b. Schwab represents and warrants that for each transfer and
liquidation transfer indicated in the Summary Sheet, it holds each underlying
instruction for re-registration or liquidation signed by its customer, and that
its customer's signature on such instruction is signature guaranteed by Schwab
pursuant to the New York Stock Exchange's Medallion Signature Program. Schwab
will retain these documents for the period required by any applicable law rule
or regulation.
c. Schwab agrees to indemnify and hold harmless Fund Company, the
Fund and each director, officer, employee and agent of Fund Company
("indemnified person") from and against any and all Losses incurred by any of
them arising out of the impropriety of any transfer or liquidation transfer
effected by the Fund in reliance on the Summary Sheet to the same extent as
provided under the New York Stock Exchange's Medallion Signature Program, except
to the extent such Losses arise out of the failure of any indemnified person to
comply with the instructions on the Summary Sheet.
d. Fund Company shall process all transfer and liquidation
requests into the appropriate Account. Schwab as custodian is qualified to
accept in the Accounts shares from Fund IRA, Keogh or 401(k) accounts. At no
time shall any Fund establish separate accounts registered to Schwab for the
benefit of individual shareholders. In the event any such account is mistakenly
opened, Schwab reserves the right to instruct such Fund to move Fund shares to
the Account.
e. Fund Company must confirm to Schwab the completion of each
transfer on the day it occurs. The confirming information shall include the
number of shares, date ("as of" date if unavoidable delay), transaction date,
account number of the customer and the Account, registration, accrued dividends
and account type (i.e., IRA, Keogh, 401(k), etc.).
f. Transfer processing after record date but prior to payable
date will include all accrued dividends. Each Fund is responsible for
monitoring all completed full transfers for "trailing" dividends. Should a
"trailing" dividend appear in an account, a Fund shall send such dividend to
Schwab within five (5) Business Days, along with a specific written notification
thereof. Notification shall include details of the dividend and customer,
including the customer's social security number or taxpayer identification
number, and/or the account number for the Account to which the transfer was
made.
g. If MFMP investors submit share certificates for transfer into
their Schwab brokerage accounts, Schwab will send such certificates, properly
endorsed to the applicable Fund, for transfer into the Account with such Fund.
Upon Schwab's request, Fund Company agrees to provide the status of said
certificates and book share balances.
12. Shareholder Communication
-------------------------
a. Fund Company shall arrange with Schwab, or a mailing agent
designated or approved by Schwab, for the distribution of the materials listed
below to all of Schwab's customers who hold Fund shares, which distribution
shall be so arranged by Fund Company as to occur immediately upon the effective
date of the materials:
i. All proxy or information statements prepared for circulation
to shareholders of record of such Fund;
ii. Annual reports;
iii. Semi-annual reports;
iv. Quarterly reports (if applicable); and
v. All updated prospectuses, supplements and amendments thereto.
Fund Company shall be responsible for providing the materials and for Schwab or
the mailing agent's fees in connection with this service as well as for timely
distribution. Fund Company agrees to have Schwab or the mailing agent
consolidate mailings of material to shareholders of more than one Fund if the
mailing is identical for all Funds in the Fund Company family.
b. In addition to the materials listed above, Fund Company agrees
to provide directly to Schwab all prospectuses, statements of additional
information and supplements and amendments thereto, and annual and other
periodic reports for each Fund in amounts reasonably requested by Schwab for
distribution to its customers. Fund Company is obligated to supply these
materials to Schwab in a timely manner so as to allow Schwab, at its own
expense, to send current prospectuses and statements of additional information
and periodic reports, immediately upon their effective dates, to customers and
prospective customers requesting them through Schwab. Schwab will also send a
current Fund prospectus with purchase trade confirmations for the initial
purchase of a Fund. Fund Company shall notify Schwab immediately of any change
to a Fund's prospectus.
c. If Schwab acts as clearing broker in an omnibus relationship
with a correspondent bank or broker ("Correspondent"), upon the request of
Schwab, Fund Company shall also provide to Schwab, in a timely manner,
sufficient supplies of Fund materials identified in Sections 12(a) and 12(b) for
Schwab to give to Correspondent for the distribution of such materials to
Correspondent's customers who hold Fund shares.
d. Fund Company shall ensure that the prospectus of each of its
Funds discloses that a broker may charge transaction fees on the purchase and/or
sale of Fund shares. Fund Company shall also ensure that either the prospectus,
or the statement of additional information ("SAI") if the SAI is incorporated in
the prospectus, of each of its Funds discloses (i) that the Fund has authorized
one or more brokers to receive on its behalf purchase and redemption Orders;
(ii) that such brokers are authorized to designate other intermediaries to
receive purchase and redemption Orders on the Fund's behalf; (iii) that the Fund
will be deemed to have received a purchase or redemption Order when an
authorized broker or, if applicable, a broker's authorized designee, receives
the Order; (iv) that customer Orders will be priced at the Fund's Net Asset
Value next computed after they are received by an authorized broker or the
broker's authorized designee; (v) that the performance of the Fund may be
compared in publications to the performance of various indices and investments
for which reliable performance data is available; (vi) that the performance of
the Fund may be compared in publications to averages, performance rankings, or
other information prepared by recognized mutual fund statistical services; and
(vii) that the annual report contains additional performance information and
will be made available to investors upon request and without charge. If
adequate disclosure is not currently contained in the prospectus (including any
incorporated SAI), then it may be added at the next regular printing of the
prospectus.
e. Schwab mails statements to its customers on a monthly basis
(or as to accounts in which there has been no activity in a particular month, no
less frequently than quarterly) showing, among other things, the number of
shares of each Fund owned by such customer and the net asset value of each such
Fund as of a recent date.
f. Schwab responds to customer inquiries regarding, among other
things, share prices, account balances, dividend amounts and dividend payment
dates. With respect to Fund shares purchased by customers after the effective
date of this Agreement, Schwab provides average cost basis reporting to assist
customers in the preparation of income tax returns.
13. New Processing Systems
----------------------
Fund Company agrees to cooperate to the extent possible with Schwab as
Schwab develops and seeks to implement new processing systems for the MFMP.
EXHIBIT (h)(46)
RETIREMENT PLAN ORDER PROCESSING AMENDMENT
TO THE OPERATING AGREEMENT
This Retirement Plan Order Processing Amendment is made as of June 17,
1999, by and between Charles Schwab & Co., Inc. ("Schwab"), a California
corporation; The Charles Schwab Trust Company ("CSTC"), a California banking
corporation; Firstar Investment Research and Management Co., LLC ("Fund
Affiliate"); and each registered investment company ("Fund Company") listed on
Schedule I hereto, executing this Amendment on its own behalf and on behalf of
each of its series or classes of shares ("Fund(s)"), which are parties to an
Operating Agreement with Schwab, made as of June 17, 1999, as amended thereafter
("Operating Agreement"), including such Funds as are listed on Schedule II
hereto, which are excluded from participation in retirement plan order
processing under this Amendment ("Excluded Funds"). This Amendment amends the
Operating Agreement. In the event that there are no Funds, then the term
"Fund(s)" shall mean "Fund Company."
WHEREAS, Schwab, Fund Affiliate and Fund Company, on its own behalf and on
behalf of the Funds, have entered into the Operating Agreement pursuant to which
shares of the Funds are made available for purchase and redemption by Schwab's
brokerage customers through Schwab's Mutual Fund Marketplace/R ("MFMP");
WHEREAS, Schwab has designated CSTC as its agent to perform certain
functions under the Operating Agreement, including communication of aggregate
purchase and redemption orders for Fund shares to each Fund, for which Schwab
remains fully responsible to Fund Company and the Funds;
WHEREAS, Schwab, Fund Affiliate and Fund Company desire to amend the
Operating Agreement to facilitate the purchase and redemption of Fund shares on
behalf of certain retirement plans ("Plans") for which CSTC acts as trustee or
custodian of the trust funds under the Plans and for which an entity identified
on Schedule III, as amended by Schwab from time to time, acts as recordkeeper
("Recordkeeper"), subject to the terms and conditions of this Amendment; and
WHEREAS, Fund Company wishes to appoint CSTC as a limited purpose co-
transfer agent to each Fund's named transfer agent to facilitate such purchases
and redemptions on behalf of the Plans, and CSTC wishes to accept this
appointment.
NOW THEREFORE, in consideration of the foregoing and the mutual promises
set forth below, the parties hereto agree as follows:
1. Agency Appointment and Acceptance. Fund Company hereby appoints CSTC
----------------------------------
to be a limited purpose co-transfer agent to each Fund's named transfer agent
for the purpose of receiving instructions in proper form from the persons
designated to direct investment of the Plan assets ("Instructions") from which
are derived orders for purchases and redemptions of Fund shares ("Orders").
CSTC hereby accepts the appointment as limited purpose co-transfer agent to each
Fund's named transfer agent.
2. Agents of CSTC. CSTC, as a co-transfer agent, may engage such
---------------
sub-agents as it deems necessary, appropriate or desirable to carry out its
obligation as a limited purpose co-transfer agent to each Fund's named transfer
agent under Section 1 of this Amendment, pursuant to such terms as are
consistent with the agreements set forth in this Amendment and as CSTC deems
necessary, appropriate or desirable. CSTC shall, however, remain fully
responsible to Fund Company and the Funds for any obligations performed by
CSTC's agents under this Section 2. These agents of CSTC shall be the
Recordkeepers and shall each be a service company and a limited purpose sub-
transfer agent to CSTC as co-transfer agent to each Fund's named transfer agent.
3. CSTC's Receipt and Transmission of Orders. CSTC agrees that (a)
------------------------------------------
Orders derived from Instructions received by Recordkeepers prior to the close of
the New York Stock Exchange (generally, 4:00 p.m. Eastern Time) ("Market Close")
on any Business Day ("Day 1") will be transmitted by CSTC to the Fund by 10:00
a.m. Eastern Time on the next Business Day ("Day 2") (such Orders are referred
to herein as "Day 1 Trades"); and (b) Orders derived from Instructions received
by Recordkeepers after Market Close on any Business Day ("Day 1") will be
transmitted by CSTC to the Fund by 10:00 am. Eastern Time on the second Business
Day following Day 1 ("Day 3") (such Orders are referred to herein as "Day 2
Trades").
4. Fund's Pricing of Orders. Fund Company agrees that Day 1 Trades will
------------------------
be effected at the net asset value of each Fund's shares ("Net Asset Value")
calculated as of Market Close on Day 1, provided such trades are received by the
Fund by 10:00 a.m. Eastern Time on Day 2; and Day 2 Trades will be effected at
the Net Asset Value calculated as of Market Close on Day 2, provided such trades
are received by the Fund by 10:00 a.m. Eastern Time on Day 3. Fund Company
agrees that, consistent with the foregoing, Day 1 Trades will have been received
by the Fund prior to Market Close on Day 1, and Day 2 Trades will have been
received by the Fund prior to Market Close on Day 2 for all purposes, including,
without limitation, effecting distributions.
5. Settlement. In accordance with the Operating Agreement, Schwab and
-----------
Fund Company will settle Day 1 Trades on Day 2 and will settle Day 2 Trades on
Day 3.
6. Provision of Net Asset Value. In accordance with the Operating
-----------------------------
Agreement, Fund Company will provide Schwab the Net Asset Value calculated as of
Market Close on each Business Day by 7:00 p.m. Eastern Time on such Business
Day.
7. Representations and Warranties as to Transfer Agency. CSTC represents
-----------------------------------------------------
and warrants that it is registered as a transfer agent under Section 17A of the
Securities Exchange Act of 1934, as amended ("1934 Act"), and CSTC will amend
its TA-1 filing to disclose its appointment pursuant to this Amendment as a
limited purpose co-transfer agent to each Fund's named transfer agent. CSTC
further represents and warrants that each Recordkeeper appointed by CSTC
pursuant to Section 2 of this Amendment shall be registered as a transfer agent
under Section 17A of the 1934 Act, and that it shall cause each Recordkeeper to
amend its TA-1 to disclose its appointment as a service company and a limited
purpose sub-transfer agent to CSTC as co-transfer agent to each Fund's named
transfer agent.
Fund Company represents and warrants that the Funds' named transfer agent
is set forth on Schedule IV hereto, as amended by Fund Company from time to
time.
8. Books and Records. To the extent required under the Investment
------------------
Company Act of 1940, as amended ("l940 Act"), and the rules thereunder, CSTC
agrees that such records maintained by it or each Recordkeeper hereunder are the
property of the Funds and will be preserved, maintained, and made available in
accordance with the 1940 Act and the rules thereunder. Copies, or if required
originals, of such records shall be surrendered promptly to a Fund and its
agents (or independent accountants) upon request. This Section 8 shall survive
termination of this Amendment.
9. Role and Relationship of CSTC. The parties acknowledge and agree
------------------------------
that, except as specifically provided in this Amendment, and for the sole and
limited purpose set forth herein, CSTC acts as an agent for Schwab under the
Operating Agreement in connection with the effectuation of Orders subject to
this Amendment. CSTC shall not be nor hold itself out as an agent of any Fund
other than as provided herein.
10. Role and Relationship of Recordkeepers. The parties acknowledge and
---------------------------------------
agree that, except as specifically provided in this Amendment and for the sole
and limited purpose set forth herein, the Recordkeepers act as agents of the
Plans in connection with the effectuation of Orders subject to this Amendment.
The parties agree that the Recordkeepers are not agents of the Funds other than
as provided herein, and CSTC shall ensure that the Recordkeepers do not hold
themselves out as an agent of any Fund other than as provided herein.
11. Insurance Coverage. CSTC shall maintain, and shall cause each
-------------------
Recordkeeper to maintain, general liability insurance, at all times that this
Amendment is in effect, that is reasonable and customary in light of its duties
hereunder. Such general liability insurance coverage shall be issued by a
qualified insurance carrier, with limits of not less than $5 million.
12. Termination. Fund Company will provide Schwab and CSTC 90 days' prior
------------
written notice if purchase orders for a Fund's shares may no longer be effected
in accordance with this Amendment. Such termination shall not affect the
remaining provisions of this Amendment as to such Fund, and redemption orders
shall continue to be effected pursuant to this Amendment. Schwab and CSTC may
terminate this Amendment as to a Fund upon 90 days' prior written notice to Fund
Company.
Any termination of the Operating Agreement by Fund Company shall not apply
to transactions effected pursuant to this Amendment prior to 90 days after the
date the Fund Company provides written notice of such termination to Schwab and
CSTC.
13. Indemnification. Schwab and CSTC, on the one hand, and Fund Company,
----------------
on the other, agree to indemnify and hold harmless Fund Company, on the one
hand, and Schwab and CSTC, on the other, together with each of its directors,
officers, employees and agents, from and against any and all losses,
liabilities, demands, claims, actions and expenses (including, without
limitation, reasonable attorney's fees) ("Losses") arising out of or in
connection with any breach by Schwab or CSTC, on the one hand, and Fund Company,
on the other, of its obligations under this Amendment, except to the extent such
breach was a direct consequence of an act or omission of an indemnified party
constituting negligence or willful misconduct. In no event will any party be
liable for consequential, incidental, special or indirect damages resulting to
an indemnified party subject to this Amendment. This Section 13 shall survive
termination of this Amendment.
14. Proprietary Information. The parties agree that all books, records,
------------------------
information, and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or carrying out of this
Amendment, including but not limited to the information on Schedule III, as
amended by Schwab from time to time, and any reports regarding Fund
shareholdings of the Plans or the Recordkeepers that CSTC may provide to Fund
Company from time to time as part of its obligations as a limited purpose co-
transfer agent to each Fund's named transfer agent, shall be kept confidential
and shall not be otherwise used or voluntarily disclosed to any other person,
except as may be required by law or judicial process. Fund Company expressly
agrees not to use nor permit others to use any such books, records, information,
or data to solicit Plans, sponsors of Plans, or Recordkeepers. This Section 14
shall survive termination of this Amendment.
15. Effect of Amendment. This Amendment is intended to amend and
--------------------
supplement the provisions of the Operating Agreement. In the event of a
conflict between the provisions of this Amendment and the provisions of the
Operating Agreement, the provisions of this Amendment shall control. All other
provisions of the Operating Agreement shall remain in full force and effect.
CHARLES SCHWAB & CO., INC FIRSTAR FUNDS, INC., on its own behalf
and on behalf of each Fund
By:/s/ Fred Potts
---------------------------
Fred Potts By: /s/ Mary Ellen Stanek
Vice President/Mutual Funds --------------------------------
Operations Administration Name: Mary Ellen Stanek
------------------------------
Date: July 5, 1999 Title: President
------------------------- -----------------------------
Date: June 21, 1999
THE CHARLES SCHWAB ------------------------------
TRUST
FIRSTAR INVESTMENT RESEARCH AND
By: /s/ Gregory Munson MANAGEMENT CO., LLC
---------------------------
Gregory Munson
Vice President By: /s/ Laura Rauman
--------------------------------
Date: July 12, 1999 Name: Laura Rauman
------------------------- ------------------------------
Title: Vice President
-----------------------------
Date: June 21, 1999
------------------------------
SCHEDULE I
TO THE RETIREMENT PLAN ORDER PROCESSING AMENDMENT TO THE OPERATING AGREEMENT,
MADE AS OF JUNE 17, 1999
FUND COMPANY
------------
Firstar Funds, Inc.
xxxxxxx
SCHEDULE II
TO THE RETIREMENT PLAN ORDER PROCESSING AMENDMENT TO THE OPERATING AGREEMENT,
MADE AS OF JUNE 17, 1999
EXCLUDED FUNDS
--------------
xxxxxxx
SCHEDULE III
TO THE RETIREMENT PLAN ORDER PROCESSING AMENDMENT TO THE OPERATING AGREEMENT,
MADE AS OF JUNE 17, 1999
RECORDKEEPERS
-------------
Schwab Retirement Plan Services, Inc.
xxxxxxx
SCHEDULE IV
TO THE RETIREMENT PLAN ORDER PROCESSING AMENDMENT TO THE OPERATING AGREEMENT,
MADE AS OF JUNE 17, 1999
NAMED TRANSFER AGENT
--------------------
Firstar Mutual Fund Services, LLC
Firstar
xxxxxxxx
LIMITED POWER OF ATTORNEY
Charles Schwab & Co., Inc. ("Schwab") does hereby make, constitute, and appoint
The Charles Schwab Trust Company ("CSTC"), as its trustee and lawful attorney or
agent ("Agent"), to transmit to each account for Schwab for the reinvestment of
capital gains and the reinvestment of dividends ("Account") with each of the
Firstar mutual funds ("Funds"), which are parties to the Retirement Plan Order
Processing Amendment to the Operating Agreement ("Amendment"), dated June 17,
1999, by and among Schwab, CSTC, and the Funds or their transfer agent, orders
for the purchase or redemption of Fund shares for the Account, as set forth in
the Amendment.
Schwab agrees to indemnify and hold harmless the Funds and their transfer agent
from acting upon orders for purchase or redemption of Fund shares received from
Agent to the same extent as if the orders were received from Schwab under the
Amendment.
This authorization and indemnity is a continuing one and shall remain in full
force and effect and shall be binding upon Schwab until revoked by Schwab in
writing.
/s/ Dennis P. Clark
------------------------------------
Dennis P. Clark
Senior Vice President - Mutual Funds
Date: July 21, 1999
-------------------------------
EXHIBIT (h) (47)
SERVICES AGREEMENT
This Agreement is made as of June 17, 1999, between Charles Schwab & Co.,
Inc. ("Schwab"), a California corporation, each registered investment company
("Fund Company") executing this Agreement, on its own behalf and on behalf of
each of its series or classes of shares ("Fund(s)") listed on Schedule I, as
amended from time to time, and Firstar Investment Research and Management
Company, LLC ("Fund Affiliate"). Fund Company and Fund Affiliate are
collectively referred to herein as "Fund Parties." "In the event that there are
no series or classes of shares listed on Schedule I, the term "Fund(s)" shall
mean "Fund Company."
WHEREAS, Fund Affiliate is either an investment adviser to or an
administrator for the Funds or the principal underwriter for the Funds.
WHEREAS, Fund Parties wish to have certain recordkeeping, shareholder
communication, and other such administrative services performed for each Fund;
and
WHEREAS, Schwab is willing to perform or cause to be performed such
administrative services on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
set forth below, the parties agree as follows:
1. Services
--------
a. During the term of this Agreement, Schwab shall perform or cause
to be performed the administrative services set forth on Exhibit A hereto, as
such exhibit may be amended from time to time by mutual consent of the parties
(the "Services").
b. The parties agree that the Operating Agreement, dated as of June
17, 1999, between Schwab, Fund Affiliate and Fund Company, as amended from time
to time ("Operating Agreement"), is incorporated herein by this reference. In
processing purchase, redemption, transfer and exchange orders placed by Schwab
on behalf of investors, and in order to facilitate the performance of Services,
all terms and conditions of the Operating Agreement shall be binding as between
Schwab and Fund Parties, and the references to Fund Company therein shall be
deemed to mean Fund Parties for the purposes of this Agreement. In the event of
any inconsistency between the Operating Agreement and this Agreement, this
Agreement shall control.
2. Fees
----
For the Services, Schwab shall receive a fee (the "Fee") which shall
be calculated and paid in accordance with Exhibit B hereto. Schedule II
identifies the amount of components of the Fee as follows: (A) that portion of
the Fee, if any, determined by the Fund's board of directors to be payable by
the Fund for non-distribution related services, and not paid pursuant to a plan
of distribution or shareholder servicing adopted and maintained pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended ("1940 Act" and "Rule
12b-1 Plan"); (B) that portion of the Fee, if any, paid pursuant to a Rule 12b-1
Plan; (C) that portion of the Fee, if any, not payable by the Fund and not paid
pursuant to a Rule 12b-1 Plan. Fund Parties acknowledge and agree that (i) Fund
Company will pay to Schwab component A, and Fund Affiliate will be jointly and
severally responsible to Schwab with Fund Company for component A; and, either
(ii) Fund Affiliate is the Fund's principal underwriter and will pay to Schwab
any remaining Fee (component B and/or component C), or (iii) Fund Affiliate, on
behalf of the Fund's principal underwriter, will pay to Schwab any remaining Fee
(component B and/or component C).
3. Transaction Charges
-------------------
The parties acknowledge and agree that Schwab may collect transaction
fees from certain customers (including "Active Traders," as Schwab may define
that term) for certain services and from other customers upon such other
customers' redemption of certain shares.
4. Indemnification
---------------
a. Schwab shall indemnify and hold harmless Fund Parties and their
directors, officers, employees, and agents ("Indemnified Parties") from and
against any and all losses, claims, liabilities and expenses (including
reasonable attorney's fees) ("Losses") incurred by any of them arising out of
(i) Schwab's dissemination of information regarding Fund Parties or a Fund that
contains an untrue statement of material fact or any omission of a material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading and that was not published or
provided to Schwab by or on behalf of Fund Company or its affiliated persons
("Affiliates") as defined under the Investment Company Act of 1940, as amended
(the "1940 Act"), or accurately derived from information published or provided
by or on behalf of Fund Company or any Affiliate, (ii) any breach by Schwab of
any representation, warranty or agreement contained in this Agreement, or (iii)
any willful misconduct or negligence by Schwab in the performance of, or failure
to perform, its obligations under this Agreement, except to the extent such
Losses are caused by Fund Company or Fund's breach of this Agreement or Fund
Company or Fund's willful misconduct or negligence in the performance, or
failure to perform, its obligations under this Agreement. This Section 4(a)
shall survive termination of this Agreement.
b. In any event, no party shall be liable for any special,
consequential or incidental damages.
5. Role and Relationship of Schwab
-------------------------------
The parties acknowledge and agree that the Services under this
Agreement are recordkeeping, shareholder communication and related services only
and are not the services of an underwriter or a principal underwriter of any
Fund within the meaning of the Securities Act of 1933, as amended, or the 1940
Act, although certain of these services may be distribution related. This
Agreement does not grant Schwab any right to purchase shares from any Fund
(although it does not preclude Schwab from purchasing any such shares), nor does
it constitute Schwab an agent of Fund Parties or any Fund for purposes of
selling shares of any Fund to any dealer or the public. To the extent Schwab is
involved in the purchase of shares of any Fund by Schwab's customers, such
involvement will be as agent of such customer only.
6. Information to be Provided
--------------------------
Fund Parties shall provide to Schwab prior to the effectiveness of
this Agreement or as soon thereafter as practicable, two (2) copies of the then-
current prospectus and statement of additional information of each Fund. Fund
Party shall provide Schwab with written copies of any amendments to or changes
in the Fund's prospectus or statement of additional information immediately upon
their effective date.
7. Representations and Warranties
------------------------------
a. Each Fund Party represents and warrants that it has obtained
certified resolutions of its board of directors authorizing such Fund Party to
enter into this Agreement.
b. Each Fund Party represents and warrants that the person signing
this Agreement on its behalf is an officer authorized to execute this Agreement
on behalf of such Fund Party.
8. Notices
-------
All notices required by this Agreement (excluding the Operating
Agreement) shall be in writing and delivered personally or sent by first class
mail. Such notices will be deemed to have been received as of the earlier of
actual physical receipt or three (3) days after deposit, first class postage
prepaid, in the United States mail. All such notices shall be made:
if to Schwab, to: Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
Attention: Dennis P. Clark
Senior Vice President/Mutual Funds
with a copy to: General Counsel, Mutual Funds & International
at the same address;
if to Fund Party, to the address given below in the signature block.
9. Nonexclusivity
--------------
Each party acknowledges that the other may enter into agreements
similar to this Agreement with other parties for the performance of services
similar to those to be provided under this Agreement, unless otherwise agreed to
in writing by the parties.
10. Assignability
-------------
This Agreement is not assignable by any party without the other
parties' prior written consents and any attempted assignment in contravention
hereof shall be null and void; provided, however, that Schwab may, without the
consent of Fund Parties, assign its rights and obligations under this Agreement
to any Affiliate.
11. Exhibits and Schedules; Entire Agreement
----------------------------------------
All Exhibits and Schedules to this Agreement, as they may be amended
from time to time, are by this reference incorporated into and made a part of
this Agreement. This Agreement (including the Exhibits and Schedules hereto),
together with the Operating Agreement, constitute the entire agreement between
the parties as to the subject matter hereof and supersede any and all
agreements, representations and warranties, written or oral, regarding such
subject matter made prior to the time at which this Agreement has been executed
and delivered by Schwab and Fund Parties.
12. No Waiver
---------
The failure of either party to insist upon exercising any right under
this Agreement shall not be construed as a waiver or relinquishment to any
extent of such party's right to assert or rely upon such provision or right in
any other instance.
13. Amendment
---------
This Agreement and the Exhibits and Schedules hereto may be amended
only by a writing executed by each party hereto that is to be bound by such
amendment.
14. Governing Law
-------------
This Agreement shall be governed by and interpreted under the laws of
the State of California, applicable to contracts between California residents
entered into and to be performed entirely within the state.
15. Effectiveness of Agreement; Termination
---------------------------------------
a. The effective date of this Agreement as to any Fund shall be the
later of the date on which this Agreement is made or the date set forth opposite
the name of the Fund on Schedule I.
b. This Agreement may be terminated as to a Fund (i) by any party
upon ninety (90) days' written notice to the other parties or (ii) by any party
upon such shorter notice as is required by law, order, or instruction by a court
of competent jurisdiction or a regulatory body or self-regulatory organization
with jurisdiction over such terminating party or (iii) by Fund Parties, upon
notice to Schwab of the termination of any Rule 12b-1 Plan as to any Fund that
had such Rule 12b-1 Plan in effect as of its effective date on this Agreement,
provided that a portion of the Fee is paid pursuant to the Rule 12b-1 Plan.
c. Notwithstanding any termination, Fund Parties will remain
obligated to pay Schwab the Fee as to each share of the Fund that was considered
in the calculation of the Fee as of the date of termination, and as to each
share of the Fund which results from reinvesting the dividends or capital gains
distributed on such shares (each a "Pre-Termination Share"), for so long as such
Pre-Termination Share is held in any of the Account(s) (as defined in the
Operating Agreement) and Schwab continues to perform substantially all of the
Services as to such Pre-Termination Share. Further, for so long as Schwab
continues to perform the Services as to any Pre-Termination Shares, this
Agreement will otherwise remain in full force and effect as to such Pre-
Termination Shares. Fund Parties shall reimburse Schwab promptly for any
reasonable expenses Schwab incurs in effecting any termination of this
Agreement, including delivery to a Fund Party of any records, instruments, or
documents reasonably requested by the Fund Party.
IN WITNESS WHEREOF, the parties have executed this Agreement by a duly
authorized representative of the parties hereto.
CHARLES SCHWAB & CO., INC. FIRSTAR FUNDS, INC. on its own behalf
and on behalf of each Fund listed on
Schedule I hereto
By:/s/ David P. Clark
-------------------------
Dennis P. Clark
Senior Vice President By: /s/ Mary Ellen Stanek
Mutual Funds ----------------------------------
Name: Mary Ellen Stanek
---------------------------------
Date: June 30, 1999 Title: President
------------------------ --------------------------------
Date: June 21, 1999
---------------------------------
FIRSTAR INVESTMENT RESEARCH
AND MANAGEMENT COMPANY, LLC
By: /s/ Laura Rauman Address: 777 E. Wisconsin Ave. Ste. 800
------------------------- --------------------------------
Name: Laura Rauman Milwaukee, WI 53202
------------------------ --------------------------------
Title: Vice President Attn: Laura Rauman
----------------------- -----------------------------------
Date June 21, 1999
-------------------------
Address: 777 E. Wisconsin Ave. Ste. 800
--------------------------------
Milwaukee, WI 53202
- ----------------------------------------
Attn: Laura Rauman
----------------------------------
EXHIBIT A
SERVICES
1. Record Maintenance
------------------
Schwab shall maintain, and require any correspondent brokers or banks
to maintain with respect to their customers, the following records with respect
to a Fund for each customer who holds Fund shares in a Schwab brokerage account:
a. Number of shares;
b. Date, price and amount of purchases and redemptions (including
dividend reinvestments) and dates and amounts of dividends paid for at least the
current year to date;
c. Name and address of the customer, including zip codes and social
security numbers or taxpayers identification numbers;
d. Records of distributions and dividend payments;
e. Any transfers of shares; and
f. Overall control records.
2. Shareholder Communications
--------------------------
Schwab shall:
a. Provide to a shareholder mailing agent for the purpose of mailing
certain Fund-related materials the names and addresses of all Schwab customers
who hold shares of such Fund in their Schwab brokerage accounts. The
shareholder mailing agent shall be a person or entity with whom the Fund has
arranged for the distribution of certain Fund-related material in accordance
with the Operating Agreement. The Fund-related materials shall consist of
updated prospectuses and any supplements and amendments thereto, annual and
other periodic reports, proxy or information statements and other appropriate
shareholder communications. In the alternative, in accordance with the
Operating Agreement, Schwab may distribute the Fund-related materials to its
customers.
b. Mail current Fund prospectuses and statements of additional
information and annual and other periodic reports upon customer request and, as
applicable, with confirmation statements;
c. Mail statements to customers on a monthly basis (or, as to
accounts in which there has been no activity in a particular month, no less
frequently than quarterly) showing, among other things, the number of shares of
each Fund owned by such customer and the net asset value of such Fund as of a
recent date;
d. Produce and mail to customers confirmation statements reflecting
purchases and redemptions of shares of each Fund in Schwab brokerage accounts;
e. Respond to customer inquiries regarding, among other things,
share prices, account balances, dividend amounts and dividend payment dates; and
f. With respect to Fund shares purchased by customers after the
effective date of this Agreement, provide average cost basis reporting to
customers to assist them in preparation of income tax returns.
g. If Schwab clears transactions in Fund shares for any
correspondent brokers or banks in an omnibus relationship, it will require each
such correspondent broker or bank to provide such shareholder communications as
set forth in 2(a) through to 2(f) to its own customers.
3. Transactional Services
----------------------
Schwab shall communicate, as to shares of each Fund, purchase,
redemption and exchange orders reflecting the orders it receives from its
customers or from any correspondent brokers and banks for their customers.
Schwab shall also communicate to beneficial owners holding through it, and to
any correspondent brokers or banks for beneficial owners holding through them,
as to shares of each Fund, mergers, splits and other reorganization activities,
and require any correspondent broker or bank to communicate such information to
its customers.
4. Tax Information Returns and Reports
-----------------------------------
Schwab shall prepare and file, and require to be prepared and filed by
any correspondent brokers or banks as to their customers, with the appropriate
governmental agencies, such information, returns and reports as are required to
be so filed for reporting (i) dividends and other distributions made, (ii)
amounts withheld on dividends and other distributions and payments under
applicable federal and state laws, rules and regulations, and (iii) gross
proceeds of sales transactions as required.
5. Fund Communications
-------------------
Schwab shall, upon request by Fund Parties, on each business day and
for each Fund, report the number of shares on which the Fee is to be paid
pursuant to this Agreement and the number of shares on which no such Fee is to
be paid. Schwab shall also provide each Fund with a monthly invoice.
EXHIBIT B
CALCULATION OF FEE
1. The Fee shall be calculated each month by multiplying the average
Daily Value of Qualifying Shares (defined below) for the month times 35 basis
points per annum. Notwithstanding the foregoing, the minimum Fee for each Fund
shall be $2,000 per month commencing with the first full month and terminating
with the last full month such Fund is effective under this Agreement. Any
Maintenance Fee as to the Account(s) of a Fund which would otherwise be assessed
under the Operating Agreement shall be waived for any month for which this
Agreement is in effect as to such Fund. The Fee shall be billed monthly in
arrears and paid in accordance with Section 5 below.
2. The Daily Value of Qualifying Shares is the aggregate daily value of
all shares of a Fund held in the Account(s), subject to the following exclusions
("Qualifying Shares"). There shall be excluded (i) shares held in the
Account(s) prior to the effective date of this Agreement as to the Fund, and
(ii) shares first held in the Account(s) after the termination of this Agreement
as to the Fund (except that Pre-Termination Shares resulting from reinvested
dividends or capital gains under Section 15(c) of this Agreement shall also be
Qualifying Shares).
3. For purposes of this Exhibit, the daily value of the shares of each
Fund will be the net asset value reported by such Fund to the National
Association of Securities Dealers, Inc. Automated Quotation System. No
adjustments will be made to the net asset values to correct errors in the net
asset values so reported for any day unless such error is corrected and the
corrected net asset value per share is reported to Schwab before 5 o'clock,
p.m., San Francisco time, on the first business day after the day to which the
error relates.
4. At the request of Fund Parties, Schwab shall provide, on each business
day, a statement of the aggregate Daily Value of the Qualifying Shares of each
Fund for such day and the estimated amount of the Fee for such day. As soon as
practicable after the end of the month, Schwab shall also provide to Fund
Parties an invoice for the amount of the Fee due for each Fund. In the
calculation of such Fee, Schwab's records shall govern unless an error can be
shown in the number of shares used in such calculation.
5. The Fee is due and payable by Fund Parties upon receipt of the invoice
setting forth the Fee. Payment shall be made by wire transfer. Such wire
transfer shall be separate from wire transfers of redemption proceeds or
distributions under the Operating Agreement. The amount of the Fee shall accrue
interest from the date of the invoice, and Schwab shall be entitled to charge
Fund Parties with payment of such accrued interest with respect to any
outstanding amount in the event that Schwab has not received full payment by the
last business day of the month in which such invoice is rendered. The rate of
interest shall be the Federal Funds "offered" rate for each day as published in
The Wall Street Journal, and shall be billed by Schwab in the following month's
invoice. Schwab shall not be entitled to charge Fund Parties with payment of
such accrued interest with respect to any amount for which Schwab has received
payment by the last business day of the month in which such invoice is rendered.
SCHEDULE I
TO THE SERVICES AGREEMENT
Fund Company/Funds Effective date
- ------------------ --------------
Firstar Funds, Inc.
Firstar Bond IMMDEX/TM Fund, Retail A Shares 6/17/99
Firstar Growth Fund, Retail A Shares 6/17/99
Firstar Growth & Income Fund, Retail A Shares 6/17/99
Firstar Intermediate Bond Market Fund, Retail A Shares 6/17/99
Firstar MicroCap Fund, Retail A Shares 6/17/99
* Indicates that Fund is a "no load" or "no sales charge" Fund as defined in
Rule 2830 of the Conduct Rules of the National Association of Securities
Dealers, Inc.
SI Indicates that Fund is available only to MFMP investors through Schwab
Institutional or another advice program offered or made available by
financial institutions clearing transactions through Schwab.
SCHEDULE II
TO THE SERVICES AGREEMENT
QUALIFYING
FEE (COMPONENT SECTION 2) SHARES FEE RATE MINIMUM FEE
- ------------------------- --------------- -----------
Component A (Fund payable, non-Rule 12b-1 Plan) 20 bps up to 25 bps
Component B (Rule 12b-1 Plan) 0 bps $ 0
Component C (non-Fund payable, non-12b-1 Plan) 10bps the difference
------ between 25 bps and
$2.000 if any
-------------
Total Fee 35 bps $2,000
EXHIBIT (h)(48)
FORM OF ADDENDUM NO. 4 TO THE CO-ADMINISTRATION AGREEMENT
This Addendum, dated as of the __th day of September, 1999, is entered into
among Firstar Funds, Inc. (formerly, Portico Funds, Inc.) (the "Company"), a
Wisconsin corporation, Firstar Mutual Fund Services, LLC, a Wisconsin
corporation ("Firstar"), and B.C. Ziegler and Company, a Wisconsin corporation
("BCZ").
WHEREAS, the Company, Firstar and BCZ have entered into a Co-Administration
Agreement dated as of January 1, 1995 and amended as of August 1, 1995 (the "Co-
Administration Agreement"), pursuant to which the Company appointed Firstar (by
assignment from Firstar Trust Company dated October 1, 1998) and BCZ to provide
certain co-administrative services to the Company for its Money Market Fund,
Tax-Exempt Money Market Fund, Growth and Income Fund, Short-Term Bond Market
Fund, Bond IMMDEX/TM Fund, Special Growth Fund, U.S. Government Money Market
Fund, Equity Index Fund, Institutional Money Market Fund, U.S. Treasury Money
Market Fund, Balanced Fund, MidCore Growth Fund, Intermediate Bond Market Fund,
Tax-Exempt Intermediate Bond Fund, International Equity Fund, MicroCap Fund,
Emerging Growth Fund, and any other Firstar Funds that may be contemplated
(collectively, the "Funds");
WHEREAS, the Company is establishing an additional investment portfolio to
be known as the International Fund and desires to retain Firstar and BCZ to act
as the co-administrators under the Co-Administration Agreement; and
WHEREAS, Firstar and BCZ are willing to serve as co-administrators for the
International Fund;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Company hereby appoints Firstar and BCZ to act as
-----------
co-administrators to the Company for the International Fund for the period and
the terms set forth herein and in the Co-Administration Agreement. Firstar and
BCZ hereby accept such appointment and agree to render the services set forth
herein and in the Co-Administration Agreement, for the compensation herein
provided.
2. COMPENSATION. For the services provided and the expenses assumed with
------------
respect to the International Fund and the other Funds pursuant to the Co-
Administration Agreement and this Addendum, the Company will pay Firstar and
BCZ, and Firstar and BCZ will accept as full compensation therefor, a fee,
computed daily and payable monthly, at the annual rate of ____% of the Funds'
first $2 billion of average aggregate daily net assets, plus ____% of the Funds'
average aggregate daily net assets in excess of $2 billion. Such fee as is
attributable to the International Fund shall be a separate charge to such Fund
and shall be the obligation of the International Fund.
3. MISCELLANEOUS. Except to the extent supplemented hereby, the Co-
-------------
Administration Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
FIRSTAR FUNDS, INC.
By:
-----------------------------
(Authorized Officer)
FIRSTAR MUTUAL FUND SERVICES, LLC
By:
-----------------------------
(Authorized Officer)
B.C. ZIEGLER AND COMPANY
By:
-----------------------------
(Authorized Officer)
EXHIBIT (h)(49)
FORM OF ADDENDUM NO. 5 TO THE CO-ADMINISTRATION AGREEMENT
This Addendum, dated as of the __th day of September, 1999, is entered into
among Firstar Funds, Inc. (formerly, Portico Funds, Inc.) (the "Company"), a
Wisconsin corporation, Firstar Mutual Fund Services, LLC, a Wisconsin
corporation ("Firstar"), and B.C. Ziegler and Company, a Wisconsin corporation
("BCZ").
WHEREAS, the Company, Firstar and BCZ have entered into a Co-Administration
Agreement dated as of January 1, 1995 and amended as of August 1, 1995 (the "Co-
Administration Agreement"), pursuant to which the Company appointed Firstar (by
assignment from Firstar Trust Company dated October 1, 1998) and BCZ to provide
certain co-administrative services to the Company for its Money Market Fund,
Tax-Exempt Money Market Fund, Growth and Income Fund, Short-Term Bond Market
Fund, Bond IMMDEX/TM Fund, Special Growth Fund, U.S. Government Money Market
Fund, Equity Index Fund, Institutional Money Market Fund, U.S. Treasury Money
Market Fund, Balanced Fund, MidCore Growth Fund, Intermediate Bond Market Fund,
Tax-Exempt Intermediate Bond Fund, International Equity Fund, MicroCap Fund,
Emerging Growth Fund and any other Firstar Funds that may be contemplated
(collectively, the "Funds");
WHEREAS, the Company is establishing an additional investment portfolio to
be known as the MidCap Index Fund, and desires to retain Firstar and BCZ to act
as the co-administrators under the Co-Administration Agreement; and
WHEREAS, Firstar and BCZ are willing to serve as co-administrators for the
MidCap Index Fund;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Company hereby appoints Firstar and BCZ to act as
-----------
co-administrators to the Company for the MidCap Index Fund for the period and
the terms set forth herein and in the Co-Administration Agreement. Firstar and
BCZ hereby accept such appointment and agree to render the services set forth
herein and in the Co-Administration Agreement, for the compensation herein
provided.
2. COMPENSATION. For the services provided and the expenses assumed with
------------
respect to the MidCap Index Fund and the other Funds pursuant to the Co-
Administration Agreement and this Addendum, the Company will pay Firstar and
BCZ, and Firstar and BCZ will accept as full compensation therefor, a fee,
computed daily and payable monthly, at the annual rate of ____% of the Funds'
first $2 billion of average aggregate daily net assets, plus ____% of the Funds'
average aggregate daily net assets in excess of $2 billion. Such fee as is
attributable to the MidCap Index Fund shall be a separate charge to such Fund
and shall be the obligation of the MidCap Index Fund.
3. MISCELLANEOUS. Except to the extent supplemented hereby, the Co-
-------------
Administration Agreement shall remain unchanged and in full force and effect and
is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
FIRSTAR FUNDS, INC.
By:
----------------------------
(Authorized Officer)
FIRSTAR MUTUAL FUND SERVICES, LLC
By:
---------------------------
(Authorized Officer)
B.C. ZIEGLER AND COMPANY
By:
---------------------------
(Authorized Officer)
EXHIBIT (h)(50)
FORM OF FUND ACCOUNTING SERVICING AGREEMENT
(ADDITION OF INTERNATIONAL FUND)
Firstar Mutual Fund Services, LLC
615 E. Michigan Street
Milwaukee, WI 53202
Gentlemen:
Pursuant to Paragraph 4 of the Fund Accounting Servicing Agreement
dated March 23, 1988 that we have entered into with you (by way of assignment
from Firstar Trust Company dated October 1, 1998) we are writing to request that
you render accounting services under the terms of said agreement with respect to
the International Fund, an additional portfolio we are establishing. Your
compensation for the services provided under said agreement for said additional
portfolio shall be determined in accordance with the fee schedule attached
hereto. Please sign two copies of this letter where indicated to signify your
agreement to provide said services and to the compensation terms set forth on
the attached fee schedule.
Sincerely,
Dated: September __, 1999 FIRSTAR FUNDS, INC.
By:
---------------------
(Authorized Officer)
ACKNOWLEDGED AND AGREED:
FIRSTAR MUTUAL FUND SERVICES, LLC
By: Dated: September __, 1999
---------------------
(Authorized Officer)
FIRSTAR MUTUAL FUND SERVICES, LLC
FUND VALUATION AND ACCOUNTING
FOR
FIRSTAR FUNDS, INC.
International Fund
------------------
Portfolio Services
- ------------------
Annual fee schedule for the International Fund based on market value of assets.
$ for first $40,000,000.00
-----
/100 of 1% on the next $200,000,000.00
-----
/100 of 1% on the balance.
-----
Out-of-Pocket Expenses: Charged on the Account.
Fees are billed monthly.
EXHIBIT (h)(51)
FORM OF FUND ACCOUNTING SERVICING AGREEMENT
(ADDITION OF MIDCAP INDEX FUND)
Firstar Mutual Fund Services, LLC
615 E. Michigan Street
Milwaukee, WI 53202
Gentlemen:
Pursuant to Paragraph 4 of the Fund Accounting Servicing Agreement
dated March 23, 1988 that we have entered into with you (by way of assignment
from Firstar Trust Company dated October 1, 1998), we are writing to request
that you render accounting services under the terms of said agreement with
respect to the MidCap Index Fund, an additional portfolio we are establishing.
Your compensation for the services provided under said agreement for said
additional portfolio shall be determined in accordance with the fee schedule
attached hereto. Please sign two copies of this letter where indicated to
signify your agreement to provide said services and to the compensation terms
set forth on the attached fee schedule.
Sincerely,
Dated: September __, 1999 FIRSTAR FUNDS, INC.
By:
----------------------
(Authorized Officer)
ACKNOWLEDGED AND AGREED:
FIRSTAR MUTUAL FUND SERVICES, LLC
By: Dated: September __, 1999
----------------------
(Authorized Officer)
FIRSTAR MUTUAL FUND SERVICES, LLC
FUND VALUATION AND ACCOUNTING
FOR
FIRSTAR FUNDS, INC.
MidCap Index Fund
------------------
Portfolio Services
- ------------------
Annual fee schedule for the MidCap Index Fund based on market value of assets.
$ for first $40,000,000.00
------
/100 of 1% on the next $200,000,000.00
-----
/100 of 1% on the balance.
-----
Out-of-Pocket Expenses: Charged on the Account.
Fees are billed monthly.
EXHIBIT (h)(52)
FORM OF LETTER AGREEMENT TO THE SHAREHOLDER SERVICING AGENT AGREEMENT
(ADDITION OF THE CORE INTERNATIONAL EQUITY FUND)
Firstar Mutual Fund Services, LLC
615 E. Michigan Street
Milwaukee, WI 53202
Gentlemen:
Pursuant to Paragraph 7 of the Shareholder Servicing Agent Agreement
dated as of March 23, 1988 and amended as of May 1, 1990, between Firstar
Funds, Inc. (formerly, Portico Funds, Inc. and formerly Elan Funds, Inc.)
(the "Company"), and you (by assignment from Firstar Trust Company dated
October 1, 1998), the Company requests that you render services as Shareholder
Servicing Agent under the terms of said agreement with respect to the
International Fund, an additional portfolio the Company is establishing.
Your compensation for the services provided under said agreement for said
additional portfolio shall be determined in accordance with the fee schedule
attached hereto.
Please sign two copies of this letter where indicated to signify your
agreement to so serve as Shareholder Servicing Agent for the International Fund
and to the compensation terms set forth on the attached fee schedule for the new
Fund, which terms are to become effective as of the date set forth below.
Sincerely,
Dated: , 1999 FIRSTAR FUNDS, INC.
By:
-------------------------
(Authorized Officer)
ACKNOWLEDGED AND AGREED:
FIRSTAR MUTUAL FUND SERVICES, LLC.
By: Dated: , 1999
-----------------------------
(Authorized Officer)
FIRSTAR MUTUAL FUND SERVICES, LLC
MUTUAL FUND SHAREHOLDER SERVICES
FOR
FIRSTAR FUNDS, INC.
International Fund
------------------
Annual Fee Schedule
- -------------------
$ per Shareholder account
------
$ per telephone exchange
------
$ per wire transfer
------
$ per NFS/NSCC networked account (Retail Class only)
------
Minimum annual fee of $ per Fund.
-------
Account fees shall be waived on the initial accounts per series.
----
Fees billed monthly.
Plus out-of-pocket expenses including, but not limited to:
- Telephone--Toll-free lines
- Postage
- Programming
- Stationery/Envelopes
- Mailing
- Proxies
- Insurance
- Retention of Records
- Microfilm/Microfiche of Records
- Special Reports
- All other out-of pocket expenses
Plus, with respect to Two-Dimensional Transaction:
$ per shareholder account to set-up
-----
$ per shareholder account to alter
-----
AUTOMATIC INVESTMENT PLAN PROCESSING
-------------------------------------
$ per cycle
-----
$ per account set-up and/or change
-----
$ per item for AIP purchases
-----
$ per correction, reversal or return item
-----
EXHIBIT (h)(53)
FORM OF LETTER AGREEMENT TO THE SHAREHOLDER SERVICING AGENT AGREEMENT
(ADDITION OF THE MIDCAP INDEX FUND)
Firstar Mutual Fund Services, LLC
615 E. Michigan Street
Milwaukee, WI 53202
Gentlemen:
Pursuant to Paragraph 7 of the Shareholder Servicing Agent Agreement
dated as of March 23, 1988 and amended as of May 1, 1990, between Firstar Funds,
Inc. (formerly, Portico Funds, Inc. and formerly Elan Funds) (the "Company"),
and you (by assignment from Firstar Trust Company dated October 1, 1998)the
Company requests that you render services as Shareholder Servicing Agent under
the terms of said agreement with respect to the MidCap Index Fund, an additional
portfolio the Company is establishing. Your compensation for the services
provided under said agreement for said additional portfolio shall be determined
in accordance with the fee schedule attached hereto.
Please sign two copies of this letter where indicated to signify your
agreement to so serve as Shareholder Servicing Agent for MidCap Index Fund and
to the compensation terms set forth on the attached fee schedule for the new
Fund, which terms are to become effective as of the date set forth below.
Sincerely,
Dated: , 1999 FIRSTAR FUNDS, INC.
By:
----------------------
(Authorized Officer)
ACKNOWLEDGED AND AGREED:
FIRSTAR MUTUAL FUND SERVICES, LLC.
By: Dated: , 1999
-------------------------------
(Authorized Officer)
FIRSTAR MUTUAL FUND SERVICES, LLC
MUTUAL FUND SHAREHOLDER SERVICES
FOR
FIRSTAR FUNDS, INC.
MidCap Index Fund
-----------------
Annual Fee Schedule
- -------------------
$ per Shareholder account
------
$ per telephone exchange
------
$ per wire transfer
------
$ per NFS/NSCC networked account (Retail Class only)
------
Minimum annual fee of $ per Fund.
-------
Account fees shall be waived on the initial accounts per series.
----
Fees billed monthly.
Plus out-of-pocket expenses including, but not limited to:
- Telephone--Toll-free lines
- Postage
- Programming
- Stationery/Envelopes
- Mailing
- Proxies
- Insurance
- Retention of Records
- Microfilm/Microfiche of Records
- Special Reports
- All other out-of pocket expenses
Plus, with respect to Two-Dimensional Transaction:
$ per shareholder account to set-up
------
$ per shareholder account to alter
------
AUTOMATIC INVESTMENT PLAN PROCESSING
------------------------------------
$ per cycle
------
$ per account set-up and/or change
------
$ per item for AIP purchases
------
$ per correction, reversal or return it
------
EXHIBIT (j)(1)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference
to our Firm under the caption "Counsel" in the Statement of Additional
Information that is included in Post-Effective Amendment No. 37 to the
Registration Statement (No. 33-18255) on Form N-1A under the Securities Act of
1933 and the Investment Company Act of 1940, as amended, of Firstar Funds, Inc.
This consent does not constitute a consent under Section 7 of the Securities Act
of 1933, and in consenting to the use of our name and the references to our Firm
under such caption we have not certified any part of the Registration Statement
and do not otherwise come within the categories of persons whose consent is
required under said Section 7 or the rules and regulations of the Securities and
Exchange Commission thereunder.
/s/ DRINKER BIDDLE & REATH LLP
------------------------------
DRINKER BIDDLE & REATH LLP
Philadelphia, Pennsylvania
August 18, 1999
EXHIBIT (j)(2)
PROPOSED AUDITOR'S CONSENT FOR PEA #37
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the reference to us under the heading "Independent
Accountants and Financial Statements" in the Statement of Additional
Information constituting part of this Post-Effective Amendment No. 37 to
the registration statement on Form N-1A.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
Milwaukee, Wisconsin
August 16, 1999
EXHIBIT (l)(5)
PURCHASE AGREEMENT
Firstar Funds, Inc., a Wisconsin corporation (the "Company"), and
B.C. Ziegler & Company ("B.C. Ziegler") hereby agree as follows:
1. The Company hereby offers B.C. Ziegler and B.C. Ziegler
hereby purchases, in consideration for the payment of $ for each share,
-------
one share of beneficial interest of the Core International Equity Fund -
Institutional, one share of the Core International Equity Fund - Series A,
and one share of the Core International Equity Fund - Series B for a purchase
price corresponding to the net asset value per share as listed in Exhibit 1 to
this agreement.
2. B.C. Ziegler acknowledges that the shares purchased hereunder
have not been registered under the federal securities laws and that the Company
is relying on certain exemptions from such registration requirements. B.C.
Ziegler represents and warrants that it is acquiring such shares solely for
investment purposes and that B.C. Ziegler has no present intention to redeem,
sell or otherwise dispose of the shares.
3. This Agreement shall be governed by the law of the State of
Wisconsin. Firstar Funds is a corporation organized under the laws of Wisconsin
and under Articles of Incorporation, to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of Wisconsin as
required by law, and to any and all amendments thereto so filed or hereafter
filed.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the __ day of , 1999.
(SEAL)
FIRSTAR FUNDS, INC.
By:
Name:
------------------------
Title:
-----------------------
B.C. ZIEGLER & COMPANY
By:
Name:
------------------------
Title:
-----------------------
EXHIBIT 1
---------
Firstar Core International Equity Fund - Institutional $
--------
Firstar Core International Equity Fund - Series A $
--------
Firstar Core International Equity Fund - Series B $
--------
Total consideration for one share of each series $
--------
EXHIBIT (l)(6)
PURCHASE AGREEMENT
Firstar Funds, Inc., a Wisconsin corporation (the "Company"), and
B.C. Ziegler & Company ("B.C. Ziegler") hereby agree as follows:
1. The Company hereby offers B.C. Ziegler and B.C. Ziegler
hereby purchases, in consideration for the payment of $ , for each share,
------
one share of beneficial interest of the MidCap Index Fund - Institutional,
one share of the MidCap Index Fund - Series A, and one share of the MidCap
Index Fund - Series B for a purchase price corresponding to the net asset
value per share as listed in Exhibit 1 to this agreement.
2. B.C. Ziegler acknowledges that the shares purchased hereunder
have not been registered under the federal securities laws and that the Company
is relying on certain exemptions from such registration requirements. B.C.
Ziegler represents and warrants that it is acquiring such shares solely for
investment purposes and that B.C. Ziegler has no present intention to redeem,
sell or otherwise dispose of the shares.
3. This Agreement shall be governed by the law of the State of
Wisconsin. Firstar Funds is a corporation organized under the laws of Wisconsin
and under Articles of Incorporation, to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of Wisconsin as
required by law, and to any and all amendments thereto so filed or hereafter
filed.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ___ day of , 1999.
(SEAL)
FIRSTAR FUNDS, INC.
By:
Name:
-------------------------
Title:
------------------------
B.C. ZIEGLER & COMPANY
By:
Name:
-------------------------
Title:
------------------------
EXHIBIT 1
---------
Firstar MidCap Index Fund - Institutional $--------
Firstar MidCap Index - Series A $
--------
Firstar MidCap Index Fund - Series B $
--------
Total consideration for one share of each series $
--------
EXHIBIT (n) (2)
FIRSTAR FUNDS, INC.
(THE "COMPANY")
FORM OF AMENDED AND RESTATED
PLAN PURSUANT TO RULE 18F-3 FOR OPERATION OF
A MULTI-SERIES SYSTEM
---------------------
I. INTRODUCTION
---------------
On February 23, 1995, the Securities and Exchange Commission (the
"Commission") promulgated Rule 18f-3 under the Investment Company Act of 1940,
as amended (the "1940 Act"), which permits the creation and operation of a
multi-class distribution structure (or in the case of the Company, a multi-
series distribution structure) without the need to obtain an exemptive order
under Section 18 of the 1940 Act. Rule 18f-3, which became effective on April
3, 1995, requires an investment company to file with the Commission a written
plan specifying all of the differences among the classes, including the various
services offered to shareholders, the different distribution arrangements for
each class, the methods for allocating expenses relating to those differences,
and any conversion features or exchange privileges. Initially, the Company
operated a multi-series distribution structure pursuant to an exemptive order
granted by the Commission on December 6, 1994. On March 17, 1995, however, the
Board of Directors authorized the Company to operate its multi-series
distribution structure in compliance with Rule 18f-3. The Company's Board
approved and the Company filed with the Commission a Plan pursuant to Rule 18f-3
for operation of a multi-series system. The Plan became effective on April 3,
1995. The Board of Directors of the Company approved the extension of the Plan
to new Portfolios on June 16, 1995 and September 15, 1995, and the adoption of
an Amended and Restated Plan pursuant to Rule 18f-3 for operation of a multi-
series system on June 13, 1997. The Board of Directors of the Company approved
an amendment and restatement of the Plan on December 18, 1998, to reflect the
creation of the Series B shares, which became effective on March 1, 1999. The
Board of Directors of the Company approved an amended and restated version of
the Plan on June 17, 1999, reflecting a revision to provisions reciting those
eligible to purchase Series A or Institutional shares, which became effective on
June 18, 1999. This Amended and Restated Plan pursuant to Rule 18f-3 was
approved by the Board of Directors on , 1999 and supersedes these
------------
prior plans.
II. ATTRIBUTES OF SERIES
------------------------
A. Generally
---------
The Company shall offer three series of shares: Institutional, Series
A, and Series B. In general, shares of each series shall be identical except
for different expense variables (which will result in different returns for each
series), certain related rights and certain shareholder services. More
particularly, the three series of shares of an investment portfolio (a "Fund")
of the Company shall represent interests in the same portfolio of investments of
the particular Fund, and shall be identical in all respects, except for: (a) the
impact of (i) expenses assessed to a series pursuant to a Distribution and
Services Plan and a Services Plan applicable to the Series A shares (the "Series
A Plans") and pursuant to a Distribution and Services Plan and a Services Plan
applicable to the Series B shares (the "Series B Plans," the Series A Plans and
the Series B Plans being referred to herein collectively, as the "Plans"), and
(ii) any other incremental expenses subsequently identified that should be
properly allocated to one series so long as any subsequent changes in expense
allocations are reviewed and approved by a vote of the Board of Directors,
including a majority of the independent directors; (b) the fact that the series
shall vote separately with respect to a Fund's Plans and any matter submitted to
shareholders relating to series expenses; (c) the different exchange privileges
of the series of shares; (d) the designation of each series of shares of a Fund;
(e) the front-end sales load applicable to the Series A shares and the
contingent deferred sales load applicable to the Series B shares; (f) the
conversion feature of the Series B shares and (g) the different shareholder
services relating to a series of shares.
B. Distribution Arrangements, Expenses and Sales Charges
-----------------------------------------------------
1. NON-MONEY MARKET FUNDS
a. Series A Shares
Series A shares of the Growth and Income Fund, Short-Term Bond Market
Fund, Special Growth Fund, Bond IMMDEX/TM Fund, Equity Index Fund, Balanced
Growth Fund, Growth Fund, Intermediate Bond Market Fund, Tax-Exempt Intermediate
Bond Fund, International Equity Fund, MicroCap Fund, Balanced Income Fund,
Emerging Growth Fund, Core International Equity Fund and MidCap Index Fund
(the "Non-Money Market Funds") shall be offered to the general public and shall
be subject to a shareholder servicing and/or distribution fee payable pursuant
to the Series A Plans which shall not initially exceed 0.25% (on an annual
basis) of the average daily net assets attributable to the outstanding Series A
shares of the Non-Money Market Funds. Series A shares of the Growth and Income
Fund, Special Growth Fund, Equity Index Fund, Balanced Growth Fund, Growth
Fund, International Equity Fund, Balanced Income Fund, MicroCap Fund, Emerging
Growth Fund, International Fund and MidCap Index Fund shall be further subject
to a sales charge which shall not initially exceed 4.5% of the offering price
of the Series A shares of those Funds (subject to the reductions and exemptions
described in the prospectus for such shares, as amended and supplemented from
time to time). Series A shares of the Short-Term Bond Market Fund, Bond
IMMDEX/TM Fund, Intermediate Bond Market Fund and Tax-Exempt Intermediate Bond
Fund shall be further subject to a sales charge which shall not initially
exceed 3.75% of the offering price of the Series A shares of those Funds
(subject to the reductions and exemptions described in the prospectus for such
shares, as amended or supplemented from time to time).
Shareholder services under the Plans may include: (i) processing
dividend and distribution payments; (ii) providing information periodically to
customers showing their positions in Series A shares; (iii) arranging for bank
wires; (iv) responding to customer inquiries relating to the services performed
by shareholder service organizations; (v) providing subaccounting with respect
to Series A shares beneficially owned by customers or the information necessary
for subaccounting; (vi) forwarding shareholder communications (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to customers; (vii) processing exchange and
redemption requests from customers and placing net exchange and redemption
orders with the Company's service contractors; and (viii) assisting customers in
changing dividend options, account designations and addresses. In addition,
distribution services may be provided under the Distribution and Services Plan
for Series A shares such as assistance by broker/dealers in forwarding sales
literature and advertising to customers.
b. Series B Shares
Series B shares of the Non-Money Market Funds shall be offered to the
general public and shall be subject to a shareholder servicing and/or
distribution fee payable under the Distribution and Services Plan and/or the
Services Plan adopted with respect to the Series B shares, each on the terms set
forth in the applicable Fund's prospectus, as amended or supplemented from time
to time.
If a shareholder redeems Series B shares which have been held for less
than the time period specified in the applicable prospectus following the time
of purchase, a deferred sales charge, on the terms set forth in the applicable
prospectus, as amended or supplemented from time to time, shall be imposed at
the time of redemption of such Series B shares. The deferred sales charge may
be waived in the circumstances set forth in the applicable prospectus.
Shareholder services under the Series B Plans may include: (i)
processing dividend and distribution payments; (ii) providing information
periodically to customers showing their positions in Series B shares; (iii)
arranging for bank wires; (iv) responding to customer inquiries relating to the
services performed by shareholder service organizations; (v) providing
subaccounting with respect to Series B shares beneficially owned by customers or
the information necessary for subaccounting; (vi) forwarding shareholder
communications (such as proxies, shareholder reports, annual and semi-annual
financial statements and dividend or distribution and tax notices) to customers;
(vii) processing exchange and redemption requests from customers and placing net
exchange and redemption orders with the Company's service contractors; and
(viii) assisting customers in changing dividend options, account designations
and addresses. In addition, distribution services may be provided under the
Distribution and Services Plan for the Series B shares, as described in the
applicable prospectus, as amended or supplemented from time to time.
c. Institutional Shares
Institutional shares of the Non-Money Market Funds initially shall be offered to
(i) all trust, agency or custodial accounts opened through Firstar Bank,
Milwaukee, N.A., (ii) all employer-sponsored qualified retirement plans other
than those serviced by certain external organizations who have service
agreements with Firstar Mutual Fund Services, LLC ("Firstar") or its affiliates,
and other than plans administered by Firstar with assets less than $1 million at
the time Firstar begins plan administration (but including plans administered by
Firstar which owned Institutional shares prior to June 18, 1999) (plans
administered by Firstar with assets less than $1 million at the time Firstar
begins plan administration will become eligible for Institutional shares as
described in the Statement of Additional Information from time to time); (iii)
all clients of Firstar Investment Research & Management Company and (iv) those
purchasing through certain broker-dealers who have agreed to provide certain
services with respect to shares of the Non-Money Market Funds, including
Waterhouse Securities, Inc. and Jack White & Co., a division of Waterhouse
Securities, Inc. Institutional shares shall be offered without a sales charge
and shall not be subject to a shareholder servicing and/or distribution fee
payable pursuant to the Plans.
2. MONEY MARKET FUNDS
a. Series A Shares
Series A shares of the Money Market Fund, Tax-Exempt Money Market
Fund, U.S. Government Money Market Fund and U.S. Treasury Money Market Fund and
the Institutional Money Market Fund (the "Money Market Funds") shall be offered
to institutional investors and the general public and, except for the
Institutional Money Market Fund, shall be subject to a shareholder servicing
and/or distribution fee payable pursuant to the Series A Plans which shall not
initially exceed 0.25% (on an annual basis) of the average daily net assets
attributable to Series A shares of the Money Market Funds. Series A shares of
the Money Market Funds shall not be subject to a sales charge.
b. Series B Shares
The Company shall not initially offer Series B shares for the Money
Market Funds.
c. Institutional Shares
The Company shall not initially offer Institutional shares for the
Money Market Funds.
C. Exchange Privileges
-------------------
1. SERIES A SHARES
Series A shareholders initially shall be generally permitted to
exchange their shares in a Fund for Series A shares of other Funds of the
Company without charge or commission by the Fund (except a wire redemption fee
which may be waived). A sales charge shall be imposed on the exchange, in
accordance with the regulations of the Commission, if the shares of the Fund
being acquired have a sales charge and the shares being redeemed were purchased
without a sales charge. The exchange privilege does not initially apply to
shares of the Institutional Money Market Fund.
2. SERIES B SHARES
Series B shareholders initially shall be generally permitted to
exchange their shares for Series B shares of another Fund offered by the Company
without paying any exchange fee or contingent deferred sales charge at the time
the exchange is made, but a deferred sales charge may be payable upon subsequent
redemption of the Series B shares acquired on exchange as provided in the Funds'
prospectuses from time to time.
3. INSTITUTIONAL SHARES
Institutional shareholders initially shall be generally permitted to
exchange their shares for Institutional shares of another Fund offered by the
Company without paying any exchange fee or contingent deferred sales charge at
the time the exchange is made.
D. Shareholder Services
--------------------
1. PERIODIC INVESTMENT PLAN
------------------------
a. Series A and B Shares
Series A and B shares of the Funds shall initially offer a periodic
investment plan whereby a shareholder may automatically make purchases of shares
of a Fund on a regular, periodic basis.
b. Institutional Shares
The Company shall not initially offer Institutional shares a periodic
investment plan.
2. CONVERTIFUND/TM TRANSACTIONS
a. Series A Shares
Series A shall initially permit shareholders to effect Convertifund/TM
transactions whereby a Series A shareholder may invest proceeds, including
dividend distributions, capital gain distributions and systematic withdrawals,
from one account to another account of the Series A shares of the Company.
Convertifund/TM transactions may be used to invest funds from a regular account
to another regular account, from a qualified plan to another qualified plan
account or from a qualified plan account to a regular account.
b. Series B Shares
Series B shares shall initially permit shareholders to effect
Convertifund/TM transactions whereby a Series B shareholder may invest proceeds,
including dividend distributions, capital gain distributions and systematic
withdrawals, from one account to another account of the Series B shares of the
Company. Convertifund/TM transactions may be used to invest funds from a
regular account to another regular account, from a qualified plan to another
qualified plan account or from a qualified plan account to a regular account.
c. Institutional Shares
The Company shall not initially offer Institutional shares the
Convertifund/TM transaction service.
3. SYSTEMATIC WITHDRAWAL PLAN
a. Series A and B Shares
Series A and B shares shall initially offer a systematic withdrawal
plan which allows a shareholder to designate a fixed sum to be distributed to
the shareholder or as otherwise directed at regular intervals.
b. Institutional Shares
The Company shall not initially offer Institutional shares a
systematic withdrawal plan.
E. Conversion Features
-------------------
1. SERIES A SHARES
The Company shall not initially offer a conversion feature to holders
of Series A shares.
2. SERIES B SHARES
Series B shares, including Series B shares issued upon exchange of or
reinvestment of distributions from such Series B shares, shall automatically
convert to Series A shares of the same Fund such period after purchase as shall
be specified in the applicable prospectus, as amended or supplemented from time
to time.
3. INSTITUTIONAL SHARES
The Company will not initially offer a conversion feature to holders
of Institutional shares.
F. Methodology for Allocating Expenses Among Series
------------------------------------------------
In allocating expenses, a determination shall be made as to which
expenses are series level and which expenses are Fund level. Expenses that are
treated as series level expenses under this Plan will be borne by a Fund's
respective series. Fund level expenses will be allocated daily to the
respective shares classes in accordance with Rule 18f-3(c) as now or hereafter
in effect, subject to the oversight of the Board of Directors.
